PORTFOLIO MANAGEMENT AGREEMENT
RYDEX FINANCIAL SERVICES FUND, VARIABLE SERIES
RYDEX HEALTH CARE FUND, VARIABLE SERIES
As of November 1, 2001
Rydex Global Advisors
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Re Portfolio Management Agreement
Ladies and Gentlemen:
Rydex Financial Services Fund, Variable Series, and Rydex Health Care Fund,
Variable Series (each a "Fund" and together, "Funds") are each a series of the
Liberty Variable Investment Trust (the "Trust"), a diversified open-end
investment company registered under the Investment Company Act of 1940 (the
"Act"), and is subject to the rules and regulations promulgated thereunder.
Liberty Advisory Services Corp. ("LASC") is the manager of the Fund. Pursuant to
the Management and Sub-Advisory Agreement of even date herewith (the "Management
and Sub-Advisory Agreement") among the Trust, on behalf of the Fund, LASC and
Colonial Management Associates, Inc. (the "Fund Manager"), LASC delegates to the
Fund Manager responsibility for investment management of the Fund. In
furtherance thereof, the Fund Manager evaluates and recommends portfolio
managers for the Fund and is responsible for certain administrative matters
relating to the Fund.
l. Employment as a Portfolio Manager. The Trust being duly authorized hereby
employs Rydex Global Advisors (the "Portfolio Manager") as a discretionary
portfolio manager, on the terms and conditions set forth herein, of those assets
of the Fund which the Fund Manager determines to assign to the Portfolio Manager
(those assets being referred to as the "Fund Account"). The Fund Manager may,
from time to time, allocate and reallocate the Fund's assets among the Portfolio
Manager and the other portfolio managers of the Fund's assets.
2. Acceptance of Employment; Standard of Performance. The Portfolio Manager
accepts its employment as a discretionary portfolio manager and agrees to use
its best professional judgment to make timely investment decisions for the Fund
Account in accordance with the provisions of this Agreement.
3. Portfolio Management Services of Portfolio Manager. In providing portfolio
management services to the Fund Account, the Portfolio Manager shall be subject
to the investment objectives, policies and restrictions of the Fund as set forth
in the Trust's current registration statement under the Act (as the same may be
modified from time to time), and the investment restrictions set forth in the
Act and the Rules thereunder (as and to the extent set forth in such
registration statement or in other documentation furnished to the Portfolio
Manager by the Fund or the Fund Manager), to the supervision and control of the
Trustees of the Trust (the "Trustees"), and to instructions from the Fund
Manager. The Portfolio Manager shall not, without the prior approval of the Fund
or the Fund Manager, effect any transactions which would cause the Fund Account,
treated as a separate fund, to be out of compliance with any of such
restrictions or policies.
4. Transaction Procedures. All portfolio transactions for the Fund Account will
be consummated by payment to or delivery by the custodian of the assets of the
Fund (the "Custodian"), or such depositories or agents as may be designated by
the Custodian in writing, as custodian for the Fund, of all cash and/or
securities due to or from the Fund Account, and the Portfolio Manager shall not
have possession or custody thereof or any responsibility or liability with
respect to such custody. The Portfolio Manager shall advise and confirm in
writing to the Custodian all investment orders for the Fund Account placed by it
with brokers and dealers at the time and in the manner set forth in Schedule A
hereto (as Schedule A may be amended from time to time). The Fund shall issue to
the Custodian such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Portfolio Manager. The Fund shall
be responsible for all custodial arrangements and the payment of all custodial
charges and fees, and, upon giving proper instructions to the Custodian, the
Portfolio Manager shall have no responsibility or liability with respect to
custodial arrangements or the acts, omissions or other conduct of the Custodian.
5. Allocation of Brokerage. The Portfolio Manager shall have authority and
discretion to select brokers and dealers to execute portfolio transactions
initiated by the Portfolio Manager, and to select the markets on or in which the
transaction will be executed.
A. In doing so, the Portfolio Manager's primary responsibility shall be to seek
to obtain best net price and execution for the Fund. However, this
responsibility shall not obligate the Portfolio Manager to solicit competitive
bids for each transaction or to seek the lowest available commission cost to the
Fund, so long as the Portfolio Manager reasonably believes that the broker or
dealer selected by it can be expected to obtain a "best execution" market price
on the particular transaction and determines in good faith that the commission
cost is reasonable in relation to the value of the brokerage and research
services (as defined in Section 28(e)(3) of the Securities Exchange Act of 1934)
provided by such broker or dealer to the Portfolio Manager viewed in terms of
either that particular transaction or of the Portfolio Manager's overall
responsibilities with respect to its clients, including the Fund, as to which
the Portfolio Manager exercises investment discretion, notwithstanding that the
Fund may not be the direct or exclusive beneficiary of any such services or that
another broker may be willing to charge the Fund a lower commission on the
particular transaction.
