INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this ___ day of _____, 1997, between VARIABLE INSURANCE
FUNDS (the "Trust"), a Massachusetts business trust having its principal place
of business at 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000-0000, and QUALIVEST
CAPITAL MANAGEMENT, INC. (the "Investment Adviser"), an Oregon corporation
having its principal place of business at 000 X.X. Xxxxx Xxxxxx, Xxxxxxxx,
Xxxxxx 00000.
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
investment advisory and administrative services to newly created investment
portfolios of the Trust and may retain the Investment Adviser to serve in such
capacity with respect to certain additional investment portfolios of the Trust,
all as now or hereafter may be identified in Schedule A hereto as such Schedule
may be amended from time to time (individually referred to herein as a "Fund"
and collectively referred to herein as the "Funds") and the Investment Adviser
represents that it is willing and possesses legal authority to so furnish such
services without violation of applicable laws and regulations;
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 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. Additional investment portfolios may
from time to time be added to those covered by this Agreement by the
parties executing a new Schedule A which shall become effective upon
its execution and shall supersede any Schedule A having an earlier
date.
2. Delivery of Documents. The Trust has furnished the Investment
Adviser with copies properly certified or authenticated of each of the
following:
(a) the Trust's Amended and Restated Agreement and Declaration
of Trust, dated as of July 20, 1994 and amended and restated
as of February 5, 1997, and any 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 any 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 (the "Commission") on July 20, 1994, and all
amendments thereto;
(e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act"), and
under the 1940 Act as filed with the Commission and all
amendments thereto (the "Registration Statement"); and
(f) the most recent Prospectus and Statement of Additional
Information of each of the Funds (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 furnish the Investment Adviser from time to
time with 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 the Funds, including investment
research and management with respect to all securities and
investments and cash equivalents in the 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 of the Fund's investment objectives, 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 Commission under the 1940 Act 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;
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(c) will not make loans to any person to purchase or carry units
of beneficial interest ("shares") in the Trust or make loans
to the Trust;
(d) will place or cause to be placed orders for the Funds
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 and to the extent
permitted by the 1940 Act, 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, the
Investment Adviser, or any affiliated person of the Trust,
BISYS Fund Services or the Investment Adviser, except to the
extent permitted by the 1940 Act and the Commission;
(e) will maintain all books and records with respect to the
securities transactions of the Funds and will furnish the
Trust's Board of Trustees with such periodic and special
reports as the Board may request;
(f) will treat confidentially and as proprietary information of
the Trust all records and other information relative to the
Trust and the Funds and prior, present, or potential
shareholders, 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;
(g) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment
recommendations for the Funds, 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;
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(h) will promptly review all (1) current security reports, (2)
summary reports of transactions and (3) current cash
position reports upon receipt thereof from the Trust and
will report any errors or discrepancies in such reports to
the Trust or its designee within three (3) business days;
and
(i) will use its best efforts to obtain and provide to the
Trust's fund accountant (1) dealer quotations, (2) prices
from a pricing service, (3) matrix prices, or (4) any other
price information believed to be reliable by the Investment
Adviser with respect to any security held by a Fund, when
requested to do so by the Trust's fund accountant.
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 Funds 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 under the
1940 Act the following records: (a) completed trade tickets for all
portfolio transactions, (b) broker confirmations for individual and
block trades, (c) credit files relating to (i) money market securities
and their issuers, (ii) repurchase agreement counterparties and (iii)
letter of credit providers, (d) transaction records indicating the
method of allocation with respect to the selection of brokers, and (e)
such other records that may be deemed necessary and appropriate by the
parties to this Agreement.
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 Funds.
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 as set forth on Schedule A hereto. The obligation of
each Fund to pay the above- described fee to the Investment Adviser
will begin as of the date of the initial public sale of shares in such
Fund. The fee attributable to each Fund shall be the obligation of
that Fund and not of any other Fund.
