As filed, via EDGAR, with the Securities and Exchange Commission on June 9, 1998
File No.: 333-42837
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. __
[X] Post-Effective Amendment No. 1
(check appropriate box or boxes)
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THE VICTORY PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
1-800-539-3863
(Area Code and Telephone Number)
3435 Stelzer Road, Columbus, Ohio 43219-3035
(Address of Principal Executive Offices)
-------------------
Michael Sullivan
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
(Name and address of agent for service)
Copies to:
William J. Blake
Key Asset Management Inc.
127 Public Square
Cleveland, Ohio 44114
Jay G. Baris
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
-------------------
It is proposed that this filing will become effective immediately upon filing
pursuant to Rule 485(b).
<PAGE>
THE VICTORY PORTFOLIOS
Cross Reference Sheet
Items Required by Form N-14
PART A
N-14
THE REGISTRANT HAS FILED THE INFORMATION IN THE PROSPECTUS/PROXY STATEMENT IN
THE DEFINITIVE FILING OF ITS REGISTRATION STATEMENT ON FORM N- 14 PURSUANT TO
RULE 497(B) ON FEBRUARY 12, 1998, (ACCESSION NUMBER 0000922423- 98-000129) AND
ARE HEREBY INCORPORATED HEREIN BY REFERENCE. THE REGISTRANT HAS NOT AMENDED ITS
PROSPECTUS/PROXY STATEMENT.
<TABLE>
<CAPTION>
Item No. Item Caption Prospectus Caption
<S> <C> <C>
1. Beginning of Registration Statement Cross Reference Sheet;
and Outside Front Cover Page of Front Cover Page.
Prospectus
2. Beginning and Outside Back Cover
Page of Prospectus Table of Contents.
3. Fee Table, Synopsis Synopsis; Comparison of the Funds'
Information and Risk Factors Investment Objectives, Policies, and
Risks; Comparison of Fees and
Expenses.
4. Information About the Transaction Reasons for the Transaction;
Information about the Transaction.
5. Information About the Registrant Comparison of the Funds' Investment
Objectives, Policies, and Risks;
Information about the Funds;
Additional Information.
6. Information About the Company Comparison of the Funds'
Being Acquired Investment Objectives, Policies, and
Risks ; Information about the
Funds; Additional Information.
7. Voting Information Information Relating to Voting
Matters.
8. Interest of Certain Persons and Information About the Funds.
Experts
9. Additional Information Required Inapplicable.
for Reoffering by Persons Deemed
to be Underwriters
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B
N-14 Statement of Additional
Item No. Item Caption Information Caption
<S> <C> <C>
10. Cover Page Cover Page.
11. Table of Contents Cover Page.
12. Additional Information About
the Registrant Statement of Additional Information
of The Victory Portfolios dated
March 1, 1997.
13. Additional Information About
the Company Being Acquired Inapplicable.
14. Financial Statements Audited annual financial statements
of The Victory Portfolios as of
October 31, 1997; Audited annual
financial statements of Key Mutual
Funds as of November 30, 1997; Pro-forma
combined financial statements of the
Victory Stock Index Fund, Victory
Special Growth Fund, Victory
Diversified Stock Fund, Key Stock
Index Fund, SBSF Capital Growth
Fund, and SBSF Fund, as of
October 31, 1997.
PART C
N-14
Item No. Item Caption Part C Caption
15. Indemnification Indemnification.
16. Exhibits Exhibits.
17. Undertakings Undertakings.
</TABLE>
<PAGE>
EXPLANATORY NOTE
THE PURPOSE OF THIS FILING IS TO FILE OPINIONS OF KRAMER, LEVIN, NAFTALIS &
FRANKEL AND OPINIONS OF MORRIS, NICHOLS, ARSCHT & TUNNELL, ALL AS TO THE
LEGALITY OF THE SECURITIES BEING ISSUED, AS WELL AS OPINIONS OF KRAMER, LEVIN,
NAFTALIS & FRANKEL SUPPORTING THE TAX CONSEQUENCES OF THE REORGANIZATION AS
UNDERTAKEN IN PRE-EFFECTIVE AMENDMENT NO. 2 AS FILED ELECTRONICALLY ON FEBRUARY
3, 1998, ACCESSION NUMBER 0000922423-98- 000095. THE PROSPECTUS/PROXY STATEMENT
HAS NOT BEEN AMENDED AND IS INCORPORATED BY REFERENCE HEREIN IN ITS ENTIRETY.
THE STATEMENT OF ADDITIONAL INFORMATION IS BEING FILED SOLELY FOR THE PURPOSE OF
INCLUDING THE DATE OF THE STATEMENT OF ADDITIONAL INFORMATION THAT WAS
INADVERTENTLY DELETED FROM THE DEFINITIVE VERSION FILED PURSUANT TO RULE 497(B)
ON FEBRUARY 12, 1998, (ACCESSION NUMBER 0000922423-98-000129). THIS FILING ALSO
INCLUDES UPDATING ITEM 16 TO PART C.
<PAGE>
Part C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
THE VICTORY PORTFOLIOS
PART C
Item 15. Indemnification.
Article X, Section 10.02 of the Registrant's Delaware Trust Instrument,
incorporated herein as Exhibit 1 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 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
<PAGE>
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 Registrant'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 7(a) hereto,
Section 28 of the Custody Agreement incorporated by reference as Exhibit 9
hereto, Section 5 of the Registrant's Fund Accounting Agreement dated May 31,
1995 between the Registrant and BISYS Fund Services Ohio, Inc. which was filed
as Exhibit 9(d) to Post-Effective Amendment No. 22 of the Registrant's
Registration Statement on Form N-1A filed on August 28, 1995, and Section 7 of
the Transfer Agency and Service Agreement dated July 12, 1996 between the
Registrant and State Street Bank and Trust Company filed as Exhibit 6(a) to
Post-Effective Amendment No. 30 to the Registrant's Registration Statement on
Form N-1A. Registrant has obtained from a major insurance carrier a trustee's
and officer's 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 of
Registrant pursuant to the foregoing provisions, or 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 Investment
Company Act of 1940, as amended, and will be governed by the final adjudication
of such issue.
<PAGE>
Item 16. Exhibits.
Exhibit No.
EX-99.1 Delaware Trust Instrument dated December 6, 1995 is
incorporated herein by reference to Exhibit 99.B1(a) 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.
EX-99.2 By-Laws adopted December 6, 1995 are incorporated herein by
reference to Exhibit 99.B2 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.
EX-99.3 Inapplicable.
EX-99.4 Agreement and Plan of Reorganization and Liquidation filed
as Exhibit A to Part A incorporated herein by reference to
Registrant's Pre-Effective Amendment No. 1 to Form N-14
filed electronically on January 30, 1998, accession number
0000922423-98-000087.
EX-99.5 Inapplicable.
EX-99.6(a) Investment Advisory Agreement dated as of March 1, 1997,
between the Registrant and Key Asset Management Inc. is
incorporated herein by reference to Exhibit 99.B(5)(a) 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.
EX-99.7(a) Distribution Agreement dated June 1, 1996 between the
Registrant and BISYS Fund Services Limited Partnership is
incorporated herein by reference to Exhibit 99.B6(a) 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.
EX-99.7(b) Form of Broker-Dealer Agreement is incorporated herein by
reference to Exhibit 99.B6(b) 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.
EX-99.8 Inapplicable.
EX-99.9(a) Amended and Restated Mutual Fund Custody Agreement dated May
24, 1995 by and between the Registrant and Key Trust Custody
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.
EX-99.9(b) Custody Agreement dated May 31, 1996 between Morgan Stanley
Trust Company and Key Trust Company of Ohio is incorporated
herein by reference to Exhibit 99.B8(c) 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.
<PAGE>
EX-99.10(a) Distribution and Service Plan dated June 5, 1995 for The
Victory Portfolios Class A Shares of 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
is incorporated herein by reference to Exhibit 15(a) to
Post-Effective Amendment No. 31 to Registrant's Registration
Statement or Form N-1A filed electronically on February 7,
1997, accession number 0000922423-97-000066.
EX-99.10(b) Distribution Plan dated June 5, 1995 for Class B Shares of
National Municipal 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 Investor Shares of the U.S. Government
Obligations Fund is incorporated herein by reference to
Exhibit 15(b) to Post-Effective Amendment No. 27 to
Registrant's Registration Statement on Form N-1A filed
electronically on January 31, 1996, accession number
0000922423-96-000047.
EX-99.B10(c) Amended and Restated Rule 18f-3 Multi-Class Plan effective
as of December 3, 1997 is filed herewith.
