As filed, via EDGAR, with the Securities and Exchange Commission on April 6,
1998.
File No.: 33-8982
ICA No.: 811-4852
SCHEDULE 14A (RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
[X] Definitive proxy statement Commission Only
[ ] Definitive additional materials (as permitted by Rule 14a-6(e)(2))
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE VICTORY PORTFOLIOS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Peter J. O'Rourke
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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THE VICTORY PORTFOLIOS
THE VICTORY INTERNATIONAL GROWTH FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
(800) 539-3863
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 1998
A Special Meeting of Shareholders (the "Meeting") of the Victory International
Growth Fund (the "Fund"), a separate series of The Victory Portfolios (the
"Victory Portfolios"), will be held on May 15, 1998 at 8:30 a.m. Eastern time,
at the offices of the Victory Portfolios, 3435 Stelzer Road, Columbus, Ohio
43219-3035, for the following purposes, which are more fully described in the
accompanying Proxy Statement dated April 10, 1998:
1. To approve a new Investment Advisory Agreement between the
Victory Portfolios, on behalf of the Fund, and the current
adviser to the Fund, Key Asset Management Inc. ("KAM")
pursuant to which KAM will employ a "Manager of Managers"
structure; and
2. To transact such other business as may properly come before
the Meeting or any adjournment or adjournments thereof.
The Board of Trustees of the Victory Portfolios unanimously recommends that
shareholders of the Fund vote to approve all proposals including the proposed
Investment Advisory Agreement.
Shareholders of record as of the close of business on March 20, 1998 are
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
The enclosed proxy is being solicited on behalf of the Board of Trustees of the
Fund. Each shareholder who does not expect to attend in person is requested to
complete, date, sign and promptly return the enclosed form of proxy.
By order of the Board of
Trustees,
Michael J. Sullivan
Secretary
Dated: April 10, 1998
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YOUR VOTE IS IMPORTANT
Please indicate your voting instructions on the enclosed proxy card, sign and
date it, and return it in the envelope provided, which needs no postage if
mailed in the United States. In order to save shareholders of the Fund any
additional expense of further solicitation, please mail your proxy promptly.
<PAGE>
THE VICTORY PORTFOLIOS
THE VICTORY INTERNATIONAL GROWTH FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219-3035
(800) 539-3863
PROXY STATEMENT
April 10, 1998
GENERAL INFORMATION
This Proxy Statement is being sent to you in connection with the solicitation of
proxies by the Board of Trustees (the "Board") of The Victory Portfolios (the
"Victory Portfolios"), on behalf of one of its series, the Victory International
Growth Fund (the "Fund"), for a Special Meeting of Shareholders (the "Meeting")
to be held at the offices of the Victory Portfolios, 3435 Stelzer Road,
Columbus, Ohio 43219-3035, on May 15, 1998, at 8:30 a.m. Eastern time, and at
any adjournments thereof. This proxy was first mailed to shareholders on or
about April 10, 1998.
You will be asked to consider a new Investment Advisory Agreement (the "New
Agreement") at the Meeting. The New Agreement would enable the current
investment adviser, Key Asset Management Inc. ("KAM"), to act as a "Manager of
Managers" with respect to the Fund. Currently, KAM provides portfolio management
services directly to the Fund. Under a Manager of Managers structure, KAM would
recommend to the Board of Trustees of the Victory Portfolios the selection of
one or more subadvisers to manage the Fund's investments rather than manage
those assets itself. The Board of Trustees, upon the recommendation of KAM and
upon notice to shareholders (but without obtaining formal shareholder approval),
will be able to replace a subadviser or appoint a subadviser (or multiple
subadvisers) for the Fund. KAM will oversee and supervise the Fund and all
subadvisers. THE NEW AGREEMENT WILL NOT CHANGE THE AMOUNT OF THE ADVISORY FEE
THE FUND PAYS TO KAM. KAM, NOT THE FUND, WILL PAY THE SUBADVISORY FEE OF ANY
SUBADVISER.
Please read the full text of this Proxy Statement. Below is a brief overview of
the matters to be voted upon. Your vote is important. If you have questions
regarding the proposal please call your investment professional or
1-800-733-8481 (ext. 469). We appreciate that you have placed your confidence in
the Victory Portfolios and look forward to helping you achieve your financial
goals.
