File No. 33-14954
File No. 811-5199
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 14 /X/
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 16 /X/
(check appropriate box or boxes)
STEINROE VARIABLE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
Federal Reserve Plaza,
600 Atlantic Avenue, Boston, Massachusetts 02210
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code:
(617) 722-6000
It is proposed that this filing become effective (check
appropriate box)
[X] immediately upon filing pursuant to paragraph (b) of Rule
485
[ ] on [date] pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule
485
[ ] on [date] pursuant to paragraph (a)(i) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(ii) of Rule
485
[ ] on [date]pursuant to paragraph (a)(ii) of Rule 485
JOHN A. BENNING, ESQ.
Senior Vice President and General Counsel
Liberty Financial Companies, Inc.
Federal Reserve Plaza
600 Atlantic Avenue
Boston, MA 02210
(Name and Address of Agent for Service)
The Registrant has registered an indefinite number of shares of
beneficial interest of all existing and subsequently created
Series of the Trust under the Securities Act of 1933 pursuant to
Rule 24f-2.
<PAGE>
STEINROE VARIABLE INVESTMENT TRUST
CROSS REFERENCE SHEET
(as required by Rule 481(a))
PART A
FORM N-1A LOCATION
1. Cover Page Cover Page
2. Synopsis The Trust
3. Condensed Financial Financial Highlights;
Information Investment Return
4. General Description of Cover Page; The Trust; How
Registrant the Funds Invest; Investment
Techniques and Restrictions;
Portfolio Turnover; How the
Funds are Managed; Organization
and Description of Shares;
Appendix A: Investment
Techniques and Securities
5. Management of the Fund How the Funds are Managed
5A. Management's Discussion of Information required by
Fund Performance Item 5A is included in the
Registrant's Annual Report for
the year ended December 31,
1997. As required by said Item
5A, the Registrant undertakes
under "Financial Highlights" in
the Prospectuses to provide
free of charge a copy of said
Annual Report to persons
requesting the same.
6. Capital Stock and Other The Trust; Purchases and
Securities Redemptions; Net Asset Value;
Taxes; Dividends and
Distributions; Shareholder
Communications; Organization
and Description of Shares;
Appendix A: Investment
Techniques and Securities
7. Purchase of Securities How the Funds are Managed;
Being Offered Purchases and Redemptions; Net
Asset Value
8. Redemption or Repurchase Purchases and Redemptions
9. Pending Legal Proceedings Not Applicable
PART B
FORM N-1A LOCATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Commencement of Operations; Mixed
History and Shared Funding
13. Investment Objectives and Investment Restrictions; Appendix
Policies A: Investment Techniques and
Securities
14. Management of the Fund Trustees and Officers; Management
Arrangements
15. Control Persons and Record Shareholders
Principal Holders of Securities
16. Investment Advisory and Management Arrangements;
Other Services Custodian; Independent Auditors
and Financial Statements
17. Brokerage Allocation and Portfolio Transactions
other Practices
18. Capital Stock and Other Investment Restrictions;
Securities Purchases and Redemptions; Net
Asset Value; Appendix A:
Investment Techniques and
Securities
19. Purchase, Redemption and Investment Restrictions;
Pricing of Securities Purchases and Redemptions; Net
Being Offered Asset Value; Investment
Performance
20. Tax Status Taxes (Part A)
21. Underwriters Purchases and Redemptions
(Part A)
22. Calculation of Investment Performance
Performance Data
23. Financial Statements The financial statements required
by Item 23 are incorporated by
reference from the Registrant's
Annual Report for the year ended
December 31, 1997 and are
included in Part B.
PART C
Information required to be set forth in Part C is set forth under
the appropriate item, so numbered, in Part C of the Registration
Statement.
<PAGE>
The prospectuses and statements of additional information relating
to the series of SteinRoe Variable Investment Trust (Stein Roe
Special Venture Fund, Variable Series; Stein Roe Growth Stock
Fund, Variable Series; Stein Roe Balanced Fund, Variable Series;
Stein Roe Mortgage Securities Fund, Variable Series; and Stein Roe
Money Market Fund, Variable Series Fund) are not affected by the
filing of this Post-Effective Amendment No. 14.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Index to Financial Statements and Supporting Schedules:
The following financial statements for each of the Funds in
the Trust are included below in this Part C:
Independent Auditors' Report
Schedules of Investments as of December 31, 1997
Statements of Assets and Liabilities as of December 31, 1997
Statements of Operations for the year ended December 31, 1997
Statements of Changes in Net Assets for each of the years in
the two-year period ended December 31, 1997
Financial Highlights for each of the years in the five-year
period ended December 31, 1997
Said financial statements are included incorporated by
reference into this filing as part of Part B.
(b) Exhibits:
1. Agreement and Declaration of Trust as amended on
September 9, 1988 and October 5, 1988 (3)
2. Amended and Restated By-Laws (3)
3. None
4. Not applicable.
5. (a) Fund Advisory Agreement, dated May 1, 1993, between
the Trust on behalf of the Capital Appreciation Fund
(now named Stein Roe Special Venture Fund, Variable
Series) and Stein Roe & Farnham Incorporated (3)
(b) Fund Advisory Agreement, dated May 1, 1993, between
the Trust on behalf of the Managed Growth Stock Fund
(now named Stein Roe Growth Stock Fund, Variable
Series) and Stein Roe & Farnham Incorporated (3)
(c) Fund Advisory Agreement, dated May 1, 1993, between
the Trust on behalf of the Managed Assets Fund (now
named Stein Roe Balanced Fund, Variable Series) and
Stein Roe & Farnham Incorporated (3)
(d) Fund Advisory Agreement, dated May 1, 1993, between
the Trust on behalf of the Mortgage Securities
Income Fund (now named SteinRoe Mortgage Securities
Fund, Variable Series) and Stein Roe & Farnham
Incorporated (3)
(e) Fund Advisory Agreement, dated December 9, 1988,
between the Trust on behalf of the Cash Income Fund
(now named Stein Roe Money Market Fund, Variable
Series) and Stein Roe & Farnham Incorporated (3)
6. Underwriting Agreement dated December 9, 1988 between
Keystone Provident Financial Services Corp. (now Keyport
Financial Services Corp.) and the Trust; and Amendment to
Underwriting Agreement dated as of April 1, 1994 between
Keyport Financial Services Corp. and the Trust (3)
7. None
8. (a) Custodian Contract dated December 31, 1988 between
State Street Bank and Trust Company and SteinRoe
Variable Investment Trust
(b) First Amendment to Custodian Contract dated February
23, 1989
(c) Second Amendment to Custodian Contract dated January
23, 1993
9. (a) Administration Agreement dated as of January 3, 1995
between the Trust, on behalf of each of its Funds,
and Stein Roe & Farnham Incorporated
(b) Transfer Agency Agreement dated as of January 3,
1995 between the Trust, on behalf of each of its
Funds, and Stein Roe & Farnham Incorporated
(c) Amended and Restated Participation Agreement dated
April 3, 1998 among the Trust, Keyport Life
Insurance Company and Keyport Financial Services
Corp. (3)
(d) Participation Agreement dated as of October 1, 1993
among the Trust, Keyport Financial Services Corp.
and Independence Life Annuity Company (formerly
"Crown America Life Insurance Company")
(e) Participation Agreement dated as of April 15, 1994
among the Trust, on behalf of the Capital
Appreciation Fund, Transamerica Occidental Life
Insurance Company, Stein Roe & Farnham Incorporated
and Charles Schwab & Co., Inc.
(f) Participation Agreement dated as of December 1, 1994
among the Trust, on behalf of the Capital
Appreciation Fund, First Transamerica Life Insurance
Company, Stein Roe & Farnham Incorporated and
Charles Schwab & Co., Inc.
(g) Accounting and Bookkeeping Agreement dated as of
January 3, 1995 between the Trust, on behalf of each
of its Funds, and Stein Roe Farnham Incorporated
(h) Participation Agreement among the Trust, on behalf
of the Capital Appreciation Fund, Great-West Life &
Annuity Insurance Company, Stein Roe & Farnham
Incorporated and Charles Schwab & Co., Inc. (2)
(i) Participation Agreement among the Trust, on behalf
of the Capital Appreciation Fund, Providian Life and
Health Insurance Company and Stein Roe & Farnham
Incorporated. (2)
(j) Participation Agreement dated May 8, 1998 among the
Trust, Keyport Benefit Life Insurance Company, and Keyport
Financial Services Corp.
10. Opinion and consent of counsel as to the legality of the
securities being registered (3)
11. None
12. Not applicable
13. Not applicable
14. Not applicable
15. Not applicable
16. Calculation of Yields and Total Returns (1)
17. Financial Data Schedules
18. Not applicable
19. (a) Power of Attorney executed by each Trustee of the
Trust pertaining to this Registration Statement (3)
(b) Power of Attorney executed by Gary A. Anetsberger
and Sharon R. Robertson pertaining to this
Registration Statement (3)
_________________
(1) Incorporated by Reference to Post-Effective Amendment No. 11
to this Registration Statement, filed April, 1996.
(2) Incorporated by References to Post-Effective Amendment No. 12
to this Registration Statement, filed April, 1997.
(3) Incorporated by Reference to Post-Effective Amendment No. 13
to this Registration Statement, filed April, 1998.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
Shares of the Trust registered pursuant to this Registration
Statement will be offered and sold to Keyport Life Insurance
Company ("Keyport"), a stock life insurance company organized
under the laws of Rhode Island, and to certain of its separate
investment accounts and the respective separate investment
accounts of Liberty Life Assurance Company of Boston ("Liberty
Life"), a stock life insurance company organized as a
Massachusetts corporation, Independence Life & Annuity Company, a
stock life insurance company organized under the laws of Rhode
Island ("Independence") and American Benefit Life Insurance
Company, a stock life insurance company organized under the laws
of New York. As described below, Keyport, Liberty Life,
Independence and American Benefit are under common control. The
purchasers of insurance contracts and policies issued in
connection with such accounts will have the right to instruct
Keyport, Liberty Life, Independence and American Benefit with
respect to the voting of the Registrant's shares held by their
respective separate accounts. Subject to such voting instruction
rights, Keyport, Liberty Life, Independence, American Benefit and
their respective separate accounts directly control the
Registrant. In addition, shares of Stein Roe Special Venture
Fund, Variable Series currently are sold to certain separate
accounts of four insurance companies not affiliated with Keyport,
and shares of any of the Funds may in the future be sold to
separate accounts of other unaffiliated insurance companies.
Keyport Financial Services Corp. ("KFSC"), the Trust's
principal underwriter, Stein Roe & Farnham Incorporated, the
Trust's investment manager (the "Adviser"), Keyport, Independence
are and American Benefit each wholly owned indirect subsidiaries
of Liberty Financial Companies, Inc. ("LFC"), Boston,
Massachusetts. As of March 31, 1997, Liberty Mutual Insurance
Company ("LMIC"), Boston, Massachusetts, owned, indirectly,
approximately 72.3% of the combined voting power of the
outstanding voting stock LFC (with the balance being publicly-
held). Liberty Life is a 90%-owned subsidiary of LMIC.
Item 26. Number of Holders of Securities
As of March 31, 1998 the number of record holders of shares
of beneficial interest of each series ("Fund") of the Trust was as
follows:
Title of Class Number of Record
Shares of Beneficial Interest of Holders
- ---------------------------------------------- ---------------
Stein Roe Special Venture Fund, Variable Series 11
Stein Roe Growth Stock Fund, Variable Series 5
Stein Roe Balanced Fund, Variable Series 4
Stein Roe Mortgage Securities Fund, Variable Series 5
Stein Roe Money Market Fund, Variable Series 7
Item 27. Indemnification
Article Tenth of the Agreement and Declaration of Trust of
Registrant (Exhibit 1), which Article is incorporated herein by
reference, provides that Registrant shall provide indemnification
of its trustees and officers (including each person who serves or
has served at Registrant's request as director, officer, or
trustee of another organization in which Registrant has any
interest as a shareholder, creditor or otherwise) ("Covered
Persons") under specified circumstances.
Section 17(h) of the Investment Company Act of 1940 ("1940
Act") provides that neither the Agreement and Declaration of Trust
nor the By-Laws of Registrant, nor any other instrument pursuant
to which Registrant is organized or administered, shall contain
any provision which protects or purports to protect any trustee or
officer of Registrant against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. In
accordance with Section 17(h) of the 1940 Act, Article Tenth shall
not protect any person against any liability to Registrant or its
shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
To the extent required under the 1940 Act,
(i) Article Tenth does not protect any person against
any liability to Registrant or to its shareholders to which he
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office;
(ii) in the absence of a final decision on the merits
by a court or other body before whom a proceeding was brought that
a Covered Person was not liable by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office, no indemnification is
permitted under Article Tenth unless a determination that such
person was not so liable is made on behalf of Registrant by (a)
the vote of a majority of the trustees who are neither "interested
persons" of Registrant as defined in Section 2(a)(19) of the 1940
Act nor parties to the proceeding ("disinterested, non-party
trustees"), or (b) an independent legal counsel as expressed in a
written opinion; and
(iii) Registrant will not advance attorneys' fees or
other expenses incurred by a Covered Person in connection with a
civil or criminal action, suit or proceeding unless Registrant
receives an undertaking by or on behalf of the Covered person to
repay the advance (unless it is ultimately determined that he is
entitled to indemnification) and (a) the Covered Person provides
security for his undertaking, or (b) Registrant is insured against
losses arising by reason of any lawful advance, or (c) a majority
of the disinterested, non-party trustees of Registrant or an
independent legal counsel as expressed in a written opinion,
determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the Covered Person ultimately will be found entitled
to indemnification.
Any approval of indemnification pursuant to Article Tenth
does not prevent the recovery from any Covered Person of any
amount paid to such Covered Person in accordance with Article
Tenth as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's
action was in, or not opposed to, the best interests of Registrant
or to have been liable to Registrant or its shareholders by reason
of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of such Covered
Person's office.
Article Tenth also provides that its indemnification
provisions are not exclusive.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933
Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a trustee,
officer, or controlling person of Registrant in the successful
defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the
securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
Registrant, its trustees and officers, its investment
adviser, the other investment companies advised by the adviser,
and persons affiliated with them are insured against certain
expenses in connection with the defense of actions, suits, or
proceedings, and certain liabilities that might be imposed as a
result of such actions, suits, or proceedings. Registrant will
not pay any portion of the premiums for coverage under such
insurance that would (1) protect any trustee or officer against
any liability to Registrant or its shareholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in
the conduct of his office or (2) protect its investment adviser or
principal underwriter, if any, against any liability to Registrant
or its shareholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, or gross
negligence, in the performance of its duties, or by reason of its
reckless disregard of its duties and obligations under its
contract or agreement with the Registrant; for this purpose the
Registrant will rely on an allocation of premiums determined by
the insurance company.
In addition, the investment adviser maintains investment
advisory professional liability insurance to insure it, for the
benefit of the Trust and its non-interested trustees, against loss
arising out of any error, omission, or breach of any duty owed to
the Trust or the Fund by the investment advisor.
Item 28. Business and Other Connections of Investment Adviser.
The Adviser is a direct wholly owned subsidiary of SteinRoe
Services Inc. ("SSI"), which in turn, is a direct wholly owned
subsidiary of LFC. LFC, as stated in Item 25 above, is an
indirect majority owned subsidiary of LMIC. The Adviser acts as
investment adviser to individuals, trustees, pension and profit-
sharing plans, charitable organizations, and other investors. In
addition to the Registrant, it also acts as investment adviser to
other no-load companies having different investment policies.
For a two-year business history of officers and directors of
the Adviser, please refer to the Form ADV of Stein Roe & Farnham
Incorporated and to the section of the Statement of Additional
Information (Part B) entitled "Investment Advisory Services."
Certain directors and officers of the Adviser also serve and
have during the past two years served in various capacities as
officers, directors or trustees of the Registrant (as reflected in
the Statement of Additional Information (Part B)) or other
investment companies managed by the Adviser.
Item 29. Principal Underwriters
(a) The Registrant's principal underwriter, Keyport
Financial Services Corp. ("KFSC"), is a wholly owned subsidiary of
Keyport Life Insurance Company, which in turn is a direct wholly
owned indirect subsidiary of SSI, which in turn is a direct wholly
owned subsidiary of LFC. KFSC acts on a "best efforts" basis and
receives no fee or commission for its underwriting and
distribution services. KFSC does not act as underwriter with
respect to shares issued to Participating Insurance Companies
which are not affiliates of Keyport or LMIC.
(b) Set forth below is information concerning the directors
and officers of KFSC:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
John S. Rosensteel Chairman and President None
William L. Dixon Vice President--Compliance None
Francis E. Reinhart Vice President--Administration None
and Director
James J. Klopper Clerk None
Donald A. Truman Assistant Clerk None
The business address of each of the directors and officers of KFSC
is 125 High Street, Boston, Massachusetts 02110.
(c) Not applicable.
Item 30. Location of Accounts and Records
Persons maintaining physical possession of accounts, books
and other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules promulgated
thereunder include Registrant's Secretary, John A. Benning;
Registrant's investment adviser, administrator and transfer and
dividend disbursing agent, Stein Roe & Farnham Incorporated;
Registrant's principal underwriter, Keyport Financial Services
Corp.; and Registrant's custodian, State Street Bank and Trust
Company. The address of the Secretary is 600 Atlantic Avenue,
Boston, MA 02210-2214; the address of Stein Roe & Farnham
Incorporated is One South Wacker Drive, Chicago, IL 60606; the
address of Keyport Financial Services, Inc., is 125 High Street,
Boston, MA 02110; and the address of State Street Bank and Trust
Company is 225 Franklin Street, Boston, MA 02110.
Item 31. Management Services
Pursuant to an Administration Agreement with the Registrant
on behalf of all the Funds dated as of January 3, 1995, the
Adviser provides each of the Funds with administrative services.
These services include the provision of office space and equipment
and facilities in connection with the maintenance of the
Registrant's headquarters, preparation and filing of required
reports, arrangements for meetings, maintenance of the
Registrant's corporate books and records, communication with
shareholders, and oversight of custodial, accounting and other
services provided to the Funds by others. The Adviser pays all
compensation of the Registrant's trustees, officers and employees
who are employees of the Adviser. The Adviser may, in its
discretion, arrange for such services to be provided by LFC or any
of its subsidiaries.
Under separate agreements, the Adviser also acts as the agent
of the Funds for the transfer of shares, disbursement of dividends
and maintenance of shareholder account records and for pricing and
bookkeeping services.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) The Registrant hereby undertakes to furnish each person
to whom a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and without
charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this Amendment to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of Boston and the Commonwealth of Massachusetts, on the
27th day of May , 1998. The Registrant hereby certifies, in
accordance with Rule 485(b)(4) under the Securities Act of 1933,
that this amendment meets the requirements for effectiveness under
Rule 485(b) thereunder.
STEINROE VARIABLE INVESTMENT TRUST
By: /s/ Richard R. Christensen*
Richard R. Christensen, President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement on Form N-1A has been signed below by
the following persons in the capacities and on the dates
indicated.
(Signature) (Title and Capacity) (Date)
/s/ Richard R. Christensen* President; Principal May 27, 1998
Richard R. Christensen Executive Officer;
Trustee
/s/ Gary A. Anetsberger* Treasurer; Principal May 27, 1998
Gary A. Anetsberger Financial Officer
/s/ Sharon R. Robertson* Controller; Principal May 27, 1998
Sharon R. Robertson Accounting Officer
/s/ John A. Bacon Jr.* Trustee May 27, 1998
John A. Bacon Jr.
/s/ Salvatore Macera * Trustee May 27, 1998
Salvatore Macera
/s/ Thomas E. Stitzel* Trustee May 27, 1998
Thomas E. Stitzel
*By KEVIN M. CAROME
Kevin M. Carome
Attorney-in-fact
<PAGE>
EXHIBIT LIST
Exhibit Description
8(a) Custodian Contract dated December 31, 1988
8(b) First Amendment to Custodian Contract dated February 23,
1989
8(c) Second Amendment to Custodian Contract dated January 23,
1993
9(a) Administration Agreement dated as of January 3, 1995
9(b) Transfer Agency Agreement dated as of January 3, 1995
9(d) Participation Agreement dated as of October 1, 1993
9(e) Participation Agreement dated as of April 15, 1994
9(f) Participation Agreement dated as of December 1, 1994
9(g) Accounting and Bookkeeping Agreement dated as of
January 3, 1995
9(j) Participation Agreement dated May 8, 1998
17 Financial Data Schedules
<PAGE>
CUSTODIAN CONTRACT
Between
STEINROE VARIABLE INVESTMENT TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
1. Employment Of Custodian and Property to be
Held By It ............................................2
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian......................3
2.1 Holding Securities...............................3
2.2 Delivery of Securities ..........................3
2.3 Registration of Securities ......................8
2.4 Bank Accounts ...................................9
2.5 Payment for Shares .............................10
2.6 Availability of Federal Funds ..................10
2.7 Collection of Income ...........................11
2.8 Payment of Fund Monies .........................12
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased ................15
2.10 Payments for Repurchases or Redemptions
of Shares of the Fund ..........................15
2.11 Appointment of Agents ..........................16
2.12 Deposit of Fund Assets in Securities System ....16
2.12A Fund Assets Held in the Custodian's Direct
Paper System....................................20
2.13 Segregated Account .............................21
2.14 Ownership Certificates for Tax Purposes ........23
2.15 Proxies ........................................23
2.16 Communications Relating to
Portfolio Securities ...........................23
2.17 Authorized Persons .............................24
2.18 Proper Instructions ............................25
2.19 Actions Permitted Without Express Authority ....26
2.20 Evidence of Authority ..........................26
2.21 Affiliation Between Fund and Custodian..........27
2.22 Persons Having Access to Assets of the
Portfolios .....................................28
3. Duties of Custodian With Respect to the Books of
Account and Calculation of Net Asset Value and
Net Income .........................................29
4. Records ..............................................29
5. Opinion of Fund's Independent Accountants ............30
6. Reports to Fund by Independent Public Accountants ....30
7. Compensation of Custodian ............................31
8. Responsibility of Custodian ......................... 31
9. Effective Period, Termination and Amendment ..........33
10. Successor Custodian ..................................34
11. Interpretive and Additional Provisions ...............36
12. Additional Funds .....................................36
13. Massachusetts Law to Apply ...........................37
14. Prior Contracts ......................................37
<PAGE>
CUSTODIAN CONTRACT
This Contract between SteinRoe Variable Investment Trust, a
business trust organized and existing under the laws of the
Commonwealth of Massachusetts and having its principal office
at 600 Atlantic Avenue, Boston, Massachusetts, hereinafter
called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at
225 Franklin Street, Boston, Massachusetts 02110, hereinafter called
the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate
series, with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Fund intends to initially offer shares in the
thirteen separate series listed in Appendix A hereto (such series
together with all other series subsequently established by the Fund and
made subject to this Contract in accordance with paragraph 12, being
herein referred to as the "Portfolio(s)");
WHEREAS, the Custodian is qualified to act as Custodian for
registered investment companies under the Investment Company Act of
1940 and the applicable rules hereunder;
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the
assets of the Portfolios of the Fund pursuant to the provisions of the
Declaration of Trust of the Fund and subject to the provisions hereof.
The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments
of income, payments of principal or capital distributions received by
it with respect to all securities owned by the Portfolio(s) from time
to time, and the cash consideration received by it for such new or
treasury shares of beneficial interest in the Fund representing
interests in the Portfolios ("Shares") as may be issued or sold from
time to time. The Custodian shall not be responsible for any property
of a Portfolio held or received by the Fund and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the meaning of
Section 2.18), the Custodian shall on behalf of the applicable
Portfolio(s) from time to time employ one or more sub-custodians, but
only in accordance with an applicable vote by the Board of Trustees of
the Fund on behalf of the applicable Portfolio(s), and provided that
the Custodian shall have no more or less responsibility or liability to
the Fund on account of any actions or omissions of any sub-custodian so
employed than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund
Held by the Custodian
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the separate account of each Portfolio all non-cash
property, including all securities, owned by such Portfolio other than
(a) securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a book-
entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System," and (b)
(subject to prior receipt of Proper Instructions) commercial paper of
an issuer for which State Street Bank and Trust Company acts as issuing
and paying agent ("Direct Paper") which is deposited and/or maintained
in the Direct Paper System of the Custodian pursuant to Section 2.12A.
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by a Portfolio held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only
upon receipt of Proper Instructions from the Fund on behalf of the
applicable Portfolio, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
(2) Upon repurchase of securities held by the Portfolio, subject to a
repurchase agreement after receipt by the Custodian, as Custodian
and not as the other party to the repurchase agreement, of payment
for such securities in accordance with the terms of the repurchase
agreement;
(3) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Portfolio;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.11 or into the
name or nominee name of any sub-custodian appointed pursuant
to Section 1; or for exchange for a different number of
bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to the
Custodian;
(7) Upon the sale of such securities for the account of the Portfolio,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility
or liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities except as
may arise from the Custodian's own negligence or willful
misconduct;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization, or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if any,
are to be delivered to the Custodian;
(10) For delivery in connection with any loans of securities made
by the Portfolio, but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the Fund on
behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its agencies or
instrumentalities, except that in connection with any loans for
which collateral is to be credited to the Custodian's account in
the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible for
the delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
(11) For delivery as security in connection with any borrowings
by the Fund on behalf of the Portfolio requiring a pledge of assets
by the Fund on behalf of the Portfolio, but only against receipt of
amounts borrowed;
(12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian
and a broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of the National Association
of Securities Dealers ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio of Fund;
(13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian,
and a Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
(14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for the Fund, for delivery to such
Transfer Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time in the
currently effective prospectus and statement of additional
information, related to the Portfolio ("Prospectus"),
in satisfaction of requests by holders of Shares for repurchase or
redemption; and
(15) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board
of Trustees or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, specifying the securities of the Portfolio to be
delivered, setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom delivery of such securities
shall be made.
2.3 Registration of Securities. Securities held by the Custodian for
the account of a Portfolio (other than bearer securities) shall be
registered in the name of the Portfolio or in the name of any nominee
of the Fund on behalf of the Portfolio or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Portfolio,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee
name of any agent appointed pursuant to Section 2.11 or in the name or
nominee name of any sub-custodian appointed pursuant to Section 1. All
securities accepted by the Custodian on behalf of the Portfolio under
the terms of this Contract shall be in "street name" or other good
delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Portfolio of the Fund,
subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Portfolio, other than cash
maintained by the Portfolio in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for a Portfolio may be deposited
by it to its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as it may in
its discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to act
as a custodian under the Investment Company Act of 1940 and that
each such bank or trust company and the funds to be deposited
with each such bank or trust company shall on behalf of each
applicable Portfolio be approved by vote of a majority of the Board of
Trustees of the Fund. Such funds shall be deposited by the Custodian
in its capacity as Custodian and shall be withdrawable by the Custodian
only in that capacity.
2.5 Payments for Shares. The Custodian shall receive from the
distributor for the Shares and deposit into the account of the
applicable Portfolio such payments as are received for Shares of that
Portfolio issued or sold from time to time by the Fund. The Custodian
will provide timely notification to the Fund on behalf of each such
Portfolio and the Transfer Agent of any receipt by it of payments for
Shares of such Portfolio.
2.6 Availability of Federal Funds. Upon mutual agreement between
the Fund on behalf of each applicable Portfolio and the Custodian, the
Custodian shall, upon the receipt of Proper Instructions from the Fund
on behalf of a Portfolio, make federal funds available to such
Portfolio as of specified times agreed upon from time to time by the
Fund and the Custodian in the amount of checks received in payment for
Shares of such Portfolio which are deposited into the Portfolio's
account.
2.7 Collection of Income. The Custodian shall collect on a timely
basis, whether upon maturity, call, redemption or retirement prior
thereto, all income, principal and other payments with respect to
registered securities held hereunder to which the Portfolio shall be
entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis, whether upon maturity,
call, redemption or retirement prior thereto, all income, principal and
other payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held by the Custodian or its
agent, and shall credit such income, principal and other payments as
collected, to such Portfolio's account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest and principal when
due on securities held hereunder. Income due the Portfolio on
securities loaned pursuant to the provisions of Section 2.2 (10) shall
be the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the
Fund with such information or data as may be necessary to assist
the Fund in arranging for the timely delivery to the Custodian
of the income to which the Portfolio is properly entitled.
2.8 Payment of Fund Monies. Upon receipt of Proper Instructions, from
the Fund on behalf of the applicable Portfolio which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
(1) Upon the purchase of securities, options, futures contracts
or options on futures contracts for the account of the Portfolio
but only (a) against the delivery of such securities, or evidence
of title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank or trust company doing
business in the United States or abroad which is qualified under
the Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its agent for
this purpose) registered in the name of the Portfolio or in the
name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance with
the conditions set forth in Section 2.12 hereof; (c) in the case of
a purchase involving the Direct Paper System, in accordance with
the conditions set forth in Section 2.12A; (d) in the case of
repurchase agreements entered into between the Fund on behalf of
the Portfolio and the Custodian, or another bank, or a broker-
dealer, or a broker-dealer which is a member of the NASD, upon (i)
receipt by the Custodian, as Custodian and not as the other party
to the repurchase agreement, of written evidence in form
satisfactory to the Fund of the obligation of the Custodian or
other bank or broker-dealer to repurchase the underlying securities
from the Portfolio; (ii) receipt of the underlying securities if
not already held by the Custodian (or appropriate notice from the
Securities System that the underlying securities have been
transferred to the Custodian's account with the Securities System);
(iii) recordation on the Custodian's records of the Portfolio's
interest in the underlying securities; and (iv) transmission of a
written notice to the Fund that the Custodian, as Custodian and not
as the other party to the repurchase agreement is holding the
underlying securities on the Portfolio's behalf pursuant to the
terms of the repurchase agreement, or (e) for transfer to a time
deposit account of the Fund in any bank whether domestic or
foreign; if authorized by Proper Instructions, such transfer may be
effected prior to receipt of a confirmation from a broker and/or
the applicable bank pursuant to Proper Instructions from the Fund
as defined in Section 2.18;
(2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
(3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability of or allocable to the
Portfolio, including but not limited to the following interest,
taxes, management, administrative, accounting, custodial, transfer
agent, legal fees, and other operating expenses whether or not such
expenses are to be in whole or part capitalized or treated as
deferred expenses;
(5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board
of Trustees or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or persons to
whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. Except as specifically stated otherwise in this Contract,
in any and every case where payment for purchase of securities for the
account of a Portfolio is made by the Custodian in advance of receipt
of the securities purchased, in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had
been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of the Fund.
From such funds as may be available for the purpose, but subject
to the limitations of the Declaration of Trust and any applicable votes
of the Board of Trustees of the Fund pursuant thereto, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make funds
available for payment to holders of Shares who have delivered to the
Transfer Agent a request for redemption or repurchase of their Shares.
In connection with the redemption or repurchase of Shares of a
Portfolio, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders.
2.11 Appointment of Agents. The Custodian may at any time or times
in its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the
Investment Company Act of 1940, as amended, to act as a custodian
for a registered investment company, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of
1934, which acts as a securities depository, or in the book-entry
system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and regulations,
if any, and subject to the following provisions:
(1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are
held in an account ("Account") of the Custodian in
the Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities of
the Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
(3) The Custodian shall pay for securities purchased for the
account of the Portfolio which are to be held in a Securities
System upon (i) receipt of advice from the Securities System that
such securities have been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of the Portfolio. Subject to
the other requirements of Section 2.2, the Custodian shall transfer
securities sold for the account of the Portfolio which are to be
held in a Securities System upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for
the account of the Portfolio. Copies of all advices from the
Securities System of transfers of securities for the account of the
Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on
behalf of the Portfolio confirmation of each transfer to or from
the account of the Portfolio in the form of a written advice or
notice and shall furnish to the Fund on behalf of the Portfolio
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Portfolio.
(4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
(5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or
of any of its or their employees or from failure of the Custodian
or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of
the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against
the Securities System or any other person which the
Custodian may have as a consequence of any such loss or
damage if and to the extent that the Portfolio has not been
made whole for any such loss or damage.
2.12A Fund Assets Held in the Custodian's Direct Paper System.
The Custodian may deposit and/or maintain securities owned by a
Portfolio in the Direct Paper System of the Custodian subject to
the following provisions:
(1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper
Instructions from the Fund on behalf of the Portfolio;
(2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are
represented in an account ("Account") of the Custodian in
the Direct Paper System which shall not include any
assets of the Custodian other than assets held as a
fiduciary, custodian, or otherwise for customers;
(3) The records of the Custodian with respect to securities
of the Portfolio which are maintained in the Direct Paper
System shall identify by book-entry those securities
belonging to the Portfolio;
(4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and
transfer of securities to the account of the Portfolio. The
Custodian shall transfer securities sold for the account
of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such transfer and
receipt of payment for the account of the Portfolio;
(5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Portfolio; and
(6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting controls as the
Fund may reasonably request from time to time.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased
or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the
Securities and Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions from the Fund on
behalf of the Portfolio, a certified copy of a resolution of the
Board of Trustees or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of each Portfolio
held by it and in connection with transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of the Portfolio or a nominee of the
Portfolio, all proxies, without indication of the manner in which
such proxies are to be voted, and shall promptly deliver to the
Portfolio such proxies, all proxy soliciting materials and all
notices relating to such securities.
2.16 Communications Relating to Portfolio Securities. The
Custodian shall transmit promptly to the Fund for each Portfolio all
written information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written
by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With
respect to tender or exchange offers, the Custodian shall transmit
promptly to the Portfolio all written information received by the
Custodian from issuers of the securities whose tender or exchange is
sought and from the party (or his agents) making the tender or exchange
offer. If the Portfolio desires to take action with respect to any
tender offer, exchange offer or any other similar transaction requiring
action on the part of the Portfolio, the Portfolio shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
2.17 Authorized Persons. (a) Authorized Persons shall be deemed to
include the President, any Vice President, the Secretary, and the
Treasurer of the Fund, or any other person, whether or not any such
person is an officer or employee of the Fund, duly authorized by the
Board of Trustees of the Fund to give oral instructions and written
instructions on behalf of the Fund and listed in the certification
annexed hereto as Appendix B or such other certification as may be
received by the Custodian from time to time. (b) Annexed hereto as
Appendix B is a certification signed by two of the present officers of
the Fund setting forth the names and the signatures of the present
Authorized Persons. The Fund agrees to furnish to the Custodian a new
certification in similar form in the event that any such present
Authorized Person ceased to be such an Authorized Person or in the
event that other or additional Authorized Persons are elected or
appointed. Until such new certification shall be received, the
Custodian shall be fully protected in acting upon the provisions of
this Contract upon oral instructions or signatures of the present
Authorized Persons as set forth in the last delivered certification.
2.18 Proper Instructions. Proper Instructions as used throughout
this Article 2 means a writing signed or initialed by one or more
Authorized Persons. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the Custodian
reasonably believes them to have been given by an Authorized Person to
give such instructions with respect to the transaction involved. The
Fund shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the
Board of Trustees, Proper Instructions may include communications
effected directly between electro-mechanical or electronic devices
provided that the Board of Trustees and the Custodian are satisfied
that such procedures afford adequate safeguards for the Portfolio's
assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three-
party agreement which requires a segregated asset account in accordance
with Section 2.13.
2.19 Actions Permitted Without Express Authority. The Custodian may
in its discretion, without express authority from the Fund on behalf of
each applicable Portfolio:
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board of
Trustees of the Fund.
2.20 Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of
a vote of the Board of Trustees of the Fund as conclusive
evidence (a) of the authority of any person to act in accordance
with such vote or (b) of any determination or of any action by
the Board of Trustees pursuant to the Declaration of Trust as
described in such vote, and such vote may be considered as in full
force and effect until receipt by the Custodian of written notice to
the contrary.
2.21 Affiliation Between the Fund and Custodian. It is understood
that the Trustees, officers, employees, agents and shareholders of the
Fund, and the officers, directors, employees, agents and shareholders
of the Fund's investment advisor, are or may be interested in the
Custodian as directors, officers, employees, agents, stockholders, or
otherwise, and that the directors, officers, employees, agents or
stockholders of the Custodian may interested in the Fund as Trustees,
officers, employees, agents, shareholders, or otherwise, or in the
investment advisor as officers, directors, employees, agents,
shareholders or otherwise.
2.22 Persons Having Access to Assets of the Portfolios.
(a) No Trustee, officer, employee or agent of the Fund shall have
physical access to the assets of the Fund held by the Custodian or be
authorized or permitted to withdraw any investments of the Fund, nor
shall the Custodian deliver any assets of the Fund to any such person.
No officer or director, employee or agent of the Custodian who holds
any similar position with the Fund or the Advisor or Administrator
shall have access to the assets of the Fund.
(b) Only officers and employees of the Custodian shall have access to
the assets of the Fund. Such officers and employees shall be
identified by certification signed by a duly authorized officer of the
Custodian from time to time. The Custodian shall advise the Fund of
any change in the individuals authorized to have access to the assets
of the Fund by written notice to the Fund.
(c) Nothing in this Section 2.22 shall prohibit any officer, employee
or agent of the Fund, or any officer, director, employee or agent of
the Advisor or Administrator, from giving oral instructions or written
instructions to the Custodian or executing a Certificate so long as it
does not result in the delivery of or access to the assets of the Fund
prohibited by paragraph (a) of this Section 2.22.
3. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Trustees of the Fund to keep the books of account of each Portfolio
and/or compute the net asset value per share of the outstanding shares
of each Portfolio or, if directed in writing to do so by the Fund on
behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed,
the Custodian shall also calculate daily the net income of the
Portfolio as described in the Fund's currently effective prospectus
related to such Portfolio and shall advise the Fund and the Transfer
Agent daily of the total amounts of such net income and, if instructed
in writing by an officer for the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among
its various components. The calculations of the net asset value per share
and the daily income of a each Portfolio shall be made in accordance with
the valuation procedures and methodology and at the time or times described
from time to time in the Fund's currently effective prospectus related to
such Portfolio.
4. Records.
The Custodian shall create and maintain all records relating to
its activities and obligations under this Contract in such manner as
will meet the obligations of the Fund under the Investment Company
Act of 1940, with particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder, applicable federal and state tax laws and
any other law or administrative rules and procedures which may be
applicable to the Fund. All such records shall be the property of the
Fund and shall at times during the regular business hours of the
Custodian be open for inspection by duly authorized officers, employees
or agents of the Fund, Auditors employed by the Fund and employees and
agents of the Securities and Exchange Commission. The Custodian shall,
at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate
numbers in such tabulations.
5. Opinion of Fund's Independent Accountant.
The Custodian shall take all reasonable action, as the Fund on
behalf of each applicable Portfolio may from time to time request, to
obtain from year to year favorable opinions from the Fund 's
independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund 's Form N-1A, and Form N-
SAR or other annual reports to the Securities and Exchange Commission
and with respect to any other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants.
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with
reports by independent public accountants on the accounting system,
internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating
to the services provided by the Custodian under this Contract; such
reports, which shall be of sufficient scope and in sufficient detail,
as may reasonably be required by the Fund, to provide reasonable
assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall
so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for
its services and expenses as Custodian, as agreed upon from time to
time between the Fund on behalf of each applicable Portfolio and the
Custodian.