EX-99.11(a) Opinions of Kramer, Levin, Naftalis & Frankel as to the
legality of the securities being issued are filed herewith.
EX-99.11(b) Opinions of Morris, Nichols, Arscht & Tunnell as to the
legality of the securities being issued are filed herewith.
EX-99.12 Opinions of Kramer, Levin, Naftalis & Frankel as to tax
consequences are filed herewith.
EX-99.13 Inapplicable.
EX-99.14(a) Consents of Coopers & Lybrand L.L.P. is incorporated herein
by reference to Exhibit 99.14(a) to Pre-Effective Amendment
No. 2 to Registrant's Registration Statement on Form N-14
filed electronically on February 3, 1998, accession number
0000922423-98-000095.
EX-99.14(b) Consent of Price Waterhouse is incorporated herein by
reference to Exhibit 99.14(b) to Pre-Effective Amendment No.
2 to Registrant's Registration Statement on Form N-14 filed
electronically on February 3, 1998, accession number
0000922423-98-000095.
EX-99.14(c) Consent of Kramer, Levin, Naftalis & Frankel is incorporated
herein by reference to Exhibit 99.14(c) to Pre-Effective
Amendment No. 2 to Registrant's Registration Statement on
Form N-14 filed electronically on February 3, 1998,
accession number 0000922423-98-000095.
EX-99.15 Inapplicable.
EX-99.16(a) Powers of Attorney of Leigh A. Wilson, Edward P. Campbell,
Harry Gazelle, Thomas F. Morrissey, H. Patrick Swygert and
Eugene J. McDonald are incorporated herein by reference to
Exhibit 99.B19(b) 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.
EX-99.16(b) Powers of Attorney of Roger Noall and Frank A. Weil are
incorporated herein by reference to Exhibit 99.16(b) to
Pre-Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-14 filed electronically on February 3,
1998, accession number 0000922423-98-000095.
EX-99.17(a) Form of Proxy Card is incorporated herein by reference to
Exhibit 99.17(a) to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-14 filed
electronically on February 3, 1998, accession number
0000922423-98-000095.
EX-99.17(b) Registrant's Registration Statement Part A and Part B
relating to the Victory Stock Index Fund, Victory Special
Growth Fund, and Victory Diversified Stock Fund is
incorporated herein by reference to Post-Effective Amendment
No. 31 to the
<PAGE>
Registrant's Registration Statement on Form N-1A as filed
electronically on February 7, 1997, accession number
0000922423-97-000066, as supplemented by Post-Effective
Amendment No. 32 to the Registrant's Registration Statement
on Form N-1A as filed electronically on June 27, 1997,
accession number 0000922423-97-000530, as supplemented on
August 29, 1997, accession number 0000922423-97-000710, and
as supplemented on December 1, 1997, accession number
0000922423-97-000986.
EX-99.17(c) Registration Statement of the SBSF Funds, Inc. (d/b/a Key
Mutual Funds) Part A and Part B, including audited financial
statements as of November 30, 1996 are incorporated herein
by reference to Post-Effective Amendment No. 30 to Key
Mutual Fund's Registration Statement on Form N-1A as filed
electronically on March 28, 1997, accession number
0000950152-97-002413, as supplemented on August 29, 1997,
accession number 0000925421-97-000046, and on October 1,
1997 accession number 0000925421-97-000054.
EX-99.17(d) Audited annual reports of Key Mutual Funds relating to the
Key Stock Index Fund, accession number
00000906197-98-000011, Key Money Market Mutual Fund,
accession number 0000906197-98-000010, KeyChoice Growth
Fund, KeyChoice Income and Growth Fund, and KeyChoice
Moderate Growth Fund, accession number 0000906197-98-000012,
SBSF Fund, SBSF Convertible Securities Fund, and SBSF
Capital Growth Fund, accession number 0000906197- 98-000013,
as of November 30, 1997 are incorporated herein by reference
to Key Mutual Funds' Form N-30D filings as filed
electronically on January 28, 1998.
EX-99.17(e) Audited annual report of The Victory Portfolios relating to
all of the portfolios as of October 31, 1997 is incorporated
herein by reference to The Victory Portfolios' Form N-30D as
filed electronically on December 24, 1997, accession number
0000906197-97-000068.
EX-99.17(f) Unaudited semi-annual report of Key Mutual Funds relating to
the SBSF Fund and SBSF Capital Growth Fund as of May 31,
1997 is incorporated herein by reference to Key Mutual
Funds' Form N-30D as filed electronically on July 31, 1997,
accession number 0000906197-97-000047.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a
part of this Registration Statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the Securities
Act [17 CFR 230.145c], the reoffering prospectus will contain the
information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Post-Effective Amendment to the Registration Statement on Form
N-14 to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of New York and State of New York, the 9th day of June, 1998.
THE VICTORY PORTFOLIOS
(Registrant)
By: /s/Leigh A. Wilson
--------------------
Leigh A. Wilson
President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-14 has been signed by the following persons in the
capacities indicated on the 9th day of June, 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
- ------------------------
Edward P. Campbell
* Trustee
- ------------------------
Harry Gazelle
* Trustee
- ------------------------
Thomas F. Morrisey
* 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 Form N-14 on February 3, 1998
[LETTERHEAD OF KRAMER, LEVIN, NAFTALIS & FRANKEL]
March 16, 1998
The Key Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219-3035
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form N-14,
Registration No. 333-42837, under the Securities Act of 1933, as amended (the
"Registration Statement"), filed with the Securities and Exchange Commission
(the "Commission") on December 19, 1997, as amended, registering shares of
beneficial interest, par value $.001 (the "Shares"), of The Victory Portfolios
(the "Trust"), a Delaware business trust. The Shares are to be issued in
connection with an Agreement and Plan of Reorganization and Liquidation dated as
of March 2, 1998 (the "Agreement") whereby all of the then-existing assets of
Key Stock Index Fund, SBSF Capital Growth Fund and SBSF Fund (individually, each
such investment portfolio being an "Acquired Portfolio" and collectively, the
"Acquired Portfolios"), portfolios of the SBSF Funds, Inc. d/b/a Key Mutual
Funds, a Maryland corporation (the "Company"), for itself and on behalf of each
of the Acquired Portfolios, will be transferred to a corresponding series of the
Trust, Victory Stock Index Fund, Victory Special Growth Fund, and Victory
Diversified Stock Fund (individually, each such investment portfolio being an
"Acquiring Fund" and collectively, the "Acquiring Funds"), in exchange for (i)
the assumption of all the obligations and liabilities of the Acquired Portfolios
and (ii) the issuance and delivery to each Acquired Portfolio of full and
fractional shares of the Acquiring Fund's Shares (as described in the
Agreement); such Shares will be distributed by the Acquired Portfolio pro rata
to its shareholders upon its
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
The Key Mutual Funds
March 16, 1998
Page 2
liquidation. The Agreement was approved by the Board of Directors of the Company
on December 2, 1997, by the Board of Trustees of the Trust on December 3, 1997,
and by the shareholders of the Acquired Portfolios at a special meeting of
shareholders on March 6, 1998 called for that purpose.
We have reviewed the Trust's Certificate of Trust, Trust Instrument,
By-Laws, resolutions of the Trustees, and Registration Statement (including
exhibits thereto). We have also made such inquiries and have examined originals,
certified copies or copies otherwise identified to our satisfaction of such
documents, records and other instruments as we have deemed necessary or
appropriate for the purposes of this opinion. For purposes of such examination,
we have assumed the genuineness of all signatures on original documents and the
conformity to the original documents of all copies submitted. In addition, we
have assumed that the representations to be made as of the closing date by the
Trust will be made by such parties in a form acceptable to us and that the
Trust's activities in connection with the Agreement and the transactions
contemplated therein have been and will be conducted in the manner provided in
such documents and as set forth herein.
The opinions set forth below are subject to the qualifications that the
indemnification and contribution provisions of the Agreement may be
unenforceable as a matter of public policy.
