INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
This Agreement, made and entered into as of this 1st day of May, 2002, by and
between SECURITY GROWTH AND INCOME FUND, a Kansas corporation (hereinafter
referred to as the "Fund"), and SECURITY MANAGEMENT COMPANY, LLC, a limited
liability company (hereinafter referred to as "SMC").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management investment
company registered under the Investment Company Act of 1940 ("1940 Act"); and
WHEREAS, SMC is willing to provide investment research and advice, general
administrative, fund accounting, transfer agency, and dividend disbursing
services to the Fund on the terms and conditions hereinafter set forth and to
arrange for the provision of all other services (except for those services
specifically excluded in this Agreement) required by the Fund, including
custodial, legal, auditing and printing;
NOW THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties agree as follows:
1. EMPLOYMENT OF SMC. The Fund hereby employs SMC to (a) act as investment
adviser to the Fund with respect to the investment of its assets and to
supervise and arrange for the purchase of securities for the Fund and the
sale of securities held in the portfolio of the Fund, subject always to the
supervision of the Board of Directors of the Fund (or a duly appointed
committee thereof), during the period and upon and subject to the terms and
conditions described herein; (b) to provide the Fund with general
administrative, fund accounting, transfer agency, and dividend disbursing
services described and set forth in Schedule A attached hereto and made a
part of this Agreement by reference; and (c) to arrange for, monitor, and
bear the expense of, the provision to the Fund of all other services
required by the Fund, including but not limited to services of independent
accountants, legal counsel, custodial services and printing. SMC may, in
accordance with all applicable legal requirements, engage the services of
other persons or entities, regardless of any affiliation with SMC, to
provide services to the Fund under this Agreement. The Fund shall bear the
expense of such other services and all other expenses of the Fund. SMC
agrees to maintain sufficient trained personnel and equipment and supplies
to perform its responsibilities under this Agreement and in conformity with
the current Prospectus of the Fund and such other reasonable standards of
performance as the Fund may from time to time specify and shall use
reasonable care in selecting and monitoring the performance of third
parties, who perform services for the Fund. SMC shall not guarantee the
performance of such persons.
SMC hereby accepts such employment and agrees to perform the services
required by this Agreement for the compensation herein provided.
2. ALLOCATION OF EXPENSES AND CHARGES.
(a) EXPENSES OF SMC. SMC shall pay all expenses in connection with the
performance of its services under this Agreement, except as provided
otherwise herein.
(b) EXPENSES OF THE FUND. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse SMC for the payment
of the following described expenses of the Fund whether or not billed
to the Fund, SMC or any related entity;
(i) brokerage fees and commissions;
(ii) taxes;
(iii) interest expenses;
(iv) any extraordinary expenses approved by the Board of Directors
of the Fund; and
(v) distribution fees paid under the Fund's Class A, Class B, Class
C and Class S Distribution Plans;
and, in addition to those expenses set forth above, the Fund shall pay all
of its expenses whether or not billed to the Fund, SMC or any related
entity, including, but not limited to the following: Board of Directors'
fees; legal, auditing and accounting expenses; insurance premiums; broker's
commissions; taxes and governmental fees and any membership dues; fees of
custodian; expenses of obtaining quotations on the Fund's portfolio
securities and pricing of the Fund's shares; costs and expenses in
connection with the registration of the Fund's capital stock under the
Securities Act of 1933 and qualification of the Fund's capital stock under
the Blue Sky laws of the states where such stock is offered; costs and
expenses in connection with the registration of the Fund under the 1940 Act
and all periodic and other reports required thereunder; expenses of
preparing, printing and distributing reports, proxy statements,
prospectuses, statements of additional information, notices and
distributions to stockholders; costs of stockholder and other meetings; and
expenses of maintaining the Fund's corporate existence.