B. Subject to the requirements of paragraph A above, the Fund Manager shall
have the right to request that transactions giving rise to brokerage
commissions shall be executed by brokers and dealers (and in amounts), to
be agreed upon from time to time between the Fund Manager and the Portfolio
Manager, that provide brokerage or research services to the Fund or the
Fund Manager, or as to which an on-going relationship will be of value to
the Fund in the management of its assets, which services and relationship
may, but need not, be of direct benefit to the Fund Account.
Notwithstanding any other provision of this Agreement, the Portfolio
Manager shall not be responsible under paragraph A above with respect to
transactions executed through any such broker or dealer.
C. The Portfolio Manager shall not execute any portfolio transactions for the
Fund Account with itself or any broker or dealer which is an "affiliated
person" (as defined in the Act) of the Fund, the Portfolio Manager or any
other Portfolio Manager of the Fund without the prior written approval of
the Fund except in accordance with SEC Exemptive Order No. 24288 dated
February 15, 2000, a copy of which has been furnished to the Portfolio
Manager, and Rule 17e-1 procedures as approved by the Fund's Trustees from
time to time. The Fund will provide the Portfolio Manager with a list of
brokers and dealers which are "affiliated persons" of the Fund or its
Portfolio Managers.
6. Proxies. The Portfolio Manager will vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Fund Account may be
invested in accordance with authorization provided by the Fund Manager from time
to time.
7. Fees for Services. As its compensation for its services under this Agreement,
the Fund Manager will pay the Portfolio Manager monthly in arrears a fee at the
annual rate of 0.50% of each Fund's daily net assets. When the combined assets
of both Funds reach $300 million, the annual fee for each Fund will be reduced
to 0.45% of the average daily net assets thereafter. The fee shall be accrued
for each calendar day and the sum of the daily fee accruals shall be paid
monthly on or before the fifteenth 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 days in the year, and (ii)
multiplying the product obtained pursuant to clause (i) above by the net asset
value of the Fund Account as determined in accordance with the Trust's
Prospectus as of the previous 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. Pursuant to the Management and
Sub-Advisory Agreement, the Fund Manager is solely responsible for the payment
of fees to the Portfolio Manager, and the Portfolio Manager agrees to seek
payment of its fees solely from the Fund Manager.
8. Other Investment Activities of Portfolio Manager. The Trust on behalf of the
Fund acknowledges that the Portfolio Manager or one or more of its affiliates
has investment responsibilities, renders investment advice to and performs other
investment advisory services for other individuals or entities ("Client
Accounts"), and that the Portfolio Manager, its affiliates or any of its or
their directors, officers, agents or employees may buy, sell or trade in any
securities for its or their respective accounts ("Affiliated Accounts"). Subject
to the provisions of paragraph 2 hereof, the Trust on behalf of the Fund agrees
that the Portfolio Manager or its affiliates may give advice or exercise
investment responsibility and take such other action with respect to other
Client Accounts and Affiliated Accounts which may differ from the advice given
or the timing or nature of action taken with respect to the Fund Account,
provided that the Portfolio Manager acts in good faith, and provided further,
that it is the Portfolio Manager's policy to allocate, within its reasonable
discretion, investment opportunities to the Fund Account over a period of time
on a fair and equitable basis relative to the Client Accounts and the Affiliated
Accounts, taking into account the cash position and the investment objectives
and policies of the Fund and any specific investment restrictions applicable
thereto. The Trust on behalf of the Fund acknowledges that one or more Client
Accounts and Affiliated Accounts may at any time hold, acquire, increase,
decrease, dispose of or otherwise deal with positions in investments in which
the Fund Account may have an interest from time to time, whether in transactions
which involve the Fund Account or otherwise. The Portfolio Manager shall have no
obligation to acquire for the Fund Account a position in any investment which
any Client Account or Affiliated Account may acquire, and the Fund shall have no
first refusal, co-investment or other rights in respect of any such investment,
either for the Fund Account or otherwise.
