SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Variable Insurance Funds
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Variable Insurance Funds
3435 Stelzer Road
Columbus, Ohio 43219-3035
1-888-427-1235
August 31, 2001
Dear Contract Owner:
The Board of Trustees have called a special meeting of the shareholders of the
Fifth Third Quality Growth VIP Fund (the "Fund"), a series of the Variable
Insurance Funds (the "Trust"), to take place on September 28, 2001, at the
offices of the Trust, 3435 Stelzer Road, Columbus, Ohio 43219 at 10:00 a.m.
Eastern Time.
The purpose of this meeting is to seek shareholder approval of a proposed
investment advisory agreement between the Trust, on behalf of the Fund, and
Fifth Third Asset Management Inc. The Trustees have unanimously approved the
proposed investment advisory agreement, and now ask that you vote FOR the
proposal.
What you need to do:
o Read all enclosed materials.
o Choose one of the following options to vote:
1. By Mail: Complete the enclosed proxy card and return it in the
postage-paid envelope provided.
2. By Telephone: Call the toll-free number on your proxy card.
3. Attend the shareholder meeting (details enclosed).
The Trustees believe that the proposal is important and recommend that you read
the enclosed materials carefully and then vote FOR the proposal.
Respectfully,
/s/ Walter B. Grimm
Walter B. Grimm
President and Chairman of the Board
Variable Insurance Funds
SHAREHOLDERS ARE URGED TO VOTE BY COMPLETING AND RETURNING THE PROXY CARD, BY
TELEPHONE, OR BY ATTENDING THE MEETING. YOUR VOTE IS IMPORTANT REGARDLESS OF THE
SIZE OF YOUR SHAREHOLDINGS.
Variable Insurance Funds
3435 Stelzer Road
Columbus, Ohio 43219-3035
1-888-427-1235
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Fifth Third Quality Growth VIP Fund
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NOTICE
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Special Meeting Of Shareholders
To Be Held September 28, 2001
To the shareholders of Fifth Third Quality Growth VIP Fund:
Notice is hereby given that a special meeting of the shareholders of the Fifth
Third Quality Growth VIP Fund (the "Fund"), a series of the Variable Insurance
Funds (the "Trust"), will be held at 10:00 a.m. Eastern Time on September 28,
2001, at the offices of the Trust, 3435 Stelzer Road, Columbus, Ohio 43219, or
as adjourned from time to time (the "Meeting"), for the following purposes:
1. To approve a proposed investment advisory agreement with respect to the
Fifth Third Quality Growth VIP Fund; and
2. To transact such other business as may properly come before the Meeting.
After careful consideration, the Trustees of the Trust unanimously approved
Proposal 1 above and unanimously recommend that shareholders of the Fund vote
"FOR" Proposal 1.
The matter referred to above is discussed in detail in the proxy statement
attached to this notice. The Board of Trustees has fixed the close of business
on August 17, 2001 as the record date for determining shareholders entitled to
notice of, and to vote at, the Meeting. Each shareholder is entitled to one vote
for each dollar invested, and each fractional share shall be entitled to a
proportionate fractional vote.
Regardless of whether you plan to attend the Meeting, PLEASE COMPLETE, SIGN,
DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, SO
THAT YOU WILL BE REPRESENTED AT THE MEETING. If you have returned a proxy card
and are present at the Meeting, you may change the vote specified in the proxy
at that time. However, attendance in person at the Meeting, by itself, will not
revoke a previously tendered proxy.
By order of the Board of Trustees,
Alaina Metz
Secretary
Columbus, Ohio
August 31, 2001
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES (UNLESS YOU ARE VOTING BY TELEPHONE). NO
POSTAGE IS NECESSARY IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
Variable Insurance Funds
3435 Stelzer Road
Columbus, Ohio 43219-3035
1-888-427-1235
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Fifth Third Quality Growth VIP Fund
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PROXY STATEMENT
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Special Meeting Of Shareholders
To Be Held September 28, 2001
This proxy statement and the enclosed form of proxy are being furnished in
connection with the solicitation of proxies by the Board of Trustees (the
"Board") of Variable Insurance Funds (the "Trust") for use at a special meeting
of shareholders of the Fifth Third Quality Growth VIP Fund (the "Fund"), a
series of the Trust, to be held at 10:00 a.m. Eastern Time on September 28,
2001, at the offices of the Trust, 3435 Stelzer Road, Columbus, Ohio 43219, or
as adjourned from time to time (the "Meeting"). The Board is soliciting proxies
from shareholders with respect to the proposal set forth in the accompanying
notice.