3. COMPENSATION OF SMC.
(a) As compensation for the investment advisory services to be rendered by
SMC to the Fund for each of the years this Agreement is in effect, the
Fund shall pay SMC an annual fee equal to 0.75% of the Fund's average
daily net assets. Such fee shall be calculated daily and payable
monthly. As compensation for the administrative services to be
rendered by SMC to the Fund, the Fund shall pay SMC an annual fee
equal to 0.09% of its average daily net assets. Such fees shall be
calculated daily and payable monthly. If this Agreement shall be
effective for only a portion of a year, then SMC's compensation for
said year shall be prorated for such portion. For purposes of this
Section 3, the value of the net assets of the Fund shall be computed
in the same manner at the end of the business day as the value of such
net assets is computed in connection with the determination of the net
asset value of the Fund's shares as described in the Fund's
prospectus. For transfer agency services provided by SMC to the Fund,
each Fund shall pay a Maintenance Fee of $8.00 per account, a
Transaction Fee of $1.00 per transaction per account and a Dividend
Fee of $1.00 per dividend per account. For the purpose of calculating
the Maintenance, Transaction and Dividend Fees applicable to the Fund,
SMC may count as a shareholder account each person that holds a
beneficial interest in an omnibus account maintained on SMC's transfer
agency system by a third-party administrator, broker/dealer, bank,
insurance company or other entity; provided that SMC is paying such
third-party administrator, broker/dealer, bank, insurance company or
other entity sub-administrative, sub-accounting and/or sub-transfer
agency fees for keeping individual shareholder records in connection
with an investment in the Fund.
(b) For each of the Fund's fiscal years that this Agreement remains in
force, SMC agrees that if total annual expenses of the Fund, exclusive
of interest and taxes, extraordinary expenses (such as litigation),
distribution fees paid under the Fund's Class A, Class B, Class C and
Class S Distribution Plans, but inclusive of SMC's compensation,
exceed any expense limitation imposed by state securities law or
regulation in any state in which shares of the Fund are then qualified
for sale, as such regulations may be amended from time to time, SMC
will contribute to the Fund such funds or waive such portion of its
fee, adjusted monthly, as may be requisite to insure that such annual
expenses will not exceed any such limitation. If this Agreement shall
be effective for only a portion of any fiscal year, then the maximum
annual expenses shall be prorated for such portion. Brokerage fees and
commissions incurred in connection with the purchase or sale of any
securities by the Fund shall not be deemed to be expenses within the
meaning of this paragraph (b).
4. INVESTMENT ADVISORY DUTIES.
(a) INVESTMENT ADVICE. SMC shall regularly provide the Fund with
investment research, advice and supervision, continuously furnish an
investment program, recommend which securities shall be purchased and
sold and what portion of the assets of the Fund shall be held
uninvested and arrange for the purchase of securities and other
investments for the Fund and the sale of securities and other
investments held in the portfolio of the Fund. All investment advice
furnished by SMC to the Fund under this Section 4 shall at all times
conform to any requirements imposed by the provisions of the Fund's
Articles of Incorporation and Bylaws, the 1940 Act, the Investment
Advisors Act of 1940 and the rules and regulations promulgated
thereunder, and other applicable provisions of law, and the terms of
the registration statement of the Fund under the Securities Act of
1933 ("1933 Act") and/or the 1940 Act, as may be applicable at the
time, all as from time to time amended. SMC shall advise and assist
the officers or other agents of the Fund in taking such steps as are
necessary or appropriate to carry out the decisions of the Board of
Directors of the Fund (and any duly appointed committee thereof) with
regard to the foregoing matters and the general account of the Fund's
business.
(b) SUBADVISERS. Subject to the provisions of the 1940 Act and any
applicable exemptions thereto, SMC is authorized, but is under no
obligation, to enter into sub-advisory agreements (the "Sub-Advisory
Agreements") with one or more subadvisers (each a "Subadviser") to
provide investment advisory services to the Fund, or any series
thereof. Each Subadviser shall have investment discretion with respect
to the assets assigned to that Subadviser by SMC. Consistent with the
provisions of the 1940 Act and any applicable exemption thereto, SMC
may enter into Sub-Advisory Agreements or amend Sub-Advisory
Agreements without the approval of the shareholders of the Fund, or
series thereof as applicable.
(c) PORTFOLIO TRANSACTIONS AND BROKERAGE.