<PAGE>
WHAT AM I BEING ASKED TO VOTE ON?
You are being asked to approve a new Investment Advisory Agreement between the
Victory Portfolios, on behalf of the Fund, and KAM, which will employ a "Manager
of Managers" structure.
HAS MY FUND'S BOARD OF TRUSTEES APPROVED THE NEW AGREEMENT?
Yes. The Board of the Victory Portfolios unanimously approved the New Agreement
at a Board meeting on February 20, 1998, and recommends that you vote to approve
the New Agreement.
HOW IS THE NEW AGREEMENT DIFFERENT?
The New Agreement is designed to provide shareholders with the benefits of a
"Manager of Managers" structure, which include:
o KAM, the current adviser, will be responsible for the overall
management of the Fund but would be able to hire one or more
subadvisers (subject to approval by the Board) to manage the
investments of the Fund, which would enhance the Fund's
ability to meet its investment objective.
o The ability to add subadvisers to the Fund expands the
investment expertise available to KAM in managing the Fund's
investments. Certain subadvisers have the ability to
investigate investment opportunities in a broad range of
geographic regions or in asset classes that would otherwise be
less accessible to KAM.
o Under the "Manager of Managers" structure, the Fund can hire
or replace a subadviser without shareholder approval, which
means that the Fund won't incur legal and other expenses
associated with preparing and printing a proxy and holding a
shareholder meeting each time a subadviser is added or
changed. Of course, shareholders will be informed of any
changes to the Fund's roster of subadvisers and will receive
information about all subadvisers to the Fund.
o With the ability to retain a new subadviser without the proxy
process, the Fund can react quickly to changes in the
international marketplace and hire additional subadvisers
without delays required by the proxy process.
o The availability of additional resources to manage the Fund's
assets at NO ADDITIONAL COSTS TO THE FUND OR ITS SHAREHOLDERS.
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WILL KAM CONTINUE TO ADVISE THE FUND ONCE SHAREHOLDERS APPROVE THE NEW
AGREEMENT?
Yes. The current portfolio manager of the Fund will continue to monitor and
oversee the activities of each subadviser appointed for the Fund.
WILL THE FEES AND EXPENSES OF THE FUND INCREASE?
NO! Each subadviser hired by KAM will be paid directly by KAM. Neither the Fund
nor shareholders will incur any additional costs associated with hiring or
replacing a new subadviser. Management fees paid by the Fund to KAM will remain
the same.
WHEN WILL THE NEW AGREEMENT TAKE EFFECT?
A Shareholder Meeting will be held on May 15, 1998. If approved, the New
Agreement will be effective on June 1, 1998 or as soon as practicable after
shareholder approval.
WILL KAM HIRE A SUBADVISER RIGHT AWAY?
Yes. KAM has recommended, and the Board unanimously approved, the retention of
Indocam International Investment Services, S.A. as a Fund subadviser, effective
June 1, 1998 (assuming shareholder approval is obtained). Further information on
Indocam International Investment Services, S.A. has been provided in this Proxy
Statement.
HOW DO I VOTE MY SHARES?
You can vote your shares by completing and signing the enclosed proxy card(s),
and mailing them in the enclosed postage paid envelope. You may also vote your
shares by phone at 1-800-733-8481 (ext. 469) or by fax at 1-800-733-1885. If you
need assistance, or have any questions regarding the proposal or how to vote
your shares, please call the Fund at 1-800-539-3863.
THE INDIVIDUALS NAMED IN THE ACCOMPANYING PROXY WILL VOTE THE NUMBER OF SHARES
REPRESENTED THEREBY AS DIRECTED BY THE PROXY OR, IN THE ABSENCE OF SUCH
DIRECTION, FOR APPROVAL OF THE PROPOSAL.
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PROPOSAL 1
APPROVAL OF NEW
INVESTMENT ADVISORY AGREEMENT
INTRODUCTION. Key Asset Management, Inc. ("KAM") serves as the investment
adviser to the Fund pursuant to an Investment Advisory Agreement dated March 1,
1997 (the "Current Agreement"). Under the Current Agreement, KAM provides
portfolio management and other related services directly to the Fund. KAM has
proposed, and the Board of Trustees of the Fund has approved, the New Agreement,
which would allow KAM to serve as a "Manager of Managers." That is, KAM would
select one or more subadvisers to manage the Fund's investments rather than
manage the assets itself. KAM will remain responsible for the overall
supervision of the Fund's investment advisory operations, but KAM may retain or
terminate a subadviser (or subadvisers) for the Fund, subject to approval by the
Board of Trustees and certain other conditions. The Board has unanimously
approved the New Agreement and recommends that shareholders approve the New
Agreement.
