INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
SECURITY MANAGEMENT COMPANY
AND
X. XXXX PRICE ASSOCIATES, INC.
INVESTMENT SUB-ADVISORY AGREEMENT, made as of the 1st day of May, 1995,
between Security Management Company ("ADVISER"), a corporation organized and
existing under the laws of the State of Kansas, and X. Xxxx Price Associates,
Inc. ("SUB-ADVISER"), a corporation organized and existing under the laws of the
State of Maryland.
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated as of the lst day of May, 1995 ("Advisory Agreement") with SBL Fund
("COMPANY"), which is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended ("1940 Act");
and
WHEREAS, the Company is authorized to issue shares of Series N ("FUND"), a
separate series of the Company;
WHEREAS, the Sub-Adviser is engaged principally in the business of
rendering investment supervisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended ("ADVISERS ACT");
and
WHEREAS, the Adviser desires to retain the Sub-Adviser as sub-adviser to
furnish certain investment advisory services to the Adviser and the Fund and the
Sub-Adviser is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual promises herein
set forth, the parties hereto agree as follows:
1. APPOINTMENT. Adviser hereby appoints the Sub-Adviser as its investment
sub-adviser with respect to the Fund for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided.
2. DUTIES OF THE SUB-ADVISER.
A. INVESTMENT SUB-ADVISORY SERVICES. Subject to the supervision of the
Company's Board of Directors ("Board") and the Adviser, the Sub-Adviser
shall act as the investment sub-adviser and shall supervise and direct
the investments of the Fund in accordance with the Fund's investment
objectives, policies, and restrictions as provided in the Fund's
Prospectus and Statement of Additional Information, as currently in
effect and as amended or supplemented from time to time (hereinafter
referred to as the "Prospectus"), and such other limitations as the
Fund may impose by notice in writing to the Sub-Adviser. The
Sub-Adviser shall obtain and evaluate such information relating to the
economy, industries, businesses, securities markets, and securities as
it may deem necessary or useful in the discharge of its obligations
hereunder and shall formulate and implement a continuing program for
the management of the assets and resources of the Fund in a manner
consistent with the Fund's investment objective(s), policies, and
restrictions. In furtherance of this duty, the Sub-Adviser, on behalf
of the Fund, is authorized, in its discretion and without prior
consultation with the Fund or the Adviser, to:
(1) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds, and other securities or assets; and
(2) directly or through the trading desks of X. Xxxx Price Associates,
Inc., and Xxxxxx Xxxxxxx Holdings Limited, and their affiliates,
place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Sub-Adviser may select.
B. FURTHER DUTIES OF SUB-ADVISER. In all matters relating to the
performance of this Agreement, the Sub-Adviser shall act in conformity
with the Company's Articles of Incorporation, By-Laws, and currently
effective Registration Statement (as defined below) and with the
written instructions and directions of the Board and the Adviser, and
shall comply with the requirements of the 1940 Act, the Advisers Act,
the rules thereunder, and all other applicable federal and state laws
and regulations.
C. In carrying out its obligations under this Agreement, the Sub-Adviser
shall ensure that the Fund complies with all applicable statutes and
regulations necessary to qualify the Fund as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code (or any
successor or similar provision), and shall notify the Adviser
immediately upon having a reasonable basis for believing that the fund
has ceased to so qualify or that it might not so qualify in the future.
D. In carrying out its obligations under this Agreement, the Sub-Advisor
shall invest the Fund assets in such a manner as to ensure that the
Fund complies with the diversification provisions of Section 817(h) of
the Internal Revenue Code and the regulations issued thereunder
relating to the diversification requirements for variable insurance
contracts and any prospective amendments or other modifications to
Section 817 or regulations thereunder. Subadviser shall notify the
Adviser immediately upon having a reasonable basis for believing that
the Fund has ceased to comply and will take all reasonable steps to
adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Regulation 1.817.5.
3. COMPENSATION. For the services provided and the expenses assumed by the
Sub-Adviser pursuant to this Agreement, the Sub-Adviser shall receive a
monthly investment management fee as set forth in Schedule 1, attached
hereto and incorporated herein by reference. The management fee shall be
payable monthly to the Sub-Adviser on or before the 25th day of the next
succeeding calendar month. If this Agreement becomes effective or
terminates before the end of any month, the investment management fee for
the period from the effective date to the end of such month or from the
beginning of such month to the date of termination, as the case may be,
shall be prorated according to the proration which such period bears to the
full month in which such effectiveness or termination occurs.
