SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into as of the 31st day of July, 2006
between SECURITY MANAGEMENT COMPANY, LLC (the "Adviser"), a Kansas limited
liability company, registered under the Investment Advisers Act of 1940, as
amended (the "Investment Advisers Act"), and RS Investment Management Co. LLC
(the "Subadviser"), a Delaware limited liability company registered under the
Investment Advisers Act.
WITNESSETH:
WHEREAS, SBL Fund and Security Equity Fund, Kansas corporations, are each
registered with the Securities and Exchange Commission (the "Commission") as
open-end management investment companies under the Investment Company Act of
1940, as amended (the "Investment Company Act");
WHEREAS, SBL Fund is authorized to issue shares of Series X, a separate
series of SBL Fund and Security Equity Fund is authorized to issue shares of the
Small Cap Growth Series, a separate series of Security Equity Fund (Series X and
the Small Cap Growth Series are referred to herein individually as a "Fund" and
collectively as the "Funds");
WHEREAS, each of the Funds has, pursuant to an Advisory Agreement with the
Adviser (the "Advisory Agreement"), retained the Adviser to act as investment
adviser for and to manage its assets;
WHEREAS, the Advisory Agreements permit the Adviser to delegate certain of
its duties under the Advisory Agreement to other investment advisers, subject to
the requirements of the Investment Company Act; and
WHEREAS, the Adviser desires to retain the Subadviser as subadviser to act
as investment adviser for and to manage the Funds' respective Investments (as
defined below) and the Subadviser desires to render such services.
NOW, THEREFORE, the Adviser and Subadviser do mutually agree and promise as
follows:
1. Appointment as Subadviser. The Adviser hereby retains the Subadviser to
act as investment adviser for and to manage the assets of each Fund subject to
the supervision of the Adviser and the Board of Directors of such Fund and
subject to the terms of this Agreement; and the Subadviser hereby accepts such
employment. In such capacity, the Subadviser shall be responsible for each
Fund's Investments.
2. Duties of Subadviser.
(a) Investments. The Subadviser is hereby authorized and directed and
hereby agrees, subject to the stated investment policies and restrictions
of each Fund as set forth in such Fund's prospectus and statement of
additional information as currently in effect and as supplemented or
amended from time to time (collectively referred to hereinafter as
the "Prospectus") and subject to the directions of the Adviser and such
Fund's Board of Directors to purchase, hold and sell investments for the
account of such Fund (hereinafter "Investments") and to monitor on a
continuous basis the performance of such Investments. The Subadviser shall
give the Funds the benefit of its best efforts in rendering its services as
Subadviser. The Subadviser may contract with or consult with such banks,
other securities firms, brokers or other parties, without additional
expense to the Funds, as it may deem appropriate regarding investment
advice, research and statistical data, clerical assistance or otherwise.
(b) Brokerage. The Subadviser is authorized, subject to the
supervision of the Adviser and the respective Fund's Board to establish and
maintain accounts on behalf of each Fund with, and place orders for the
purchase and sale of each Fund's Investments with or through, such persons,
brokers or dealers as Subadviser may select which may include, to the
extent permitted by the Adviser and the respective Fund's Board, brokers or
dealers affiliated with the Subadviser or Adviser, and negotiate
commissions to be paid on such transactions. The Subadviser agrees that in
placing such orders for a Fund it shall attempt to obtain best execution,
provided that, the Subadviser may, on behalf of such Fund, pay brokerage
commissions to a broker which provides brokerage and research services to
the Subadviser in excess of the amount another broker would have charged
for effecting the transaction, provided (i) the Subadviser determines in
good faith that the amount is reasonable in relation to the value of the
brokerage and research services provided by the executing broker in terms
of the particular transaction or in terms of the Subadviser's overall
responsibilities with respect to such Fund and the accounts as to which the
Subadviser exercises investment discretion, (ii) such payment is made in
compliance with Section 28(e) of the Securities Exchange Act of 1934, as
amended, and any other applicable laws and regulations, and (iii) in the
opinion of the Subadviser, the total commissions paid by such Fund will be
reasonable in relation to the benefits to the Fund over the long term. In
reaching such determination, the Subadviser will not be required to place
or attempt to place a specific dollar value on the brokerage and/or
research services provided or being provided by such broker. It is
recognized that the services provided by such brokers may be useful to the
Subadviser in connection with the Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale of a security
to be in the best interests of the Fund as well as other clients of the
Subadviser, the Subadviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the
securities to be sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such
event, allocation of securities so sold or purchased, as well as the
expenses incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser considers to be the most equitable and consistent
with its fiduciary obligations to the Fund or Funds involved and to such
other clients. The Subadviser will report on such allocations at the
request of the Adviser, or the respective Fund's Board, providing such
information as the number of aggregated trades to which a Fund was a party,
the broker(s) to whom such trades were directed and the basis of the
allocation for the aggregated trades. Subject to the foregoing provisions
of this subsection 2(b) and at the direction of the Adviser or the Fund,
the Subadviser may also consider sales of the Funds' shares as a factor in
the selection of brokers or dealers for a Fund's portfolio transactions.
