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 BRANCH BANKING
AND TRUST COMPANY (the "Investment Adviser"), a bank having its principal place
of business at 000 Xxxxxxxxxxx Xxxxxx Xxxx, Xxxxxxx, Xxxxx Xxxxxxxx 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 or any other regulatory authority has censured the
Investment Adviser; placed limitations upon its activities,
functions or operations; 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 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. 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,
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
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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:_______________________
BRANCH BANKING AND TRUST COMPANY
[SEAL] By:__________________________
Title:_______________________
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Dated: _______, 1997
Schedule A
to the Investment Advisory Agreement
between Variable Insurance Funds and
Branch Banking and Trust Company
NAME OF FUND COMPENSATION
BB&T Growth and Income Fund Annual rate of seventy-four
one-hundredths of one
percent (.74%) of the
average daily net assets of
such Fund.
BB&T Capital Manager Fund Annual rate of twenty-five
one-hundredths of one
percent (.25%) of the
average daily net assets of
such Fund.
_______________________________________________
All fees are computed daily and paid monthly.
VARIABLE INSURANCE FUNDS
By:________________________________
Name:______________________________
Title:_____________________________
BRANCH BANKING AND TRUST COMPANY
By:________________________________
Name:______________________________
Title:_____________________________
A-1
