SUBADVISORY AGREEMENT
THIS AGREEMENT is made and entered into on as of the close of business on
the 31st day of December, 2004 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 ▇▇▇▇▇
CAPITAL MANAGEMENT INCORPORATED (the "Subadviser"), a California corporation
registered under the Investment Advisers Act.
W I T N E S S E T H:
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, SBL Fund is authorized to issue shares of Series Q, a separate
series of SBL Fund (Series Q being referred to herein as 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 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 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 Board 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.
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The Subadviser agrees to observe and comply with Rule 17j-l 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), (to) and (11) and Subsection (f) of Rule 31a-l 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-l 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
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Advisers Act, the Commodity Exchange Act, 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 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 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.
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6. REPRESENTATIONS AND WARRANTIES OF SUBADVISER. The Subadviser
represents and warrants to the Adviser and the Fund 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 is a corporation duly organized and validly
existing under the laws of the State of California 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 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;
(e) This Agreement is a valid and binding agreement of the
Subadviser; and
(f) 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 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. 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;
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(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;
(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.
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 Fund, and their respective officers and directors, for any
liability and expenses, including 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
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liability and expenses, including 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
with respect to the Fund 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 180 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.
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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:
▇▇▇▇▇ Capital Management Incorporated
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Client Administration
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ Capital Management Incorporated
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Adviser:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
Security Management Company, LLC
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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(c) If to SBL Fund:
▇▇▇ ▇. ▇▇▇
Secretary
SBL Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: ▇▇▇ ▇. ▇▇▇, Secretary
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
15. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Kansas.
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. 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.
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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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
Attest: /s/ ▇▇▇ ▇. ▇▇▇
----------------------------------
Name: ▇▇▇ ▇. ▇▇▇
Title: Secretary
▇▇▇▇▇ CAPITAL MANAGEMENT INCORPORATED
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Chief Compliance Officer
Attest: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: CFO
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Exhibit A
SUBADVISORY FEE
For all services rendered by the Subadviser hereunder, Adviser shall pay
to Subadviser an annual fee (the "Subadvisory Fee"), as follows:
An annual rate of .50% of the average daily net assets of the Fund under
$150 million.
An annual rate of .45% of the average daily net assets of the Fund at or
above $150 million but less than $500 million.
An annual rate of .40% of the average daily net assets of the Fund at or
above $500 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 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. The daily fee accruals on the first $150
million of the Fund's net assets will be computed by multiplying the fraction of
one (1) over the number of calendar days in the year by the appropriate annual
rate described above and multiplying the product of the net asset value of the
Fund as determined in accordance with the Fund's prospectus as of the close of
business on the previous business day on which the Fund was open for business.
The daily fee accruals on the Fund's net assets equal to or in excess of $150
million but less than $500 million will be computed by multiplying the fraction
of one (1) over the number of calendar days in the year by the appropriate
annual rate described above and multiplying the product by the amount by which
the average daily net asset value of the Fund, as determined in accordance with
the Fund's prospectus as of the close of business on the previous business day
on which the Fund was open for business, equals or exceeds $150 million but is
less than $500 million. The daily fee accruals on the Fund's net assets at or
above $500 million will be computed by multiplying the fraction of one (1) over
the number of calendar days in the year by the appropriate annual rate described
above and multiplying the product by the amount by which the average daily net
asset value of the Fund, as determined in accordance with the Fund's prospectus
as of the close of business on the previous business day on which the Fund was
open for business, equals or exceeds $500 million.
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