QUANTITATIVE RESEARCH AGREEMENT
THIS AGREEMENT is made this 1st day of May, 1995, by and between SECURITY
MANAGEMENT COMPANY, a Kansas Corporation (the "Adviser"), and Meridian
Investment Management Corporation, a Colorado corporation ("Meridian").
WITNESSETH:
WHEREAS, the Adviser is a registered investment adviser under the Investment
Advisers Act of 1940, as amended, and engages in the business of acting as an
investment adviser;
WHEREAS, Meridian is a registered investment adviser under the Investment
Advisers Act of 1940, as amended, and engages in the business of acting as an
investment adviser;
WHEREAS, the Adviser is the investment adviser for the Security Equity Fund (the
"Fund"), and provides investment advisory services to the Fund on the terms and
conditions set forth in an investment advisory contract;
WHEREAS, the Fund is registered as a diversified, open-end investment company
under the Investment Company Act of 1940, as amended, (the "1940 Act"), and the
rules and regulations promulgated thereunder;
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Adviser desires to retain Meridian as the Adviser's agent to
furnish certain research services for the benefit of the Asset Allocation Series
of the Fund (the "Series"), on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual convenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment.
The Adviser hereby appoints Meridian to provide certain quantitative
research services to the Adviser on behalf of the Series for the period and
on the terms set forth in this Agreement. Meridian accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided.
2. Quantitative Research.
(a) Meridian agrees to provide the Adviser with an asset allocation
strategy whose objective is to maximize total return through a quantitative
investment process, within the restrictions on investment category
concentrations and any other investment restrictions set forth in the
Series prospectus and statement of additional information. The strategy
will indicate where, and in what percentage (in Meridian's opinion) assets
should be allocated among the following investment categories in order to
achieve this objective.
1. Sectors within the domestic equity market, consisting of
sub-categories of the general domestic equity market where companies
are grouped by the type of business in which they engage (e.g.
pharmaceuticals, biotechnology, hotels, etc.) as identified by the S&P
500.
2. Domestic fixed income securities.
3. International equity securities, to include the specific countries to
which assets are to be allocated. The countries eligible for
recommendation under this section are those countries followed by the
Xxxxxx Xxxxxxx Capital International World Index (the "MSCI").
4. International fixed income securities, to include the specific
countries to which assets are to be allocated.
5. Gold stocks.
6. Real estate investments made through exchange traded real estate
investment trusts.
7. Cash.
In addition to providing allocations among the identified investment
categories, Meridian shall also provide the Adviser with the underlying
analytical research which supports the recommendations made with respect to
each investment category. Other investment categories may be added by the
mutual agreement of the parties.
(b) An initial asset allocation strategy portfolio will be provided to the
Adviser, and/or its designee, simultaneous with the execution of this
Agreement. Thereafter, Meridian shall continuously review the strategy
established for the Series and continuously update said strategy. Changes
in the strategy will be provided to the Adviser, and/or its designee, at
such times as Meridian's research indicates that changes are necessary in
order to achieve the objective set forth above. However, regardless of
whether there are changes in the strategy or not, Meridian will report at
least weekly to the Adviser in order to discuss the performance of the
strategy and any recommended changes thereto.
Meridian will give the Adviser the benefit of its best judgment, efforts
and facilities in rendering its services under this Agreement.
3. Records.
Meridian hereby agrees to maintain all records relating to its activities
and obligations under this Agreement which are required to be maintained by
Rule 31a-1 under the 1940 Act and/or Rule 204-2 under the Investment
Advisers Act of 1940 (the "Advisers Act") and agrees to preserve such
records for the periods prescribed by Rule 31a-2 under the 1940 Act and/or
Rule 204-2 under the Advisers Act, as applicable.
4. Expenses.
The expenses connected with the services provided hereunder shall be borne
by Meridian as follows:
(a) Meridian shall pay any expenses associated with carrying out its
obligation under paragraph 2 hereof and in preparing reports to the Adviser
and the expenses of any reasonable travel in connection with its
participation in Board meetings of the Fund or in delivering reports to the
Adviser.
(b) Meridian shall pay any expenses that it may incur in communicating with
the Adviser in connection with its obligations under this Agreement,
including the expenses of telephone calls, special mail services and
telecopier charges.
