FORM OF
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
This Agreement, made and entered into this 27th day of January, 2000, by and
between SECURITY ULTRA 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 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. 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, including all fees
and charges of third parties providing services to the Fund, whether
or not such expenses are billed to SMC or the Fund, except as
otherwise provided 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;
(v) distribution fees paid under the Fund's Class B Distribution
Plan; and
(vi) distribution fees paid under the Fund's Class C Distribution
Plan.
3. COMPENSATION OF SMC.
(a) In consideration of the services to be rendered by SMC pursuant to
this Agreement, the Fund shall pay SMC an annual fee equal to 2% of
the first $10 million of the average net assets of the Fund, and 1
1/2% of the next $20 million of the average net assets, and 1% of the
remaining average net assets of the Fund for any fiscal year,
determined and payable monthly. If this Agreement shall be effective
for only a portion of a year in which a fee is owed, then SMC's
compensation for the year shall be prorated for that portion. For
purposes of this Section 3, the value of the net assets of the Fund
shall be computed in the same manner as the value of such net assets
is computed in connection with the determination of the net asset
value of the shares of the Fund as described in the Fund's Prospectus
and Statement of Additional Information.
(b) For each of the Fund's fiscal years 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 B and Class C
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 paragraph 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 statements 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 Investment Company Act
of 1940 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 paragraph 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 the 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 shall, however,
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 paragraph
4. As used in this paragraph 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 Paragraph 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 paragraph 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 paragraph 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 paragraph 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 January 27, 2000, provided that on January 26, 2000, it is
approved by a majority of the holders of the outstanding voting securities
of the Fund. This Agreement shall continue in effect until January 27,
2002, 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 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 ULTRA FUND
By
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Title:
ATTEST:
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Secretary
SECURITY MANAGEMENT COMPANY, LLC
By
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Title:
ATTEST:
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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. Maintenance of Fund, General Ledger and Journal.
b. Preparing and recording disbursements for direct Fund expenses.
c. Preparing daily money transfers.
d. Reconciliation of all Fund bank and custodian accounts.
e. Assisting 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 Investment
Company Act of 1940 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. Reports to the Audit Committee of the Board of Directors, if
applicable.
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 Investment Company
Act of 1940 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
provisions of the 1940 and 1933 Acts.
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. Maintenance of shareholder accounts, including processing of new accounts.
2. Posting address changes and other file maintenance for shareholder
accounts.
3. Posting 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. Issuing all checks and stopping and replacing lost checks.
8. Draft clearing services.
a. Maintenance of signature cards and appropriate corporate resolutions.
b. Comparison of 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. Receiving checks presented for payment and liquidating shares after
verifying account balance.
d. Ordering checks in quantity specified by the Fund for the shareholder.
9. Mailing confirmations, checks and/or certificates resulting from
transaction requests to shareholders.
10. Performing 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. Answering all service related telephone inquiries from shareholders and
others, including:
a. General and policy inquiries (research and resolve problems);
b. Fund yield inquiries;
c. Taking shareholder processing requests and account maintenance changes
by telephone as described above;
d. Submit pending requests to correspondence;
e. Monitor on-line statistical performance of unit; and
f. Develop 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. Maintaining and retrieving all required past history for shareholders and
provide research capabilities as follows:
a. Daily monitoring of all processing activity to verify back-up
documentation;
b. Provide exception reports;
c. Microfilming; and
d. Storage, retrieval and archive.
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 escheat requirements.
Approved: Fund SMC
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