8. Responsibility of Custodian.
So long as and to the extent that it is in the exercise of
reasonable care, the Custodian shall not be responsible for the title,
validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Contract and shall
be held harmless in acting upon any notice, request, consent,
certificate or other instrument reasonably believed by it to be
genuine and to be signed by the proper party or parties including any
futures commission merchant acting pursuant to the terms of a three-
party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this
Contract, but shall be kept indemnified by and shall be without
liability to the Fund for any action taken or omitted by it in good
faith without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. Notwithstanding the foregoing, the
responsibility of the Custodian with respect to redemptions effected by
check shall be in accordance with a separate Agreement entered into
between the Custodian and the Fund.
If the Fund on behalf of a Portfolio requires the Custodian to
take any action with respect to securities, which action involves the
payment of money (other than Fund assets) or which action may, in the
opinion of the Custodian, result in the Custodian or its nominee
assigned to the Fund on behalf of the Portfolio being liable for the
payment of money or incurring liability of some other form, the Fund or
the Portfolio, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and
form satisfactory to it.
If the Fund requires the Custodian to advance cash or securities
for any purpose for the benefit of a Portfolio or in the event
that the Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection
with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the account of
the applicable Portfolio shall be security therefor and should the Fund
fail to repay the Custodian promptly, the Custodian shall be entitled
to utilize available cash and to dispose of such Portfolio's assets to
the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an instrument
in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30) days after
the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to a Portfolio act under Section 2.12
hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees of the
Fund has approved the initial use of a particular Securities System by
such Portfolio and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has
reviewed the use by such Portfolio of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of
1940, as amended and that the Custodian shall not with respect to a
Portfolio act under Section 2.12A hereof in the absence of receipt of
an initial certificate of the Secretary or an Assistant Secretary that
the Board of Trustees has approved the initial use of the Direct Paper
System by such Portfolio and the receipt of an annual certificate of
the Secretary or an Assistant Secretary that the Board of Trustees has
reviewed the use by such Portfolio of the Direct Paper System; provided
further, however, that the Fund shall not amend or terminate this
Contract in contravention of any applicable federal or state
regulations, or any provision of the Declaration of Trust, and further
provided, that the Fund on behalf of one or more of the Portfolios may
at any time by action of its Board of Trustees (i) substitute another
bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in
the event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the happening of a
like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as
may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian for the Fund or one or more of the
Portfolios shall be appointed by the Board of Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian
at the office of the Custodian, duly endorsed and in the form for
transfer, all securities of each applicable Portfolio then held by it
hereunder and shall transfer to an account of the successor custodian
all of the securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of
the Board of Trustees of the Fund, deliver at the office of the
Custodian and transfer such securities, funds and other properties in
accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board of Trustees shall
have been delivered to the Custodian on or before the date when such
termination shall become effective, then the Custodian shall have the
right to deliver to a bank or trust company, which is a "bank" as
defined in the Investment Company Act of 1940, doing business in
Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last published
report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio
and all instruments held by the Custodian relative thereto and all
other property held by it under this Contract on behalf of each
applicable Portfolio and to transfer to an account of such successor
custodian all of the securities of each such Portfolio held in any
Securities System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain
in the possession of the Custodian after the date of termination
hereof owing to failure of the Fund to procure the certified copy of
vote referred to or of the Board of Trustees to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for
its services during such period as the Custodian retains possession of
such securities, funds and other properties and the provisions of this
Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian
and the Fund on behalf of each Portfolio, may from time to time agree
on such provisions interpretive of or in addition to the provisions of
this Contract as may in their joint opinion be consistent with the
general tenor of this Contract. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional
provisions shall contravene any applicable federal or state regulations
or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
12. Additional Funds
In the event that the Fund establishes one or more series of
Shares in addition to those listed on Appendix A with respect to which
it desires to have Custodian render services as Custodian under the
terms hereof, it shall so notify Custodian in writing, and if Custodian
agrees in writing to provide such services, such series of Shares shall
become a Portfolio hereunder.
13. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
14. Prior Contracts.
This Contract supersedes and terminates, as of the date hereof,
all prior contracts between the Fund on behalf of each of the
Portfolios and the Custodian relating to the custody of the Fund's
assets.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as of
the 31st day of December, 1987.
STEINROE VARIABLE INVESTMENT TRUST
BY: ERNST E. DUNBAR
Attest:
JOHN L. DAVENPORT
STATE STREET BANK AND TRUST COMPANY
BY: GUY R. STURGEON
Attest: Vice President
Assistant Secretary
<PAGE>
APPENDIX A
Aggressive Stock Fund
Cash Income Fund
Government Guaranteed Securities Fund
Government Securities Zero Coupon Fund Matched Maturity Series 1991
Government Securities Zero Coupon Fund Matched Maturity Series 1993
Government Securities Zero Coupon Fund Matched Maturity Series 1996
Government Securities Zero Coupon Fund Matched Maturity Series 1998
Government Securities Zero Coupon Fund Matched Maturity Series 2001
High Income Bond Fund
Investment Grade Bond Fund
Managed Assets Fund
Managed Growth Stock Fund
Mortgage Securities Income Fund
<PAGE>
AMENDMENT TO THE CUSTODIAN CONTRACT
AGREEMENT made by and between State Street Bank and Trust Company
(the "Custodian") and SteinRoe Variable Investment Trust (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian
contract dated December 31, 1998 (the "Custodian Contract") governing
the terms and conditions under which the Custodian maintains custody of
the securities and other assets of the thirteen then authorized
separate series("Portfolios") of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the Custodian
Contract(i) to add two additional Portfolios, International Stock Fund
and Aggressive Managed Assets Fund, and (ii) to provide for the
maintenance of the foreign securities of those Portfolios which are
permitted to invest the assets (or a portion thereof) in foreign
securities, and cash incidental to transactions in such securities, in
the custody of certain foreign banking institutions and foreign
securities depositories acting as sub-custodians in conformity with the
requirements of Rule 17f-5 under the Investment Company Act of 1940;
NOW THEREFORE, in consideration of the premises and covenants
contained herein, the Custodian and the Fund hereby amend the Custodian
Contract by the addition of the following terms and conditions:
1. ADDITION OF PORTFOLIOS
The Custodian shall provide services pursuant to the Custodian
Contract as amended hereby to the two new Portfolios referred to above,
and Appendix A to the Custodian Contract is hereby amended to read in
its entirety as attached hereto.
2. APPOINTMENT OF FOREIGN SUB-CUSTODIANS
The Fund hereby authorizes and instructs the Custodian to
employ as sub-custodians for the securities and other assets of the
nine Portfolios indicated by an asterisk on Appendix A hereto (the
"International Portfolios") maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule B hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 2.18 of the
Custodian Contract, together with a certified resolution of the Fund's
Board of Directors, the Custodian and the Fund may agree to amend
Schedule B hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories to act as sub-
custodian. Upon receipt of Proper Instructions, the Fund may instruct
the Custodian to cease the employment of any one or more of such sub-
custodians for maintaining custody of the assets of any one or more of
the International Portfolios.
3. ASSETS TO BE HELD
The Custodian shall limit the securities and other assets
maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Fund's foreign securities
transactions.
4. FOREIGN SECURITIES DEPOSITORIES
Except as may otherwise be agreed upon in writing by the
Custodian and the Fund, assets of the International Portfolios shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-
custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 5 hereof.
5. SEGREGATION OF SECURITIES
The Custodian shall identify on its books as belonging to each
International Portfolio, the foreign securities of that International
Portfolio held by each foreign sub-custodian. Each agreement pursuant
to which the Custodian employees a foreign banking institution shall
require that such institution establish a custody account for the
Custodian on behalf of each International Portfolio and physically
segregate in that account, securities and other assets of that
International Portfolio, and, in the event that such institution
deposits that International Portfolio's securities in a foreign
securities depository, that it shall identify on its books as belonging
to the Custodian, as agent for that International Portfolio, the
securities so deposited.
6. AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS
Each agreement with a foreign banking institution shall be
substantially in the form set forth in Exhibit 1 hereto and shall
provide that: (a) each International Portfolio's assets will not be
subject to any right, charge, security interest, lien or claim of any
kind in favor of the foreign banking institution or its creditors or
agents, except a claim of payment for their safe custody or
administration; (b) beneficial ownership of each International
Portfolio's assets will be freely transferable without the payment of
money or value other than for custody or administration; (c) adequate
records will be maintained identifying the assets as belonging to that
International Portfolio; (d) officers of or auditors employed by, or
other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for
the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with
the Custodian; and (e) assets of the International Portfolios held by
the foreign sub-custodian will be subject only to the instructions of
the Custodian or its agents.
7. ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND
Upon request of the Fund, the Custodian will use its best
efforts to arrange for the independent accountants of the Fund to be
afforded access to the books and records of any foreign banking
institution employed as a foreign sub-custodian insofar as such books
and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
8. REPORTS BY CUSTODIAN
The Custodian will supply to the Fund from time to time, as
mutually agreed upon, statements in respect of the securities and other
assets of the International Portfolios held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of each International Portfolio's securities and other
assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of the International Portfolio,
indicating, as to the securities acquired for the International
Portfolio, the identity of the entity having physical possession of
such securities.
9. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT
(a) Except as otherwise provided in paragraph (b) of this
Section 8, the provisions of Sections 2.2 and 2.8 of the Custodian
Contract shall apply, mutatis mutandis to the foreign securities of the
International Portfolio held outside the United States by foreign sub-
custodians.
(b) Notwithstanding any provision of the Custodian Contract
to the contrary, settlement and payment for securities received for the
account of an International Portfolio and delivery of securities
maintained for the account of an International portfolio may be
effected in accordance with the customary established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or
to a dealer therefor (or an agent for such purchaser or dealer) against
a receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-
custodian may be maintained in the name of such entity's nominee to the
same extent as set forth in Section 2.3 of the Custodian Contract, and
the Fund agrees to hold any such nominee harmless from any liability as
a holder of record of such securities.
10. LIABILITY OF FOREIGN SUB-CUSTODIANS
Each agreement pursuant to which the Custodian employs a
foreign banking institution as a foreign sub-custodian shall require
the institution to exercise reasonable care in the performance of its
duties and to indemnify, and hold harmless, the Custodian and the Fund
from and against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's performance of
such obligations. At the election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian with respect to any claims
against a foreign banking institution as a consequence of any such
loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
11. LIABILITY OF CUSTODIAN
The Custodian shall be liable for the acts or omissions of a
foreign banking institution to the same extent as set forth with
respect to sub-custodians generally in the Custodian Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by paragraph 13 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 11, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
12. REIMBURSEMENT FOR ADVANCES
If the Fund requires the Custodian to advance cash or
securities for any purpose including the purchase or sale of foreign
exchange or of contracts for foreign exchange, or in the event that the
Custodian or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments claims or liabilities in connection with the
performance of this Contract, except such as may arise form its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund
shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of the Fund assets to the extent
necessary to obtain reimbursement.
13. MONITORING RESPONSIBILITIES
The Custodian shall furnish annually to the Fund, during the
month of June, information concerning the foreign sub-custodians
employed by the Custodian. Such information shall be similar in kind
and scope to that furnished to the Fund in connection with the initial
approval of this amendment to the Custodian Contract. In addition, the
Custodian will promptly inform the Fund in the event that the Custodian
leans of a material adverse change in the financial condition of a
foreign sub-custodian or any material loss of the assets of any
International Portfolio or in the case of any foreign sub-custodian not
the subject of an exemptive order from the Securities and Exchange
Commission is notified by any foreign sub-custodian that there appears
to be a substantial likelihood that its shareholders' equity will
decline below $200 million (U.S. dollars or the equivalent thereof) or
that its shareholders' equity has declined below $200 million (in each
case computed in accordance with generally accepted U.S. accounting
principles).
14. BRANCHES OF U.S. BANKS
(a) Except as otherwise set forth in this amendment to the
Custodian Contract, the provisions hereof shall not apply where the
custody of the Fund assets is maintained in a foreign branch of a
banking institution which is a "bank" as defined by Section 2(a)(5) of
the Investment Company Act of 1940 meeting the qualification set forth
in Section 26(a) of said Act. The appointment of any such branch as
sub-custodian shall be governed by paragraph 1 of the Custodian
Contract.
(b) Cash held for the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund with
the Custodian's London Branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
15. APPLICABILITY OF CUSTODIAN CONTRACT
Except as specifically superseded or modified herein, the
terms and provisions of the Custodian Contract shall continue to apply
with full force and effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed as of the 23rd day
of February, 1989.
STEINROE VARIABLE INVESTMENT TRUST
By: RICHARD R. CHRISTENSEN
Attest: (Title) President
______________
(Title)
STATE STREET BANK AND TRUST COMPANY
By: [SIGNATURE]
Vice President
Attest:
[SIGNATURE]
Assistant Secretary
<PAGE>
APPENDIX A
Aggressive Managed Assets Fund*
Aggressive Stock Fund*
Cash Income Fund*
Government Guaranteed Securities Fund
Government Securities Zero Coupon Fund Matched Maturity Series 1991
Government Securities Zero Coupon Fund Matched Maturity Series 1993
Government Securities Zero Coupon Fund Matched Maturity Series 1996
Government Securities Zero Coupon Fund Matched Maturity Series 1998
Government Securities Zero Coupon Fund Matched Maturity Series 2001
High Yield Bond Fund*
International Stock Fund*
Investment Grade Bond Fund*
Managed Assets Fund*
Managed Growth Stock Fund*
Mortgage Securities Income Fund*
__________
*May invest in foreign securities.
<PAGE>
SCHEDULE B
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of SteinRoe
Variable Investment Trust for use as sub-custodians for the Fund's
securities and other assets.
Country Bank
- ------- -----
Australia ANZ Banking Group Ltd.
Austria Girozentrale Und Bank Der Osterreichischen
Belgium Banque Bruxelles Lambert
Canada Canada Trust Company
Denmark Den Danske Bank
Finland Kansallis-Osake Pankki
France Credit Commercial de France
Germany Berliner Handels Und Frankfurter Bank
Hong Kong Standard Chartered Bank
Italy Credito Italiano
Japan Sumitomo Trust & Banking Company Limited
Netherlands Bank Mees & Hope, N.V.
New Zealand Westpac Banking Corp.
Norway Christiania Bank Og Kreditkasse
Singapore DPS Bank
Spain Banco Hispano Americano
Sweden Skandinaviska Enskilda Banken
Switzerland Union Bank of Switzerland
United Kingdom State Street London Limited
DEPOSITORIES
Austria Oesterreichischen Kontrollbank AG
Wertpapiersammelbank beider (OeKB-WSB)
Belgium Caisse Interprofessionelle de Depots et de
Virements de Titres S.A. (C.I.K.)
Denmark Vaerdipapircentralen (VP-Centralen)
France Societe Interprofessionnelle pour la
Compensation des Valeurs Mibilieres (SICOVAM)
Germany Kassenverein
Italy Monte Titoli, SpA
Netherlands Netherlands Clearing Institute for Giro
Securities Deliveries (NECIGEF)
Switzerland Schweizerische Effekten Giro A.G.(SEGA)
- --------------------------
EuroClear (Brussels, Belgium)
Cedel (Luxembourg)
<PAGE>
LIBERTY FINANCIAL Liberty Investment Services, Inc.
Federal Reserve Plaza
600 Atlantic Avenue
Boston, MA 02210-2214
617-722-6000
January 22, 1993
State Street Bank & Trust Co.
Attn: R. H. La Fleur
Fiduciary Control A2N
1776 Heritage Drive
N. Quincy, MA 02171
RE: SteinRoe Variable Investment Trust
Dear Mr. La Fleur:
This is to advise you that SteinRoe Variable Investment Trust has
established a new series of shares to be known as Managed Income Fund.
In accordance with the Additional Funds provision in Section 12 of
the Custodian Contract dated December 31, 1988 between the Fund and
State Street Bank and Trust Company, the Fund hereby requests that you
act as Custodian for Managed Income Fund and render to the Series such
services as Custodian as are provided under the terms of the Contract.
Please acknowledge your agreement to the foregoing by executing
two copies of this letter, returning one to the Fund and retaining one
copy for your records.
SteinRoe Variable Investment Trust
By: ERNST E. DUNBAR
Agreed to this 3rd day of February, 1993
State Street Bank and Trust Company
By: THERESA MC GUIRE
Vice President
ADK/emj: 3189
<PAGE>
[LOGO] STATE STREET
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE ADDENDUM
STEINROE VARIABLE INVESTMENT TRUST
This addendum will be effective on April 1, 1993
- ----------------------------------------------------------------------
Global Custody - Services provided include:
Cash movements, Foreign Communication, Foreign Exchange
(local currency settlements).
Fund Net Assets Annual Fees
- --------------- -------------
First $50 Million 22 Basis Points
Over $50 Million 20 Basis Points
Minimum Per Client $5,000.00 Annually
Global Trades - For each item processed $25.00
STEIN ROE VARIABLE INVESTMENT STATE STREET BANK & TRUST COMPANY
TRUST
BY: THOMAS J. SIMPSON BY: CHARLES R. WITTEMORE, JR.
TITLE: Controller TITLE: Vice President
DATE: 4/14/93 DATE: 3/29/93
<PAGE>
[LOGO] STATE STREET
STATE STREET BANK AND TRUST COMPANY
Custodian Fee Schedule
STEINROE VARIABLE INVESTMENT TRUST
MANAGED INCOME FUND
- ----------------------------------------------------------------------
I. Administration
Custody, Portfolio and Fund Accounting Service - Maintain custody
of fund assets Settle portfolio purchases and sales. Report buy
and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions. Maintain
investment ledgers, provide select portfolio transactions,
position and income reports. Maintain general ledger and capital
stock accounts. Prepare daily trial balance. Calculate net asset
value daily. Provide selected general ledger reports. Securities
yield or market value quotations will be provided to State Street
by the fund.
The administration fee shown below is an annual charge, billed
and payable monthly, based on average monthly net assets.
ANNUAL FEES PER PORTFOLIO
Fund Net Assets Custody, Portfolio & Fund Acct.
--------------- -------------------------------
First $20 Million 1/15 of 1%
Next $80 Million 1/30 of 1%
Excess 1/100 of 1%
Minimum Monthly Charges $3,000
II. Global Custody - Services provided include: Cash Movements,
Foreign Communication, Foreign Exchange (local currency
settlements).
Fund Net Assets Annual Fees
--------------- -----------
First $50 Million 22 Basis Points
Over $50 Million 20 Basis Points
Minimum Per Client $5,000.00 Annually
III. Portfolio Trades - For each line item processed
State Street Bank Repos $ 7.00
DTC or Fed Book Entry $12.00
New York Physical Settlements $25.00
Maturity Collections $ 8.00
All other trades $20.00
IV. Options
Option charge for each option written
or closing contract, per issue, per broker $25.00
Option expiration charge, per issue, per
broker $15.00
Option exercised charge, per issue, per
broker $15.00
V. Lending of Securities
Deliver loaned securities versus cash
collateral $20.00
Deliver loaned securities versus
securities collateral $30.00
Receive/deliver additional cash collateral $ 6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt
of loaned securities $15.00
Deliver securities collateral versus
receipt of loaned securities $25.00
Loan administration - mark-to-market per
day, per loan $ 3.00
VI. Interest Rate Futures
Transactions - no security movement $ 8.00
VII. Holdings Charge
For each issue maintained - monthly charge $ 5.00
VIII. Principal Reduction Payments
Per paydown $10.00
IX. Dividend Charges (For items held at the
Request of Traders over record date in
street form) $50.00
X. Special Services
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security
shipments and the preparation of special reports will be
subject to negotiation. Fees for tax accounting/recordkeeping
for options, financial futures, and other special items will be
negotiated separately.
XI. Earnings Credit
A balance credit equal to 75% of the 90-day Treasury Bill rate in
effect the last business day of each month will be applied to the
Custodian Demand Deposit Account Balance, net of check redemption
service overdrafts, on a pro-rated basis against the Fund's
Custodian Fees, excluding out-of-pocket expenses. The balance
credit will be cumulative and carried forward each month. Any
excess credit remaining at year-end (December 31) will not be
carried forward.
XII. Out-of-Pocket Expenses
A billing for the recovery of applicable out-of-pocket expenses
will be made as of the end of each month. Out-of-pocket expenses
include, but are not limited to the following:
Telephone
Wire Charges ($5.25 per wire in and $5.00 out)
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer - $800 Each
Transfer Fees
Sub-Custodian Charges
Price Waterhouse Audit Letter
Federal Reserve Fee for Return Check items over $2,500 -
$4.25
GNMA Transfer - $15 each
XIII. Payment
The above fees will be charged against the fund's custodian
checking account five (5) days after the invoice is mailed to the
fund's offices.
STEINROE VARIABLE INVESTMENT TRUST STATE STREET BANK
MANAGED INCOME FUND & TRUST CO.
BY: THOMAS J. SIMPSON BY: CHARLES R. WITTEMORE, JR.
TITLE: Controller TITLE: Vice President
DATE: May 13, 1993 DATE: May 3, 1993
<PAGE>
STATE STREET BANK AND TRUST COMPANY
Fee Information for Automated Pricing
This service provides securities pricing on request. Services and fees are
based on the schedule below. Reports can be generated at State Street or on a
remote basis via PC. Reporting has both up load and down load capabilities.
Customized reports may require programming fees.
- -------------------------------------------------------------------------
Monthly charges for the State Street Bank Automated Pricing System are
determined by:
1. Mix of security positions.
2. The number of positions that are priced during the month.
Monthly Base Fee $375.00
Monthly Quote Charge:
- - Municipal Bonds via Muller Data $ 21.00
- - Municipal Bonds via Kenney Information Systems $ 16.00
- - Government, Corporate and Convertible Bonds
via Muller Data $ 11.00
- - Corporate and Government Bonds via Standard &
Poor's $ 11.00
- - Options, Futures and Private Placements $ 6.00
- - Foreign Equities and Bonds via Extel Ltd. $ 6.00
- - Listed Equities, OTC Equities, and Bonds $ 6.00
- - Corporate, Municipal, Convertible and Government
Bonds, Adjustable Rate Preferred Stocks via IDSI $ 6.00
For billing purposes, the monthly quote charge will be based on the average
number of positions in the portfolio.
STEINROE VARIABLE INVESTMENT TRUST STATE STREET BANK
MANAGED INCOME FUND & TRUST CO.
BY: THOMAS J. SIMPSON BY: CHARLES R. WITTEMORE, JR.
TITLE: Controller TITLE: Vice President
DATE: May 13, 1993 DATE: May 3, 1993
STEINROE VARIABLE INVESTMENT TRUST
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT dated as of January 3, 1995 between
STEINROE VARIABLE INVESTMENT TRUST, a business trust organized
under the laws of the Commonwealth of Massachusetts (the
"Trust"), on behalf of each of its separate series funds listed
on Schedule A hereto (each individually a "Fund" and,
collectively, the "Funds"), and STEIN ROE & FARNHAM INCORPORATED,
a corporation organized under the laws of the State of Delaware
(the "Administrator").
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 has authorized the issuance of shares of beneficial
interest in one or more separate series each representing
interests in a separate portfolio of securities and other assets,
which shares are to be issued and sold to and held by various
separate accounts of Keyport Life Insurance Company ("Keyport")
or separate accounts of other insurance companies that are
affiliated or are not affiliated with Keyport ("Participating
Insurance Company");
WHEREAS, the Trust, on behalf of each Fund, has entered into
a separate Fund Advisory Agreement with the Administrator (each
individually a "Fund Advisory Agreement" and, collectively, the
"Fund Advisory Agreements") providing for investment management;
and
WHEREAS, the Trust desires the Administrator to render
administrative services to the Funds in the manner and on the
terms and conditions hereinafter set forth (it being understood
that the Administrator will act as a transfer agent for the
shares of the Funds pursuant to a separate agreement);
NOW, THEREFORE, the Trust, on behalf of the Funds, and the
Administrator agree as follows:
1. EMPLOYMENT OF THE ADMINISTRATOR. The Trust hereby
engages the Administrator to provide administrative and oversight
services for the period, in the manner, and on the terms
hereinafter set forth. The Administrator hereby accepts such
engagement and agrees during such period to render the services
and to assume the obligations herein set forth. The
Administrator shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to
act for or represent the Trust or any of the Funds in any way or
otherwise be deemed an agent of the Trust or any of the Funds.
2. ADMINISTRATIVE SERVICES. (a) The Administrator will
provide hereunder general administrative services and oversee the
operations of the Trust and the Funds ("Administrative
Services"), all subject to the direction and overall control of
the Board of Trustees of the Trust. Such Administrative Services
shall not include investment advisory, custodian, underwriting
and distribution, transfer agency or pricing and bookkeeping
services, but shall include, without limitation, (i) the
provision of office space, equipment and facilities necessary in
connection with the maintenance of the headquarters of the Trust;
(ii) the maintenance of the corporate books and records of the
Trust, other than its accounting books and records and those of
its records maintained by the Investment Adviser, the transfer
agent and the custodian of the Trust, and making arrangements for
meetings of the Trustees of the Trust; (iii) preparation and
filing of proxy materials and making arrangements for meetings of
shareholders or beneficial owners of the Funds;(iv) 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 and the rules
and regulations thereunder; (v) calculation of distributions
required or advisable under the Internal Revenue Code of 1986;
(vi) periodic computation and reporting to the Investment Adviser
of the Funds' compliance with diversification and other portfolio
requirements of the Investment Company Act and the Internal
Revenue Code; (vii) 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 (viii) 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 Funds by others
(including, without limitation, by others pursuant to paragraph
(e) of this Section 2).
(b) The Administrator will preserve for the Trust all
records it maintains for the Trust as prescribed by the rules and
regulations of the Securities and Exchange Commission (the "SEC")
in the manner and for the time periods prescribed by such rules.
The Administrator agrees that all such records shall be the
property and under the control of the Trust and shall be made
available, within five business days of any request therefor, to
the Trust's Board of Trustees or auditors during regular business
hours at the Administrator's offices. In the event of
termination of this Agreement for any reason, all such records
shall be returned, without charge, promptly to the Trust, free
from any and all claim or retention of rights by the
Administrator, except that the Administrator may retain copies of
such records.
(c) The Administrator will report to the Trustees of the
Trust any potential or existing material irreconcilable conflict
among the interests of shareholders (the separate accounts of
insurance companies investing in the Trust) of which it is aware.
The Administrator will assist the Trustees in carrying out their
responsibilities under an Order from the SEC, dated July 1, 1988,
granting insurance companies and variable annuity and variable
life insurance separate accounts exemptions from the provisions
of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold
to and held by variable annuity and variable life insurance
separate accounts of insurance companies affiliated and
unaffiliated with each other. The Investment shall provide the
Trustees with all information reasonably necessary for the
Trustees to consider any issues raised.
(d) The Administrator will not disclose or use any records
or information obtained pursuant to this Agreement in any manner
whatsoever except as expressly authorized herein, and will keep
confidential any information obtained pursuant to this Agreement,
and disclose such information only if the Trust has authorized
such disclosure, or it such disclosure is expressly required by
applicable federal or state regulatory authorities.
(e) The Administrator may, in its discretion, arrange for
Administrative Services and related services subject to this
Agreement to be provided to the Trust by the Administrator's
affiliate, Liberty Financial Companies, Inc. ("LFC"), or by any
of LFC's majority or greater owned subsidiaries.
3. EXPENSES BORNE BY ADMINISTRATOR. To the extent
necessary to perform its obligations under this Agreement, the
Administrator, at its own expense, shall furnish executive and
other personnel and office space, equipment and facilities, and
shall pay any other expenses incurred by it, in connection with
the performance of its duties hereunder, except that the Trust or
the Funds, as appropriate, shall reimburse the Administrator 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 Funds. The
Administrator shall pay all salaries, fees and expenses of
Trustees or officers of the Trust who are employees of the
Administrator. The Administrator shall not be obliged to bear
any other expenses incidental to the operations and business of
the Trust. The Administrator shall not be required to pay or
provide any credit for services provided by the Trust's
custodian, transfer agent or other agents, including the
Investment Adviser.
4. EXPENSES BORNE BY THE TRUST. The Trust or one or more
of the Funds, as appropriate, shall pay all expenses incidental
to the operations and business of the Trust and the Funds not
specifically assumed or agreed to be paid by the Administrator
pursuant to the Fund Advisory Agreements or this Agreement (as
the case may be), or by Keyport or any Participating Insurance
Company, including, without limitation:
(a) the fees of the Administrator as provided in Section 5
of this Agreement and of the Administrator in its capacity as
investment adviser under the Fund Advisory Agreements (in such
capacity, the "Investment Advisor");
(b) fees payable pursuant to any plan adopted by the Trust
pursuant to Rule 12b-1 under the Investment Company Act;
(c) all fees and charges of depositories, custodians and
other agencies for the safekeeping and servicing of the cash,
securities, and other property of the Trust or the Funds;
(d) all fees and charges of transfer, shareholder servicing,
shareholder record keeping and dividend disbursing agents and all
other expenses relating to the issuance and redemption of shares
of the Trust and the maintenance and servicing of shareholder
accounts;
(e) all charges for equipment or services used for obtaining
price quotations or for communication among the Administrator,
any sub-adviser appointed by the Trust, the Trust, Keyport or any
Participating Insurance Company, the custodian or any sub-
custodian, transfer agent or any other agent selected by the
Trust;
(f) all expenses incurred in periodic calculations of the
net asset value of the shares of the Funds;
(g) all charges for bookkeeping, accounting and tax
information services provided to the Trust by the custodian or
any subcustodian;
(h) all charges for services of the Trust's independent
auditors;
(i) all charges and expenses of outside legal counsel for
the Trust and for the Trustees of the Trust in connection with
legal matters relating to the Trust or the Funds;
(j) all compensation of the Trustees of the Trust other than
those Trustees who are interested persons of the Trust including,
without limitation, Trustees who are interested persons of LFC,
the Administrator, Keyport or any Participating Insurance
Company, or the principal underwriter of the Trust, and all
expenses (including expenses incident to Trustees' meetings),
incurred in connection with their services to the Trust;
(k) all expenses of preparation, printing and mailing of
notices and proxy solicitation material and of reports and other
communications to shareholders and beneficial owners of the Funds
and all other expenses (including proxy solicitation expenses)
incidental to meetings of the shareholders of the Funds:
(l) all expenses of preparation (including type setting) and
printing of annual or more frequent revisions of the Trust's
prospectuses and statements of additional information and
supplements thereto, of supplying each then-existing holder or
beneficial owner of shares of the Funds or purchaser thereof with
a copy of such revised prospectus or supplements, and of
supplying copies of such statements of additional information to
persons requesting the same;
(m) all expenses, if any, related to preparing, printing and
engraving and transmitting certificates representing shares of
the Trust;
(n) all expenses of bond and insurance coverage required by
law or deemed advisable by the Board of Trustees;
(o) all brokers' commissions and other normal charges
incident to the purchase and sale of portfolio securities;
(p) costs, including interest expense, of borrowing money;
(q) all taxes and corporate fees payable to federal, state
or other governmental agencies, domestic or foreign, and all
costs and expenses incident to the maintenance of the Trust's
legal existence;
(r) all expenses of registering and maintaining the
registration of the Trust under the Investment Company Act and
the shares of the Trust under the Securities Act of 1933, and all
expenses, if any, of qualifying and maintaining the qualification
of the shares of the Trust for sale under securities laws of
various states or other jurisdictions and of registration and
qualification of the Trust under all other laws applicable to the
Trust or its business activities;
(s) all fees, dues, and other expenses incurred by the Trust
in connection with its membership in any trade association or
other investment organization; and
(t) all miscellaneous business expenses.
The Trust or one or more of the Funds, as appropriate, shall
also bear all extraordinary, non-recurring expenses as may arise,
including but not limited to expenses incurred in connection with
litigation, proceedings and claims and expenses incurred in
connection with any obligation of the Trust or the Funds to
indemnify any person.
Expenses which are directly charged to or attributable to
any particular Fund shall be borne by that Fund and expenses
which are not solely attributable to any one Fund shall be
allocated among the Funds on a basis that the Trustees of the
Trust deem fair and equitable.
5. ADMINISTRATION FEE. For the services to be rendered by
the Administrator hereunder, the Trust, for the benefit of each
Fund, shall pay the Administrator out of the assets of such Fund
an annual fee in the amount described in Schedule B attached
hereto and made a part hereof.
6. NON-EXCLUSIVITY. The services of the Administrator to
the Trust hereunder are not to be deemed exclusive and the
Administrator shall be free to render similar services to others.
7. STANDARD OF CARE. Neither the Administrator, nor any of
its directors, officers or stockholders, agents or employees
shall be liable or responsible to the Trust or the Funds or their
shareholders (or the beneficial owners of their shares) for any
error of judgment, mistake of law or any loss arising out of any
act or omission in the performance by the Administrator of its
duties under this Agreement, except for liability resulting from
willful misfeasance, bad faith or gross negligence on the
Administrator's part or from reckless disregard by the
Administrator of its obligations and duties under this Agreement.
8. AMENDMENT. This Agreement may be amended at any time by
a written agreement executed by both parties hereto, provided
that with respect to amendments of substance such execution on
behalf of the Trust shall have been approved by the vote of a
majority of those Trustees who are not interested persons of the
Trust, the Administrator, the Investment Adviser, Keyport or a
Participating Insurance Company.
9. TERM AND TERMINATION. This Agreement shall begin on the
date first written above, and may be terminated at any time,
without payment of any penalty, by the Board of Trustees of the
Trust, or by the vote of a majority of the outstanding voting
securities of the Trust, upon sixty (60) days' written notice to
the Administrator. This Agreement may be terminated by the
Administrator at any time upon sixty (60) days' written notice to
the Trust.
10. NON-LIABILITY OF TRUSTEES AND SHAREHOLDERS. As provided
in the Declaration of Trust of the Trust, a copy of which is on
file with the Secretary of State of The Commonwealth of
Massachusetts, any obligation of the Trust or the Funds hereunder
shall be binding only upon the assets and property of the Trust
or the applicable Funds, as the case may be, and shall not be
binding upon any Trustee, officer, employee, agent or shareholder
(or beneficial owner of shares) of the Trust, including, without
limitation, the officer of the Trust executing this Agreement on
its behalf. Neither the authorization of any action by the
Trustees or shareholders (or beneficial owners of shares) of the
Trust nor the execution of this Agreement on behalf of the Trust
shall impose any liability upon any Trustee or any shareholder
(or beneficial owner of shares).
11. HEADINGS. Headings are placed herein for convenience
of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this
Agreement.
12. INTERPRETATION; GOVERNING LAW. This Agreement shall be
interpreted under, and the performance of the Administrator under
this Agreement shall be consistent with, the provisions of the
Agreement and Declaration of Trust and the By-Laws of the Trust,
each as in effect from time to time, the terms of the Investment
Company Act, other applicable laws and regulations thereunder
(including any amendments hereafter adopted), the Internal
Revenue Code of 1986, as amended, and regulations thereunder, and
the Trust's prospectus and statement of additional information,
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 conflicts or choice of laws rule or
provision 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.
13. SEVERABILITY. If any provision of this Agreement shall
be held or made invalid by a court decision, a statute, a rule,
or otherwise, the remainder of this Agreement shall not be
affected thereby.
14. EFFECTIVE DATE. This Administration Agreement shall
become effective as of its date.
15. JOINDER AND REMOVAL OF FUNDS. In the event that the
Trust creates additional series funds, the Trust and the
Administrator may jointly amend Schedules A and B hereto with
respect to such new series fund, in which case such new series
fund shall thereupon be deemed to be a "Fund" for all purposes of
this Agreement. In the event that any Fund ceases to exist as a
separate series fund of the Trust, whether as a result of merger,
substitution or otherwise, from and after such event, such Fund
shall no longer be subject to this Agreement, and the Trust and
the Administrator may, if they desire, jointly amend Schedule A
hereto to reflect such event.
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 as of the date first above written.
STEINROE VARIABLE INVESTMENT TRUST
by ______________________________
Name:
Title:
STEIN ROE & FARNHAM INCORPORATED
by ______________________________
Name:
Title:
<PAGE>
Schedule A
Administration Agreement
Funds
as of January 3, 1995
Capital Appreciation Fund
Managed Growth Stock Fund
Strategic Managed Assets Fund
Managed Assets Fund
Managed Income Fund
Mortgage Securities Income Fund
Cash Income Fund
<PAGE>
Schedule B
Administration Agreement
Fee Schedule
The annual administration fee referred to in paragraph 5 of
this Agreement for each Fund shall be 0.15% of the net asset
value of such Fund. The applicable 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 for such Fund 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 such product by the net asset value of such
Fund as determined in accordance with the Fund'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.
<PAGE>
STEINROE VARIABLE INVESTMENT TRUST
Joinder And Release Agreement
With Respect To Transfer Agency Agreement
AGREEMENT, made as of January 3, 1995, among STEINROE
VARIABLE INVESTMENT TRUST, a business trust organized under the
laws of The Commonwealth of Massachusetts (the "Trust"), LIBERTY
INVESTMENT SERVICES, INC., a Massachusetts corporation ("LIS"),
and STEINROE SERVICES, INC., a Massachusetts corporation ("SSI").
1. Reference is made to the Transfer Agency Agreement dated
December 8, 1988 between the Trust and LIS (as amended and in
effect on the date hereof, the "Transfer Agency Agreement"). A
complete and correct composite copy of the Transfer Agency
Agreement is attached hereto as Annex A.
2. Each of the parties hereby agrees that, from and after
the date hereof, (i) SSI shall become a party to the Transfer
Agency Agreement in place and stead of LIS, and shall thereupon
become the "Transfer Agent" for all purposes thereof, and (ii)
LIS shall be released from its obligations as Transfer Agent
under the Transfer Agency Agreement for all periods following the
effectiveness of this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have executed and delivered this Agreement
as of the date first written above.
STEINROE VARIABLE INVESTMENT TRUST
by RICHARD R. CHRISTENSEN
Name:
Title:
STEINROE SERVICES, INC.
by JILAINE HUMMEL BAUER
Name:
Title: Vice President
LIBERTY INVESTMENT SERVICES, INC.
by ERNST E. DUNBAR
Name:
Title:
<PAGE>
ANNEX A
COMPOSITE COPY OF TRANSFER AGENCY AGREEMENT
<PAGE>
STEINROE VARIABLE INVESTMENT TRUST
TRANSFER AGENCY AGREEMENT
TRANSFER AGENCY AGREEMENT dated December 9, 1988 between
STEINROE VARIABLE INVESTMENT TRUST, a business trust organized
under the laws of the Commonwealth of Massachusetts (the
"Trust"), and LIBERTY INVESTMENT SERVICES, INC., a corporation
organized under the laws of the Commonwealth of Massachusetts
(the "Transfer Agent").
WHEREAS, the Trust has been organized as an open-end
management investment company registered as such under the
Investment Company Act of 1940 ("Investment Company Act") and has
authorized the issuance of shares of beneficial interest in the
thirteen separate series listed on Schedule A attached hereto
(such series being hereinafter collectively referred to as the
"Funds"), each Fund representing interests in a separate
portfolio of securities and other assets, which shares are to be
issued and sold to and held by various separate accounts of
Keystone Provident Life Insurance Company ("Keystone") or
separate accounts of other insurance companies that are
affiliated or are not affiliated with Keystone ("Participating
Insurance Company") pursuant to a Participation Agreement among
the Trust, its principal underwriter and the Participating
Insurance Company ("Participation Agreement);
WHEREAS, the Trust desires the Transfer Agent to Act as
transfer and dividend disbursing agent for the shares of the
Funds in the manner and on the terms and conditions hereinafter
set forth (it being understood that Liberty Investment Services,
Inc. will also act as administrator of the Trust pursuant to a
separate agreement).
