INTERIM SUB-ADVISORY AGREEMENT
AGREEMENT dated as of [ ], 2002, between AmSouth Investment Management
Company, LLC, an investment adviser having its principal place of business in
Alabama (herein called the "Investment Adviser") and OakBrook Investments, Inc.,
a limited liability company having its principal place of business in Illinois
(herein called the "Sub-Adviser").
WHEREAS, Variable Insurance Funds (the "Trust"), a Massachusetts business
trust having its principal place of business at 0000 Xxxxxxx Xxxx, Xxxxxxxx,
Xxxx 00000-0000, is registered as an open-end, management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust has retained the Investment Adviser to provide or
procure investment advisory services on behalf of certain investment portfolios
of the Trust pursuant to an investment advisory agreement dated September 16,
1997, as amended and restated May 21, 2001 (the "Advisory Agreement");
WHEREAS, the Investment Adviser wishes to retain the Sub-Adviser to assist
the Investment Adviser in providing investment advisory services in connection
with each portfolio of the Trust as now or hereafter may be identified on
Schedule A hereto, as such Schedule may be amended from time to time with the
consent of the parties hereto (each a "Fund");
WHEREAS, the Sub-Adviser is willing to provide such services to the
Investment Adviser upon the terms and conditions and for the compensation set
forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, it is agreed between
the parties hereto as follows:
1. Appointment. The Investment Adviser hereby appoints the Sub-Adviser its
sub-adviser with respect to the Fund and the Sub-Adviser accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. The Investment Adviser shall provide to the
Sub-Adviser copies of the Trust's most recent prospectus and statement of
additional information (including supplement thereto) which relate to any class
of shares representing interests in the Fund (each such prospectus and statement
of additional information as presently in effect, and as they shall from time to
time be amended and supplemented, is herein respectively called a "Prospectus"
and a "Statement of Additional Information").
3. Sub-Advisory Services to the Fund.
(a) Subject to the supervision of the Investment Adviser, the
Sub-Adviser will provide a continual investment program for such portion, if
any, of the Fund's assets, that is allocated to the Sub-Adviser by the
Investment Adviser from time to time. With respect to such assets, the
Sub-Adviser will: (i) provide investment research and credit analysis concerning
the Fund's investments; (ii) place orders for all purchases and sales of the
investments made for the Fund; (iii) maintain the books and records required in
connection with its duties hereunder; and (iv) keep the Investment Adviser
informed of developments materially affecting the Fund.
(b) The Sub-Adviser 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; provided that, notwithstanding this Paragraph 3(b),
the liability of the Sub-Adviser for actions taken and non-actions with respect
to the performance of services under this Agreement shall be subject to the
limitations set forth in Paragraph 11(a) of this Agreement.
(c) The Sub-Adviser will communicate to the Investment Adviser and to
the Trust's custodian and Fund accountants as instructed by the Investment
Adviser on each day that a purchase or sale of a security is effected for the
Fund (i) the name of the issuer, (ii) the amount of the purchase or sale, (iii)
the name of the broker or dealer, if any, through which the purchase or sale
will be affected, (iv) the CUSIP number of the security, if any, and (v) such
other information as the Investment Adviser may reasonably require for purposes
of fulfilling its obligations to the Trust under the Advisory Agreement.
(d) The Sub-Adviser will provide the services rendered by it hereunder
in accordance with the Fund's investment objectives, policies and restrictions
as stated in the Prospectus and Statement of Additional Information and such
other guidelines as the Board of Trustees of the Trust ("Board") or the
Investment Adviser may establish.
(e) The Sub-Adviser will maintain records of the information set forth
in Paragraph 3(c) hereof with respect to the securities transactions of the Fund
and will furnish the Trust's Board with such periodic and special reports as the
Board may reasonably request.
(f) The Sub-Adviser will promptly review all (1) reports of current
security holdings in the Fund, (2) summary reports of transactions and pending
maturities (including the principal, cost and accrued interest on each portfolio
security in maturity date order) and (3) current cash position reports
(including cash available from portfolio sales and maturities and sales of the
Fund's shares less cash needed for redemptions and settlement of portfolio
purchases), all within a reasonable time after 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 after discovery of such discrepancies.
