INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of October 1, 2001, between VARIABLE INSURANCE
FUNDS, a Massachusetts business trust (herein called the "Trust"), and Fifth
Third Asset Management, an Ohio corporation with its principal place of business
at 00 Xxxxxxxx Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxx 00000 (herein called the
"Investment Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
investment advisory services to certain investment portfolios of the Trust (the
"Funds") and the Investment Adviser represents that it is willing and possesses
legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to
act as investment adviser to the Funds identified on Schedule A hereto for the
period and on the terms set forth in this Agreement. The Investment Adviser
accepts such appointment and agrees to furnish the services herein set forth for
the compensation herein provided.
2. Availability of Documents. The Trust has made available to the
Investment Adviser copies properly certified or authenticated of each of the
following:
(a) the Trust's Amended and Restated Declaration of Trust dated as
of July 20, 1994 and amended and restated as of February 5, 1997, and all
amendments thereto or restatements thereof (such Declaration, as presently in
effect and as it shall from time to time be amended or restated, is herein
called the "Declaration of Trust");
(b) the Trust's By-laws and amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission on July 20, 1994
and all amendments thereto;
(e) the Trust's Registration Statement on Form N-lA under the
Securities Act of 1933, as amended ("1933 Act"), (File No. 33-81800) and under
the 1940 Act as filed with the Securities and Exchange Commission and all
amendments thereto; and
(f) the Funds' most recent prospectuses and Statement of Additional
Information (such prospectus and Statement of Additional Information, as
presently in effect, and all amendments and supplements thereto are herein
collectively called the "Prospectus").
The Trust will make available to the Investment Adviser from
time to time copies of all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Investment Adviser will provide a continuous investment program
for each Fund, including investment research and management with respect to all
securities and investments and cash equivalents in said Funds. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by the Trust with respect to the Funds. The
Investment Adviser will provide the services under this Agreement in accordance
with each Fund's investment objective, policies, and restrictions as stated in
the Prospectus and resolutions of the Trust's Board of Trustees. The Investment
Adviser further agrees that it:
(a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which it has investment
responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and in addition will conduct its activities
under this Agreement in accordance with any applicable regulations of any
governmental authority pertaining to the investment advisory activities of the
Investment Adviser, including applicable state insurance laws of which the Trust
informs the Investment Adviser. The Trust shall inform the Investment Adviser
regarding any such laws of which it becomes aware pursuant to any applicable
fund participation agreement, or otherwise;
(c) will not knowingly make loans to any person to purchase or
carry units of beneficial interest in the Trust or make loans to the Trust;
(d) will place orders pursuant to its investment determinations for
the Trust either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Investment Adviser will attempt to
obtain prompt execution of orders in an effective manner at the most favorable
price. Consistent with this obligation, when the execution and price offered by
two or more brokers or dealers are comparable, the Investment Adviser may, in
its discretion, purchase and sell portfolio securities to and from brokers and
dealers who provide the Investment Adviser with research advice and other
services. In no instance will portfolio securities be purchased from or sold to
BISYS Fund Services ("BISYS"), Fifth Third Asset Management, or any affiliated
person of either the Trust, BISYS, or Fifth Third Asset Management, except to
the extent permitted by the 1940 Act and the Securities and Exchange Commission;
(e) will maintain all books and records with respect to its
transactions with the Trust, to the extent required by Rule 31a-1(f) under the
1940 Act, and will furnish the Trust's Board of Trustees such periodic and
special reports as the Board reasonably may request;
(f) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and prior,
present, or potential interestholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Investment Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Trust;
and
(g) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment recommendations for the
Trust, the Investment Adviser's personnel will not inquire or take into
consideration whether the issuers of securities proposed for purchase or sale
for the Trust's account are customers of the Investment Adviser or of its parent
or its subsidiaries or affiliates. In dealing with such customers, the
Investment Adviser and its parent, subsidiaries, and affiliates will not inquire
or take into consideration whether securities of those customers are held by the
Trust.
4. Services Not Exclusive. The investment management services
furnished by the Investment Adviser hereunder are not to be deemed exclusive,
and the Investment Adviser shall be free to furnish similar services to others
so long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Investment Adviser hereby agrees that all records
which it maintains for the Trust are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
request. The Investment Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2(e) under the 1940 Act all records maintained by it
pursuant to Rule 31a-1(f) under the 1940 Act, and also to preserve for the
periods prescribed by 31a-2 all other records the Investment Adviser agrees in
writing to maintain pursuant to Rule 31a-1.
6. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Trust.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the Investment Adviser
and the Investment Adviser will accept as full compensation therefor a fee
computed daily and paid monthly at the applicable annual rate set forth on
Schedule A hereto. Each Fund's obligation to pay the above-described fee to the
Investment Adviser will begin as of the latter of the date hereof or the date of
the initial public sale of shares in that Fund. The fee attributable to each
Fund shall be the obligation of that Fund and not of any other Fund.
If in any fiscal year the aggregate expenses of any of the Funds
exceed any applicable expense limitation imposed by law or regulation, the
Investment Adviser will reimburse the Fund for a portion of such excess expenses
(after repayment of fees received in excess of contractual fee rates) equal to
such excess times the ratio of the fees otherwise payable by the Fund to the
Investment Adviser hereunder to the aggregate fees otherwise payable by the Fund
to the Investment Adviser hereunder and to BISYS Fund Services Ohio, Inc.
