LIBERTY VARIABLE INVESTMENT TRUST
RYDEX FINANCIAL SERVICES FUND, VARIABLE SERIES
RYDEX HEALTH CARE FUND, VARIABLE SERIES
LIBERTY S&P 500 INDEX FUND, VARIABLE SERIES
MANAGEMENT AND SUB-ADVISORY AGREEMENT
MANAGEMENT AND SUB-ADVISORY AGREEMENT ("Agreement"), made this 30th day of
May, 2000, between LIBERTY VARIABLE INVESTMENT TRUST, a business trust organized
under the laws of The Commonwealth of Massachusetts (the "Trust"), on its own
behalf and on behalf of the Rydex Financial Services Fund, Variable Series,
Rydex Health Care Fund, Variable Series, Liberty S&P 500 Index Fund, Variable
Series (2) (each a "Fund," and collectively, the "Funds"), LIBERTY ADVISORY
SERVICES CORP., a corporation organized under the laws of The Commonwealth of
Massachusetts ("LASC"), and COLONIAL MANAGEMENT ASSOCIATES, INC., a
Massachusetts corporation ("Colonial").
WHEREAS, the Trust has been organized as an open-end management investment
company registered as such under the Investment Company Act of 1940, as amended
("Investment Company Act"), and is authorized to issue shares of beneficial
interest in one or more separate series (each representing interests in a
separate portfolio of securities and other assets), including the Funds, which
shares are to be issued and sold to and held by various separate accounts of
Keyport Life Insurance Company ("Keyport"), or separate accounts of other
insurance companies that are affiliated or are not affiliated with Keyport
(collectively, "Participating Insurance Companies");
WHEREAS, the Trust heretofore has created various other separate funds
which are covered by various Management Agreements among the Trust, on its own
behalf and on behalf of such other series funds, and LASC, and the Trust may in
the future create additional fund(s) that may be covered by other separate
agreements;
WHEREAS, the Trust desires LASC to render certain investment management
and administrative services to the Trust and the Funds, all in the manner and on
the terms and conditions hereinafter set forth;
WHEREAS, the Trust and LASC desire that Colonial, as sub-adviser to LASC,
provide investment management services to the Funds based on Colonial's
portfolio manager concept, under which Colonial recommends, over-sees and
coordinates, and allocates each Fund's portfolio assets among, portfolio
managers ("Portfolio Managers"); and
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(2) "S&P 500 Index" is a trademark of XxXxxx-Xxxx Companies, Inc. and has been
licensed for use by Liberty Funds Distributor, Inc.
WHEREAS, each of LASC and Colonial is registered as an investment adviser
under the Investment Advisers of 1940 (the "Investment Advisers Act"), and
desires to provide services to the Trust and the Funds, in the manner
contemplated above, in consideration of and on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, the Trust, on its own behalf and on behalf of the Funds,
LASC and Colonial hereby agree as follows:
1. Employment of the Investment Adviser.
The Trust hereby employs LASC (i) to provide certain administrative
and limited oversight services and (ii) to provide certain investment management
and related services to the Trust and the Funds, all in the manner set forth in
Section 2 of this Agreement, subject to the direction of the Trustees, and for
the period, in the manner, and on the terms set forth hereinafter. LASC hereby
accepts such employment and agrees during such period to render the services and
to assume the obligations herein set forth. LASC shall for all purposes herein
be deemed to be an independent contractor and, except as expressly provided or
authorized (whether herein or otherwise), shall have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. Obligations of, and Services to be Provided by, the Manager.
LASC undertakes to provide the services hereinafter set forth and to
assume the following obligations:
A. Administrative Services.
(a) LASC will provide general administrative services as hereinafter
set forth ("Administrative Services"), all subject to the overall direction and
control of the Board of Trustees of the Trust (the "Board").