(i) Transactions in portfolio securities shall be effected by SMC,
through brokers or otherwise (including affiliated brokers), in
the manner permitted in this Section 4 and in such manner as
SMC shall deem to be in the best interests of the Fund after
consideration is given to all relevant factors.
(ii) In reaching a judgment relative to the qualification of a
broker to obtain the best execution of a particular
transaction, SMC may take into account all relevant factors and
circumstances, including the size of any contemporaneous market
in such securities; the importance to the Fund of speed and
efficiency of execution; whether the particular transaction is
part of a larger intended change of portfolio position in the
same securities; the execution capabilities required by the
circumstances of the particular transaction; the capital
required by the transaction; the overall capital strength of
the broker; the broker's apparent knowledge of or familiarity
with sources from or to whom such securities may be purchased
or sold; as well as the efficiency, reliability and
confidentiality with which the broker has handled the execution
of prior similar transactions.
(iii) Subject to any statements concerning the allocation of
brokerage contained in the Fund's Prospectus or Statement of
Additional Information, SMC is authorized to direct the
execution of portfolio transactions for the Fund to brokers who
furnish investment information or research service to SMC. Such
allocations shall be in such amounts and proportions as SMC may
determine. If the transaction is directed to a broker providing
brokerage and research services to SMC, the commission paid for
such transaction may be in excess of the commission another
broker would have charged for effecting that transaction, if
SMC shall have determined in good faith that the commission is
reasonable in relation to the value of the brokerage and
research services provided, viewed in terms of either that
particular transaction or the overall responsibilities of SMC
with respect to all accounts as to which it now or hereafter
exercises investment discretion. For purposes of the
immediately preceding sentence, "providing brokerage and
research services" shall have the meaning generally given such
terms or similar terms under Section 28(e)(3) of the Securities
Exchange Act of 1934, as amended.
(iv) In the selection of a broker for the execution of any
transaction not subject to fixed commission rates, SMC shall
have no duty or obligation to seek advance competitive bidding
for the most favorable negotiated commission rate to be
applicable to such transaction, or to select any broker solely
on the basis of its purported or "posted" commission rates.
(v) In connection with transactions on markets other than national
or regional securities exchanges, the Fund will deal directly
with the selling principal or market maker without incurring
charges for the services of a broker on its behalf unless, in
the best judgment of SMC, better price or execution can be
obtained by utilizing the services of a broker.
(d) LIMITATION OF LIABILITY OF SMC WITH RESPECT TO RENDERING INVESTMENT
ADVISORY SERVICES. So long as SMC shall give the Fund the benefit of
its best judgment and effort in rendering investment advisory services
hereunder, SMC shall not be liable for any errors of judgment or
mistake of law, or for any loss sustained by reason of the adoption of
any investment policy or the purchase, sale or retention of any
security on its recommendation, whether or not such recommendation
shall have been based upon its own investigation and research or upon
investigation and research made by any other individual, firm or
corporation, if such recommendation shall have been made and such
other individual, firm or corporation shall have been selected with
due care and in good faith. Nothing herein contained, however, shall
be construed to protect SMC against any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Section 4.
As used in this Section 4, "SMC" shall include directors, officers and
employees of SMC, as well as SMC itself.
5. ADMINISTRATIVE AND TRANSFER AGENCY SERVICES.
(a) RESPONSIBILITIES OF SMC. SMC will provide the Fund with general
administrative, fund accounting, transfer agency, and dividend
disbursing services described and set forth in Schedule A attached
hereto and made a part of this Agreement by reference. SMC agrees to
maintain sufficient trained personnel and equipment and supplies to
perform such services in conformity with the current Prospectus of the
Fund and such other reasonable standards of performance as the Fund
may from time to time specify, and otherwise perform such services in
an accurate, timely, and efficient manner.
(b) INSURANCE. The Fund and SMC agree to procure and maintain, separately
or as joint insureds with themselves, their directors, employees,
agents and others, and other investment companies for which SMC acts
as investment adviser and transfer agent, a policy or policies of
insurance against loss arising from breaches of trust, errors and
omissions, and a fidelity bond meeting the requirements of the 1940
Act, in the amounts and with such deductibles as may be agreed upon
from time to time. SMC shall be solely responsible for the payment of
premiums due for such policies.