It is anticipated that the mailing of proxies and proxy statements to
shareholders will begin on or about August 31, 2001.
Semi-Annual Report
Shareholders can find important information about the Fund in its semi-annual
report dated June 30, 2001, which previously has been furnished to shareholders.
Shareholders may request another copy of the report by writing to the Trust at
the above address, or by calling the telephone number above. Copies of the
report will be provided free of charge.
PROPOSAL 1
APPROVAL OF AN INVESTMENT ADVISORY AGREEMENT
FOR THE FUND
Introduction
The Fund currently is managed by Lyon Street Asset Management Company ("Lyon
Street"), 111 Lyon Street, NW, Grand Rapids, Michigan 49503, pursuant to an
investment advisory agreement dated April 2, 2001 between the Trust, on behalf
of the Fund, and Lyon Street. This agreement was approved by the sole initial
shareholder of the Fund on January 26, 2001.
On April 2, 2001, Fifth Third Bancorp acquired Old Kent Financial Corporation,
the parent company of Lyon Street. As a result, Fifth Third Bancorp became the
parent company of Lyon Street.
Fifth Third Bancorp has proposed to transfer investment advisory services for
the Fund from Lyon Street to Fifth Third Asset Management Inc. ("Fifth Third"),
an investment advisory subsidiary of Fifth Third Bancorp. Although both Lyon
Street and Fifth Third are indirect, wholly-owned subsidiaries of Fifth Third
Bancorp, the proposed transfer may be deemed to be an "assignment" that, under
applicable law, would terminate the Fund's existing investment advisory
agreement with Lyon Street.
At a meeting held on August 27, 2001, the Board considered whether it was in the
best interests of the Fund and its shareholders to approve an investment
advisory agreement between the Trust, on behalf of the Fund, and Fifth Third
(the "New Agreement"). In light of the information presented for its
consideration, the Board determined that the New Agreement was in the best
interests of the Fund and its shareholders and approved the New Agreement. The
Board also authorized submission of the New Agreement for approval by the Fund's
shareholders, as required by applicable law.
If approved by shareholders at the Meeting, the New Agreement will take effect
on October 1, 2001. Approval of the New Agreement is not expected to result in
any increase in investment advisory fees or overall operating expenses with
respect to the Fund.
The Board recommends that shareholders of the Fund approve the proposed New
Agreement, a copy of which is attached as Exhibit A.
Proposed New Agreement with Fifth Third
The terms and advisory fee of the proposed New Agreement are substantially
identical to the current investment advisory agreement with respect to the Fund,
except for the parties to the agreement and its effective date.
Under the terms of the proposed New Agreement, Fifth Third agrees to furnish the
Fund with investment advisory and other services in connection with a continuous
investment program for the Fund, including investment research and management
with respect to all securities, investments, cash and cash equivalents held by
the Fund. Subject to the supervision and control of the Board, Fifth Third
agrees to: (a) conform to all applicable rules and regulations of the Securities
and Exchange Commission ("SEC"); (b) provide the services rendered by it in
accordance with the Fund's investment objective and policies, as stated in the
prospectus of the Fund and consistent with the Board's resolutions; (c)
determine from time to time what securities or other investments will be
purchased, sold or retained by the Fund; (d) place orders for portfolio
investments of the Fund either directly with the issuer or with any broker or
dealer selected by it; and (e) maintain books and records with respect to the
securities transactions of the Fund and render periodic and special reports as
requested. The New Agreement also provides that the services of Fifth Third to
the Trust are not exclusive, and Fifth Third is free to render similar services
to others so long as its services pursuant to the New Agreement are not
impaired.
For its services, Fifth Third would be entitled to receive a fee calculated at
an annual rate of 0.70% of the average daily net assets of the Fund, which will
be calculated daily and paid monthly.
The New Agreement has an initial term of up to two years from its effective
date, with continuation thereafter subject to annual approval by the Board or
Fund shareholders, as well as by a majority of the Trustees who are not
"interested persons" (for regulatory purposes) of any party to the New Agreement
("Independent Trustees"). The New Agreement may be terminated at any time,
without payment of penalty, on 60 days' written notice by the Board, the
shareholders of the Fund, or Fifth Third. The New Agreement automatically
terminates in the event of its assignment.
