1
Exhibit 99.(d)(2)
FORM OF
INVESTMENT ADVISORY AGREEMENT
BETWEEN
SSGA FUNDS MANAGEMENT, INC.
AND
STATE STREET INSTITUTIONAL INVESTMENT TRUST
This Agreement is made as of this 1st day of May, 2001, between State
Street Institutional Investment Trust, a Massachusetts business trust (the
"Trust"), and SSgA Funds Management, Inc., a Massachusetts corporation (the
"Adviser").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), currently consisting of the five separate portfolio series set forth on
Exhibit A to this Agreement (each a "Fund" and collectively, the "Initial
Funds"), each having its own investment policies; and
WHEREAS, the Adviser is in the business of providing investment
advisory services; and
WHEREAS, the Trust desires to retain the Adviser to render investment
advisory services to the Trust with respect to the Initial Funds and such other
series subsequently established by the Trust and made subject to this Agreement
in accordance with paragraph 1(b) (the "Additional Funds") (the Initial Funds
together with the Additional Funds being referred to herein as the "Funds"), and
the Adviser is willing to render such services;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the Trust and Adviser agree as follows:
1. APPOINTMENT OF ADVISER.
(a) Initial Funds: The Trust hereby appoints the Adviser to act as
investment adviser to the Initial Funds for the period and on the terms set
forth in this Agreement. The Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided. The
Trust warrants that the Adviser has been duly appointed to act hereunder.
(b) Additional Funds: In the event that the Trust establishes one
or more series other than the Initial Funds with respect to which it desires to
retain the Adviser to render investment advisory services hereunder, it shall so
notify the Adviser in writing,
-1-
2
indicating the advisory fee to be payable with respect to each Additional Fund.
If the Adviser is willing to render such services at such fee, it shall so
notify the Trust in writing, whereupon each such Additional Fund shall become a
Fund hereunder. In such event, a writing signed by both the Trust and the
Adviser shall be annexed hereto as a part hereof indicating that each such
Additional Fund has become a Fund hereunder and reflecting the agreed-upon fee
schedule for each such Additional Fund.
2. ADVISORY DUTIES. Subject to the supervision of the Board of Trustees of
the Trust (the "Board"), the Adviser shall manage the investment operations and
determine the composition of the portfolio of each Fund, including the purchase,
retention and disposition of the securities and other instruments held by the
Fund, in accordance with such Fund's investment objective and policies as stated
in the then current prospectus and Statement of Additional Information for such
Fund contained in the Trust's Registration Statement on Form N-1A (the
"Registration Statement"), as such prospectus and Statement of Additional
Information are amended or supplemented from time to time. The Adviser's duties
hereunder are subject to the following understandings:
(a) The Adviser shall provide supervision of investments, furnish
a continuous investment program for the Funds, determine from time to time what
investments or securities will be purchased, retained or sold by the Funds, and
what portion of the assets will be invested or held uninvested as cash;
(b) The Adviser, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Trust's Declaration of
Trust, By-Laws, Registration Statement, and with the instructions and directions
of the Board, provided, however, the Adviser shall not be responsible for acting
contrary to any of the foregoing that are changed without notice of such change
to the Adviser; and the Adviser shall conform to and comply with the applicable
requirements of the 1940 Act and all other applicable federal or state laws and
regulations;
(c) The Adviser shall promptly communicate to the officers and
Trustees of the Trust such information relating to transactions of the Funds as
they may reasonably request. On occasions when the Adviser deems the purchase or
sale of a security to be in the best interest of a Fund as well as other
clients, the Adviser, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be sold or purchased, provided that
all accounts are treated equitably and fairly. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transactions, shall be made by the Adviser in the manner it considers to be the
most equitable and consistent with its fiduciary obligations to the Trust and to
such other clients;
(d) The Adviser shall maintain books and records with respect to
the Trust's securities transactions and shall render to the Board such periodic
and special reports as the Board may reasonably request;
(e) The Adviser shall provide the Trust with a list of all
securities transactions as reasonably requested by the Trust;
-2-
3
(f) The investment advisory services of the Adviser to the Trust
under this Agreement are not to be deemed exclusive, and the Adviser shall be
free to render similar services to others.
(g) With respect to any Fund of the Trust, for so long as all
investable assets of the Fund are invested in a Portfolio of the State Street
Master Trust or another investment company with substantially the same
investment objectives and policies as the Fund (a "Master Fund"), the Adviser's
duties with respect to that Fund shall be to monitor the services of the Master
Fund to determine if an investment in the Master Fund remains appropriate.