NOW THEREFORE, the Trust and the Transfer Agent agree as
follows:
1. Employment of the Transfer Agent. The Trust hereby
appoints the Transfer Agent as the transfer agent and the
dividend disbursing agent for the shares of the Funds for the
period and on the terms hereinafter set forth. The Transfer
Agent hereby accepts such appointment and agrees during such
period to render the services and to assume the obligations
herein set forth.
2. Representations and Agreements of the Trust. The Trust
represents that the number of authorized shares of each Fund is
unlimited, and agrees to furnish to the Transfer Agent such
certificates and documents as the Transfer Agent may reasonably
request in connection the performance of its duties hereunder.
The Trust will be responsible for compliance with the Investment
Company Act, the Securities Act of 1933 and all other applicable
federal and state laws in connection with the offering, issuance
and sale and the redemption or repurchase of shares of the Funds
and the payment of dividends and distributions thereon, and the
Transfer Agent will have no responsibility, liability or
obligation thereunder.
3. Services to be provided. The Transfer Agent will
perform the services set forth on Schedule B hereto. It is
understood that the shares of the Funds will be held of record
only by separate accounts ("Separate Accounts") of Keystone or
other Participating Insurance Companies for the benefit of the
holders of variable annuity contracts ("VA contracts") and
variable life insurance policies ("VLI policies") offered and
sold by the Separate Accounts, and that the Transfer Agent's
obligations, duties and responsibilities hereunder shall relate
only to the record Fund shareholder accounts of the Separate
Accounts, and not to the accounts of the holders of the VA
contracts and VLI policies.
The Transfer Agent shall maintain all records relating to
the accounts of record holders of the Funds which the Trust is
required to maintain pursuant to Rule 31a-1 under the Investment
Company Act and shall preserve such records for the periods
prescribed by Rule 31a-2 thereunder. All such records are and
shall remain the property and under the control of the Trust and
shall upon request be made available during reasonable business
hours to the Trust's Board of Trustees or auditors at the
Transfer Agent's offices.
4. Standard of Care. The Transfer Agent will at all times
act in good faith in the performance of its duties and
obligations hereunder, but assumes no responsibility and shall
not be liable for loss or damage unless caused by the negligence,
bad faith or willful or wanton misconduct of the Transfer Agent
or its employees. The Transfer Agent shall be entitled to act,
and shall have no responsibility or liability for actions taken
without negligence or willful or wanton misconduct, upon any
instruction believed by it to have been authorized by the Trust
or any Fund. The Transfer Agent shall in no event be liable for
consequential damages, lost profits or other special damages,
even if informed of the possibility of such damage or loss.
5. Uncontrollable Events. The Transfer Agent shall not be
liable for damage, delays or errors occurring by reason of
circumstances beyond its control, including but not limited to
acts of civil or military authority, national emergencies, fires,
flood or catastrophe, acts of God, insurrection, war, riots or
failure of transportation, communication or power supply.
However, the Transfer Agent shall use reasonable care to minimize
the likelihood of damage, delays and errors resulting from an
uncontrollable event, and should such damage, delays or errors
occur, shall use its best efforts to mitigate the effects of such
occurrence.
6. Indemnification. The Trust shall indemnify and hold the
Transfer Agent, its employees and agents harmless against any
losses, claims, damages, judgments, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from
action taken by the Transfer Agent in good faith with due care
and without negligence pursuant hereto or in accordance with
instructions believed by it to have been authorized by the Trust
or any Fund.
7. Fees and Charges. For services rendered by the Transfer
Agent pursuant hereto, the Trust for the benefit of the Funds,
shall pay the Transfer Agent a fee in the amount shown in
Schedule C hereto.
8. Term. This Agreement shall begin on the date first
written above and shall continue until terminated by either party
hereto upon not less than 120 days' prior written notice to the
other party.
9. Non-Liability of Trustees and Shareholders. As provided
in the Declaration of Trust of the Trust, a copy of which is on
file with the Secretary of the Commonwealth of Massachusetts, any
obligation of the Trust or the Funds hereunder shall be binding
only upon the assets and property of the Trust or the Funds, as
the case may be, and shall not be binding upon any Trustee,
officer, employee, agent or shareholder (or beneficial owner of
shares) of the Trust, including without limitation, the officer
of the Trust executing this Agreement on its behalf. Neither the
authorization of any action by the Trustees or shareholders (or
beneficial owners of shares) of the Trust shall impose any
liability upon any Trustee or any shareholder (or beneficial
owner of shares).
10. Interpretation; Governing Law. The provisions of this
Agreement shall be construed and interpreted in accordance with
the laws of Massachusetts, without giving effect to the conflict
of laws provisions thereof.
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.
STEINROE VARIABLE INVESTMENT TRUST
By ERNST E. DUNBAR
Treasurer
LIBERTY INVESTMENT SERVICES, INC.
By RICHARD R. CHRISTENSEN
President
<PAGE>
Schedule A
----------
Transfer Agency Agreement
Cash Income Fund
Mortgage Securities Income Fund
Managed Assets Fund
Managed Growth Stock Fund
Capital Appreciation Fund
Strategic Managed Assets Fund
Managed Income Fund
<PAGE>
Schedule B
Transfer Agency Agreement
-------------------------
The services to be performed by the Transfer Agent with
respect to the shares of each Fund pursuant to paragraph 2 are as
follows:
1. Establishing and maintaining shareholder accounts as
instructed and reporting thereon.
2. Processing the issuance, transfer and redemption of
shares in certificate form, and recording and
controlling shares outstanding in certificate and non-
certificate form. Acting as the designee of the Trust
to receive orders for the purchase of shares of the
Funds from the Participating Insurance Company pursuant
to Section 1.1 of the Participation Agreement.
3. Reporting the number of outstanding Fund shares to the
Trust and the Trust's custodian on a daily basis.
4. Passing upon the adequacy of documents submitted by or
on behalf of a shareholder to transfer ownership or
redeem shares.
5. Transferring ownership of shares upon the books of the
appropriate Fund.
6. Redeeming shares and authorizing payment of the proceeds
as instructed. Acting as the designee of the Trust to
receive requests for redemption of shares of the Funds
from the Participating Insurance Company pursuant to
Section 1.5 of the Participation Agreement.
7. Preparing and mailing account statements to the
shareholder whenever transaction activity effecting
share balances are posted to a Fund account that is of
the type that should receive such statement.
8. Maintaining and updating a stop transfer file.
9. Balancing outstanding shares of record with the
custodian prior to each distribution and processing the
reinvestment of dividends and distributions as
instructed.
10. Processing exchanges of shares of one Fund for another.
11. Reporting to the Trust and its custodian daily the
capital stock activities and dollar amount of
transactions.
12. Maintaining and safeguarding an inventory of unissued
blank stock certificates, checks and other Trust
records.
13. Providing such assistance as may be required to enable
the Trust and its properly authorized auditors,
examiners and other designated by the Trust to properly
understand and examine all books, records, computer
files, microfilm and other items maintained pursuant to
this Agreement, and to assist as required in such
examination.
14. Maintaining information, performing the necessary
research and producing reports required to comply with
all applicable state escheat or abandoned property laws.
15. Furnishing the Participating Company with notices of
dividends and distributions declared by the Funds.
The transfer agent will produce reports as requested by the
Trust including, but not limited to the following:
Shareholder Account Confirmation As required
Certificates When requested
Proxy When required
1099 Annually
1042-S Annually
Transaction journals Daily
Record date position control Daily
Daily and (monthly) cash proof Daily
Daily (monthly) share proof Daily
Daily master control Daily
Account information reports When requested
(Monthly) Cumulative transaction Monthly
Shareholder master list When requested
Activities statistics Monthly
Distribution journals As required
<PAGE>
Schedule C
----------
Transfer Agency Agreement
The Transfer Agency fee referred to in paragraph 7 of this
Agreement for each Fund shall be in the amount of $625 per month.
The foregoing fee shall be prorated for any month during which
this Agreement is in effect for only a portion of the month.
PARTICIPATION AGREEMENT
AMONG
STEINROE VARIABLE INVESTMENT TRUST,
KEYPORT FINANCIAL SERVICES CORP.,
and
CROWN AMERICA LIFE INSURANCE COMPANY
This Agreement, made and entered into as of this lst day of October,
1993 by and among Crown America Life Insurance Company (the "Company"), on
its own behalf and on behalf of its Separate Accounts, each of which is a
segregated asset account of one the Company, SteinRoe Variable Investment
Trust (the "Trust"), and Keyport Financial Services Corp. ("KFSC").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and
variable annuity contracts (collectively, "Variable Insurance Products") to
be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares (such series being hereinafter referred to individually as
a "Series" or collectively as the "Series"); and
WHEREAS, the Trust relies on an order from the Securities and Exchange
Commission ("SEC"), dated July 1, 1988 (File No. 812-7044), granting life
insurance companies and variable annuity and variable life insurance
separate accounts exemptions from the provisions of Sections 9(a), 13(a),
15(a), and 15(b) of the Investment Company Act of 1940, as amended (the
"1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder to the
extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, Stein Roe & Farnham Incorporated ("SR&F") is duly
registered as an investment adviser under the federal Investment Advisers
Act of 1940 ("Advisers Act") and applicable state securities laws; and
WHEREAS, Liberty Investment Services, Inc. ("LIS") provides certain
administrative services to the Trust and serves as transfer agent to the
Trust; and
WHEREAS, the Company has registered or will register certain
Variable Insurance Products under the 1933 Act; and
WHEREAS, the Company has established duly organized, validly
existing segregated asset accounts (the "Separate Accounts") by resolution
of its Board of Directors; and
WHEREAS, the Company has registered or will register certain Separate
Accounts as unit investment trusts under the 1940 Act; and
WHEREAS, the Company relies on certain provisions of the 1940 and 1933
Acts that exempt certain Separate Accounts and Variable Insurance Products
from the registration requirements of the Acts in connection with the sale
of Variable Insurance Products under certain tax-advantaged retirement
programs, described in Article II., Section 2.12. and as provided for by
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, KFSC is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Trust on behalf
of each Separate Account to fund certain Variable Insurance Products and
KFSC is authorized to sell such shares to unit investment trusts such as
each Separate Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Trust and KFSC agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. KFSC will sell to the Company those shares of the Trust which
each Separate Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Separate Accounts of
purchase payments or for the business day on which transactions under
Variable Insurance Products are effected by the Separate Accounts. For
purposes of this Section 1.1., LIS shall be the designee of the Trust for
receipt of such orders from each Separate Account and receipt by such
designee shall constitute receipt by the Trust. "Business Day" shall mean
any day on which the New York Stock Exchange is open for trading and any
other day on which the Trust calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Trust will make its shares available indefinitely for purchase
at the applicable net asset value per share by the Company and their
Separate Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall use reasonable
efforts to calculate such net asset value on each Business Day.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Trustees") may refuse to sell shares of any Series to any person, or
suspend or terminate the offering of shares of any Series if such action is
required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees, acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Series.
1.3. The Trust and KFSC agree that shares of the Trust will be sold
only to Participating Insurance Companies and their Separate Accounts. No
shares of any Series will be sold to the general public.
1.4. The Trust and KFSC will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles I., III., V., VII. and Sections 2.5. and
2.12. and 2.13. of Article II. of this Agreement is in effect to govern such
sales.
1.5. The Trust will redeem for cash, at the Company's request, any
full or fractional shares of the Trust held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Separate Accounts of redemption requests or for the Business Day on
which transactions under Variable Insurance Products are effected by the
Separate Accounts. For purposes of this Section 1.5., LIS shall be
the designee of the Trust for receipt of requests for redemption for each
Separate Account.
Subject to the applicable rules and regulations, if any, of the SEC,
the Trust may pay the redemption price for shares of any Series in whole or
in part by a distribution in kind of securities from the portfolio of the
Trust allocated to such Series in lieu of money, valuing such securities at
their value employed for determining net asset value governing such
redemption price, and selecting such securities in a manner the Trustees may
determine in good faith to be fair and equitable.
1.6. The Trust may suspend the redemption of any full or fractional
shares of the Trust (1) for any period (a) during which the New York Stock
Exchange is closed (other than customary weekend and holiday closings) or
(b) during which trading on the New York Stock Exchange is restricted; (2)
for any period during which an emergency exists as a result of which (a)
disposal by the Trust of securities owned by it is not reasonably
practicable or (b) it is not reasonably practicable for the Trust fairly to
determine the value of its net assets; or (3) for such other periods as the
SEC may by order permit for the protection of shareholders of the Trust.
1.7. The Company will purchase and redeem the shares of each Series
offered by the then current prospectus of the Trust and in accordance with
the provisions of such prospectus and statement of additional information
(the "SAI") (collectively referred to as "Prospectus," unless otherwise
provided). The Company agrees that all net amounts available under the
Variable Insurance Products with the form number(s) which are listed on
Schedule A attached hereto and incorporated herein by this reference, as
such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto (the "Contracts"), shall be invested in
the Trust, in such other trusts advised by SR&F as may be mutually
agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Trust if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of each of the Series
of the Trust; or (b) the Company gives the Trust and KFSC forty-five (45) days
written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts; or (c) such other investment
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so informs the Trust and KFSC prior to their
signing this Agreement; or (d) the Trust or KFSC consents to the use of such
other investment company.
1.8. The Company shall pay for Trust shares on the next Business Day
after an order to purchase Trust shares is made in accordance with the
provisions of Section 1.1. hereof. Payment shall be in federal funds
transmitted by wire, or may otherwise be provided by separate agreement.
1.9. Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to either the Company or the
Separate Accounts. Shares ordered from the Trust will be recorded in an
appropriate title for each Separate Account or the appropriate subaccount of
each Separate Account.
1.10. The Trust, through its designee LIS, shall furnish same day
notice (by wire or telephone, followed by written confirmation) to the
Company of any income dividends or capital gain distributions payable on
the shares of any Series. The Company hereby elects to receive all such
income, dividends and capital gain distributions as are payable on the
shares of each Series in additional shares of that Series. The Company
reserves the right to revoke this election and to receive all such income,
dividends and capital gain distributions in cash. The Trust shall notify
the Company through its designee, LIS, of the number of shares so issued
as payment of such income, dividends and distributions.
1.11. The Trust shall make the net asset value per share for each
Series available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use
its best efforts to make such net asset value per share available by 7 p.m.,
Boston time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act to the extent required by the 1933 Act;
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws and that the sale of the
Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that
it is an insurance company duly organized and in good standing under
applicable law and that prior to any issuance or sale of any Contract it
has legally and validly established each Separate Account as a segregated
asset account under the applicable state insurance laws and have registered
or, prior to any issuance or sale of the Contracts, will register each
Separate Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for
the Contracts, to the extent required by the 1940 Act.
2.2. The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act to the extent
required by the 1933 Act, duly authorized for issuance and sold in
compliance with the laws of The Commonwealth of Massachusetts and all
applicable federal and any state securities laws and that the Trust is and
shall remain registered under the 1940 Act to the extent required by the
1940 Act. The Trust shall amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as required in order
to effect the continuous offering of its shares. The Trust shall register
and qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust or KFSC.
2.3. The Trust represents that it intends to qualify as a Regulated
Investment Company under Subchapter M of the Code and that it will make
every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased
to so qualify or that it might not so qualify in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment, annuity or life insurance contracts under applicable
provisions of the Code and that they will make every effort to maintain such
treatment and that they will notify the Trust and KFSC immediately upon
having a reasonable basis for believing that the Contracts have ceased to be
so treated or that they might not be so treated in the future.
2.5. The Trust currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future consistent with
applicable law. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Trust undertakes to have its Trustees,
a majority of whom are not interested persons of the Trust, formulate and
approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states except that the Trust represents that it is currently in compliance
and shall at all times remain in compliance with the applicable insurance
laws of the domiciliary states of the Participating Insurance Companies to
the extent that the Participating Insurance Company advises the Trust, in
writing, of such laws or any changes in such laws.
2.7. KFSC represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the SEC. KFSC further
represents that it will sell and distribute the Trust shares in accordance
with the laws of The Commonwealth of Massachusetts and all applicable state
and federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 1940 Act.
2.8. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material aspects with the 1940 Act.
2.9. The Trust represents and warrants that SR&F is and shall
remain duly registered as an investment adviser in all material aspects
under all applicable federal and state securities laws and that SR&F
shall perform its obligations for the Trust in compliance in all material
respects with the applicable laws of The Commonwealth of Massachusetts and
any applicable state and federal securities laws.
2.10. The Trust represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities
having access to securities or funds of the Trust are and shall continue to
be at all times covered by a joint fidelity bond in an amount not less than
three million seven hundred fifty thousand dollars ($3,750,000) with no
deductible amount. The aforesaid bond shall include coverage for larceny
and embezzlement and shall be issued by a reputable fidelity insurance
company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
having access to securities or funds of the Trust are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Trust, in an amount not less than ten million dollars
($10,000,000) with no deductible amount. The aforesaid bond shall include
coverage for larceny and embezzlement and shall be issued by a reputable
fidelity insurance company.
2.12. The Company represents and warrants that it will not, without
the prior written consent of KFSC, purchase Trust shares with Separate
Account assets derived from the sale of Contracts to individuals or entities
which qualify under current or future state or federal law for any type of
tax advantage (whether by a reduction or deferral of, deduction or exemption
from, or credit against income or otherwise). Examples of such types of
funds under current law include: any tax-advantaged retirement program,
whether maintained by an individual, employer, employee association or
otherwise (including, without limitation, retirement programs which qualify
under Sections 401(a), 401(k), 403(a), 403(b), 408 and 457 of the Code), and
any retirement programs maintained for employees of the Government of the
United States or by the government of any state or political subdivision
thereof, or by any agency or instrumentality of any of the foregoing.
2.13. The Company represents and warrants that it will not transfer
or otherwise convey shares of the Trust, without the prior written consent
of KFSC.
ARTICLE III. Prospectus and Proxy Statements; Voting
3.1. KFSC shall provide the Company with as many copies of the Trust's
current prospectus, excluding the SAI, as the Company may reasonably request
in connection with delivery of the prospectus, excluding the SAI, to
shareholders and purchasers of Variable Insurance Products. If
requested by the Company in lieu thereof, the Trust shall provide such
documentation (including a final copy of the new prospectus, excluding the
SAI, as set in type at the Trust's expense) and other assistance as is
reasonably necessary in order for the Company once each year (or more
frequently if the prospectus for the Trust is amended) to have the
prospectus for the Contracts and the Trust's prospectus, excluding the SAI,
printed together in one document (such printing to be at the Company's
expense).
3.2. The Trust's prospectus shall state that the SAI for the Trust is
available from KFSC and the Trust, at its expense, shall provide final copy
of such SAI to KFSC for duplication and provision to any prospective owner
who requests the SAI and to any owner of a Variable Insurance Product
("Owners").
3.3. The Trust, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require for
distribution to Owners.
3.4. If and to the extent required by law, the Company and, so long
as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for Owners, the Trust shall:
(i) solicit voting instructions from Owners;
(ii) vote the Trust shares in accordance with instructions received
from Owners; and
(iii) vote Trust shares for which no instructions have been received in
the same proportion as Trust shares of such Series for which
instructions have been received;
The Company reserves the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their Separate Accounts participating in the Trust calculates voting
privileges in a manner consistent with the standards to be provided in
writing to the Participating Insurance Companies.
3.5. The Trust will comply with all provisions of the 1940 Act
requiring voting by shareholders. The Trust reserves the right to take all
actions, including but not limited to, the dissolution, merger, and sale of
all assets of the Trust upon the sole authorization of its Trustees, to the
extent permitted by the laws of The Commonwealth of Massachusetts and the
1940 Act.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to
the Trust or its designee, each piece of sales literature or other
promotional material in which the Trust or SR&F, or any sub-adviser,
or KFSC is named, at least fifteen (15) days prior to its use. No
such material shall be used if the Trust or its designee object to
such use within fifteen (15) days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or Prospectus for
the Trust shares, as such registration statement and Prospectus may be
amended or supplemented from time to time, or in reports or proxy statements
for the Trust, or in sales literature or other promotional material approved
by the Trust or its designee or by KFSC, except with the permission of the
Trust or KFSC or the designee of either.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designees, each piece of sales
literature or other promotional material in which the Company and/or its
Separate Account(s), are named at least fifteen (15) days prior to its use.
No such material shall be used if the Company or its designee object to
such use within fifteen (15) days after receipt of such material.
4.4. The Trust and KFSC shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, any Separate Account, or the Variable Insurance Products other
than the information or representations contained in a registration
statement or prospectus for such Variable Insurance Products, as such
registration statement and prospectus may be amended or supplemented from
time to time, or in published reports for such Separate Account which are in
the public domain or approved by the Company for distribution to Owners, or
in sales literature or other promotional material approved by the Company
or its designee, except with the permission of the Company.
4.5. The Trust will provide to the Company at least one complete copy
of all registration statements, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications
for exemption, requests for no-action letters, and all amendments to any of
the above, that relate to the Trust or its shares, contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
4.6. The Company will provide to the Trust at least one complete copy
of all registration statements, prospectuses, SAIs, reports, solicitations
for voting instructions, sales literature and other promotional materials,
applications for exemption, requests for no-action letters, and all
amendments to any of the above, that relate to the Variable Insurance
Products or any Separate Account, contemporaneously with the filing of such
document with the SEC.
4.7. For purposes of this Article IV., the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public
media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
and registration statements, prospectuses, SAIs, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Trust and KFSC shall pay no fee or other compensation to the
Company under this Agreement, except that if the Trust or any Series
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then KFSC may make payments to the Company or to the underwriter
for the Variable Insurance Products if and in amounts agreed to by KFSC in
writing and such payments will be made out of existing fees payable to KFSC
by the Trust for this purpose. No such payments shall be made directly by
the Trust. Currently, no such plan pursuant to Rule 12b-1 or payments are
contemplated.
5.2. All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all
its shares are registered and authorized for issuance in accordance with
applicable federal law and, if and to the extent deemed advisable by the
Trust, in accordance with applicable state laws prior to their sale. The
Trust shall bear the expenses of registration and qualification of the
Trust's shares, preparation and filing of the Trust's prospectus and
registration statement, proxy materials and reports, setting the prospectus
in type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by
any federal or state law, and all taxes on the issuance or transfer of the
Trust's shares.
5.3. The Company shall bear the expenses of distributing the Trust's
proxy materials and reports to Owners.
ARTICLE VI. Diversification
6.1. The Trust will at all times invest money from the Variable
Insurance Products in such a manner as to ensure that, insofar as such
investment is required to assure such treatment, the Variable Insurance
Products will be treated as variable contracts under the Code and the
regulations issued thereunder. Without limiting the scope of the foregoing,
the Trust will at all times comply with Section 817(h) of the Code and the
Treasury Regulations thereunder relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and any
amendments or other modifications to such Section or Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the Owners of
separate accounts of the Participating Insurance Companies investing in the
Trust. A material irreconcilable conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Series
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance policy owners; or (f) a
decision by an insurer to disregard the voting instructions of Owners. The
Trustees shall promptly inform the Company if they determine that a
material irreconcilable conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts
(including the occurrence of any event specified in paragraph 7.1. which may
give rise to such a conflict) of which they are aware to the Trustees. The
Company will assist the Trustees in carrying out their responsibilities
under the Shared Funding Exemptive Order, by providing the Trustees with all
information reasonably necessary for the Trustees to consider any issues
raised. This includes, but is not limited to, an obligation by the
Company to inform the Trustees whenever Owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Trustees, or a majority
of its disinterested Trustees, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at
their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Trustees), take whatever steps are necessary
to remedy or eliminate the material irreconcilable conflict, up to and
including: (1) withdrawing the assets allocable to some or all of the
separate accounts of Participating Insurance Companies from the Trust or any
Series and reinvesting such assets in a different investment medium,
including (but not limited to) another Series of the Trust, or submitting
the question whether such segregation should be implemented to a vote of all
affected Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected Owners the option of making such a change; (2), establishing a new
registered management investment company or managed separate account; and
(3) obtaining SEC approval.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Separate
Account's investment in the Trust and terminate this Agreement; provided,
however that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Any such withdrawal and termination
must take place within six (6) months after the Trust gives written notice that
this provision is being implemented, and until the end of that six (6) month
period KFSC and Trust shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Trust.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Separate Account's investment in the Trust and terminate this
Agreement within six (6) months after the Trustees inform the Company in
writing that they have determined that such decision has created a material
irreconcilable conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of the foregoing six (6) month period, KFSC and Trust
shall continue to accept and implement orders the Company for the purchase (and
redemption) of shares of the Trust.
7.6. For purposes of Sections 7.3. through 7.6. of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in no
event will the Trust be required to establish a new funding medium for the
Variable Insurance Products. The Company shall not be required by Section 7.3.
to establish a new funding medium for the Variable Insurance Products if an
offer to do so has been declined by vote of a majority of Owners materially
adversely affected by the material irreconcilable conflict. In the event that
the Trustees determine that any proposed action does not adequately remedy any
material irreconcilable conflict, then the Company will withdraw the affected
Separate Account's investment in the Trust and terminate this Agreement
within six (6) months after the Trustees inform the Company in writing of the
foregoing determination, provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested
Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) or terms
and conditions materially different from those contained in the Shared
Funding Exemptive Order, then (a) the Trust and/or the Company, as
appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4., 3.5., 7.1., 7.2., 7.3., 7.4.,
and 7.5. of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained
in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1.(a). The Company will indemnify and hold harmless the Trust and
each of its Trustees and Officers and each person, if any, who controls the
Trust within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1.) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Company) or litigation (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Trust's shares or
the Variable Insurance Products and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement or prospectus for the Variable Insurance
Products or contained in the sales literature for the Variable
Insurance Products (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and
in conformity with information furnished in writing to the Company
by or on behalf of the Trust for use in the registration statement
or prospectus for the Variable Insurance Products or in the Variable
Insurance Products or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Variable Insurance Products or Trust shares; or
(ii) arise out of or are based upon statements or representations
(other than statements or representations contained in the
registration statement, Prospectus or sales literature of the
Trust not supplied by the Company, or persons under their control) or
wrongful conduct of one or both of the Company or persons under their
control, with respect to the sale or distribution of the Variable
Insurance Products or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, Prospectus,
or sales literature of the Trust or any amendment thereof or
supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading if such a statement
or omission was made in reliance upon information furnished in
writing to the Trust by or on behalf of the Company; or
(iv) arise out of or result from any failure by the Company to provide the
services and furnish the materials contemplated by this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company.
8.1.(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Trust, whichever is applicable.
8.1.(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Company of any such claim shall not relieve the Company from any
liability which they may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified
Parties, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Company to such party of
the election of the Company to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained
by it, and the Company will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
8.1.(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Trust shares or the Contracts or the
operation of the Trust.
8.2. Indemnification By the Trust
8.2.(a). The Trust will indemnify and hold harmless the Company, and
each of their directors and officers and each person, if any, who controls
the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2.)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Trust) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, regulation at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements result from the gross negligence, bad
faith or willful misconduct of the Trustees or any member thereof, are
related to the operations of the Trust and:
(i) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VI. of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Trust;
as limited by and in accordance with the provisions of Sections 8.2.(b). and
8.2.(c). hereof.
8.2.(b). The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise by subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Trust, KFSC or each
Separate Account, whichever is applicable.
8.2.(c). The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have served upon such
Indemnified Party (or after such Indemnified party shall have received
notice of such service on any designated agent), but failure to notify the
Trust of any such claim shall not relieve the Trust from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Trust will be
entitled to participate, at its own expense, in the defense thereof. The
Trust also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Trust
to such party of the Trust's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Trustees will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.2.(d). The Company and KFSC agree promptly to notify the Trust of
the commencement of any litigation or proceedings against them or any of
their respective officers or directors in connection with this Agreement,
the issuance or sale of the Contracts, with respect to the operation of
any Separate Account, or the sale or acquisition of shares of the Trust.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts; provided, however, that if such laws or any of the provisions
of this Agreement conflict with applicable provisions of the 1940 Act, the
latter shall control.
9.2. This Agreement shall be made subject to the provisions of the
1933, 1934, and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant (including, but not limited to, the Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one (1) year advance written notice
to the other parties; provided, however such notice shall not be given
earlier than one (1) year following the date of this Agreement; or
(b) at the option the Company to the extent that shares of Series are
not reasonably available to meet the requirements of the Variable Insurance
Products as determined by Company; provided however, that such termination
shall apply only to the Series not reasonably available. Prompt notice of
the election to terminate for such cause shall be furnished by the Company;
or
(c) at the option of the Trust in the event that formal administrative
proceedings are instituted against the Company or KFSC by the NASD, the SEC,
the Insurance Commissioner of the domiciliary state of the Company or any other
regulatory body regarding the duties of the Company under this Agreement or
related to the sale of the Variable Insurance Products, with respect to the
operation of a Separate Account, or the purchase of the Trust shares; provided,
however, that the Trust determines in its sole judgement exercised in good
faith, that any such administrative proceedings will have a material adverse
effect upon the ability of the Company to perform its obligations under this
Agreement or of KFSC to perform its obligations under its underwriting
agreement with the Trust; or
(d) at the option of the Company in the event that formal administrative
proceedings are instituted against the Trust by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body; provided,
however, that the Company determines in its sole judgement exercised in good
faith, that any such administrative proceedings will have a material adverse
effect upon the ability of the Trust to perform its obligations under this
Agreement; or
(e) with respect to a Separate Account, upon requisite authority to
substitute the shares of another investment company for shares of the
corresponding Series of the Trust in accordance with the terms of the
Variable Insurance Products for which those Series shares had been selected
to serve as the underlying investment media. The Company will give thirty
(30) days' prior written notice to the Trust of the date of any proposed
action to replace the Trust shares; or
(f) at the option of the Company, in the event any of the Trust's shares
are not registered, issued or sold in accordance with applicable federal and
any state law or such law precludes the use of such shares as the underlying
investment media of the Variable Insurance Products issued or to be issued by
the Company; or
(g) at the option of the Company, if the Trust ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that the
Trust may fail to so qualify; or
(h) at the option of the Company, if the Trust fails to meet the
diversification requirements specified in Article VI. hereof; or
(i) at the option of either the Trust or KFSC, if (1) the Trust or
KFSC, respectively, shall determine, in their sole judgement reasonably
exercised in good faith, that the Company has suffered a material adverse
change in its business or financial condition or is the subject of material
adverse publicity and such material adverse publicity will have a material
adverse impact upon the business and operations of either the Trust or KFSC,
(2) the Trust or KFSC shall notify the Company in writing of such determination
and its intent to terminate this Agreement, and (3) after considering the
actions taken by the Company and any other changes in circumstances since the
giving of such notice, such determination of the Trust or KFSC shall continue
to apply on the sixtieth (60th) day following the giving of such notice, which
sixtieth (60th) day shall be the effective date of termination; or
(j) at the option of the Company, if (1) the Company shall determine, in
its sole judgment reasonably exercised in good faith, that either the Trust or
KFSC has suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and such material
adverse publicity will have a material adverse impact upon the business and
operations of the Company, (2) the Company shall notify the Trust and KFSC in
writing of such determination and its intent to terminate the Agreement, and
(3) after considering the actions taken by the Trust and/or KFSC and any other
changes in circumstances since the giving of such notice, such determination
shall continue to apply on the sixtieth (60th) day following the giving of
such notice, which sixtieth (60th) day shall be the effective date of
termination; or
(k) at the option of either the Trust or KFSC, if the Company gives the
Trust and KFSC the written notice specified in Section 10.3.(a). hereof and at
the time such notice was given there was no notice of termination outstanding
under any other provision of this Agreement; provided, however any termination
under this Section 10.1.(k). shall be effective forty-five (45) days after the
notice specified in 10.3.(a). was given.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1.(a). may be exercised for
any reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate which notice shall set forth the basis for such termination.
Furthermore,
(a) in the event that any termination is based upon the provisions of
Article VII., or the provision of Section 10.1.(a)., 10.1.(i)., 10.1.(j). or
10.1.(k). of this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions;
and
(b) in the event that any termination is based upon the provisions of
Section 10.1.(c). or 10.1.(d). of this Agreement, such prior written notice
shall be given at least ninety (90) days before the effective date of
termination.
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust and KFSC shall at the option of the Company, continue to
make available additional shares of the Trust pursuant to the terms and
conditions of this Agreement, for all Variable Insurance Products in effect on
the effective date of termination of this Agreement (hereinafter referred to as
"Existing Products"). Specifically, without limitation, the Owners of the
Existing Products shall be permitted to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Products. The parties agree
that this Section 10.4. shall not apply to any terminations under Article VII.
and the effect of such Article VII. terminations shall be governed by Article
VII. of this Agreement.
10.5. The Company shall not redeem Trust shares attributable to the
Variable Insurance Products (as opposed to Trust shares attributable to the
Company's assets held in a Separate Account) except (i) as necessary to
implement Owner initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption").
Upon request, the Company will promptly furnish to the Trust and KFSC the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and KFSC) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Variable
Insurance Products, the Company shall not prevent Owners from allocating
payments to a Series that was otherwise available under the Variable
Insurance Products without first giving the Trustee or KFSC ninety (90) days
notice of their intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Trust:
c/o Liberty Investment Services, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Attention: Secretary
If to the Company:
c/o Keyport Life Insurance Company
125 High Street
Oliver Street Tower
Thirteenth Floor
Boston, MA 02110
Attention: General Counsel
If to KFSC:
Keyport Financial Services, Corp.
125 High Street
Boston, Massachusetts 02110
Attention: Secretary
ARTICLE XII. Miscellaneous
12.1. All persons dealing with Trust must look solely to the property
of the Trust for the enforcement of any claims against the Trust hereunder
and otherwise understand that neither the Trustees, officers, agents or
shareholders of the Trust have any personal liability for any obligations
entered into by or on behalf of the Trust.
12.2. Subject to the requirements of legal process and regulatory
authority, each Party hereto shall treat as confidential the names and
addresses of the Owners and all information reasonably identified as
confidential in writing be any other party hereto and, except as permitted
by this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come
into the public domain without the express written consent of the affected
party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be effected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD, the Internal Revenue Service and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or
the transactions contemplated hereby.
12.7. The Trust and KFSC agree that to the extent any advisory or other
fees received by the Trust, KFSC, or SR&F are determined to be unlawful
in appropriate legal or administrative proceedings, the Trust shall
indemnify and reimburse the Company for any out of pocket expenses and
actual damages the Company has incurred as a result of any such
proceeding; provided however that the provision of Section 8.2.(b). of this
and 8.2.(c). shall apply to such indemnification and reimbursement
obligation. Such indemnification and reimbursement obligation shall be in
addition to any other indemnification and reimbursement obligations of the
Trust under this Agreement.
12.8. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligation, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as of
the date specified below.
CROWN AMERICA LIFE INSURANCE COMPANY
By its authorized officer,
By: [SIGNATURE]
Title: Senior Vice President
Date: October 1, 1993
STEINROE VARIABLE INVESTMENT TRUST
By its authorized officer,
By: ERNST E. DUNBAR
Title: Treasurer
Date: October 1, 1993
KEYPORT FINANCIAL SERVICES CORP.
By its authorized officer,
By:
Title: President
Date: October 1, 1993
<PAGE>
Schedule A
1. Variable Life Insurance Policy CAL-2 and any various thereof issued in
particular states.
2. Variable Annuity Contract CAL-3 and any variations thereof issued in
particular states.
<PAGE 1>
PARTICIPATION AGREEMENT
AMONG
STEINROE VARIABLE INVESTMENT TRUST
STEIN ROE & FARNHAM INCORPORATED
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
and
CHARLES SCHWAB & CO., INC.
This Agreement, made and entered into as of this l5th day of April,
1994 by and among TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
(hereinafter "Transamerica"), a California life insurance company, on
its own behalf and on behalf of its Separate Account VA-5 (the
"Account"); STEINROE VARIABLE INVESTMENT TRUST, a business trust
organized under the laws of Massachusetts (hereinafter the "Fund");
STEIN ROE & FARNHAM INCORPORATED hereinafter the "Adviser"), a Delaware
corporation; and CHARLES SCHWAB & CO., INC., a California corporation
(hereinafter "Schwab").
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies
and/or variable annuity contracts (collectively, the "Variable Insurance
Products") to be offered by insurance companies which have entered into
participation agreements similar to this Agreement (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each designated a "Portfolio" and representing
the interest in a particular managed portfolio of securities and other
assets; and
<PAGE 2>
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (hereinafter the "SEC"), dated July 1, 1988 (File
No. 812-7044), granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the "1940 Act")
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by
variable annuity and variable life insurance separate accounts of life
insurance companies that may or may not be affiliated with one another
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and shares of the Portfolio(s) are
registered under the Securities Act of 1933, as amended (hereinafter the
"1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, and any
applicable state securities laws; and
WHEREAS, Transamerica has registered or will register certain
variable annuity contracts supported wholly or partially by the Account
(the "Contracts") under the 1933 Act and said Contracts are listed in
Schedule A hereto, as it may be amended form time to time by mutual
written agreement; and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of Transamerica on September 28, 1993, to set aside and invest
assets attributable to the Contracts; and
WHEREAS, Transamerica has registered or will register the Account
as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Transamerica intends to purchase shares in the Portfolio(s)
listed in Schedule B hereto, as it may
<PAGE 3>
be amended from time to time by mutual written agreement (the
"Designated Portfolio(s)"), on behalf of the Account to fund the
aforesaid Contracts, and the Fund is authorized to sell such shares to
unit investment trusts such as the Account at net asset value; and
WHEREAS, Schwab will perform certain services for the Fund and
Adviser in connection with the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Account also intends to purchase shares in other open-
end investment companies or series thereof not affiliated with the Trust
(the "Unaffiliated Funds") on behalf of the Account to fund the
Contracts; and
NOW, THEREFORE, in consideration of their mutual promises,
Transamerica, Schwab, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to Transamerica those shares of the
Designated Portfolio(s) which the Account orders, executing such orders
on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the order for the shares of the Portfolios.
For purposes of this Section 1.1, Transamerica shall be the designee of
the Fund for receipt of such orders and receipt by such designee shall
constitute receipt by the Fund, provided that the Fund receives notice
of the applicable order by 9:30 a.m. Eastern time on the next following
Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading on which the Fund calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Fund agrees to make shares of the Designated Portfolio(s)
available for purchase at the applicable net asset value per share by
Transamerica and the Account on those days on which the Fund calculates
its Designated Portfolio(s)' net asset value pursuant to rules of
<PAGE 4>
the SEC, and the Fund shall calculate such net asset value on each day
which the New York Stock Exchange is open for trading. Notwithstanding
the foregoing, the Board of Trustees of the Fund (hereinafter the
"Board") may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board, acting in good
faith and in light of their fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated Portfolio(s)
to any insurance company or separate account unless an agreement
containing provisions substantially the same as Sections 2.1, 3.6, 3.7,
3.8, and Article VII of this Agreement is in effect to govern such
sales.