The New Agreement provides that Fifth Third shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of the New 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 Fifth Third in the performance of its duties, or from reckless disregard
by Fifth Third of its duties under the New Agreement.
The foregoing discussion is qualified in its entirety by reference to the
attached form of the proposed New Agreement.
Information About Fifth Third and Management of the Fund
Fifth Third, located at 38 Fountain Square Plaza, Cincinnati, Ohio 45263, is an
Ohio corporation and is registered with the SEC as an investment advisor. Since
1976, Fifth Third and its predecessors have been actively engaged in providing
discretionary investment management services to institutional and individual
clients. As of June 30, 2001, Fifth Third managed approximately $5.8 billion of
mutual fund assets in the Fifth Third Funds.
Fifth Third is a wholly-owned subsidiary of Fifth Third Bank, which is a
wholly-owned subsidiary of Fifth Third Bancorp. Fifth Third Bancorp, an Ohio
corporation with its principal office located at 38 Fountain Square Plaza,
Cincinnati, Ohio 45263, is a multi-bank holding company and is registered with
the Board of Governors of the Federal Reserve System.
Information about Fifth Third's current directors and principal executive
officer, as well as information about Fifth Third's experience managing
comparable mutual funds, is set forth in Exhibit B.
Steven E. Folker currently serves as the portfolio manager of the Fund and will
continue to do so in the event the New Agreement is approved by Fund
shareholders. Mr. Folker is the Chief Equity Strategist for Fifth Third, a Vice
President and Trust Officer of Fifth Third Bank, and a Vice President of Lyon
Street. He also is a Chartered Financial Analyst with over 16 years of
investment experience, including service as portfolio manager of three series of
the Fifth Third Funds since 1993, and is a member of the Cincinnati Society of
Financial Analysts. Mr. Folker earned a B.B.A. in Finance & Accounting and an
M.S. in Finance, Investments & Banking from the University of Wisconsin.
Board Consideration of the New Agreement
The Board has concluded that the New Agreement will enable the Fund to continue
to receive high quality services at a cost that is appropriate, reasonable, and
in the best interests of the Fund and its shareholders. Accordingly, the
Trustees, including the Independent Trustees, unanimously approved the New
Agreement and authorized the submission of the New Agreement to Fund
shareholders for their approval.
In determining whether it was appropriate to approve the New Agreement and to
recommend approval by shareholders, the Board requested information, provided by
Fifth Third, that it believed to be reasonably necessary to reach its
conclusion. The Board carefully evaluated this information, and was advised by
legal counsel with respect to its deliberations.
The Trustees approved the New Agreement and recommended that Fund shareholders
approve the New Agreement on the basis of the following considerations, among
others:
o The investment advisory fees payable to Fifth Third under the proposed New
Agreement are fair and reasonable in light of the services to be provided,
the anticipated costs of these services, and the comparability of the
proposed fee to fees paid by comparable mutual funds;
o The proposed New Agreement is not anticipated to increase current
investment advisory fees or overall operating expenses of the Fund;
o The continuity of the Fund's current portfolio manager and other persons
responsible for management of the Fund, which should help ensure continuity
of management and consistency of performance;
o The nature, quality and extent of the investment advisory services expected
to be provided by Fifth Third, in light of the high quality services
provided to the other mutual funds advised by Fifth Third;
o Fifth Third's representations regarding its staffing and capabilities to
manage the Fund, including the retention of personnel with significant
portfolio management experience; and
o The overall high quality of the personnel, operations, financial condition,
investment management capabilities, methodologies, and performance of Fifth
Third.
Based on its review of the information requested and provided, the Board
determined that the New Agreement was consistent with the best interests of the
Fund and its shareholders. Accordingly, in light of the above considerations and
such other factors and information it considered relevant, the Board unanimously
approved the New Agreement and recommended its approval by Fund shareholders.
The Board, including the Independent Trustees, unanimously recommends that Fund
shareholders vote "FOR" approval of the New Agreement. Unmarked proxies will be
so voted.
OTHER BUSINESS
The Trustees do not know of any matters to be presented at the Meeting other
than those set forth in this proxy statement. If other business should properly
come before the Meeting, proxies will be voted in accordance with the judgment
of the persons named in the accompanying proxy.
OTHER INFORMATION
Proxy Solicitation
The costs of the Meeting, including the solicitation of proxies, will be paid by
Fifth Third and its affiliates. The principal solicitation will be by mail, but
proxies also may be solicited by telephone, telegraph, or personal interview by
officers or agents of the Trust. The Trust will forward to record owners proxy
materials for any beneficial owners that such record owners may represent.