3. EXECUTION AND ALLOCATION OF PORTFOLIO BROKERAGE COMMISSIONS. The
Adviser, subject to and in accordance with any directions which the Board may
issue from time to time, shall place, in the name of the Trust, orders for the
execution of the securities transactions in which any Fund is authorized to
invest. When placing such orders, the primary objective of the Adviser shall be
to obtain the best net price and execution ("best execution") for the Trust but
this requirement shall not be deemed to obligate the Adviser to place any order
solely on the basis of obtaining the lowest commission rate if the other
standards set forth in this section have been satisfied. The Trust recognizes
that there are likely to be many cases in which different brokers are equally
able to provide such best execution and that, in selection among such brokers
with respect to particular trades, it is desirable to choose those brokers who
furnish "brokerage and research services" (as defined in Section 28(e)(3) of the
Securities and Exchange Act of 1934) or statistical quotations and other
information to the Trust and/or the Adviser in accordance with the standards set
forth below. Moreover, to the extent that it continues to be lawful to do so and
so long as the Board determines as a matter of general policy that the Trust and
the respective Funds will benefit, directly or indirectly, by doing so, the
Adviser may place orders with a broker who charges a higher commission than
another broker would have charged for effecting that transaction, provided that
the excess commission is reasonable in relation to the value of brokerage and
research services provided by that broker. Accordingly, the Trust and the
Adviser agree that the Adviser shall select brokers for the execution of any
Fund's securities transactions from among:
(a) Those brokers and dealers who provide brokerage and research
services, or statistical quotations and other information to the Trust,
specifically including the quotations necessary to determine the Trust's net
assets, in such amount of total brokerage as may reasonably be required in light
of such services.
(b) Those brokers and dealers who provide brokerage and research
services to the Adviser which relate directly to portfolio securities, actual or
potential, of the Trust, or which place the Adviser in a better position to make
decisions in connection with the management of the Trust's assets, whether or
not such data may also be useful to the
-3-
4
Adviser in managing other portfolios or advising other clients, in such amount
of total brokerage as may reasonably be required.
The Adviser agrees that no investment decision will be made or
influenced by a desire to provide brokerage for allocation in accordance with
the foregoing, and that the right to make such allocation of brokerage shall not
interfere with the Adviser's primary duty to obtain the best execution for the
Trust.
4. BOOKS AND RECORDS. The Adviser shall keep the Trust's books and records
required to be maintained by it pursuant to paragraph 2(d) hereof. The Adviser
agrees that all records which it maintains for the Trust are the property of the
Trust and it shall surrender promptly to the Trust any of such records upon the
Trust's request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 of the Securities and Exchange Commission (the
"Commission") under the 1940 Act any such records as are required to be
maintained by Rule 31a-1(f) of the Commission under the 1940 Act. Nothing herein
shall prevent the Adviser from maintaining its own records as required by law,
which may be a duplication of the Trust's records.
5. REPORTS TO ADVISER. The Trust agrees to furnish the Adviser at its
principal office all prospectuses, proxy statements, reports to stockholders,
sales literature or other material prepared for distribution to shareholders of
the Trust or the public, which refer in any way to the Adviser, if reasonably
practicable ten (10) days prior to use thereof and not to use such material if
the Adviser should object thereto in writing within seven (7) days after receipt
of such material; provided, however, that the Adviser hereby approves all uses
of its name which merely refer in accurate terms to its appointment as
investment adviser hereunder, which merely identifies the Trust, or which are
required by the Commission or a state securities commission. In the event of
termination of this Agreement, the Trust shall, on written request of the
Adviser, forthwith delete any reference to the Adviser from any materials
described in the preceding sentence. The Trust shall furnish or otherwise make
available to the Adviser such other information relating to the business affairs
of the Trust as the Adviser at any time, or from time to time, reasonably
requests in order to discharge its obligations hereunder.
6. PROXIES. Unless the Trust gives written instructions to the contrary,
the Adviser shall vote or not vote all proxies solicited by or with respect to
the issuers of securities in which assets of any Fund may be invested. The
Adviser shall use its best good faith judgment to vote or not vote such proxies
in a manner which best serves the interests of the Trust's shareholders. The
Trust has received and reviewed the proxy guidelines of the Adviser which
indicate how the Adviser will vote.