(b) Such Administrative Services shall not include investment
advisory, custodian, underwriting and distribution, transfer agency or pricing
and bookkeeping services, but shall include: (i) provision of office space,
equipment and facilities necessary in connection with the services to be
performed hereunder and the maintenance of the headquarters of the Trust; (ii)
maintenance of the corporate books and records of the Trust (other than those of
its records maintained by Colonial or the Portfolio Managers, the transfer
agent, the custodian and the pricing and bookkeeping agent); (iii)
administration of all dealings and relationships with the Trustees for meetings
of the Board, the scheduling of such meetings and the conduct thereof; (iv)
preparation and filing of proxy materials and administration of arrangements for
meetings of shareholders or beneficial owners of the Funds; (v) preparation and
filing of all required reports and all updating and other amendments to the
Trust's Registration Statement under the Investment Company Act, the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and regulations
thereunder; (vi) calculation of distributions required or advisable under the
Investment Company Act and the Internal Revenue Code of 1986, as amended (the
"Code"); (vii) periodic computation and reporting to the Trustees of each Fund's
compliance with diversification and other portfolio requirements of the
Investment Company Act and the Code; (viii) development and implementation of
general shareholder and beneficial owner correspondence and communications
relating to the Funds, including the preparation and filing of shareholder and
beneficial owner reports as are required or deemed advisable; and (ix) general
oversight of the custodial, net asset value computation, portfolio accounting,
financial statement preparation, legal, tax and accounting services performed
for the Trust or the Funds by others.
It is understood that LASC may, in its discretion and at its expense,
delegate some or all of its administrative duties and responsibilities under
this subsection 2A to its affiliate, Liberty Financial Companies, Inc. ("LFC"),
or any majority or greater owned subsidiaries of LFC.
B. Investment Advisory Services.
(a) LASC shall have overall supervisory responsibility for the
management and investment of the assets of the Funds, subject to and in
accordance with the investment objectives, policies and limitations of
each Fund, as provided in the Trust's Prospectus and Statement of Additional
Information and governing instruments, as amended from time to time, and any
directions and policies which the Trustees may issue to LASC from time to time
(collectively, "Investment Policies").
(b) With the consent of the Trust, on behalf of the Funds, LASC
hereby delegates to Colonial the obligation to provide the Funds, as sub-advisor
to LASC, an overall investment program and strategy, in accordance with
Colonial's portfolio manager concept. LASC shall be solely responsible for
paying the fees of Colonial from the fees it collects from the Trust as provided
in paragraph 5 below.
(c) In accordance with Colonial's portfolio manager concept,
Colonial will recommend to the Trustees one or more persons or companies
registered as investment advisers under the Investment Advisers Act or
qualifying as a "bank" within the meaning of the Investment Advisers Act and
thereby exempted from the requirement to be so registered ("Portfolio
Managers"), pursuant to a portfolio management agreement among the Trust, on
behalf of each Fund, each Portfolio Manager and Colonial. Each Portfolio Manager
shall have full investment discretion and authority to make all determinations
with respect to the investment and reinvestment of the portion of each Fund's
assets assigned to that Portfolio Manager by Colonial from time to time and the
purchase and sale of portfolio securities with those assets, all within each
Fund's Investment Policies. Subject to Section 6, Colonial shall not be
responsible or liable for the investment merits of any decision by a Portfolio
Manager to purchase hold or sell a security for a Fund's portfolio. Colonial
shall advise the Trustees as to which persons or companies Colonial believes are
best suited for appointment as Portfolio Managers; shall monitor and evaluate
the investment performance of each Portfolio Manager, shall allocate and
reallocate from time to time, in its sole discretion, the respective portions of
each Fund's assets to be managed by the Portfolio Managers; shall recommend to
the Trustees changes of, additions to or terminations of Portfolio Managers when
it believes such changes, additions or terminations are appropriate; and shall
coordinate the investment activities of the Portfolio Managers with a view to
ensuring their compliance with each Fund's Investment Policies and applicable
laws.
(d) Colonial shall be solely responsible for paying the fees of each
Portfolio Manager from the fees it collects from LASC as provided in paragraph 5
below.
(e) LASC and/or Colonial shall render regular reports to the Board
relating to the performance of their duties specified in paragraphs 2B(a), (b)
and (c).