4. DUTIES OF THE ADVISER.
A. The Adviser shall continue to have responsibility for all services to
be provided to the Fund pursuant to the Advisory Agreement and shall
oversee and review the Sub-Adviser's performance of its duties under
this Agreement.
B. The Adviser has furnished the Sub-Adviser with copies of each of the
following documents and will furnish to the Sub-Adviser at its
principal office all future amendments and supplements to such
documents, if any, as soon as practicable after such documents become
available:
(1) The Articles of Incorporation of the Company, as filed with the
Secretary of State, as in effect on the date hereof and as amended
from time to time;
(2) The By-Laws of the Company as in effect on the date hereof and as
amended from time to time ("BY-LAWS");
(3) Certified resolutions of the Board of the Company authorizing the
appointment of the Adviser and the Sub-Adviser and approving the
form of the Advisory Agreement and this Agreement;
(4) The Company's Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended, on Form N-1A, as filed with
the Securities and Exchange Commission ("SEC") relating to the
Fund and its shares and all amendments thereto ("REGISTRATION
STATEMENT");
(5) The Notification of Registration of the Company under the 1940 Act
on Form N-8A as filed with the SEC and any amendments thereto;
(6) The Funds Prospectus (as defined above); and
(7) A certified copy of any financial statement or report prepared for
the Fund by certified or independent public accountants, and
copies of any financial statements or reports made by the Fund to
its shareholders or to any governmental body or securities
exchange.
The Adviser shall furnish the Sub-Adviser with any further documents,
materials or information that the Sub-Adviser may reasonably request to enable
it to perform its duties pursuant to this Agreement.
C. During the term of this Agreement, the Adviser shall furnish to the
Sub-Adviser at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature, or other material prepared
for distribution to shareholders of the Fund or the public, which refer
to the Sub-Adviser or its clients in any way, prior to the use thereof,
and the Adviser shall not use any such materials if the Sub-Adviser
reasonably objects in writing five business days (or such other time as
may be mutually agreed) after receipt thereof. The Adviser shall ensure
that materials prepared by employees or agents of the Adviser or its
affiliates that refer to the Sub-Adviser or its clients in any way are
consistent with those materials previously approved by the Sub-Adviser
as referenced in the preceding sentence.
5. BROKERAGE.
A. The Sub-Adviser agrees that, in placing orders with broker-dealers for
the purchase or sale of portfolio securities, it shall attempt to
obtain best execution at favorable security prices; provided that, on
behalf of the Fund, the Sub-Adviser may, in its discretion, agree to
pay a broker-dealer that furnishes brokerage or research services as
such services are defined under Section 28(e) of the Securities
Exchange Act of 1934, as amended ("1934 Act"), a higher commission than
that which might have been charged by another broker-dealer for
effecting the same transactions, if the Sub-Adviser determines in good
faith that such commission is reasonable in relation to the brokerage
and research services provided by the broker-dealer, viewed in terms of
either that particular transaction or the overall responsibilities of
the Sub-Adviser with respect to the accounts as to which it exercises
investment discretion (as such term is defined under Section 3(a)(35)
of the 1934 Act). In no instance will portfolio securities be purchased
from or sold to the Sub-Adviser, or any affiliated person thereof
("PRINCIPAL TRANSACTIONS"), except in accordance with the federal
securities laws and the rules and regulations thereunder. Regardless of
the provisions of the federal securities laws relating to Principal
Transactions, as currently in effect or as may be amended in the
future, no such transactions will be effected for the Fund without the
express written authorization of the Adviser.
B. On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other
clients of the Sub-Adviser, the Sub-Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation
to, aggregate the securities to be purchased or sold to attempt to
obtain a more favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Sub-Adviser in the manner the Sub-Adviser considers
to be the most equitable and consistent with its fiduciary obligations
to the Fund and to its other clients.
6. OWNERSHIP OF RECORDS. The Sub-Adviser shall maintain all books and records
required to be maintained by the Sub-Adviser pursuant to the 1940 Act and
the rules and regulations promulgated thereunder with respect to
transactions on behalf of the Fund. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Sub-Adviser hereby agrees (i) that all
records that it maintains for the Fund are the property of the Company,
(ii) to preserve for the periods prescribed by Rule 31a-2 under the 1940
Act any records that it maintains for the Company and that are required to
be maintained by Rule 31a-1 under the 1940 Act, and (iii) agrees to
surrender promptly to the Company any records that it maintains for the
Company upon request by the Company; provided, however, the Sub-Adviser may
retain copies of such records.
