INVESTMENT ADVISORY AND MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT is made and entered into this 20th day of March, 2001, by
and between STATE FARM ASSOCIATES' FUNDS TRUST, a Delaware business trust (the
"Trust"), and STATE FARM INVESTMENT MANAGEMENT CORP., a Delaware corporation
(the "Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust issues shares of beneficial interest (the "Shares")
registered under the Securities Act of 1933, as amended (the "1933 Act")
pursuant to a registration statement filed with the Securities and Exchange
Commission (the "SEC"), as amended from time to time (the "Registration
Statement");
WHEREAS, the Trust has established separate series of Shares, each
corresponding to a separate investment portfolio having its own investment
objective, and may establish additional series of Shares in the future (such
existing and future series are collectively referred to herein as the "Funds");
WHEREAS, the Adviser is an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the "Advisers Act") and has filed
notification filings under all applicable state securities laws;
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory services and management services to each Fund listed on Appendix A, as
amended from time to time, in the manner and on the terms and conditions set
forth below; and
WHEREAS, the Adviser is willing to provide investment advisory services and
management services to each Fund listed on Appendix A, as amended from time to
time, in the manner and on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of their mutual promises, the Trust and
the Adviser agree as follows:
ARTICLE 1
Employment of Adviser
1.1 The Trust hereby employs the Adviser to act as investment adviser
for and to manage, or arrange for the management of, the investment and
reinvestment of the assets of the Funds listed on Appendix A, and to manage and
administer, or arrange for the management and administration of, its affairs to
the extent requested by and subject to the supervision and control of, the Board
of Trustees of the Trust (the "Board") for the period and upon the terms herein
set forth.
1.2 The Adviser accepts such employment and agrees during such period
at its own expense to render the services, or to arrange for the services to be
rendered, and to assume the obligations herein set forth for the compensation
herein provided. In connection therewith, the Adviser may retain one or more
sub-advisers to render such services and to assume the obligations set forth
herein, subject to the provisions of the 1940 Act and the Advisers Act.
1.3 The Adviser shall for all purposes be deemed to be an independent
contractor, and unless otherwise expressly provided or authorized shall have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust. Notwithstanding the foregoing, the Adviser shall, for the
purposes of this agreement, have and exercise full investment discretion and
authority to act as agent for the Trust in buying, selling or otherwise
disposing of or managing the Trust's investments, subject to supervision by the
Board.
1.4 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.
ARTICLE 2
Duties of Adviser
2.1 Management Services. Subject to the terms of this Agreement and
the supervision and control of the Trust's Board, the Adviser shall provide the
following services with respect to the Trust:
(a) Preparation and maintenance of the Trust's Registration
Statement with the SEC;
(b) Preparation and periodic updating of the prospectus and
statement of additional information for the Funds ("Prospectus");
(c) Preparation, filing with appropriate regulatory authorities,
and dissemination of various reports for the Funds, including but not limited to
semiannual reports to shareholders under Section 30(d) of the 1940 Act, annual
and semiannual reports on Form N-SAR, and notices pursuant to Rule 24f-2;
(d) Arrangement for all meetings of shareholders, including the
collection of all information required for preparation of proxy statements, the
preparation and filing with appropriate regulatory agencies of such proxy
statements, the supervision of solicitation of shareholders and shareholder
nominees in connection therewith, tabulation (or supervision of the tabulation)
of votes, response to all inquiries regarding such meetings from shareholders,
the public and the media, and preparation and retention of all minutes and all
other records required to be kept in connection with such meetings;
(e) Maintenance and retention of all Trust charter documents and
the filing of all documents required to maintain the Trust's status as a
Delaware business trust and as a registered open-end investment company;
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(f) Arrangement and preparation and dissemination of all
materials for meetings of the Board and committees thereof and preparation and
retention of all minutes and other records thereof;
(g) Preparation and filing of the Trust's Federal, state, and
local income tax returns and calculation of any tax required to be paid in
connection therewith;
(h) Calculation of all Trust and Fund expenses and arrangement
for the payment thereof;
(i) Calculation of and arrangement for payment of all income,
capital gain, and other distributions to shareholders of each Fund;
(j) Determination, after consultation with the officers of the
Trust, of the jurisdictions in which Shares shall be qualified for sale, or may
be sold pursuant to an exemption from such qualification, and preparation and
maintenance of the qualification of the Shares for sale under the securities
laws of each such jurisdiction;
(k) Provision of the services of persons who may be appointed as