C. Expenses Borne By Manager.
To the extent necessary to perform its obligations under this
Agreement, LASC and/or Colonial, at their own expense, shall furnish executive
and other personnel and office space, equipment and facilities, and shall pay
any other expenses incurred by them, in connection with the performance of their
duties hereunder, except that the Trust or the Funds, as appropriate, shall
reimburse LASC and/or Colonial (as appropriate) for its out-of-pocket costs,
including telephone, postage and supplies, incurred by it in connection with
communications with shareholders and beneficial owners of the Funds. LASC and/or
Colonial shall pay all salaries, fees and expenses of Trustees or officers of
the Trust who are their employees. LASC and Colonial shall not be obligated to
bear any other expenses incidental to the operations and business of the Trust.
LASC and Colonial shall not be required to pay or provide any credit for
services provided by the Trust's custodian, transfer agent or other agents.
D. Provision of Information Necessary for Preparation of Registration
Statement Amendments and Other Materials.
LASC will make available and provide such information as the Trust
may reasonably request for use in the preparation of its Registration Statement,
reports and other documents required by federal laws and any securities and
insurance laws of the other states and other jurisdictions in which the Trust's
shares are sold.
E. Code of Ethics.
Each of LASC and Colonial has adopted a written code of ethics
complying with the requirements of Rule 17j-1 under the Investment Company Act
and has provided the Trust with a copy of such code of ethics and
evidence of its adoption. On or before June 1 in each year, an executive officer
of each of LASC and Colonial shall verify to the Trustees that it has complied
with the requirements of Rule 17j-1 during the previous year and that there has
been no material violation of its code of ethics or, if such a violation has
occurred, that appropriate action was taken in response to such violation. Upon
the written request of the Trust, each of LASC and Colonial shall permit the
Trust to examine the reports required to be made to it by Rule 17j-1(c)(1).
F. Disqualification.
Each of LASC and Colonial shall immediately notify the Trustees of
the occurrence of any event which would disqualify it from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the
Investment Company Act or any other applicable statute or regulation.
G. Other Obligations and Service.
Each of LASC and Colonial shall make its officers and employees
available to the Trustees and officers of the Trust for consulting and
discussions regarding the management of the Trust and its investment activities.
3. Expenses of the Trust.
It is understood that the Trust (or each of its funds
(including the Funds), where applicable) will pay, or will enter into
arrangements that require third parties to pay, all of the expenses of the Trust
or such funds, other than those expressly assumed by LASC and Colonial herein,
including without limitation:
A. Advisory, sub-advisory and administrative fees;
B. Fees for services of independent public accountants;
C. Legal and consulting fees;
D. Transfer agent, custodian and portfolio pricing, recordkeeping
and tax information services;
E. Expenses of periodic calculations of the funds' net asset
values and of equipment for communication among the funds'
custodian, transfer agent and others;
F. Taxes and the preparation of the funds' tax returns;
G. Brokerage fees and commissions;
H. Interest;
I. Costs of Board of Trustees and shareholder meetings;
J. Updates and printing of prospectuses, proxy statements and
reports to shareholders;
K. Fees for filing reports with regulatory bodies and the
maintenance of the Trust's existence;
L. Membership dues for industry trade associations;
M. Fees to federal authorities for the registration of the shares
of the funds;
N. Fees and expenses of Trustees who are not directors, officers,
employees or stockholders of LASC, Colonial or any of their
respective affiliates;
O. Insurance and fidelity bond premiums; and
P. Litigation and other extraordinary expenses of a non-recurring
nature.
4. Activities and Affiliates of the Manager.
A. The Trust acknowledges that each of LASC and Colonial or one or
more of its affiliates may have investment or administrative responsibilities or
render investment advice to or perform other investment advisory services for
other individuals or entities, and that each of LASC and Colonial, its
affiliates or any of its or their directors, officers, agents or employees may
buy, sell or trade in securities for its or their respective accounts
("Affiliated Accounts"). The Trust agrees that each of LASC and Colonial or its
affiliates may give advice or exercise investment responsibility and take such
other action with respect to Affiliated Accounts which may differ from the
advice given or the timing or nature of action with respect to the Funds,
provided that it acts in good faith. The Trust acknowledges that one or more of
the Affiliated Accounts may at any time hold, acquire, increase, decrease,
dispose of or otherwise deal with positions in investments in which the Funds
may have an interest.
