Investment Advisory Agreement
LIBERTY VARIABLE INVESTMENT TRUST
LIBERTY S&P 500 INDEX FUND, VARIABLE SERIES
RYDEX FINANCIAL SERVICES FUND, VARIABLE SERIES
RYDEX HEALTH CARE FUND, VARIABLE SERIES
MANAGEMENT AND SUB-ADVISORY AGREEMENT
MANAGEMENT AND SUB-ADVISORY AGREEMENT ("Agreement"), made this 1st day of
November 2001, among 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 Liberty S&P 500 Index Fund, Variable Series,
Rydex Financial Services Fund, Variable Series and Rydex Health Care Fund,
Variable Series (the "Fund(s)"), LIBERTY ADVISORY SERVICES CORP., a corporation
organized under the laws of The Commonwealth of Massachusetts ("LASC"), and
COLONIAL MANAGEMENT ASSOCIATES, INC., a corporation organized under the laws of
the State of Massachusetts (the "Sub-Advisor").
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 Fund, which
shares are to be issued and sold to and held by various separate accounts of
insurance companies ("Participating Insurance Companies");
WHEREAS, the Trust heretofore has created various other separate funds which are
covered by other 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 Fund, all in the manner and on the
terms and conditions hereinafter set forth;
WHEREAS, the Trust and LASC desire that the Sub-Advisor, as sub-adviser to LASC,
provide investment management services to the Fund based on the Sub-Advisor's
multi-manager concept, under which the Sub-Advisor recommends, over-sees and
coordinates, and allocates the Fund's portfolio assets among, several portfolio
managers ("Portfolio Managers"), each having a different investment style, each
of which manages a different portion of the Fund's investment portfolio; and
WHEREAS, each of LASC and the Sub-Advisor is registered as an investment adviser
under the Investment Adviser's Act of 1940, as amended (the "Investment
Adviser's Act"), and desires to provide services to the Trust and the Fund, 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 Fund, LASC and
the Sub-Advisor 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
Fund, 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 the Sub-Advisor 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 Fund 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 any of its affiliates.
B. Investment Advisory Services.
(a) LASC shall have overall supervisory responsibility for the management and
investment of the assets of the Fund, subject to and in accordance with the
investment objectives, policies and limitations of the 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 Fund, LASC hereby delegates
to the Sub-Advisor the obligation to provide the Fund, as sub-advisor to LASC,
an overall investment program and strategy, in accordance with the Sub-Advisor's
multi-manager concept. LASC shall be solely responsible for paying the fees of
the Sub-Advisor from the fees it collects from the Trust as provided in
paragraph 5 below.
(c) In accordance with the Sub-Advisor's multi-manager concept, the Sub-Advisor
will recommend to the Trustees one or more persons or companies registered as
investment advisers under the Investment Adviser's Act or qualifying as a "bank"
within the meaning of the Investment Adviser's 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 the Fund, each Portfolio
Manager and the Sub-Advisor. 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 the Fund's assets assigned to that
Portfolio Manager by the Sub-Advisor from time to time and the purchase and sale
of portfolio securities with those assets, all within the Fund's Investment
Policies. Subject to Section 6, the Sub-Advisor 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 the Fund's portfolio. The Sub-Advisor shall
advise the Trustees as to which persons or companies the Sub-Advisor 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 the 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 the Fund's Investment
Policies and applicable laws.
(d) The Sub-Advisor 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 the Sub-Advisor 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 the Sub-Advisor, 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
Fund, as appropriate, shall reimburse LASC and/or the Sub-Advisor (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 Fund. LASC and/or the Sub-Advisor shall pay all
salaries, fees and expenses of Trustees or officers of the Trust who are their
employees. LASC and the Sub-Advisor shall not be obligated to bear any other
expenses incidental to the operations and business of the Trust. LASC and the
Sub-Advisor 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 the Sub-Advisor 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 the Sub-Advisor 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 the
Sub-Advisor 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 the Sub-Advisor 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 the Sub-Advisor 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 Fund), 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 the Sub-Advisor
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, the Sub-Advisor 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 the Sub-Advisor 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 the Sub-Advisor, 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 the Sub-Advisor
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 Fund,
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 Fund 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 the Sub-Advisor or of their respective
affiliates as directors, officers, agents and shareholders thereof; that
directors, officers, agents and shareholders of LASC and/or the Sub-Advisor 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 the Sub-
Advisor 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 the Sub-Advisor. All services to be rendered and
payments made pursuant to this Agreement are as follows:
(a) the Trust, on its own behalf and on behalf of the Funds, will pay LASC
monthly in arrears a fee at an annual rate equal to 0.40% of the net
asset value of the Liberty S&P 500 Index Fund, Variable Series, 1.00%
of the net asset value of the Rydex Health Care Fund, Variable Series,
and 0.85% of the net asset value of the Rydex Financial Services Fund,
Variable Series,
(b) and LASC, on its own behalf, will pay the Sub-Advisor monthly in
arrears a fee at an annual rate equal to 0.20% of such net asset value
for the Liberty S&P 500 Index Fund, Variable Series 0.65% of such net
asset value for the Rydex Financial Services Fund, Variable Series, and
0.85 % of such net asset value for the Rydex Health Care Fund, Variable
Series.
The Sub-Advisor acknowledges and agrees that the Trust shall have no obligation
to the Sub-Advisor 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 the Fund as determined in
accordance with the Trust's Prospectus as of the previous business day on which
the 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 the Sub-Advisor.
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 the Sub-Advisor, as the case may be, LASC or the Sub-Advisor
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. The Sub-Advisor 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 the
Sub-Advisor 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 the Sub-Advisor, 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 Fund has 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 July 31, 2003, 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 the
Sub-Advisor, and this Agreement shall terminate automatically in the event of
any such assignment. Each of LASC and the Sub-Advisor 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, the Sub-Advisor 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 the Sub-Advisor;
(b) shall immediately terminate in the event of its assignment; and
(c) may be terminated by LASC or the Sub-Advisor 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 the Sub-Advisor 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 the Sub-Advisor 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 the Sub-Advisor 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" and "Rydex" or
any other name derived from such names only for so long as this Agreement (or
another similar management agreement with Liberty Financial 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
LIBERTY S&P 500 INDEX FUND, VARIABLE SERIES
RYDEX FINANCIAL SERVICES FUND, VARIABLE SERIES
RYDEX HEALTH CARE FUND, VARIABLE SERIES
By:/s/Xxxxxxx X. Xxxxxx
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Title: Secretary
LIBERTY ADVISORY SERVICES CORP.
By: /s/Xxxxxx X. Xxxxxxx
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Title: Chief Operating Officer
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: /s/Xxxxxxx X. Xxxxxx
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Title: Assistant Secretary
