STATE FARM VARIABLE PRODUCT TRUST
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SUB-ITEM 77Q1(e)
INVESTMENT ADVISORY AND MANAGEMENT
SERVICES AGREEMENT
THIS AGREEMENT was first made and entered into on the 12th day of
December, 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"). This AGREEMENT is hereby
amended effective July 1, 2005 by the Trust and 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 multiple 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:
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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
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
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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
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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.
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.
(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.
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(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
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%
Large Cap Equity Fund .60%
Small Cap Equity Fund .80%
International Equity Fund .80%
(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.
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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 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 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.
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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 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
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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,
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
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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, 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
contained in this agreement are cumulative and are in addition to any and
all rights, remedies and oat law or in equity, parties are entitled to
under which the parties hereto are entitled to under state and federal
obligations, at laws.
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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 VARIABLE PRODUCT TRUST
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President and Treasurer
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