EXHIBIT 5(a)
INVESTMENT ADVISORY AND MANAGEMENT
SERVICES AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of __________, 1997,
by and between STATE FARM VARIABLE PRODUCT 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 initially filed with the Securities and
Exchange Commission on February 27, 1997, as amended from time to time (the
"Registration Statement");
WHEREAS, the Trust has established six 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 Shares are sold exclusively to certain segregated asset
accounts (the "Accounts") of State Farm Life Insurance Company ("State Farm") or
its affiliated life insurance companies (collectively, "State Farm") to fund
certain variable annuity and/or life insurance contracts issued by State Farm
(the "Contracts");
WHEREAS, the Adviser is an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the "Advisers Act") and all
applicable state securities laws, a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and a member of
the National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS, the Trust desires to retain the Adviser to render management and
investment advisory services to each Fund in the manner and on the terms and
conditions set forth below; and
WHEREAS, the Adviser is willing to provide management and investment
advisory services to each Fund 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, and to administer, or arrange for the
administration of, its affairs to the extent requested by, and subject to the
supervision and control of, the Board of Trustees of the Trust 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 General Management Services. The Adviser shall perform (or
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arrange for the performance) the management and administrative services
necessary for the operation of the Trust, including processing shareholder
orders, administering shareholder accounts and handling shareholder relations.
The Adviser shall provide the Trust with office space, equipment, facilities and
such other services as the Adviser, subject to review by the Board, shall from
time to time determine to be necessary or useful to perform its obligations
under this agreement. The Adviser shall also, on behalf of the Trust, conduct
relations with custodians, depositories, transfer agents, dividend disbursing
agents, other shareholder service agents, accountants, attorneys, underwriters,
brokers and dealers, corporate fiduciaries, insurers, banks and such other
persons in any such other capacity deemed to be necessary or desirable. The
Adviser shall make reports to the Board of its performance of its obligations
hereunder and furnish advice and recommendations with respect to such other
aspects of the business and affairs of the Trust as it shall determine to be
desirable.
2.2 Investment Management Services.
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(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;
(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, appropriate state insurance laws, 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: (1)
each Fund shall comply with Section 817(h) of the Code, and the regulations
issued thereunder specifically Regulation Section 1.817-5, relating to the
diversification requirements for variable annuity, endowment, and life insurance
contracts, and any amendments or other modifications to such Section or
regulations; (2) each Fund continuously qualifies as a Regulated Investment
Company under Subchapter M of the Code or any successor provision; (3) each Fund
shall comply with any and all applicable state insurance law restrictions on
investments, and any changes thereto, that operate to limit or restrict the
investments that such Fund may otherwise make. 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 the Trust'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 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 best execution and price 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, the 1934 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 price and execution, the Adviser
may also take into consideration research and statistical 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 will periodically 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 the sale or purchase of securities or other investments by two or more Funds
of the Trust or by the Trust and other separate accounts or other accounts
(collectively, "Advisory Clients") managed by the Adviser, provided that: (i)
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; and (ii) the
Adviser's policies with respect to the aggregation of orders for multiple
Advisory Clients have been previously submitted and approved by the Board.
ARTICLE 3
Allocation of Charges and Expenses
3.1 Charges and Expenses Allocated to the Adviser.
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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 operating 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 and state
securities laws, shall also be paid by the Adviser.
3.2 Charges and Expenses Allocated to the Trust.
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(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 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 on the
last day of each such quarter a fee based upon the average daily net assets of
each Fund, as determined pursuant to the Trust's Registration Statement and
Declaration of Trust, at the following annual rates:
Fund Rate
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Large Cap Equity Index Fund .26%
Small Cap Equity Index Fund .40%
International Equity Index Fund .55%
Bond Fund .50%
Money Market Fund .40%
Stock and Bond Balanced Fund .00%
(b) The Adviser acknowledges that it has agreed not to be paid an
investment advisory fee for performing its services for the Stock and Bond
Balanced Fund.
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 and the administration of its
affairs, it will act in conformity with the Registration Statement, Declaration
of Trust, and Bylaws of the Trust then in effect. It is understood and agreed
that the Adviser, by virtue of a separate agreement with the Trust, may also act
as an underwriter for the Trust.
ARTICLE 5
Limitations of Liability
5.1 Limitation of Liability of Adviser. The Adviser shall give the
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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; (iii) a breach of Section 2.2(c) of this agreement.
5.2 Limitation of Liability of Trust. The Adviser acknowledges that
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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.
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
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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.
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(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 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 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 Variable Product Trust
Xxx Xxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: _____________________
If to the Adviser:
State Farm Investment Management Corp.
Xxx Xxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: _____________________
ARTICLE 10
Miscellaneous Provisions
10.1 Other Relationships. It is understood that the officers,
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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",
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"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.
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(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
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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
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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
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multiple counterparts, each of which taken together shall constitute one and the
same instrument.
10.7 Cooperation with Authorities. Each party hereto shall cooperate
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with the other party and all appropriate governmental authorities (including
without limitation the SEC, 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.
10.8 Cumulative Rights. The rights, remedies and obligations
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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.
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:
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Title:
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STATE FARM VARIABLE PRODUCT TRUST
By:
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Title:
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