Required Vote
Approval of Proposal 1 requires the vote of a "majority of the outstanding
voting securities" entitled to vote on the proposal, which means the vote of 67%
or more of the Fund's shares that are present at the Meeting, if the holders of
more than 50% of the outstanding shares entitled to vote on the proposal are
present or represented by proxy, or the vote of more than 50% of the outstanding
shares of the Fund, whichever is less.
Shareholder Voting
Shareholders of record at the close of business on August 17, 2001 (the "Record
Date") are entitled to notice of, and to vote at, the Meeting. Each shareholder
is entitled to one vote for each dollar invested, and each fractional share
shall be entitled to a proportionate fractional vote.
As of the Record Date, the following number of shares of the Fund, representing
the indicated number of votes, were outstanding:
Fund Number of Shares Number of Votes
---- ---------------- ---------------
Fifth Third Quality Growth VIP Fund 57,891.764 566,701.80
As of the Record Date, the following persons were known by the Trust to own
beneficially five percent (5%) or more of the outstanding shares of the Fund, as
determined in accordance with Rule 13d-3 under the Securities Exchange Act of
1934:
Beneficial Owner and Address Share Balance Percentage
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Hartford Life Insurance 7,891.764 13.6319%
P.O. Box 2999
Hartford, CT 06104
Hartford Life Insurance 50,000.000 86.3681%
P.O. Box 2999
Hartford, CT 06104
As of the Record Date, the Trustees and officers of the Trust, as a group,
beneficially owned less than one percent (1%) of the outstanding shares of the
Fund.
Insurance companies that use shares of the Fund as funding media for their
variable insurance contracts will vote shares of the Fund held by their separate
accounts in accordance with instructions received from owners of the variable
insurance contracts. An insurance company also will vote shares of the Fund held
in such separate account for which it has not received timely instructions in
the same proportion as it votes shares held by that separate account for which
it has received instructions. An insurance company whose separate account
invests in the Fund will vote shares held by its general account and its
subsidiaries in the same proportion as other votes cast by its separate account
in the aggregate. Shareholders and variable insurance contract owners permitted
to give instructions, and the number of shares for which such instructions may
be given to be voted at the Meeting, will be determined as of the Record Date.
In addition to voting in person at the Meeting, shareholders also may sign and
mail the proxy card received with this proxy statement. Timely, properly
executed proxies will be voted as instructed by shareholders. If no instructions
are given on the proxy (but the proxy is executed), it will be voted FOR
Proposal 1. In addition, shareholders may give voting instructions via
touch-tone telephone by following the instructions enclosed with the proxy card.
A shareholder may revoke his or her proxy at any time prior to its exercise by
written notice addressed to the Secretary of the Trust at the address set forth
on the cover of this proxy statement, or by voting in person at the Meeting.
However, attendance in person at the Meeting, by itself, will not revoke a
previously tendered proxy.
The presence in person or by proxy of the holders of a majority of the Fund's
outstanding shares is required to constitute a quorum at the Meeting. Shares
held by shareholders present in person or represented by proxy at the Meeting
will be counted both for the purposes of determining the presence of a quorum
and for calculating the votes cast on the proposal before the Meeting.
Proxies that reflect abstentions or broker "non-votes" (that is, shares
attributable to a contract held of record by brokers or nominees as to which (a)
instructions have not been received from the beneficial owner or other persons
entitled to vote and (b) the brokers or nominees do not have discretionary
voting power on a particular matter) will be counted as shares that are present
and entitled to vote for purposes of determining the presence of a quorum.
Accordingly, assuming the presence of a quorum, abstentions and non-votes have
the effect of a negative vote on Proposal 1.
In the event that a quorum is present at the Meeting but sufficient votes to
approve Proposal 1 are not received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies or to obtain the vote required for approval of the proposal. Any such
adjournment will require the affirmative vote of a majority of those shares
represented at the Meeting in person or by proxy. The persons named as proxies
will vote those proxies which they are entitled to vote FOR the proposal in
favor of such an adjournment and will vote those proxies required to be voted
AGAINST the proposal against any such adjournment.
Shareholder Proposals
The Trust does not hold regular shareholders' meetings. Shareholders wishing to
submit proposals for inclusion in a proxy statement for a subsequent
shareholders' meeting should send their written proposals to the Secretary of
the Trust at the address set forth on the cover of this proxy statement.
