EXHIBIT 5(b)
INVESTMENT SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of __________, 1997,
by and among STATE FARM VARIABLE PRODUCT TRUST, a Delaware business trust (the
"Trust"), STATE FARM INVESTMENT MANAGEMENT CORP., a Delaware corporation (the
"Adviser"), and BARCLAYS GLOBAL FUND ADVISORS (the "Sub-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 (the "Funds");
WHEREAS, pursuant to a separate investment advisory and management services
agreement between the Trust and the Adviser (the "Advisory Agreement"), the
Trust has retained the Adviser to render management and investment advisory
services to each Fund;
WHEREAS, the Sub-Adviser is an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the "Advisers Act");
WHEREAS, the Adviser desires to retain the Sub-Adviser to provide
investment advisory services to certain Funds in the manner and on the terms and
conditions set forth below; and
WHEREAS, the Sub-Adviser is willing to provide investment advisory services
to certain Funds in the manner and on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, the
Adviser, and the Sub-Adviser agree as follows:
ARTICLE 1
Employment of Sub-Adviser
1.1 The Adviser hereby employs the Sub-Adviser to act as investment sub-
adviser for and to invest and reinvest the assets of the Large Cap Equity Index
Fund, Small Cap Equity Index Fund, and International Equity Index Fund (the
"Index Funds"), 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 Sub-Adviser accepts such employment and agrees during such period
at its own expense to render the services set forth herein, or to arrange for
such services to be rendered, and to assume the obligations herein set forth for
the compensation herein provided.
1.3 The Sub-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 or the Adviser in any way or
otherwise be deemed an agent of the Trust or the Adviser. Notwithstanding the
foregoing, the Sub-Adviser shall, for the purposes of this agreement, have and
exercise full investment discretion and authority to act as agent for the Trust
and the Adviser in buying, selling or otherwise disposing of the Index Funds'
investments, subject to supervision by the Board.
1.4 The services of the Sub-Adviser herein provided are not to be deemed
exclusive. The Sub-Adviser may act as an investment adviser to any other
person, firm or corporation, and may perform management and any other services
for any other person, association, corporation, firm or other entity pursuant to
any contract or otherwise, and take any action or do anything in connection
therewith or related thereto, except as prohibited by applicable law; and no
such performance of management or other services shall be in any manner
restricted or otherwise affected by any aspect of any relationship of the Sub-
Advisor to the Trust, the Index Funds or the Adviser except as otherwise imposed
by law or by this agreement.
ARTICLE 2
Duties of Sub-Adviser
2.1 Investment Advisory Services.
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(a) Subject to the supervision of the Board and the Adviser, the Sub-
Adviser shall provide the Index Funds with such investment research, advice and
supervision as is necessary for the investment and proper supervision of the
assets of each Index Fund. In this regard, the Sub-Adviser shall:
(i) perform research and obtain and evaluate pertinent economic,
statistical, and financial data relevant to the investment policies of each
Index Fund as set forth in the Registration Statement;
(ii) at such times as shall be reasonably requested by the Board
or the Adviser, consult with the Board and furnish to the Board recommendations
with
respect to an overall investment strategy for each Index 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 Index 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
Index 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 Index Fund
including furnishing, within 10 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 Index Fund as of the end of the quarter;
(vi) maintain all accounts, records, memoranda, instructions or
authorizations required to be maintained by the Sub-Adviser pursuant to the
requirements of Rule 31a-1 under the 1940 Act, for the period required by Rule
31a-2 under the 1940 Act, with respect to transactions by the Sub-Adviser on
behalf of the Index Funds;
(vii) assist in determining each business day the net asset value
of the shares of each Index Fund in accordance with applicable law; and
(viii) provide the Adviser with a report of each portfolio
transaction no later than the close of the next business day following such
transaction.
(b) The Sub-Adviser's services shall be subject always to the control
and supervision of the Board and the Adviser, the restrictions of the
Declaration of Trust and Bylaws of the Trust, as amended from time to time, the
provisions of the 1940 Act, and each Index Fund's investment objective or
objectives, investment policies and investment restrictions as set forth in the
then-current Registration Statement. The Trust or the Adviser has furnished or
will furnish the Sub-Adviser with copies of the Registration Statement,
Declaration of Trust, and Bylaws as currently in effect and the Trust agrees
during the continuance of this agreement to furnish the Sub-Adviser with copies
of any amendments or supplements thereto before or at the time the amendments or
supplements become effective. The Sub-Adviser will be entitled to rely on all
documents and other information furnished by the Trust or the Adviser or the
representatives of either.
(c) The Sub-Adviser represents that in performing investment
advisory services for each Index Fund, the Sub-Adviser shall use its best
efforts to ensure that: (1) each Index Fund shall comply with Section 817(h) of
the Internal Revenue Code of 1986, as amended ("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 Index Fund continuously qualifies as a Regulated
Investment Company under Subchapter M of the Code or any successor provision;
(3) each Index 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 Index Fund may otherwise make. The Sub-
Adviser shall be obligated for compliance under clauses (1) and (3) of this
Section 2.1(c) only to the extent that the Trust has provided the Sub-Adviser
with notice, in writing, of the diversification requirements or state insurance
law restrictions applicable to the Index Funds, including a description thereof.