1.4. The Fund agrees to redeem for cash, on Transamerica's
request, any full or fractional shares of the Fund held by Transamerica,
executing such requests on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of the request for
redemption. Request for redemption identified by Transamerica, or its
agent, as being in connection with surrenders, annuitizations, or death
benefits under the Contracts, upon prior written notice, may be executed
within seven (7) calendar days after receipt by the Fund or its designee
of the requests for redemption. If permitted by an order of the SEC
under Section 22(e) of the 1940 Act, the Fund shall be permitted to
delay sending redemption proceeds to Transamerica beyond the foregoing
deadlines, provided, however, that the Account receives similar relief
to defer paying proceeds to contract Owners, and further, that the
Account is treated no less favorably than the other shareholders of the
Designated Portfolios. This Section 1.4 may be amended, in writing, by
the parties consistent with the requirements of the 1940 Act and
interpretations thereof. For purposes of this Section 1.4, Transamerica
shall be the designee of the Fund for receipt of requests for redemption
and receipt by such designee shall constitute receipt
<PAGE 5>
by the Fund, provided that the Fund receives notice of the applicable
request for redemption by 9:30 a.m. Eastern time on the next following
Business Day.
1.5 The Parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares may
be sold to other insurance companies (subject to Section 1.3 and Article
VI hereof) and the cash value of the Contracts may be invested in
Unaffiliated Funds.
1.6. Transamerica shall pay for Fund shares by 11:00 a.m. Eastern
time on the next Business Day after an order to purchase Fund shares is
made in accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire and/or by a credit for any
shares redeemed the same day as the purchase.
1.7. The Fund shall pay and transmit the proceeds of redemptions
of Fund shares by 11:00 a.m. Eastern time on the next Business Day after
a redemption order is received in accordance with Section 1.4 hereof.
Payment shall be in federal funds transmitted by wire and/or a credit
for any shares purchased the same day as the redemption.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to Transamerica or
the Account. Shares ordered from the Fund will be recorded in an
appropriate title for the Account or the appropriate sub-account of the
Account.
1.9. The Fund or its designee shall furnish same day notice (by
wire or telephone, followed by written confirmation) to Transamerica of
any income dividends or capital gain distributions payable on the
Designated Portfolio(s)' shares. Transamerica hereby elects to receive
all such income dividends and capital gain distributions as are payable
on the Portfolio shares in additional shares of that Portfolio.
Transamerica reserves the right to revoke this election and to receive
all such income, dividends and capital gain distributions in cash. The
Fund or its designee shall notify Transamerica by the end of the next
following Business Day of the number of shares so issued as payment of
such dividends and distributions.
<PAGE 6>
1.10. The Fund shall make the net asset value per share for each
Designated Portfolio available to Transamerica on a daily basis as soon
as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:00 p.m. Eastern time. The Fund or its designee
shall notify Transamerica by 5:45 p.m. Eastern time in the event that
the Fund cannot meet such 6:00 p.m. deadline. In such event the Fund
shall use its best efforts to make such value available as soon
thereafter as is practicable. If the Fund provides incorrect share net
asset value information, Transamerica shall be entitled to an adjustment
to the number of shares purchased or redeemed to reflect the correct net
asset value per share (and, if and to the extent necessary, Transamerica
shall make adjustments to the number of units credited and/or unit
values for the Contracts for the periods affected). Any error in the
calculation or reporting of net asset value per share, dividend or
capital gains information shall be reported promptly upon discovery to
Transamerica. Any error of a an amount less than $0.01 per share shall
be corrected in the next Business Day's net asset value per share.
ARTICLE II. Representations and Warranties
2.1. Transamerica represents and warrants that the Contracts are
or will be registered under the 1933 Act; that the Contracts will be
issued and sold in compliance in all material respects with all
applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with state insurance suitability
requirements. Transamerica further represents and warrants that it is
an insurance company duly organized and in good standing under
applicable law and that it has legally and validly established the
Account prior to any issuance or sale thereof as a segregated asset
account under applicable law (Section 10506 of the California Insurance
Law) and has registered the Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts.
<PAGE 7>
2.2. The Fund represents and warrants that Designated Portfolio
shares sold pursuant to this Agreement shall be registered under the
1933 Act, duly authorized for issuance and sold in compliance with all
applicable federal securities laws including without limitation the 1933
Act, the 1934 Act, and the 1940 Act and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940
Act from time to time as required in order to effect the continuous
offering of its shares.
2.3. The Fund reserves the right to adopt a plan pursuant to Rule
12b-1 under the 1940 Act and to impose an asset-based or other charge to
finance distribution expenses as permitted by applicable law and
regulation. In any event, the Fund and Adviser agree to comply with
applicable provisions and SEC staff interpretations of the 1940 Act to
assure that the investment advisory or management fees paid to the
Adviser by the Fund are legitimate and not excessive. To the extent
that the Fund decides to finance distribution expenses pursuant to Rule
12b-1, the Fund undertakes to have a Board, a majority of whom are not
interested persons of the Fund, formulate and approve any plan pursuant
to Rule 12b-1 under the 1940 Act to finance distribution expenses.
2.4. The Fund represents and warrants that the investment
policies, fees and expenses of the Designated Portfolio(s) are and shall
at all times remain in compliance with the insurance and other
applicable laws of the State of California and any other applicable
state to the extent required to perform this Agreement. The Fund
further represents and warrants that Designated Portfolio shares will be
sold in compliance with the insurance laws of the State of California
and all applicable state insurance and securities laws. Transamerica
will advise the Fund of any applicable changes in California insurance
law that affect the Designated Portfolios, and the Fund will be deemed
to be in compliance with this Section 2.4 so long as the Fund complies
with such advice of Transamerica. The Fund shall register and qualify
the shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Fund with the
<PAGE 8>
concurrence of Transamerica. Without limiting the generality of the
foregoing, the Fund represents and warrants that it is and shall at all
times remain in compliance with the policies and restrictions enumerated
in Schedule C hereto, except as to those items disclosed to and not
objected to by the Department of Insurance of the State of California.
2.5. The Fund represents and warrants that it is lawfully
organized and validly existing under the laws of the Commonwealth of
Massachusetts and that it does and will comply in all material aspects
with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall
remain duly registered under all applicable federal and state securities
laws and that it shall perform its obligations for the Fund in
compliance in all material respects with the laws of the State of
Delaware and any applicable state and federal securities laws.
2.7. The Fund and the Adviser represent and warrant that all of
their officers, employees, investment advisers, and other individuals or
entities dealing with money and/or securities of the Fund are, and shall
continue to be at all times, covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than
the minimal coverage required by Section 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The
aforesaid bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company.
2.8. Schwab represents and warrants that it has completed,
obtained and performed, in all material respects, all registrations,
filings, approvals, and authorizations, consents and examinations
required by any government or governmental authority as may be necessary
to perform this Agreement. Schwab does and will comply, in all material
respects, with all applicable laws, rules and regulations in the
performance of its obligations under this Agreement.
2.9. The Fund will provide Transamerica with as much advance
notice as is reasonably practicable of any material change affecting the
Designated Portfolio(s) (including, but not limited
<PAGE 9>
to, any material change in its registration statement or prospectus
affecting the Designated Portfolio(s) and any proxy solicitation
affecting the Designated Portfolio(s) and consult with Transamerica in
order to implement any such change in an orderly manner, recognizing the
expenses of changes and attempting to minimize such expenses by
implementing them in conjunction with regular annual updates of the
prospectus for the Contracts. The Fund or Adviser agree to share
equitably in expenses incurred by Transamerica as a result of actions
taken by the Fund, consistent with the allocation of expenses contained
in Schedule F.
2.10. The Insurance Company represents, assuming that the Fund
complies with Article VI of this Agreement, that the Contracts are
currently treated as annuity contracts under applicable provisions of
the Internal Revenue Code of 1986 (the "Code"), as amended, and that it
will make every effort to maintain such treatment and that it will
notify the Fund immediately upon having a reasonably basis for believing
that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.11. Transamerica represents and warrants that it will not
purchase Fund shares with assets derived from tax-qualified retirement
plans except indirectly, through Contracts purchased in connection with
such plans.
2.12. Transamerica represents and warrants that it will not
transfer or otherwise convey shares of any Designated Portfolio, without
the prior written consent of the Fund, which consent shall not be
unreasonably withheld.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Fund or the Adviser shall provide
Transamerica and Schwab with as many copies of the Fund's current
prospectus for the Designated Portfolio(s) as Transamerica and Schwab
may reasonably request for marketing purposes (including distribution to
Contract owners with respect to new sales of a Contract). If requested
by Transamerica in lieu
<PAGE 10>
thereof, the Adviser or Fund shall provide such documentation (including
a final copy of the new prospectus for the Designated Portfolio(s)) and
other assistance as is reasonably necessary in order for Transamerica
once each year (or more frequently if the prospectus for the Designated
Portfolio are amended) to have the prospectus for the Contracts and the
Fund's prospectus for the Designated Portfolio(s) printed together in
one document. The Fund and Adviser agree that the prospectus, and semi-
annual and annual reports for the Designated Portfolio(s) provided
pursuant to this Section 3.1 will described only the Designated
Portfolio(s) and will not name or describe any other portfolios or
series that may be in the Fund unless required by law.
3.2. If applicable state or Federal laws or regulations require
that the Statement of Additional Information ("SAI") for the Fund be
distributed to all Contract purchasers, then the Adviser or the Fund
shall provide Transamerica with the Fund's SAI or documentation thereof
in such quantities and/or with expenses to be borne in accordance with
Schedule F hereof.
3.3. The Fund or the Adviser shall provide Transamerica and Schwab
with as many copies of the Fund's SAI as each of them may reasonably
request. The Fund or the Adviser shall also provide such SAI to any
owner of a Contract or prospective owner who requests such SAI (although
it is anticipated that such requests will be made to Schwab).
3.4. The Fund shall provide Transamerica with copies of its
prospectus, SAI, proxy material, reports to stockholders and other
communications to stockholders for the Designated Portfolio(s) in such
quantity as Transamerica shall reasonably require for distributing to
Contract owners.
3.5. It is understood and agreed that, except with respect to
information regarding Transamerica or Schwab provided in writing by that
party, neither Transamerica nor Schwab are responsible for the content
of the prospectus or SAI for the Designated Portfolio(s). It is also
understood and agreed that, except with respect to information regarding
the Fund, Adviser or
<PAGE 11>
the Designated Portfolio(s) provided in writing by the Fund or the
Adviser, neither the Fund nor Adviser are responsible for the content of
the prospectus or SAI for the Contracts.
3.6. If and to the extent required by law, Transamerica shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Designated Portfolio shares in accordance with
instructions from Contract owners; and
(iii) vote Designated Portfolio shares for which no
instructions have been received in the same proportion
as Designated Portfolio shares for instructions have
been received from Contract owners, so long as and to
the extent that the SEC continues to interpret the 1940
Act to require pass-through voting privileges for
variable contract owners. Transamerica reserves the
right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by
law.
3.7. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts holding shares of a
Designated Portfolio calculates voting privileges in the manner required
by the Shared Funding Exemptive Order. Transamerica's procedures
currently are in compliance with such requirements, as described in
Schedule G. The Fund agrees to promptly notify Transamerica of any
changes of interpretations or amendments of the Shared Funding Exemptive
Order.
3.8. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings (except insofar as the SEC may interpret
Section 16 of the 1940 Act not to require such meetings) or, as the Fund
currently intends, comply with Section 16(c) of the 1940 Act (although
the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's interpretation
of the
<PAGE 12>
requirements of Section 16(a) with respect to periodic elections of
directors or trustees and with whatever rules the Commission may
promulgate with respect thereto. The Fund reserves the right, upon 45
days prior written notice to Transamerica and Schwab, to take all
actions, including but not limited to, the dissolution, merger, and sale
of all assets of the Fund or any Designated Portfolio upon the sole
authorization of the Board, to the extent permitted by the laws of The
Commonwealth of Massachusetts and the 1940 Act.
ARTICLE IV. Sales Material and Information
4.1. Transamerica and Schwab shall furnish, or shall cause to be
furnished, to the Fund or its designee, each piece of sales literature
or other promotional material that Transamerica or Schwab, respectively,
develops or proposes to use and in which the Fund (or a Portfolio
thereof), its investment adviser or one of its sub-advisers or the
underwriter for the Fund shares is named in connection with the
Contracts, at least 10 (ten) Business Days
<PAGE 13>
prior to its use. No such material shall be used if the Fund or its
designee objects to such use within 5 (five) Business Days after receipt
of such material.
4.2. Transamerica and Schwab shall not give any information or
make any representations or statements on behalf of the Fund or
concerning the Fund in connection with the sale of the Contracts other
than the information or representations contained in the registration
statement or prospectus for the Fund shares, as such registration
statement and prospectus may be amended or supplemented from time to
time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its
designee or by the Adviser, except with the permission of the Fund or
the Adviser.
4.3. The Fund or Adviser shall furnish, or shall cause to be
furnished, to Transamerica and Schwab, a copy of each piece of sales
literature or other promotional material in which Transamerica and/or
its separate account(s), or Schwab is named at least 10 (ten) Business
Days prior to its use. No such material shall be used if Transamerica or
Schwab objects to such use within 5 (five) Business Days after receipt
of such material.
4.4. The Fund and the Adviser shall not give any information or
make any representations on behalf of Transamerica or concerning
Transamerica, the Account, or the Contracts other than the information
or representations contained in a registration statement or prospectus
for the Contracts, as such registration statement and prospectus may be
amended or supplemented from time to time, or in reports for the
Account, or in sales literature or other promotional material approved
by Transamerica or its designee, except with the permission of
Transamerica.
4.5. The Fund and Adviser shall not give any information or make
any representations on behalf of or concerning Schwab, or use Schwab's
name except with permission of Schwab.
4.6. The Fund will provide to Transamerica and Schwab at least one
complete copy of all registration statements, prospectuses, Statements
of Additional Information, reports, proxy statements, sales literature
and other promotional materials, applications for exemptions, requests
for no-action letters, and all amendments to any of the above, that
relate to the Designated Portfolio(s), contemporaneously with the filing
of such document(s) with the SEC or NASD or other regulatory
authorities.
4.7. Transamerica or Schwab will provide to the Fund at least one
complete copy of all registration statements, prospectuses, Statements
of Additional Information, reports, solicitations for voting
instructions, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Contracts or the
Account, contemporaneously with the filing of such document(s) with the
SEC, NASD, or other regulatory authority.
4.8. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed
<PAGE 14>
for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs or
billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available
to customers or the public, including brochures, circulars, research
reports, market letters, form letters seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, and registration statements, prospectuses, Statements of
Additional Information, shareholder reports, and proxy materials.
4.9. At the request of any party to this Agreement, each other
party will make available to the other party's independent auditors
and/or representative of the appropriate regulatory agencies, all
records, data and access to operating procedures that may be reasonably
requested in connection with compliance and regulatory requirements
related to this Agreement or any party's obligations under this
Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund and the Adviser shall pay no fee or other
compensation to Transamerica under this Agreement, and Transamerica
shall pay no fee or other compensation to the Fund or Adviser under this
Agreement, although the parties hereto will bear certain expenses in
accordance with Schedule F, Articles III, V, and other provisions of
this Agreement.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, as further provided in Schedule F.
The Fund shall see to it that all shares of the Designated Portfolio(s)
are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale.
<PAGE 15>
5.3. The parties shall bear the expenses of routine annual
distribution (mailing costs) of the Fund's prospectus and distribution
(mailing costs) of the Fund's proxy materials and reports to owners of
Contracts offered by Transamerica, as provided in Schedule F.
5.4. The Fund and Adviser acknowledge that a principal feature of
the Contracts is the Contract owner's ability to choose from a number of
unaffiliated mutual funds (and portfolios or series thereof), including
the Designated Portfolio(s) and the Unaffiliated Funds, and to transfer
the Contract's cash value between funds and portfolios. The Fund and
Adviser agree to cooperate with Transamerica and Schwab in facilitating
the operation of the Account and the Contracts as intended, including
but not limited to cooperation in facilitating transfers between
Unaffiliated Funds.
5.5. Schwab agrees to provide certain administrative services,
specified in Schedule D hereto, in connection with the arrangements
contemplated by this Agreement. The parties acknowledge and agree that
the services referred to in this Section 5.5 are recordkeeping,
shareholder communications, and other transaction facilitation and
processing, and related administrative services only and are not the
services of an underwriter or a principal underwriter of the Fund and
that Schwab is not an underwriter for the shares of the Designated
Portfolio(s), within the meaning of the 1933 Act or the 1940 Act.
5.6. As compensation for the services specified in Schedule D
hereto, the Adviser agrees to pay Schwab a monthly Administrative
Service Fee based on the percentage per annum on Schedule D hereto
applied to the average daily value of the shares of the Designated
Portfolio(s) held in the Account with respect to Contracts sold by
Schwab. This monthly Administrative Service Fee is due and payable
before the 15th (fifteenth) day following the last day of the month to
which it relates.
ARTICLE VI. Diversification and Qualification
<PAGE 16>
6.1. The Fund and Adviser represent and warrant that the Fund will
at all times sell its shares and invest its assets in such a manner as
to ensure that the Contracts will be treated as annuity contracts under
the Code, and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund and Adviser represent and warrant that
the Fund and each Designated Portfolio thereof will at all times comply
with Section 817(h) of the Code and Treasury Regulation [Section] 1.817-
5, as amended from time to time, and any Treasury interpretations
thereof, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments or
other modifications or successor provisions to such Section or
Regulations. The Fund and the Adviser agree that shares of the
Designated Portfolio(s) will be sold only to Participating Insurance
Companies and their separate accounts.
6.2. No shares of any series or portfolio of the Fund will be sold
to the general public.
6.3. The Fund and Adviser represent and warrant that the Fund and
each Designated Portfolio is currently qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will
maintain such qualification (under Subchapter M or any successor or
similar provisions) as long as this Agreement is in effect.
6.4. The Fund or Adviser will notify Transamerica immediately upon
having a reasonable basis for believing that the Fund or any Portfolio
has ceased to comply with the aforesaid Section 817(h) diversification
or Subchapter M qualification requirements or might not so comply in the
future.
6.5. The Fund and Adviser acknowledge that full compliance with
the requirements referred to in Sections 6.1, 6.2, and 6.3 hereof is
absolutely essential because any failure to meet those requirements
would result in the Contracts not being treated as annuity contracts for
federal income tax purposes, which would have adverse tax consequences
for Contract owners and could also adversely affect Transamerica's
corporate tax liability. The Fund and Adviser also acknowledge that it
is solely within their power and control to meet those requirements.
<PAGE 17>
Accordingly, without in any way limiting the effect of Section 8.3
hereof and without in any way limiting or restricting any other remedies
available to Transamerica, the Adviser will pay all costs associated
with or arising out of any failure, or any anticipated or reasonably
foreseeable failure, of the Fund or any Designated Portfolio to comply
with Sections 6.1, 6.2 or 6.3 hereof, including all costs associated
with reasonable and appropriate corrections or responses to any such
failure; such costs may include, but are not limited to, the costs
involved in creating, organizing, and registering a new investment
company as a funding medium for the Contracts and/or the costs of
obtaining whatever regulatory authorizations are required to substitute
shares of another investment company for those of the failed Portfolio
(including but not limited to an order pursuant to Section 26(b) of the
1940 Act); such costs are to include, but are not limited to, fees and
expenses of legal counsel and other advisors to Transamerica and any
federal income taxes or tax penalties (or "toll charges" or exactments
or amounts paid in settlement) incurred by Transamerica with respect to
itself or owners of its Contracts in connection with any such failure or
anticipated or reasonably foreseeable failure.
6.6. The Fund shall provide Transamerica or its designee with
reports certifying compliance with the aforesaid Section 817(h)
diversification and Subchapter M qualification requirements, at the
times provided for and substantially in the form attached hereto as
Schedule E; provided, however, that providing such reports does not
relieve the Fund or Adviser of their responsibility for such compliance
or of their liability for non-compliance.
ARTICLE VII. Potential Conflicts and Compliance With Shared Funding
Exemptive Order
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons,
including: (a) an
<PAGE 18>
action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Designated Portfolio(s) are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by a
Participating Insurance Company to disregard the voting instructions of
contract owners. The Board shall promptly inform Transamerica if it
determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. Transamerica will report any potential or existing conflicts
of which it is aware to the Board. Transamerica will assist the Board
in carrying out its responsibilities under the Shared Funding Exemptive
Order, by providing the Board with all information reasonably necessary
for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by Transamerica to inform the Board whenever
contract owner voting instructions are disregarded. Such
responsibilities (other than the duty to report, which is unqualified)
shall be carried out by Transamerica with a view only to the interests
of its Contract Owners.
7.3. If it is determined by a majority of the Board, or a majority
of its directors who are not interested persons of the Fund, the Adviser
or any sub-adviser to any of the Portfolios (the "Independent
Directors"), that a material irreconcilable conflict exists,
Transamerica and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a
majority of the Independent Directors), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict,
up to and including: (1) withdrawing the assets allocable to some or
all of the separate accounts from the Fund or any Designated Portfolio
and reinvesting such assets in a different investment medium, including
(but not limited to) another Designated Portfolio of the Fund, or
submitting the question whether such segregation
<PAGE 19>
should be implemented to a vote of all affected contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable
contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected contract
owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by Transamerica to disregard contract owner voting instructions
and that decision represents a minority position or would preclude a
majority vote, Transamerica may be required, at the Fund's election, to
withdraw the Account's investment in the Fund and terminate this
Agreement; provided, however; that such withdrawal and termination shall
be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the Independent
Directors. Any such withdrawal and termination must take place within
six (6) months after the Fund gives written notice that this provision
is being implemented, and until the end of the effective date of such
termination the Fund shall continue to accept and implement orders by
Transamerica for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to
Transamerica conflicts with the majority of other state regulators, then
Transamerica will withdraw the Account's investment in the Fund and
terminate this Agreement within six months after the Board informs
Transamerica in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that
such withdrawal and termination shall be limited to the extent required
by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Until the end of
the effective date of such termination, the Fund shall continue to
accept and implement orders by Transamerica for the purchase (and
redemption) of shares of the Fund.
<PAGE 20>
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Trustees shall determine whether any
proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new
funding medium for the Contracts. Transamerica shall not be required by
Section 7.3 to establish a new funding medium for the Contracts if an
offer to do so has been declined by vote of a majority of Contract
owners materially adversely affected by the irreconcilable material
conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict,
then Transamerica will withdraw the Account's investment in the Fund and
terminate this Agreement within six (6) months after the Board informs
Transamerica in writing of the foregoing determination; provided,
however, that such withdrawal and termination shall be limited to the
extent required by any such material irreconcilable conflict as
determined by a majority of the Independent Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with
respect to mixed or shared funding (as defined in the Shared Funding
Exemptive Order) or terms and conditions materially different from those
contained in the Shared Funding Exemptive Order, then (a) the Fund
and/or Participating Insurance Companies, as appropriate, shall take
such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.6, 3.7, 3.8, 7.1, 7.2, 7.3, 7.4, and 7.5
of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By Transamerica
<PAGE 21>
8.1(a). Transamerica agrees to indemnify and hold harmless the
Fund and its officers and each member of its Board and the Adviser
(collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written consent of
Transamerica) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims,
expenses, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the registration statement or prospectus or SAI for
the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to Transamerica or
Schwab by or on behalf of the Adviser or Fund for use in
the registration statement or prospectus for the
Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in any Registration Statement, prospectus, or statement
or additional information for any Unaffiliated Fund, or
arise out of or are based upon the omission or alleged
omission to state therein a material fact or necessary to
make the statements therein not misleading, or otherwise
pertain to or arise in connection with the availability
of any Unaffiliated Funds as an underlying funding
vehicle in respect of the Contracts; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of the Fund not supplied by Transamerica
or persons under its control) or wrongful conduct of
Transamerica or persons under its control, with respect
to the sale or distribution of the Contracts or Fund
Shares; or
<PAGE 22>
(iv) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in
a registration statement, prospectus, or sales literature
of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading
if such a statement or omission was made in reliance upon
information furnished in writing to the Fund by or on
behalf of Transamerica; or
(v) arise as a result of any failure by Transamerica to
provide the services and furnish the materials under the
terms of this Agreement; or
(vi) arise out of or result from any material breach of any
representation and/or warranty made by Transamerica in
this Agreement or arise out of or result from any other
material breach of this Agreement by Transamerica,
as limited by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof.
8.1(b). Transamerica shall not be liable under this
indemnification provision with respect to any losses, claims, expenses,
damages, liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). Transamerica shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
Transamerica in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim
shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify Transamerica of any such claim
shall not relieve Transamerica from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision, except to the extent that
Transamerica has been prejudiced by such failure to give notice. In
case any such action is
<PAGE 23>
brought against the Indemnified Parties, Transamerica shall be entitled
to participate, at its own expense, in the defense of such action.
Transamerica also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from Transamerica to such party of Transamerica's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and Transamerica will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify Transamerica
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the Contracts
or the operation of the Fund.
8.2. Indemnification By Schwab
8.2(a). Schwab agrees to indemnify and hold harmless the Fund and
its officers and each member of its Board and the Adviser (collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of Schwab) or litigation (including
legal and other expenses), to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon Schwab's dissemination of
information regarding the Fund that is both (A)
materially incorrect and (B) that was not either
contained in the Fund's registration statement or sales
literature or provided in writing to Schwab, or approved
in writing, by or on behalf of the Fund or the Adviser;
or
(ii) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the sales literature for the Contracts or arise out of
or are based upon the omission or the alleged omission to
state therein a material fact
<PAGE 24>
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
Agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing
to Transamerica or Schwab by or on behalf of the Adviser
or Fund for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of the Fund not supplied by Schwab or
persons under its control) or wrongful conduct of Schwab
or persons under its control, with respect to the sale or
distribution of the Contracts; or
(iv) arise as a result of any failure by Schwab to provide the
services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by Schwab in this
Agreement or arise out of or result from any other
material breach of this Agreement by Schwab; or
(vi) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in any Registration Statements, prospectus, or statement
of additional information for any Unaffiliated Fund, or
arise out of or are based upon the omission or alleged
omission to state therein a material fact or necessary to
make the statements therein not misleading, or otherwise
pertain to or arise in connection with the availability
of any Unaffiliated Funds as an underlying funding
vehicle in respect of the Contract;
as limited by and in accordance with the provisions of Sections 8.2(b)
and 8.2(c) hereof.
8.2(b). Schwab shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, whichever is applicable.
<PAGE 25>
8.2(c). Schwab shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified Schwab in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify Schwab of any such claim shall not relieve Schwab from any
liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision, except to the extent that Schwab has been prejudiced by such
failure to give notice. In case any such action is brought against the
Indemnified Parties, Schwab shall be entitled to participate, at its own
expense, in the defense of such action. Schwab also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from Schwab to such party of Schwab's
election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and
Schwab will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
8.2(d). The Indemnified Parties will promptly notify Schwab of the
commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the
operation of the Fund.
8.3. Indemnification by the Adviser
8.3(a). The Adviser agrees to indemnify and hold harmless
Transamerica and Schwab and each of their directors and officers and
each person, if any, who controls Transamerica or Schwab within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Adviser) or
<PAGE 26>
litigation (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related
to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement or prospectus or SAI or
sales literature for the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to the Adviser or Fund
by or on behalf of Transamerica or Schwab for use in the
Registration Statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Adviser or persons under its control) or wrongful conduct
of the Fund or Adviser or persons under their control,
with respect to the sale or distribution of the Contracts
or Fund shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in
a registration statement, prospectus, or sales literature
covering the Contracts or any amendment thereof or
supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated
therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was
made in reliance upon information furnished in writing to
Transamerica or Schwab by or on behalf of the Adviser or
Fund; or
(iv) arise as a result of any failure by the Fund or Adviser
to provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise, to
comply with the diversification and other qualification
requirements specified in Article VI of this Agreement);
or
<PAGE 27>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or
Adviser in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Adviser;
as limited by and in accordance with the provisions of Sections 8.3(b)
and 8.3(c) hereof. This indemnification is in addition to and apart
from the responsibilities and obligations of the Adviser specified in
Article VI hereof.
8.3(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to Transamerica or to Schwab or the
Account, whichever is applicable.
8.3(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Adviser in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify the Adviser of any such claim shall not relieve the Adviser from
any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision, except to the extent that the Adviser has been prejudiced by
such failure to give notice. In case any such action is brought against
the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Adviser to such party
of the Adviser's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such party
<PAGE 28>
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). Transamerica and Schwab agree promptly to notify the
Adviser of the commencement of any litigation or proceedings against it
or any of its officers and directors in connection with the issuance or
sale of the Contracts or the operation of the Account.
8.4. Indemnification By the Fund
8.4(a). The Fund agrees to indemnify and hold harmless
Transamerica and Schwab, and each of their directors and officers and
each person, if any, who controls Transamerica or Schwab within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.4) against any and all losses,
claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties
may be required to pay or may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims,
expenses, damages, liabilities or expenses (or actions in respect
thereof) or settlements, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification and other qualification
requirements specified in Article VI of this Agreement);
or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund; or
(iii) arise out of or result from the incorrect or untimely
calculation or reporting of the daily net asset value per
share or dividend or capital gain distribution rate;
as limited by and in accordance with the provisions of Sections 8.4(b)
and 8.4(c) hereof.
<PAGE 29>
8.4(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise by subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to Transamerica, Schwab, the Fund, the
Adviser or the Account, whichever is applicable.
8.4(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision, except to the extent that the Fund has been prejudiced by
such failure to give notice. In case any such action is brought against
the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Fund to such party of
the Fund's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by
it, and the Fund will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
8.4(d). Transamerica and Schwab each agree promptly to notify the
Fund of the commencement of any litigation or proceedings against itself
or any of its respective officers or
<PAGE 30>
directors in connection with this Agreement, the issuance or sale of the
Contracts, the operation of the Account, or the sale or acquisition of
shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of
California, except the California conflict of laws provisions.
9.2. This Agreement shall be made subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the Securities and Exchange Commission may grant
(including, but not limited to, the Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with
respect to some or all Designated Portfolios, upon one (1)
year advance written notice delivered to the other parties;
provided, however, that such notice shall not be given
earlier than one year following the date of this Agreement;
or
(b) at the option of Transamerica by written notice to the
other parties with respect to any Designated Portfolio based
upon Transamerica's reasonable and good faith determination
that shares of such Designated Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) at the option of Transamerica by written notice to the
other parties with respect to any Designated Portfolio in the
event any of the Designated Portfolio's
<PAGE 31>
shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the
use of such shares as the underlying investment media of the
Contracts issued or to be issued by Transamerica; or
(d) at the option of the Fund in the event that formal
administrative proceedings are instituted against
Transamerica or Schwab by the NASD, the SEC, the Insurance
Commissioner of like official of any state or any other
regulatory body regarding Transamerica's or Schwab's duties
under this Agreement or related to the sale of the Contracts,
the operation of any Account, or the purchase of the Fund
shares or the shares or sponsor of any Unaffiliated Fund,
provided, however, that the Fund determines in its sole
judgement exercised reasonably and in good faith, that any
such administrative proceedings will have a material adverse
effect upon the ability of Transamerica or Schwab to perform
its obligations under this Agreement or would have a material
adverse impact upon the Fund; or
(e) at the option of Transamerica in the event that formal
administrative proceedings are instituted against the Fund or
Adviser by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, provided,
however, that Transamerica determines in its sole judgement
exercised reasonably and in good faith, that any such
administrative proceedings will have a material adverse
effect upon the ability of the Fund or Adviser to perform its
obligations under this Agreement; or
(f) at the option of Transamerica by written notice to the
Fund and the Adviser with respect to any Portfolio if
Transamerica reasonably and in good faith believes that the
Portfolio will fail to meet the Section 817(h)
diversification requirements or Subchapter M qualifications
specified in Article VI hereof; or
<PAGE 32>
(g) at the option of either the Fund or Adviser, if (i) the
Fund or Adviser, respectively, shall determine, in their sole
judgement reasonably exercised in good faith, that either
Transamerica or Schwab has suffered a material adverse change
in their business or financial condition or is the subject of
material adverse publicity and that material adverse change
or publicity will have a material adverse impact on
Transamerica's or Schwab's ability to perform its obligations
under this Agreement, (ii) the Fund or Adviser notifies
Transamerica or Schwab, as appropriate, of that determination
and its intent to terminate this Agreement, and (iii) after
considering the actions taken by Transamerica or Schwab and
any other changes in circumstances since the giving of such
notice, the determination of the Fund or Adviser shall
continue to apply on the sixtieth (60th) day following the
giving of that notice, which sixtieth day shall be the
effective date of termination; or
(h) at the option of either Transamerica or Schwab, if (i)
Transamerica or Schwab, respectively, shall determine, in its
sole judgment reasonably exercised in good faith, that either
the Fund or Adviser have suffered a material adverse change
in their business or financial condition or is the subject of
material adverse publicity and that material adverse change
or publicity will have a material adverse impact upon the
Fund's or Adviser's ability to perform its obligations under
this Agreement, (ii) Transamerica or Schwab notifies the Fund
or Adviser, as appropriate, of that determination and its
intent to terminate this Agreement, and (iii) after
considering the actions taken by the Fund or Adviser and any
other changes in circumstances since the giving of such
notice, the determination of Transamerica or Schwab shall
continue to apply on the sixtieth (60th) day following the
giving of that notice, which sixtieth day shall be the
effective date of termination; or
<PAGE 33>
(i) termination at the option of Transamerica in the event
that formal administrative proceedings are instituted against
Schwab by the NASD, the Securities and Exchange Commission,
or any state securities or insurance department or any
regulatory body regarding Schwab's duties under this
Agreement or related to the sale of the Fund's shares or the
Contracts, the operation of any Account, or the purchase of
Fund shares, provided, however, that Transamerica determines
in its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse
effect upon the ability of Schwab to perform its obligations
related to the Contracts.
10.2. Notice Requirement. No termination of this Agreement shall
be effective unless and until the party terminating this Agreement gives
prior written notice to all other parties of its intent to terminate,
which notice shall set forth the basis for such termination.
10.3. Effect of Termination. Notwithstanding any termination of
this Agreement, the Fund and the Adviser, shall, at the option of
Transamerica, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts
shall be permitted to reallocate investments in the Designated
Portfolio(s) (as in effect on such date), redeem investments in such
Designated Portfolios(s) and/or invest in such Designated Portfolios(s)
upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.3 shall not apply to
any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.4. Surviving Provisions. Notwithstanding any termination of
this Agreement, each party's obligations under Article VIII to indemnify
other parties shall survive and not be affected by any termination of
this Agreement. In addition, with respect to Existing Contracts, all
<PAGE 34>
provisions of this Agreement shall also survive and not be affected by
any termination of this Agreement.
10.5. Survival of Agreement. A termination by Schwab shall
terminate this Agreement only as to that party, and this Agreement shall
remain in effect as to the other parties; provided, however, that in the
event of a termination by Schwab the other parties shall have the option
to terminate this Agreement upon 60 (sixty) days notice, rather than the
one (1) year specified in Section 10.1(a).
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time
specify in writing to the other party.
If to the Fund:
SteinRoe Variable Investment Trust
c/o Liberty Investment Services, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Attention: Secretary
If to Transamerica:
Transamerica Occidental Life Insurance Company
115 South Olive
Los Angeles, CA 90015
Attention: President, Living Benefits Division
If to the Adviser:
<PAGE 35>
Stein Roe & Farnham Incorporated
One South Wacker Drive
Chicago, IL 60606
Attention: Secretary
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94014
Attention: General Counsel
ARTICLE XII. Miscellaneous
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement, shall not disclose, disseminate
or utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as such information may come into the public domain. Without
limiting the foregoing, no party hereto shall disclose any information
designated as proprietary by another party.
12.2. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the
same instrument.
<PAGE 36>
12.4. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of the Agreement shall not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation
the Securities and Exchange Commission, the NASD and state insurance
regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto
further agrees to furnish the California Insurance Commissioner with any
information or reports in connection with services provided under this
Agreement which such Commissioner may request in order to ascertain
whether the variable annuity operations of Transamerica are being
conducted in a manner consistent with the California Variable Annuity
Regulations and any other applicable law or regulations.
12.6. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws.
12.7. This Agreement or any of the rights or obligations hereunder
may not be assigned by any party without the prior written consent of
all parties hereto.
12.8. All persons dealing with the Fund and any Designated
Portfolio shall look solely to the assets of such Designated Portfolio
for the enforcement of any claims against the Fund hereunder. Each
other party acknowledges and agrees that none of the Trustees, officers
or shareholders of the Fund shall have any personal liability for any
obligations entered into by or on behalf of the Fund.
<PAGE 37>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as
of the date specified below.
Transamerica:
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
By its authorized officer,
By: [SIGNATURE]
Title: President, Living Benefits Division
Date: 4/12/94
Fund:
STEIN ROE & FARNHAM INCORPORATED
By its authorized officer,
By: TIMOTHY H. ARMOUR
Title: President
Date: 4/4/94
Adviser:
STEINROE VARIABLE INVESTMENT TRUST
on behalf of the Designated Portfolio
By its authorized officer,
By: RICHARD R. CHRISTENSEN
Title: President
Date: 4/7/94
Schwab:
<PAGE 38>
CHARLES SCHWAB & CO., INC.
By its authorized officer,
By: [SIGNATURE]
Title: Vice President
Date: April 4, 1994
<PAGE 39>
SCHWAB INVESTMENT ADVANTAGE, A VARIABLE ANNUITY
SCHEDULE A
----------
Contracts Form Numbers
- --------- ------------
Transamerica Occidental Life Insurance Company
- ----------------------------------------------
Group Annuity Contract Form No. GNP-215-193
Dollar Cost Averaging Endorsement Form No. GPM-020-193
Automatic Payout Option Endorsement Form No. GPM-021-193
Systematic Withdrawal Option Endorsement Form No. GPM-022-193
Acceptance of Group Annuity Contract Form No. GNA-212-193
Variable Annuity Application Form No. GNA-213-193
Certificate of Participation Form No. GNC-37-193
IRA Endorsement Form No. GCE-020-193
Benefit Distribution Endorsement Form No. GCE-021-193
Dollar Cost Averaging Endorsement Form No. GCE-022-193
Automatic Payout Option Endorsement Form No. GCE-923-193
Systematic Withdrawal Option Endorsement Form No. GCE-024-193
First Transamerica Life Insurance Company
- -----------------------------------------
Group Annuity Contract Form No. FTGP-501-193
Dollar Cost Averaging Endorsement Form No. FTGE-003-193
Automatic Payout Option Endorsement Form No. FTGE-004-193
Systematic Withdrawal Option Endorsement Form No. FTGE-005-193
Acceptance of Group Annuity Contract Form No. FTGA-003-193
Variable Annuity Application Form No. FTGA-004-193
Certificate of Participation Form No. FTCG-101-193
IRA Endorsement Form No. FTCE-005-193
Benefit Distribution Endorsement Form No. FTCE-006-193
Dollar Cost Averaging Endorsement Form No. FTCE-007-193
Automatic Payout Option Endorsement Form No. FTCE-008-193
Systematic Withdrawal Option Endorsement Form No. FTCE-009-193
Annuity Rate Table Endorsement Form No. FTCE-010-193
<PAGE 40>
SCHEDULE B
----------
Designated Portfolios
- ---------------------
Capital Appreciation Fund
<PAGE 41>
SCHEDULE C
----------
Certain Investment Policies and Restrictions
Imposed by the
California Department of Insurance
Pursuant to Section 2.4 hereof, the Fund represents and warrants
that it is and shall at all times remain in compliance with the
following investment policies and restrictions. THESE ARE IN ADDITION
TO other related obligations of the Fund, including the general
obligation to comply with all applicable laws and regulation, including
but not limited to California insurance laws and regulations, the
Investment Company Act of 1940, and other applicable insurance and
securities laws.
