SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of July,
2003, 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 MAINSTREAM INVESTMENT ADVISERS, LLC
(the "Subadviser"), a Kentucky 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 Z, a separate
series of SBL Fund, and Security Equity Fund is authorized to issue shares of
Alpha Opportunity Series, a separate series of Security Equity Fund (Series Z
and Alpha Opportunity 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;
WHEREAS, the Adviser desires to retain the Subadviser as subadviser to
act as investment adviser for and to manage a portion of each Fund's assets and
the Subadviser desires to render such services; and
WHEREAS, the Adviser shall have the sole discretion to determine the
percentage of each Fund's assets to be managed by the Subadviser.
NOW, THEREFORE, the Adviser and the 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 assets of the Funds, subject to
the supervision of the Adviser, the Board of Directors of such Fund and the
terms of this Agreement, and the Subadviser hereby accepts such employment. In
such capacity, the Subadviser shall be responsible for the Investments (as
defined herein) of the Funds; provided that the Adviser reserves the authority
to review, modify or reject Subadviser's investment recommendations with respect
to the management of the Funds' Investments.
2. Duties of Subadviser.
(a) Investments. Subject to the instructions of the Adviser
from time to time, 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 the 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") to purchase, hold and sell investments
for the account of the Fund (hereinafter "Investments") and to monitor
on a continuous basis the performance of such Investments.
"Investments" when referred to in this Agreement shall mean those
investments included in the portion of each Fund's total assets that
Adviser has allocated to Subadviser for management. The Adviser has
agreed that it shall increase or decrease the total assets allocated to
the Subadviser for management solely as of the first business day of
each calendar month, unless otherwise mutually agreed to by the
parties. Subject to the instructions of the Adviser from time to time,
the Subadviser may contract with or consult with such banks, other
securities firms, brokers or other parties, without additional expense
to the Adviser, 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 of
Directors, 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 or the respective Fund's Board of Directors, brokers or dealers
affiliated with the Subadviser. The Subadviser is also authorized,
subject to the supervision of the Adviser and the respective Fund's
Board of Directors to negotiate commissions to be paid on such
transactions. The Subadviser shall make sales, exchanges, commitments,
contracts, investments or reinvestments, or take any action which it
deems necessary or desirable in connection with the Investments, in
accordance with its own judgment and discretion. Specifically, the
Subadviser shall have the authority to purchase, sell, sell short,
transfer, deal in or otherwise invest in publicly traded common stocks,
convertible bonds, convertible preferred stocks, stock warrants and
rights. 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 that
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
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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, shall
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 shall
report on such allocations at the request of the Adviser, or the
respective Fund's Board of Directors, 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.
(c) Securities Transactions. The Subadviser and any affiliated
person of the Subadviser shall not purchase securities or other
instruments from or sell securities or other instruments to a Fund
("Principal Transactions"); provided, however, 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 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 in all
material respects 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 with a copy of such Code of
Ethics.
(d) Books and Records. The Subadviser shall 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
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the Adviser to keep such other books and records of the Funds required
by Rule 31a-1 under the Investment Company Act. The Subadviser shall
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
during any business day.
(e) Information Concerning Investments and Subadviser. From
time to time as the Adviser or a Fund may reasonably request, the
Subadviser shall furnish the requesting party reports on transactions
and reports on Investments held in the Fund portfolios, all in such
detail as the Adviser or the applicable Fund may reasonably request.
From time to time as the Adviser or a 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 shall also provide such information as is
customarily provided by a subadviser and as 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.
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 (the "Custodian"), on each business day, information
relating to all transactions made by it on behalf of the Funds.
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(g) Compliance with Applicable Laws and Governing Documents.
In all matters relating to the performance of this Agreement, the
Subadviser and its members, officers, partners, employees and
interested persons shall act in conformity in all material respects
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 of Directors and the Adviser, after
receipt of such documents from the relevant Fund, and shall comply in
all material respects 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, solely with regard to those matters within its
control and based on information available to it (i) invest the assets
of the Fund in such a manner that each Fund complies with Section
851(b)(2) and Section 851(b)(3) of Subchapter M of the Code (or any
successor provision), and (ii) invest the assets of Series Z of SBL
Fund in such a manner that Series Z 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 modifications to Section 817 or regulations
thereunder. Subadviser shall notify the Adviser immediately upon having
a reasonable basis for believing that a Fund has ceased to qualify as a
Regulated Investment Company under Subchapter M of the Internal Revenue
Code (or any successor or similar provision) or Series Z has ceased to
comply with Section 817(h) and, with respect to Section 817(h), shall
take all reasonable steps to adequately diversify Series Z so as to
achieve compliance within the grace period afforded by Regulation
1.817-5.