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(c) Securities Transactions. The Subadviser and any affiliated person
of the Subadviser will not purchase securities or other instruments from or
sell securities or other instruments to a Fund ("Principal Transactions");
provided, however, the Subadviser or an affiliated person of the Subadviser
may enter into a Principal Transaction with a Fund if (i) the transaction
is permissible under applicable laws and regulations, including, without
limitation, the Investment Company Act and the Investment Advisers Act and
the rules and regulations promulgated thereunder, and (ii) the transaction
or category of transactions receives the express written approval of the
Adviser.
The Subadviser agrees to observe and comply with Rule 17j-1 under the
Investment Company Act and its Code of Ethics, as the same may be amended
from time to time. The Subadviser agrees to provide the Adviser and the
Funds with a copy of such Code of Ethics.
(d) Books and Records. The Subadviser will maintain all books and
records required to be maintained pursuant to the Investment Company Act
and the rules and regulations promulgated thereunder solely with respect to
transactions made by it on behalf of the Funds including, without
limitation, the books and records required by Subsections (b)(1), (5), (6),
(7), (9), (10) and (11) and Subsection (f) of Rule 31a-1 under the
Investment Company Act and shall timely furnish to the Adviser all
information relating to the Subadviser's services hereunder needed by the
Adviser to keep such other books and records of the Funds required by Rule
31a-1 under the Investment Company Act. The Subadviser will also preserve
all such books and records for the periods prescribed in part (e) of Rule
31a-2 under the Investment Company Act, and agrees that such books and
records shall remain the sole property of the respective Fund and shall be
immediately surrendered to the appropriate Fund upon request. The
Subadviser further agrees that all books and records maintained hereunder
shall be made available to the respective Fund or the Adviser at any time
upon reasonable request and notice, including telecopy, during any business
day.
(e) Information Concerning Investments and Subadviser. From time to
time as the Adviser or a Fund may request, the Subadviser will furnish the
requesting party reports on portfolio transactions and reports on
Investments held in the portfolios, all in such detail as the Adviser or
the applicable Fund may reasonably request. The Subadviser will make
available its officers and employees to meet with the Board of Directors of
a Fund at the Fund's principal place of business on due notice to review
the Investments of the Fund.
The Subadviser will also provide such information as is customarily
provided by a subadviser and may be required for each Fund or the Adviser
to comply with their respective obligations under applicable laws,
including, without limitation, the Internal Revenue Code of 1986, as
amended (the "Code"), the Investment Company Act, the Investment Advisers
Act, the Securities Act of 1933, as amended (the "Securities Act") and any
state securities laws, and any rule or regulation thereunder.
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During the term of this Agreement, the Adviser agrees to furnish the
Subadviser at its principal office all registration statements, proxy
statements, reports to stockholders, sales literature or other materials
prepared for distribution to stockholders of each Fund, or the public that
refer to the Subadviser for Subadviser's review and approval. The
Subadviser shall be deemed to have approved all such materials unless the
Subadviser reasonably objects by giving notice to the Adviser in writing
within five business days (or such other period as may be mutually agreed)
after receipt thereof. The Subadviser's right to object to such materials
is limited to the portions of such materials that expressly relate to the
Subadviser, its services and its clients. The Adviser agrees to use its
best efforts to ensure that materials prepared by its employees or agents
or its affiliates that refer to the Subadviser or its clients in any way
are consistent with those materials previously approved by the Subadviser
as referenced in this paragraph. Sales literature may be furnished to the
Sub-Adviser by first class or overnight mail, facsimile transmission
equipment or hand delivery.
(f) Custody Arrangements. The Subadviser shall provide each Fund's
custodian, on each business day with information relating to all
transactions concerning the Fund's assets.