KAM does not propose to increase its fee under the New Agreement. KAM, not the
Fund, will compensate subadvisers for their services. Therefore, the Fund will
not bear any increase in the contractual advisory fee rates under the New
Agreement or any subadvisory agreement.
BACKGROUND - MANAGER OF MANAGERS ARRANGEMENT
Under its current arrangement with the Fund, KAM selects portfolio securities to
buy and sell. If shareholders approve the New Agreement, KAM will serve as a
"Manager of Managers." As a Manager of Managers, KAM will recommend one or more
subadvisers to manage a portion or all of the Fund's assets. KAM will base its
selections primarily on a quantitative and qualitative evaluation of each
subadviser's skills, investment styles and strategies. If more than one
subadviser is used for the Fund, KAM will allocate and, when appropriate,
re-allocate the Fund's assets among subadvisers, depending upon KAM's assessment
of what combination of subadvisers it believes will optimize the Fund's chances
of achieving its investment objective. The Board of Trustees will approve the
appointment or termination of each subadviser, or the reallocation of assets
under management.
The Fund's prospectus will describe the total amount of subadvisory fees that
KAM pays to all subadvisers. The prospectus will not identify the fees received
by any one subadviser.
As a Manager of Managers, KAM will have general oversight responsibility for the
investment advisory services provided to the Fund, including formulating
investment policies and analyzing economic trends affecting the Fund. KAM will
be responsible for allocating the Fund's assets among one or more subadvisers
and directing and evaluating the investment advisory services rendered to the
Fund by various subadvisers, including their adherence to the Fund's investment
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<PAGE>
objective and policies. KAM will also evaluate the investment performance of the
Fund and may provide specific portfolio advice, including advice with respect to
short-term debt instruments. KAM will have the ultimate responsibility for the
investment performance of the Fund due to its responsibility to oversee the
subadviser(s) and recommend to the Board of Trustees the hiring, termination and
replacement of subadvisers.
Generally, the Investment Company Act of 1940, as amended (the "1940 Act")
requires shareholders to approve a contract with a new investment adviser or
subadviser. The Securities and Exchange Commission (the "SEC") issued an order
to the Victory Portfolios that will allow the Board of Trustees of the Victory
Portfolios to hire, terminate or replace subadvisers without shareholder
approval (the "Order") based on the recommendations of KAM, the Manager of
Managers. The Fund would need shareholder approval, however, for the appointment
of a KAM affiliate as a subadviser.
If shareholders approve the New Agreement, KAM has recommended (and the Board
has unanimously approved) the retention of Indocam International Investment
Services, S.A. as the initial subadviser for all of the Fund's assets (other
than short-term debt instruments). We will describe Indocam International
Investment Services, S.A. later in this Proxy Statement.
THE NEW AGREEMENT
The New Agreement differs from the Current Agreement in a number of ways. The
New Agreement implements the Manager of Managers structure and contains other
changes summarized below. You can find a copy of the New Agreement as Exhibit A
to this Proxy Statement, which you should also read for a more complete
explanation of KAM's responsibilities.
Among other things, the New Agreement imposes new responsibilities on KAM as a
Manager of Managers. For example, the New Agreement requires KAM to perform
certain services in addition to its general oversight responsibility, such as:
o providing general management and administrative services to the
Fund;
o establishing the Fund's overall investment strategies;
o recommending subadvisers;
o allocating and, when appropriate, reallocating the Fund's assets
among subadvisers;
o monitoring and evaluating subadviser performance; and
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o oversight of subadviser compliance with each Fund's investment
objective, policies, and restrictions.