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, as filed with the
Commission, and (iv) any written instructions of the respective Fund's
Board of Directors and the Adviser. The Subadviser shall not be held
responsible for compliance with any document described above unless and
until such document has been received by the Subadviser.
(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 Investments 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
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represent the Funds or Adviser in any way or otherwise be deemed an agent of the
Funds or Adviser.
4. Compensation. The Adviser shall pay to the Subadviser an Advisory
Fee computed in accordance with Schedule A attached hereto, which fee shall be
payable as provided therein. The parties hereby disclaim any obligation on the
part of the Funds or their shareholders to pay any portion of the Advisory Fee
payable by the Adviser to the Subadviser.
5. Expenses. The Subadviser shall bear all expenses incurred by it in
connection with its services under this Agreement and shall, 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 written approval of the
Adviser and the respective Fund's Board of Directors.
6. Representations and Warranties of Subadviser. The Subadviser
represents and warrants to the Adviser as follows:
(a) The Subadviser is registered as an investment adviser
under the Investment Advisers Act;
(b) The Subadviser shall immediately notify the Adviser of the
existence or 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 is fully authorized under all applicable
law to serve as Subadviser to the Funds and to perform the services
described under this Agreement;
(d) The Subadviser is a limited liability company duly
organized and validly existing under the laws of the State of Kentucky
with the power to own and possess its assets and carry on its business
as it is now being conducted;
(e) 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 of the 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 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;
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(f) This Agreement is a valid and binding agreement of the
Subadviser; and
(g) The Form ADV of the Subadviser previously provided to the
Adviser is accurate and complete in all material respects, 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 and to engage in other activities. Nothing in this Agreement shall limit
or restrict the Subadviser or any of its officers, managers, members, employees,
affiliates or agents from buying, selling or trading in any securities for its
or their own account or accounts, except as set forth in Subsection 2(c) herein.
The Adviser acknowledges that the Subadviser and its officers, managers,
members, employees, affiliates or agents and its other clients may at any time
have, acquire, increase, decrease or dispose of positions in investments which
are at the same time being acquired or disposed of for the Funds. The Adviser
agrees that the Subadviser may give advice and take action with respect to any
of its other clients which may differ from advice given or the timing or nature
of action taken with respect to the Funds, so long as it is the Subadviser's
policy, to the extent practical, to allocate investment opportunities to the
Funds over a period of time on a fair and equitable basis relative to other
clients.
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 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
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(iii) any agreement, judgment, injunction, order, decree or other
instrument binding upon the Adviser;
(e) This Agreement is a valid and binding agreement of the
Adviser; and
(f) 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. Duty of Care and Indemnification.
(a) Liability. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Subadviser or a material
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 material 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 reasonable 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,
material breach of its duties hereunder or material 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 reasonable attorneys' fees, which may be sustained as a
result of the Adviser's, or the Funds' willful misfeasance, bad faith,
or gross negligence, material breach of its duties hereunder or
material violation of applicable law, including, without limitation,
the federal and state securities laws or the CEA.
12. 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
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Funds, unless it has first been approved by a vote of a majority of
those directors of SBL Fund 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 reasonably may 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 material 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 sixty (60) 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.
13. 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.
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14. Amendment. This Agreement may be amended in writing 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.
15. Notice. Any notice that is required to be given by the parties to
each other 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:
Mainstream Investment Advisers, LLC
000 X. Xxxxxx Xxxxxx
Xxxxxx Xxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxxx X. Hulls, Director
Facsimile: (000) 000-0000
(b) If to the Adviser:
Security Management Company, LLC
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Xxxxx X. Xxxxxxx, President
Facsimile: (000) 000-0000
(c) 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
16. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Kansas.
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17. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the same
instrument.
18. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
19. 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.
20. Definitions. As used herein, "business day" means any customary
business day in the United States on which the New York Stock Exchange is open.