9. Limitation of Liability. The Portfolio Manager shall not be liable for any
action taken, omitted or suffered to be taken by it in its reasonable judgment,
in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Agreement, or in accordance with (or
in the absence of) specific directions or instructions from the Fund or the Fund
Manager, provided, however, that such acts or omissions shall not have resulted
from the Portfolio Manager's willful misfeasance, bad faith or gross negligence,
a violation of the standard of care established by and applicable to the
Portfolio Manager in its actions under paragraph 2 hereof or breach of its duty
or of its obligations hereunder (provided, however, that the foregoing shall not
be construed to protect the Portfolio Manager from liability in violation of
Section 17 of the Act).
10. Confidentiality. Subject to the duty of the Portfolio Manager and the Fund
to comply with applicable law, including any demand of any regulatory or taxing
authority having jurisdiction, the parties hereto shall treat as confidential
all information pertaining to the Fund Account and the actions of the Portfolio
Manager and the Fund in respect thereof.
11. Assignment. This Agreement shall terminate automatically in the event of its
assignment, as that term is defined in Section 2(a)(4) of the Act. The Portfolio
Manager shall notify the Fund in writing sufficiently in advance of any proposed
change of control, as defined in Section 2(a)(9) of the Act, as will enable the
Fund to consider whether an assignment as defined in Section 2(a)(4) of the Act
will occur, and whether to take the steps necessary to enter into a new contract
with the Portfolio Manager.
12. Representations, Warranties and Agreements of the Fund. The Trust on behalf
of the Fund represents, warrants and agrees that:
A. The Portfolio Manager has been duly appointed to provide investment services
to the Fund Account as contemplated hereby.
B. The Trust on behalf of the Fund will deliver to the Portfolio Manager a true
and complete copy of its then current registration statement as effective from
time to time and such other documents governing the investment of the Fund
Account, or such other information as is necessary for the Portfolio Manager to
carry out its obligations under this Agreement.
C. Upon certification by the Portfolio Manager that it has adopted a written
code of ethics and procedures reasonably necessary to prevent access persons, as
defined by said code of ethics, from violating the anti- fraud provisions of
Rule 17j-1 under the Act, the Fund will not unreasonably withhold its approval
of the code of ethics adopted by the Portfolio Manager provided that the
Portfolio Manager certifies to the Fund that in all other material respects the
Portfolio Manager's code of ethics complies with Rule 17j-1.
13. Representations, Warranties and Agreements of the Portfolio Manager. The
Portfolio Manager represents, warrants and agrees that:
A. It is registered as an "Investment Adviser" under the Investment Advisers Act
of 1940 ("Advisers Act").
B. It will maintain, keep current and preserve on behalf of the Fund, in the
manner required or permitted by the Act and the Rules thereunder, the records
identified in Schedule B (as Schedule B may be amended from time to time). The
Portfolio Manager agrees that such records are the property of the Fund, and
will be surrendered to the Fund promptly upon request.
C. It will adopt and maintain a written code of ethics complying with the
requirements of Rule 17j-1 and submit same and any amendments thereto promptly
to the Fund, but not less often than annually. The Portfolio Manager agrees that
it will notify the Fund within 15 days of adopting material changes to its code
of ethics. While this Agreement is in effect, an officer or general partner of
the Portfolio Manager shall certify annually to the Fund that the Portfolio
Manager has complied with the requirements of Rule l7j-1 during the previous
year and has procedures reasonably necessary to prevent access persons from
violating the Portfolio Manager's code of ethics. On an annual basis, the
Portfolio Manager shall provide a written report to the Fund describing any
issues arising under its code of ethics or procedures since the last report was
so submitted, including information about material violations of the code or
procedures and any action taken in response to such violations. Upon the written
request of the Fund, the Portfolio Manager shall permit the Fund to examine the
reports required to be maintained by the Portfolio Manager under Rule
l7j-l(c)(l).
D. Upon request, the Portfolio Manager will promptly supply the Trust with any
information concerning the Portfolio Manager and its stockholders, employees and
affiliates which the Trust may reasonably require in connection with the
preparation of its registration statement, proxy material, reports and other
documents relating to the Fund required to be filed under the Act, the
Securities Act of 1933, or other applicable securities laws.
E. Reference is hereby made to the Declaration of Trust dated March 4, 1993, as
amended, establishing the Trust, a copy of which has been filed with the
Secretary of the Commonwealth of Massachusetts and elsewhere as required by law,
and to any and all amendments thereto so filed or hereafter filed. The name
Liberty Variable Investment Trust refers to the Trustees under said Declaration
of Trust, as Trustees and not personally, and no Trustee, shareholder, officer,
agent or employee of the Trust shall be held to any personal liability hereunder
or in connection with the affairs of the Trust or the Fund, but only the assets
of the Fund are liable under this Agreement. Without limiting the generality of
the foregoing, neither the Portfolio Manager nor any of its officers, directors,
partners, shareholders or employees shall, under any circumstances, have
recourse or cause or willingly permit recourse to be had directly or indirectly
to any personal, statutory, or other liability of any shareholder, Trustee,
officer, agent or employee of the Trust or of any successor of the Trust or the
Fund, whether such liability now exists or is hereafter incurred, for claims
against the Trust estate, but shall look for payment solely to the assets of the
Fund or any successor thereto.