Under both the Current Agreement and the New Agreement, KAM, in its discretion,
is to provide advisory services (to the extent allowed under the Manager of
Managers arrangement) through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser and are
under the control of KeyCorp, the indirect parent of KAM, provided that (i) all
such persons 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 KAM. Both the Current Agreement and the New Agreement allow KAM to employ
subadvisers, provided that the Fund shall not pay any additional compensation
for any subadviser and that the Adviser shall be as fully responsible to the
Fund for the acts and omissions of a subadviser as it is for its own acts and
omissions. KAM, however, in the agreement with the subadviser, may obtain
indemnification from the subadviser for any liability arising from the
subadviser's actions or inactions.
The New Agreement authorizes KAM to make investment decisions with respect to
specific securities. Consistent with the Order, however, KAM intends to make
portfolio management decisions only with respect to short-term assets, including
money market securities and repurchase agreements.
OPERATING CONDITIONS
If shareholders approve the New Agreement (effectively authorizing the Manager
of Managers arrangement), KAM must comply with certain conditions that the SEC
imposed in the Order. These conditions affect the governance, administration and
operations of the Victory Portfolios and the Fund if KAM serves as a Manager of
Managers. If shareholders approve the New Agreement, KAM intends to comply with
these conditions, some of which we summarize below:
Initial Shareholder Approval. A "majority of the outstanding voting securities"
of the Fund must approve the Manager of Managers arrangement prior to its
implementation. If shareholders approve the New Agreement, the Fund will satisfy
this requirement.
Shareholder Notification of New Subadvisers. Within 60 days after KAM hires any
new subadviser, or makes any material change in a subadvisory agreement, KAM
will notify Fund shareholders of the new subadvisory arrangements. KAM will send
Fund shareholders the information that is required to be included in a proxy
statement, except with respect to disclosure of fees paid to particular
subadvisers.
Prospectus and Marketing Material Disclosure. The Fund's prospectus must
disclose the existence, substance and effect of the Order. In addition, the Fund
will hold itself out to the public as a "Manager of Managers" with respect to
the Fund.
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Board Composition and Counsel. At all times when the Fund uses a Manager of
Managers structure, a majority of the Board of the Victory Portfolios will not
be "interested persons" as defined in the 1940 Act, of the Victory Portfolios or
of the Fund (the "Independent Trustees"). The Independent Trustees are required
to retain separate "knowledgeable" counsel to represent them. The Independent
Trustees, who now constitute a majority of the entire Board, have retained
separate counsel.
Relationship with Affiliates. KAM may not enter into a subadvisory agreement
with any of its affiliates unless shareholders approve the agreement and the fee
arrangement. In addition, if KAM proposes to change a subadviser with an
affiliated subadviser, the Board, including a majority of the Independent
Trustees, will make a separate finding, reflected in the minutes of the Board's
meeting at which the matter is considered, that the change is in the best
interests of the Fund and its shareholders and does not involve a conflict of
interest from which KAM or the affiliate derives any inappropriate advantage.
Profitability Information to be Provided to the Board. KAM is required to
provide the Trustees at least quarterly with information about KAM's
profitability with respect to its management of the Fund. Whenever a subadviser
to the Fund is hired or terminated, KAM will provide the Trustees with
information showing the expected impact on KAM's profitability.
ADVANTAGES TO THE FUND AND ITS SHAREHOLDERS
KAM believes that the Manager of Managers arrangement provides several potential
advantages to the Fund and its shareholders.
o KAM believes that it has expertise in the selection and
monitoring of subadvisers and in asset allocation among
subadvisers. KAM believes that by analyzing the investment style
of a particular subadviser, and by monitoring the subadviser's
performance and how it adheres to its stated philosophy, KAM will
enhance the Fund's ability to achieve its investment objective.
o KAM believes that as a Manager of Managers, it will be uniquely
suited to quickly retain (subject to the approval of the Board of
the Victory Portfolios) a particular subadviser with expertise in
a particular geographic region or asset class. KAM would be able
to tap the most refined aspects of a specific manager's
investment expertise.
o KAM believes that this arrangement may reduce legal and related
expenses associated with the preparation and printing of proxy
statements and the solicitation of proxies because the Fund will
not have to prepare and solicit proxies each time KAM recommends
adding or terminating a subadviser.
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o KAM believes that this arrangement will enable the Fund to
operate more efficiently. For example, the Fund may be able to
react more quickly to rapid changes in the marketplace by
retaining a new subadviser to manage a new class of assets or a
geographic region than it would if the Fund needed to obtain
shareholder approval for each change.
