SUBADVISORY AGREEMENT
THIS AGREEMENT is made and entered into as of April 30, 1999, 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 BANKERS TRUST COMPANY (the "Subadviser"), a New
York corporation.
WITNESSETH:
WHEREAS, SBL Fund a Kansas corporation, is registered with the Securities
and Exchange Commission (the "Commission") as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "Investment
Company Act");
WHEREAS, the Subadviser is a bank within the meaning of Section 2(a)(5) of
the Investment Company Act and Section 202(a)(2) of the Investment Advisers Act;
WHEREAS, SBL Fund is authorized to issue shares of Series H, a separate
series of SBL Fund (such series referred to herein the "Fund");
WHEREAS, SBL Fund has, pursuant to an Advisory Agreement with the Adviser
(the "Advisory Agreement"), retained the Adviser to act as investment adviser
for and to manage the Fund's assets;
WHEREAS, the Advisory Agreement permits 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 for the
Fund to act as investment adviser for and to manage the Fund's 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 certain assets of the Fund subject
to the supervision of the Adviser and the Boards of Directors of SBL 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 the 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
the Fund as set forth in the Fund's current 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 the Fund's Board 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. The Subadviser shall give the Fund the benefit of its best
efforts in rendering its services as Subadviser.
(b) BROKERAGE. The Subadviser is authorized, subject to the supervision
of the Adviser and the Fund's Board to establish and maintain accounts on
behalf of the Fund with, and place orders for the purchase and sale of the
Fund's Investments with or through, such persons, brokers or dealers as
Subadviser may select and negotiate commissions to be paid on such
transactions. The Subadviser agrees that in placing such orders it shall
attempt to obtain best execution, provided that, the Subadviser may, on
behalf of the 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 the 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 the Fund will be reasonable in relation to the benefits
to the Fund over the long term. 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 and to
such other clients. The Subadviser will report on such allocations at the
request of the Adviser, the Fund or the Fund's Board providing such
information as the number of aggregated trades to which the Fund was a
party, the broker(s) to whom such trades were directed and the basis of the
allocation for the aggregated trades.
(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 the Fund ("Principal Transactions");
PROVIDED, HOWEVER, the Subadviser may enter into a Principal Transaction
with the 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 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 Fund
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 with respect to
transactions made by it on behalf of the Fund 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 Fund 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 Rule 31a-2 under the Investment Company Act,
and agrees that such books and records shall remain the sole property of the
Fund and shall be immediately surrendered to the Fund upon request. The
Subadviser further agrees that all books and records maintained hereunder
shall be made available to the Fund or the Adviser at any time upon
reasonable request, including telecopy, during any business day.
(e) INFORMATION CONCERNING INVESTMENTS AND SUBADVISER. From time to time
as the Adviser or the Fund may request, the Subadviser will furnish the
requesting party reports on portfolio transactions and reports on
Investments held in the portfolio, all in such detail as the Adviser or the
Fund may reasonably request. The Subadviser will make available its officers
and employees to meet with the Fund's Board of Directors 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 or perform such
additional acts as are customarily performed by a subadviser and may be
required for the 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.
(f) CUSTODY ARRANGEMENTS. The Subadviser shall provide the 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 the Fund's Articles of Incorporation, By-Laws, and
currently effective registration statement and with the written instructions
and directions of the Fund's Board and the Adviser, 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, solely with regard to those matters within its control, 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
Code (or any successor 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.
In carrying out its obligations under this Agreement, the Subadviser
shall invest the assets of the Fund in such a manner as to ensure that the
Fund 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 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.
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 the Fund, (ii) the By-Laws of the Fund and (iii) the Fund's
registration statement under the Investment Company Act and the Securities
Act of 1933, as amended, as filed with the Commission.
(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 the
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 Fund or the Adviser in any way or
otherwise be deemed an agent of the Fund or the Adviser.
4. COMPENSATION. The Adviser shall pay to the Subadviser, for the services
rendered hereunder, the fees set forth in Exhibit A attached hereto.
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 duties under
this Agreement without the approval of the Adviser and the Fund's Board.
6. REPRESENTATIONS AND WARRANTIES OF SUBADVISER. The Subadviser represents
and warrants to the Adviser and the Fund as follows:
(a) The Subadviser is a bank within the meaning of Section 2(a)(5) of
the Investment Company Act and Section 202(a)(2) of 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 is not required to register with the Commodity
Futures Trading Commission (the "CFTC") as a commodity trading advisor
pursuant to Section 1a(5)(B) or 4m of the CEA;
(d) The Subadviser is a corporation duly organized and validly existing
under the laws of the State of New York 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 on the part of its shareholders, 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;
(f) This Agreement is a valid and binding agreement of the Subadviser;
7. 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 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 (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;
(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 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;
8. 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 7 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.