(g) Compliance with Applicable Laws and Governing Documents. In all
matters relating to the performance of this Agreement, the Subadviser and
its directors, officers, partners, employees and interested persons shall
act in conformity with each Fund's Articles of Incorporation, By-Laws, and
currently effective registration statement and with the written
instructions and directions of each Fund's Board and the Adviser, after
receipt of such documents, from the relevant Fund, and shall comply with
the requirements of the Investment Company Act, the Investment Advisers
Act, the Commodity Exchange Act (the "CEA"), the rules thereunder, and all
other applicable federal and state laws and regulations.
In carrying out its obligations under this Agreement, the Subadviser
shall ensure that, each Fund complies with all applicable statutes and
regulations necessary to qualify such Fund as a Regulated Investment
Company under Subchapter M of the Code (or any successor provision), and
shall notify the Adviser immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so
qualify in the future.
In carrying out its obligations under this Agreement, the Subadviser
shall invest the assets of Series X of SBL Fund in such a manner as to
ensure that Series X complies with the diversification provisions of
Section 817(h) of the Code (or any successor provision) and the regulations
issued thereunder relating to the diversification requirements for variable
insurance contracts and any prospective amendments or other enacted
modifications to Section 817 or regulations thereunder. Subadviser shall
notify the Adviser immediately upon having a reasonable basis for believing
that Series X has ceased to comply and will take all reasonable steps to
adequately diversify Series X so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
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The Adviser has furnished the Subadviser with copies of each of the
following documents and will furnish the Subadviser at its principal office
all future amendments and supplements to such documents, if any, as soon as
practicable after such documents become available: (i) the Articles of
Incorporation of each Fund, (ii) the By-Laws of each Fund, (iii) each
Fund's registration statement under the Investment Company Act and the
Securities Act of 1933, as amended, as filed with the Commission, and (iv)
any written instructions of the respective Fund's Board and the Adviser.
(h) Voting of Proxies. The Subadviser shall direct the custodian as to
how to vote such proxies as may be necessary or advisable in connection
with any matters submitted to a vote of shareholders of securities held by
a Fund.
3. Independent Contractor. In the performance of its duties hereunder, the
Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Funds or the Adviser in any way or
otherwise be deemed an agent of the Funds or the Adviser.
4. Compensation. The Adviser shall pay to the Subadviser, for the services
rendered hereunder, the fees set forth in Exhibit A to this Agreement.
5. Expenses. The Subadviser shall bear all expenses incurred by it in
connection with its services under this Agreement and will, from time to time,
at its sole expense employ or associate itself with such persons as it believes
to be particularly fitted to assist it in the execution of its duties hereunder.
However, the Subadviser shall not assign or delegate any of its investment
management duties under this Agreement without the approval of the Adviser and
the appropriate Fund's Board.
6. Representations and Warranties of Subadviser. The Subadviser represents
and warrants to the Adviser and the Funds as follows:
(a) The Subadviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Subadviser will immediately notify the Adviser of the
occurrence of any event that would disqualify the Subadviser from
serving as an investment adviser of an investment company
pursuant to Section 9(a) of the Investment Company Act;
(c) The Subadviser has filed a notice of exemption pursuant to Rule
4.14 under the CEA with the Commodity Futures Trading Commission
(the "CFTC") and the National Futures Association;
(d) The Subadviser is fully authorized under all applicable law to
serve as Subadviser to the Funds and to perform the services
described under this Agreement;
(e) The Subadviser is a limited liability company duly organized and
validly existing under the laws of the state of Delaware with the
power to own and possess its assets and carry on its business as
it is now being conducted;
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(f) The execution, delivery and performance by the Subadviser of this
Agreement are within the Subadviser's powers and have been duly authorized
by all necessary action on the part of its member, and no action by or in
respect of, or filing with, any governmental body, agency or official is
required on the part of the Subadviser for the execution, delivery and
performance by the Subadviser of this Agreement, and the execution,
delivery and performance by the Subadviser of this Agreement do not
contravene or constitute a default under (i) any provision of applicable
law, rule or regulation, (ii) the Subadviser's governing instruments, or
(iii) any agreement, judgment, injunction, order, decree or other
instrument binding upon the Subadviser;
(g) This Agreement is a valid and binding agreement of the Subadviser;
(h) The Form ADV of the Subadviser previously provided to the Adviser
is a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date, and does not omit to state any material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
7. Non-Exclusivity. The services of the Subadviser with respect to the
Funds are not deemed to be exclusive, and the Subadviser and its officers shall
be free to render investment advisory and administrative or other services to
others (including other investment companies) and to engage in other activities
so long as its duties hereunder are not impaired thereby.