(g) At such times as reasonably requested by the Board or the
Investment Adviser, the Sub-Adviser will provide economic and investment
analysis and reports, and make available to the Board and the Investment Adviser
such economic, statistical, or investment services normally available to similar
investment company clients of the Sub-Adviser.
(h) The Sub-Adviser will make its portfolio managers and other
appropriate personnel available to the Board and the Investment Adviser at
reasonable times to review the Fund's investment policies and to consult with
the Board and the Investment Adviser regarding the investment affairs of the
Fund, including economic and statistical and investment matters relevant to the
Sub-Adviser's duties hereunder, and the portfolio strategies employed.
(i) The Sub-Adviser will provide the Investment Adviser with quarterly
compliance reports and certifications in the forms requested by the Investment
Adviser.
(j) The Sub-Adviser will provide the Trust with reasonable evidence
that, with respect to its activities on behalf of the Fund, the Sub-Adviser is
maintaining (i) adequate fidelity bond insurance; and (ii) an appropriate Code
of Ethics and related reporting procedures.
4. Brokerage. The Sub-Adviser may place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with any broker
or dealer. In placing orders, the Sub-Adviser will consider the experience and
skill of the firm's securities traders, as well as the firm's financial
responsibility and administrative efficiency. The Sub-Adviser will use its best
efforts to obtain the best price and the most favorable execution of its orders.
Consistent with these obligations, the Sub-Adviser may, subject to the approval
of the Board, select brokers on the basis of the research, statistical and
pricing services they provide to the Fund. A commission paid to such brokers may
be higher than that which another qualified broker would have charged for
effecting the same transaction, provided that the Sub-Adviser determines in good
faith that the amount of such commission is reasonable in relation to the value
of the brokerage or research services provided, viewed either in terms of a
particular transaction or the overall responsibility of the Sub-Adviser to the
Fund and its other clients. In no instance will portfolio securities be
purchased from or sold to the Trust's principal distributor, the Investment
Adviser or any affiliate thereof (as the term "affiliate" is defined in the 1940
Act), except to the extent permitted by Securities and Exchange Commission
("SEC") exemptive order or by applicable law.
5. Compliance with Laws: Confidentiality: Conflicts of Interest.
(a) The Sub-Adviser agrees that it will comply with all applicable
laws, rules and regulations of all federal and state regulatory agencies having
jurisdiction over the Sub-Adviser in performance of its duties hereunder (herein
called the "Rules").
(b) The Sub-Adviser will treat confidentially and as proprietary
information of the Trust all records and information relative to the Trust 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 Sub-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.
(c) The Sub-Adviser will maintain a policy and practice of conducting
sub-advisory services hereunder independently of the banking operations of its
affiliates. In making investment recommendations for the Fund, the Sub-Adviser's
personnel will not inquire or take into consideration whether the issuers of
securities proposed for purchase or sale for the Fund's account are bank
customers of the Sub-Adviser's affiliates unless so required by applicable law.
In dealing with their bank customers, affiliates of Sub-Adviser will not inquire
or take into consideration whether securities of those customers are held by the
Fund.
6. Control by Trust's Board of Trustees. Any recommendations concerning the
Fund's investment program proposed by the Sub-Adviser to the Fund and the
Investment Adviser pursuant to this Agreement, as well as any other activities
undertaken by the Sub-Adviser on behalf of the Fund pursuant thereto shall at
all times be subject to any applicable directives of the Board of Trustees of
the Trust.
7. Services Not Exclusive. The Sub-Adviser's services hereunder are not
deemed to be exclusive, and the Sub-Adviser shall be free to render similar or
dissimilar services to others so long as its services under this Agreement are
not impaired thereby.
8. Books and Records. In compliance with the requirements of Rule 31a-3 of
the Rules, and any other applicable Rule, the Sub-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 such records upon the
Trust's request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 and any other applicable Rule, the records required to
be maintained by the Sub-Adviser hereunder pursuant to Rule 31a-1 and any other
applicable Rule.