[Note: The following are derived from a questionnaire used by the
California Department of Insurance as part of an insurance company's
application for qualification to transact a variable annuity business.
The parenthetical references below are to question numbers in that
questionnaire.]
The Fund represents and warrants that:
1. All repurchase agreements will be transacted only with entities
meeting specific credit and solvency standards administered and verified
by the Adviser (46(a)).
2. All repurchase transactions will be executed pursuant to a
comprehensive master repurchase agreement setting forth the terms and
conditions of the transaction, and having the incidents of a valid
promissory note in favor of the Fund (46(b)).
3. A valid, binding security interest in favor of the Fund or portfolio
thereof will be created and perfected in all collateral securing such
repurchase agreements (46(c)).
4. All such repurchase agreements will be secured at all times by
collateral consisting of liquid assets having a market value of not less
than 102% of the cash or assets transferred to the other party (46(d)).
5. All securities lending activities will be entered into only with
entities meeting specific credit and solvency standards administered and
verified by the Adviser (47).
6. All investments in instruments or certificates of any sort issued by
the U.S. Office of a bank or other savings institution domiciled in a
foreign nation, or a foreign branch of a U.S.
<PAGE 42>
savings institution, will be instruments or certificates payable in the
United States and in U.S. dollars (48).
7. All investments of the Fund which possess a readily-available market
value will be valued either at their market value on the date of
valuation, or at amortized cost if it approximates market value within
the limits and constraints imposed by the U.S. Securities and Exchange
Commission (49).
8. All investments of the Fund which lack a readily-available market
will be valued according to specific, objective methods or procedures
set forth in writing (50).
9. The investment manager of each portfolio or series of the Fund
possesses substantial expertise and experience as an investment manager
or advisor of a portfolio consisting of asset and investments of the
same type as he or she will manage in regard to the portfolio or series.
(If experience is less than three years, please provide resume of
investment manager; note that in this case, the Company must provide
notarized certifications that it has fully investigated and is satisfied
with the qualifications, background, and expertise of the investment
manager.) (52).
10. At no time during the past ten years have the managers of any
portfolio or series resigned to avoid dismissal or been dismissed or
requested to resign from any position involving investment duties, on
account of violation of any law, rule or ethical standard relating to
insurance, annuities, or securities (53).
11. The investment advisory agreements concerning the Fund's operations
provide in substance that notwithstanding any other provisions of the
agreement, it is understood and agreed that the Fund shall retain the
ultimate responsibility for and control of all investments made pursuant
to the agreement, and reserve the right to direct, approve or disapprove
any action taken on its behalf by the investment advisor (54).
12. Every custodian holding securities or other assets of the Fund is
an institution permitted to serve in such capacity by the Investment
Company Act of 1940 and/or reviewed and approved for such purposes by
the U.S. Securities and Exchange Commission (55).
13. The Fund refuses to employ in any material connection with the
handling of assets of the Fund, any person who:
(a) In the last 10 years has been convicted of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, or involving
violations of Title 18, United States Code [Sections] 1341, 1342, or
1343 (58(a)).
(b) Within the last 10 years has been found by any state regulatory
authority to have violated or has acknowledged violation of, any
provision of any state insurance law involving fraud, deceit or knowing
misrepresentation (59(b)).
<PAGE 43>
(c) Within the last 10 years has been found by any federal or state
regulatory authorities to have violated, or have acknowledged violation
of, any provisions of federal or state securities laws involving fraud,
deceit, or knowing misrepresentation (58(c)).
14. The Fund will make inquiries and attempt to determine that no
persons, firms, or employees of firms which supply consulting,
investment, administrative, custodial or other services affecting the
administration of the Company's variable annuity business (including
such services for the Fund), have been subject to the sanctions
described in the preceding representation (59).
15. The Fund will seek to prevent its officers and Board members, and
officers, directors and portfolio managers of the investment advisor,
from receiving, directly or indirectly, any commission, or any other
compensation with respect to the purchase or sale of assets of the Fund
(61).
16. No officer, director, trustee, or member of any governing board or
body of the Fund will receive directly or indirectly any commissions or
any other compensation contingent upon the writing, issuance, sale,
procurement of application for, or renewal, of any variable annuity
contract (62).
17. All service agreements affecting the administration of the Fund
allow the Fund to terminate such contracts without payment of any
penalty, forfeiture, compulsory buyout amount, or performance of any
other obligation which could deter termination (65).
18. All service agreements affecting the administration of the Fund
afford the Fund a right to cancel the contract and discharge the
servicing entity or person in the event such entity of person fails to
perform in a satisfactory manner (66).
19. All service agreements affecting the administration of the Fund
provide that the Fund shall own and control all the pertinent records
pertaining to its operations (67).
20. All service agreements affecting the administration of the Fund
provide that the Fund shall have the right to inspect, audit and copy
all records pertaining to performance of services under the agreement
(68).
<PAGE 44>
SCHEDULE D
----------
ADMINISTRATIVE SERVICES
-----------------------
To be performed by Charles Schwab & Co., Inc.
A. Schwab will provide the properly registered and licensed personnel
and systems needed for all customer servicing support - for both fund
and annuity information and questions - including:
delivery of prospectus - both fund and annuity;
entry of initial and subsequent orders;
transfer of cash to insurance company and/or funds;
explanations of fund objectives and characteristics;
entry of transfers between funds;
fund balance and allocation inquiries;
mail fund prospectus;
B. Schwab will calculate on a daily basis for each fund the number of
shares and the asset balance on which the fee is to be paid pursuant to
this agreement. Also provided will be a monthly summary of the reports,
expressed in both shares and dollar amounts.
C. Schwab will communicate all purchase, withdrawal, and exchange
orders it receives from its customers to Transamerica who will
retransmit them to each fund.
D. For its services, Schwab shall receive a fee of 0.20% per annum
applied to the average daily value of the shares of the fund held by
Schwab's customers, payable by the Adviser directly to Schwab, such
payments being due and payable within 15 (fifteen) days after the last
day of the month to which such payment relates.
<PAGE 45>
SCHEDULE E
----------
Reports per Section 6.6
-----------------------
With regard to the reports relating to the quarterly testing of
compliance with the requirement of Section 817(h) and Subchapter M under
the Internal Revenue Code (the "Code") and the regulations thereunder,
the Fund shall provide within twenty (20) Business Days of the close of
the calendar quarter a report in the attached form regarding the status
under such sections of the Code of the Designated Portfolio(s), and if
necessary, identification of any remedial action to be taken to remedy
non-compliance.
With regard to the reports relating to the year-end testing of
compliance with the requirements of Subchapter M of the Code, referred
to hereinafter as "RIC status," the Fund will provide the reports on the
following basis: the year-end report in the attached form will be
provided 45 days after the end of the calendar year, but prior thereto,
the Fund will provide the additional interim and supplemental reports,
described below.
The additional reports are as follows:
1. A report in the usual reporting format and content, as of November
30, of each future fiscal year. The report will be provided under cover
of a letter from the Adviser stating that the Fund is in full compliance
with the requirements of Section 817(h) and Subchapter M of the Code.
Assuming such satisfactory report, the Fund will not provide any
additional interim reports. The report will be delivered by facsimile
by the twentieth day of December.
2. In the alternative, if a problem, as defined below, is identified in
the November report or its accompanying transmittal letter, additional
interim reports, on a weekly basis, starting on the 15th of December and
through the 30th of December, also will be supplied ("additional interim
reports"). The additional interim reports will not follow the format of
the regular reports, but will specifically address the problem
identified in the November 30 report. If any interim report,
thereafter, memorializes the cure of the problem, subsequent additional
reports will not be required.
<PAGE 46>
With regard to the delivery of the additional reports, they will be
transmitted by facsimile on the next Business Day, subject to the
following schedule of special dates: if the 15th of December is a
Saturday, the required report date will be accelerated to the 14th of
December; if the 15th of December is a Sunday, the report will be
transmitted on the 16th of December.
3. A problem with regard to RIC status is defined as any violation of
the following standards, as referenced to the applicable sections of the
Code:
(a) Less than ninety-five percent of gross income is derived from
sources of income specified in Section 851(b)(2);
(b) Twenty-five percent or greater gross income is derived from the sale
or disposition of assets specified in Section 851(b)(3);
(c) Fifty-five percent or less of the value of total assets consists of
assets specified in Sections 851(b)(4)(A); and
(d) Twenty percent or more of the value of total assets is invested in
the securities of one issuer, as that requirement is set forth in
Section 851(b)(4)(B).
<PAGE 47>
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
<TABLE>
<CAPTION>
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
<S> <C> <C> <C> <C>
Liberty Investment Services, Inc.
Requirements for Regulated Investment
Companies and Specific Investment
Restrictions
Source: AICPA Audit and Accounting
Guide - Audits of Investment Companies
To qualify as a regulated investment company for tax
purposes, an investment company generally must:
a) Derive at least 90 percent of its gross income RIC 3,4 RIC 3,4 RIC 3,4 RIC 3, 4
from dividends, interest, income from securities
on loan, and gains (without including losses) from
the sale or other disposition of securities.
(Perform monthly.)
b) Derive less than 30 percent of its gross income 10.68% 13.29% 22.10% 13.74%
from gains (without including losses) on the sale or
other disposition of securities held for less than
three months (short-short test). (Perform monthly.)
c) Distribute at least 90 percent of its investment DONE @Y/E DONE @Y/E DONE @Y/E Y
company taxable income for the taxable year.
(Perform quarterly.)
To meet the diversification requirements at the RIC RIC RIC RIC
end of each quarter of the taxable year, at least WORKSHEET WORKSHEET WORKSHEET WORKSHEET
50 percent of the value of the company's total 5 C 5 C 5 C 5 C
assets must be represented by cash and cash
equivalents, U.S. government securities, securities PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLO
of other regulated investment companies, and other MANAGER MANAGER MANAGER MANAGER
securities. For that purpose, other securities do CHECKLIST CHECKLIST CHECKLIST CHECKLIST
not include investments in the securities of any 3, 33 3, 33 3, 33 3, 33
one issuer that represent more than 5 percent of
the value of the investment company's total assets
or more than 10 percent of the issuer's
outstanding voting securities. The diversification
requirements further prohibit an investment company
from investing more than 25 percent of its total
assets in the securities of any one issuer, except
for the securities of the U.S. government or other
regulated investment companies. The requirements
also prohibit investing more than 25 percent of the
company's total assets in two or more issuers
controlled by the investment company that are engaged
in the same (or similar) or related trade or
business. For that purpose, the company controls
the issuers if it has 20 percent or more of the
combined voting power. the investment company
should keep a record of those quarterly
computations. (Perform monthly.)
Municipal Bond Funds
A dividend qualifies as an exempt-interest dividend
only if both of the following conditions are met:
a) At least 50 percent of the value of the total N/A N/A N/A N/A
assets of the regulated investment company at the
close of each quarter of its taxable year consists
of certain tax-exempt government obligations.
b) The dividend is designated by the regulated N/A N/A N/A N/A
investment company as an exempt-interest dividend
in a written notice mailed to shareholders not later
than sixty days after the end of its taxable year.
</TABLE>
Page 1 of 6
<PAGE 48>
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
<TABLE>
<CAPTION>
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
<S> <C> <C> <C> <C>
CAPITAL APPRECIATION FUND
Source: Prospectus dated May 1, 1992
Investment Techniques
1) The Capital Appreciation Fund may invest up to PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
25% of its total assets in securities of foreign MG CHECK- MG CHECK- MG CHECK- MG CHECK-
issuers that are not publicly traded in the U.S. LIST 24 LIST 24 LIST 24 LIST 24
(foreign securities).
2) The Fund may enter into forward contracts to sell NOTED NOTED NOTED NOTED
an amount of foreign currency approximating the
value of some or all of the Fund's portfolio
securities denominated in such foreign currency.
The Fund may also enter into forward foreign
currency contracts to protect against loss
between Trade and Settlement dates resulting
from changes in foreign currency exchange rates.
3) The Fund may invest in securities purchased on a NOTED NOTED NOTED NOTED
when-issued or delayed-delivery basis.
4) The Fund may invest in securities purchased on a NOTED NOTED NOTED NOTED
standby commitment basis.
NOTE: The Fund may receive a commitment fee in
consideration for its standby commitment.
NOTE: When the adviser deems a temporary defensive
position advisable, the Fund may invest, without
limitation, in high-quality fixed-income securities,
or hold assets in cash or cash equivalents.
5) The Fund may not:
a) with respect not 75% of the value of its SEE RIC SEE RIC SEE RIC SEE RIC
total assets, invest more than 5% of its total WORKSHEET WORKSHEET WORKSHEET WORKSHEET
assets in the securities of any one issuer
(except that this restriction does not apply to
U.S. Government Securities);
b) invest more than 25% of its total assets (at PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
market) in the securities of issuers in any MGR CHKLIST MGR CHKLIST MGR CHKLIST MGR CHKLIST
particular industry (except for U.S. Government 3 3 3 3
Securities);
c) acquire more than 10% of the outstanding voting 33 33 33 33
securities of any one issuer;
d) borrow money except as a temporary measure for PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
extraordinary or emergency purposes, and then MGR CHKLIST MGR CHKLIST MGR CHKLIST MGR CHKLIST
the aggregate borrowings at any one time may 14 14 14 14
not exceed 33 1/3% of its assets at market.
The fund will not purchase additional
securities if the fund's borrowings less
proceeds receivable exceeds 5% of total assets;
e) invest more than 15% of its total assets (at PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
market) in repurchase agreements maturing in MGR CHKLIST MGR CHKLIST MGR CHKLIST MGR CHKLIST
more than seven days or other illiquid 13 13 13 13
securities.
</TABLE>
NOTE: THE SEC HAS ISSUED A POLICY STATEMENT EFFECTIVE MARCH 20, 1992,
WHICH WOULD ALLOW THE FUND TO INVEST UP TO 15% IN ILLIQUID SECURITIES.
A SHAREHOLDER MEETING HELD IN APRIL 1993 APPROVED THE NECESSARY CHANGE
TO A FUNDAMENTAL POLICY.
Note: In each case, if a percentage limit is satisfied at the time
of investment investment or borrowing, a later increase or decrease
resulting from a change in the value of a security or decrease in a
Fund's assets will not constitute a violation of the limit.
Page 2 of 6
<PAGE 49>
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
<TABLE>
<CAPTION>
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
<S> <C> <C> <C> <C>
Source: Statement of Additional
Information dated 5/1/92
Investment Restrictions - Fundamental
(Required shareholder vote to amend)
The Fund may not:
1) with respect to 75% of the value of the total RIC RIC RIC RIC
assets of the Fund, invest more than 5% of the WORKSHEET WORKSHEET WORKSHEET WORKSHEET
value of its total assets, taken at market
value at the time of a particular purchase,
in the securities of any one issuer, except
securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities;
2) purchase securities of any one issuer if more CHECKLIST CHECKLIST CHECKLIST CHECKLIST
than 10% of the outstanding voting securities 33 33 33 33
of such issuer would at the time be held by the
Fund;
3) act as an underwriter of securities, except 1 1 1 1
insofar as it may be deemed an underwriter for
purposes of the Securities Act of 1933 on
disposition of securities acquired subject to
legal or contractual restrictions on resale;
4) invest in a security if more than 25% of its 3 3 3 3
total assets (taken at market value at the
time of a particular purchase) would be
invested in the securities of issuers in any
particular industry, except that this
restriction does not apply to securities issued
or guaranteed by the U.S. Government or its
agencies or instrumentalities;
5) purchase or sell real estate (although it may 2 2 2 2
purchase securities secured by real estate or
interests therein, and securities issued by
companies which invest in real estate or interests
therein), commodities or commodity contracts,
except that it may enter into (a) futures and
options on futures and (b) forward contracts;
6) purchase securities on margin (except for use 4, 5, 22 4, 5, 22 4, 5, 22 4, 5, 22
of short-term credits as are necessary for
the clearance of transactions), make short sales
of securities, or participate on a joint or
a joint and several basis in any trading account
in securities, except in connection with
transactions in options, futures, and options
on futures;
7) make loans, but this restriction shall not 6, 7, 8 6, 7, 8 6, 7, 8 6, 7, 8
prevent a Fund from (a) buying a part of an
issue of bonds, debentures, or other obligations
which are publicly distributed, or from investing
up to an aggregate of 15% of its total assets
(taken at market value at the time of each
purchase) in parts of issues of bonds,
debentures or other obligations of a type
privately placed with financial institutions,
(b) investing in repurchase agreements, or
(c) lending portfolio securities, provided that
it may not lend securities if, as a result,
the aggregate value of all securities loaned
would exceed 15% of its total assets (taken at
market value at the time of such loan); or
</TABLE>
Page 3 of 6
<PAGE 50>
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
<TABLE>
<CAPTION>
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
<S> <C> <C> <C> <C>
8) Invest more than 15% of the Fund's net assets 13 13 13 13
(taken at market value at the time of each
purchase) in illiquid securities including
repurchase agreements maturing in more than
seven days;
NOTE: THE SEC HAS ISSUED A POLICY STATEMENT
EFFECTIVE MARCH 20, 1992, WHICH WOULD ALLOW THE
FUND TO INVEST UP TO 15% IN ILLIQUID SECURITIES.
A SHAREHOLDER MEETING HELD IN APRIL 1993 APPROVED
THE NECESSARY CHANGE TO A FUNDAMENTAL POLICY.
9) borrow, except that it may (a) borrow up to 14 14 14 14
33 1/3% of its total assets from banks, taken
at market value at the time of such borrowing,
as a temporary measure for extraordinary or
emergency purposes, but not to increase
portfolio income (the total of reverse
repurchase agreements and such borrowings
will not exceed 33 1/3% of its total assets,
and the Fund will not purchase additional
securities when its borrowings, less proceeds
receivable from sales of portfolio securities,
exceed 5% of its total assets) and (b) enter
into transactions in options, futures, and
options on futures.
10) invest in companies for the purpose of 9 9 9 9
exercising control or management;
11) purchase more than 3% of the stock of another 10,11,12 10,11,12 10,11,12 10,11,12
investment company or purchase stock of
other investment companies equal to more
than 5% of the Fund's total assets (valued
at time of purchase) in the case of any one
other investment company and 10% of such
assets (valued at the time of purchase) in
the case of all other investment companies in
the aggregate; any such purchases are to be
made in the open market where no profit to a
sponsor or dealer results from the purchase,
other than the customary broker's commission,
except for securities acquired as part of a
merger, consolidation or acquisition of assets;
12) mortgage, pledge, hypothecate or in any 15 15 15 15
manner transfer, as security for indebtedness,
any securities owned or held by it, except as
may be necessary in connection with (a)
permitted borrowings and (b) options, futures
and options on futures;
13) issue senior securities, except to the extent 16 16 16 16
permitted by the Investment Company Act of 1940
(including permitted borrowings);
14) purchase portfolio securities for the Fund from, 17 17 17 17
or sell portfolio securities to, any of the
officers and directors or Trustees of the Trust
or of its investment adviser;
15) invest more than 5% of its net assets (valued at 18, 19 18, 19 18, 19 18, 19
time of purchase) in warrants, nor more than 2%
of its net assets in warrants that are not
listed on the New York or American Stock
Exchanges;
16) write an option on a security unless the option 25 25 25 25
is issued by the Options Clearing Corporation,
an exchange or similar entity;
</TABLE>
Page 4 of 6
<PAGE 51>
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
<TABLE>
<CAPTION>
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
<S> <C> <C> <C> <C>
17) buy or sell an option on a security, a futures 26 26 26 26
contract or an option on a futures contract
unless the option, the futures contract, or the
option on the futures contract is offered
through the facilities of a recognized
securities association or listed on a
recognized exchange or similar entity;
18) purchase a put or call option if the aggregate 27 27 27 27
premiums paid for all put and call options
exceed 20% of its net assets (less the
amount by which any such positions are
in-the-money), excluding put and call
options purchased as closing transactions.
</TABLE>
Note: If a percentage limit is satisfied at the
time of investment or borrowing, a later increase or
decrease in a Fund's assets will not constitute a
violation of the limit.
Page 5 of 6
<PAGE 52>
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND CAFQTRLY
QUARTERLY COMPLIANCE REVIEW MDA
YEAR ENDING DECEMBER 31, 1993 03/31/94
<TABLE>
<CAPTION>
03/31/93 06/30/93 09/30/93 12/31/93
Prepared By: DAR DAR MDA MDA
Reviewed By:
<S> <C> <C> <C> <C>
Source: Portfolio Management Handbook
dated December 20, 1988
(Updated for subsequent events)
1) The Fund may, up to a minimum of 15% of the CHECKLIST CHECKLIST CHECKLIST CHECKLIST
value of its total assets, loan its portfolio 8 8 8 8
securities to broker-dealer firms or other
institutional investors to generate additional
income.
2) The Fund is permitted to enter into repos with 20 20 20 20
member banks of the Federal Reserve System which
have at least $1 billion in deposits, primary
dealers in U.S. government securities or other
financial institutions believed by SteinRoe to
be creditworthy.
The Fund may enter into repos only with 20 20 20 20
financial institutions which, in SteinRoe's
judgment, meet the creditworthiness standards
adopted by the Board of Trustees of the Trust.
At present, the following institutions have been
approved:
a) State Street Bank and Trust Company
b) Daiwa Securities of America, Inc.
c) Goldman Sachs Money Markets, Inc.
d) Morgan Stanley, Inc.
e) Salomon Brothers
Not more than 15% of the Fund's net assets may 13 13 13 13
be invested in illiquid securities, specifically
including repos maturing in more than 7 days.
3) The Fund may not purchase any securities (debt 34 37 37 37
or equity) issued by persons in the securities
or investment banking business except as
permitted by rule 12-d3-1 of the 1940 Act (i.e.,
broker-dealer firms, underwriters, advisers of
investment companies or other investment advisory
firms).
4) The Fund and other investment companies advised 22 22 22 22
by Stein Roe & Farn. are prohibited by the 1940
Act from engaging in joint transactions with one
another. Accordingly, the Fund and other
investment companies for which combined purchases
or sales are made should be obligated to deliver
or make payment for only the portion of the
combined purchase or sale being made by it.
5) No portfolio transaction for the Fund should be 23 23 23 23
placed with broker-dealer firms affiliated with
Stein Roe & Farnham. The following lists all
such broker-dealer firms:
a) Liberty Securities Corporation
b) Keyport Financial Services Corp.
In addition, no portfolio transactions should
be placed with New England Securities Corporation.
</TABLE>
Page 6 of 6
<PAGE 53>
CAFQTR
MDA
03/31/94
STEINROE VARIABLE INVESTMENT TRUST
CAPITAL APPRECIATION FUND
REGULATED INVESTMENT COMPANY
QUARTERLY COMPLIANCE CHECKLIST
FISCAL YEAR END DECEMBER 31, 1993
Requirements for qualification
- ------------------------------
To qualify as a regulated investment company for tax purposes, set
forth more fully in the Code, an investment company generally must:
<TABLE>
<CAPTION>
Prepared By: DAR DAR MDA MDA
Reviewed By:
QUALIFIES (Y/N)
QTR 1 QTR 2 QTR 3 QTR 4
<S> <C> <C> <C> <C>
1. Be a domestic corporation, other than a personal Y Y Y Y
holding company, registered at all times
during the taxable year under the 1940 Act.
2. Elect to be taxed as a regulated investment Y Y Y Y
company or have previously made such election.
3. Derive at least 90 percent of its gross income Y Y Y Y
from dividends, interest, and gains (disregarding
losses) from the sale or other disposition of
securities. (See attached worksheet)
4. Derive less than 30 percent of its gross income Y Y Y Y
from gains (disregarding losses) on the sale or
other disposition of securities held for less
than three months. (See attached worksheet)
5. Meet certain requirements as to diversification Y Y Y Y
of its total assets at the close of each quarter
of the taxable year. (See attached worksheet)
6. Pay out at least 90 percent of its investment done @ done @ done @ Y
company taxable income (as defined) for the year end year end year end
taxable year. (See attached worksheet)
7. Comply with certain record-keeping and Y Y Y Y
notification (to shareholders) requirements in
addition to the records required of an ordinary
corporation.
</TABLE>
<PAGE 54>
INTERNAL REVENUE CODE WORKSHEET
CAPITAL APPRECIATION FUND
FISCAL YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Prepared By: DAR DAR MDA MDA
Reviewed By:
QTR 1 QTR 2 QTR 3 QTR 4
<S> <C> <C> <C> <C>
1. Total assets (gross assets) at
the end of each fiscal quarter. $61,076,549 $70,834,462 $84,520,930 $98,402,768
2. 5% of total assets. 3,053,827 3,541,723 4,226,047 4,920,138
3. Portfolio securities at value in None None None None
excess of the 5% test.
</TABLE>
SECURITY NAME
- -------------
QTR 1.
QTR 2.
QTR 3.
QTR 4. Grupo Radio Centro SA
If there was any purchase of the securities named in line 3 above,
during the quarter under review, it must be determined if that
acquisition caused an investment of more than 5% of the company's
total assets as follows:
NOTES:
QTR 1.
QTR 2.
QTR 3.
QTR 4. No purchases since July 2, 1993, increase due to
market appreciation.
QTR 1 QTR 2 QTR 3 QTR 4
Total assets at quarter
end prior to acquisition
date.
- ---------------------------------------------------------------------
For securities listed above:
<TABLE>
<CAPTION>
(1) (2) (3)
Value of Add: purchases Less: sales of Value of Percent of value
security of security at security at prior security of security
at prior cost including quarter end acquired acquired to total
Security quarter end latest acquisition value (1+2-3) assets*
-------- ----------- ------------------ ----------------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
QTR 1. 0.00%
0.00%
QTR 2. 0.00%
0.00%
QTR 3. 0.00%
0.00%
QTR 4. 0.00%
0.00%
<FN>
*If greater than 5%, security cannot be included in line B-2 of
quarterly compliance requirement 5.
</TABLE>
<PAGE 55>
INTERNAL REVENUE CODE WORKSHEET
CAPITAL APPRECIATION FUND
FISCAL YEAR ENDED DECEMBER 31, 1993
Prepared By: MDA Reviewed By: _________
Requirements 3 and 4: (4th quarter computation)
Income (for the taxable year to date):
Net gain on securities sold (tax basis) $19,052,047
Add back capital losses on sale
of investments 1,731,678
Interest and dividends from invest-
ments (net of taxes) 662,360
Other Income (income equalization) 10,277
Net exchange gains 0
-----------
D. TOTAL $21,456,362
-----------
E. 10 Percent of Line D $2,145,636
-----------
F. 30 Percent of Line D $6,436,909
-----------
Other Income (income other than dividends,
interest and gains on securities) cannot
exceed Line E. 10,277 0.05%
---------- ------
Gains on securities held less than three
months must be less than line F 2,9468,664 13.74%
---------- ------
Requirement 5:
Assets
A. Cash, receivables, securities,
and total other assets $98,402,768
-----------
B-1 Cash, receivables,
government securities,
and securities of other
regulated investment
companies 3,557,882
B-2 Other securities not in-
cluding either (a)
securities of any one
issuer having a value in
excess of 5 percent of line
(A) or (b) securities repre-
senting more than 10 percent
of the outstanding voting
securities of any one
issuer. 89,007,242
----------
B-3 (B-1 plus B-2) $92,565,124
-----------
C. 25 percent of line A $24,600,692
Line B-3 must be at least 50 percent
of line A 94.07%
------
No one issuer other than government securities or securities
of other regulated investment investment companies can
exceed Line C. 0.00%
------
ISSUER: Grupo Radio Centro Corp. 5.92%
<PAGE 56>
CAFCOMP Liberty Investment Services
MDA Section 817(h) Diversification Compliance Review
SRVIT Capital Appreciation Fund 31-Mar-94
Period Ended: 31-Dec-93
Total Assets: $98,402,768
-----------
5% 4,920,138
-----------
Safe Harbor Review
1. List the amounts of the following investment classifications
and their percentage relationship to total assets:
A) Cash, cash items* and receivables 3,557,882 3.62%
B) U.S. Government Securities 0
C) Securities of other RIC's --------- -----
Total: 3,557,882 3.62%
(must be no more than 55%) --------- -----
Applying the Section 817(h) definition of investment,
list the following:
1. All securities of the same issuer: 0 -----
(see detail)
2. All securities of a particular gov't 0 -----
agency: (see detail)
3. All direct obligations of the U.S. 0 -----
Treasury, including cash in excess of
FDIC-insured bank accounts
4. $100,000 of each certificate of deposit 16,540 0.02%
and FDIC-insured bank accounts (include
in Safe Harbor Review as a U.S. Government
Security (see detail):
5. All other securities (securities which 89,007,242 90.45%
individually represent less than 5% of
total assets) (# of investments 82
largest inv. 4.57% Countrywide Funding
6. Securities which represent 5% or more 5,827,500 5.92%
of total assets (see detail) Groupo
Radio Centro Corp.
NOTE: No more than 55% of the value of total assets may be
represented by any 1 investment 5.92% (single
largest investment) Groupo Radio Centro Corp.
No more than 70% of the value of total assets may be
represented by any 2 investments 10.49% (two largest
investments) Countrywide Funding 4.57%
No more than 80% of the value of total assets may be
represented by any 3 investments 14.55% (three largest
investments) Fundex Corp. 4.06%
No more than 90% of the value of total assets may be
represented by any 4 investments 18.61% (four
largest investments) Southland Corp. 4.06%
<PAGE 57>
CAFCOMP
MDA
SRVIT Capital Appreciation Fund Detail Sheet
Period Ended: 31-Dec-93
Securities of the Same Issuer:
Corp. 0 0.00%
------- -------
Total 0 0.00%
Govt. 0 0.00%
------- 0.00%
------- 0.00%
0 0.00%
------- ------
Sub-Total 0 0.00%
------- 0.00%
Total 0 0.00%
Definition of "investment" under Section 817(h).
A) All securities of the same issuer, regardless of the type
or class, all interests in the same real property project,
and all interests in the same commodity are each treated as
a single investment.
B) All securities of a particular agency or instrumentality
of the U.S. Government, regardless of whether or not backed
by the full faith credit of the U.S. Treasury, are treated
as a single investment.
C) All direct obligations of the U.S. Treasury, including
cash in excess of FDIC-insured bank accounts are treated
as a single investment.
D) To the extent insured by the FDIC, all certificates of
deposit and other FDIC-insured accounts are considered
as a security of the FDIC (i.e., $100,000 of each
certificate of deposit.
<PAGE 58>
CAFCOMP Liberty Investment Services
MDA Monthly Compliance Review
SRVIT Capital Appreciation Fund 31-Mar-94
Period Ended: 3/15/94
Total Assets: $113,025,435 Net Assets: $110,215,399
5%: 5,651,272
1. List the amounts of the following investment classifications and
their percentage relationship to total assets:
A) Cash, cash items* and receivables 90,942 0.1%
B) U.S. Government Securities ----------- -----
C) Securities of other RIC's ----------- -----
D) Other securities (exclude any
securities above 5% of assets) 112,925,222 99.9%
Subtotal (> or = 75%) 113,016,164 100.0%
Total Assets 113,025,435 100.0%
E) Municipal Obligations (> or = 50%) ----------- ------
2. List the three largest holdings and their percentage of total
assets (excluding Govt. Sec)
A) *Ford Motor Cr. Co. 4,999,089 4.4%
B) *Dayton Hudson Corp. 4,947,195 4.4%
C) *Merrill Lynch + Co., Inc. 4,700,000 4.2%
*Includes commercial paper
3. Depending on the type of fund, list the appropriate amount
for the largest:
A) Industry classification
(< or = 25%) --------- ----
B) Issues located in the same state --------- ----
4. List the following sources of gross income:
A) Interest Income 154,331 2.6%
B) Dividend Income (net of taxes) 80,379 1.4%
C) Securities Gains (see detail) 5,692,314 96.0%
D) Income from securities on loan --------- -----
E) Other sources (< or = 10%) 304 0.0%
F) Gross income 5,927,328 100.0%
5. Determine the percentage of short-short income to
gross income:
A) Gross income 5,927,328
B) Short-short gains (< or = 30%) 1,813,927
C) Short-short percentage 30.6%
*Cash items do not include certificates of deposit, bank obligations
or commercial paper. A repurchase agreement should be treated as
the security of the bank or broker-dealer, not as cash or a U.S.
Government Security.
<PAGE 59>
CAFCOMP Liberty Investment Services
MDA Section 817(h) Diversification Compliance Review
SRVIT Capital Appreciation Fund 31-Mar-94
Period Ended: 3/15/94
Total Assets: $113,025,435
5%: 5,651,272
Safe Harbor Review
1. List the amount of the following investment classifications
and their percentage relationship to total assets:
A) Cash, cash items* and receivables 90,942 0.1%
B) U.S. Government Securities ------ 0.0%
C) Securities of other RIC's ------ ----
Total: 90,942 0.1%
(must be no more than 55%)
Applying the Section 817(h) definition of investment, list the
following:
1. All securities of the same issuer: -------- -----
(see detail)
2. All securities of a particular gov't ------- -----
agency: (see detail)
3. All direct obligations of the U.S. ------- -----
Treasury, including cash in excess of
FDIC-insured bank accounts
4. $100,000 of each certificate of deposit 42,762 0.0%
and FDIC-insured bank accounts (include
in Safe Harbor Review as a U.S. Government
Security (see detail):
5. All other securities (securities which 112,925,222 99.9%
individually represent less than 5% of
total assets) (# of investments 92
largest inv. 4.4%) *Ford Motor Cr. Co.
6. Securities which represent 5% or more None ----
of total assets (see detail)
NOTE: No more than 55% of the value of total assets may be
represented by any 1 investment 4.4% (single
largest investment) *Ford Motor Cr. Co.
No more than 70% of the value of total assets may be
represented by any 2 investments 8.8% (two largest
investments) *Dayton Hudson Corp. 4.4%
No more than 80% of the value of total assets may be
represented by any 3 investments 13.0% (three largest
investments) *Merrill Lynch + Co., Inc. 4.2%
No more than 90% of the value of total assets may be
represented by any 4 investments 16.7% (four
largest investments) Grupo Radio Centro SA 3.7%
<PAGE 60>
CAFCOMP
MDA
SRVIT Capital Appreciation Fund Detail Sheet
Period Ended: 3/15/94
Security Gains
gross gains net gains net gains gains
(from G/L rep) (from G/L rep) 3/15/94
-------------- ------------- --------- -------
Long term 1,600,411 1,583,507 1,998,860 415,353
Short term 1,807,066 1,382,483 1,438,040 55,557
Short 3 1,747,837 1,747,837 1,813,927 66,090
--------- --------- --------- -------
Total 5,155,313 4,713,826 5,250,827 537,001
Add: gains
1/1 - 1/15 537,001
---------
security
gains for
period 5,692,314
=========
Securities of the Same Issuer:
Govt: FNMA -------------- -----------
FHLMC -------------- -----------
GNMA -------------- -----------
SLMA -------------- -----------
Sub-Total -------------- -----------
U.S. Treasury -------------- -----------
Total Govt -------------- -----------
Corp.
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
-------------- -----------
Total -------------- -----------
A) All securities of the same issuer, regardless of the type
or class, all interests in the same real property project,
and all interests in the same commodity are each treated as
a single investment.
B) All securities of a particular agency or instrumentality
of the U.S. Government, regardless of whether or not backed
by the full faith credit of the U.S. Treasury, are treated
as a single investment.
C) All direct obligations of the U.S. Treasury, including
cash in excess of FDIC-insured bank accounts are treated
as a single investment.
D) To the extent insured by the FDIC, all certificates of
deposit and other FDIC-insured accounts are considered
as a security of the FDIC (i.e., $100,000 of each
certificate of deposit.
<PAGE 61>
SCHEDULE F
EXPENSES
1. The Fund and Transamerica will pay the costs of printing
and/or distributing copies of the documents based upon an
allocation of costs that reflects the Fund's share of total
costs determined according to the number of pages of the
parties' and other funds' respective portions of the
documents.
2. The Adviser and Transamerica will pay the costs of printing
and/or distributing copies of the documents based upon an
allocation of the costs that reflects the Adviser's share of
the total costs determined according to the number of pages of
the parties' and other funds' respective portions of the
documents.
RESPONSIBLE
ITEM FUNCTION PARTY
PROSPECTUS
Annual Update Printing 1
Distribution 1
New Sales: Marketing (supply and distribution of 2
prospectuses to persons who have not yet
invested in a Designated Portfolio)
Delivery of prospectuses to satisfy legal 1
prospectus delivery requirements (e.g., copies
sent with confirmations of sales)
Existing Supply quantities described in Section 3.4 1
Owners: Distribution 1
<PAGE 62>
Interim Updates
New Sales: Marketing (supply and distribution of 2
prospectuses to persons who have not yet
invested in a Designated Portfolio)
Delivery of prospectuses to satisfy legal 1
prospectus delivery requirements (e.g., copies
sent with confirmations of sales
If required by Participating Insurance
Company (PIC) PIC
If required by Schwab Schwab
Existing If required by Fund or Adviser: Fund
Owners: If required by PIC: PIC
If required by Schwab: Schwab
STATEMENTS Same as Prospectus Same
OF ADDITIONAL
INFORMATION
PROXY Printing Fund
MATERIALS Distribution
OF THE FUND (a) If required by law: Fund
(b) If required by participating insurance
company: PIC
(c) If required by Schwab: Schwab
<PAGE 63>
ANNUAL Printing Fund
REPORTS Distribution 1
& OTHER
COMMUNICATIONS
WITH SHAREHOLDERS
OF THE FUND
OPERATIONS All operations and related expenses, including Fund
OF FUND the cost of registration and qualification of
the Fund's shares, preparation and filing of the
Fund's prospectus and registration statement,
proxy materials and reports, the preparation of
all statements and notices required by any
federal or state law and all taxes on the
issuance of the Fund's shares, and all costs
of management of the business affairs of the
Fund.
* Schwab will advise the Adviser and the Fund of the allocation of the
foregoing expenses among the parties as soon as possible after such
allocations are determined.
<PAGE 64>
SCHEDULE G
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities
for the handling of proxies relating to the Fund, the Fund and
Transamerica. The defined terms herein shall have the meanings assigned
in the Participation Agreement except that the term "Transamerica" shall
also include the department or third party assigned by Transamerica to
perform the steps delineated below.
1. The number of proxy proposals is given to Transamerica by the
Fund as early as possible before the date set by the Fund for
the shareholder meeting to facilitate the establishment of
tabulation procedures. At this time the Fund will inform
Transamerica of the Record, Mailing and Meeting dates. This
will be done verbally approximately two months before the
meeting.
2. Promptly after the Record Date, Transamerica will perform a
"tape run", or other activity, which will generate the names,
addresses and number of units which are attributed to each
contractowner/policyholder (the "Contract Owners") as of the
Record Date. Allowance should be made for account adjustments
made after this date that could affect the status of the
Contract Owners' accounts of the Record Date.