We are members of the Bar of the State of New York and do not hold
ourselves out as experts as to the law of any other state or jurisdiction. As to
matters of Delaware law, we have relied upon the opinion of Morris, Nichols,
Arsht & Tunnell (copy attached) and our opinion is qualified by the
qualifications contained therein. Based upon and subject to the foregoing and
provided that the reorganization occurs in accordance with the terms of the
Agreement, we are of the opinion that, and so advise you as follows:
(1) The Trust is a business trust duly created and validly existing
under the laws of the State of Delaware and is duly registered as an
open-end, management investment company under the Investment Company
Act of 1940, as amended, and each Acquiring Fund is a validly existing
series of shares of the Trust and, under the Trust Instrument, the
shares of each Acquiring Fund represent equal beneficial interests in
the net assets of such Acquiring Fund;
(2) The execution, delivery and performance of the Agreement will not
result in a violation of the Trust's Certificate of Trust, Trust
Instrument, or By-Laws, each as amended to date;
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
The Key Mutual Funds
March 16, 1998
Page 3
(3) The execution, delivery and performance of the Agreement has been
duly authorized by all necessary action on the part of the Trust and
each Acquiring Fund, and the Agreement has been duly executed and
delivered by the Trust and is a valid and binding obligation of the
Trust and each Acquiring Fund, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights or
remedies and to general equity principles (regardless of whether
considered at a proceeding in law or equity), equitable defenses or
waivers and the discretion of the court before which any proceeding for
specific performance, injunctive and other forms of equitable relief
may be brought; and
(4) The Acquiring Fund Shares to be issued and delivered pursuant to
the terms of the Agreement have been duly authorized as of the closing
date of the reorganization, and, when so issued and delivered, will be
validly issued, fully paid and non-assessable (except as disclosed in
the Acquiring Fund's then current Prospectus and Statement of
Additional Information).
This opinion is solely for your information and is not to be quoted in
whole or in part, summarized or otherwise referred to, nor is it to be filed
with or supplied to or relied upon by any governmental agency or other person
without the prior written consent of this firm. This opinion is as of the date
hereof. We disclaim any responsibility to update or supplement this opinion to
reflect any events or state of facts which may hereafter come to our attention,
or any changes in statutes or regulations or any court decisions which may
hereafter occur.
Very truly yours,
/s/ Kramer, Levin, Naftalis & Frankel
<PAGE>
[LETTERHEAD OF KRAMER, LEVIN, NAFTALIS & FRANKEL]
March 23, 1998
The Key Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219-3035
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form N-14,
Registration No. 333-42837, under the Securities Act of 1933, as amended (the
Registration Statement ), filed with the Securities and Exchange Commission (the
Commission ) on December 19, 1997, as amended, registering shares of beneficial
interest, par value $.001 (the Shares ), of The Victory Portfolios (the Trust ),
a Delaware business trust. The Shares are to be issued in connection with an
Agreement and Plan of Reorganization and Liquidation dated as of March 2, 1998
(the "Agreement") whereby all of the then-existing assets of the KeyChoice
Growth Fund, KeyChoice Income and Growth Fund, KeyChoice Moderate Growth Fund,
Key Money Market Mutual Fund, and SBSF Convertible Securities Fund
(individually, each such investment portfolio being an "Acquired Portfolio" and
collectively, the "Acquired Portfolios"), portfolios of the SBSF Funds, Inc.
d/b/a Key Mutual Funds, a Maryland corporation (the "Company"), for itself and
on behalf of each of the Acquired Portfolios, will be transferred to a
corresponding series of the Trust, Victory LifeChoice Growth Investor Fund,
Victory LifeChoice Conservative Investor Fund, Victory LifeChoice Moderate
Investor Fund, Victory Federal Money Market Fund, and Victory Convertible
Securities Fund (individually, each such investment portfolio being an
"Acquiring Fund" and collectively, the "Acquiring Funds"), in exchange for (i)
the assumption of all the obligations and liabilities of the Acquired Portfolios
and (ii) the issuance
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
The Key Mutual Funds
March 23, 1998
Page 2
and delivery to each Acquired Portfolio of full and fractional shares of the
Acquiring Fund's Shares (as described in the Agreement); such Shares will be
distributed by the Acquired Portfolio pro rata to its shareholders upon its
liquidation. The Agreement was approved by the Board of Directors of the Company
on December 2, 1997, by the Board of Trustees of the Trust on December 3, 1997,
and by the shareholders of the Acquired Portfolios at a special meeting of
shareholders on March 6, 1998 called for that purpose.
We have reviewed the Trust's Certificate of Trust, Trust Instrument,
By-Laws, resolutions of the Trustees, and Registration Statement (including
exhibits thereto). We have also made such inquiries and have examined originals,
certified copies or copies otherwise identified to our satisfaction of such
documents, records and other instruments as we have deemed necessary or
appropriate for the purposes of this opinion. For purposes of such examination,
we have assumed the genuineness of all signatures on original documents and the
conformity to the original documents of all copies submitted. In addition, we
have assumed that the representations to be made as of the closing date by the
Trust will be made by such parties in a form acceptable to us and that the
Trust's activities in connection with the Agreement and the transactions
contemplated therein have been and will be conducted in the manner provided in
such documents and as set forth herein.
The opinions set forth below are subject to the qualifications that
the indemnification and contribution provisions of the Agreement may be
unenforceable as a matter of public policy.
We are members of the Bar of the State of New York and do not hold
ourselves out as experts as to the law of any other state or jurisdiction. As to
matters of Delaware law, we have relied upon the opinion of Morris, Nichols,
Arsht & Tunnell (copy attached) and our opinion is qualified by the
qualifications contained therein. Based upon and subject to the foregoing and
provided that the reorganization occurs in accordance with the terms of the
Agreement, we are of the opinion that, and so advise you as follows:
(1) The Trust is a business trust duly created and validly existing under
the laws of the State of Delaware and is duly registered as an open-end,
management investment company under the Investment Company Act of 1940, as
amended, and each Acquiring Fund is a validly existing series of shares of
the Trust and, under the Trust Instrument, the shares of each Acquiring
Fund represent equal beneficial interests in the net assets of such
Acquiring Fund;
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
The Key Mutual Funds
March 23, 1998
Page 3
(2) The execution, delivery and performance of the Agreement will not
result in a violation of the Trust's Certificate of Trust, Trust
Instrument, or By-Laws, each as amended to date;
(3) The execution, delivery and performance of the Agreement has been duly
authorized by all necessary action on the part of the Trust and each
Acquiring Fund, and the Agreement has been duly executed and delivered by
the Trust and is a valid and binding obligation of the Trust and each
Acquiring Fund, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights or remedies and to general
equity principles (regardless of whether considered at a proceeding in law
or equity), equitable defenses or waivers and the discretion of the court
before which any proceeding for specific performance, injunctive and other
forms of equitable relief may be brought; and
(4) The Acquiring Fund Shares to be issued and delivered pursuant to the
terms of the Agreement have been duly authorized as of the closing date of
the reorganization, and, when so issued and delivered, will be validly
issued, fully paid and non-assessable (except as disclosed in the Acquiring
Fund's then current Prospectus and Statement of Additional Information).
This opinion is solely for your information and is not to be quoted in
whole or in part, summarized or otherwise referred to, nor is it to be filed
with or supplied to or relied upon by any governmental agency or other person
without the prior written consent of this firm. This opinion is as of the date
hereof. We disclaim any responsibility to update or supplement this opinion to
reflect any events or state of facts which may hereafter come to our attention,
or any changes in statutes or regulations or any court decisions which may
hereafter occur.
Very truly yours,
/s/Kramer, Levin, Naftalis & Frankel
MORRIS, NICHOLS, ARSHT & TUNNELL
120 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899-1347
March 16, 1998
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY - 10022
Re: The Victory Portfolios
Ladies and Gentlemen:
We have acted as special Delaware counsel to The Victory Portfolios, a
Delaware business trust (the "Trust"), in connection with certain matters
relating to the creation of the Trust and the execution, delivery and
performance by the Trust of that certain Agreement and Plan of Reorganization
and Liquidation dated as of March 2, 1998 (the "Agreement and Plan") among SBSF
Funds, Inc. for itself and on behalf of each of its existing investment
portfolios identified by Schedule A thereto (each individually a "Portfolio" and
collectively, the "Portfolios") and the Trust for itself and on behalf of each
of its existing investment portfolios set forth on Schedule A thereto (each
individually a "Fund" and collectively the'"Funds"). For purposes of this
opinion, three of the Portfolios: Key Stock Index Fund, SBSF Capital Growth Fund
and SBSF Fund are referred to herein collectively as the "Acquired Portfolios"
and each individually as an "Acquired Portfolio" and three of the Funds: Victory
Stock Index Fund, Victory Special Growth Fund, Victory Diversified Stock Fund
are referred to herein collectively as the "Acquiring Funds" and each
individually as an "Acquiring Fund". Capitalized terms used herein and not
otherwise herein defined are used as defined in the Trust Instrument of the
Trust dated December 6, 1995 as amended by an Addendum to Trust Instrument dated
as of February 19, 1997 and a Certificate of Amendment to Trust Instrument dated
as of October 23, 1997 (as so amended, the "Governing Instrument").