9. LIABILITY AND INDEMNIFICATION.
(a) LIABILITY. In the absence of willful misfeasance, bad faith or
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 or the Fund or any of the Fund's shareholders, and, in the absence
of willful misfeasance, bad faith or 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 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 as a
result of the Subadviser's willful misfeasance, bad faith, 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 directors, for
any liability and expenses, including reasonable attorneys' fees, which may
be sustained as a result of the Adviser's willful misfeasance, bad faith,
negligence, breach of its duties hereunder or violation of applicable law,
including, without limitation, the federal and state securities laws or the
CEA.
10. 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 Fund unless it has first been approved (i) by a vote of a
majority of those directors of the Fund 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. 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 the Fund if specifically approved each year by either (i)
the Board of Directors of the Fund, or (ii) by the affirmative vote of a
majority of the Fund's outstanding voting securities. In addition to the
foregoing, each renewal of this Agreement must be approved by the vote of a
majority of the 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 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 Fund,
or by vote of a majority of the outstanding voting securities of the
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 during the notice period, upon twenty (20)
days written notice;
(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 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.
11. DUTIES OF THE ADVISER. The Adviser shall continue to have responsibility
for all services to be provided to the Fund pursuant to the Advisory Agreements
and shall oversee and review the Subadviser's performance of its duties under
this Agreement.
12. AMENDMENT. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment shall be approved by the
Board of Directors of the Fund or by a vote of a majority of the outstanding
voting securities of the Fund.
13. CONFIDENTIALITY. Subject to the duties of the Adviser, the Fund and the
Subadviser to comply with applicable law, including any demand of any regulatory
or taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Fund and the actions of the
Subadviser, the Adviser and the Fund in respect thereof.
14. NOTICE. Any notice that is required to be given by the parties to each
other (or to the Funds) 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:
Bankers Trust Company
One Bankers Trust Plaza
Mail Stop 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxxx, Vice President
Facsimile: (000) 000-0000
(b) If to the Adviser:
Security Management Company, LLC
000 XX Xxxxxxxx
Xxxxxx, Xxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, President
Facsimile: (000) 000-0000
(c) If to SBL Fund:
SBL Fund
000 XX Xxxxxxxx
Xxxxxx, Xxxxxx 00000-0000
Attention: Xxx X. Xxx, Secretary
Facsimile: (000) 000-0000
15. INSTRUCTIONS. The Subadviser is authorized to honor and act on any
notice, instruction or confirmation given by the Adviser in writing signed or
sent by one of the persons whose names, addresses and specimen signatures will
be provided by the Adviser from time to time.
16. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Kansas.
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. 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. 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 Investment Company Act shall be resolved by
reference to such term or provision of the Investment Company Act and to
interpretations thereof, if any, by the U.S. courts or, in the absence of
any controlling decisions of any such court, by rules, regulation or order
of the Commission validly issued pursuant to the Investment Company Act.
Specifically, 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
SECURITY MANAGEMENT COMPANY, LLC
By: XXXXX X. XXXXXXX
-------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
Attest: XXX X. XXX
-------------------------
Name: Xxx X. Xxx
Title: Secretary
BANKERS TRUST COMPANY
By: XXXXX X. XXXXXXXXX
-------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
Attest: XXXXXXX XXXXXX
-------------------------
Name: Xxxxxxx Xxxxxx
Title: Assistant Treasurer
Exhibit A
SUBADVISORY FEE
1. ENHANCED INDEX FUNDS
The parties agree that the fee paid by the Adviser to the Subadviser for the
services rendered by the Subadviser to Series H of SBL Fund shall be based on
the combined average daily net assets of Series H of SBL Fund and the Enhanced
Index Series of Security Equity Fund. Series H of SBL Fund and the Enhanced
Index Series of Security Equity Fund are collectively referred to herein as the
"Enhanced Index Funds."
For all services rendered to Series H of SBL Fund by the Subadviser
hereunder, Adviser shall pay to Subadviser an annual fee (the "Subadvisory
Fee"), as follows:
An annual rate of .20% of the combined average daily net assets of the
Enhanced Index Funds of $100 million or less; and
An annual rate of .15% of the combined average daily net assets of the
Enhanced Index Funds of more than $100 million but less than $300 million; and
An annual rate of .13% of the combined average daily net assets of the
Enhanced Index Funds of more than $300 million.
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 fifteen (15) 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. For purposes of calculating the fee
hereunder, the value of the net assets of the Enhanced Index Funds shall be
computed in the same manner at the end of the business day as the value of such
net assets are computed in connection with the determination of the net asset
value of the Enhanced Index Funds' shares as described in the applicable current
Prospectus.
2. INDEX FUNDS' MINIMUM FEES
The schedule in 1 above is subject to a minimum fee as set forth in that
certain Subadvisory Agreement between the Adviser and Subadviser dated January
26, 1999 which schedule is incorporated into this Agreement by this reference.