B. Subject to and in accordance with the Declaration of Trust and
By-Laws of the Trust as currently in effect and the Investment Company Act and
the rules thereunder, it is understood that Trustees, officers and agents of the
Trust and shareholders of the Trust are or may be interested persons as defined
by the Investment Company Act of LASC and/or Colonial or of their respective
affiliates as directors, officers, agents and shareholders thereof; that
directors, officers, agents and shareholders of LASC and/or Colonial or of their
respective affiliates are or may be interested persons of the Trust as Trustees,
officers, agents, shareholders or otherwise; that LASC and/or Colonial or their
respective affiliates may be interested persons of the Trust as shareholders or
otherwise; and that the effect of any such interests shall be governed by said
Declaration of Trust and By-Laws and the Investment Company Act and the rules
thereunder.
5. Compensation of LASC and Colonial.
For all services to be rendered and payments made pursuant to this
Agreement, (a) the Trust, on its own behalf and on behalf of Fund, will pay LASC
monthly in arrears a fee at an annual rate equal to 0.85% in the case of the
Rydex Financial Services Fund, Variable Series, 1.00% in the case of the Rydex
Health Care Fund, Variable Series and 0.40%, in the case of the Liberty S&P 500
Index Fund, Variable Series of the net asset value of such Fund, and (b) LASC,
on its own behalf, will pay Colonial monthly in arrears a fee at an annual rate
equal to to 0.65% in the case of the Rydex Financial Services Fund, Variable
Series, 0.80% in the case of the Rydex Health Care Fund, Variable Series and
0.20%, in the case of the Liberty S&P 500 Index Fund, Variable Series of the net
asset value of such Fund. Colonial acknowledges and agrees that the Trust shall
have no obligation to Colonial to pay any portion of such fee, which shall be
solely the responsibility of LASC. Each such fee shall be accrued for each
calendar day and the sum of the daily fee accruals shall be paid monthly on or
before the tenth day of the following calendar month. The daily accruals of the
fee will be computed by (i) multiplying the annual percentage rate referred to
above by the fraction the numerator of which is one and the denominator of which
is the number of calendar days in the year, and (ii) multiplying the product
obtained pursuant to clause (i) above by the net asset value of such Fund as
determined in accordance with the Trust's Prospectus as of the previous business
day on which each Fund was open for business. The foregoing fee shall be
prorated for any month during which this Agreement is in effect for only a
portion of the month.
6. Liabilities of LASC and Colonial.
A. Except as provided below, in the absence of willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of LASC or Colonial, as the case may be, LASC or Colonial
shall not be subject to liability to the Trust or to any shareholder of the
Trust for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
B. Colonial shall indemnify and hold harmless the Trust from any
loss, cost, expense or damage resulting from the failure of any Portfolio
Manager to comply with (i) any statement included in the Prospectus and
Statement of Additional Information of the Trust, or (ii) instructions given by
Colonial to any Portfolio Manager for the purpose of ensuring the Trust's
compliance with securities, tax and other requirements applicable to the Trust's
business and the investment activities of its Funds; provided, however, that the
indemnification provided in this paragraph 6B shall apply only to the extent
that a Portfolio Manager is liable to the Trust and, after demand by the Trust,
is unable or refuses to discharge its obligations to the Trust.
C. No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or the LASC or Colonial, as the case may be,
from liability in violation of Sections 17(h) and (i) of the Investment Company
Act.
7. Effective Date: Term.
This Agreement shall become effective on the later of (i) the date first
written above or (ii) the date on which the offer and sale of shares of the
Funds have been registered under the Securities Act and the Investment Company
Act pursuant to an effective Registration Statement of the Trust on Form N-1A
and shall continue until May 30, 2002, and from year to year thereafter, but
only so long as such continuance is specifically approved at least annually by a
vote of the Trustees, including the vote of a majority of the Trustees who are
not interested persons of the Trust, cast in person at a meeting called for the
purpose of voting on such approval, or by vote of a majority of the outstanding
voting securities. The aforesaid provision shall be construed in a manner
consistent with the Investment Company Act and the rules and regulations
thereunder.