We understand that, pursuant to the Agreement and Plan and subject to
the conditions set forth therein, Shares of each of the Funds will be
distributed to the Shareholders of each of the Portfolios in connection with the
liquidation and termination of the Portfolios.
In rendering this opinion, we have examined copies of the following
documents, each in the form provided to us: the Certificate of Trust of the
Trust as filed in the Office of the Secretary of State of the State of Delaware
(the "Recording Office") on December 21, 1995
<PAGE>
Kramer, Levin, Naftalis & Frankel
March 16, 1998
Page 2
(the "Certificate"); the Governing Instrument; the Bylaws of the Trust; certain
resolutions of the Trustees of the Trust including resolutions dated October 22,
1997 relating to the establishment of certain of the Funds and resolutions dated
December 3, 1997 relating to the approval and authorization of the Agreement and
Plan by the Trustees of the Trust and to the change of name of certain of the
Funds; the Agreement and Plan; Post-Effective Amendment No. 26 to the
Registration Statement on Form N-lA of The Victory Portfolios, a Massachusetts
business trust and the predecessor to the Trust (the "Predecessor Trust") by
which the Trust adopted such Registration Statement and the Predecessor Trust's
Notification of Registration and Registration Statement under the Investment
Company Act of 1940, as filed with the Securities and Exchange Commission on
December 28, 1995; the Trust's Registration Statement on Form N-14 as filed with
the Securities and Exchange Commission on December 19, 1997 to which the
Agreement and Plan is attached as an exhibit (the "Registration Statement"); a
certificate of the Trust dated on or about the date hereof; and a certification
of good standing of the Trust obtained as of a recent date from the Recording
office. In such examinations, we have assumed the genuineness of all signatures,
the conformity to original documents of all documents submitted to us as copies
or drafts of documents to be executed, and the legal capacity of natural persons
to complete the execution of documents. We have further assumed for purposes of
this opinion: (i) except to the extent addressed in our opinion in paragraph 3
below relating to the due authorization by the Trust of the execution, delivery
and performance of the Agreement and Plan, the due authorization, execution and
delivery by, or on behalf of, each of the parties thereto of the
above-referenced agreements, instruments, certificates and other documents, and
of all documents contemplated by the Governing Instrument and applicable
resolutions of the Trustees to be executed by investors desiring to become
Shareholders; (ii) the satisfaction of all conditions precedent to the issuance
of Shares pursuant to the Agreement and Plan and compliance with all other
terms, conditions and restrictions set forth in the Agreement and Plan and the
Governing Instrument and all applicable resolutions of the Trustees in
connection with the issuance of Shares; (iii) that appropriate notation of the
names and addresses of, the number of Shares held by, and the consideration paid
by, Shareholders will be maintained in the appropriate registers and other books
and records of the Trust in connection with the issuance or transfer of Shares;
(iv) that, subsequent to the filing of the Certificate, no event has occurred,
or prior to the issuance of Shares pursuant to this Agreement and Plan will
occur, that would cause a termination or dissolution of the Trust under Sections
11.04 or 11.05 of the Governing Instrument; (v) that the activities of the Trust
have been and will be conducted in accordance with the terms of the Governing
Instrument and the Delaware Act; (vi) that the post-effective amendment to the
Trust's Registration Statement form N-lA relating to the registration of shares
<PAGE>
Kramer, Levin, Naftalis & Frankel
March 16, 1998
Page 3
in the Federal Money Market Fund (Investor Class and Select Class), the
Convertible Securities Fund, the KeyChoice Growth Fund, the KeyChoice Moderate
Growth Fund, and the KeyChoice Income and Growth Fund has become effective under
the Securities Act of 1933, as amended; (vii) that the form of the Agreement and
Plan attached as an exhibit to the Registration Statement is the form presented
to the Trustees of the Trust for approval and that the final form of the
Agreement and Plan is in substantially the form presented to the Trustees of the
Trust for approval; and (viii) that each of the documents examined by us is in
full force and effect and has not been amended, supplemented or otherwise
modified except as herein referenced. No opinion is expressed herein with
respect to the requirements of, or compliance with, federal or state securities
or blue sky laws. Further, we express no opinion on the sufficiency or accuracy
of the Registration Statement, or any other registration or offering
documentation relating to the Trust or the Shares. As to any facts material to
our opinion, other than those assumed, we have relied without independent
investigation on the above-referenced documents and on the accuracy, as of the
date hereof, of the matters therein contained.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that:
1. The Trust is a duly created and validly existing business trust in
good standing under the laws of the State of Delaware. Each Acquiring Fund is a
validly existing Series of the Trust and, under the Governing Instrument, the
Shares of each Acquiring Fund represent equal beneficial interests in the net
assets of such Acquiring Fund.
2. The execution, delivery and performance of the Agreement and Plan by
the Trust will not result in a violation of the Governing Instrument or the
Bylaws of the Trust.
3. The execution, delivery and performance of the Agreement and Plan
have been duly authorized by all necessary action on the part of the Trust on
its own behalf and on behalf of each Acquiring Fund.
4. The Shares of each Acquiring Fund to be issued and delivered
pursuant to the terms of the Agreement and Plan have been duly authorized and,
when duly issued and delivered in accordance with the Agreement and Plan, will
be validly issued, fully paid and non-assessable (except as disclosed in such
Acquiring Fund's then current Prospectus and Statement of Additional
Information).
We understand that you wish to rely on this opinion as to certain
matters of Delaware law in connection with the rendering of your opinion to SBSF
Funds, Inc. d/b/a The Key Mutual Funds relating to the transactions contemplated
hereby and we hereby consent to such reliance. We also consent to the filing of
a copy of this opinion with the Securities and Exchange Commission as an exhibit
to a pre-effective amendment to the Registration Statement.
<PAGE>
Kramer, Levin, Naftalis & Frankel
March 16, 1998
Page 4
In giving this consent, we do not thereby admit that we come within the category
of person whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder. Except as provided in this paragraph, this opinion may
not be relied on by any person or for any purpose without our prior written
consent. This opinion speaks only, as of the date hereof and is based on our
understandings and assumptions as to present facts, and on the application of
Delaware law as the same exists on the date hereof, and we undertake no
obligation to update or supplement this opinion after the date hereof for the
benefit of any person or entity with respect to any facts or circumstances that
may hereafter come to our attention or any changes in facts or law that may
hereafter occur or take effect.
Sincerely,
/s/ MORRIS, NICHOLS, ARSHT & TUNNELL
<PAGE>
MORRIS, NICHOLS, ARSHT & TUNNELL
120 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899-1347
March 23, 1998
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY - 10022
Re: The Victory Portfolios
Ladies and Gentlemen:
We have acted as special Delaware counsel to The Victory Portfolios, a
Delaware business trust (the "Trust"), in connection with certain matters
relating to the creation of the Trust and the execution, delivery and
performance by the Trust of that certain Agreement and Plan of Reorganization
and Liquidation dated as of March 2, 1998 (the "Agreement and Plan") among SBSF
Funds, Inc. for itself and on behalf of each of its existing investment
portfolios identified by Schedule A thereto (each individually a "Portfolio" and
collectively, the "Portfolios") and the Trust for itself and on behalf of each
of its existing investment portfolios set forth on Schedule A thereto (each
individually a "Fund" and collectively the "Funds"). For purposes of this
opinion, five of the Portfolios: SBSF Convertible Securities Fund, Key Money
Market Mutual Fund, KeyChoice Growth Fund, KeyChoice Moderate Growth Fund and
KeyChoice Income and Growth Fund are referred to herein collectively as the
"Acquired Portfolios" and each individually as an "Acquired Portfolio" and five
of the Funds: Victory Convertible Securities Fund, Victory Federal Money Market
Fund, Victory LifeChoice Growth Investor Fund, Victory LifeChoice Moderate
Investor Fund and Victory LifeChoice Conservative Investor Fund are referred to
herein collectively as the "Acquiring Funds" and each individually as an
"Acquiring Fund". Capitalized terms used herein and not otherwise herein defined
are used as defined in the Trust Instrument of the Trust dated December 6, 1995
as amended by an Addendum to Trust Instrument dated as of February 19, 1997 and
a Certificate of Amendment to Trust Instrument dated as of October 23, 1997 (as
so amended, the "Governing Instrument").
We understand that, pursuant to the Agreement and Plan and subject to
the conditions set forth therein, Shares of each of the Funds will be
distributed to the Shareholders of each of the Portfolios in connection with the
liquidation and termination of the Portfolios.