Except as instructed by the Board, the Sub-Adviser shall also make decisions for
the Index Funds as to the manner in which voting rights, rights to consent to
corporate action and any other rights pertaining to the Index Funds' portfolio
securities shall be exercised. Should the Board at any time make any
determination as to investment policy and notify the Sub-Adviser thereof in
writing, the Sub-Adviser, upon receipt of such notice, shall be bound by such
determination for the period, if any, specified in such written notice or until
similarly notified that such determination has been revoked.
(d) In connection with the acquisition or disposition of securities
described in Section 2.1(a)(iv), the Sub-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 Sub-Adviser is
authorized as the agent of the Trust to give instructions to the custodians 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
Sub-Adviser is directed at all times to seek to obtain best execution and price.
Subject to this requirement and the provisions of the Advisers Act, the 1940
Act, the 1934 Act, and other applicable provisions of law, the Sub-Adviser may
select brokers or dealers with which it or the Trust or the Adviser is
affiliated.
(e) In seeking the best price and execution, the Sub-Adviser may
also take into consideration research and statistical information and wire and
other quotation services provided by brokers and dealers to the Sub-Adviser.
The Sub-Adviser is authorized to effect individual securities transactions at
commission rates in excess of the minimum commission rates available, if the
Sub-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 Sub-Adviser's overall responsibilities with respect to the Index
Funds and its other clients and that the total commissions paid by each Index
Fund will be reasonable in relation to the benefits to the Index Fund over the
long term. 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 Sub-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 Sub-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 Sub-Adviser, provided that:
(i) the Sub-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
Sub-Adviser's policies with respect to the aggregation of orders for multiple
Advisory Clients have been previously submitted and approved by the Board. The
Adviser and the Trust recognize that in some cases this procedure may adversely
affect the results obtained for an Index Fund.
2.2 The Adviser shall retain the authority to establish and modify, from
time to time, the investment strategies and approaches to be followed by the
Sub-Adviser with respect to any Fund, subject, in all respects, to the
supervision and direction of the Trust's Board of Trustees and subject to
compliance with the investment objectives, policies and restrictions applicable
to such Fund as set forth in the Registration Statement, provided, however, that
the Sub-Adviser's duty under this agreement to act in conformity with any
document, instruction or guidelines produced by the Adviser shall not arise
until such document, instruction or guideline has been delivered to the Sub-
Adviser in writing.
ARTICLE 3
Compensation of the Sub-Adviser
3.1 (a) For the services to be rendered, the facilities to be furnished
and the payments to be made, as provided herein, the parties hereto agree that
the Adviser shall pay to the Sub-Adviser for each of the Trust's fiscal quarters
on the last day of each such quarter:
(i) With respect to the Large Cap Equity Index Fund, a fee equal
to a percentage of the Large Cap Equity Index Fund's average daily net assets
during such quarter at the following rates minus $875:
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.15% of the first $50,000,000 of net assets
.09% of the next $50,000,000 of net assets
.07% thereafter
(ii) With respect to the Small Cap Equity Index Fund, a fee equal
to a percentage of the Small Cap Equity Index Fund's average daily net assets
during such quarter at the following rates minus $2,875:
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.20% of the first $50,000,000 of net assets
.14% of the next $50,000,000 of net assets
.11% thereafter;
(iii) With respect to the International Equity Index Fund, a fee
equal to a percentage of the International Equity Index Fund's average daily net
assets during such quarter at the rates set forth below minus $3,750 and minus
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an amount equal to X minus Y, where: X is the amount of the Trust's
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international custody fees for such quarter and Y is equal to 0.02% of the
average daily net assets of the International Equity Index Fund during such
quarter plus $20 for each International Equity Index Fund portfolio transaction
during such quarter. If negative, the amount of such fee shall be carried over
to the following quarter and credited against the fee calculated pursuant to
this Section 3.1(a)(iii) for such quarter. The rates upon which the
International Equity Index Fund's fee shall be based are as follows:
.35% of the first $50,000,000 of net assets
.30% of the next $50,000,000 of net assets
.20% thereafter
(b) The Adviser shall be responsible for payment of, and the Sub-
Adviser agrees that it shall have no claim against the Trust or any Index Fund
respecting, the Sub-Adviser's compensation under this Agreement.
(c) During the term of this agreement, the Sub-Adviser will bear all
expenses incurred by it in connection with its services under this agreement.
The Sub-Adviser shall not be responsible for any expenses incurred by the Trust,
the Index Funds or the Adviser.
3.2 For the quarter and year in which this agreement becomes effective or
terminates there shall be a proration on the basis of the number of days that
the agreement is in effect during the quarter and year respectively.