Proposals must be received a reasonable time prior to the date of a meeting of
shareholders to be considered for inclusion in the proxy materials for a
meeting. Timely submission of a proposal does not, however, necessarily mean
that the proposal will be included. Persons named as proxies for any subsequent
shareholders' meeting will vote in their discretion with respect to proposals
submitted on an untimely basis.
Other Service Providers
BISYS Fund Services Ohio, Inc. serves as administrator to the Fund pursuant to
an Administration Agreement dated as of March 1, 1999. BISYS Fund Services LP
serves as the distributor of shares of the Fund pursuant to a Distribution
Agreement dated June 1, 1997. The address of each is 3435 Stelzer Road,
Columbus, Ohio 43219-3035.
To ensure the presence of a quorum at the Meeting, prompt execution and return
of the enclosed proxy is requested. A self-addressed, postage-paid envelope is
enclosed for your convenience.
By order of the Board of Trustees,
Alaina Metz
Secretary
August 31, 2001
EXHIBIT A
Form of Investment Advisory Agreement
AGREEMENT made as of October 1, 2001, between VARIABLE INSURANCE
FUNDS, a Massachusetts business trust (herein called the "Trust"), and Fifth
Third Asset Management, Inc. an Ohio corporation with its principal place of
business at 38 Fountain Square Plaza, Cincinnati, Ohio 45263 (herein called the
"Investment Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to furnish
investment advisory services to certain investment portfolios of the Trust (the
"Funds") and the Investment Adviser represents that it is willing and possesses
legal authority to so furnish such services;
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 identified on Schedule A hereto 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.
2. Availability of Documents. The Trust has made available to the
Investment Adviser copies properly certified or authenticated of each of the
following:
(a) the Trust's Amended and Restated Declaration of Trust dated as of
July 20, 1994 and amended and restated as of February 5, 1997, 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 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 on July 20, 1994
and all amendments thereto;
(e) the Trust's Registration Statement on Form N-lA under the
Securities Act of 1933, as amended ("1933 Act"), (File No. 33-81800) and under
the 1940 Act as filed with the Securities and Exchange Commission and all
amendments thereto; and
(f) the Funds' most recent prospectuses and Statement of Additional
Information (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 make available to the Investment Adviser from time to
time 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 each Fund, including investment research and management with respect to all
securities and investments and cash equivalents in said 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 Fund's investment objective, 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
Securities and Exchange Commission 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, including applicable state insurance laws of which the Trust
informs the Investment Adviser. The Trust shall inform the Investment Adviser
regarding any such laws of which it becomes aware pursuant to any applicable
fund participation agreement, or otherwise;
(c) will not knowingly make loans to any person to purchase or carry
units of beneficial interest in the Trust or make loans to the Trust;
(d) will place orders pursuant to its investment determinations for
the Trust 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, 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 ("BISYS"), Fifth Third Asset Management, or any affiliated
person of either the Trust, BISYS, or Fifth Third Asset Management, except to
the extent permitted by the 1940 Act and the Securities and Exchange Commission;
(e) will maintain all books and records with respect to its
transactions with the Trust, to the extent required by Rule 31a-1(f) under the
1940 Act, and will furnish the Trust's Board of Trustees such periodic and
special reports as the Board reasonably may request;
(f) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and prior,
present, or potential interest holders, 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;
and
(g) will maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for the Trust, 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.
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 Trust 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(e) under the 1940 Act all records maintained by it
pursuant to Rule 31a-1(f) under the 1940 Act, and also to preserve for the
periods prescribed by 31a-2 all other records the Investment Adviser agrees in
writing to maintain pursuant to Rule 31a-1.
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 Trust.
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
computed daily and paid monthly at the applicable annual rate set forth on
Schedule A hereto. Each Fund's obligation to pay the above-described fee to the
Investment Adviser will begin as of the latter of the date hereof or the date of
the initial public sale of shares in that Fund. The fee attributable to each
Fund shall be the obligation of that Fund and not of any other Fund.
If in any fiscal year the aggregate expenses of any of the Funds
exceed any applicable expense limitation imposed by law or regulation, the
Investment Adviser will reimburse the Fund for a portion of such excess expenses
(after repayment of fees received in excess of contractual fee rates) 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 Ohio, Inc.
("BISYS Ohio") under the Administration Agreement between BISYS Ohio and the
Trust, unless otherwise agreed by the Investment Adviser and BISYS Ohio. 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 that the
securities regulations of any state having jurisdiction over the Trust so
require. 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.