In rendering this opinion, we have examined copies of the following
documents, each in the form provided to us: the Certificate of Trust of the
Trust as filed in the Office of the Secretary of State of the State of Delaware
(the "Recording Office") on December 21, 1995 (the "Certificate"); the Governing
Instrument; the Bylaws of the Trust; certain resolutions of the
<PAGE>
Kramer, Levin, Naftalis & Frankel
March 23, 1998
Page 2
Trustees of the Trust including resolutions dated October 22, 1997 relating to
the establishment of certain of the Funds and resolutions dated December 3, 1997
relating to the approval and authorization of the Agreement and Plan by the
Trustees of the Trust and to the change of name of certain of the Funds; the
Agreement and Plan; Post-Effective Amendment No. 26 to the Registration
Statement on Form N-lA of The Victory Portfolios, a Massachusetts business trust
and the predecessor to the Trust (the "Predecessor Trust") by which the Trust
adopted such Registration Statement and the Predecessor Trust's Notification of
Registration and Registration Statement under the Investment Company Act of
1940, as filed with the Securities and Exchange Commission on December 28, 1995;
the Trust's Registration Statement on Form N-14 as filed with the Securities and
Exchange Commission on December 19, 1997 to which the Agreement and Plan is
attached as an exhibit (the "Registration Statement"); a certificate of the
Trust dated on or about the date hereof; and a certification of good standing of
the Trust obtained as of a recent date from the Recording office. In such
examinations, we have assumed the genuineness of all signatures, the conformity
to original documents of all documents submitted to us as copies or drafts of
documents to be executed, and the legal capacity of natural persons to complete
the execution of documents. We have further assumed for purposes of this
opinion: (i) except to the extent addressed in our opinion in paragraph 3 below
relating to the due authorization by the Trust of the execution, delivery and
performance of the Agreement and Plan, the due authorization, execution and
delivery by, or on behalf of, each of the parties thereto of the
above-referenced agreements, instruments, certificates and other documents, and
of all documents contemplated by the Governing Instrument and applicable
resolutions of the Trustees to be executed by investors desiring to become
Shareholders; (ii) the satisfaction of all conditions precedent to the issuance
of Shares pursuant to the Agreement and Plan and compliance with all other
terms, conditions and restrictions set forth in the Agreement and Plan and the
Governing Instrument and all applicable resolutions of the Trustees in
connection with the issuance of Shares; (iii) that appropriate notation of the
names and addresses of, the number of Shares held by, and the consideration paid
by, Shareholders will be maintained in the appropriate registers and other books
and records of the Trust in connection with the issuance or transfer of Shares;
(iv) that, subsequent to the filing of the Certificate, no event has occurred,
or prior to the issuance of Shares pursuant to this Agreement and Plan will
occur, that would cause a termination or dissolution of the Trust under Sections
11.04 or 11.05 of the Governing Instrument; (v) that the activities of the Trust
have been and will be conducted in accordance with the terms of the Governing
Instrument and the Delaware Act; (vi) that the post-effective amendment to the
Trust's Registration Statement form N-lA relating to the registration of shares
in the Federal Money Market Fund (Investor Class and Select Class), the
Convertible Securities Fund, the KeyChoice Growth Fund, the KeyChoice Moderate
Growth Fund, and the KeyChoice Income and Growth Fund has become effective under
the Securities Act of 1933, as amended; (vii) that the form of the Agreement and
Plan attached as an exhibit to the Registration Statement is the form presented
to the Trustees of the Trust for approval and that the final form of the
Agreement and Plan is in substantially the form presented to the Trustees of the
Trust for approval; and (viii) that each of the documents examined by us is in
full force and effect and has
<PAGE>
Kramer, Levin, Naftalis & Frankel
March 23, 1998
Page 3
not been amended, supplemented or otherwise modified except as herein
referenced. No opinion is expressed herein with respect to the requirements of,
or compliance with, federal or state securities or blue sky laws. Further, we
express no opinion on the sufficiency or accuracy of the Registration Statement,
or any other registration or offering documentation relating to the Trust or the
Shares. As to any facts material to our opinion, other than those assumed, we
have relied without independent investigation on the above-referenced documents
and on the accuracy, as of the date hereof, of the matters therein contained.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that:
1. The Trust is a duly created and validly existing business trust in
good standing under the laws of the State of Delaware. Each Acquiring Fund is a
validly existing Series of the Trust and, under the Governing Instrument, the
Shares of each Acquiring Fund represent equal beneficial interests in the net
assets of such Acquiring Fund.
2. The execution, delivery and performance of the Agreement and Plan by
the Trust will not result in a violation of the Governing Instrument or the
Bylaws of the Trust.
3. The execution, delivery and performance of the Agreement and Plan
have been duly authorized by all necessary action on the part of the Trust on
its own behalf and on behalf of each Acquiring Fund.
4. The Shares of each Acquiring Fund to be issued and delivered
pursuant to the terms of the Agreement and Plan have been duly authorized and,
when duly issued and delivered in accordance with the Agreement and Plan, will
be validly issued, fully paid and non-assessable (except as disclosed in such
Acquiring Fund's then current Prospectus and Statement of Additional
Information).
We understand that you wish to rely on this opinion as to certain
matters of Delaware law in connection with the rendering of your opinion to SBSF
Funds, Inc. d/b/a The Key Mutual Funds relating to the transactions contemplated
hereby and we hereby consent to such reliance. We also consent to the filing of
a copy of this opinion with the Securities and Exchange Commission as an exhibit
to a pre-effective amendment to the Registration Statement. In giving this
consent, we do not thereby admit that we come within the category of person
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder. Except as provided in this paragraph, this opinion may not be relied
on by any person or for any purpose without our prior written consent. This
opinion speaks only, as of the date hereof and is based on our understandings
and assumptions as to present facts, and on the application of Delaware law as
the same exists on the date hereof, and we undertake no obligation to update or
<PAGE>
Kramer, Levin, Naftalis & Frankel
March 23, 1998
Page 4
supplement this opinion after the date hereof for the benefit of any person or
entity with respect to any facts or circumstances that may hereafter come to our
attention or any changes in facts or law that may hereafter occur or take
effect.
Sincerely,
/s/ MORRIS, NICHOLS, ARSHT & TUNNELL
[LETTERHEAD OF KRAMER, LEVIN, NAFTALIS & FRANKEL]
March 16, 1998
Key Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
and
The Victory Portfolios
3435 Stelzer Road
Columbus, Ohio 43219
Ladies and Gentlemen:
This opinion is being furnished to you in connection with the
reorganization (the "Reorganization") of each of three series of SBSF Funds,
Inc., doing business as Key Mutual Funds, a Maryland corporation ("Key," and
each such series, a "Transferor"), into a corresponding series of The Victory
Portfolios, a Delaware business trust ("Victory," and each such series, a
"Transferee"), pursuant to the Agreement and Plan of Reorganization and
Liquidation (the "Reorganization Plan") dated as of March 2, 1998, by and among
Key, for itself and on behalf of each Transferor, and Victory, for itself and on
behalf of each Transferee.
In the Reorganization, each Transferor will transfer substantially all
of its assets to a corresponding Transferee in exchange for stock of such
Transferee and the
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
Key Mutual Funds
and
The Victory Portfolios
March 16, 1998
Page 2
assumption by such Transferee of the liabilities of Transferor/1/. Each
Transferor will distribute the stock of the Transferee received in the
Reorganization pro rata to its shareholders in exchange for their Transferor
stock in complete liquidation of Transferor.
The Transferors and the corresponding Transferees into which they are
reorganizing are as follows:
(1) SBSF Fund into Victory Diversified Stock Fund;
(2) SBSF Capital Growth Fund into Victory Special Growth Fund; and
(3) Key Stock Index Fund into Victory Stock Index Fund.
All capitalized terms used in this opinion and not defined herein have
the respective meanings assigned to them in the Reorganization Plan and the
Combined Prospectus/Proxy Statement included in the registration statement on
Form N-14, as amended, filed by Victory with The Securities and Exchange
Commission on December 19, 1997 (the "Proxy Statement").
For purposes of the opinion set forth below, we have reviewed and
relied upon (i) the Reorganization Plan, (ii) the Proxy Statement, and (iii)
such other documents, records, and instruments as we have deemed necessary or
appropriate as a basis for our opinion. In addition, in rendering our opinion we
have relied upon certain statements and representations, which we have neither
investigated nor verified, made by Key, Victory, and Key Asset Management, Inc.,
the investment adviser to each of the Transferees and Transferors (the
"Certified Representations"), including, inter alia, that with respect to each
Transferor and its corresponding Transferee:
(i) there is no plan or intention by the holders of shares of
Transferor, apart from investment decisions made in the
ordinary course of investing in Transferee, to sell, exchange,
or otherwise dispose of, or reduce the risk of loss relating
to, a number of shares of Transferee stock received in the
Reorganization that would reduce the Transferor shareholders'
ownership of Transferee stock to a
- --------
/1/ Pursuant to section 851(g)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), each Transferor and each Transferee is treated as
a separate corporation. Under Delaware law, ownership interests in a
Transferee constitute shares of beneficial interest. Such interests are
considered stock for federal income tax purposes and are referred to as
"stock" or "shares" in this letter.