8. Representations and Warranties of Adviser. The Adviser represents and
warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Adviser has filed a notice of exemption pursuant to Rule 4.14
under the CEA with the Commodity Futures Trading Commission (the "CFTC")
and the National Futures Association;
(c) The Adviser is a limited liability company duly organized and
validly existing under the laws of the State of Kansas with the power to
own and possess its assets and carry on its business as it is now being
conducted;
(d) The execution, delivery and performance by the Adviser of this
Agreement and the Advisory Agreement are within the Adviser's powers and
have been duly authorized by all necessary action on the part of its
members, and no action by or in respect of, or filing with, any
governmental body, agency or official is required on the part of the
Adviser for the execution, delivery and performance by the Adviser of this
Agreement, and the execution, delivery and performance by the Adviser of
this Agreement do not contravene or constitute a default under (i) any
provision of applicable law, rule or regulation, (ii) the Adviser's
governing instruments, or (iii) any agreement, judgment, injunction, order,
decree or other instrument binding upon the Adviser;
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(e) This Agreement and the Advisory Agreement are valid and binding
agreements of the Adviser;
(f) The Form ADV of the Adviser previously provided to the Subadviser
is a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
(g) The Adviser acknowledges that it received a copy of the
Subadviser's Form ADV at least 48 hours prior to the execution of this
Agreement.
9. Survival of Representations and Warranties; Duty to Update Information.
All representations and warranties made by the Subadviser and the Adviser
pursuant to Sections 6 and 8 hereof shall survive for the duration of this
Agreement and the parties hereto shall promptly notify each other in writing
upon becoming aware that any of the foregoing representations and warranties are
no longer true.
10. Liability and Indemnification.
(a) Liability. In the absence of willful misfeasance, bad faith or
gross negligence on the part of the Subadviser or a breach of its duties
hereunder, the Subadviser shall not be subject to any liability to the
Adviser, to either Fund, or any of either Fund's shareholders, and, in the
absence of willful misfeasance, bad faith or gross negligence on the part
of the Adviser or a breach of its duties hereunder, the Adviser shall not
be subject to any liability to the Subadviser, for any act or omission in
the case of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of
Investments; provided, however, that nothing herein shall relieve the
Adviser and the Subadviser from any of their respective obligations under
applicable law, including, without limitation, the federal and state
securities laws and the CEA
(b) Indemnification. The Subadviser shall indemnify the Adviser and
the Funds, and their respective officers and directors, for any liability
and expenses, including attorneys' fees, which may be sustained by the
Adviser, or the Funds, as a result of the Subadviser's willful misfeasance,
bad faith, or gross negligence, breach of its duties hereunder or violation
of applicable law, including, without limitation, the federal and state
securities laws or the CEA. The Adviser shall indemnify the Subadviser and
its officers and partners, for any liability and expenses, including
attorneys' fees, which may be sustained as a result of the Adviser's, or
the Funds' willful misfeasance, bad faith, or gross negligence, breach of
its duties hereunder or violation of applicable law, including, without
limitation, the federal and state securities laws or the CEA.
11. Duration and Termination.
(a) Duration. This Agreement shall become effective upon the date
first above written, provided that this Agreement shall not take effect
with respect to the Funds unless it has first been approved by a vote of a
majority of those directors of SBL Fund
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and Security Equity Fund, as applicable, 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. This Agreement
shall continue in effect for a period of two years from the date hereof,
subject thereafter to being continued in force and effect from year to year
with respect to each Fund if specifically approved each year by the Board
of Directors of the applicable Fund. In addition to the foregoing, each
renewal of this Agreement with respect to each Fund must be approved by the
vote of a majority of the applicable Fund's directors 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. Prior to
voting on the renewal of this Agreement, the Board of Directors of the
applicable Fund may request and evaluate, and the Subadviser shall furnish,
such information as may reasonably be necessary to enable the Fund's Board
of Directors to evaluate the terms of this Agreement.