Note: The number of proxy statements is determined by the
activities described in Step #2. Transamerica will use its
best efforts to call in the number of Contract Owners to the
Adviser, as soon as possible, but no later than one week after
the Record Date.
3. The Fund's Annual Report must be sent to each Contract Owner
by Transamerica either before or together with the Contract
Owner's receipt of a proxy statement. The Fund will provide
at least one copy of the last Annual Report to Transamerica.
4. The text and format for the Voting Instructions Card ("Cards"
or "Card") is provided to Transamerica by the Fund.
Transamerica shall produce and personalize the Voting
Instruction cards. The Fund's Administrator, Liberty
Investment Services, Inc. must approve the Card before it is
printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the
Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes
<PAGE 65>
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological
process due to possible uncertainties relating to the
proposals.)
5. During this time, the Fund's Administrator will develop and
produce the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be
sent to Transamerica for insertion into envelopes (envelopes
and return envelopes are provided and paid for by
Transamerica). Contents of envelope sent to Contract Owners
by Transamerica will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid) addressed to
Transamerica or its tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is a
small single sheet of paper that requests Contract Owners
to vote as quickly as possible and that their vote is
important. One copy will be supplied by the Fund.)
e. Cover letter - optional, supplied by Transamerica and
reviewed and approved in advance by the Fund's
Administrator.
6. The above contents should be received by Transamerica
approximately 3-5 business days before mail date. Individual
in charge at Transamerica reviews and approves the contents of
the mailing package to ensure correctness and completeness.
Copy of this approval sent to the Fund's Administrator.
7. Package mailed by Transamerica.
* The Fund must allow at least a 15-day solicitation time to
Transamerica as the shareowner. (A 5-week period is
recommended.) Solicitation time is calculated as calendar
days from (but not including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually
takes place in another department or another vendor depending
on the process used. An often used procedure is to sort cards
on arrival by proposal into vote categories of all yes, no, or
mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for
postmark information would be due to an insurance company's
internal procedure.
9. If cards are mutilated, or for any reason are illegible or are
not signed properly, they are sent back to the Contract Owner
with an explanatory letter, a new Card and return envelope.
The mutilated or illegible Card is disregarded and considered
to be not received for purposes of vote tabulation. Such
mutilated or illegible Cards are "hand verified," i.e.,
<PAGE 66>
examined as to why they did not complete the system. Any
questions on those Cards are usually remedied individually.
10. There are various control procedures used to ensure proper
tabulation of votes and accuracy of the tabulation. The most
prevalent is to sort the Cards as they first arrive into
categories depending upon their vote; an estimate of how the
vote is progressing may then be calculated. If the initial
estimates and the actual vote do no coincide, then an
internal audit of that vote should occur. This may entail a
recount.
11. The actual tabulation of votes is done in units which are then
converted to shares. (It is very important that the Fund
receives the tabulations stated in terms of a percentage and
the number of shares.) The Fund's Administrator must review
and approve tabulation format.
12. Final tabulation in shares is verbally given by Transamerica
to the Fund's Administrator on the morning of the meeting not
later than 10:00 a.m. Denver time. The Fund's Administrator
may request an earlier deadline if required to calculate the
votes in time for the meeting.
13. A Certificate of Mailing and Authorization to Vote Shares will
be required from Transamerica as well as an original copy of
the final vote. The Fund's Administrator will provide a
standard form for each Certification.
14. Transamerica will be required to box and archive the Cards
received from the Contract Owners. In the event that any vote
is challenged or is otherwise necessary for legal, regulatory,
or accounting purposes, the Fund's Administrator will be
permitted reasonable access to such Cards.
15. All approvals and "signing-off" may be done orally, but must
always be followed up in writing.
<PAGE 1>
PARTICIPATION AGREEMENT
AMONG
STEINROE VARIABLE INVESTMENT TRUST
STEIN ROE & FARNHAM INCORPORATED
FIRST TRANSAMERICA LIFE INSURANCE COMPANY
and
CHARLES SCHWAB & CO., INC.
This Agreement, made and entered into as of this lst day of
December, 1994 by and among FIRST TRANSAMERICA LIFE INSURANCE COMPANY
(hereinafter "First Transamerica"), a New York life insurance company,
on its own behalf and on behalf of its Separate Account VA-5 NLNY(the
"Account"); STEINROE VARIABLE INVESTMENT TRUST, a business trust
organized under the laws of Massachusetts (hereinafter the "Fund");
STEIN ROE & FARNHAM INCORPORATED hereinafter the "Adviser"), a Delaware
corporation; and CHARLES SCHWAB & CO., INC., a New York corporation
(hereinafter "Schwab").
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies
and/or variable annuity contracts (collectively, the "Variable Insurance
Products") to be offered by insurance companies which have entered into
participation agreements similar to this Agreement (hereinafter
"Participating Insurance Companies"); and
<PAGE 2>
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each designated a "Portfolio" and representing
the interest in a particular managed portfolio of securities and other
assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (hereinafter the "SEC"), dated July 1, 1988 (File
No. 812-7044), granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the "1940 Act")
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by
variable annuity and variable life insurance separate accounts of life
insurance companies that may or may not be affiliated with one another
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and shares of the Portfolio(s) are
registered under the Securities Act of 1933, as amended (hereinafter the
"1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser
under the Investment Advisers Act of 1940, as amended, and any
applicable state securities laws; and
WHEREAS, First Transamerica has registered or will register certain
variable annuity contracts supported wholly or partially by the Account
(the "Contracts") under the 1933 Act and said Contracts are listed in
Schedule A hereto, as it may be amended form time to time by mutual
written agreement; and
<PAGE 3>
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of First Transamerica on September 28, 1993, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, First Transamerica has registered or will register the
Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, First Transamerica intends to purchase shares in the
Portfolio(s) listed in Schedule B hereto, as it may be amended from time
to time by mutual written agreement (the "Designated Portfolio(s)"), on
behalf of the Account to fund the aforesaid Contracts, and the Fund is
authorized to sell such shares to unit investment trusts such as the
Account at net asset value; and
WHEREAS, Schwab will perform certain services for the Fund and
Adviser in connection with the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Account also intends to purchase shares in other open-
end investment companies or series thereof not affiliated with the Trust
(the "Unaffiliated Funds") on behalf of the Account to fund the
Contracts; and
NOW, THEREFORE, in consideration of their mutual promises, First
Transamerica, Schwab, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
<PAGE 4>
1.1. The Fund agrees to sell to First Transamerica those shares of
the Designated Portfolio(s) which the Account orders, executing such
orders on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the order for the shares of the
Portfolios. For purposes of this Section 1.1, First Transamerica shall
be the designee of the Fund for receipt of such orders and receipt by
such designee shall constitute receipt by the Fund, provided that the
Fund receives notice of the applicable order by 9:30 a.m. Eastern time
on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading on which the
Fund calculates its net asset value pursuant to the rules of the SEC.
1.2. The Fund agrees to make shares of the Designated Portfolio(s)
available for purchase at the applicable net asset value per share by
First Transamerica and the Account on those days on which the Fund
calculates its Designated Portfolio(s)' net asset value pursuant to
rules of the SEC, and the Fund shall calculate such net asset value on
each day which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Fund
(hereinafter the "Board") may refuse to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any
Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Board, acting
in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.3. The Fund will not sell shares of the Designated Portfolio(s)
to any insurance company or separate account unless an agreement
containing provisions substantially the same as Sections 2.1, 3.6, 3.7,
3.8, and Article VII of this Agreement is in effect to govern such
sales.
<PAGE 5>
1.4. The Fund agrees to redeem for cash, on First Transamerica's
request, any full or fractional shares of the Fund held by First
Transamerica, executing such requests on a daily basis at the net asset
value next computed after receipt by the Fund or its designee of the
request for redemption. Request for redemption identified by First
Transamerica, or its agent, as being in connection with surrenders,
annuitizations, or death benefits under the Contracts, upon prior
written notice, may be executed within seven (7) calendar days after
receipt by the Fund or its designee of the requests for redemption. If
permitted by an order of the SEC under Section 22(e) of the 1940 Act,
the Fund shall be permitted to delay sending redemption proceeds to
First Transamerica beyond the foregoing deadlines, provided, however,
that the Account receives similar relief to defer paying proceeds to
contract Owners, and further, that the Account is treated no less
favorably than the other shareholders of the Designated Portfolios.
This Section 1.4 may be amended, in writing, by the parties consistent
with the requirements of the 1940 Act and interpretations thereof. For
purposes of this Section 1.4, First Transamerica shall be the designee
of the Fund for receipt of requests for redemption and receipt by such
designee shall constitute receipt by the Fund, provided that the Fund
receives notice of the applicable request for redemption by 9:30 a.m.
Eastern time on the next following Business Day.
1.5 The Parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares may
be sold to other insurance companies (subject to Section 1.3 and Article
VI hereof) and the cash value of the Contracts may be invested in
Unaffiliated Funds.
1.6. First Transamerica shall pay for Fund shares by 11:00 a.m.
Eastern time on the next Business Day after an order to purchase Fund
shares is made in accordance with the
<PAGE 6>
provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire and/or by a credit for any shares redeemed the same
day as the purchase.
1.7. The Fund shall pay and transmit the proceeds of redemptions
of Fund shares by 11:00 a.m. Eastern time on the next Business Day after
a redemption order is received in accordance with Section 1.4 hereof.
Payment shall be in federal funds transmitted by wire and/or a credit
for any shares purchased the same day as the redemption.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to First Transamerica
or the Account. Shares ordered from the Fund will be recorded in an
appropriate title for the Account or the appropriate sub-account of the
Account.
1.9. The Fund or its designee shall furnish same day notice (by
wire or telephone, followed by written confirmation) to First
Transamerica of any income dividends or capital gain distributions
payable on the Designated Portfolio(s)' shares. First Transamerica
hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional
shares of that Portfolio. First Transamerica reserves the right to
revoke this election and to receive all such income, dividends and
capital gain distributions in cash. The Fund or its designee shall
notify First Transamerica by the end of the next following Business Day
of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Designated Portfolio available to First Transamerica on a daily basis as
soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share
<PAGE 7>
available by 6:00 p.m. Eastern time. The Fund or its designee shall
notify First Transamerica by 5:45 p.m. Eastern time in the event that
the Fund cannot meet such 6:00 p.m. deadline. In such event the Fund
shall use its best efforts to make such value available as soon
thereafter as is practicable. If the Fund provides incorrect share net
asset value information, First Transamerica shall be entitled to an
adjustment to the number of shares purchased or redeemed to reflect the
correct net asset value per share (and, if and to the extent necessary,
First Transamerica shall make adjustments to the number of units
credited and/or unit values for the Contracts for the periods affected).
Any error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to First Transamerica. Any error of a an amount less than
$0.01 per share shall be corrected in the next Business Day's net asset
value per share.
ARTICLE II. Representations and Warranties
2.1. First Transamerica represents and warrants that the Contracts
are or will be registered under the 1933 Act; that the Contracts will be
issued and sold in compliance in all material respects with all
applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with state insurance suitability
requirements. First Transamerica further represents and warrants that
it is an insurance company duly organized and in good standing under
applicable law and that it has legally and validly established the
Account prior to any issuance or sale thereof as a segregated asset
account under applicable law (New York Insurance Law) and has registered
the Account as a unit investment trust in accordance with the provisions
of the 1940 Act to serve as a segregated investment account for the
Contracts.
<PAGE 8>
2.2. The Fund represents and warrants that Designated Portfolio
shares sold pursuant to this Agreement shall be registered under the
1933 Act, duly authorized for issuance and sold in compliance with all
applicable federal securities laws including without limitation the 1933
Act, the 1934 Act, and the 1940 Act and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940
Act from time to time as required in order to effect the continuous
offering of its shares.
2.3. The Fund reserves the right to adopt a plan pursuant to Rule
12b-1 under the 1940 Act and to impose an asset-based or other charge to
finance distribution expenses as permitted by applicable law and
regulation. In any event, the Fund and Adviser agree to comply with
applicable provisions and SEC staff interpretations of the 1940 Act to
assure that the investment advisory or management fees paid to the
Adviser by the Fund are legitimate and not excessive. To the extent
that the Fund decides to finance distribution expenses pursuant to Rule
12b-1, the Fund undertakes to have a Board, a majority of whom are not
interested persons of the Fund, formulate and approve any plan pursuant
to Rule 12b-1 under the 1940 Act to finance distribution expenses.
2.4. The Fund represents and warrants that the investment
policies, fees and expenses of the Designated Portfolio(s) are and shall
at all times remain in compliance with the insurance and other
applicable laws of the State of New York and any other applicable state
to the extent required to perform this Agreement. The Fund further
represents and warrants that Designated Portfolio shares will be sold in
compliance with the insurance laws of the State of New York and all
applicable state insurance and securities laws. First Transamerica will
advise the Fund of any applicable changes in New York insurance law that
affect the Designated Portfolios, and the Fund will be deemed to be in
compliance with this Section 2.4 so long as the Fund complies with such
<PAGE 9>
advice of First Transamerica. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only
if and to the extent deemed advisable by the Fund with the concurrence
of First Transamerica. Without limiting the generality of the
foregoing, the Fund represents and warrants that it is and shall at all
times remain in compliance with the investment objectives, policies and
restrictions and the operation of the Fund enumerated in Schedule C
hereto, except as to those items disclosed with prior notice to First
Transamerica and not objected to by the Department of Insurance of the
State of New York.
2.5. The Fund represents and warrants that it is lawfully
organized and validly existing under the laws of the Commonwealth of
Massachusetts and that it does and will comply in all material aspects
with the 1940 Act.
2.6. The Adviser represents and warrants that it is and shall
remain duly registered under all applicable federal and state securities
laws and that it shall perform its obligations for the Fund in
compliance in all material respects with the laws of the State of
Delaware and any applicable state and federal securities laws.
2.7. The Fund and the Adviser represent and warrant that all of
their officers, employees, investment advisers, and other individuals or
entities dealing with money and/or securities of the Fund are, and shall
continue to be at all times, covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than
the minimal coverage required by Section 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The
aforesaid bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company.
<PAGE 10>
2.8. Schwab represents and warrants that it has completed,
obtained and performed, in all material respects, all registrations,
filings, approvals, and authorizations, consents and examinations
required by any government or governmental authority as may be necessary
to perform this Agreement. Schwab does and will comply, in all material
respects, with all applicable laws, rules and regulations in the
performance of its obligations under this Agreement.
2.9. The Fund will provide First Transamerica with as much advance
notice as is reasonably practicable of any material change affecting the
Designated Portfolio(s) (including, but not limited to, any material
change in its registration statement or prospectus affecting the
Designated Portfolio(s) and any proxy solicitation affecting the
Designated Portfolio(s) and consult with First Transamerica in order to
implement any such change in an orderly manner, recognizing the expenses
of changes and attempting to minimize such expenses by implementing them
in conjunction with regular annual updates of the prospectus for the
Contracts. The Fund or Adviser agree to share equitably in expenses
incurred by First Transamerica as a result of actions taken by the Fund,
consistent with the allocation of expenses contained in Schedule F.
2.10. The Insurance Company represents, assuming that the Fund
complies with Article VI of this Agreement, that the Contracts are
currently treated as annuity contracts under applicable provisions of
the Internal Revenue Code of 1986 (the "Code"), as amended, and that it
will make every effort to maintain such treatment and that it will
notify the Fund immediately upon having a reasonably basis for believing
that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
<PAGE 11>
2.11. First Transamerica represents and warrants that it will not
purchase Fund shares with assets derived from tax-qualified retirement
plans except indirectly, through Contracts purchased in connection with
such plans.
2.12. First Transamerica represents and warrants that it will not
transfer or otherwise convey shares of any Designated Portfolio, without
the prior written consent of the Fund, which consent shall not be
unreasonably withheld.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. At least annually, the Fund or the Adviser shall provide
First Transamerica and Schwab with as many copies of the Fund's current
prospectus for the Designated Portfolio(s) as First Transamerica and
Schwab may reasonably request for marketing purposes (including
distribution to Contract owners with respect to new sales of a
Contract). If requested by First Transamerica in lieu thereof, the
Adviser or Fund shall provide such documentation (including a final copy
of the new prospectus for the Designated Portfolio(s)) and other
assistance as is reasonably necessary in order for First Transamerica
once each year (or more frequently if the prospectus for the Designated
Portfolio are amended) to have the prospectus for the Contracts and the
Fund's prospectus for the Designated Portfolio(s) printed together in
one document. The Fund and Adviser agree that the prospectus, and semi-
annual and annual reports for the Designated Portfolio(s) provided
pursuant to this Section 3.1 will described only the Designated
Portfolio(s) and will not name or describe any other portfolios or
series that may be in the Fund unless required by law.
<PAGE 12>
3.2. If applicable state or Federal laws or regulations require
that the Statement of Additional Information ("SAI") for the Fund be
distributed to all Contract purchasers, then the Adviser or the Fund
shall provide First Transamerica with the Fund's SAI or documentation
thereof in such quantities and/or with expenses to be borne in
accordance with Schedule F hereof.
3.3. The Fund or the Adviser shall provide First Transamerica and
Schwab with as many copies of the Fund's SAI as each of them may
reasonably request. The Fund or the Adviser shall also provide such SAI
to any owner of a Contract or prospective owner who requests such SAI
(although it is anticipated that such requests will be made to Schwab).
3.4. The Fund shall provide First Transamerica with copies of its
prospectus, SAI, proxy material, reports to stockholders and other
communications to stockholders for the Designated Portfolio(s) in such
quantity as First Transamerica shall reasonably require for distributing
to Contract owners.
3.5. It is understood and agreed that, except with respect to
information regarding First Transamerica or Schwab provided in writing
by that party, neither First Transamerica nor Schwab are responsible for
the content of the prospectus or SAI for the Designated Portfolio(s).
It is also understood and agreed that, except with respect to
information regarding the Fund, Adviser or the Designated Portfolio(s)
provided in writing by the Fund or the Adviser, neither the Fund nor
Adviser are responsible for the content of the prospectus or SAI for the
Contracts.
3.6. If and to the extent required by law, First Transamerica
shall:
(i) solicit voting instructions from Contract owners;
<PAGE 13>
(ii) vote the Designated Portfolio shares in accordance with
instructions from Contract owners; and
(iii) vote Designated Portfolio shares for which no
instructions have been received in the same proportion
as Designated Portfolio shares for instructions have
been received from Contract owners, so long as and to
the extent that the SEC continues to interpret the 1940
Act to require pass-through voting privileges for
variable contract owners. First Transamerica reserves the
right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by
law.
3.7. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts holding shares of a
Designated Portfolio calculates voting privileges in the manner required
by the Shared Funding Exemptive Order. First Transamerica's procedures
currently are in compliance with such requirements, as described in
Schedule G. The Fund agrees to promptly notify First Transamerica of
any changes of interpretations or amendments of the Shared Funding
Exemptive Order.
3.8. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings (except insofar as the SEC may interpret
Section 16 of the 1940 Act not to require such meetings) or, as the Fund
currently intends, comply with Section 16(c) of the 1940 Act (although
the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's interpretation
of the requirements of Section 16(a) with respect to periodic elections
of directors or trustees and with whatever rules the Commission may
promulgate with respect thereto. The Fund reserves the
<PAGE 14>
right, upon 45 days prior written notice to First Transamerica and
Schwab, to take all actions, including but not limited to, the
dissolution, merger, and sale of all assets of the Fund or any
Designated Portfolio upon the sole authorization of the Board, to the
extent permitted by the laws of The Commonwealth of Massachusetts and
the 1940 Act.
ARTICLE IV. Sales Material and Information
4.1. First Transamerica and Schwab shall furnish, or shall cause
to be furnished, to the Fund or its designee, each piece of sales
literature or other promotional material that First Transamerica or
Schwab, respectively, develops or proposes to use and in which the Fund
(or a Portfolio thereof), its investment adviser or one of its sub-
advisers or the underwriter for the Fund shares is named in connection
with the Contracts, at least 10 (ten) Business Days prior to its use.
No such material shall be used if the Fund or its designee objects to
such use within 5 (five) Business Days after receipt of such material.
4.2. First Transamerica and Schwab shall not give any information
or make any representations or statements on behalf of the Fund or
concerning the Fund in connection with the sale of the Contracts other
than the information or representations contained in the registration
statement or prospectus for the Fund shares, as such registration
statement and prospectus may be amended or supplemented from time to
time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its
designee or by the Adviser, except with the permission of the Fund or
the Adviser.
<PAGE 15>
4.3. The Fund or Adviser shall furnish, or shall cause to be
furnished, to First Transamerica and Schwab, a copy of each piece of
sales literature or other promotional material in which First
Transamerica and/or its separate account(s), or Schwab is named at least
10 (ten) Business Days prior to its use. No such material shall be used
if First Transamerica or Schwab objects to such use within 5 (five)
Business Days after receipt of such material.
4.4. The Fund and the Adviser shall not give any information or
make any representations on behalf of First Transamerica or concerning
First Transamerica, the Account, or the Contracts other than the
information or representations contained in a registration statement or
prospectus for the Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in
reports for the Account, or in sales literature or other promotional
material approved by First Transamerica or its designee, except with the
permission of First Transamerica.
4.5. The Fund and Adviser shall not give any information or make
any representations on behalf of or concerning Schwab, or use Schwab's
name except with permission of Schwab.
4.6. The Fund will provide to First Transamerica and Schwab at
least one complete copy of all registration statements, prospectuses,
Statements of Additional Information, reports, proxy statements, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above,
that relate to the Designated Portfolio(s), contemporaneously with the
filing of such document(s) with the SEC or NASD or other regulatory
authorities.
<PAGE 16>
4.7. First Transamerica or Schwab will provide to the Fund at
least one complete copy of all registration statements, prospectuses,
Statements of Additional Information, reports, solicitations for voting
instructions, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Contracts or the
Account, contemporaneously with the filing of such document(s) with the
SEC, NASD, or other regulatory authority.
4.8. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone
or tape recording, videotape display, signs or billboards, motion
pictures, or other public media), sales literature (i.e., any written
communication distributed or made generally available to customers or
the public, including brochures, circulars, research reports, market
letters, form letters seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration
statements, prospectuses, Statements of Additional Information,
shareholder reports, and proxy materials.
4.9. At the request of any party to this Agreement, each other
party will make available to the other party's independent auditors
and/or representative of the appropriate regulatory agencies, all
records, data and access to operating procedures that may be reasonably
requested in connection with compliance and regulatory requirements
related to this Agreement or any party's obligations under this
Agreement.
ARTICLE V. Fees and Expenses
<PAGE 17>
5.1. The Fund and the Adviser shall pay no fee or other
compensation to First Transamerica under this Agreement, and First
Transamerica shall pay no fee or other compensation to the Fund or
Adviser under this Agreement, although the parties hereto will bear
certain expenses in accordance with Schedule F, Articles III, V, and
other provisions of this Agreement.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, as further provided in Schedule F.
The Fund shall see to it that all shares of the Designated Portfolio(s)
are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale.
5.3. The parties shall bear the expenses of routine annual
distribution (mailing costs) of the Fund's prospectus and distribution
(mailing costs) of the Fund's proxy materials and reports to owners of
Contracts offered by First Transamerica, as provided in Schedule F.
5.4. The Fund and Adviser acknowledge that a principal feature of
the Contracts is the Contract owner's ability to choose from a number of
unaffiliated mutual funds (and portfolios or series thereof), including
the Designated Portfolio(s) and the Unaffiliated Funds, and to transfer
the Contract's cash value between funds and portfolios. The Fund and
Adviser agree to cooperate with First Transamerica and Schwab in
facilitating the operation of the Account and the Contracts as intended,
including but not limited to cooperation in facilitating transfers
between Unaffiliated Funds.
<PAGE 18>
5.5. Schwab agrees to provide certain administrative services,
specified in Schedule D hereto, in connection with the arrangements
contemplated by this Agreement. The parties acknowledge and agree that
the services referred to in this Section 5.5 are recordkeeping,
shareholder communications, and other transaction facilitation and
processing, and related administrative services only and are not the
services of an underwriter or a principal underwriter of the Fund and
that Schwab is not an underwriter for the shares of the Designated
Portfolio(s), within the meaning of the 1933 Act or the 1940 Act.
5.6. As compensation for the services specified in Schedule D
hereto, the Adviser agrees to pay Schwab a monthly Administrative
Service Fee based on the percentage per annum on Schedule D hereto
applied to the average daily value of the shares of the Designated
Portfolio(s) held in the Account with respect to Contracts sold by
Schwab. This monthly Administrative Service Fee is due and payable
before the 15th (fifteenth) day following the last day of the month to
which it relates.
ARTICLE VI. Diversification and Qualification
6.1. The Fund and Adviser represent and warrant that the Fund will
at all times sell its shares and invest its assets in such a manner as
to ensure that the Contracts will be treated as annuity contracts under
the Code, and the regulations issued thereunder. Without limiting the
scope of the foregoing, the Fund and Adviser represent and warrant that
the Fund and each Designated Portfolio thereof will at all times comply
with Section 817(h) of the Code and Treasury Regulation [Section] 1.817-
5, as amended from time to time, and any Treasury interpretations
thereof, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments or
other modifications or successor provisions to such
<PAGE 19>
Section or Regulations. The Fund and the Adviser agree that shares of
the Designated Portfolio(s) will be sold only to Participating Insurance
Companies and their separate accounts.
6.2. No shares of any series or portfolio of the Fund will be sold
to the general public.
6.3. The Fund and Adviser represent and warrant that the Fund and
each Designated Portfolio is currently qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will
maintain such qualification (under Subchapter M or any successor or
similar provisions) as long as this Agreement is in effect.
6.4. The Fund or Adviser will notify First Transamerica
immediately upon having a reasonable basis for believing that the Fund
or any Portfolio has ceased to comply with the aforesaid Section 817(h)
diversification or Subchapter M qualification requirements or might not
so comply in the future.
6.5. The Fund and Adviser acknowledge that full compliance with
the requirements referred to in Sections 6.1, 6.2, and 6.3 hereof is
absolutely essential because any failure to meet those requirements
would result in the Contracts not being treated as annuity contracts for
federal income tax purposes, which would have adverse tax consequences
for Contract owners and could also adversely affect First Transamerica's
corporate tax liability. The Fund and Adviser also acknowledge that it
is solely within their power and control to meet those requirements.
Accordingly, without in any way limiting the effect of Section 8.3
hereof and without in any way limiting or restricting any other remedies
available to First Transamerica, the Adviser will pay all costs
associated with or arising out of any failure, or any anticipated or
reasonably foreseeable failure, of the Fund or any Designated Portfolio
to comply with Sections 6.1, 6.2 or 6.3 hereof,
<PAGE 20>
including all costs associated with reasonable and appropriate
corrections or responses to any such failure; such costs may include,
but are not limited to, the costs involved in creating, organizing, and
registering a new investment company as a funding medium for the
Contracts and/or the costs of obtaining whatever regulatory
authorizations are required to substitute shares of another investment
company for those of the failed Portfolio (including but not limited to
an order pursuant to Section 26(b) of the 1940 Act); such costs are to
include, but are not limited to, fees and expenses of legal counsel and
other advisors to First Transamerica and any federal income taxes or tax
penalties (or "toll charges" or exactments or amounts paid in
settlement) incurred by First Transamerica with respect to itself or
owners of its Contracts in connection with any such failure or
anticipated or reasonably foreseeable failure.
6.6. The Fund shall provide First Transamerica or its designee
with reports certifying compliance with the aforesaid Section 817(h)
diversification and Subchapter M qualification requirements, at the
times provided for and substantially in the form attached hereto as
Schedule E; provided, however, that providing such reports does not
relieve the Fund or Adviser of their responsibility for such compliance
or of their liability for non-compliance.
ARTICLE VII. Potential Conflicts and Compliance With Shared Funding
Exemptive Order
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretive letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c)
<PAGE 21>
an administrative or judicial decision in any relevant proceeding; (d)
the manner in which the investments of any Designated Portfolio(s) are
being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a
decision by a Participating Insurance Company to disregard the voting
instructions of contract owners. The Board shall promptly inform First
Transamerica if it determines that an irreconcilable material conflict
exists and the implications thereof.
7.2. First Transamerica will report any potential or existing
conflicts of which it is aware to the Board. First Transamerica will
assist the Board in carrying out its responsibilities under the Shared
Funding Exemptive Order, by providing the Board with all information
reasonably necessary for the Board to consider any issues raised. This
includes, but is not limited to, an obligation by First Transamerica to
inform the Board whenever contract owner voting instructions are
disregarded. Such responsibilities (other than the duty to report,
which is unqualified) shall be carried out by First Transamerica with a
view only to the interests of its Contract Owners.
7.3. If it is determined by a majority of the Board, or a majority
of its directors who are not interested persons of the Fund, the Adviser
or any sub-adviser to any of the Portfolios (the "Independent
Directors"), that a material irreconcilable conflict exists, First
Transamerica and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a
majority of the Independent Directors), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict,
up to and including: (1) withdrawing the assets allocable to some or
all of the separate accounts from the Fund or any Designated Portfolio
and reinvesting such assets in a different investment medium, including
(but not limited to) another Designated Portfolio of the Fund, or
submitting the question whether such
<PAGE 22>
segregation should be implemented to a vote of all affected contract
owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed
separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by First Transamerica to disregard contract owner voting
instructions and that decision represents a minority position or would
preclude a majority vote, First Transamerica may be required, at the
Fund's election, to withdraw the Account's investment in the Fund and
terminate this Agreement; provided, however; that such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
Independent Directors. Any such withdrawal and termination must take
place within six (6) months after the Fund gives written notice that
this provision is being implemented, and until the end of the effective
date of such termination the Fund shall continue to accept and implement
orders by First Transamerica for the purchase (and redemption) of shares
of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to First
Transamerica conflicts with the majority of other state regulators, then
First Transamerica will withdraw the Account's investment in the Fund
and terminate this Agreement within six months after the Board informs
First Transamerica in writing that it has determined that such decision
has created an irreconcilable material conflict; provided, however, that
such withdrawal and termination shall be limited to the extent required
by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members
<PAGE 23>
of the Board. Until the end of the effective date of such termination,
the Fund shall continue to accept and implement orders by First
Transamerica for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Trustees shall determine whether any
proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new
funding medium for the Contracts. First Transamerica shall not be
required by Section 7.3 to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority
of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any
proposed action does not adequately remedy any irreconcilable material
conflict, then First Transamerica will withdraw the Account's investment
in the Fund and terminate this Agreement within six (6) months after the
Board informs First Transamerica in writing of the foregoing
determination; provided, however, that such withdrawal and termination
shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the Independent
Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder with
respect to mixed or shared funding (as defined in the Shared Funding
Exemptive Order) or terms and conditions materially different from those
contained in the Shared Funding Exemptive Order, then (a) the Fund
and/or Participating Insurance Companies, as appropriate, shall take
such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.6, 3.7, 3.8, 7.1, 7.2, 7.3, 7.4, and 7.5
of this Agreement shall continue in effect only to the extent that terms
<PAGE 24>
and conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By First Transamerica
8.1(a). First Transamerica agrees to indemnify and hold harmless
the Fund and its officers and each member of its Board and the Adviser
(collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written consent of First
Transamerica) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims,
expenses, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the registration statement or prospectus or SAI for
the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to First Transamerica or
Schwab by or on behalf of the Adviser or Fund for use in
the registration statement or prospectus for the
Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or are based upon any untrue statements or
alleged untrue statements of any
<PAGE 25>
material fact contained in any Registration Statement,
prospectus, or statement or additional information for any
Unaffiliated Fund, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
or necessary to make the statements therein not misleading, or
otherwise pertain to or arise in connection with the
availability of any Unaffiliated Funds as an underlying funding
vehicle in respect of the Contracts; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of the Fund not supplied by First Transamerica
or persons under its control) or wrongful conduct of
First Transamerica or persons under its control, with respect
to the sale or distribution of the Contracts or Fund
Shares; or
(iv) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in
a registration statement, prospectus, or sales literature
of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading
if such a statement or omission was made in reliance upon
information furnished in writing to the Fund by or on
behalf of First Transamerica; or
(v) arise as a result of any failure by First Transamerica to
provide the services and furnish the materials under the
terms of this Agreement; or
(vi) arise out of or result from any material breach of any
representation and/or warranty made by First Transamerica in
this Agreement or arise out of or result from any other
material breach of this Agreement by First Transamerica,
as limited by and in accordance with the provisions of Sections 8.1(b)
and 8.1(c) hereof.
8.1(b). First Transamerica shall not be liable under this
indemnification provision with respect to any losses, claims, expenses,
damages, liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
<PAGE 26>
8.1(c). First Transamerica shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
First Transamerica in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify First Transamerica of any such
claim shall not relieve First Transamerica from any liability which it
may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision, except to
the extent that First Transamerica has been prejudiced by such failure
to give notice. In case any such action is brought against the
Indemnified Parties, First Transamerica shall be entitled to
participate, at its own expense, in the defense of such action. First
Transamerica also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from First Transamerica to such party of First Transamerica's election
to assume the defense thereof, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and First
Transamerica will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify First
Transamerica of the commencement of any litigation or proceedings
against them in connection with the issuance or sale of the Fund Shares
or the Contracts or the operation of the Fund.
<PAGE 27>
8.2. Indemnification By Schwab
8.2(a). Schwab agrees to indemnify and hold harmless the Fund and
its officers and each member of its Board and the Adviser (collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of Schwab) or litigation (including
legal and other expenses), to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon Schwab's dissemination of
information regarding the Fund that is both (A)
materially incorrect and (B) that was not either
contained in the Fund's registration statement or sales
literature or provided in writing to Schwab, or approved
in writing, by or on behalf of the Fund or the Adviser;
or
(ii) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the sales literature for the Contracts or arise out of
or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this Agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished in writing to First
Transamerica or Schwab by or on behalf of the Adviser or Fund
for use in the registration statement or prospectus for the
Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of the Fund not supplied by Schwab or
persons under its control) or wrongful conduct of Schwab
or persons under its control, with respect to the sale or
distribution of the Contracts; or
(iv) arise as a result of any failure by Schwab to provide the
services and furnish the materials under the terms of
this Agreement; or
<PAGE 28>
(v) arise out of or result from any material breach of any
representation and/or warranty made by Schwab in this
Agreement or arise out of or result from any other
material breach of this Agreement by Schwab; or
(vi) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in any Registration Statements, prospectus, or statement
of additional information for any Unaffiliated Fund, or
arise out of or are based upon the omission or alleged
omission to state therein a material fact or necessary to
make the statements therein not misleading, or otherwise
pertain to or arise in connection with the availability
of any Unaffiliated Funds as an underlying funding
vehicle in respect of the Contract;
as limited by and in accordance with the provisions of Sections 8.2(b)
and 8.2(c) hereof.
8.2(b). Schwab shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, whichever is applicable.
8.2(c). Schwab shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified Schwab in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify Schwab of any such claim shall not relieve Schwab from any
liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision, except to the extent that Schwab has been prejudiced by such
failure to give notice. In case any such action is brought against the
Indemnified Parties,
<PAGE 29>
Schwab shall be entitled to participate, at its own expense, in the
defense of such action. Schwab also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the
action. After notice from Schwab to such party of Schwab's election to
assume the defense thereof, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and Schwab will
not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.2(d). The Indemnified Parties will promptly notify Schwab of the
commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the
operation of the Fund.
8.3. Indemnification by the Adviser
8.3(a). The Adviser agrees to indemnify and hold harmless First
Transamerica and Schwab and each of their directors and officers and
each person, if any, who controls First Transamerica or Schwab within
the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Adviser) or litigation
(including legal and other expenses) to which the Indemnified Parties
may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to
the sale or acquisition of the Fund's shares or the Contracts and:
<PAGE 30>
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement or prospectus or SAI or
sales literature for the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to the Adviser or Fund
by or on behalf of First Transamerica or Schwab for use in
the Registration Statement or prospectus for the Fund or
in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Adviser or persons under its control) or wrongful conduct
of the Fund or Adviser or persons under their control,
with respect to the sale or distribution of the Contracts
or Fund shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in
a registration statement, prospectus, or sales literature
covering the Contracts or any amendment thereof or
supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated
therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was
made in reliance upon information furnished in writing to
First Transamerica or Schwab by or on behalf of the Adviser or
Fund; or
(iv) arise as a result of any failure by the Fund or Adviser
to provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise, to
comply with the diversification and other qualification
requirements specified in Article VI of this Agreement);
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or
Adviser in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Adviser;
<PAGE 31>
as limited by and in accordance with the provisions of Sections 8.3(b)
and 8.3(c) hereof. This indemnification is in addition to and apart
from the responsibilities and obligations of the Adviser specified in
Article VI hereof.
8.3(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to First Transamerica or to Schwab or the
Account, whichever is applicable.
8.3(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Adviser in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify the Adviser of any such claim shall not relieve the Adviser from
any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this indemnification
provision, except to the extent that the Adviser has been prejudiced by
such failure to give notice. In case any such action is brought against
the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Adviser to such party
of the Adviser's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such party
<PAGE 32>
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). First Transamerica and Schwab agree promptly to notify the
Adviser of the commencement of any litigation or proceedings against it
or any of its officers and directors in connection with the issuance or
sale of the Contracts or the operation of the Account.
8.4. Indemnification By the Fund
8.4(a). The Fund agrees to indemnify and hold harmless First
Transamerica and Schwab, and each of their directors and officers and
each person, if any, who controls First Transamerica or Schwab within
the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.4) against any and
all losses, claims, expenses, damages, liabilities (including amounts
paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties
may be required to pay or may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims,
expenses, damages, liabilities or expenses (or actions in respect
thereof) or settlements, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of
this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification and other qualification
requirements specified in Article VI of this Agreement);
or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund; or
<PAGE 33>
(iii) arise out of or result from the incorrect or untimely
calculation or reporting of the daily net asset value per
share or dividend or capital gain distribution rate;
as limited by and in accordance with the provisions of Sections 8.4(b)
and 8.4(c) hereof.
8.4(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise by subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to First Transamerica, Schwab, the Fund,
the Adviser or the Account, whichever is applicable.
8.4(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have served upon
such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision, except to the extent that the Fund has been prejudiced by
such failure to give notice. In case any such action is brought against
the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Fund to such party of
the Fund's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by
it, and the Fund will not be liable to such party under this
<PAGE 34>
Agreement for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.4(d). First Transamerica and Schwab each agree promptly to
notify the Fund of the commencement of any litigation or proceedings
against itself or any of its respective officers or directors in
connection with this Agreement, the issuance or sale of the Contracts,
the operation of the Account, or the sale or acquisition of shares of
the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of New York.