MODERNIZATION OF THE INVESTMENT ADVISORY AGREEMENT
The New Agreement also clarifies KAM's activities and obligations as investment
adviser of the Fund. The New Agreement specifically acknowledges that the Fund
may place brokerage trades with a broker that is affiliated with KAM, provided
that KAM complies with applicable regulations. The New Agreement authorizes
affiliated brokers to retain commissions they earn from effecting portfolio
transactions on behalf of the Fund and to pay out of such commissions any
compensation due to others in connection with effecting the transaction.
Although KAM does not currently execute portfolio transactions through
affiliates, it may do so in the future. The New Agreement also clarifies the
circumstances under which the Fund may allocate brokerage commissions to pay for
certain research services in "soft dollar" arrangements.
KAM believes that these changes will not materially affect how KAM, or any
subadviser, will manage the Fund in the future or result in additional costs to
shareholders.
CONSIDERATION BY THE BOARD
The Board approved the New Agreement at a meeting held on February 20, 1998.
At the meeting, the Board met with representatives of KAM, who described why KAM
believed that the Manager of Managers arrangement would benefit the Fund and its
shareholders. The Board compared KAM's ability to manage the Fund's portfolio to
KAM's ability to evaluate, select and monitor subadvisers.
The Board considered the fact that the new arrangement would not result in
additional fees to the Fund, and the Board weighed the potential benefits
offered by the proposed Manager of Managers arrangement. The Board also met with
representatives of Indocam, which KAM proposes to retain as the initial
subadviser for the Fund's assets, and reviewed information about Indocam. The
Board had the opportunity to discuss the proposal with its independent counsel.
Based upon KAM's representations and recommendations, the Board, including a
majority of the Independent Trustees, concluded that the New Agreement (and the
Manager of Managers arrangement) was in the best interests of the Fund and its
shareholders. The Board, including a majority of the Independent Trustees, also
approved the appointment of Indocam International Investment Services, S.A. as
the Fund's initial subadviser.
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ADDITIONAL INFORMATION ABOUT KEY ASSET MANAGEMENT
Under the Current Agreement, KAM is entitled to receive a fee calculated as a
percentage of the average daily net assets of the Fund, computed daily and paid
monthly, at the annual rate of 1.10% of average daily net assets. This
contractual fee rate will not change in the New Agreement. Furthermore, KAM, not
the Fund, will pay any subadviser retained by the Fund. Therefore, the Fund will
not bear any increase in the contractual rate of advisory fees.
KAM is a New York corporation that is registered as an investment adviser with
the SEC. KAM is a wholly owned subsidiary of KeyBank National Association, which
is a wholly owned subsidiary of KeyCorp, one of the largest financial services
holding companies in the United States. KAM and its affiliates managed
approximately $60 billion as of March 1, 1998, for numerous clients, including
large corporate and public retirement plans, Taft-Hartley plans, foundations and
endowments, high net-worth individuals, and mutual funds.
The following persons are directors and/or senior officers of KAM: William G.
Spears, Chairman, Chief Operating Officer, and Senior Managing Director; Richard
J. Buoncore, Director, President, Chief Operating Officer, and Senior Managing
Director; Anthony Aveni, Director, Chief Investment Officer, and Senior Managing
Director; William J. Blake, Secretary; Vincent Farrell, Director, Chief
Investment Officer, and Senior Managing Director; Kathleen A. Dennis, Senior
Managing Director; James D. Kacic, Treasurer, Chief Financial Officer, and
Senior Managing Director; Charles G. Crane, Chief Strategist and Senior Managing
Director; Gary R. Martzolf, Director and Senior Managing Director; and Richard
E. Solomon, Director and Senior Managing Director. The business address of each
of the directors and officers is 127 Public Square, Cleveland, Ohio 44114.
Advisory Fees. For the fiscal years ended October 31, 1997, 1996 and 1995, the
investment advisory fees payable by the Fund to KAM (and its predecessors)
amounted to $1,317,383, $1,224,364 and $901,337, respectively of which $0,
$30,428 and $116,464, respectively was voluntarily waived by KAM.