14. Amendment. This Agreement may be amended at any time, but only by written
agreement among the Portfolio Manager, the Fund Manager and the Trust, on behalf
of the Fund, which amendment, other than amendments to Schedules A and B (which
may be amended by the Fund Manager acting alone), is subject to the approval of
the Trustees and the Shareholders of the Fund as and to the extent required by
the Act.
15. Effective Date; Term. This Agreement shall continue in effect until July 31,
2003, and shall continue in effect thereafter provided such continuance is
specifically approved at least annually by (i) the Trust's Board of Trustees or
(ii) a vote of a "majority" (as defined in the Act) of the Fund's outstanding
voting securities, provided that in either event the continuance is also
approved by a majority of the Board of Trustees who are not "interested persons"
(as defined in the Act) of any party to this Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval. The aforesaid
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the Act and the
Rules and Regulations thereunder.
16. Termination. This Agreement may be terminated by any party, without penalty,
immediately upon written notice to the other parties in the event of a breach of
any provision thereof by a party so notified, or otherwise upon not less than
thirty (30) days' written notice to the Portfolio Manager in the case of
termination by the Trust on behalf of the Fund or the Fund Manager, or ninety
(90) days' written notice to the Trust and the Fund Manager in the case of
termination by the Portfolio Manager, but any such termination shall not affect
the status, obligations or liabilities of any party hereto to the other parties.
17. Applicable Law. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the Commonwealth of
Massachusetts.
18. Severability. If any term or condition of this Agreement shall be invalid or
unenforceable to any extent or in any application, then the remainder of this
Agreement, and such term or condition except to such extent or in such
application, shall not be affected thereby, and each and every term and
condition of this Agreement shall be valid and enforced to the fullest extent
and in the broadest application permitted by law.
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the date
first written above.
LIBERTY VARIABLE INVESTMENT TRUST on its own behalf and on behalf of the Rydex
Financial Services Fund, Variable Series Rydex Health Care Fund, Variable Series
By: ____________________________________
Name:
Title:
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: ____________________________________
Name:
Title:
ACCEPTED AND AGREED TO:
Rydex Global Advisors
By: ____________________________________
Name: __________________________________
Title: ___________________________________
S:\Advisory Agreements\LVIT PM Agree Rydex Combo.doc
SCHEDULES:*
A. Operational Procedures [omitted]
B. Record Keeping Requirements
* The Schedules relate to day-to-day operational logistics and to technical
compliance matters.
RYDEX FINANCIAL SERVICES FUND, VARIABLE SERIES
RYDEX HEALTH CARE FUND, VARIABLE SERIES
Record Keeping Requirements
Portfolio Management Agreement
SCHEDULE B
RECORDS TO BE MAINTAINED BY THE PORTFOLIO MANAGER
1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all other
portfolio purchases and sales, given by the Portfolio Manager on behalf of the
Fund for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modifications or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or bases
upon which the allocation of orders for the purchase and sale of portfolio
securities to named brokers or dealers was effected, and the division of
brokerage commissions or other compensation on such purchase and sale orders.
Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers to:
(a) The Fund;
(b) The Manager;
(c) The Portfolio Manager; and
(d) Any person other than the foregoing.
(iii) Any other consideration other than the technical qualifications of the
brokers and dealers as such.
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general or specific formula
or other determinant used in arriving at such allocation of purchase and
sale orders and such division of brokerage commissions or other
compensation.
D. The name of the person responsible for making the determination
of such allocation and such division of brokerage
commissions or other compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the purchase
or sale of portfolio securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members who participate in
the authorization. There shall be retained as part of this record: any
memorandum, recommendation or instruction supporting or authorizing the purchase
or sale of portfolio securities and such other information as is appropriate to
support the authorization.(1)
4. (Rule 31a-1(f)) Such accounts, books and other documents as are required to
be maintained by registered investment advisers by rule adopted Under Section
204 of the Investment Advisers Act of 1940, to the extent such records are
necessary or appropriate to record the Portfolio Manager's transactions with the
Fund.
(1) Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and
from brokerage firms (including their recommendation: i.e., buy, sell,
hold) or any internal reports or portfolio manager
reviews.