officers of the Trust by the Board (it is agreed that some person or persons may
be officers of both the Trust and the Adviser, and that the existence of any
such dual interest shall not affect the validity of this Agreement except as
otherwise provided by specific provision of applicable law);
(l) Preparation and dissemination of the Trust's and each Fund's
quarterly financial information to the Board and preparation of such other
reports relating to the business and affairs of the Trust and each Fund as the
officers and Board may from time to time reasonably request;
(m) Administration of the Trust's Code of Ethics and required
reporting to the Board and officer compliance therewith;
(n) Provision of internal legal, accounting, compliance, audit,
and risk management services and periodic reporting to the Board with respect to
such services;
(o) Negotiation, administration, and oversight of third party
services to the Trust including, but not limited to, sub-advisory, custody, tax,
disaster recovery, audit, and legal services;
(p) Negotiation and arrangement for insurance desired or
required of the Trust and administering all claims thereunder;
(q) Response to all inquiries by regulatory agencies, the press,
and the general public concerning the business and affairs of the Trust,
including the oversight of all periodic inspections of the operations of the
Trust and its agents by regulatory authorities and responses to subpoenas and
tax levies;
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(r) Handling and resolution of any complaints registered with
the Trust by shareholders, regulatory authorities, and the general public;
(s) Monitoring legal, tax, regulatory, and industry developments
related to the business affairs of the Trust and communicating such developments
to the officers and the Board as they may reasonably request or as the Adviser
believes appropriate;
(t) Administration of operating policies of the Trust and
recommendation to the officers and the Board of the Trust of modifications to
such policies to facilitate the protection of shareholders or market
competitiveness of the Trust and Fund and to the extent necessary to comply with
new legal or regulatory requirements;
(u) Responding to surveys conducted by third parties and
reporting of Fund performance and other portfolio information; and
(v) Filing of claims, class actions involving portfolio
securities, and handling administrative matters in connection with the
litigation or settlement of such claims.
2.2 Investment Management Services.
(a) The Adviser shall provide the Trust with such investment
research, advice and supervision as the latter may from time to time consider
necessary for the proper supervision of the assets of each Fund. In this
regard, the Adviser shall:
(i) perform research and obtain and evaluate pertinent
economic, statistical, and financial data relevant to the investment policies of
each Fund as set forth in the Registration Statement;
(ii) consult with the Board and furnish to the Board
recommendations with respect to an overall investment strategy for each Fund for
approval, modification, or rejection by the Board;
(iii) seek out and implement specific investment
opportunities, consistent with any investment strategies approved by the Board;
(iv) take such steps as are necessary to implement any
overall investment strategies approved by the Board for each Fund, including
making and carrying out day-to-day decisions to acquire or dispose of
permissible investments, management of investments and any other property of the
Fund, and providing or obtaining such services as may be necessary in managing,
acquiring or disposing of investments;
(v) regularly report to the Board with respect to the
implementation of any approved overall investment strategy and any other
activities in connection with management of the assets of each Fund, including
furnishing, within 30 days after the end of each calendar quarter, a statement
of all purchases and sales during the quarter and a schedule of investments and
other assets of each Fund as of the end of the quarter;
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(vi) maintain all required accounts, records, memoranda,
instructions or authorizations relating to the acquisition or disposition of
investments for each Fund and the Trust;
(vii) assist in determining each business day the net asset
value of the shares of each Fund in accordance with applicable law; and
(viii) enter into any advisory or sub-advisory contract
with another affiliated or unaffiliated entity pursuant to which such entity
will carry out some or all of the Adviser's responsibilities (as specified in
such advisory or sub-advisory contract) listed above.
(b) The Adviser's services shall be subject always to the control and
supervision of the Board, the restrictions of the Declaration of Trust and
Bylaws of the Trust, as amended from time to time, the provisions of the 1940
Act, the statements relating to each Fund's investment objective or objectives,
investment policies and investment restrictions as set forth in the then-current
Registration Statement, and any applicable provisions of the Internal Revenue
Code of 1986, as amended (the "Code"). The Trust has furnished or will furnish
the Adviser with copies of the Registration Statement, Declaration of Trust, and
Bylaws as currently in effect and agrees during the continuance of this
agreement to furnish the Adviser with copies of any amendments or supplements
thereto before or at the time the amendments or supplements become effective.
The Adviser will be entitled to rely on all documents furnished by the Trust.