Under a sub-administration agreement, the Fund's administrator (BISYS Fund
Services) pays KAM a fee at the annual rate of up to 0.05% of the Fund's average
daily net assets to perform certain administrative duties for the Fund. KAM's
affiliate, Key Trust Company of Ohio, N.A., serves as custodian to the Fund. As
custodian, Key Trust of Ohio, N.A. provides for safekeeping of the Fund's
investments and cash, settles trades made by the Fund, and is entitled to such
compensation as is decided between the Fund and the custodian from time to time.
Affiliated Transactions. The Fund may execute portfolio transactions through
KAM, but does not acquire portfolio securities issued by, make savings deposits
in, or enter into repurchase or reverse repurchase agreements with KAM or any of
its affiliates.
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ADDITIONAL INFORMATION REGARDING THE BOARD
The Board of the Victory Portfolios now consists of nine members, seven of which
are Independent Trustees. The remaining Trustees, Roger Noall and Leigh A.
Wilson, are considered "interested persons" of the Victory Portfolios. Mr. Noall
is considered an "interested person" of the Victory Portfolios because he serves
as Chairman. Mr. Noall is also an "interested person" of the Victory Portfolios
because he is an "interested person" of KAM by virtue of his employment
relationship with KeyCorp, KAM's parent, and because he is a KeyCorp
stockholder. Mr. Wilson is considered an "interested person" of the Victory
Portfolios because he serves as President of the Victory Portfolios.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Approval of the New Agreement will require the affirmative vote of a "majority
of the outstanding voting securities" of the Portfolio, which, for this purpose,
means the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Fund, or (2) 67% or more of the shares of the Fund present at the
Meeting if more than 50% of the outstanding shares of the Fund are represented
at the Meeting in person or by proxy. If the shareholders of the Fund do not
approve the New Agreement, the Board will take such further action as it may
deem to be in the best interests of the Fund's shareholders.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL
INFORMATION REGARDING INDOCAM INTERNATIONAL INVESTMENT SERVICES, S.A.
KAM has recommended, and the Board approved, Indocam International Investment
Services, S.A. ("IIIS") as a subadviser pursuant to the Manager of Managers
arrangement with respect to all of the Fund's assets (other than short-term debt
securities). KAM does not recommend the appointment of any additional
subadvisers at this time. You are not being asked to approve the retention of
IIIS, nor are you being requested to consider the form of subadvisory agreement
between KAM and IIIS.
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
international 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.
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Indocam has affiliates which are engaged in the brokerage business. The
principal office of IIIS is 9, rue Louis Murat, Paris, France 75008.
IIIS's parent, Credit Agricole, is the third largest banking group in the world
when measured by "tier one" capital. Credit Agricole is owned by 56 cooperative
banks located throughout France. IIIS is not aware of any shareholder who owns
more than 5% of the beneficial interests of Credit Agricole.
Under a Portfolio Management Agreement between KAM and IIIS, KAM will pay IIIS a
monthly fee calculated at the annual rate of 0.55% of the Fund's average daily
net assets. KAM, as the Manager of Managers, will retain the remainder of the
advisory fee under the New Agreement (0.55% of the Fund's average daily net
assets before any waivers or reimbursement of expenses).
The principal executive officers and directors of IIIS are: 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.
PORTFOLIO MANAGERS. 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 shareholders. Mr. Taze-Bernard,
the lead portfolio manager, has been employed by IIIS (or its affiliates) since
1987 and currently is the Head of Strategy & Asset Allocation of IIIS. Mr.
Ebrahim is the Director and Portfolio Manager of Indocam, Hong Kong. Mr. Ebrahim
has been employed by IIIS (or its affiliates) since 1991. Mr. Le Conte is the
Senior Portfolio Manager responsible for European Equities at IIIS and has been
employed by IIIS (or its affiliates) since 1966. Mr. Kaltenbach is the Head of
Equity Management 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.
OTHER INFORMATION
The Board of Trustees has fixed the close of business on March 20, 1998 as the
record date (the "Record Date") for the determination of the shareholders
entitled to notice of and to vote at the Meeting or any adjournment thereof. As
of that date, there were approximately 7,741,607 outstanding shares of the Fund,
each share being entitled to one vote on each matter to come before the Meeting.