As used herein, "investment company," "affiliated person," "interested person,"
"assignment," "broker," and "dealer" 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 Advisers Act or 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.
MAINSTREAM INVESTMENT ADVISERS, LLC
By: XXXXXXX X. XXXXXXX
------------------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Manager
Attest: XXXXX X. HULLS
------------------------------------------------------
Name: Xxxxx X. Hulls
Title: Director
SECURITY MANAGEMENT COMPANY, LLC
By: XXXXX X. XXXXXXX
------------------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
Attest: XXX X. XXX
------------------------------------------------------
Name: Xxx X. Xxx
Title: Secretary
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SCHEDULE A
INVESTMENT ADVISORY FEE
1. Base Fee. The Adviser shall pay the Subadviser at the end of each
calendar month, an advisory fee (the "Base Fee") equal to 2.50%, on an annual
basis, of that portion of each Fund's net assets that Adviser has allocated to
Subadviser for management ("Subadviser Assets"). The Base Fee shall be
determined as of the last day of each calendar month based upon the average of
the value of Subadviser Assets as of the close of business on the first business
day, and the close of business on the last business day, of each calendar month.
If the Subadviser shall serve for less than the whole of any calendar month, the
Base Fee shall be calculated on a pro rata basis for the portion of the month
for which it has served as Subadviser. The value of the Subadviser Assets shall
be determined by valuations made in accordance with each Fund's procedures for
calculating its net assets as described in each Fund's current prospectus and/or
Statement of Additional Information. During the first 12 months of operations,
the management fee will be charged at the Base Fee of 2.50% without any
adjustment as discussed in Section 2 below.
2. Base Fee Adjustment. Beginning in the 13th month of operations, the
Base Fee of 2.50% will be adjusted upward or downward on a monthly basis based
upon the performance of the Subadviser Assets relative to the performance of the
S&P 500 Index (the "Index"). The maximum or minimum adjustment is 1.50%
annually. Therefore, the maximum annual fee payable to the Subadviser shall be
4.00% of Subadviser Assets, and the minimum annual fee shall be 1.00% of
Subadviser Assets. The pro rata adjustment upward or downward will be determined
based upon the performance of the Subadviser Assets in excess of, or below, that
of the Index. The amount of any upward adjustment in the Base Fee shall be equal
to 1.50% multiplied by the ratio of the number of percentage points by which the
performance of the Subadviser Assets exceeds the performance of the Index as
compared to 30 percentage points. For example, if the performance of the
Subadviser Assets was 6.6% above that of the S&P 500 Index, the ratio would be
6.6 to 30, or 22%, times 1.50%, for an upward adjustment of 0.33%. The amount of
any downward adjustment in the Base Fee will be equal to 1.50% multiplied by the
ratio of the number of percentage points by which the performance of the
Subadviser Assets is less than the performance of the Index as compared to 30
percentage points. For example, if the performance of the Subadviser Assets was
10.0% below that of the S&P 500 Index, the ratio would be 10 to 30, or 33.33%,
times 1.50%, for a downward adjustment of 0.50%.
In determining the Base Fee adjustment, if any, applicable during any
month, the Adviser will compare the investment performance of the Subadviser
Assets for the twelve-month period ending on the last day of the prior month
(the "Performance Period") to the investment record of the Index during the
Performance Period. The investment performance of the Subadviser Assets will be
determined for each month in the Performance Period by subtracting (i) the value
of the Subadviser Assets as of the first business day of the calendar month
(including any amounts allocated to the Subadviser Assets as of that date) from
(ii) the value of the Subadviser Assets as of the last business day of the
calendar month, expressed as a percentage of (iii) the value of the Subadviser
Assets
13
as of the first business day of the calendar month (including any amounts
allocated to the Subadviser Assets as of that date). The investment performance
for the Performance Period shall be the annualized product of the investment
performance for each month in the Performance Period. The investment performance
of the Index will be determined by adding together (i) the change in the level
of the Index during the Performance Period, and (ii) the value, computed
consistently with the Index, of cash distributions made by companies whose
securities comprise the Index accumulated to the end of the Performance Period,
and will be expressed as a percentage of the Index at the beginning of the
Performance Period.