7. EXPENSES. During the term of this Agreement, the Adviser shall pay all
of its own expenses incurred by it in connection with its activities under this
Agreement. Each Fund of the Trust shall bear all expenses that are incurred in
its operation except as provided in the Administration Agreement between State
Street Bank and Trust Company and the Trust dated February 28, 2000. Said
expenses to be borne by each Fund of the Trust will include, but not be limited
to, the following (or the Fund's
-4-
5
proportionate share of the following): (a) brokerage commissions relating to
securities purchased or sold by the Fund or any losses incurred in connection
therewith; (b) fees payable to and expenses incurred on behalf of the Fund by
the Trust's administrator; (c) expenses of organizing the Trust and the Fund;
(d) fees and expenses of registering and maintaining the registration of the
Fund's shares and the Trust under federal securities laws and making and
maintaining any notice filings required under any state securities laws; (e)
fees and salaries payable to the Trust's Trustees and officers who are not
officers or employees of the Adviser or any underwriter of the Trust; (f) taxes
(including any income or franchise taxes) and governmental fees; (g) costs of
any liability, uncollectible items of deposit and other insurance or fidelity
bonds; (h) any costs, expenses or losses arising out of any liability of or
claim for damage or other relief asserted against the Trust or the Fund for
violation of any law; (i) legal, accounting and auditing expenses, including
legal fees of special counsel for the independent Trustees, if any; (j) charges
of custodians, transfer agents and other agents; (k) costs of preparing share
certificates (if any); (l) expenses of setting in type and printing prospectuses
and Statements of Additional Information and supplements thereto for existing
shareholders, reports and statements to shareholders and proxy material; (m) any
extraordinary expenses (including fees and disbursements of counsel) incurred by
the Trust or the Fund; and (n) fees and other expenses incurred in connection
with membership in investment company organizations.
8. COMPENSATION OF THE ADVISER.
For so long as substantially all of the assets of each Fund are
invested in the corresponding Portfolio of State Street Master Funds, no fees
shall be received for the services to be rendered by the Adviser under this
Agreement; otherwise, the Adviser shall receive fees, payable monthly, at the
following annual rates (expressed as a percentage of the average daily net
assets of each Fund):
State Street Equity 500 Index Fund .045%
State Street Equity 400 Index Fund .08%
State Street Equity 2000 Index Fund .10%
State Street MSCI(R) EAFE(R) Index Fund .15%
State Street Aggregate Bond Index Fund .10%
9. LIMITATION OF ADVISER'S LIABILITY. In the absence of (a) willful
misfeasance, bad faith or gross negligence on the part of the Adviser in
performance of its obligations and duties hereunder, (b) reckless disregard by
the Adviser of its obligations and duties hereunder, or (c) a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services (in which case, any award of damages shall be limited to the period and
the amount set forth in Section 36(b)(3) of the 1940 Act), the Adviser shall not
be subject to any liability whatsoever to the Trust, or to any shareholder of
the Trust, for any error of judgment, mistake of law or any other act or
omission in the course of, or connected with, rendering services hereunder
including,
-5-
6
without limitation, for any losses that may be sustained in connection with the
purchase, holding, redemption or sale of any security on behalf of the Trust.
10. DURATION AND TERMINATION.
(a) This Agreement shall become effective with respect to each
Initial Fund on the date hereof, or, with respect to any Additional Fund on the
date of the written notification specified in Section 1(b). This Agreement,
unless sooner terminated as provided herein, shall continue for each Fund for
two years following the effective date of this Agreement with respect to the
Fund, and thereafter shall continue for periods of one year so long as such
continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Board who are not parties to this Agreement or
"interested persons" (as defined in the ▇▇▇▇ ▇▇▇) of any such party, cast in
person at a meeting called for the purpose of voting such approval, and (b) by
the Board or by vote of a majority of the outstanding voting securities of the
Fund in accordance with the provisions of the 1940 Act.
(b) This Agreement may be terminated by the Trust at any time,
without the payment of any penalty, by the Board or by the majority vote of
either the entire Board or by vote of a majority of the outstanding voting
securities of the Fund (in accordance with the provisions of the ▇▇▇▇ ▇▇▇) on 60
days' written notice to the Adviser. This Agreement may also be terminated by
the Adviser on 90 days' written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its assignment (as
defined in the 1940 Act and the rules thereunder).
11. CHOICE OF LAW. This Agreement shall be construed in accordance with the
laws of The Commonwealth of Massachusetts and any applicable federal law.
12. LIMITATION OF LIABILITY. The Declaration of Trust dated February 16,
2000, establishing the Trust, which is hereby referred to and a copy of which is
on file with the Secretary of The Commonwealth of Massachusetts, provides that
the name State Street Institutional Investment Trust means the Trustees from
time to time serving (as Trustees but not personally) under such Declaration of
Trust. It is expressly acknowledged and agreed that the obligations of the Trust
hereunder shall not be binding upon any of the interest holders, Trustees,
officers, employees or agents of the Trust, personally, but shall bind only the
trust property of the Trust, as provided in its Declaration of Trust. The
execution and delivery of this Agreement have been authorized by the Trustees of
the Trust and signed by an officer of the Trust, acting as such, and neither
such authorization by such Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Declaration of Trust.
-6-
7
IN WITNESS WHEREOF, the due execution hereof as of the date first above
written.
Attest: STATE STREET INSTITUTIONAL
INVESTMENT TRUST
By: ___________________________ By: _____________________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
President
Attest: SSGA FUNDS MANAGEMENT, INC.
By: ___________________________ By: ___________________________
Name: ___________________________
Title: ___________________________
-7-
