INVESTMENT ADVISORY AND MANAGEMENT
SERVICES AGREEMENT
AGREEMENT dated April 1, 1987 by and between STATE FARM BALANCED FUND, INC., a
Maryland corporation registered under the Investment Company Act of 1940 as an
open-end diversified management investment company (hereinafter called the
"Fund"), and STATE FARM INVESTMENT MANAGEMENT CORP., a Delaware corporation
registered under the Investment Advisers Act of 1940 as an investment adviser
(hereinafter called the "Adviser"):
WITNESSETH:
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the
parties hereto as follows:
1. Engagement of Adviser. The Fund hereby employs the Adviser to act as
investment adviser for and to manage the investment and reinvestment of the
assets of the Fund, and to administer its affairs to the extent requested by and
subject to the supervision and control of the Board of Directors of the Fund for
the period and upon the terms herein set forth. The Adviser shall give due
consideration to the investment policies and restrictions and the other
statements concerning the Fund in the Fund's articles of incorporation, by-laws,
and registration statements under the Investment Company Act of 1940 (the "Act")
and the Securities Act of 1933 (the "Securities Act"), and to the provisions of
the Internal Revenue Code applicable to the Fund as a regulated investment
company.
The Adviser is authorized to make the decisions to buy and sell securities of
the Fund, to place the Fund's portfolio transactions with securities broker-
dealers, and to negotiate brokerage commisssions and other terms of such
transactions on behalf of the Fund. The Adviser is authorized to exercise
discretion within the Fund's policy concerning allocation of its portfolio
brokerage as permitted by law, including but not limited to Section 28(e) of the
Securities Exchange Act of 1934, and in so doing shall not be required to make
any reduction in its investment advisory fees.
The Adviser shall for all purposes herein provided be deemed to be an
independent contractor, and unless otherwise expressly provided or authorized
shall have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund.
2. Expenses. The Advisor shall at its own expense furnish to the Fund
suitable office space in its own offices or in such other place as may be agreed
upon from time to time between the parties hereto, and in addition shall furnish
all necessary office facilities, equipment, administrative services and clerical
personnel for managing the affairs and investments of the Fund. The Adviser
shall arrange, if desired by the Fund, for officers or employees of the Adviser
to serve without salary from the Fund as directors, officers or agents of the
Fund if duly elected or appointed to such positions by the shareholders of the
Fund or by the Board of Directors thereof and subject to their individual
consent and to any limitations imposed
by law. The Adviser assumes and shall pay all of the expenses of the Fund, other
than those expressly to be paid by the Fund as specified herein and expenses
payable by any distributor of the Fund's shares pursuant to a separate agreement
between the Fund and such distributor.
The Fund assumes and shall pay the following expenses related to the Fund: (i)
all fees of the Adviser hereunder; (ii) all charges of independent auditors, of
legal counsel, of depositaries, custodians and other agencies for the
safekeeping and servicing of its cash, securities and other property, and for
keeping the Fund's books of account and calculating the Fund's net asset value
if such books are kept and such calculations are made by a custodian, and of its
transfer agents, registrars and dividend disbursing and redemption agents, if
any; (iii) all compensation of directors other than those affiliated with the
Adviser; (iv) interest, if any, on obligations incurred by the Fund; (v) the
cost of preparing, printing and distributing stock certificates, corporate
reports, notices, proxy solicitation material and reports to its shareholders;
(vi) all taxes and corporate fees payable to federal, state and other
governmental agencies, domestic or foreign; (vii) all registration and filing
fees payable under federal securities laws; and (viii) the cost of the Fund's
membership in any association of investment companies. The Fund shall also
assume and pay the following expenses related to the Fund except to the extent
that they shall be assumed and paid by a distributor of the Fund's shares
pursuant to a separate agreement between the Fund and such distributor: (i) all
expenses of printing and distributing any prospectus of the Fund and of
preparing, printing, distributing and disseminating any other literature,
advertising and selling aids in connection with the offering of the shares for
sale (except the cost of preparing, printing and distributing reports and other
communications to shareholders in their capacity as such); (ii) all expenses of
advertising in connection with such offering; and (iii) all fees payable to
states in connection with the qualification of Fund shares for sale, or the
qualification of the Fund as a dealer or broker, under the laws of such states
as may be designated by the Underwriter. In addition to the payment of
expenses, the Fund shall also assume, and pay all brokers' commissions and other
charges incurred in connection with the purchase and sale of portfolio
securities. The Fund shall not pay or incur any obligation for any management
or administrative expenses for which the Fund intends to seek reimbursement from
the Adviser as herein provided without first obtaining the written approval of
the Adviser. The Fund shall be free to retain at its expense other persons to
furnish it with any services whatsoever, including, without limitation,
statistical, factual or technical information or advice.