(c) The Adviser represents that in performing investment advisory
services for each Fund, the Adviser shall make every effort to ensure that each
Fund continuously qualifies as a Regulated Investment Company under Subchapter M
of the Code or any successor provision. Except as instructed by the Board, the
Adviser shall also make decisions for the Trust as to the manner in which voting
rights, rights to consent to corporate action and any other rights pertaining to
each Fund's portfolio securities shall be exercised. Should the Board at any
time make any determination as to investment policy and notify the Adviser
thereof, the Adviser shall be bound by such determination for the period, if
any, specified in such notice or until similarly notified that such
determination has been revoked.
(d) In connection with the acquisition or disposition of securities
described in Section 2.2(a) (iv), the Adviser may place orders for the purchase
or sale of portfolio investments for the account of each Fund with brokers or
dealers selected by it and, to that end, the Adviser is authorized as the agent
of the Trust to give instructions to the custodian(s) of the Trust as to
deliveries of securities and payments of cash for the account of each Fund. In
connection with the selection of brokers or dealers and the placing of purchase
and sale orders with respect to assets of the Funds, the Adviser is directed at
all times to seek to obtain the best combination of net price and execution
under the circumstances within the policy guidelines determined by the Board and
set forth in the current Registration Statement. Subject to this requirement
and the provisions of the Advisers Act, the 1940 Act, and other applicable
provisions of law, the Adviser may select brokers or dealers with which it or
the Trust is affiliated.
(e) In addition to seeking the best combination of net price and
execution under the circumstances, the Adviser may also take into consideration
research and statistical
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information and wire and other quotation services provided by brokers and
dealers to the Adviser. The Adviser is also authorized to effect individual
securities transactions at commission rates in excess of the minimum commission
rates available, if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or Adviser's overall responsibilities with respect to
each Fund. The policies with respect to brokerage allocation, determined from
time to time by the Board are those disclosed in the Registration Statement. The
execution of such transactions shall not be deemed to represent an unlawful act
or breach of any duty created by this agreement or otherwise. The Adviser
periodically will evaluate the statistical data, research and other investment
services provided to it by brokers and dealers. Such services may be used by
the Adviser in connection with the performance of its obligations under this
agreement or in connection with other advisory or investment operations
including using such information in managing its own accounts.
(f) Nothing in this agreement shall preclude the aggregation of
orders for sale or purchase of securities or other investments by two or more
Funds of the Trust or by the Trust and other accounts (collectively, "Advisory
Clients") managed by the Adviser, provided that the Adviser's actions with
respect to the aggregation of orders for multiple Advisory Clients, including
the Trust, are consistent with the then-current positions in this regard taken
by the Securities and Exchange Commission or its staff through releases,
"no-action" letters, or otherwise.
ARTICLE 3
Allocation of Charges and Expenses
3.1 Charges and Expenses Allocated to the Adviser. The Adviser shall
provide all executive, administrative, clerical and other personnel necessary to
operate the Trust and shall pay the salaries and other costs of employing all of
these persons. The Adviser shall also furnish the Trust with office space,
facilities, and equipment and shall pay the day to day expenses related to the
operation and maintenance of such office space, facilities and equipment. All
expenses incurred in the organization of the Trust or of any new Funds of the
Trust, including legal and accounting expenses and certain costs of registering
securities of the Trust under federal securities law and qualifying for sale
under state securities laws, shall also be paid by the Adviser. The Adviser
shall assume and pay all expenses incurred by it in connection with managing the
assets of the Funds.
3.2 Charges and Expenses Allocated to the Trust.
(a) The Trust shall be responsible for payment of all expenses
it may incur in its operation and all of its general administrative expenses
except those expressly assumed by the Adviser as described in Section 3.1 above.
These include (by way of description and not of limitation), any share
redemption expenses, expenses of portfolio transactions, shareholder servicing
costs, pricing costs, interest on borrowings by the Trust, charges of the
custodians and transfer agent, if any, cost of auditing services, non-interested
Trustees' fees, all taxes and fees, investment advisory fees (other than
subadvisory fees), certain insurance premiums, cost of maintenance of corporate
existence, investor services (including allocable
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personnel and telephone expenses), costs of printing and mailing updated Trust
prospectuses to shareholders and contractholders, preparing, printing and
mailing proxy statements and shareholder reports to shareholders and
contractholders, the cost of paying dividends and capital gains distributions,
costs of Trustee and shareholder meetings, dues to trade organizations, and any
extraordinary expenses, including litigation costs in legal actions involving
the Trust, or costs related to indemnification of Trustees, officers and
employees of the Trust.
(b) The Trust 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.