7. REPORTS. The Sub-Adviser shall furnish to the Board or the Adviser, or
both, as appropriate, such information, reports, evaluation, analyses and
opinions as the Sub-Adviser and the Board or the Adviser, as appropriate,
may mutually agree upon from time to time.
8. SERVICES TO OTHERS CLIENTS. Nothing contained in this Agreement shall limit
or restrict (i) the freedom of the Sub-Adviser, or any affiliated person
thereof, to render investment management and corporate administrative
services to other investment companies, to act as investment manager or
investment counselor to other persons, firms, or corporations, or to engage
in any other business activities, or (ii) the right of any director,
officer, or employee of the Sub-Adviser, who may also be a director,
officer, or employee of the Company, to engage in any other business or to
devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature, so long as the Sub-Adviser's services under this Agreement is not
impaired thereby.
9. SUB-ADVISER'S USE OF THE SERVICES OF OTHERS. The Sub-Adviser may (at its
cost except as contemplated by Paragraph 5 of the Agreement) employ,
retain, or otherwise avail itself of the services or facilities of other
persons or organizations for the purpose of providing the Sub-Adviser or
the Company or Fund, as appropriate, with such statistical and other
factual information, such advice regarding economic factors and trends,
such advice as to occasional transactions in specific securities, or such
other information, advice, or assistance as the Sub-Adviser may deem
necessary, appropriate, or convenient for the discharge of its obligations
hereunder or otherwise helpful to the Company or the Fund, as appropriate,
or in the discharge of Sub-Adviser's overall responsibilities with respect
to the other accounts that it serves as investment manager or counselor.
However, the Sub-Adviser shall not assign or delegate any of its duties
under this Agreement without the approval of the Advisor and the Board.
10. LIMITATION OF LIABILITY OF THE SUB-ADVISER. Neither the Sub-Adviser nor any
of its officers, directors, or employees, nor any person performing
executive, administrative, trading, or other functions for the Company, the
Fund (at the direction or request of the Sub-Adviser) or the Sub-Adviser in
connection with the Sub-Adviser's discharge of its obligations undertaken
or reasonably assumed with respect to this Agreement, shall be liable for
(i) any error of judgment or mistake of law or for any loss suffered by the
Company or Fund or (ii) any error of fact or mistake of law contained in
any report or data provided by the Sub-Adviser, except for any error,
mistake or loss resulting from willful misfeasance, bad faith, or gross
negligence in the performance of its or his duties on behalf of the Company
or Fund or from reckless disregard by the Sub-Adviser or any such person of
the duties of the Sub-Adviser pursuant to this Agreement.
11. REPRESENTATIONS OF SUB-ADVISER. The Sub-Adviser represents, warrants, and
agrees as follows:
A. The Sub-Adviser: (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act or
the Advisers Act from performing the services contemplated by this
Agreement; (iii) has met, and will continue to meet for so long as this
Agreement remains in effect, any other applicable federal or state
requirements, or the applicable requirements of any regulatory or
industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; (iv) has the
authority to enter into and perform the services contemplated by this
Agreement; and (v) will immediately notify the Adviser of the
occurrence of any event that would disqualify the Sub-Adviser from
serving as an investment adviser of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise.
B. The Sub-Adviser has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and, if it has not
already done so, will provide the Adviser and the Company with a copy
of such code of ethics, together with evidence of its adoption.
C. The Sub-Adviser has provided the Adviser and the Company with a copy of
its Form ADV as most recently filed with the SEC and will, promptly
after filing any amendment to its Form ADV with the SEC, furnish a copy
of such amendment to the Adviser.
12. TERM OF AGREEMENT. This Agreement shall become effective upon the date
first above written, provided that this Agreement shall not take effect
unless it has first been approved (i) by a vote of a majority of those
directors of the Company 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, and (ii) by vote of a majority
of the Fund's outstanding voting securities. Unless sooner terminated as
provided herein, this Agreement shall continue in effect for two years from
its effective date. Thereafter, this Agreement shall continue in effect
from year to year, with respect to the Fund, subject to the termination
provisions and all other terms and conditions hereof, so long as such
continuation shall be specifically approved at least annually (a) by either
the Board, or by vote of a majority of the outstanding voting securities of
the Fund; (b) in either event, by the vote, cast in person at a meeting
called for the purpose of voting on such approval, of a majority of the
directors of the Company who are not parties to this Agreement or
interested persons of any such party; and (c) the Sub-Adviser shall not
have notified the Company, in writing, at least 60 days prior to such
approval that it does not desire such continuation. The Sub-Adviser shall
furnish to the Company, promptly upon its request, such information as may
reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal, or amendment hereof.