8. Assignment.
No assignment of this Agreement shall be made by LASC or Colonial, and
this Agreement shall terminate automatically in the event of any such
assignment. Each of LASC and Colonial shall notify the Trust in writing in
advance of any proposed change of control with respect to it to enable the Trust
to take the steps necessary to enter into a new advisory contract.
9. Amendment
This Agreement may be amended at any time, but only by written
agreement between LASC, Colonial and the Trust, which is subject to the approval
of the Trustees of the Trust and the shareholders of any affected Fund in the
manner required by the Investment Company Act and the rules thereunder.
10. Termination.
This Agreement:
(a) may at any time be terminated without payment of any penalty,
by the Trust (by the Board of Trustees of the Trust or by the
vote of a majority of the outstanding voting securities of the
Fund) on sixty (60) days' written notice to LASC and Colonial;
(b) shall immediately terminate in the event of its assignment;
and
(c) may be terminated by LASC or Colonial on sixty (60) days
written notice to the other parties hereto.
11. Definitions.
As used in this Agreement, the terms "affiliated person," "assignment,"
"control," "interested person" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act and
the rules and regulations thereunder, subject to any applicable orders of
exemption issued by the Securities and Exchange Commission.
12. Notice.
Any notice under this Agreement shall be given in writing addressed and
delivered or mailed postpaid to the other party to this Agreement at its
principal place of business.
13. Severability.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
14. Shareholder Liability.
Each of LASC and Colonial is hereby expressly put on notice of the
limitation of shareholder liability as set forth in the Declaration of Trust of
the Trust and agrees that obligations assumed by the Trust pursuant to this
Agreement shall be limited in all cases to the Trust and its assets, and if the
liability relates to one or more Funds, the obligations thereunder shall be
limited to the respective assets of such Funds. Each of LASC and Colonial
further agrees that it shall not seek satisfaction of any such obligation from
the shareholders of the Funds, nor from the Trustees or any individual Trustee
of the Trust.
15. Governing Law.
This Agreement shall be interpreted under, and the performance of each of
LASC and Colonial under this Agreement shall be consistent with, the provisions
of the Agreement and Declaration of Trust and By-Laws of the Trust, the terms of
the Investment Company Act, applicable rules and regulations thereunder, the
Code and regulations thereunder, and the Trust's Prospectus and Statement of
Additional Information, in each case as from time to time in effect. The
provisions of this Agreement shall be construed and interpreted in accordance
with the domestic substantive laws of The Commonwealth of Massachusetts without
giving effect to any choice or conflict of laws rules or provisions that would
result in the application of the domestic substantive laws of any other
jurisdiction; provided, however, that if such law or any of the provisions of
this Agreement conflict with the applicable provisions of the Investment Company
Act, the latter shall control.
16. Use of Manager's Name.
The Trust may use the names "Liberty" or any other name derived from such
names only for so long as this Agreement (or another similar management
agreement with LFC or a majority or greater owned subsidiary thereof pertaining
to other series funds of the Trust) or any extension, renewal, or amendment
hereof (or thereof) remains in effect. At such time as this Agreement (and each
such other similar agreement pertaining to such other series funds) or any
extension, renewal or amendment hereof (or thereof), or each such other similar
successor organization agreement shall no longer be in effect, the Trust will
cease to use any name derived from any such names similar thereto, or any other
name indicating that it is managed by or otherwise connected with the Manager,
or with any organization which shall have succeeded to Manager's business as
investment advisor or manager.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement
on the date first above written.
LIBERTY VARIABLE INVESTMENT TRUST,
on its own behalf and on behalf of
Rydex Financial Services Fund, Variable Series
Rydex Health Care Fund, Variable Series
Liberty S&P 500 Index Fund, Variable Series
By: /s/Xxxxxxx X. Xxxxxx
Title: President
LIBERTY ADVISORY SERVICES CORP.
By: /s/Xxxxxx X. Xxxxxxxxxxx
Title: President
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: /s/Xxxxxxx X. Xxxxxx
Title: President