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
Key Mutual Funds
and
The Victory Portfolios
March 16, 1998
Page 3
number of shares having a value, as of the date of the
Reorganization, of less than 50 percent of the value of all of
the formerly outstanding stock of Transferor as of the same
date;
(ii) the fair market value of Transferee stock received by each
shareholder of Transferor will be approximately equal to the
fair market value of the Transferor stock surrendered in the
Reorganization;
(iii) each of Transferor and Transferee is qualified as a regulated
investment company, as defined in section 851 of the Code; and
(iv) Transferee will acquire at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair
market value of the gross assets held by Transferor
immediately prior to the Reorganization, calculated in
accordance with the relevant provisions of Rev. Proc. 77-37,
1977-2 C.B. 568, as amended.
We have also obtained such additional information and representations
as we have deemed relevant and necessary through consultation with the officers
and directors of Key and Victory, as well as with other professionals engaged by
them. We have assumed, with your consent, that all documents reviewed by us are
originals or photocopies that faithfully reproduce the originals thereof, that
all such documents have been or will be duly executed to the extent required,
that all representations and statements set forth in such documents are true,
correct, complete, and not breached, that no actions that are inconsistent with
such representations and statements will be taken, and that all obligations
imposed by any such documents on the parties thereto have been or will be
performed or satisfied in accordance with their terms. We have further assumed
that all representations made in the Certified Representations "to the best
knowledge of" any person will be true, correct, and complete as if made without
such qualification.
Based upon the foregoing, and subject to the qualifications set forth
below, it is our opinion that, with respect to each Transferor and its
corresponding Transferee, for federal income tax purposes:
(i) the transfer by Transferor of substantially all of its assets
to Transferee in exchange for shares of Transferee and the
assumption by Transferee of the liabilities of Transferor, and
the subsequent liquidation of Transferor, pursuant
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
Key Mutual Funds
and
The Victory Portfolios
March 16, 1998
Page 4
to the Plan, will constitute a reorganization within the
meaning of section 368(a)(1) of the Code, and Transferor and
Transferee will each be "a party to a reorganization" within
the meaning of section 368(b) of the Code;
(ii) Transferor will not recognize any gain or loss as a result of
the Reorganization;
(iii) Transferee will not recognize any gain or loss on the receipt
of the assets of Transferor in exchange for shares of
Transferee and the assumption of the liabilities of
Transferor;
(iv) the shareholders of Transferor will not recognize any gain or
loss on the exchange of their shares of Transferor for shares
of Transferee in the Reorganization;
(v) the aggregate tax basis of the shares of Transferee received
by each shareholder of Transferor will be the same as the
aggregate tax basis of the shares of Transferor exchanged
therefor;
(vi) Transferee's adjusted tax bases in the assets received from
Transferor in the Reorganization will be the same as the
adjusted tax bases of such assets in the hands of Transferor
immediately prior to the Reorganization;
(vii) the holding period of each former shareholder of Transferor in
the shares of Transferee received in the Reorganization will
include the period during which such shareholder held the
Transferor shares exchanged therefor, if such shares were held
as a capital asset at the time of the Reorganization; and
(viii) Transferee's holding periods in the assets received from
Transferor in the Reorganization will include the holding
periods of such assets in the hands of Transferor immediately
prior to the Reorganization.
Our opinion, which is not binding on the Internal Revenue Service or
the courts, is based upon existing statutory, regulatory, and administrative and
judicial authority, any of which may be changed at any time with retroactive
effect to the detriment of Transferee, Transferor, and/or their shareholders. We
do not undertake to advise you as to any changes after the date of this opinion
in the above-referenced authorities that may affect
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
Key Mutual Funds
and
The Victory Portfolios
March 16, 1998
Page 5
our opinion unless we are specifically requested to do so. As noted above, our
opinion is based solely on the documents that we have examined, the assumptions
we have made, the additional information that we have obtained, and the
representations that have been made to us. Our opinion cannot be relied upon if
any of the facts contained in such documents, such additional information, or
any of our assumptions or the representations made to us is, or later becomes,
inaccurate. Finally, our opinion is limited to the tax matters specifically
stated above, and we have not been asked to address, nor have we addressed, any
other matters relating to the Reorganization, Transferees, Transferors, or any
investment in or by Transferees or Transferors.
This opinion is intended for the exclusive use of Key and Victory. This
opinion may not be circulated or relied upon by any other person or entity or
for any other purpose without our prior consent. We hereby authorize you to
attach this opinion as an exhibit to the Registration Statement on Form N-14.
Very truly yours,
/s/ Kramer, Levin, Naftalis & Frankel
<PAGE>
[LETTERHEAD OF KRAMER, LEVIN, NAFTALIS & FRANKEL]
March 23, 1998
Key Mutual Funds
3435 Stelzer Road
Columbus, Ohio 43219
and
The Victory Portfolios
3435 Stelzer Road
Columbus, Ohio 43219
Ladies and Gentlemen:
This opinion is being furnished to you in connection with the
reorganization (the "Reorganization") of each of five series of SBSF Funds,
Inc., doing business as Key Mutual Funds, a Maryland corporation ("Key," and
each such series, a "Transferor"), into a corresponding series of The Victory
Portfolios, a Delaware business trust ("Victory," and each such series, a
"Transferee"), pursuant to the Agreement and Plan of Reorganization and
Liquidation (the "Reorganization Plan") dated as of March 2, 1998, by and among
Key, for itself and on behalf of each Transferor, and Victory, for itself and on
behalf of each Transferee.
In the Reorganization, each Transferor will transfer all of its assets
to a corresponding Transferee in exchange for stock of such Transferee and the
assumption by
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
Key Mutual Funds
and
The Victory Portfolios
March 23, 1998
Page 2
such Transferee of the liabilities of Transferor./1/ Each Transferor will
distribute the stock of the Transferee received in the Reorganization pro rata
to its shareholders in exchange for their Transferor stock in complete
liquidation of Transferor.
The Transferors and the corresponding Transferees into which they are
reorganizing are as follows:
(1) KeyChoice Growth Fund into Victory LifeChoice Growth Investor
Fund;
(2) KeyChoice Income and Growth Fund into Victory LifeChoice
Conservative Investor Fund;
(3) KeyChoice Moderate Growth Fund into Victory LifeChoice Moderate
Investor Fund;
(4) Key Money Market Mutual Fund into Victory Federal Money Market
Fund; and
(5) SBSF Convertible Securities Fund into Victory Convertible
Securities Fund.
All capitalized terms used in this opinion and not defined herein have
the respective meanings assigned to them in the Reorganization Plan and the
Combined Prospectus/Proxy Statement included in the registration statement on
Form N-14, as amended, filed by Victory with The Securities and Exchange
Commission on December 19, 1997 (the "Proxy Statement").
For purposes of the opinion set forth below, we have reviewed and
relied upon (i) the Reorganization Plan, (ii) the Proxy Statement, and (iii)
such other documents, records, and instruments as we have deemed necessary or
appropriate as a basis for our opinion. In addition, in rendering our opinion we
have relied upon certain statements and representations, which we have neither
investigated nor verified, made by Key, Victory, and Key Asset Management, Inc.,
the investment adviser to each of the Transferees and Transferors (the
"Certified Representations"), including, inter alia, that with respect to each
Transferor and its corresponding Transferee:
- --------
/1/ Pursuant to section 851(g)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), each Transferor and each Transferee is treated as
a separate corporation. Under Delaware law, ownership interests in a
Transferee constitute shares of beneficial interest. Such interests are
considered stock for federal income tax purposes and are referred to as
"stock" or "shares" in this letter.
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
Key Mutual Funds
and
The Victory Portfolios
March 23, 1998
Page 3
(i) there is no plan or intention by the holders of shares of
Transferor, apart from investment decisions made in the ordinary
course of investing in Transferee, to sell, exchange, or
otherwise dispose of, or reduce the risk of loss relating to, any
of the shares of Transferee stock received in the Reorganization;
(ii) immediately after the Reorganization, the holders of shares of
Transferor will own all of the outstanding stock of Transferee;
(iii) the fair market value of Transferee stock received by each
shareholder of Transferor will be approximately equal to the fair
market value of the Transferor stock surrendered in the
Reorganization; and
(iv) each of Transferor and Transferee is qualified as a regulated
investment company, as defined in section 851 of the Code.