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If in any fiscal year the aggregate expenses of any of the Funds
exceed any applicable expense limitation, the Investment Adviser will
reimburse the Fund for a portion of such excess expenses 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 under the Management and Administration Agreement
between BISYS Fund Services and the Trust. 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 required by any applicable regulation. 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. It
is further agreed that the Investment Adviser shall have no
responsibility or liability for the accuracy or completeness of the
Trust's Registration Statement under the 1940 Act and the 1933 Act,
except for information supplied by the Investment Adviser for
inclusion therein or information known by the Investment Adviser to be
false or misleading. The Trust agrees to indemnify the Investment
Adviser to the full extent permitted by the Trust's Declaration of
Trust.
9. Duration and Termination. This Agreement will become effective with
respect to each Fund listed on Schedule A 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,
and, unless sooner terminated as provided herein, shall continue in
effect until ______, 1999. Thereafter, if not terminated, this
Agreement shall continue in effect as to a particular Fund for
successive one-year terms, only so long as such continuance is
specifically approved at least annually
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(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 as to
a particular Fund 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
meanings as ascribed to such terms in the 1940 Act.)
10. Investment Adviser's Representations. The Investment Adviser hereby
represents and warrants as follows:
(a) it is willing and possesses all requisite legal authority to
provide the services contemplated by this Agreement without violation
of applicable laws and regulations;
(b) 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 policies;
(c) it shall immediately notify the Trust in the event (1) that the
Commission has censured the Investment Adviser; placed limitations
upon its activities, functions or operations; suspended or revoked its
registration as an investment adviser; or has commenced proceedings or
an investigation that may result in any of these actions, (2) upon
having a reasonable basis for believing that any Fund has ceased to
qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (3) 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. The Investment Adviser
further agrees to notify the Trust immediately of any material fact
known to the Investment Adviser respecting or relating to the
Investment Adviser that is not contained in the Registration Statement
or Prospectus for the Trust, or any amendment or supplement thereto,
or of any statement contained therein that becomes untrue; and
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(d) 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 Nationwide Life and Annuity Insurance Company and to
separate accounts and the general accounts of any insurance companies
that are affiliated with Nationwide Life and Annuity 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. Governing Law. This Agreement shall be governed by and its provisions
shall be construed in accordance with the laws of the Commonwealth of
Massachusetts.
14. Miscellaneous. It is expressly agreed that the obligations of the
Trust hereunder shall not be binding upon any of the Trustees,
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shareholders, nominees, officers, agents or employees of the Trust
personally, but shall bind only the trust property of the Trust. The
execution and delivery of this Agreement have been authorized by the
Trustees, and this Agreement has been signed and delivered by an
authorized officer of the Trust, acting as such, and neither such
authorization by the Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually
or to impose any liability on any of them personally, but shall bind
only the trust property of the Trust as provided in the Trust's
Declaration of Trust.
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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.
[SEAL] VARIABLE INSURANCE FUNDS
By:
Title:
QUALIVEST CAPITAL MANAGEMENT, INC.
[SEAL] By:
Title:
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Dated: _______, 1997
Schedule A
to the Investment Advisory Agreement
between Variable Insurance Funds and
Qualivest Capital Management, Inc.
NAME OF FUND COMPENSATION
Variable Insurance Money Market Fund Annual rate of thirty
five one-hundredths of
one percent (.35%) of
the average daily net
assets of such Fund.
Variable Insurance Allocated Annual rate of five one-
Conservative Fund hundredths of one
percent (.05%) of the
average daily net assets
of such Fund.
Variable Insurance Allocated Annual rate of five one-
Balanced Fund hundredths of one
percent (.05%) of the
average daily net assets
of such Fund.
Variable Insurance Allocated Growth Annual rate of five one-
Fund hundredths of one
percent (.05%) of the
average daily net assets
of such Fund.
Variable Insurance Allocated Annual rate of five one-
Aggressive hundredths of one
Fund percent (.05%) of the
average daily net assets
of such Fund.
____________________________________________________
All fees are computed daily and paid monthly.
VARIABLE INSURANCE FUNDS
By:________________________________
Name:______________________________
Title:_____________________________
A-1
QUALIVEST CAPITAL MANAGEMENT, INC.
By:________________________________
Name:______________________________
Title:_____________________________
A-2