After it determines any Base Fee adjustment, the Adviser will determine
the dollar amount of additional fees or fee reductions to be accrued each month
by multiplying the Base Fee adjustment by the average Subadviser Assets during
the Performance Period and dividing that number by the number of months in the
Performance Period. The average Subadviser Assets will be the average of (i) the
value of the Subadviser Assets as of the first business day of each calendar
month (including any amounts allocated to the Subadviser Assets as of that
date), and (ii) the value of the Subadviser Assets as of the last business day
of each calendar month (not including any rebalancing), in the Performance
Period. The Base Fee, as adjusted, is accrued and paid monthly and shall be
prorated in any month for which this Agreement is not in effect for the entire
month.
3. Valuation. For purposes of calculating the compensation to be paid
hereunder, the value of the Subadviser Assets shall be computed in the same
manner at the end of each business day as the value of the Funds' net assets is
computed in connection with the determination of the net asset value of Fund
shares as described in the then current registration statement for the
applicable Fund. Adviser shall provide Subadviser within three business days of
each calendar month end such information as Adviser used to value the Subadviser
Assets as of the first and last business day of that calendar month. The parties
agree to review the valuation process on or before August 15, 2003 to determine
whether there is any material difference in the valuation of the Fund's net
assets as determined by Adviser from that determined by Banc of America, the
Funds' custodian. In the event that there is a material difference, the parties
agree to promptly renegotiate the basis for valuation of the Subadviser Assets
for purposes of calculating the compensation to be paid hereunder.
4. Payment of Fees. All fees due Subadviser shall be remitted by the
Adviser within thirty (30) days after the applicable calendar month end and/or
Valuation Period.
14
AMENDMENT TO
SUB-ADVISORY AGREEMENT
This Amendment (the "Amendment") to Sub-Advisory Agreement is made and
entered into as of this [18th] day of August, 2008, between SECURITY INVESTORS,
LLC (formerly 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 MAINSTREAM INVESTMENT ADVISERS, LLC
(the "Subadviser"), a Kentucky limited liability company, registered under the
Investment Advisers Act.
WITNESSETH:
WHEREAS, the Adviser and Subadviser are parties to a Sub-Advisory
Agreement dated July 1, 2003 (the "Agreement") in respect of Series Z of SBL
Fund and the Alpha Opportunity Series of Security Equity Fund (Series Z and
Alpha Opportunity Series are referred to herein individually as a "Fund" and
collectively as the "Funds");
WHEREAS, the Adviser and Subadviser desire to amend the Agreement as
set forth herein;
NOW, THEREFORE, the Agreement is hereby amended as follows:
A. Section 15 of the Agreement is deleted in its entirety and replaced with the
following new Section 15:
15. Notice. Any notice that is required to be given by the parties to
each other 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:
Mainstream Investment Advisers, LLC
000 X. Xxxxxx Xxxxxx
Xxxxxx Xxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxxx X. Hulls, Director
Facsimile: (000) 000-0000
(b) If to the Adviser:
Security Investors, LLC
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: President
Facsimile: (000) 000-0000
(c) If to SBL Fund:
SBL Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Secretary
Facsimile: (000) 000-0000
(d) If to Security Equity Fund:
Security Equity Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Secretary
Facsimile: (000) 000-0000
B. Schedule A to the Agreement is deleted in its entirety and replaced with the
new Schedule A attached hereto.
C. In the event of a conflict between the terms of this Amendment and the
Agreement, it is the intention of the parties that the terms of this Amendment
shall control and the Agreement shall be interpreted on that basis. This
Amendment and the Agreement constitutes the entire agreement among the parties
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
the Agreement.
MAINSTREAM INVESTMENT ADVISERS, LLC
By:
------------------------------------------------------
Name:
------------------------------------------------------
Title:
Attest:
------------------------------------------------------
Name:
Title:
SECURITY INVESTORS, LLC
By:
------------------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
Attest:
------------------------------------------------------
Name: Xxx X. Xxx
Title: Secretary
SCHEDULE A
INVESTMENT ADVISORY FEE
For all services rendered by the Subadviser hereunder, Adviser shall pay to
Subadviser a fee (the "Subadvisory Fee") at an annual rate of 1.45% of that
portion of each Fund's net assets that the Adviser has allocated to Subadviser
for management ("Subadviser Assets").
For purposes of calculating the compensation to be paid hereunder, the
Subadviser Assets 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 each 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) business 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.
17