3.3 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.
3.4 In connection with purchases or sales of portfolio securities for the
account of the Index Funds, neither the Sub-Adviser nor any officer, director,
shareholder or other affiliate of the Sub-Adviser 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.
ARTICLE 4
Limitations of Liability; Indemnification
4.1 Limitation of Liability of Sub-Adviser. The Sub-Adviser shall not be
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liable for any error of judgment or import of law, or for any loss suffered by
the Trust, any Index Fund or their shareholders 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 Sub-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 2.1(c) of this agreement.
4.2 Limitation of Liability of Trust. The Sub-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 Sub-Adviser agrees that the Trust's obligations
hereunder shall be limited to the assets of the Index Funds and, with respect to
each Index Fund, shall be limited to the assets of such Index 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.
4.3 Indemnification. Because the Sub-Adviser has been retained solely to
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provide the investment advisory and related services described in this
agreement, the Adviser shall indemnify the Sub-Adviser to the fullest extent
permitted by law against any and all loss and expenses, including attorneys'
fees, incurred by the Sub-Adviser to the extent resulting, in whole or in part,
from any acts, or failures to act, of the Adviser or any affiliate of the
Adviser, or any employee or agent of the Adviser or any of its affiliates, in
connection with the marketing and distribution of the Shares, except to the
extent such loss or expense arises solely from: (i) willful misfeasance, bad
faith or gross negligence on the part of the Sub-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
2.1(c) of this agreement.
ARTICLE 5
Books and Records
5.1 The Sub-Adviser hereby undertakes and agrees to maintain, in the form
and for the period required, all records relating to the Index Funds'
investments that are required to be maintained by the Trust pursuant to the
requirements of Rule 31a-1 of the 1940 Act.
5.2 In compliance with Rule 31a-3 of the 1940 Act, the Sub-Adviser agrees
that all books and records which it maintains for the Index Funds 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 Sub-
Adviser's offices. The Trust or its authorized representative shall have the
right to copy any records in the possession of the Sub-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, upon payment of any compensation due Sub-Adviser under Article 3
hereof, all such books, records or other information shall be returned to the
Trust.
5.3 The Sub-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 or as otherwise authorized by
the Trust or the Adviser and that it will keep confidential any information
obtained pursuant to this agreement and disclose such information only if the
Trust or the Adviser has authorized such disclosure, or if such disclosure is
required by federal or state regulatory authorities.
ARTICLE 6
Duration and Termination of this Agreement
6.1 Effective Date and Term. As to each Index 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 Index
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.
As to each Index 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 Index Fund at least annually by:
(i) the Board, or by the vote of a majority of such Index 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.
6.2 Termination.
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(a) As to each Index Fund, this agreement may be terminated at any
time, without penalty, by vote of the Board, by vote of the holders of a
majority of such Index Fund's outstanding voting securities, or by the Adviser
or Sub-Adviser, on sixty (60) days' written notice to the other parties.
(b) This agreement may be terminated at any time without the
payment of any penalty by the Adviser or by vote of the Board in the event that
it shall have been established by a court of competent jurisdiction that the
Sub-Adviser or any officer or director of the Sub-Adviser has taken any action
which results in a breach of the covenants of the Sub-Adviser set forth herein.
(c) This agreement shall automatically terminate in the event of
its assignment.
ARTICLE 7
Amendments to this Agreement
7.1 This agreement may be amended as to each Index Fund by the parties
only if such amendment is specifically approved by: (i) the vote of a majority
of such Index 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 (unless, in the case of (i), the Trust receives an order of the
Commission or "no-action" letter permitting it to modify the agreement without
such vote).
ARTICLE 8
Notices
8.1 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: _____________________
If to the Sub-Adviser:
Barclays Global Fund Advisors
00 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: _____________________
ARTICLE 9
Miscellaneous Provisions
9.1 Definitions of Certain Terms. The terms "assignment", "affiliated
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person" and "interested person", when used in this agreement, shall have the
respective meanings specified in the 1940 Act. The term "majority of such Index
Fund's outstanding voting securities" means the lesser of: (a) 67% or more of
the votes attributable to such Shares of the Index Fund 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 the Index Fund.
9.2 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 1940 and
the Advisers 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.
9.3 Severability. If any provision of this agreement shall be held or
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made invalid by a court decision, statute, rule or otherwise, the remainder of
this agreement shall not be affected thereby.
9.4 "State Farm". The Sub-Adviser agrees that the name "State Farm,"
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which comprises a component of the Trust's name, is a property right of the
parent of the
Adviser. The Sub-Adviser acknowledges that the use of the name "State Farm" by
the Trust is governed by the terms of the Advisory Agreement.
9.5 Captions. The captions in this agreement are included for convenience
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of reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
9.6 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.
9.7 Cooperation with Authorities. Each party hereto shall cooperate with
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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.
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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BARCLAY'S GLOBAL FUND ADVISORS
By:
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Title:
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