We have also obtained such additional information and representations
as we have deemed relevant and necessary through consultation with the officers
and directors of Key and Victory, as well as with other professionals engaged by
them. We have assumed, with your consent, that all documents reviewed by us are
originals or photocopies that faithfully reproduce the originals thereof, that
all such documents have been or will be duly executed to the extent required,
that all representations and statements set forth in such documents are true,
correct, complete, and not breached, that no actions that are inconsistent with
such representations and statements will be taken, and that all obligations
imposed by any such documents on the parties thereto have been or will be
performed or satisfied in accordance with their terms. We have further assumed
that all representations made in the Certified Representations "to the best
knowledge of" any person will be true, correct, and complete as if made without
such qualification.
Based upon the foregoing, and subject to the qualifications set forth
below, it is our opinion that, with respect to each Transferor and its
corresponding Transferee, for federal income tax purposes:
(i) the transfer by Transferor of all of its assets to Transferee in
exchange for shares of Transferee and the assumption by
Transferee of the liabilities of Transferor, and the subsequent
liquidation of Transferor, pursuant to the Plan, will constitute
a reorganization within the meaning of section 368(a)(1) of the
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
Key Mutual Funds
and
The Victory Portfolios
March 23, 1998
Page 4
Code, and Transferor and Transferee will each be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
(ii) Transferor will not recognize any gain or loss as a result of the
Reorganization;
(iii) Transferee will not recognize any gain or loss on the receipt of
the assets of Transferor in exchange for shares of Transferee and
the assumption of the liabilities of Transferor;
(iv) the shareholders of Transferor will not recognize any gain or
loss on the exchange of their shares of Transferor for shares of
Transferee in the Reorganization;
(v) the aggregate tax basis of the shares of Transferee received by
each shareholder of Transferor will be the same as the aggregate
tax basis of the shares of Transferor exchanged therefor;
(vi) Transferee's adjusted tax bases in the assets received from
Transferor in the Reorganization will be the same as the adjusted
tax bases of such assets in the hands of Transferor immediately
prior to the Reorganization;
(vii) the holding period of each former shareholder of Transferor in
the shares of Transferee received in the Reorganization will
include the period during which such shareholder held the
Transferor shares exchanged therefor, if such shares were held as
a capital asset at the time of the Reorganization; and
(viii) Transferee's holding periods in the assets received from
Transferor in the Reorganization will include the holding periods
of such assets in the hands of Transferor immediately prior to
the Reorganization.
Our opinion, which is not binding on the Internal Revenue Service or
the courts, is based upon existing statutory, regulatory, and administrative and
judicial authority, any of which may be changed at any time with retroactive
effect to the detriment of Transferee, Transferor, and/or their shareholders. We
do not undertake to advise you as to any changes after the date of this opinion
in the above-referenced authorities that may affect our opinion unless we are
specifically requested to do so. As noted above, our opinion is
<PAGE>
KRAMER, LEVIN, NAFTALIS & FRANKEL
Key Mutual Funds
and
The Victory Portfolios
March 23, 1998
Page 5
based solely on the documents that we have examined, the assumptions we have
made, the additional information that we have obtained, and the representations
that have been made to us. Our opinion cannot be relied upon if any of the facts
contained in such documents, such additional information, or any of our
assumptions or the representations made to us is, or later becomes, inaccurate.
Finally, our opinion is limited to the tax matters specifically stated above,
and we have not been asked to address, nor have we addressed, any other matters
relating to the Reorganization, Transferees, Transferors, or any investment in
or by Transferees or Transferors.
This opinion is intended for the exclusive use of Key and Victory. This
opinion may not be circulated or relied upon by any other person or entity or
for any other purpose without our prior consent. We hereby authorize you to
attach this opinion as an exhibit to the Registration Statement on Form N-14.
Very truly yours,
/s/ Kramer, Levin, Naftalis & Frankel
THE VICTORY PORTFOLIOS
AMENDED AND RESTATED
RULE 18F-3 MULTI-CLASS PLAN
I. INTRODUCTION.
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the following sets forth the method for allocating
fees and expenses among each class of shares of the various series (each series
a "Fund") of The Victory Portfolios (the "Company") that issue multiple classes
of shares, whether now existing or subsequently established (the "Multi-Class
Funds"). In addition, this Rule 18f-3 Multi-Class Plan (the "Plan") sets forth
the shareholder servicing arrangements, distribution arrangements, conversion
features, exchange privileges, and other shareholder services of each class of
shares in the Multi-Class Funds.
The Company is an open-end series investment company registered under
the 1940 Act, the shares of which are registered on Form N-1A under the
Securities Act of 1933 (Registration Nos. 33-8982 and 811-4851). Upon the
effective date of this Plan, the Company hereby elects to offer multiple classes
of shares in the Multi-Class Funds pursuant to the provisions of Rule 18f-3 and
this Plan. This Plan does not make any material changes to the general class
arrangements and expense allocations previously approved by the Board of
Trustees of the Company (the "Board of Trustees").
The Company currently consists of the following thirty-six separate
Funds:
Balanced Fund New York Tax-Free Fund
Convertible Securities Fund Ohio Municipal Bond Fund
Diversified Stock Fund Ohio Municipal Money Market Fund
Federal Money Market Fund Ohio Regional Stock Fund
Financial Reserves Fund Prime Obligations Fund
Fund For Income Real Estate Investment Fund
Government Mortgage Fund Special Growth Fund
Growth Fund Special Value Fund
Institutional Money Market Fund Stock Index Fund
Intermediate Income Fund Tax-Free Money Market Fund
International Growth Fund U.S. Government Obligations Fund
Investment Quality Bond Fund Value Fund
Lakefront Fund Fund A
LifeChoice Conservative Investor Fund Fund B
LifeChoice Moderate Investor Fund Fund C
LifeChoice Growth Investor Fund Fund D
Limited Term Income Fund Fund E
National Municipal Bond Fund Fund F
<PAGE>
The Funds are authorized to issue the following classes of shares
representing interests in the same underlying portfolio of assets of the
respective Fund:
THE MULTI-CLASS FUNDS THE NON-MULTI-CLASS FUNDS
- --------------------------------------------------------------------------------
CLASS A SHARES AND CLASS B SHARES CLASS A SHARES
- --------------------------------- --------------
Balanced Fund Convertible Securities Fund
Diversified Stock Fund Financial Reserves Fund
International Growth Fund Fund for Income
National Municipal Bond Fund Government Mortgage Fund
New York Tax-Free Fund Growth Fund
Ohio Regional Stock Fund Intermediate Income Fund
Special Value Fund Investment Quality Bond Fund
LifeChoice Growth Fund
LifeChoice Income and Growth Fund
LifeChoice Moderate Growth Fund
Lakefront Fund
Limited Term Income Fund
Ohio Municipal Bond Fund
INVESTOR CLASS SHARES AND SELECT CLASS SHARES Ohio Municipal Money Market Fund
Federal Money Market Fund Prime Obligations Fund
Institutional Money Market Fund Real Estate Investment Fund
U.S. Government Obligations Fund Special Growth Fund
Stock Index Fund
Tax-Free Money Market Fund
Value Fund
Fund A
Fund B
Fund C
Fund D
Fund E
Fund F
I. CLASS ARRANGEMENTS.
The following summarizes the front-end sales charges, contingent
deferred sales charges, Rule 12b-1 distribution fees, shareholder servicing
fees, conversion features, exchange privileges, and other shareholder services
applicable to each particular class of shares of the Funds. Additional details
regarding such fees and services are set forth in each Fund's current Prospectus
and Statement of Additional Information.
A. CLASS A SHARES:
1. Maximum Initial Sales Load: 5.75% (of the offering price).
Exceptions: Fund for Income and Limited Term Income Fund
have an initial sales charge of 2.00% (of the offering
price). Exceptions: Financial Reserves Fund, LifeChoice
Conservative Investor Fund, LifeChoice Moderate Investor
Fund, LifeChoice Growth Investor Fund, Ohio Municipal Money
Market Fund, Prime Obligations Fund, and Tax-Free Money
Market Fund have no sales charge.