As of the Record Date, the Trustees and executive officers of the Victory
Portfolios as a group beneficially owned less than 1% of all issued and
outstanding shares of the Fund. As of the Record Date, the Fund believes that
SNBOC & Company ("SNBOC") was shareholder of record (but not the beneficial
owner) and possessed sole or shared voting power as a fiduciary, agent or
custodian of 5,667,840.456 (approximately 73%) of the outstanding shares of the
Fund. Accordingly, SNBOC could be deemed to be a controlling person of the Fund
under the 1940 Act. However, SNBOC
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has advised the Fund that it will vote the shares over which it has voting power
in the manner instructed by the customers for which such shares are held or, if
no such instructions are received, in the same proportion as the votes cast by
other shareholders. As of the Record Date, no shareholder beneficially owned 5%
or more of the Fund's shares.
You may receive a copy of the Fund's annual report for the fiscal year ended
October 31, 1997, free of charge, by calling the Fund, toll free, at
1-800-539-3863.
Even if you sign and return the accompanying proxy, you may revoke it by writing
to the Secretary of the Victory Portfolios prior to the Meeting, by delivering a
subsequently dated proxy, or by attending and voting at the Meeting in person.
In addition to the solicitation of proxies by mail, the Fund may use the
services of officers and employees of the Fund, KAM, and BISYS Fund Services,
the Fund's distributor and administrator (none of whom receive any compensation
for that service), to solicit proxies by telephone, telegraph and personal
interview, and may also provide shareholders with a procedure for recording
their votes by telegraph, facsimile, telephone or other electronic means. The
Fund may also hire an agent to solicit proxies. The Fund will pay the costs of
proxy solicitation which we estimate to be $5,000. The Fund may request brokers,
custodians, nominees and fiduciaries to forward proxy material to the beneficial
owners of shares of record. Persons holding shares as nominees will, upon
request, be reimbursed by the Fund for their reasonable expenses incurred in
sending soliciting material to their principals.
If a proxy represents a broker "non-vote" (that is, a proxy from a broker or
nominee indicating that such person has not received instructions from the
beneficial owner or other person entitled to vote shares on a particular matter
with respect to which the broker or nominee does not have discretionary power)
or marked with an abstention (collectively, "abstentions"), the shares
represented thereby will be considered to be present at the meeting for purposes
of determining the existence of a quorum for the transaction of business and
will have the effect of a vote against the proposal.
Voting Information and Discretion of the Persons Named as Proxies. While the
Meeting is called to act upon any other business that may properly come before
it, as of the date of this Proxy Statement, the only business which management
intends to present or knows that others will present is the business mentioned
in the Notice of Meeting. If any other matters lawfully come before the Meeting,
and in all procedural matters at the Meeting, the persons named as proxies (or
their substitutes) intend to vote in accordance with their best business
judgment.
12
<PAGE>
At the time any session of the Meeting is called to order, if a quorum is not
present, in person or by proxy, the persons named as proxies may vote those
proxies which have been received to adjourn the Meeting to a later date. In the
event that a quorum is present but sufficient votes in favor of the proposal
have not been received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies with
respect to the proposal. All such adjournments will require the affirmative vote
of a majority of the shares present in person or by proxy at the session of the
Meeting to be adjourned. In such event, the persons named as proxies will vote
those proxies which they are entitled to vote in favor of the proposal, in favor
of such an adjournment, and will vote those proxies required to be voted against
the proposal, against any such adjournment. Any adjourned session or sessions
may be held within a reasonable period after the date set for the original
Meeting without the necessity of further notice.
Administrator and Principal Underwriter. BISYS Fund Services, 3435 Stelzer Road,
Columbus, Ohio 43219, serves as the administrator of the Fund and as the
principal underwriter of its shares.
Submission of Proposals for the Next Annual Meeting. Under the Victory
Portfolio's Trust Instrument and By-Laws, annual meetings of shareholders are
not required to be held unless necessary under the 1940 Act (for example, when
fewer than a majority of the Trustees have been elected by shareholders).
Therefore, the Fund does not hold shareholder meetings on an annual basis. A
shareholder proposal intended to be presented at any meeting hereafter called
should be sent to the Fund at 3435 Stelzer Road, Columbus, Ohio 43219-3035, and
must be received by the Fund within a reasonable time before the solicitation
relating thereto is made in order to be included in the notice or proxy
statement related to such meeting. The submission by a shareholder of a proposal
for inclusion in a proxy statement does not guarantee that it will be included.