ARTICLE 4
Compensation of the Adviser
4.1 (a) For the services to be rendered, the facilities to be
furnished and the payments to be made by the Adviser, as provided herein, the
Trust shall pay to the Adviser for each of the Trust's fiscal quarters, and
within three business days after the end each such quarter, a fee based upon the
average daily net assets of each Fund for the quarter, as determined pursuant to
the Trust's Registration Statement and Declaration of Trust, at the annual rates
set forth below for the named Funds:
Growth Fund and Balanced Fund
Average Daily Net Assets Rate of Fee
--------------------------------------------
First $100 million 0.20%
$100 million to $200 million 0.15%
In excess of $200 million 0.10%
Interim Fund and Municipal Bond Fund
Average Daily Net Assets Rate of Fee
--------------------------------------------
First $50 million 0.20%
$50 million to $100 million 0.15%
In excess of $100 million 0.10%
(b) The management fee will be reduced, or the Adviser will reimburse
a Fund, by any amount necessary to prevent a Fund's total expenses (excluding
taxes,
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interest, extraordinary litigation expenses, brokerage commissions and other
portfolio transaction costs) from exceeding 0.40% of the average net assets of
the Fund on an annual basis.
4.2 For the quarter and year in which this agreement becomes effective or
terminates there shall be an appropriate proration on the basis of the number of
days that the agreement is in effect during the quarter and year respectively.
4.3 If, pursuant to the Trust's Registration Statement and Declaration of
Trust, 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 of a share as last determined shall be deemed to be the net asset value of
a share as of the close of business on that day.
4.4 In connection with purchases or sales of portfolio securities for the
account of the Trust, neither the Adviser nor any officer, director, shareholder
or other affiliate of the Adviser nor any officer, trustee, shareholder or other
affiliate of the Trust shall: (i) act as agent and accept any compensation
other than its compensation provided for in this agreement, except in the course
of such person's business as an underwriter or broker; or (ii) act as broker and
accept any commission, fee, or other remuneration in excess of the limits
prescribed in the 1940 Act and the rules promulgated thereunder.
4.5 The Adviser agrees that in all matters relating to the management of
the investment of the assets of the Trust, it will act in conformity with the
Registration Statement, Declaration of Trust, and Bylaws of the Trust then in
effect.
ARTICLE 5
Limitations of Liability
5.1 Limitation of Liability of Adviser. The Adviser shall give the Trust
the benefit of the Adviser's best judgment and efforts in rendering services
under this agreement; provided, that the Adviser shall not be liable for any
error of judgment or import of law, or for any loss suffered by the Trust in
connection with the matters to which this agreement relates, except loss
resulting from: (i) willful misfeasance, bad faith or gross negligence on the
part of the Adviser in the performance of its obligations and duties under this
agreement; (ii) its reckless disregard of its obligations and duties under this
agreement; or (iii) a breach of Section 2.2(c) of this agreement.
5.2 Limitation of Liability of Trust. The Adviser acknowledges that it
has received notice of and accepts the limitations on the Trust's liability as
set forth in the Trust's Declaration of Trust, as amended from time to time. In
accordance therewith, the Adviser agrees that the Trust's obligations hereunder
shall be limited to the assets of the Funds, and with respect to each Fund shall
be limited to the assets of such Fund, and no party shall seek satisfaction of
any such obligation from any shareholder of the Trust, nor from any trustee,
officer, employee or agent of the Trust.
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ARTICLE 6
Books and Records
6.1 The Adviser hereby undertakes and agrees to maintain, in the form
and for the period required, all records relating to the Trust's investments
that are required to be maintained by the Trust pursuant to applicable law.
6.2 The Adviser agrees that all books and records which it maintains
for the Trust are the property of the Trust and further agrees to surrender
promptly to the Trust any such books, records or information upon the Trust's
request. All such books and records shall be made available, within five
business days of a written request, to the Trust's accountants or auditors
during regular business hours at the Adviser's offices. The Trust or its
authorized representative shall have the right to copy any records in the
possession of the Adviser which pertain to the Trust. Such books, records,
information or reports shall be made available to properly authorized government
representatives consistent with state and federal law and/or regulations. In
the event of the termination of this agreement, all such books, records or other
information shall be returned to the Trust free from any claim or assertion of
rights by the Adviser.
6.3 The Adviser further agrees that it will not disclose or use any
records or information obtained pursuant to this agreement in any manner
whatsoever except as authorized in this agreement and that it will keep
confidential any information obtained pursuant to this agreement and disclose
such information only if the Trust has authorized such disclosure, or if such
disclosure is required by federal or state regulatory authorities.