(c) REGISTRATION AND COMPLIANCE.
(i) SMC represents that as of the date of this Agreement it is
registered as a transfer agent with the Securities and Exchange
Commission ("SEC") pursuant to Subsection 17A of the Securities
and Exchange Act of 1934 and the rules and regulations
thereunder, and agrees to maintain said registration and comply
with all of the requirements of said Act, rules and regulations
so long as this Agreement remains in force.
(ii) The Fund represents that it is a diversified management
investment company registered with the SEC in accordance with
the 1940 Act and the rules and regulations thereunder, and
authorized to sell its shares pursuant to said Act, the 1933
Act and the rules and regulations thereunder.
(d) LIABILITY AND INDEMNIFICATION WITH RESPECT TO RENDERING ADMINISTRATIVE
AND TRANSFER AGENCY SERVICES. SMC shall be liable for any actual
losses, claims, damages or expenses (including any reasonable counsel
fees and expenses) resulting from SMC's bad faith, willful
misfeasance, reckless disregard of its obligations and duties,
negligence or failure to properly perform any of its responsibilities
or duties under this Section 5. SMC shall not be liable and shall be
indemnified and held harmless by the Fund, for any claim, demand or
action brought against it arising out of, or in connection with:
(i) The bad faith, willful misfeasance, reckless disregard of its
duties or negligence by the Board of Directors of the Fund, or
SMC's acting upon any instructions properly executed and
authorized by the Board of Directors of the Fund;
(ii) SMC acting in reliance upon advice given by independent counsel
retained by the Board of Directors of the Fund.
In the event that SMC requests the Fund to indemnify or hold it
harmless hereunder, SMC shall use its best efforts to inform
the Fund of the relevant facts concerning the matter in
question. SMC shall use reasonable care to identify and
promptly notify the Fund concerning any matter which presents,
or appears likely to present, a claim for indemnification
against the Fund.
The Fund shall have the election of defending SMC against any
claim which may be the subject of indemnification hereunder. In
the event the Fund so elects, it will so notify SMC and
thereupon the Fund shall take over defenses of the claim, and
if so requested by the Fund, SMC shall incur no further legal
or other claims related thereto for which it would be entitled
to indemnity hereunder provided, however, that nothing herein
contained shall prevent SMC from retaining, at its own expense,
counsel to defend any claim. Except with the Fund's prior
consent, SMC shall in no event confess any claim or make any
compromise in any matter in which the Fund will be asked to
indemnify or hold SMC harmless hereunder.
PUNITIVE DAMAGES. SMC shall not be liable to the Fund, or any
third party, for punitive, exemplary, indirect, special or
consequential damages (even if SMC has been advised of the
possibility of such damage) arising from its obligations and
the services provided under this Section 5, including but not
limited to loss of profits, loss of use of the shareholder
accounting system, cost of capital and expenses of substitute
facilities, programs or services.
FORCE MAJEURE. Anything in this Section 5 to the contrary
notwithstanding, SMC shall not be liable for delays or errors
occurring by reason of circumstances beyond its control,
including but not limited to acts of civil or military
authority, national emergencies, work stoppages, fire, flood,
catastrophe, earthquake, acts of God, insurrection, war, riot,
failure of communication or interruption.
(e) DELEGATION OF DUTIES. SMC may, at its discretion, delegate, assign, or
subcontract any of the duties, responsibilities and services governed
by this Section 5, to an affiliated company, whether or not by formal
written agreement. SMC shall, however, retain ultimate responsibility
to the Fund, and shall implement such reasonable procedures as may be
necessary, for assuring that any duties, responsibilities or services
so assigned, subcontracted or delegated are performed in conformity
with the terms and conditions of this Agreement.
6. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent
SMC or any officer thereof from acting as investment adviser, administrator
or transfer agent for any other person, firm or corporation, nor shall it
in any way limit or restrict SMC or any of its directors, officers,
stockholders or employees from buying, selling, or trading any securities
for its own accounts or for the accounts of others for whom it may be
acting; provided, however, that SMC expressly represents that it will
undertake no activities which, in its judgment, will conflict with the
performance of its obligations to the Fund under this Agreement. The Fund
acknowledges that SMC acts as investment adviser, administrator and
transfer agent to other investment companies, and it expressly consents to
SMC acting as such; provided, however, that if in the opinion of SMC,
particular securities are consistent with the investment objectives of, and
desirable purchases or sales for the portfolios of one or more of such
other investment companies or series of such companies at approximately the
same time, such purchases or sales will be made on a proportionate basis if
feasible, and if not feasible, then on a rotating or other equitable basis.
7. AMENDMENT. This Agreement and the schedules forming a part hereof may be
amended at any time, without shareholder approval to the extent permitted
by applicable law, by a writing signed by each of the parties hereto. Any
change in the Fund's registration statements or other documents of
compliance or in the forms relating to any plan, program or service offered
by its current Prospectus which would require a change in SMC's obligations
hereunder shall be subject to SMC's approval, which shall not be
unreasonably withheld.
8. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective on May 1, 2002, provided that at the meeting of the Fund's
shareholders of April 17, 2002 (or any adjournment thereof), it is approved
by a majority of the holders of the outstanding voting securities of the
Fund. This Agreement shall continue in effect until May 1, 2004, and for
successive 12-month periods thereafter, unless terminated, provided that
each such continuance is specifically approved at least annually by (a) the
vote of the majority of the entire Board of Directors of the Fund, and the
vote of the majority of those directors who are not parties to this
Agreement or interested persons (as such terms are defined in the 0000 Xxx)
of any such party cast in person at a meeting called for the purpose of
voting on such approval, or (b) by the vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act).
Upon this Agreement becoming effective, any previous Agreement between the
Fund and SMC providing for investment advisory, administrative and/or
transfer agency services shall concurrently terminate, except that such
termination shall not affect any fees accrued and guarantees of expenses
with respect to any period prior to termination.
This Agreement may be terminated at any time without payment of any
penalty, by the Fund upon the vote of a majority of the Fund's Board of
Directors or, by a majority of the outstanding voting securities of the
Fund, or by SMC, in each case on sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of
its assignment (as such term is defined in the 1940 Act).
9. SEVERABILITY. If any clause or provision of this Agreement is determined to
be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, then such clause or provision shall be considered
severed herefrom and the remainder of this Agreement shall continue in full
force and effect.
10. APPLICABLE LAW. This Agreement shall be subject to and construed in
accordance with the laws of the State of Kansas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereto duly authorized on the day, month
and year first above written.
SECURITY GROWTH AND INCOME FUND
By: XXXXX X. XXXXXXX
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Title: President
ATTEST:
XXX X. XXX
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Secretary
SECURITY MANAGEMENT COMPANY, LLC
By: XXXXX X. XXXXXXX
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Title: President
ATTEST:
XXX X. XXX
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Secretary
SCHEDULE A
INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES
AND TRANSFER AGENCY AGREEMENT
SCHEDULE OF ADMINISTRATIVE AND FUND ACCOUNTING FACILITIES AND SERVICES
Security Management Company, LLC agrees to provide the Fund the following
administrative facilities and services.
1. FUND AND PORTFOLIO ACCOUNTING
a. Maintain Fund General Ledger and Journal.
b. Prepare and record disbursements for direct Fund expenses.
c. Prepare daily money transfers.
d. Reconcile all Fund bank and custodian accounts.
e. Assist Fund independent auditors as appropriate.
f. Prepare daily projection of available cash balances.
g. Record trading activity for purposes of determining net asset values
and daily dividend.
h. Prepare daily portfolio evaluation report to value portfolio securities
and determine daily accrued income.
i. Determine the daily net asset value per share.
j. Determine the daily, monthly, quarterly, semiannual or annual dividend
per share.
k. Prepare monthly, quarterly, semiannual and annual financial statements.
l. Provide financial information for reports to the Securities and
Exchange Commission in compliance with the provisions of the 1940 Act
and the Securities Act of 1933, the Internal Revenue Service and any
other regulatory agencies as required.
m. Provide financial, yield, net asset value, etc. information to NASD and
other survey and statistical agencies as instructed by the Fund.
n. Report to the Audit Committee of the Board of Directors.