9.2. This Agreement shall be made subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the Securities and Exchange Commission may grant
(including, but not limited to, the Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party, with or without cause, with
respect to some or all Designated Portfolios, upon one (1)
year advance written notice delivered to the
<PAGE 35>
other parties; provided, however, that such notice shall not be
given earlier than one year following the date of this Agreement;
or
(b) at the option of First Transamerica by written notice to the
other parties with respect to any Designated Portfolio based
upon First Transamerica's reasonable and good faith determination
that shares of such Designated Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) at the option of First Transamerica by written notice to the
other parties with respect to any Designated Portfolio in the
event any of the Designated Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by First
Transamerica; or
(d) at the option of the Fund in the event that formal
administrative proceedings are instituted against First
Transamerica or Schwab by the NASD, the SEC, the Insurance
Commissioner of like official of any state or any other
regulatory body regarding First Transamerica's or Schwab's duties
under this Agreement or related to the sale of the Contracts,
the operation of any Account, or the purchase of the Fund
shares or the shares or sponsor of any Unaffiliated Fund,
provided, however, that the Fund determines in its sole
judgement exercised reasonably and in good faith, that any
such administrative proceedings will have a material adverse
effect upon the ability of First Transamerica or Schwab to
perform its obligations under this Agreement or would have a
material adverse impact upon the Fund; or
<PAGE 36>
(e) at the option of First Transamerica in the event that formal
administrative proceedings are instituted against the Fund or
Adviser by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, provided,
however, that First Transamerica determines in its sole judgement
exercised reasonably and in good faith, that any such
administrative proceedings will have a material adverse
effect upon the ability of the Fund or Adviser to perform its
obligations under this Agreement; or
(f) at the option of First Transamerica by written notice to the
Fund and the Adviser with respect to any Portfolio if
First Transamerica reasonably and in good faith believes that the
Portfolio will fail to meet the Section 817(h) diversification
requirements or Subchapter M qualifications specified in Article VI
hereof; or
(g) at the option of either the Fund or Adviser, if (i) the
Fund or Adviser, respectively, shall determine, in their sole
judgement reasonably exercised in good faith, that either
First Transamerica or Schwab has suffered a material adverse change
in their business or financial condition or is the subject of
material adverse publicity and that material adverse change
or publicity will have a material adverse impact on
First Transamerica's or Schwab's ability to perform its obligations
under this Agreement, (ii) the Fund or Adviser notifies
First Transamerica or Schwab, as appropriate, of that determination
and its intent to terminate this Agreement, and (iii) after
considering the actions taken by First Transamerica or Schwab and
any other changes in circumstances since the giving of such
notice, the determination of the Fund or Adviser shall
continue to apply on the sixtieth (60th) day following
<PAGE 37>
the giving of that notice, which sixtieth day shall be the
effective date of termination; or
(h) at the option of either First Transamerica or Schwab, if (i)
First Transamerica or Schwab, respectively, shall determine, in its
sole judgment reasonably exercised in good faith, that either
the Fund or Adviser have suffered a material adverse change
in their business or financial condition or is the subject of
material adverse publicity and that material adverse change
or publicity will have a material adverse impact upon the
Fund's or Adviser's ability to perform its obligations under
this Agreement, (ii) First Transamerica or Schwab notifies the Fund
or Adviser, as appropriate, of that determination and its
intent to terminate this Agreement, and (iii) after
considering the actions taken by the Fund or Adviser and any
other changes in circumstances since the giving of such
notice, the determination of First Transamerica or Schwab shall
continue to apply on the sixtieth (60th) day following the
giving of that notice, which sixtieth day shall be the
effective date of termination; or
(i) termination at the option of First Transamerica in the event
that formal administrative proceedings are instituted against
Schwab by the NASD, the Securities and Exchange Commission,
or any state securities or insurance department or any
regulatory body regarding Schwab's duties under this
Agreement or related to the sale of the Fund's shares or the
Contracts, the operation of any Account, or the purchase of
Fund shares, provided, however, that First Transamerica determines
in its sole judgment exercised in good faith, that
<PAGE 38>
any such administrative proceedings will have a material adverse
effect upon the ability of Schwab to perform its obligations
related to the Contracts.
10.2. Notice Requirement. No termination of this Agreement shall
be effective unless and until the party terminating this Agreement gives
prior written notice to all other parties of its intent to terminate,
which notice shall set forth the basis for such termination.
10.3. Effect of Termination. Notwithstanding any termination of
this Agreement, the Fund and the Adviser, shall, at the option of First
Transamerica, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts
shall be permitted to reallocate investments in the Designated
Portfolio(s) (as in effect on such date), redeem investments in such
Designated Portfolios(s) and/or invest in such Designated Portfolios(s)
upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.3 shall not apply to
any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.4. Surviving Provisions. Notwithstanding any termination of
this Agreement, each party's obligations under Article VIII to indemnify
other parties shall survive and not be affected by any termination of
this Agreement. In addition, with respect to Existing Contracts, all
provisions of this Agreement shall also survive and not be affected by
any termination of this Agreement.
<PAGE 39>
10.5. Survival of Agreement. A termination by Schwab shall
terminate this Agreement only as to that party, and this Agreement shall
remain in effect as to the other parties; provided, however, that in the
event of a termination by Schwab the other parties shall have the option
to terminate this Agreement upon 60 (sixty) days notice, rather than the
one (1) year specified in Section 10.1(a).
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time
specify in writing to the other party.
If to the Fund:
SteinRoe Variable Investment Trust
c/o Liberty Investment Services, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Attention: Secretary
If to First Transamerica:
First Transamerica Life Insurance Company
575 Fifth Avenue
New York, NY 10017-2422
Attention: President
If to the Adviser:
Stein Roe & Farnham Incorporated
One South Wacker Drive
<PAGE 40>
Chicago, IL 60606
Attention: Secretary
If to Schwab:
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, CA 94014
Attention: General Counsel
<PAGE 41>
ARTICLE XII. Miscellaneous
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement, shall not disclose, disseminate
or utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as such information may come into the public domain. Without
limiting the foregoing, no party hereto shall disclose any information
designated as proprietary by another party.
12.2. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the
same instrument.
12.4. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of the Agreement shall not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation
the Securities and Exchange Commission, the NASD and state insurance
regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry
relating to this Agreement or
<PAGE 42>
the transactions contemplated hereby. Notwithstanding the generality of
the foregoing, each party hereto further agrees to furnish the
California Insurance Commissioner with any information or reports in
connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable
annuity operations of First Transamerica are being conducted in a manner
consistent with the California Variable Annuity Regulations and any
other applicable law or regulations.
12.6. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws.
12.7. This Agreement or any of the rights or obligations hereunder
may not be assigned by any party without the prior written consent of
all parties hereto.
12.8. All persons dealing with the Fund and any Designated
Portfolio shall look solely to the assets of such Designated Portfolio
for the enforcement of any claims against the Fund hereunder. Each
other party acknowledges and agrees that none of the Trustees, officers
or shareholders of the Fund shall have any personal liability for any
obligations entered into by or on behalf of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as
of the date specified below.
<PAGE 43>
First Transamerica:
FIRST TRANSAMERICA LIFE INSURANCE COMPANY
By its authorized officer,
By: [SIGNATURE]
Title: Chairman Gen. Coun. & Sec.
Date: Jan 95
Fund:
STEINROE VARIABLE INVESTMENT TRUST
on behalf of the Designated Portfolio
By its authorized officer,
By: RICHARD R. CHRISTENSEN
Title: President
Date: 1/9/95
Adviser:
STEIN ROE & FARNHAM INCORPORATED
By its authorized officer,
By: JILAINE HUMMEL BAUER
Title: Senior Vice President
Date: 11/10/94
Schwab:
CHARLES SCHWAB & CO., INC.
By its authorized officer,
<PAGE 44>
By: [SIGNATURE]
Title: Vice President
Date: ________
<PAGE 45>
SCHWAB INVESTMENT ADVANTAGE, A VARIABLE ANNUITY
SCHEDULE A
----------
Contracts Form Numbers
- --------- ------------
First Transamerica Life Insurance Company
- -----------------------------------------
Group Annuity Contract Form No. FTGP-501-193
Dollar Cost Averaging Endorsement Form No. FTGE-003-193
Automatic Payout Option Endorsement Form No. FTGE-004-193
Systematic Withdrawal Option Endorsement Form No. FTGE-005-193
Acceptance of Group Annuity Contract Form No. FTGA-003-193
Modification of Allocation of Net Purchase Payments
Provision Form No. FTGE-007-194
Variable Annuity Application Form No. FTGA-004-193
Certificate of Participation Form No. FTCG-101-193
IRA Endorsement Form No. FTCE-005-193
Benefit Distribution Endorsement Form No. FTCE-006-193
Dollar Cost Averaging Endorsement Form No. FTCE-007-193
Automatic Payout Option Endorsement Form No. FTCE-008-193
Systematic Withdrawal Option Endorsement Form No. FTCE-009-193
Annuity Rate Table Endorsement Form No. FTCE-010-193
Unisex Annuity Rate Tables Endorsement Form No. FTCE-010-193
Modification of Allocation of Net Purchase Payments
Provision Form No. FTCE-011-194
<PAGE 46>
SCHEDULE B
----------
Designated Portfolios
- ---------------------
Capital Appreciation Fund
<PAGE 47>
SCHEDULE C
----------
Stein Roe Capital Appreciation Fund (the "Fund")
The Fund is one of the seven Funds that comprise the Stein Roe
Variable Investment Trust (the "Trust"), an open-end diversified
management investment company. The Trust issues shares of beneficial
interest in each Fund that represent interests in a separate portfolio
of securities and other assets.
The Trust is the funding vehicle for variable annuity contracts
("VA contracts") and variable life insurance policies("VLI policies")
offered by the separate accounts of life insurance companies
("Participating Insurance Companies"). The shares of the Fund currently
are sole only to Keyport Life Insurance Company ("Keyport") and Liberty
Life Assurance Company of Boston ("Liberty Mutual").
The Participating Insurance Companies and their separate accounts
are the shareholders or investors ("shareholders") of the Fund. Owners
of VA contracts or owners of VLI policies invest in sub-accounts of
separate accounts of the Participating Insurance Companies that, in
turn, invest in the Funds.
The investment portfolio of the Fund is managed, subject to the
direction of the Board of Trustees, and by Stein Roe & Farnham
Incorporated (the "Adviser"), One South Wacker Drive, Chicago, Illinois
60606, pursuant to an Advisory Agreement dated December 9, 1988 with the
Fund. The Adviser was organized in 1986 to succeed to the business of
Stein Roe & Farnham ("SRF"), a partnership that had been providing
investment advisory and administrative services since 1932. The Adviser
is a wholly owned indirect subsidiary of Liberty Mutual. As of December
21, 1992, the Adviser had assets under management of approximately $28.9
billion.
The Adviser places orders for the purchase and sale of securities
and options for each Fund. In doing so, the Adviser seeks to obtain the
best combination of price and execution, which involves a number of
judgmental factors.
Liberty Investment Services, Inc. the "Administrator", Federal
Reserve Plaza, 600 Atlantic Avenue, Boston, Massachusetts 02210,
provides the Fund with management and administrative services pursuant
to an Administration Agreement with the Trust on behalf of the Fund.
These services include the provision of office space and equipment and
facilities in connection with the maintenance of the Trust's
headquarters, preparation and filing of required reports, arrangements
for meetings, maintenance of the Trust's corporate books and records,
communication with shareholders, and oversight of custodial, accounting
and other
<PAGE 48>
services provided to the Fund by others. The Administrator pays all
compensation of the Trust's Trustees, officers and employees who are
employees of the Administrator.
Under a separate agreement, the Administrator also acts as the
agent of the Fund for the transfer of shares, disbursement of dividends
and maintenance of shareholder account records.
The Administrator was organized in 1983 and commenced active
operations in 1987. It became an indirect wholly owned subsidiary of
Liberty Mutual in 1985.
Liberty Mutual is an international multi-line insurance writer and,
with its affiliates, is currently the fifth largest writer of property-
casualty insurance in the United Sates. Its headquarters are in Boston,
Massachusetts, and it employs approximately 23,000 people in over 250
offices across North America. At December 31, 1992, Liberty Mutual and
its affiliates had total assets of approximately $31.4 billion.
Keyport Financial Services Corp. (the "Underwriter") serves as the
Underwriter of the Trust, and is a wholly owned indirect subsidiary of
Liberty Mutual.
The Fund intends to declare and distribute, as dividends or capital
gains distributions, at least annually, substantially all of its net
investment income and net profits realized from the sale of portfolio
securities, if any, to its shareholders (Participating Insurance
Companies' separate accounts). Income dividends will be declared and
distributed annually. All dividends and distributions are reinvested in
additional shares of the Fund at net asset value, as of the record date
for the distributions.
The Trust's custodian, State Street Bank and Trust Company,
determines net asset value per share of the Fund as of the close or
regular trading on the New York Stock Exchange (currently 4:00 p.m.,
Boston time). Net asset value per share is calculated for the Fund by
dividing the current market value (amortized cost value in the case of
the Cash Income Fund) of total portfolio assets, less all liabilities
(including accrued expenses), by the total number of shares outstanding.
Net asset value is determined on each day when the Exchange is open,
except on such days in which no order to purchase or redeem shares is
received.
Investment Objectives & Policies
The Fund seeks to provide shareholders with growth of capital. It
pursues this objective by investing primarily in common stocks,
securities convertible into common stocks and securities having common
stock characteristics, including rights and warrants, selected primarily
for prospective capital growth.
<PAGE 49>
Investments in newer and smaller companies (those having a market
capitalization of less than $500,000,000), particularly those believed
to be in the earlier phases of growth, are emphasized. The Fund may
also invest in securities of larger, more established companies that the
Adviser believes possess some of the same characteristics as smaller
companies. While income is not an objective, securities appearing to
offer attractive possibilities for future growth of income may be
included in the Fund's portfolio.
The type of securities in which Capital Appreciation Fund invests
may be expected to experience wide fluctuations in price in both rising
and declining markets. The Fund may be expected to experience a greater
degree of market and financial risk than other equity portfolios. The
Fund's portfolio may include securities that are not widely traded or
new issues of securities.
The Fund may invest up to 25% of its total assets in securities of
foreign issuers that are not publicly traded in the U.S., which for this
purpose do not include securities represented by American Depository
Receipts ("ADRs") and securities guaranteed by a U.S. person. While
investment in foreign securities is intended to reduce risk by providing
further diversification, such investments involve sovereign risk in
addition to the credit and market risks normally associated with
domestic securities. Foreign investments may be affected favorably or
unfavorably by changes in currency rates and exchange control
regulations. There may be less publicly available information about a
foreign company than about a U.S. company, and foreign companies may not
be subject to accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies.
Securities of some foreign companies are less liquid or more volatile
than securities of U.S. companies, and foreign brokerage commissions and
custodian fees are generally higher than in the U.S. Investments in
foreign securities may also be subject to other risks different from
those affecting U.S. investments, including local political or economic
developments, expropriation or nationalization of assets, imposition of
withholding taxes on dividend or interest payments, currency
blockage(which would prevent cash from being brought back to the U.S.),
and sometimes less advantageous legal, operational, and financial
protection applicable to foreign subcustodial arrangements. These risks
are carefully considered by the Adviser prior to the purchase of these
securities.
When the Adviser believes that the currency of a particular foreign
country may suffer a substantial decline against the U.S. dollar, it may
cause the Fund to enter into forward contracts to sell an amount of
foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. The Adviser
may also cause the Fund to
<PAGE 50>
enter into forward foreign currency contracts to protect against loss
between trade and settlement dates resulting from changes in foreign
currency exchange rates. Such contracts will also have the effect of
limiting any gains to the Fund that would have resulted from
advantageous changes in such rates.
When the Adviser deems a temporary defensive position advisable The
Fund may invest, without limitation, in high-quality fixed-income
securities, or hold assets in cash or cash equivalents.
The Fund may invest in securities purchased on a when-issued or
delayed-delivery basis. Although the payment terms of these securities
are established at the time the Fund enters into the commitment, the
securities may be delivered and paid for a month or more after the date
of purchase, when their value may have changed and the yields then
available in the market may be greater. The Fund will make such
commitments only with the intention of actually acquiring the
securities, but may sell the securities before settlement date if it is
deemed advisable for investment reasons.
The Fund may also invest in securities purchased on a standby
commitment basis, which is a delayed delivery agreement in which the
Fund binds itself to accept delivery of a security at the option of the
other party to the agreement. The Fund usually receives a commitment
fee in consideration for its standby commitment.
The Fund, may purchase and write both call options and put options
on securities and on indexes, and enter into interest rate and index
futures contracts and options on such futures contracts in order to
provide additional revenue, or to hedge against changes in security
prices or interest rates. If other types of options, future contracts,
or options on future contracts are traded in the future, the Fund may
also use those investment vehicles, provided the Board of Trustees
determines that their use is consistent with the Fund's investment
objective.
Investment Restrictions
The Fund operates under the investment restrictions listed below.
Restrictions numbered (i) through (ix) are fundamental policies which
may not be changed for the Fund without approval of a majority of the
outstanding voting shares of the Fund, defined as the lesser of the vote
of (a) 67% of the shares of the Fund at a meeting where more than 50% of
the outstanding shares are present in person or by proxy or (b) more
than 50% of the outstanding shares of the Fund. Other restrictions are
not fundamental policies and may be changed with respect to the Fund by
the Trustees without shareholder approval.
<PAGE 51>
The following investment restrictions apply to the Fund. The Fund
may not:
(i) with respect to 75% of the value of its total assets,
invest more than 5% of the value of its total assets, taken at
market value at the time of a particular purchase, in the
securities of any one issuer, except (a) securities issued or
guaranteed by the U.S. government or its agencies or
instrumentalities and (b) [with respect to Cash Income Fund only]
certificates of deposit, bankers' acceptances and repurchase
agreements;
(ii) purchase securities of any one issuer if more than 10%
of the outstanding voting securities of such issuer would at the
time beheld by the Fund;
(iii) act as an underwriter of securities, except insofar as
it may be deemed an underwriter for purposes of the Securities Act
of 1933 on disposition of securities acquired subject to legal or
contractual restrictions on resale;
(iv) invest in a security if more than 25% of its total
assets (taken at market value at the time of a particular
purchase) would be invested in the securities of issuers in any
particular industry, except that this restriction does not apply
to (i) securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities;
(v) purchase or sell real estate (although it may purchase
securities secured by real estate or interests therein, and
securities issued by companies which invest in real estate or
interests therein), commodities, or commodity contracts, except
that it may enter into (a) futures and options on futures and (b)
forward contracts;
(vi) purchase securities on margin (except for use of short-
term credits as are necessary for the clearance of transactions),
make short sales of securities, or participate on a joint or a
joint and several basis in any trading account in securities,
except in connection with transactions in options, futures, and
options on futures;
(vii) make loans, but this restriction shall not prevent the
Fund from (a) buying a part of an issue of
<PAGE 52>
bonds, debentures, or other obligations which are publicly
distributed, or from investing up to an aggregate of 15% of its
total assets (taken at market value at the time of each purchase)
in parts of issues of bonds, debentures or other obligations of a
type privately placed with financial institutions, (b) investing
in repurchase agreements, or (c) lending portfolio securities,
provided that it may not lend securities if, as a result, the
aggregate value of all securities loaned would exceed 15% of its
total assets (taken at market value at the time of such loan);
(viii) borrow, except that it may (a) borrow up to 33-1/3% of
its total assets from banks, taken at market value at the time of
such borrowing, as a temporary measure for extraordinary or
emergency purposes, but not to increase portfolio income (the
total of reverse repurchase agreements and such borrowings will
not exceed 33-1/3% of its total assets, and the Fund will not
purchase additional securities when its borrowings, less proceeds
receivable from sales of portfolio securities, exceed 5% of its
total assets and (b) enter into transactions in options, futures,
and options on futures.
The Fund is also subject to the following restrictions and
policies, which are not fundamental and may be changed by the
Trustees without shareholder approval.
The Fund may not:
(a) invest in companies for the purpose of exercising control
or management;
(b) purchase more than 3% of the stock of another investment
company; or purchase stock of other investment companies equal to
more than 5% of the Fund's total assets (valued at time of
purchase) in the case of any one other investment company and 10%
of such assets (valued at the time of purchase) in the case of all
other investment companies in the aggregate; any such purchases
are to be made in the open market where no profit to a sponsor or
dealer results from the purchase, other than the customary
broker's commission, except for securities acquired as part of a
merger, consolidation or acquisition of assets;
(c) mortgage, pledge, hypothecate or in any manner transfer,
as security for indebtedness, any securities owned or held by it,
except as may be necessary in connection with (i) permitted
<PAGE 53>
borrowings and (ii) options, futures and options on futures;
(d) issue senior securities, except to the extent permitted
by the Investment Company Act of 1940, including permitted
borrowings;
(e) purchase portfolio securities for the Fund from, or sell
portfolio securities to, any of the officers and directors or
Trustees of the Trust or of its Adviser;
(f) invest more than 5% of its net assets (valued at time of
purchase) in warrants that are not listed on the New York or
American Stock Exchange;
(g) write an option on a security unless the option is issued
by the Options Clearing Corporation, an exchange, or similar
entity;
(h) buy or sell an option on a security, a futures contract,
or an option on a futures contract unless the option, the futures
contract, or the option on the futures contract is offered through
the facilities of a recognized securities association or listed on
a recognized exchange or similar entity;
(i) purchase a put or call option if the aggregate premiums
paid for all put and call potions exceed 20% of its net assets
(less the amount by which any such positions are in-the-money),
excluding put and call options purchased as closing transactions;
(j) investment more than 15% of the Fund's net assets (taken
at market value at the time of each purchase) in illiquid
securities including repurchase agreements maturing in more than
seven days.
<PAGE 54>
SCHEDULE D
----------
ADMINISTRATIVE SERVICES
-----------------------
To be performed by Charles Schwab & Co., Inc.
A. Schwab will provide the properly registered and licensed personnel
and systems needed for all customer servicing support - for both fund
and annuity information and questions - including:
delivery of prospectus - both fund and annuity;
entry of initial and subsequent orders;
transfer of cash to insurance company and/or funds;
explanations of fund objectives and characteristics;
entry of transfers between funds;
fund balance and allocation inquiries;
mail fund prospectus;
B. Schwab will calculate on a daily basis for each fund the number of
shares and the asset balance on which the fee is to be paid pursuant to
this agreement. Also provided will be a monthly summary of the reports,
expressed in both shares and dollar amounts.
C. Schwab will communicate all purchase, withdrawal, and exchange
orders it receives from its customers to First Transamerica who will
retransmit them to each fund.
D. For its services, Schwab shall receive a fee of 0.20% per annum
applied to the average daily value of the shares of the fund held by
Schwab's customers, payable by the Adviser directly to Schwab, such
payments being due and payable within 15 (fifteen) days after the last
day of the month to which such payment relates.
<PAGE 55>
SCHEDULE E
----------
Reports per Section 6.6
- -----------------------
With regard to the reports relating to the quarterly testing of
compliance with the requirement of Section 817(h) and Subchapter M under
the Internal Revenue Code (the "Code") and the regulations thereunder,
the Fund shall provide within twenty (20) Business Days of the close of
the calendar quarter a report in the attached form regarding the status
under such sections of the Code of the Designated Portfolio(s), and if
necessary, identification of any remedial action to be taken to remedy
non-compliance.
With regard to the reports relating to the year-end testing of
compliance with the requirements of Subchapter M of the Code, referred
to hereinafter as "RIC status," the Fund will provide the reports on the
following basis: the year-end report in the attached form will be
provided 45 days after the end of the calendar year, but prior thereto,
the Fund will provide the additional interim and supplemental reports,
described below.
The additional reports are as follows:
1. A report in the usual reporting format and content, as of November
30, of each future fiscal year. The report will be provided under cover
of a letter from the Adviser stating that the Fund is in full compliance
with the requirements of Section 817(h) and Subchapter M of the Code.
Assuming such satisfactory report, the Fund will not provide any
additional interim reports. The report will be delivered by facsimile
by the twentieth day of December.
2. In the alternative, if a problem, as defined below, is identified in
the November report or its accompanying transmittal letter, additional
interim reports, on a weekly basis, starting on the 15th of December and
through the 30th of December, also will be supplied ("additional interim
reports"). The additional interim reports will not follow the format of
the regular reports, but will specifically address the problem
identified in the November 30 report. If any interim report,
thereafter, memorializes the cure of the problem, subsequent additional
reports will not be required.
<PAGE 56>
With regard to the delivery of the additional reports, they will be
transmitted by facsimile on the next Business Day, subject to the
following schedule of special dates: if the 15th of December is a
Saturday, the required report date will be accelerated to the 14th of
December; if the 15th of December is a Sunday, the report will be
transmitted on the 16th of December.
3. A problem with regard to RIC status is defined as any violation of
the following standards, as referenced to the applicable sections of the
Code:
(a) Less than ninety-five percent of gross income is derived from
sources of income specified in Section 851(b)(2);
(b) Twenty-five percent or greater gross income is derived from the sale
or disposition of assets specified in Section 851(b)(3);
(c) Fifty-five percent or less of the value of total assets consists of
assets specified in Sections 851(b)(4)(A); and
(d) Twenty percent or more of the value of total assets is invested in
the securities of one issuer, as that requirement is set forth in
Section 851(b)(4)(B).
<PAGE 61>
SCHEDULE F
EXPENSES
1. The Fund and First Transamerica will pay the costs of printing
and/or distributing copies of the documents based upon an
allocation of costs that reflects the Fund's share of total
costs determined according to the number of pages of the
parties' and other funds' respective portions of the
documents.
2. The Adviser and First Transamerica will pay the costs of printing
and/or distributing copies of the documents based upon an
allocation of the costs that reflects the Adviser's share of
the total costs determined according to the number of pages of
the parties' and other funds' respective portions of the
documents.
RESPONSIBLE
ITEM FUNCTION PARTY
PROSPECTUS
Annual Update Printing 1
Distribution 1
New Sales: Marketing (supply and distribution of 2
prospectuses to persons who have not yet
invested in a Designated Portfolio)
Delivery of prospectuses to satisfy legal 1
prospectus delivery requirements (e.g., copies
sent with confirmations of sales)
Existing Supply quantities described in Section 3.4 1
Owners: Distribution 1
<PAGE 62>
Interim Updates
New Sales: Marketing (supply and distribution of 2
prospectuses to persons who have not yet
invested in a Designated Portfolio)
Delivery of prospectuses to satisfy legal 1
prospectus delivery requirements (e.g., copies
sent with confirmations of sales
If required by Participating Insurance
Company (PIC) PIC
If required by Schwab Schwab
Existing If required by Fund or Adviser: Fund
Owners: If required by PIC: PIC
If required by Schwab: Schwab
STATEMENTS Same as Prospectus Same
OF ADDITIONAL
INFORMATION
PROXY Printing Fund
MATERIALS Distribution
OF THE FUND (a) If required by law: Fund
(b) If required by participating insurance
company: PIC
(c) If required by Schwab: Schwab
<PAGE 63>
ANNUAL Printing Fund
REPORTS Distribution 1
& OTHER
COMMUNICATIONS
WITH SHAREHOLDERS
OF THE FUND
OPERATIONS All operations and related expenses, including Fund
OF FUND the cost of registration and qualification of
the Fund's shares, preparation and filing of the
Fund's prospectus and registration statement,
proxy materials and reports, the preparation of
all statements and notices required by any
federal or state law and all taxes on the
issuance of the Fund's shares, and all costs
of management of the business affairs of the
Fund.
* Schwab will advise the Adviser and the Fund of the allocation of the
foregoing expenses among the parties as soon as possible after such
allocations are determined.
<PAGE 64>
SCHEDULE G
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities
for the handling of proxies relating to the Fund by the Adviser, the
Fund and First Transamerica. The defined terms herein shall have the
meanings assigned in the Participation Agreement except that the term
"First Transamerica" shall also include the department or third party
assigned by First Transamerica to perform the steps delineated below.
1. The number of proxy proposals is given to First Transamerica by the
Adviser as early as possible before the date set by the Fund for
the shareholder meeting to facilitate the establishment of
tabulation procedures. At this time the Adviser will inform
First Transamerica of the Record, Mailing and Meeting dates. This
will be done verbally approximately two months before the
meeting.
2. Promptly after the Record Date, First Transamerica will perform a
"tape run", or other activity, which will generate the names,
addresses and number of units which are attributed to each
contractowner/policyholder (the "Contract Owners") as of the
Record Date. Allowance should be made for account adjustments
made after this date that could affect the status of the
Contract Owners' accounts of the Record Date.
Note: The number of proxy statements is determined by the
activities described in Step #2. First Transamerica will use its
best efforts to call in the number of Contract Owners to the
Adviser, as soon as possible, but no later than one week after
the Record Date.
3. The Fund's Annual Report must be sent to each Contract Owner
by First Transamerica either before or together with the Contract
Owner's receipt of a proxy statement. The Adviser will provide
at least one copy of the last Annual Report to First Transamerica.
4. The text and format for the Voting Instructions Card ("Cards"
or "Card") is provided to First Transamerica by the Fund.
First Transamerica shall produce and personalize the Voting
Instruction cards. The legal department of the Adviser ("Adviser
Legal") must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes
<PAGE 65>
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological
process due to possible uncertainties relating to the
proposals.)
5. During this time, Adviser Legal will develop and produce the
Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to
First Transamerica for insertion into envelopes (envelopes
and return envelopes are provided and paid for by First
Transamerica). Contents of envelope sent to Contract Owners
by First Transamerica will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid) addressed to
First Transamerica or its tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is a
small single sheet of paper that requests Contract Owners
to vote as quickly as possible and that t their vote is
important. One copy will be supplied by the Fund.)
e. Cover letter - optional, supplied by First Transamerica and
reviewed and approved in advance by Adviser Legal.
6. The above contents should be received by First Transamerica
approximately 3-5 business days before mail date. Individual
in charge at First Transamerica reviews and approves the contents of
the mailing package to ensure correctness and completeness.
Copy of this approval sent to Adviser Legal.
7. Package mailed by First Transamerica.
* The Fund must allow at least a 15-day solicitation time to
First Transamerica as the shareowner. (A 5-week period is
recommended.) Solicitation time is calculated as calendar
days from (but not including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually
takes place in another department or another vendor depending
on the process used. An often used procedure is to sort cards
on arrival by proposal into vote categories of all yes, no, or
mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for
postmark information would be due to an insurance company's
internal procedure.
9. If cards are mutilated, or for any reason are illegible or are
not signed properly, they are
<PAGE 66>
sent back to the Contract Owner with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
tabulation. Such mutilated or illegible Cards are "hand verified,"
i.e., examined as to why they did not complete the system. Any
questions on those Cards are usually remedied individually.
10. There are various control procedures used to ensure proper
tabulation of votes and accuracy of the tabulation. The most
prevalent is to sort the Cards as they first arrive into
categories depending upon their vote; an estimate of how the
vote is progressing may then be calculated. If the initial
estimates and the actual vote do no coincide, then an
internal audit of that vote should occur. This may entail a
recount.
11. The actual tabulation of votes is done in units which are then
converted to shares. (It is very important that the Fund
receives the tabulations stated in terms of a percentage and
the number of shares.) Adviser Legal must review and approve
tabulation format.
12. Final tabulation in shares is verbally given by First Transamerica
to Adviser Legal on the morning of the meeting not later than 10:00
a.m. Denver time. Adviser Legal may request an earlier deadline if
required to calculate the votes in time for the meeting.
13. A Certificate of Mailing and Authorization to Vote Shares will
be required from First Transamerica as well as an original copy of
the final vote. Adviser Legal will provide a standard form for each
Certification.
14. First Transamerica will be required to box and archive the Cards
received from the Contract Owners. In the event that any vote
is challenged or is otherwise necessary for legal, regulatory,
or accounting purposes, Adviser Legal will be permitted reasonable
access to such Cards.
15. All approvals and "signing-off" may be done orally, but must
always be followed up in writing.
<PAGE>
STEINROE VARIABLE INVESTMENT TRUST
ACCOUNTING AND BOOKKEEPING AGREEMENT
(date)
This Agreement is made this ___ day of ______, 19__, by
and between SteinRoe Variable Investment Trust, a Massachusetts
business trust, (hereinafter referred to as the "Trust") and Stein
Roe & Farnham Incorporated ("SteinRoe"), a Delaware corporation.
1. Appointment. Each Trust hereby appoints SteinRoe to act as
its agent to perform the services described herein with respect
to each series of shares of the Trust (the "Series") identified
in and beginning on the date specified on Appendix I to this
Agreement, as may be amended from time to time. SteinRoe
hereby accepts appointment as each Trust's agent and agrees to
perform the services described herein.
2. Accounting.
(a) Pricing. For each Series of the Trust, SteinRoe shall
value all securities and other assets of the Series,
and compute the net asset value per share of such
Series, at such times and dates and in the manner and
by such methodology as is specified in the then
currently effective prospectus and statement of
additional information for such Series, and pursuant
to such other written procedures or instructions
furnished to SteinRoe by the Trust. To the extent
procedures or instructions used to value securities
or other assets of a Series under this Agreement are
at any time inconsistent with any applicable law or
regulation, the Trust shall provide SteinRoe with
written instructions for valuing such securities or
assets in a manner which the Trust represents to be
consistent with applicable law and regulation.
(b) Net Income. SteinRoe shall calculate with such
frequency as the Trust shall direct, the net income
of each Series of the Trust for dividend purposes and
on a per share basis. Such calculation shall be at
such times and dates and in such manner as the Trust
shall instruct SteinRoe in writing. For purposes of
such calculation, SteinRoe shall not be responsible
for determining whether any dividend or interest
accruable to the Trust is or will be actually paid,
but will accrue such dividend and interest unless
otherwise instructed by the Trust.
(c) Capital Gains and Losses. SteinRoe shall calculate
gains or losses of each Series of the Trust from the
sale or other disposition of assets of that Series as
the Trust shall direct.
(d) Yields. At the request of the Trust, SteinRoe shall
compute yields for each Series of the Trust for such
periods and using such formula as shall be instructed
by the Trust.
(e) Communication of Information. SteinRoe shall provide
the Trust, the Trust's transfer agent and such other
parties as directed by the Trust with the net asset
value per share, the net income per share and yields
for each Series of the Trust at such time and in such
manner and format and with such frequency as the
parties mutually agree.
(f) Information Furnished by the Trust. The Trust shall
furnish SteinRoe with any and all instructions,
explanations, information, specifications and
documentation deemed necessary by SteinRoe in the
performance of its duties hereunder, including,
without limitation, the amounts and/or written
formula for calculating the amounts, and times of
accrual of liabilities and expenses of each Series of
the Trust. The Trust shall also at any time and from
time to time furnish SteinRoe with bid, offer and/or
market values of securities owned by the Trust if the
same are not available to SteinRoe from a pricing or
similar service designated by the Trust for use by
SteinRoe to value securities or other assets.
SteinRoe shall at no time be required to commence or
maintain any utilization of, or subscriptions to, any
such service which shall be the sole responsibility
and expense of the Trust.
3. Recordkeeping.
(a) SteinRoe shall, as agent for the Trust, maintain and
keep current and preserve the general ledger and
other accounts, books, and financial records of the
Trust relating to activities and obligations under
this Agreement in accordance with the applicable
provisions of Section 31(a) of the General Rules and
Regulations under the Investment Company Act of 1940,
as amended (the "Rules").
(b) All records maintained and preserved by SteinRoe
pursuant to this Agreement which the Trust is
required to maintain and preserve in accordance with
the Rules shall be and remain the property of the
Trust and shall be surrendered to the Trust promptly
upon request in the form in which such records have
been maintained and preserved.
(c) SteinRoe shall make available on its premises during
regular business hours all records of a Trust for
reasonable audit, use and inspection by the Trust, its
agents and any regulatory agency having authority over the
Trusts.
4. Instructions, Opinion of Counsel, and Signatures.
(a) At any time Stein Roe may apply to a duly authorized
agent of the Trust for instructions regarding the
Trust, and may consult counsel for such Trust or its
own counsel, in respect of any matter arising in
connection with this Agreement, and it shall not be
liable for any action taken or omitted by it in good
faith in accordance with such instructions or with
the advice or opinion of such counsel. SteinRoe
shall be protected in acting upon any such
instruction, advice, or opinion and upon any other
paper or document delivered by the Trust or such
counsel believed by SteinRoe to be genuine and to
have been signed by the proper person or persons and
shall not be held to have notice of any change of
authority of any officer or agent of the Trust, until
receipt of written notice thereof from such Trust.
(b) SteinRoe may receive and accept a certified copy of a
vote of the Board of Trustees of the Trust as
conclusive evidence of (i) the authority of any
person to act in accordance with such vote or (ii)
any determination or any action by the Board of
Trustees pursuant to its Agreement and Declaration of
Trust as described in such vote, and such vote may be
considered as in full force and effect until receipt
by SteinRoe of written notice to the contrary.
5. Compensation. The Trust shall reimburse SteinRoe from the
assets of the respective applicable Series of the Trust, for
any and all out-of-pocket expenses and charges in performing
services under this Agreement and such compensation as is
provided in Appendix II to this Agreement, as amended from time
to time. SteinRoe shall invoice the Trust as soon as
practicable after the end of each calendar month, with
allocation among the respective Series and full detail, and the
Trust shall promptly pay SteinRoe the invoiced amount.
6. Confidentiality of Records. SteinRoe agrees not to
disclose any information received from the Trust to any other
client of SteinRoe or to any other person except its employees
and agents, and shall use its best efforts to maintain such
information as confidential. Upon termination of this
Agreement, SteinRoe shall return to each Trust all records in
the possession and control of SteinRoe related to such Trust's
activities, other than SteinRoe's own business records, it
being also understood and agreed that any programs and systems
used by SteinRoe to provide the services rendered hereunder
will not be given to any Trust.
7. Liability and Indemnification.
(a) SteinRoe shall not be liable to any Trust for any
action taken or thing done by it or its employees or
agents on behalf of the Trust in carrying out the
terms and provisions of this Agreement if done in
good faith and without negligence or misconduct on
the part of SteinRoe, its employees or agents.
(b) Each Trust shall indemnify and hold SteinRoe, and its
controlling persons, if any, harmless from any and
all claims, actions, suits, losses, costs, damages,
and expenses, including reasonable expenses for
counsel, incurred by it in connection with its
acceptance of this Agreement, in connection with any
action or omission by it or its employees or agents
in the performance of its duties hereunder to the
Trust, or as a result of acting upon instructions
believed by it to have been executed by a duly
authorized agent of the Trust or as a result of
acting upon information provided by the Trust in form
and under policies agreed to by SteinRoe and the
Trust, provided that: (i) to the extent such claims,
actions, suits, losses, costs, damages, or expenses
relate solely to one or more Series, such
indemnification shall be only out of the assets of
that Series or group of Series; (ii) this
indemnification shall not apply to actions or
omissions constituting negligence or misconduct on
the part of SteinRoe or its employees or agents,
including but not limited to willful misfeasance, bad
faith, or gross negligence in the performance of
their duties, or reckless disregard of their
obligations and duties under this Agreement; and
(iii) SteinRoe shall give the Trust prompt notice and
reasonable opportunity to defend against any such
claim or action in its own name or in the name of
SteinRoe.
(c) SteinRoe shall indemnify and hold harmless each Trust
from and against any and all claims, demands,
expenses and liabilities which such Trust may sustain
or incur arising out of, or incurred because of, the
negligence or misconduct of SteinRoe or its agents or
contractors, or the breach by SteinRoe of its
obligations under this Agreement, provided that: (i)
this indemnification shall not apply to actions or
omissions constituting negligence or misconduct on
the part of such Trust or its other agents or
contractors and (ii) such Trust shall give SteinRoe
prompt notice and reasonable opportunity to defend
against any such claim or action in its own name or
in the name of such Trust.
8. Further Assurances. Each party agrees to perform such
further acts and execute such further documents as are
necessary to effectuate the purposes hereof.