ARTICLE 7
Duration and Termination of this Agreement
7.1 Effective Date and Term. As to each Fund, this agreement shall
not become effective unless and until the later of the time at which it is
approved by the Trust's Board, including a majority of trustees who are not
parties to this agreement or interested persons of any such party to this
agreement, or the time at which it is approved by a majority of such Fund's
outstanding voting securities as required by the 1940 Act. This agreement shall
come into full force and effect on the later of such two dates, provided that it
shall not become effective as to any subsequently created Fund until it has been
approved by the Board specifically for such Fund. As to each Fund, the
agreement shall continue in effect for two years and shall thereafter continue
in effect from year to year so long as such continuance is specifically approved
for each Fund at least annually by: (i) the Board, or by the vote of a majority
of the Fund's outstanding voting securities; and (ii) a majority of those
trustees who are not parties to this agreement or interested persons of any such
party cast in person at a meeting called for the purpose of voting on such
approval.
7.2 Termination.
(a) As to each Fund, this agreement may be terminated at any
time, without penalty, by vote of the Board or by vote of the holders of a
majority of such Fund's
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outstanding voting securities, or by the Adviser, on sixty (60) days' written
notice to the other party.
(b) This agreement may be terminated at any time without the
payment of any penalty by vote of the Board 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.
(c) This agreement shall automatically terminate in the event of
its assignment.
(d) The Trust agrees that upon the termination of this agreement
at any time or for any reason it shall, when so requested by State Farm Mutual
Automobile Insurance Company or 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.
ARTICLE 8
Amendments to this Agreement
8.1 This agreement may be amended as to each Fund by the parties only
if such amendment is specifically approved by: (i) the vote of a majority of
such Fund's outstanding voting securities; and (ii) a majority of those trustees
who are not parties to this agreement or interested persons of any such party
cast in person at a meeting called for the purpose of voting on such approval.
ARTICLE 9
Notices
9.1 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:
State Farm Associates' Funds Trust
Xxx Xxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxx
If to the Adviser:
State Farm Investment Management Corp.
Xxx Xxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxx
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ARTICLE 10
Miscellaneous Provisions
10.1 Other Relationships. It is understood that the officers,
directors, agents, shareholders and other affiliates of the Trust are or may be
interested in the Adviser as officers, directors, agents, shareholders,
affiliates or otherwise, and that the officers, directors, shareholders, agents
and other affiliates of the Adviser may be interested in the Trust otherwise
than as a shareholder.
10.2 Definitions of Certain Terms. The terms "assignment",
"affiliated person" and "interested person", when used in this agreement, shall
have the respective meanings specified in the 1940 Act. The term "majority of
the outstanding voting securities" means the lesser of: (a) 67% or more of the
votes attributable to Shares of a Fund or the Trust, as appropriate, present at
a meeting if the holders of more than 50% of such votes are present or
represented by proxy; or (b) more than 50% of the votes attributable to Shares
of a Fund or the Trust, as appropriate.
10.3 Applicable Law.
(a) This agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of Delaware without regard to
conflicts of law principles or precedents.
(b) This agreement shall be 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 and the terms hereof shall be interpreted and construed in accordance
therewith.
10.4 Severability. If any provision of this agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this agreement shall not be affected thereby.
10.5 Captions. 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.
10.6 Counterparts. This agreement may be executed simultaneously in
multiple counterparts, each of which taken together shall constitute one and the
same instrument.
10.7 Cooperation with Authorities. Each party hereto shall cooperate
with the other party and all appropriate governmental authorities (including
without limitation the SEC) 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.
10.8 Cumulative Rights. 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.
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10.9 Privacy. The Adviser shall not disclose or use nonpublic
personal information (as defined in Rule 3(t) of Regulation S-P), except as
necessary to carry out the purposes for which the Trust disclosed such
information to the Adviser, including information that is used in accordance
with Rules 14 and 15 of Regulation S-P in the ordinary course of business to
carry out those purposes.
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed in their names and on their behalf by their duly authorized officers
all on the day and year first above written.
STATE FARM INVESTMENT
MANAGEMENT CORP.
By: /s/ Xxxxxx X. Xxxx, Xx.
Name: Xxxxxx X. Xxxx, Xx.
Title: President
STATE FARM ASSOCIATES' FUNDS
TRUST
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President and
Treasurer
00
XXXXXXXX X
Xxxxx Xxxx Xxxxxx Xxxx
Xxxxx Farm Balanced Fund
State Farm Interim Fund
State Farm Municipal Bond Fund
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