9. Expenses. During the term of this Agreement, the Sub-Adviser will bear
all expenses incurred by it in connection with the performance of its services
under this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Fund. Notwithstanding the foregoing, the
Sub-Adviser shall not bear expenses related to the operation of the Trust or any
Fund including, but not limited to, taxes, interest, brokerage fees and
commissions and any extraordinary expense items.
10. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Investment Adviser will pay the Sub-Adviser and
the Sub-Adviser will accept as full compensation therefor a fee computed daily
and paid monthly in arrears on the first business day of each month equal to the
lesser of (i) the fee at the applicable annual rates set forth on Schedule A
hereto or (ii) such fee as may from time to time be agreed upon in writing by
the Investment Adviser and the Sub-Adviser. If the fee payable to the
Sub-Adviser pursuant to this paragraph begins to accrue after the beginning of
any month or if this Agreement terminates before the end of any month, the fee
for the period from such date to the end of such month or from the beginning of
such month to the date of termination, as the case may be, shall be prorated
according to the proportion which such period bears to the full month in which
such effectiveness or termination occurs. For purposes of calculating fees, the
value of a Fund's net assets shall be computed in the manner specified in the
Prospectus and the Statement of Additional Information for the computation of
the value of the Fund's net assets in connection with the determination of the
net asset value of the Fund's shares. Payment of said compensation shall be the
sole responsibility of the Investment Adviser and shall in no way be an
obligation of the Fund or of the Trust.
11. Limitation of Liability.
(a) The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Investment Adviser, the Trust or
the Fund in connection with the matters to which Agreement relates, except that
Sub-Adviser shall be liable to the Investment Adviser for a loss resulting from
a breach of fiduciary duty by Sub-Adviser under the 1940 Act and other Rules
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
Sub-Adviser in the performance of its duties or from reckless disregard by it of
its obligations or duties under this Agreement. The Sub-Adviser shall indemnify
and hold harmless the Investment Adviser, the Trust, the Fund, their Trustees,
officers and shareholders, from any and all claims, losses, expenses,
obligations and liabilities (including reasonable attorneys fees) which arise or
result from the Sub-Adviser's willful misfeasance, bad faith or gross negligence
in the performance of its duties or from the Sub-Adviser's reckless disregard of
its obligations or duties under this Agreement. In no case shall the Sub-Adviser
be liable for actions taken or non-actions with respect to the performance of
services under this Agreement based upon specific information, instructions or
requests given or made to the Sub-Adviser by the Investment Adviser.
(b) The Investment Adviser shall be responsible at all times for
supervising the Sub-Adviser, and this Agreement does not in any way limit the
duties and responsibilities that the Investment Adviser has agreed to under the
Advisory Agreement.
12. Duration and Termination. Unless sooner terminated as provided herein,
this Agreement shall continue until the sooner of (a) 150 days from the date
this Agreement is entered into, or (b) the date upon which Fund shareholders
approve the retention of the Sub-Adviser in accordance with Section 15(a) of the
1940 Act and the Investment Adviser executes a Sub-Advisory Agreement with the
Sub-Adviser; provided, however, that this Agreement may continue for a period in
excess of 150 days upon the written agreement of the parties and consistent with
SEC or SEC staff action or interpretation of applicable law. This Agreement may
be terminated: (i) by the Trust at any time without the payment of penalty by
the Board; (ii) by vote of a majority of the outstanding voting securities of
the Fund; (iii) by the Investment Adviser on 60 days written notice to the
Sub-Adviser; or (iv) by the Sub-Adviser on 60 days written notice to the
Investment Adviser. Any notice of termination served on the Sub-Adviser by the
Trust or the Investment Adviser shall be without prejudice to the obligation of
the Sub-Adviser to complete transactions already initiated or acted upon with
respect to the Fund. This Agreement shall terminate automatically in the event
of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person" and "assignment" shall have
the same meaning as such terms have in the 1940 Act.)