13. TERMINATION OF AGREEMENT. Notwithstanding the foregoing, this Agreement may
be terminated at any time, without the payment of any penalty, by vote of
the Board or by a vote of a majority of the outstanding voting securities
of the Fund on at least 60 days' prior written notice to the Sub-Adviser.
This Agreement may also be terminated by the Adviser: (i) on at least 60
day's prior written notice to the Sub-Adviser, without the payment of any
penalty; (ii) upon material breach by the Sub-Adviser of any of the
representations and warranties set forth in Paragraph 11 of this Agreement,
if such breach shall not have been cured within a 20-day period after
notice of such breach; or (iii) if the Sub-Adviser becomes unable to
discharge its duties and obligations under this Agreement. The Sub-Adviser
may terminate this Agreement at any time, without the payment of any
penalty, on at least 60 days' prior notice to the Adviser. This Agreement
shall terminate automatically in the event of its assignment or upon
termination of the Advisory Agreement.
14. AMENDMENT OF AGREEMENT. No provision of this Agreement may be changed,
waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change,
waiver, discharge, or termination is sought, and no material amendment of
this Agreement shall be effective until approved by vote of a majority of
the Fund's outstanding voting securities.
15. MISCELLANEOUS
A. GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Maryland without giving effect to the conflicts of
laws principles thereof and the 1940 Act. To the extent that the
applicable laws of the State of Maryland conflict with the applicable
provisions of the 1940 Act, the latter shall control.
B. CAPTIONS. The captions contained in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
C. ENTIRE AGREEMENT. This Agreement represents the entire agreement and
understanding of the parties hereto and shall supersede any prior
agreements between the parties relating to the subject matter hereof,
and all such prior agreements shall be deemed terminated upon the
effectiveness of this Agreement.
D. INTERPRETATION. Nothing herein contained shall be deemed to require the
Company to take any action contrary to its Articles of Incorporation or
By-Laws, or any applicable statutory or regulatory requirement to which
it is subject or by which it is bound; or to relieve or deprive the
Board of its responsibility for and control of the conduct of the
affairs of the Fund.
E. DEFINITIONS. Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term
or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if
any, by the United States courts or, in the absence of any controlling
decision of any such court, by rules, regulations, or orders of the SEC
validly issued pursuant to the Act. As used in this Agreement, the
terms "majority of the outstanding voting securities," "affiliated
person," "interested person," "assignment," "broker," "investment
adviser," "net assets," "sale," "sell," and "security" shall have the
same meaning as such terms have in the 1940 Act, subject to such
exemption as may be granted by the SEC by any rule, regulation, or
order. Where the effect of a requirement of the federal securities laws
reflected in any provision of this Agreement is made less restrictive
by a rule, regulation, or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the
effect of such rule, regulation, or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Attest: SECURITY MANAGEMENT COMPANY
XXX X. XXX By: XXXXX X. XXXXXXX
--------------------------- -----------------------------------
Xxx X. Xxx Xxxxx X. Xxxxxxx
Secretary Senior Vice President
Attest: X. XXXX PRICE ASSOCIATES, INC.
XXXX XXXXXX By: XXXXX X. XXXXXX
--------------------------- -----------------------------------
SCHEDULE 1
FEE SCHEDULE
For the services provided and the expenses assumed by the Sub-Adviser under the
terms of the Agreement, the Sub-Adviser shall receive a monthly investment
management fee as set forth below:
Average Daily Net Assets of the Fund Compensation
The first $50 million .50% plus
$50 million or more .40%
The schedule above is subject, however, to a minimum investment management fee
of $100,000 over the first twelve months from the date of inception of the Fund.
Therefore, if at the end of the twelfth month after inception of the investment
management fee paid totals less than $100,000, then the Adviser will pay any
such difference in a lump-sum to the Sub-Adviser. For purposes of Section 3 of
the Agreement, the value of the net assets of the Fund shall be computed in the
same manner at the end of the business day as the value of such net assets is
computed in connection with the determination of the net asset value of the
Fund's shares as described in the Fund's prospectus and statement of additional
information.
Attest: SECURITY MANAGEMENT COMPANY
XXX X. XXX By: XXXXX X. XXXXXXX
--------------------------- -----------------------------------
Xxx X. Xxx Xxxxx X. Xxxxxxx
Secretary Senior Vice President
Attest: X. XXXX PRICE ASSOCIATES, INC.
XXXX XXXXXX By: XXXXX X. XXXXXX
--------------------------- -----------------------------------
Xxxx Xxxxxx Xxxxx X. Xxxxxx
Vice President Vice President