Shareholder proposals are subject to certain regulations under federal
securities law.
IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE SIGN YOUR PROXY CARD PROMPTLY
AND RETURN IT IN THE ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND DELAY.
NO POSTAGE IS NECESSARY.
By Order of the Board of Trustees,
Michael J. Sullivan
Secretary
13
<PAGE>
EXHIBIT A
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 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.
Exh A-1
<PAGE>
(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 Managers 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
(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
Exh A-2
<PAGE>
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 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.
Exh A-3
<PAGE>
(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 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.
Exh A-4
<PAGE>
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
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
Exh A-5
<PAGE>
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.
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.
Exh A-6
<PAGE>
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
Exh A-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.
Exh A-8
<PAGE>
<TABLE>
<CAPTION>
THE VICTORY PORTFOLIOS
THE INTERNATIONAL GROWTH FUND
PROXY
SPECIAL MEETING OF SHAREHOLDERS SCHEDULED TO BE
HELD MAY 15, 1998
<S> <C>
THE VICTORY PORTFOLIOS Please refer to the Proxy Statement for
127 PUBLIC SQUARE a discussion of these matters. THE
CLEVELAND, OH 44114 UNDERSIGNED CONSTITUTES AND APPOINTS
KAREN F. HABER AND MICHAEL J. SULLIVAN
OR EITHER OR THEM, THE ATTORNEYS AND
PROXIES OF THE UNDERSIGNED WITH FULL
POWER OF SUBSTITUTION IN EACH OF THEM,
BISYS FUND SERVICES TO ATTEND AND TO VOTE AS DIRECTED ALL
ATTN FUND ADMINISTRATION THE VOTES THE UNDERSIGNED IS ENTITLED TO
3435 STELZER RD CAST AT THE SPECIAL MEETING OF
COLUMBUS, OH 43219-6004 SHAREHOLDERS OF THE VICTORY PORTFOLIOS
(THE "TRUST") TO BE HELD AT 3435 STELZER
ROAD, COLUMBUS, OHIO ON MAY 15, 1998, AT
8:30 A.M. EASTERN TIME, AND AT ANY AND
ALL ADJOURNMENTS THEREOF. THE
UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT
OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND THE ACCOMPANYING PROXY
STATEMENT AND HEREBY REVOKES ANY PRIOR
PROXIES. To vote, mark an x in blue or
black ink on the proxy card below. THIS
PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE TRUST. The
attorneys and proxies are authorized and
directed to vote as directed on the
matter or proposal to be voted upon when
submitted for the approval of the
shareholders of the International Growth
Fund (the "Fund"). If this proxy is
executed and returned prior to the
meeting, but no direction is given, the
votes will be cast "FOR" the approval of
the new Investment Advisory Agreement
and in the discretion of the proxy
holder on any other matter that may
properly come before the meeting or any
adjournment thereof.
IMPORTANT NOTICE: Please take a moment now to vote
your shares. You may vote directly over the phone
by calling 1-800-733-8481 (EXT. 469). ACCOUNT NUMBER:
Representatives are available from 9:00 a.m. to SHARES:
11:00 p.m. Eastern time. You may also fax your CONTROL NO:
ballot to 1-800-733-1885 or return it in the
enclosed postage paid envelope.
</TABLE>
Your vote is very important. Thank you for your prompt action.
<TABLE>
<CAPTION>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS
===========================================================================================================
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS ONLY VALID WHEN SIGNED AND DATED
- -----------------------------------------------------------------------------------------------------------
The International Growth Fund
Please sign exactly as your name appears on this card. When account is joint
tenants, all should sign. When signing as executor, administrator, trustee or
guardian, please give title. If a corporation or partnership, sign entity's name
and by authorized person.
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
<S> <C> <C> <C>
1. To approve a new Investment Advisory Agreement between the Trust, [_] [_] [_]
on behalf of the Fund, and the current adviser to the Fund, Key
Asset Management Inc., pursuant to which Key Asset Management Inc.
will employ a "Manager of Managers" structure.
2. The Transaction of such other business as may be properly brought [_] [_] [_]
before the meeting.
------------------------
Signature Date Signature (Joint Owners) Date
- -----------------------------------------------------------------------------------------------------------
</TABLE>