("BISYS Ohio") under the Administration Agreement between BISYS Ohio and the
Trust, unless otherwise agreed by the Investment Adviser and BISYS Ohio. The
obligation of the Investment Adviser to reimburse the Funds hereunder is limited
in any fiscal year to the amount of its fee hereunder for such fiscal year,
provided, however, that notwithstanding the foregoing, the Investment Adviser
shall reimburse the Funds for such proportion of such excess expenses regardless
of the amount of fees paid to it during such fiscal year to the extent that the
securities regulations of any state having jurisdiction over the Trust so
require. Such expense reimbursement, if any, will be estimated daily and
reconciled and paid on a monthly basis.
8. Limitation of Liability. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
9. Duration and Termination. This Agreement will become effective as
to a particular Fund as of the date first written above (or, if a particular
Fund is not in existence on that date, on the date a registration statement
relating to that Fund becomes effective with the Commission), provided that it
shall have been approved by vote of a majority of the outstanding voting
securities of such Fund, in accordance with the requirements under the 1940 Act.
Unless sooner terminated, this Agreement shall continue in effect for an initial
term of two years and thereafter shall continue in effect for successive periods
of one year, provided such continuance is specifically approved at least
annually (a) by the vote of a majority of those members of the Trust's Board of
Trustees who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the vote of a majority of the Trust's Board
of Trustees or by the vote of a majority of all votes attributable to the
outstanding Shares of such Fund. Notwithstanding the foregoing, this Agreement
may be terminated at any time on sixty days' written notice, without the payment
of any penalty, by the Trust (by vote of the Trust's Board of Trustees or by
vote of a majority of the outstanding voting securities of such Fund) or by the
Investment Adviser. This Agreement will immediately terminate in the event of
its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall have
the same meaning of such terms in the 1940 Act.)
10. Investment Adviser's Representations. The Investment Adviser
hereby represents and warrants as follows:
(a) it will manage each Fund so that each Fund will qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code and
will comply with the diversification requirements of Section 817(h) of the
Internal Revenue Code and the regulations issued thereunder, and any other rules
and regulations pertaining to investment vehicles underlying variable annuity or
variable life insurance contracts;
(b) It shall immediately notify the Trust upon having a reasonable
basis for believing that any Fund has ceased to comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the regulations
thereunder; and
(c) it shall be responsible for making inquiries and for reasonably
ensuring that any employee of the Investment Adviser, any person or firm that
the Investment Adviser has employed or with which it has associated, or any
employee thereof has not, to the best of the Investment Adviser's knowledge, in
any material connection with the handling of Trust assets: (i) been convicted,
in the last ten (10) years, of any felony or misdemeanor arising out of conduct
involving embezzlement, fraudulent conversion, or misappropriation of funds or
securities, or involving violations of Sections 1341, 1342, or 1343 of Xxxxx 00,
Xxxxxx Xxxxxx Code; or (ii) been found by any state regulatory authority, within
the last ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or (iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated or to have
acknowledged violation of any provisions of federal or state securities laws
involving fraud, deceit or knowing misrepresentation.
11. Insurance Company Offerees. All parties acknowledge that the Trust
will offer its shares so that it may serve as an investment vehicle for variable
annuity contracts and variable life insurance policies issued by insurance
companies, as well as to qualified pension and retirement plans. The Trust and
the Investment Adviser agree that shares of the Funds may be offered only to the
separate accounts and general accounts of insurance companies that are approved
in writing by the Investment Adviser. The Investment Adviser agrees that shares
of the Funds may be offered to separate accounts and the general account of
Hartford Life Insurance Company and to separate accounts and the general
accounts of any insurance companies that are affiliated with Hartford Life
Insurance Company. The Investment Adviser and the Trust agree that the
Investment Adviser shall be under no obligation to investigate insurance
companies to which the Trust offers or proposes to offer its shares.
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. 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. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of The Commonwealth of Massachusetts.
The names "Variable Insurance Funds" and "Trustees of Variable
Insurance Funds" refer respectively to the Trust created and the Trustees, as
trustees but not individually or personally, acting from time to time under the
Declaration of Trust to which reference is hereby made and a copy of which is on
file at the office of the Secretary of State of The Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "Variable Insurance
Funds" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, interestholders or representatives of
the Trust personally, but bind only the assets of the Trust, and all persons
dealing with any Fund must look solely to the assets of the Trust belonging to
such Fund for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
VARIABLE INSURANCE FUNDS
Seal By:
---------------------------------
Name:
-----------------------------
Title:
-----------------------------
FIFTH THIRD ASSET MANAGEMENT
Seal
By:
---------------------------------
Name:
-------------------------------
Title:
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Dated: October 1, 2001
Schedule A
to the Investment Advisory Agreement
between Variable Insurance Funds and Fifth Third Asset Management
NAME OF FUND COMPENSATION*
------------ ------------
Fifth Third Quality Growth VIP Fund Annual rate of seventy
one-hundredths of one
percent (.70%) of the
average daily net assets of
such Fund.
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* All fees are computed daily and paid monthly.
VARIABLE INSURANCE FUNDS
By:_______________________________
Name:_____________________________
Title:____________________________
FIFTH THIRD ASSET MANAGEMENT
By:________________________________
Name:______________________________
Title: ___________________________