-2-
<PAGE>
2. Contingent Deferred Sales Charge: None.
3. Rule 12b-1 Distribution Fees: None. Exceptions: Convertible
Securities Fund, Financial Reserves Fund, Fund For Income,
Lakefront Fund, LifeChoice Conservative Investor Fund,
LifeChoice Moderate Investor Fund, LifeChoice Growth
Investor Fund, National Municipal Bond Fund, New York
Tax-Free Fund, Ohio Municipal Money Market Fund, and Real
Estate Investment Fund each have a "Defensive" Rule 12b-1
Plan.
4. Shareholder Servicing Fees: Up to 0.25% per annum of average
daily net assets. Exceptions: Financial Reserves Fund and
Stock Index Fund do not have shareholder servicing plans or
fees.
5. Conversion Features: None.
6. Exchange Privileges: Class A shares may be exchanged with
Class A shares of other Funds without incurring a sales
charge. However, exchanges made into a Fund with a higher
sales charge require payment of the percentage-point
difference between the higher and lower sales charges. For
example, investors that exchange Class A shares from the
Fund for Income or the Limited Term Income Fund to purchase
Class A shares of a Fund with a 5.75% sales charge would pay
the 3.75% difference in sales charge. Class A shares may be
exchanged with Investor Class shares or Select Class shares
of Federal Money Market Fund, Institutional Money Market
Fund, and U.S. Government Obligations Fund without incurring
a sales charge.
7. Other Shareholder Services: As provided in the Fund's
Prospectus. These services do not differ from those
applicable to Class B shares.
B. CLASS B SHARES:
1. Initial Sales Load: None
2. Contingent Deferred Sales Charge ("CDSC"): 5% in the first
year, declining to 1% in the sixth year, and eliminated
thereafter. The CDSC is based on the original purchase cost
of investment or the net asset value of the shares at the
time of redemption, whichever is lower.
3. Rule 12b-1 Distribution Fees: 0.75% per annum of the average
daily net assets.
4. Shareholder Servicing Fees: Up to 0.25% per annum of the
average daily net assets.
-3-
<PAGE>
5. Conversion Features: Class B shares convert automatically to
Class A shares eight years after purchase, based on relative
net asset values of the two classes. Class B shares acquired
by the reinvestment of dividends and distributions are
included in the conversion.
6. Exchange Privileges: Class B shares may be exchanged with
Class B shares of other Funds without incurring a sales
charge.
7. Other Shareholder Services: As provided in the Fund's
Prospectus. These services do not differ from those
applicable to Class A shares.
C. INVESTOR SHARES:
1. Maximum Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Rule 12b-1 Distribution Fees: Federal Money Market Fund and
Institutional Money Market Fund each have a "Defensive" Rule
12b-1 Plan.
4. Shareholder Servicing Fees: None.
5. Conversion Features: None.
6. Exchange Privileges: Investor shares may be exchanged with
Investor shares of other Funds at relative net asset value.
Investor shares may be exchanged with Class A shares of
other Funds; however, such exchanges require payment of the
sales charge of the other Fund's Class A shares.
7. Other Shareholder Services: As provided in the Fund's
Prospectus.
D. SELECT SHARES:
1. Maximum Initial Sales Load: None.
2. Contingent Deferred Sales Charge: None.
3. Rule 12b-1 Distribution Fees: None. Exception: Federal Money
Market Fund and Institutional Money Market Fund has a
"Defensive" Rule 12b-1 Plan.
4. Shareholder Servicing Fees: Up to 0.25% per annum of the
average daily net assets.
-4-
<PAGE>
5. Conversion Features: None.
6. Exchange Privileges: Select shares may be exchanged with
Select shares of other Funds at relative net asset value.
Select shares may be exchanged with Class A shares of other
Funds; however, such exchanges require payment of the sales
charge of the other Fund's Class A shares.
7. Other Shareholder Services: As provided in the Fund's
Prospectus.
II. ALLOCATION OF EXPENSES.
Pursuant to Rule 18f-3 under the 1940 Act, the Company shall allocate
to each class of shares in a Multi-Class Fund (i) any fees and expenses incurred
by the Company in connection with the distribution of such class of shares
(other than with respect to the money market Funds) under a distribution plan
adopted for such class of shares pursuant to Rule 12b-1 ("Rule 12b-1 Fees") and
(ii) any fees and expenses incurred by the Company under a shareholder servicing
plan in connection with the provision of shareholder services to the holders of
such class of shares ("Service Plan Fees"). In addition, pursuant to Rule 18f-3,
the Company may allocate the following fees and expenses (the "Class Expenses")
to a particular class of shares in a single Multi-Class Fund:
1. transfer agent fees identified by the transfer agent as
being attributable to such class of shares;
2. printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses, reports, and proxies to current shareholders
of such class of shares or to regulatory agencies with
respect to such class of shares;
3. blue sky registration or qualification fees incurred by such
class of shares;
4. Securities and Exchange Commission registration fees
incurred by such class of shares;
5. the expense of administrative personnel and services
(including, but not limited to, those of a fund accountant
or dividend paying agent charged with calculating net asset
values or determining or paying dividends) as required to
support the shareholders of such class of shares;
6. litigation or other legal expenses relating solely to such
class of shares;
7. fees of the Board of Trustees incurred as result of issues
relating to such class of shares;
-5-
<PAGE>
8. independent accountants' fees relating solely to such class
of shares; and shareholder meeting expenses for meetings of
a particular class.
Class Expenses, Rule 12b-1 Fees, and Service Plan Fees are the only
expenses allocated to the classes disproportionately. The Class Expenses
allocated to each share of a class during a year will differ from the Class
Expenses allocated to each share of any other class by less than 50 basis points
of the average daily net asset value of the class of shares with the smallest
average daily net asset value.
The initial determination of fees and expenses that will be allocated
by the Company to a particular class of shares and any subsequent changes
thereto will be reviewed by the Board of Trustees and approved by a vote of the
Board of Trustees including a majority of the Trustees who are not interested
persons of the Company. The Board of Trustees will monitor conflicts of interest
among the classes and agree to take any action necessary to eliminate conflicts.
Income, realized and unrealized capital gains and losses, and any
expenses of a money market Fund not allocated to a particular class of such Fund
by this Plan shall be allocated to each class of such Fund on the basis of the
relative net assets (settled shares), as defined in Rule 18f-3, of that class in
relation to the net assets of such Fund.
Income, realized and unrealized capital gains and losses, and any
expenses of a non-money market Fund not allocated to a particular class of any
such Fund pursuant to this Plan shall be allocated to each class of the Fund on
the basis of the net asset value of that class in relation to the net asset
value of the Fund.
Any dividends and other distributions on shares of a class will differ
from dividends and other distributions on shares of other classes only as a
result of the allocation of Class Expenses, Rule 12b-1 Fees, Service Plan Fees,
and the effects of such allocations.
The Investment Adviser will waive or reimburse its management fee in
whole or in part only if the fee is waived or reimbursed to all shares of a Fund
in proportion to their relative average daily net asset values. The Investment
Adviser, and any entity related to the Investment Adviser, who charges a fee for
a Class Expense will waive or reimburse that fee in whole or in part only if the
revised fee more accurately reflects the relative costs of providing to each
class the service for which the Class Expense is charged.
III. BOARD REVIEW.
The Board of Trustees shall review this Plan as frequently as it deems
necessary. Prior to any material amendment(s) to this Plan, the Board of
Trustees, including a majority of the Trustees that are not interested persons
of the Company, shall find that the Plan, as proposed to be amended (including
any proposed amendments to the method of allocating Class Expenses
-6-
<PAGE>
and/or Fund expenses), is in the best interest of each class of shares of a
Multi-Class Fund individually and the Fund as a whole. In considering whether to
approve any proposed amendment(s) to the Plan, the Board of Trustees shall
request and evaluate such information as it considers reasonably necessary to
evaluate the proposed amendment(s) to the Plan. Such information shall address
the issue of whether any waivers or reimbursements of advisory or administrative
fees could be considered a cross-subsidization of one class by another and other
potential conflicts of interest between classes.
In making its initial determination to approve this Plan, the Board of
Trustees has focused on, among other things, the relationship between or among
the classes and has examined potential conflicts of interest among classes
(including those potentially involving a cross-subsidization between classes)
regarding the allocation of fees, services, waivers and reimbursements of
expenses, and voting rights. The Board of Trustees has evaluated the level of
services provided to each class and the cost of those services to ensure that
the services are appropriate and the allocation of expenses is reasonable. In
approving any subsequent amendments to this Plan, the Board of Trustees shall
focus on and evaluate such factors as well as any others it deems necessary.
Adopted May 24, 1995; Effective June 5, 1995
Amended and Restated:
December 6, 1995;
February 14, 1996;
May 31, 1996;
February 19, 1997;
October 22, 1997; and
December 3, 1997
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