9. Duration and Termination. This Agreement will become effective as
to a particular Fund 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.
Unless sooner terminated, this Agreement shall continue in effect for an initial
term of two years and thereafter shall continue in effect for successive periods
of one year, provided such continuance is specifically approved at least
annually (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 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 meaning of such terms in the 1940 Act.)
10. Investment Adviser's Representations. The Investment 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 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 contracts;
(b) It shall immediately notify the Trust 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 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 Title 18,
United States 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. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
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
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of The Commonwealth of Massachusetts.
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 the
Declaration of Trust 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, interest holders or representatives of
the Trust personally, but bind only the assets of the Trust, and all persons
dealing with any Fund must look solely to the assets of the Trust belonging to
such Fund 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
VARIABLE INSURANCE FUNDS
Seal By: ________________________
Name:
_______________________
Title:
_______________________
FIFTH THIRD ASSET MANAGEMENT INC.
Seal By:
__________________________
Name:
__________________________
Title:
__________________________
Schedule A
to the Investment Advisory Agreement
between Variable Insurance Funds and Fifth Third Asset Management Inc.
NAME OF FUND COMPENSATION*
------------ ------------
Fifth Third Quality Growth VIP Fund Annual rate of seventy
one-hundredths of one percent
(.70%) of the average daily net
assets of such Fund.
________________________________________________________________________________
* All fees are computed daily and paid monthly.
VARIABLE INSURANCE FUNDS
By:___________________________
Name:_________________________
Title:________________________
FIFTH THIRD ASSET MANAGEMENT INC.
By:___________________________
Name:_________________________
Title: ______________________
EXHIBIT B
Fifth Third Asset Management Inc. ("Fifth Third")
Fifth Third's directors and principal executive officer are set forth below. The
address of each is: 38 Fountain Square Plaza, Cincinnati, Ohio 45263.
Name Principal Occupation
-------- ---------------------
James D. Berghausen Director, President & Chief Investment Officer
Michael K. Keating Director
Other Investment Company Clients
Fifth Third also serves as investment advisor to the following investment
company, at the fee rate shown below, which had the following net assets as of
June 29th, 2001.
Name of Fund Advisory Fee Rate Approximate Assets
- ------------ ----------------- ------------------
Fifth Third Quality Annual rate of 0.80% of average daily net assets $1,091,678,935
Growth Fund
Variable Insurance Funds
3435 Stelzer Road
Columbus, Ohio 43219-3035
1-888-427-1235
----------------------- -------------------------------
Fifth Third Quality Growth VIP Fund
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PROXY
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The undersigned hereby appoints Walter B. Grimm and Charles L. Booth and each of
them, with full power of substitution, as proxies of the undersigned to vote all
shares of beneficial interest that the undersigned is entitled in any capacity
to vote at the special meeting of shareholders of the Fifth Third Quality Growth
VIP Fund, a series of Variable Insurance Funds, to be held at 10:00 a.m. Eastern
Time on September 28, 2001 at BISYS Fund Services, 3435 Stelzer Road, Columbus,
Ohio 43219, or as adjourned from time to time (the "Meeting"), on the matters
set forth on this proxy and referred to in the proxy statement for the Meeting,
and, in their discretion, upon all matters incident to the conduct of the
Meeting and upon such other matters as may be properly brought before the
Meeting. This proxy revokes all prior proxies given by the undersigned.
To vote by Telephone
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-888-427-1235.
3) Enter the 12-digit control number set forth on the right and follow the
simple instructions.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X]
KEEP THIS PORTION FOR YOUR RECORDS
- ------------------------------------------------------------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
- ---------------------------------------------------- -----------------------------------
VARIABLE INSURANCE FUNDS - Fifth Third Quality Growth VIP Fund
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF VARIABLE INSURANCE FUNDS.
The Board of Trustees recommends that you vote FOR Proposal 1.
Vote On Proposals For Against Abstain
1. To approve an Investment Advisory Agreement with respect [ __ ] [ __ ] [ __ ]
to the Fifth Third Quality Growth VIP Fund.
2. To transact such other business as may properly come
before the Meeting.
Signature Date Signature (Joint Owners) Date
- --------- ---- ------------------------ ----
[PLEASE SIGN WITHIN BOX] [PLEASE SIGN WITHIN BOX]
- ------------------------ ------------------------