5. Compensation.
For the services to be rendered and the facilities furnished hereunder, the
Adviser shall pay Meridian an annual fee equal to .20% of the average daily
closing value of the net assets of the Series, computed on a daily basis,
payable quarterly for the preceding quarter on or before the 25th day after
the end of each calendar quarter. If this Agreement shall be effective for
only a portion of a year, then Meridian's compensation for said year shall
be prorated for such portion. For purposes of this paragraph 5, the value
of the net assets of the Series 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 Series'
shares as described in the Fund's prospectus and statement of additional
information.
6. Non-Exclusivity.
The services of Meridian to the Adviser are not to be deemed to be
exclusive, and Meridian shall be free to render research or other services
to others (including other investment Advisers) and to engage in other
activities, so long as its services under the Agreement are not impaired
thereby.
7. Non-Disclosure.
The asset allocation strategy and all information and services relating
thereto which are provided by Meridian to the Adviser shall be used only in
connection with the management and distribution of the Series. The strategy
and information and services shall not be sold or offered for sale by the
Adviser to any other registered investment adviser, regulated investment
company or broker/dealer. However, nothing herein shall be deemed to
restrict the Adviser, or any of its affiliates, from discussing the asset
allocation strategy, or specific recommendations made by Meridian, in
connection with (i) the management and distribution of the Series, and (ii)
the education of registered representatives of broker/dealers who sell
interests in the Series, or as may otherwise be required by law.
8. Term.
This Agreement shall become effective at the close of business on the date
first shown above. It shall remain in force and effect, subject to
paragraph 9 hereof for one year from the date hereof.
9. Renewal.
Following the expiration of its initial year term, this Agreement shall
continue in force and effect from year to year, provided that such
continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a majority
of the Series' outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the directors who are not
parties to this Agreement or interested persons of a party to this
Agreement (other than as a director of the Fund), by votes cast in person
at a meeting specifically called for such purpose.
10. Termination.
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Fund's Board of Directors or by vote of a majority
of the Series' outstanding voting securities (as defined in Section 2
(a)(42) of the 1940 Act), or by the Adviser or by Meridian on sixty (60)
days' written notice to the other party. This Agreement shall automatically
terminate in the event of its "assignment" as that term is defined in
Section 2 (a)(4) of the 1940 Act. This Agreement shall automatically
terminate in the event that the investment advisory contract between the
Adviser and the Fund is terminated, assigned or not renewed.
11. Liability of Meridian.
In the absence of willful misfeasance, bad faith or gross negligence on the
part of Meridian or its officers, directors or employees, or reckless
disregard by Meridian of its duties under this Agreement, Meridian shall
not be liable to the Adviser, the Fund or to any shareholder of the Fund
for any act or omission in the course of, or connected with, rendering
services hereunder.
12. Indemnification.
The Adviser and Meridian each agree to indemnify the other against any
claim against, loss or liability to, such other party (including reasonable
attorneys' fees) arising out of any action on the part of the indemnifying
party which constitutes willful misfeasance, bad faith or gross negligence.
13. Representations and Warranties of Meridian.
Meridian represents and warrants that: (i) it is registered as an
investment adviser under the Advisers Act and will continue to be so
registered for so long as this Agreement remains in effect; and (ii) it is
not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by this Agreement.
14. Right to Use Name.
During the term of this Agreement, the Adviser (or any of its subsidiaries
or affiliates) shall be entitled to use the Meridian Investment Management
Corporation name in all prospectuses, proxy statements, reports to
shareholders, sales literature or other material prepared for distribution
to shareholders of the Fund.
15. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Kansas. To the extent that the applicable
laws of the State of Kansas conflict with the applicable provisions of
the 1940 Act, and/or the Advisers Act, the latter two shall control.
B. Captions. The captions contained in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction.
C. Entire Agreement. This Agreement represents the entire agreement and
understanding of the parties hereto and shall supersede any prior
agreements between the parties relating to the subject matter hereof,
and all such prior agreements shall be deemed terminated upon the
effectiveness of this Agreement.
16. Notices.
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage-paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further
notice to the other party, it is agreed that the address of Meridian for
this purpose shall be 00000 Xxxx Xxxxxxxx Xxxx, Tower II, 7th Floor,
Xxxxxxxxx, Xxxxxxxx 00000 and the address of the Adviser for this purpose
shall be 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxx 00000-0000.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the day and year first above
written.
ATTEST:
SECURITY MANAGEMENT COMPANY
Xxx X. Xxx
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Title: Secretary
By Xxxxx X. Xxxxxxx
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Senior Vice President
ATTEST:
MERIDIAN INVESTMENT MANAGEMENT
CORPORATION
Xxxxx X. Xxxxxxxx
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Title: Secretary
By Xxxxxxx X. Xxxx
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President