9. Dual Interests. It is understood and agreed that some
person or persons may be trustees, officers, or shareholders of
both the Trusts and SteinRoe, and that the existence of any
such dual interest shall not affect the validity hereof or of
any transactions hereunder except as otherwise provided by
specific provision of applicable law.
10. Amendment and Termination. This Agreement may be modified
or amended from time to time, or terminated, by mutual
agreement between the parties hereto and may be terminated by
at least one hundred eighty (180) days' written notice given by
one party to the other. Upon termination hereof, each Trust
shall pay to SteinRoe such compensation as may be due from it
as of the date of such termination, and shall reimburse
SteinRoe for its costs, expenses, and disbursements payable
under this Agreement to such date. In the event that, in
connection with termination, a successor to any of the duties
or responsibilities of SteinRoe hereunder is designated by a
Trust by written notice to SteinRoe, SteinRoe shall promptly
upon such termination and at the expense of such Trust, deliver
to such successor all relevant books, records, and data
established or maintained by SteinRoe under this Agreement and
shall cooperate in the transfer of such duties and
responsibilities, including provision, at the expense of such
Trust, for assistance from SteinRoe personnel in the
establishment of books, records, and other data by such
successor.
11. Assignment. Any interest of SteinRoe under this Agreement
shall not be assigned or transferred either voluntarily or
involuntarily, by operation of law or otherwise, without prior
written notice to each Trust.
12. Notice. Any notice under this Agreement shall be in
writing, addressed and delivered or sent by registered mail,
postage prepaid to the other party at such address as such
other party may designate for the receipt of such notices.
Until further notice to the other parties, it is agreed that
the address of each Trust and SteinRoe is One South Wacker
Drive, Chicago, Illinois 60606, Attention: Secretary.
13. Non-Liability of Trustees and Shareholders. Any
obligation of the Trust hereunder shall be binding only upon
the assets of that Trust (or the applicable Series thereof), as
provided in the Agreement and Declaration of Trust of that
Trust, and shall not be binding upon any Trustee, officer,
employee, agent or shareholder of the Trust or upon any other
Trust. Neither the authorization of any action by the Trustees
or the shareholders of the Trust, nor the execution of this
Agreement on behalf of the Trust shall impose any liability
upon any Trustee or any shareholder. Nothing in this
Agreement shall protect any Trustee against any liability to
which such Trustee would otherwise be subject by willful
misfeasance, bad faith or gross negligence in the performance of
his duties, or reckless disregard of his obligations and duties
under this Agreement. In connection with the discharge and
satisfaction of any claim made by SteinRoe against the Trust
involving more than one Series, the Trust shall have the
exclusive right to determine the appropriate allocations of
liability for any such claim between or among the Series.
14. References and Headings. In this Agreement and in any
such amendment, references to this Agreement and all
expressions such as "herein," "hereof," and "hereunder," shall
be deemed to refer to this Agreement as amended or affected by
any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as part
hereof or control or affect the meaning, construction or effect
of this Agreement. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an
original.
15. Governing Law. This Agreement shall be governed by the
laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the day and year first above written.
STEINROE VARIABLE INVESTMENT TRUST
By: RICHARD R. CHRISTENSEN
Chairman
Attest:
KEVIN M. CAROME
Secretary
STEIN ROE & FARNHAM INCORPORATED
By: TIMOTHY K. ARMOUR
President - Fund Division
Attest:
JILAINE HUMMEL BAUER
Assistant Secretary
<PAGE>
APPENDIX I
FUND EFFECTIVE DATE
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STEINROE VARIABLE INVESTMENT TRUST
Cash Income Fund
Investment Grade Bond Fund
Mortgage Securities Income Fund
High Yield Bond Fund
Managed Income Fund
Managed Assets Fund
Managed Growth Stock Fund
Capital Appreciation Fund
Strategic Managed Assets Fund
<PAGE>
APPENDIX II
For the services provided under the Accounting Agreement
(the "Agreement"), the Trust shall pay SteinRoe an annual fee
with respect to each Fund, calculated and paid monthly, equal to
$25,000 plus .0025 percent per annum of the average daily net
assets of the Fund in excess of $50 million. Such fee shall be
paid within thirty days after receipt of monthly invoice.
PARTICIPATION AGREEMENT
AMONG
KEYPORT BENEFIT LIFE INSURANCE COMPANY,
KEYPORT FINANCIAL SERVICES CORP.,
and
STEINROE VARIABLE INVESTMENT TRUST
This Agreement, made and entered into as of this 8th day of May, 1998
by and among Keyport Benefit Life Insurance Company (the "Company"), on its
own behalf and on behalf of its Separate Account(s), each of which is a
segregated asset account of the Company, SteinRoe Variable Investment Trust
(the "Trust"), and Keyport Financial Services Corp. ("KFSC").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and
variable annuity contracts (collectively, "Variable Insurance Products") to
be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares (such series being hereinafter referred to individually as
a "Series" or collectively as the "Series"); and
WHEREAS, the Trust relies on an order from the Securities and Exchange
Commission ("SEC"), dated July 1, 1988 (File No. 812-7044), granting life
insurance companies and variable annuity and variable life insurance
separate accounts exemptions from the provisions of Sections 9(a), 13(a),
15(a), and 15(b) of the Investment Company Act of 1940, as amended (the
"1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder to the
extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, Stein Roe & Farnham Incorporated. ("Stein Roe") is duly
registered as an investment adviser under the Advisers Act and applicable
state securities laws; and provides certain administrative services; and
WHEREAS, Liberty Investment Services, Inc. ("LIS") serves as transfer
agent to the Trust; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, the Company has established duly organized, validly existing
segregated asset accounts (the "Separate Accounts") by resolution of the
Board of Directors of the Company; and
WHEREAS, the Company has registered or will register certain Separate
Accounts as unit investment trusts under the 1940 Act; and
WHEREAS, the Company relies on certain provisions of the 1940 and 1933
Acts that exempt certain Separate Accounts and Variable Insurance Products
from the registration requirements of the Acts in connection with the sale
of Variable Insurance Products under certain tax-advantaged retirement
programs, described in Article II., Section 2.12. and as provided for by
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, KFSC is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Trust on behalf
of each Separate Account to fund certain Variable Insurance Products and
KFSC is authorized to sell such shares to unit investment trusts such as
each Separate Account at net asset value; and
NOW, THEREFORE, in consideration of their mutual promises, the Company,
KFSC and the Trust agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. KFSC will sell to the Company those shares of the Trust which each
Separate Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Separate Accounts of purchase
payments or for the business day on which transactions under Variable
Insurance Products are effected by the Separate Accounts. For purposes of
this Section 1.1., LIS shall be the designee of the Trust for receipt of
such orders from each Separate Account and receipt by such designee shall
constitute receipt by the Trust. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and any other day on which
the Trust calculates its net asset value pursuant to the rules of the SEC.
1.2. The Trust will make its shares available indefinitely for purchase
at the applicable net asset value per share by the Company and its Separate
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall use reasonable efforts to
calculate such net asset value on each Business Day. Notwithstanding the
foregoing, the Board of Trustees of the Trust (the "Trustees") may refuse to
sell shares of any Series to any person, or suspend or terminate the
offering of shares of any Series if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Trustees, acting in good faith and in light of their fiduciary duties
under federal and any applicable state laws, necessary in the best interests
of the shareholders of such Series.
1.3. The Trust and KFSC agree that shares of the Trust will be sold
only to Participating Insurance Companies and their Separate Accounts. No
shares of any Series will be sold to the general public.
1.4. The Trust and KFSC will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles I., III., V., VII. and Sections 2.5. and
2.12. of Article II. of this Agreement is in effect to govern such sales.
1.5. The Trust will redeem for cash, at the Company's request, any full
or fractional shares of the Trust held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Separate Accounts of redemption requests or for the Business Day on
which transactions under Variable Insurance Products are effected by the
Separate Accounts. For purposes of this Section 1.5., Stein Roe shall be
the designee of the Trust for receipt of requests for redemption for each
Separate Account.
Subject to the applicable rules and regulations, if any, of the SEC,
the Trust may pay the redemption price for shares of any Series in whole or
in part by a distribution in kind of securities from the portfolio of the
Trust allocated to such Series in lieu of money, valuing such securities at
their value employed for determining net asset value governing such
redemption price, and selecting such securities in a manner the Trustees may
determine in good faith to be fair and equitable.
1.6. The Trust may suspend the redemption of any full or fractional
shares of the Trust (1) for any period (a) during which the New York Stock
Exchange is closed (other than customary weekend and holiday closings) or
(b) during which trading on the New York Stock Exchange is restricted; (2)
for any period during which an emergency exists as a result of which (a)
disposal by the Trust of securities owned by it is not reasonably
practicable or (b) it is not reasonably practicable for the Trust fairly to
determine the value of its net assets; or (3) for such other periods as the
SEC may by order permit for the protection of shareholders of the Trust.
1.7. The Company will purchase and redeem the shares of each Series
offered by the then current prospectus of the Trust and in accordance with
the provisions of such prospectus and statement of additional information
(the "SAI") (collectively referred to as "Prospectus," unless otherwise
provided). The Company agrees that all net amounts available under the
Variable Insurance Products with the form number(s) which are listed on
Schedule A attached hereto and incorporated herein by this reference, as
such Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto (the "Contracts"), shall be invested in
the Trust, in such other trusts advised by Stein Roe as may be mutually
agreed to in writing by the parties hereto, or in the Company's general
accounts, provided that such amounts may also be invested in an investment
company other than the Trust if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of each of the Series
of the Trust; or (b) the Company gives the Trust and KFSC forty-five (45)
days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts; or (c) such other
investment company was available as a funding vehicle for the Contracts
prior to the date of this Agreement and the Company so informs the Trust and
KFSC prior to its signing this Agreement; or (d) the Trust or KFSC consents
to the use of such other investment company.
1.8. The Company shall pay for Trust shares on the next Business Day
after an order to purchase Trust shares is made in accordance with the
provisions of Section 1.1. hereof. Payment shall be in federal funds
transmitted by wire, or may otherwise be provided by separate agreement.
1.9. Issuance and transfer of the Trusts' shares will be by book entry
only. Stock certificates will not be issued to either the Company or the
Separate Accounts. Shares ordered from the Trust will be recorded in an
appropriate title for each Separate Account or the appropriate subaccount of
each Separate Account.
1.10. The Trust, through its designee LIS, shall furnish same day
notice (by wire or telephone, followed by written confirmation) to the
Company of any income dividends or capital gain distributions payable on the
shares of any Series. The Company hereby elects to receive all such income,
dividends and capital gain distributions as are payable on the shares of
each Series in additional shares of that Series. The Company reserves the
right to revoke this election and to receive all such income, dividends and
capital gain distributions in cash. The Trust shall notify the Company
through its designee, LIS, of the number of shares so issued as payment of
such income, dividends and distributions.
1.11. The Trust shall make the net asset value per share for each
Series available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use
its best efforts to make such net asset value per share available by 7 p.m.,
Boston time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act to the extent required by the 1933 Act;
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws and that the sale of the
Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that
it is an insurance company duly organized and in good standing under
applicable law and that prior to any issuance or sale of any Contract it has
legally and validly established each Separate Account as a segregated asset
account under the applicable state insurance laws and has registered or,
prior to any issuance or sale of the Contracts, will register each Separate
Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts, to
the extent required by the 1940 Act.
2.2. The Trust represents and warrants that Trust shares sold pursuant
to this Agreement shall be registered under the 1933 Act to the extent
required by the 1933 Act, duly authorized for issuance and sold in
compliance with the laws of the Commonwealth of Massachusetts and all
applicable federal and any state securities laws and that the Trust is and
shall remain registered under the 1940 Act to the extent required by the
1940 Act. The Trust shall amend the registration statement for its shares
under the 1933 Act and the 1940 Act from time to time as required in order
to effect the continuous offering of its shares. The Trust shall register
and qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust or KFSC.
2.3. The Trust represents that it intends to qualify as a Regulated
Investment Company under Subchapter M of the Code and that it will make
every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased
to so qualify or that it might not so qualify in the future.
2.4. The Company represents that the Contracts are currently treated as
endowment, annuity or life insurance contracts under applicable provisions
of the Code and that it will make every effort to maintain such treatment
and that it will notify the Trust and KFSC immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.5. The Trust currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future consistent with
applicable law. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Trust undertakes to have its Trustees,
a majority of whom are not interested persons of the Trust, formulate and
approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states except that the Trust represents that it is currently in compliance
and shall at all times remain in compliance with the applicable insurance
laws of the domiciliary states of the Participating Insurance Companies to
the extent that the Participating Insurance Company advises the Trust, in
writing, of such laws or any changes in such laws.
2.7. KFSC represents and warrants that it is a member in good standing
of the NASD and is registered as a broker-dealer with the SEC. KFSC further
represents that it will sell and distribute the Trust shares in accordance
with the laws of the Commonwealth of Massachusetts and all applicable state
and federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 1940 Act.
2.8. The Trust represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it
does and will comply in all material aspects with the 1940 Act.
2.9. The Trust represents and warrants that Stein Roe is and shall
remain duly registered as an investment adviser in all material aspects
under all applicable federal and state securities laws and that Stein Roe
shall perform its obligations for the Trust in compliance in all material
respects with the applicable laws of the Commonwealth of Massachusetts and
any applicable state and federal securities laws.
2.10. The Trust represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities
having access to securities or funds of the Trust are and shall continue to
be at all times covered by a joint fidelity bond in an amount not less than
three million seven hundred fifty thousand dollars ($3,750,000) with no
deductible amount. The aforesaid bond shall include coverage for larceny
and embezzlement and shall be issued by a reputable fidelity insurance
company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
having access to securities or funds of the Trust are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Trust, in an amount not less than ten million dollars
($10,000,000) with no deductible amount. The aforesaid bond shall include
coverage for larceny and embezzlement and shall be issued by a reputable
fidelity insurance company.
2.12. The Company represents and warrants that it will not, without the
prior written consent of KFSC, purchase Trust shares with Separate Account
assets derived from the sale of Contracts to individuals or entities which
qualify under current or future state or federal law for any type of tax
advantage (whether by a reduction or deferral of, deduction or exemption
from, or credit against income or otherwise). Examples of such types of
funds under current law include: any tax-advantaged retirement program,
whether maintained by an individual, employer, employee association or
otherwise (including, without limitation, retirement programs which qualify
under Sections 401(a), 401(k), 403(a), 403(b), 408 and 457 of the Code), and
any retirement programs maintained for employees of the Government of the
United States or by the government of any state or political subdivision
thereof, or by any agency or instrumentality of any of the foregoing.
2.13. The Company represents and warrants that it will not transfer or
otherwise convey shares of the Trust, without the prior written consent of
KFSC.
ARTICLE III. Prospectus and Proxy Statements; Voting
3.1. KFSC shall provide the Company with as many copies of the Trust's
current prospectus, excluding the SAI, as the Company may reasonably request
in connection with delivery of the prospectus, excluding the SAI, to
shareholders and purchasers of Variable Insurance Products. If requested by
the Company in lieu thereof, the Trust shall provide such documentation
(including a final copy of the new prospectus, excluding the SAI, as set in
type at the Trust's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the
prospectus for the Trust is amended) to have the prospectus for the
Contracts and the Trust's prospectus, excluding the SAI, printed together in
one document (such printing to be at the Company's expense).
3.2. The Trust's prospectus shall state that the SAI for the Trust is
available from KFSC and the Trust, at its expense, shall provide final copy
of such SAI to KFSC for duplication and provision to any prospective owner
who requests the SAI and to any owner of a Variable Insurance Product
("Owners").
3.3. The Trust, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require for
distribution to Owners.
3.4. If and to the extent required by law, the Company and, so long as
and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for Owners, the Trust shall:
(i) solicit voting instructions from Owners;
(ii) vote the Trust shares in accordance with instructions received
from Owners; and
(iii) vote Trust shares for which no instructions have been received in
the same proportion as Trust shares of such Series for which
instructions have been received;
The Company reserves the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their Separate Accounts participating in the Trust calculates voting
privileges in a manner consistent with the standards to be provided in
writing to the Participating Insurance Companies.
3.5. The Trust will comply with all provisions of the 1940 Act
requiring voting by shareholders. The Trust reserves the right to take all
actions, including but not limited to, the dissolution, merger, and sale of
all assets of the Trust upon the sole authorization of its Trustees, to the
extent permitted by the laws of the Commonwealth of Massachusetts and the
1940 Act.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust or Stein Roe, or any sub-adviser ("Sub-
Adviser"), or KFSC is named, at least fifteen (15) days prior to its use.
No such material shall be used if the Trust or its designee object to such
use within fifteen (15) days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or Prospectus for
the Trust shares, as such registration statement and Prospectus may be
amended or supplemented from time to time, or in reports or proxy statements
for the Trust, or in sales literature or other promotional material approved
by the Trust or its designee or by KFSC, except with the permission of the
Trust or KFSC or the designee of either.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designees, each piece of sales literature
or other promotional material in which the Company and/or its Separate
Account(s), are named at least fifteen (15) days prior to its use. No such
material shall be used if the Company or its designee object to such use
within fifteen (15) days after receipt of such material.
4.4. The Trust and KFSC shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, any Separate Account, or the Variable Insurance Products other than
the information or representations contained in a registration statement or
prospectus for such Variable Insurance Products, as such registration
statement and prospectus may be amended or supplemented from time to time,
or in published reports for such Separate Account which are in the public
domain or approved by the Company for distribution to Owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Trust will provide to the Company at least one complete copy
of all registration statements, prospectuses, SAIs, reports, proxy
statements, sales literature and other promotional materials, applications
for exemption, requests for no-action letters, and all amendments to any of
the above, that relate to the Trust or its shares, contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
4.6. The Company will provide to the Trust at least one complete copy
of all registration statements, prospectuses, SAIs, reports, solicitations
for voting instructions, sales literature and other promotional materials,
applications for exemption, requests for no-action letters, and all
amendments to any of the above, that relate to the Variable Insurance
Products or any Separate Account, contemporaneously with the filing of such
document with the SEC.
4.7. For purposes of this Article IV., the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public
media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other
communications distributed or made generally available to some or all agents
or employees, and registration statements, prospectuses, SAIs, shareholder
reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Trust and KFSC shall pay no fee or other compensation to the
Company under this Agreement, except that if the Trust or any Series adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then KFSC may make payments to the Company or to the underwriter
for the Variable Insurance Products if and in amounts agreed to by KFSC in
writing and such payments will be made out of existing fees payable to KFSC
by the Trust for this purpose. No such payments shall be made directly by
the Trust. Currently, no such plan pursuant to Rule 12b-1 or payments are
contemplated.
5.2. All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall see to it that all
its shares are registered and authorized for issuance in accordance with
applicable federal law and, if and to the extent deemed advisable by the
Trust, in accordance with applicable state laws prior to their sale. The
Trust shall bear the expenses of registration and qualification of the
Trust's shares, preparation and filing of the Trust's prospectus and
registration statement, proxy materials and reports, setting the prospectus
in type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by
any federal or state law, and all taxes on the issuance or transfer of the
Trust's shares.
5.3. The Company shall bear the expenses of distributing the Trust's
proxy materials and reports to Owners.
ARTICLE VI. Diversification
6.1. The Trust will at all times invest money from the Variable
Insurance Products in such a manner as to ensure that, insofar as such
investment is required to assure such treatment, the Variable Insurance
Products will be treated as variable contracts under the Code and the
regulations issued thereunder. Without limiting the scope of the foregoing,
the Trust will at all times comply with Section 817(h) of the Code and the
Treasury Regulations thereunder relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and any
amendments or other modifications to such Section or Regulations.
ARTICLE VII. Potential Conflicts
7.1. The Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the Owners of
separate accounts of the Company investing in the Trust. A material
irreconcilable conflict may arise for a variety of reasons, including: (a)
an action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Series
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance policy owners; or (f) a
decision by an insurer to disregard the voting instructions of Owners. The
Trustees shall promptly inform the Company if they determine that a material
irreconcilable conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts
(including the occurrence of any event specified in paragraph 7.1. which may
give rise to such a conflict) of which it is aware to the Trustees. The
Company will assist the Trustees in carrying out their responsibilities
under the Shared Funding Exemptive Order, by providing the Trustees with all
information reasonably necessary for the Trustees to consider any issues
raised. This includes, but is not limited to, an obligation by the Company
to inform the Trustees whenever Owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Trustees, or a majority
of its disinterested Trustees, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at
their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Trustees), take whatever steps are necessary
to remedy or eliminate the material irreconcilable conflict, up to and
including: (1), withdrawing the assets allocable to some or all of the
separate accounts of Participating Insurance Companies from the Trust or any
Series and reinvesting such assets in a different investment medium,
including (but not limited to) another Series of the Trust, or submitting
the question whether such segregation should be implemented to a vote of all
affected Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected Owners the option of making such a change; (2), establishing a new
registered management investment company or managed separate account; and
(3) obtaining SEC approval.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the
Company may be required, at the Trust's election, to withdraw the affected
Separate Account's investment in the Trust and terminate this Agreement;
provided, however that such withdrawal and termination shall be limited to
the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such withdrawal
and termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented, and until the end
of that six (6) month period KFSC and Trust shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares
of the Trust.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts
with the majority of other state regulators, then the Company will withdraw
the affected Separate Account's investment in the Trust and terminate this
Agreement within six (6) months after the Trustees inform the Company in
writing that they have determined that such decision has created a material
irreconcilable conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Until the end of the foregoing six (6) month
period, KFSC and Trust shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Trust.
7.6. For purposes of Sections 7.3. through 7.6. of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in no
event will the Trust be required to establish a new funding medium for the
Variable Insurance Products. The Company shall not be required by Section
7.3. to establish a new funding medium for the Variable Insurance Products
if an offer to do so has been declined by vote of a majority of Owners
materially adversely affected by the material irreconcilable conflict. In
the event that the Trustees determine that any proposed action does not
adequately remedy any material irreconcilable conflict, then the Company
will withdraw the affected Separate Account's investment in the Trust and
terminate this Agreement within six (6) months after the Trustees inform
the Company in writing of the foregoing determination, provided, however,
that such withdrawal and termination shall be limited to the extent required
by any such material irreconcilable conflict as determined by a majority of
the disinterested Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) or terms
and conditions materially different from those contained in the Shared
Funding Exemptive Order, then (a) the Trust and/or the Company, as
appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4., 3.5., 7.1., 7.2., 7.3., 7.4.,
and 7.5. of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to such Sections are contained
in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1.(a). The Company will indemnify and hold harmless the Trust and
each of its Trustees and Officers and each person, if any, who controls the
Trust within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1.) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Company) or litigation (including legal and
other expenses), to which the Indemnified Parties may become subject under
any statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Trust's shares or
the Variable Insurance Products and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement or prospectus for the Variable Insurance
Products or contained in the sales literature for the Variable
Insurance Products (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this Agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by
or on behalf of the Trust for use in the registration statement or
prospectus for the Variable Insurance Products or in the Variable
Insurance Products or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Variable Insurance Products or Trust shares; or
(ii) arise out of or are based upon statements or representations (other
than statements or representations contained in the registration
statement, Prospectus or sales literature of the Trust not supplied
by the Company, or persons under its control) or wrongful conduct
of the Company or persons under its control, with respect to the
sale or distribution of the Variable Insurance Products or Trust
shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, Prospectus, or
sales literature of the Trust or any amendment thereof or
supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading if such a statement
or omission was made in reliance upon information furnished in
writing to the Trust by or on behalf of the Company; or
(iv) arise out of or result from any failure by the Company to provide
the services and furnish the materials contemplated by this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Company.
8.1.(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Trust, whichever is applicable.
8.1.(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Company of any such claim shall not relieve the Company from any liability
which they may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the Company
shall be entitled to participate, at its own expense, in the defense of such
action. The Company also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice
from the Company to such party of the election of the Company to assume
the defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and the Company will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
8.1.(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Trust shares or the Contracts or the
operation of the Trust.
8.2. Indemnification By the Trust
8.2.(a). The Trust will indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2.) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Trust) or litigation (including legal and
other expenses) to which the Indemnified Parties may become subject under
any statute, regulation at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith or willful
misconduct of the Trustees or any member thereof, are related to the
operations of the Trust and:
(i) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VI. of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Trust; as limited by and in accordance with the
provisions of Sections 8.2.(b). and 8.2.(c). hereof.
8.2.(b). The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise by subject by
reason of such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Trust, KFSC or each
Separate Account, whichever is applicable.
8.2.(c). The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have served upon such
Indemnified Party (or after such Indemnified party shall have received
notice of such service on any designated agent), but failure to notify the
Trust of any such claim shall not relieve the Trust from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Trust will be
entitled to participate, at its own expense, in the defense thereof. The
Trust also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Trust
to such party of the Trust's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Trustees will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other than
reasonable cases of investigations.
8.2.(d). The Company and KFSC agree promptly to notify the Trust of the
commencement of any litigation or proceedings against them or any of their
respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Trust.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts provided, however, that if such laws or any of the provisions
of this Agreement conflict with applicable provisions of the 1940 Act, the
latter shall control.
9.2. This Agreement shall be made subject to the provisions of the
1933, 1934, and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant (including, but not limited to, the Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one (1) year advance written notice
to the other parties; provided, however such notice shall not be given
earlier than one (1) year following the date of this Agreement; or
(b) at the option of the Company to the extent that shares of Series
are not reasonably available to meet the requirements of the Variable
Insurance Products as determined by the Company, provided however, that
such termination shall apply only to the Series not reasonably available.
Prompt notice of the election to terminate for such cause shall be furnished
by the Company; or
(c) at the option of the Trust in the event that formal administrative
proceedings are instituted against the Company or KFSC by the NASD, the
SEC, the Insurance Commissioner or any other regulatory body regarding the
duties of the Company under this Agreement or related to the sale of the
Variable Insurance Products, with respect to the operation of a Separate
Account, or the purchase of the Trust shares, provided, however, that the
Trust determines in its sole judgement exercised in good faith, that any
such administrative proceedings will have a material adverse effect upon the
ability of the Company to perform its obligations under this Agreement or
of KFSC to perform its obligations under its underwriting agreement with the
Trust; or
(d) at the option of the Company in the event that formal
administrative proceedings are instituted against the Trust by the NASD, the
SEC, or any state securities or insurance department or any other regulatory
body, provided, however, that the Company determine in its sole judgement
exercised in good faith, that any such administrative proceedings will have
a material adverse effect upon the ability of the Trust to perform its
obligations under this Agreement; or
(e) with respect to a Separate Account, upon requisite authority to
substitute the shares of another investment company for shares of the
corresponding Series of the Trust in accordance with the terms of the
Variable Insurance Products for which those Series shares had been selected
to serve as the underlying investment media. The Company will give thirty
(30) days' prior written notice to the Trust of the date of any proposed
action to replace the Trust shares; or
(f) at the option of the Company, in the event any of the Trust's
shares are not registered, issued or sold in accordance with applicable
federal and any state law or such law precludes the use of such shares as
the underlying investment media of the Variable Insurance Products issued or
to be issued by the Company; or
(g) at the option of the Company, if the Trust ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or under any
successor or similar provision, or if the Company reasonably believes that
the Trust may fail to so qualify; or
(h) at the option of the Company, if the Trust fails to meet the
diversification requirements specified in Article VI. hereof; or
(i) at the option of either the Trust or KFSC, if (1) the Trust or
KFSC, respectively, shall determine, in their sole judgement reasonably
exercised in good faith, that the Company has suffered a material adverse
change in its business or financial condition or is the subject of material
adverse publicity and such material adverse publicity will have a material
adverse impact upon the business and operations of either the Trust or KFSC,
(2) the Trust or KFSC shall notify the Company in writing of such
determination and its intent to terminate this Agreement, and (3) after
considering the actions taken by the Company and any other changes in
circumstances since the giving of such notice, such determination of the
Trust or KFSC shall continue to apply on the sixtieth (60th) day following
the giving of such notice, which sixtieth (60th) day shall be the effective
date of termination; or
(j) at the option of the Company, if (1) the Company shall determine,
in its sole judgment reasonably exercised in good faith, that either the
Trust or KFSC has suffered a material adverse change in its business or
financial condition or is the subject of material adverse publicity and
such material adverse publicity will have a material adverse impact upon the
business and operations of the Company, (2) the Company shall notify the
Trust and KFSC in writing of such determination and its intent to terminate
the Agreement, and (3) after considering the actions taken by the Trust
and/or KFSC and any other changes in circumstances since the giving of such
notice, such determination shall continue to apply on the sixtieth (60th)
day following the giving of such notice, which sixtieth (60th) day shall be
the effective date of termination; or
(k) at the option of either the Trust or KFSC, if the Company gives
the Trust and KFSC the written notice specified in Section 10.3.(a). hereof
and at the time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement; provided, however
any termination under this Section 10.1.(k). shall be effective forty-five
(45) days after the notice specified in 10.3.(a). was given.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1.(a). may be exercised for
any reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement shall be
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate which notice shall set forth the basis for such termination.
Furthermore,
(a) in the event that any termination is based upon the provisions of
Article VII., or the provision of Section 10.1.(a)., 10.1.(i)., 10.1.(j). or
10.1.(k). of this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions;
and
(b) in the event that any termination is based upon the provisions of
Section 10.1.(c). or 10.1.(d). of this Agreement, such prior written notice
shall be given at least ninety (90) days before the effective date of
termination.
10.4. Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust and KFSC shall at the option of the Company, continue
to make available additional shares of the Trust pursuant to the terms and
conditions of this Agreement, for all Variable Insurance Products in effect
on the effective date of termination of this Agreement (hereinafter referred
to as "Existing Products"). Specifically, without limitation, the Owners of
the Existing Products shall be permitted to reallocate investments in the
Trust, redeem investments in the Trust and/or invest in the Trust upon the
making of additional purchase payments under the Existing Products. The
parties agree that this Section 10.4. shall not apply to any terminations
under Article VII. and the effect of such Article VII. terminations shall be
governed by Article VII. of this Agreement.
10.5. The Company shall not redeem Trust shares attributable to the
Variable Insurance Products (as opposed to Trust shares attributable to the
Company's assets held in a Separate Account) except (i) as necessary to
implement Owner initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption").
Upon request, the Company will promptly furnish to the Trust and KFSC the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and KFSC) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Variable
Insurance Products, the Company shall not prevent Owners from allocating
payments to a Series that was otherwise available under the Variable
Insurance Products without first giving the Trustee or KFSC ninety (90) days
notice of their intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Trust:
c/o Liberty Investment Services, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Attention: Secretary
If to the Company:
Keyport Benefit Life Insurance Company
Service Office
125 High Street
Boston, MA 02110
Attention: General Counsel
If to KFSC:
Keyport Financial Services, Corp.
125 High Street
Boston, Massachusetts 02110
Attention: Secretary
ARTICLE XII. Miscellaneous
12.1. All persons dealing with Trust must look solely to the property
of the Trust for the enforcement of any claims against the Trust hereunder
and otherwise understand that neither the Trustees, officers, agents or
shareholders of the Trust have any personal liability for any obligations
entered into by or on behalf of the Trust.
12.2. Subject to the requirements of legal process and regulatory
authority, each Party hereto shall treat as confidential the names and
addresses of the Owners and all information reasonably identified as
confidential in writing be any other party hereto and, except as permitted
by this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come
into the public domain without the express written consent of the affected
party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be effected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD, the Internal Revenue Service and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or
the transactions contemplated hereby.
12.7. The Trust and KFSC agree that to the extent any advisory or other
fees received by the Trust, KFSC, or Stein Roe are determined to be unlawful
in appropriate legal or administrative proceedings, the Trust shall
indemnify and reimburse the Company for any out of pocket expenses and
actual damages the Company has incurred as a result of any such proceeding,
provided however that the provision of Section 8.2.(b). of this and 8.2.(c).
shall apply to such indemnification and reimbursement obligation. Such
indemnification and reimbursement obligation shall be in addition to any
other indemnification and reimbursement obligations of the Trust under this
Agreement.
12.8. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligation, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as of
the date specified below.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/STEPHEN B. BONNER
Title: Senior Vice President
Date: 5-11-98
KEYPORT FINANCIAL SERVICES CORP.
By its authorized officer,
By: /s/JAMES J. KLOPPER
Title: Clerk
Date: 5-11-98
STEINROE VARIABLE INVESTMENT TRUST
By its authorized officer,
By:
Title:
Date:
<PAGE>
Schedule A
Individual and group variable annuity contracts and certificates.
Individual variable life contracts.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STEIN ROE SPECIAL VENTURE FUND, VARIABLE SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 187,478
<INVESTMENTS-AT-VALUE> 201,186
<RECEIVABLES> 1,305
<ASSETS-OTHER> 70
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 202,561
<PAYABLE-FOR-SECURITIES> 1,721
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 250
<TOTAL-LIABILITIES> 1,971
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169,976
<SHARES-COMMON-STOCK> 11,145
<SHARES-COMMON-PRIOR> 9,464
<ACCUMULATED-NII-CURRENT> 51
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16,856
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,708
<NET-ASSETS> 200,590
<DIVIDEND-INCOME> 721
<INTEREST-INCOME> 826
<OTHER-INCOME> 0
<EXPENSES-NET> 1,463
<NET-INVESTMENT-INCOME> 84
<REALIZED-GAINS-CURRENT> 16,867
<APPREC-INCREASE-CURRENT> (2,574)
<NET-CHANGE-FROM-OPS> 14,377
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 265
<DISTRIBUTIONS-OF-GAINS> 36,940
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,129
<NUMBER-OF-SHARES-REDEEMED> 3,703
<SHARES-REINVESTED> 2,256
<NET-CHANGE-IN-ASSETS> 4,371
<ACCUMULATED-NII-PRIOR> 263
<ACCUMULATED-GAINS-PRIOR> 36,897
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,002
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,463
<AVERAGE-NET-ASSETS> 200,328
<PER-SHARE-NAV-BEGIN> 20.73
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 1.25
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 3.96
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.00
<EXPENSE-RATIO> .73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> STEIN ROE GROWTH STOCK FUND, VARIABLE SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 115,208
<INVESTMENTS-AT-VALUE> 213,726
<RECEIVABLES> 162
<ASSETS-OTHER> 63
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 213,951
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 552
<TOTAL-LIABILITIES> 552
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101,690
<SHARES-COMMON-STOCK> 5,906
<SHARES-COMMON-PRIOR> 5,658
<ACCUMULATED-NII-CURRENT> 589
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,602
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 98,518
<NET-ASSETS> 213,399
<DIVIDEND-INCOME> 1,538
<INTEREST-INCOME> 429
<OTHER-INCOME> 0
<EXPENSES-NET> 1,357
<NET-INVESTMENT-INCOME> 611
<REALIZED-GAINS-CURRENT> 12,626
<APPREC-INCREASE-CURRENT> 39,258
<NET-CHANGE-FROM-OPS> 52,494
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 710
<DISTRIBUTIONS-OF-GAINS> 7,500
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,105
<NUMBER-OF-SHARES-REDEEMED> 1,131
<SHARES-REINVESTED> 274
<NET-CHANGE-IN-ASSETS> 51,520
<ACCUMULATED-NII-PRIOR> 689
<ACCUMULATED-GAINS-PRIOR> 7,746
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 959
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,357
<AVERAGE-NET-ASSETS> 191,875
<PER-SHARE-NAV-BEGIN> 28.61
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> 8.84
<PER-SHARE-DIVIDEND> .12
<PER-SHARE-DISTRIBUTIONS> 1.30
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 36.13
<EXPENSE-RATIO> .71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> STEIN ROE BALANCED FUND, VARIABLE SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 265,584
<INVESTMENTS-AT-VALUE> 323,169
<RECEIVABLES> 3,420
<ASSETS-OTHER> 57
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 326,646
<PAYABLE-FOR-SECURITIES> 269
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,344
<TOTAL-LIABILITIES> 1,613
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 236,151
<SHARES-COMMON-STOCK> 19,334
<SHARES-COMMON-PRIOR> 18,379
<ACCUMULATED-NII-CURRENT> 9,886
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 21,411
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 57,585
<NET-ASSETS> 325,033
<DIVIDEND-INCOME> 3,022
<INTEREST-INCOME> 9,283
<OTHER-INCOME> 0
<EXPENSES-NET> 2,072
<NET-INVESTMENT-INCOME> 10,233
<REALIZED-GAINS-CURRENT> 21,484
<APPREC-INCREASE-CURRENT> 17,141
<NET-CHANGE-FROM-OPS> 48,858
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,262
<DISTRIBUTIONS-OF-GAINS> 25,340
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,917
<NUMBER-OF-SHARES-REDEEMED> 3,350
<SHARES-REINVESTED> 2,388
<NET-CHANGE-IN-ASSETS> 25,848
<ACCUMULATED-NII-PRIOR> 10,358
<ACCUMULATED-GAINS-PRIOR> 25,081
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,417
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,072
<AVERAGE-NET-ASSETS> 314,922
<PER-SHARE-NAV-BEGIN> 16.28
<PER-SHARE-NII> .53
<PER-SHARE-GAIN-APPREC> 1.96
<PER-SHARE-DIVIDEND> .56
<PER-SHARE-DISTRIBUTIONS> 1.40
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.81
<EXPENSE-RATIO> .66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> STEIN ROE MORTGAGE SECURITIES FUND, VARIABLE SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 75,321
<INVESTMENTS-AT-VALUE> 77,207
<RECEIVABLES> 1,071
<ASSETS-OTHER> 61
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 78,339
<PAYABLE-FOR-SECURITIES> 1,010
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 156
<TOTAL-LIABILITIES> 1,166
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 73,734
<SHARES-COMMON-STOCK> 7,195
<SHARES-COMMON-PRIOR> 7,724
<ACCUMULATED-NII-CURRENT> 4,579
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,026)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,886
<NET-ASSETS> 77,173
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,410
<OTHER-INCOME> 0
<EXPENSES-NET> 519
<NET-INVESTMENT-INCOME> 4,891
<REALIZED-GAINS-CURRENT> 3
<APPREC-INCREASE-CURRENT> 1,495
<NET-CHANGE-FROM-OPS> 6,389
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 929
<NUMBER-OF-SHARES-REDEEMED> 1,459
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,164
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3,042)
<OVERDISTRIB-NII-PRIOR> (299)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 519
<AVERAGE-NET-ASSETS> 74,191
<PER-SHARE-NAV-BEGIN> 9.84
<PER-SHARE-NII> 0.68
<PER-SHARE-GAIN-APPREC> 0.21
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.73
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> STEIN ROE MONEY MARKET FUND, VARIABLE SERIES
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 66,592
<INVESTMENTS-AT-VALUE> 66,592
<RECEIVABLES> 890
<ASSETS-OTHER> 60
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67,542
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 405
<TOTAL-LIABILITIES> 405
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,137
<SHARES-COMMON-STOCK> 67,137
<SHARES-COMMON-PRIOR> 65,461
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 67,137
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,857
<OTHER-INCOME> 0
<EXPENSES-NET> 438
<NET-INVESTMENT-INCOME> 3,419
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,419
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,149
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 67,656
<NUMBER-OF-SHARES-REDEEMED> 69,400
<SHARES-REINVESTED> 3,419
<NET-CHANGE-IN-ASSETS> 1,675
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 238
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 438
<AVERAGE-NET-ASSETS> 67,857
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