3. Compensation of Adviser: Limitation of Fund's Expenses. For the services
to be rendered, the facilities to be furnished and the expenses to be assumed by
the Adviser, as provided in this agreement, the Fund shall pay to the Adviser a
fee at the following annual rates:
Annual Rate of Advisory Fee Based on Average Net Assets
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.20% of the first $100 million
.15% of the next $100 million
.10% in excess of $200 million
Such fee shall be payable in quarterly installments, within 20 days after each
fiscal quarter of the Fund, equal to one-quarter of the annual rate of fee
applied to the average net assets of the Fund during the preceding fiscal
quarter, with a final adjustment, within 20 days after the end of each fiscal
year, so that the
total fees for the fiscal year will equal the appropriate annual percentages of
the average net assets of the Fund during the fiscal year.
The Adviser shall reimburse the Fund to such extent as the total expenses of
the Fund for any fiscal year during the term of this agreement chargeable to
income on the accrual basis of accounting, including fees to the Adviser but
excluding all (i) taxes, (ii) interest and (iii) extraordinary litigation
expenses, shall exceed .40% of the average net assets of the Fund during such
year. Brokers' commissions and other charges incurred in connection with the
purchase and sale of portfolio securities shall not be regarded as expenses for
this purpose. Such reimbursement shall be made quarterly on an interim basis,
with a final adjustment as of the end of each year.
For the quarter and year in which this agreement becomes effective or
terminates there shall be an appropriate proration of the fee and of the
reimbursement (if any) on the basis of the number of days that the agreement is
in effect during such quarter and year.
For purposes of this section the average net asset value during a period shall
be determined on the basis of the net asset value of the Fund as of the close of
each business day during the period in accordance with the articles of
incorporation of the Fund. If pursuant to the articles of incorporation of the
Fund the net asset value is not required to be determined on any particular
business day, then for the purpose of the foregoing computations the net asset
value last determined shall be deemed to be the net asset value as of the close
of business on that day.
4. Interested parties; services other than as Adviser. It is understood that
the officers, directors, agents and shareholders of the Fund are or may be
interested in the Adviser as officers, directors, agents, shareholders or
otherwise, and that the officers, shareholders and agents of the Adviser may be
interested in the Fund otherwise than as a shareholder. It is further
understood that the Adviser, by virtue of separate agreements, may also act as
transfer agent, dividend disbursing agent and underwriter for the Fund and that
State Farm Mutual Automobile Insurance Company, by virtue of a separate
agreement, may furnish services to the Adviser to assist the Adviser in
fulfilling its obligations to the Fund pursuant to this agreement. The services
of the Adviser herein provided are not to be deemed exclusive and the Adviser
shall be free to render similar services or other services to others so long as
its services hereunder shall not be impaired thereby.
5. Limitation of liability of Adviser. The Adviser shall not be liable for
any error of judgment or import of law, or for any loss suffered by the Fund or
its shareholders from or as a consequence of any act or omission of the Adviser,
or of any of the directors, officers, employees or agents of the Adviser, in
connection with the matters to which this agreement relates, except loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its obligations and duties or by reason of its
reckless disregard of its obligations and duties under this agreement.
6. Term and termination. This agreement shall become effective on the date
hereof and unless sooner terminated as hereinafter provided, shall continue in
effect until April 1, 1989, and from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually in the manner required by the Act.
This agreement may be terminated at any time without the payment of any
penalty by the Board of Directors of the Fund, or by vote of the holders of a
majority of the outstanding shares of the Fund, or by the Adviser, on sixty (60)
days' written notice to the other party.
This agreement may be terminated at any time without the payment of any
penalty by the Board of Directors of the Fund in the event that it shall have
been established by a court of competent jurisdiction that the Adviser or any
officer or director of the Adviser has taken any action which results in a
breach of the covenants of the Adviser set forth herein.
This agreement shall automatically terminate in the event of its assignment
(as defined in the Act).
7. Notices. Any notice under this agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
8. "State Farm" name. The Fund agrees that upon the termination of this
agreement at any time or for any reason it shall, when so requested by the
Adviser, eliminate all reference to the name "State Farm" from its corporate
name and thereafter refrain from using the name "State Farm" in connection with
its business or activities in any form or combination whatsoever except as may
be necessary to identify its prior name.
9. Amendment. This agreement may be amended only with the affirmative vote
(i) of a majority of those directors who are not "interested persons" (as
defined in the Act) of the Fund or the Adviser, voting in person at a meeting
called for the purpose of voting on such approval, and (ii) of the holders of a
majority of the outstanding shares of the Fund.
STATE FARM BALANCED FUND, INC.
By: /s/ Xxx X. Xxxxx
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President
ATTEST: /s/ Xxxxx X. Xxxxxxx
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STATE FARM INVESTMENT MANAGE-
MENT CORP.
By: /s/ Xxxxxx X. Xxxx, Xx.
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President
ATTEST: /s/ Xxxxx X. Xxxxxxx
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