(b) Termination. Notwithstanding whatever may be provided herein to
the contrary, this Agreement may be terminated at any time, without payment
of any penalty:
(i) By vote of a majority of the Board of Directors of the
applicable Fund, or by vote of a majority of the outstanding voting
securities of the applicable Fund, or by the Adviser, in each case,
upon sixty (60) days' written notice to the Subadviser;
(ii) By the Adviser upon breach by the Subadviser of any
representation or warranty contained in Section 6 hereof, which shall
not have been cured within twenty (20) days of the Subadviser's
receipt of written notice of such breach;
(iii) By the Adviser immediately upon written notice to the
Subadviser if the Subadviser becomes unable to discharge its duties
and obligations under this Agreement; or
(iv) By the Subadviser upon 120 days written notice to the
Adviser and the applicable Fund.
This Agreement shall not be assigned (as such term is defined in the
Investment Company Act) without the prior written consent of the parties hereto.
This Agreement shall terminate automatically in the event of its assignment
without such consent or upon the termination of the Advisory Agreement.
12. Duties of the Adviser. The Adviser shall continue to have
responsibility for all services to be provided to the Funds pursuant to the
Advisory Agreement and shall oversee and review the Subadviser's performance of
its duties under this Agreement.
13. Amendment. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment with respect to a Fund
shall be approved by the Board of Directors of the applicable Fund or by a vote
of a majority of the outstanding voting securities of the applicable Fund.
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14. Notice. Any notice that is required to be given by the parties to each
other (or to the Fund) under the terms of this Agreement shall be in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
RS Investment Management Co. LLC
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx, CEO
Facsimile: (000) 000-0000
(b) Copy to:
RS Investment Management Co. LLC
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
(c) If to the Adviser:
Security Management Company, LLC
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Xxxxxxx X. Xxxxx, President
Facsimile: (000) 000-0000
(d) If to SBL Fund:
SBL Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Xxx X. Xxx, Secretary
Facsimile: (000) 000-0000
(d) If to Security Equity Fund:
Security Equity Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Xxx X. Xxx, Secretary
Facsimile: (000) 000-0000
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15. Governing Law; Jurisdiction. Except as indicated in Section 19(b) of
this Agreement, this Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to its conflicts of law
provisions.
16. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the same
instrument.
17. Captions. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
18. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and effect.
19. Certain Definitions.
(a) "Business day." As used herein, business day means any customary
business day in the United States on which the New York Stock Exchange is
open.
(b) Miscellaneous. As used herein, "investment company," "affiliated
person," "interested person," "assignment," "broker," "dealer" and
"affirmative vote of the majority of the Fund's outstanding voting
securities" shall all have such meaning as such terms have in the
Investment Company Act. The term "investment adviser" shall have such
meaning as such term has in the Investment Advisers Act and the Investment
Company Act, and in the event of a conflict between such Acts, the most
expansive definition shall control. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of
this Agreement is relaxed by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
SECURITY MANAGEMENT COMPANY, LLC
By: /s/ XXXXXXX X. XXXXX
-----------------------
Name: Xxxxxxx X. Xxxxx
Title: President
Attest: /s/ XXX X. XXX
-----------------------
Name: Xxx X. Xxx
Title: Secretary
RS INVESTMENT MANAGEMENT CO. LLC
By: /s/ XXXXX X. XXXXX
-----------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
Attest: /s/ XXXXXXXX X. XXXXXX
-----------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Executive Assistant
EXHIBIT A
Compensation
For all services rendered by the Subadviser hereunder, Adviser shall pay to
Subadviser a fee (the "Subadvisory Fee") as follows:
An annual rate of 0.55% (55 basis points) of the combined averaged daily
net assets of the Funds of $100 million or less; plus
An annual rate of 0.50% (50 basis points) of the combined average daily net
assets of the Funds of more than $100 million, up to $400 million; plus
An annual rate of 0.45% (45 basis points) of the combined average daily net
assets of the Funds of more than $400 million.
For purposes of calculating the compensation to be paid hereunder, the
value of the net assets of a 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 then current prospectus for the applicable Fund.
The Subadvisory Fee shall be accrued for each calendar day the Subadviser
renders subadvisory services hereunder and the sum of the daily fee accruals
shall be paid monthly to the Subadviser as soon as practicable following the
last day of each month, by wire transfer if so requested by the Subadviser, but
no later than ten (10) calendar days thereafter. If this Agreement shall be
effective for only a portion of a year, then the Subadviser's fee for said year
shall be prorated for such portion.