13. Sub-Adviser's Representations. The Sub-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: (i) the diversification requirements of Section 817(h) of the
Internal Revenue Code and the regulations issued thereunder; (ii) the Fund's
investment objectives and investment policies; (iii) the Fund's Prospectus and
Statement of Additional Information; (iv) the 1940 Act; and (v) any other rules
and regulations pertaining to investment vehicles underlying variable annuity or
variable life insurance policies;
(b) it will immediately notify the Trust and the Investment Adviser
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 will be responsible for making inquiries and for reasonably
ensuring that any employee of the Sub-Adviser, any person or firm that the
Sub-Adviser has employed or with which it has associated, or any employee
thereof has not, to the best of the Sub-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.
14. 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 Investment
Adviser and the Sub-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 New York Life Insurance Company and to separate accounts and the
general accounts of any insurance companies that are affiliated with New York
Life Insurance Company. The Sub-Adviser and the Investment Adviser agree that
the Sub-Adviser shall be under no obligation to investigate insurance companies
to which the Trust offers or proposes to offer its shares.
15. Amendment of this Agreement. No provision of this Agreement may be
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, discharge or
termination is sought.
16. Notification of Investment Adviser. The Sub-Adviser will promptly
notify the Investment Adviser in writing of the occurrence of any of the
following events: (a) the Sub-Adviser shall fail to be registered as an
investment adviser under the Investment Advisers Act of 1940, as amended; (b)
the Sub-Adviser shall have been served or otherwise have notice of any action
suit, proceeding, inquiry or investigation, at law or in equity, before or by
any court, public board or body, involving the affairs of the Fund or the Trust;
or (c) any other occurrence that reasonably could have a material adverse impact
on the ability of the Sub-Adviser to provide the services provided for in this
Agreement.
17. Entire Agreement. This Agreement embodies the entire agreement and
understanding among the parties hereto, and supersedes all prior agreements and
understandings relating to the subject matter hereof.
18. Privacy Policy. The Sub-Adviser acknowledges that nonpublic customer
information (as defined in Regulation S-P, including any amendments thereto) of
customers of the Fund received from the Investment Adviser is subject to the
limitations on redisclosure and reuse set forth in Section 248.11 of Regulation
S-P, and agrees that such information: (i) shall not be disclosed to any third
party for any purpose without the written consent of the Investment Adviser
unless permitted by exceptions set forth in Sections 248.14 or 248.15 of
Regulation S-P; and (ii) shall be safeguarded pursuant to procedures adopted
under Section 248.30 of Regulation S-P if so required.
19. Anti-Money Laundering Compliance. The Sub-Adviser acknowledges that, in
compliance with the Bank Secrecy Act, as amended, and implementing regulations
("BSA"), the Trust has adopted an Anti-Money Laundering Policy. The Sub-Adviser
agrees to comply with the Trust's Anti-Money Laundering Policy and the BSA, as
the same may apply to the Sub-Adviser, now or in the future. The Sub-Adviser
further agrees to provide to the Trust such reports, certifications and
contractual assurances as may be requested by the Trust or the Investment
Adviser.
20. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any 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 effected thereby.
This Agreement shall be binding upon and shall inure to the benefit of the
parties herein and their respective successors and shall be governed by
Massachusetts law.
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 an Amended
and Restated Declaration of Trust dated as of July 20, 1994 and amended and
restated as of February 5, 1997, 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, shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with any series of shares of the Trust must look solely to the assets of the
Trust belonging to such series 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.
AmSouth Investment Management Company, LLC
By: _________________________________
Title: ______________________________
OakBrook Investments, LLC
By: _________________________________
Title: ______________________________
[Dated: ]
Schedule A
to the Interim Sub-Advisory Agreement
between AmSouth Investment Management Company, LLC and
OakBrook Investments, LLC
NAME OF FUND COMPENSATION
AmSouth Mid Cap Fund - Variable Insurance Fund Annual rate of [_____] of the
average daily net assets of
such Fund.
____________________________________________
All fees are computed daily and paid monthly.
AmSouth Investment Management Company, LLC
By:____________________________________
Name:__________________________________
Title:_________________________________
OakBrook Investments, LLC
By:_____________________________________
Name:___________________________________
Title:__________________________________
A-1