2. LEGAL
a. Provide registration and other administrative services necessary to
qualify the shares of the Fund for sale in those jurisdictions
determined from time to time by the Fund's Board of Directors (commonly
known as "Blue Sky Registration").
b. Provide registration with and reports to the Securities and Exchange
Commission in compliance with the provisions of the 1940 Act and the
Securities Act of 1933.
c. Prepare and review Fund Prospectus and Statement of Additional
Information.
d. Prepare proxy statements and oversee proxy tabulation for annual
meetings.
e. Prepare Board materials and maintain minutes of the Board meetings.
f. Draft, review and maintain contractual agreements between Fund and
Investment Adviser, Custodian, Distributor and Transfer Agent.
g. Oversee printing of proxy statements, financial reports to
shareholders, prospectuses and Statements of Additional Information.
h. Provide legal advice and oversight regarding shareholder transactions,
administrative services, compliance with contractual agreements and the
provision of the 1940 Act and the Securities Act of 1933.
SCHEDULE OF SHARE TRANSFER AND DIVIDEND DISBURSING SERVICES
Security Management Company, LLC agrees to provide the Fund the following
transfer agency and dividend disbursing services.
1. Maintain shareholder accounts, including processing of new accounts.
2. Post address changes and perform other file maintenance for shareholder
accounts.
3. Post all transactions to the shareholder file, including:
a. Direct purchases;
b. Wire order purchases;
c. Direct redemptions;
d. Wire order redemptions;
e. Draft redemptions;
f. Direct exchanges;
g. Transfers;
h. Certificate issuances; and
i. Certificate deposits.
4. Monitor fiduciary processing, insuring accuracy and deduction of fees.
5. Prepare daily reconciliations of shareholder processing to money movement
instructions.
6. Handle bounced check collections. Immediately liquidate shares purchased
and return to the shareholder the check and confirmation of the
transaction.
7. Issue all checks and stop and replace lost checks.
8. Draft clearing services.
a. Maintain signature cards and appropriate corporate resolutions.
b. Compare the signature on the check to the signatures on the signature
card for the purpose of paying the face amount of the check only.
c. Receive checks presented for payment and liquidate shares after
verifying account balance.
d. Order checks in quantity specified by the Fund for the shareholder.
9. Mail confirmations, checks and/or certificates resulting from transaction
requests to shareholders.
10. Perform all of the Fund's other mailings, including:
a. Dividend and capital gain distributions;
b. Semiannual and annual reports;
c. 1099/year-end shareholder reporting;
d. Systematic withdrawal plan payments; and
e. Daily confirmations.
11. Answer all service-related telephone inquiries from shareholders and
others, including:
a. General and policy inquiries (research and resolve problems);
b. Fund yield inquiries;
c. Shareholder processing requests and account maintenance changes by
telephone as described above;
d. Pending requests to correspondence;
e. On-line statistical performance of unit; and
f. Reports on telephone activity.
12. Respond to written inquiries (research and resolve problems), including:
a. Initiate shareholder account reconciliation proceeding when
appropriate;
b. Notify shareholder of bounced investment checks;
c. Respond to financial institutions regarding verification of deposit;
d. Initiate proceedings regarding lost certificates;
e. Respond to complaints and log activities; and
f. Correspondence control.
13. Maintain and retrieve all required past history for shareholders and
provide research capabilities as follows:
a. Monitor daily all processing activity to verify back-up documentation;
b. Provide exception reports;
c. Provide microfilming services; and
d. Provide storage, retrieval and archive services.
14. Prepare materials for annual meetings.
a. Address and mail annual proxy and related material.
b. Prepare and submit to Fund an affidavit of mailing.
c. Furnish certified list of shareholders (hard copy or microfilm) and
inspectors of elections.
15. Report and remit as necessary for state escheatment requirements.
Approved: Fund XXXXX X. XXXXXXX SMC XXXXX X. XXXXXXX
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