INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
This Agreement, made and entered into this 27th day of January, 2000, and
amended and restated effective as of the 1st day of May, 2002, by and between
SECURITY EQUITY FUND, a Kansas corporation (hereinafter referred to as the
"Fund"), and SECURITY MANAGEMENT COMPANY, LLC, a Kansas 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 of the Fund and the
sales 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) 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) arrange for, and monitor, 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.
(c) EXPENSE CAP. For each of the Fund's full fiscal years that this
Agreement remains in force, SMC agrees that if total annual expenses
of each Series of the Fund identified below, exclusive of interest,
taxes, extraordinary expenses (such as litigation), brokerage fees and
commissions, and 12b-1 fees paid under a Fund's Class A, Class B,
Class C or Class S Distribution Plans, but inclusive of SMC's
compensation, exceeds the amount set forth below (the "Expense Cap"),
SMC shall contribute to such Series such funds or waive such portion
of its fee, adjusted monthly, as may be required to insure that the
total annual expenses of the Series shall not exceed the Expense Cap.
If this Agreement shall be effective for only a portion of a Series'
fiscal year, then the maximum annual expenses shall be prorated for
such portion.
EXPENSE CAP
International Series, Class A, B, C and S shares - 2.25%
Enhanced Index Series, Class A, B, C and S shares - 1.75%
Select 25 Series, Class A, B, C and S shares - 1.75%
3. COMPENSATION OF SMC.
(a) As compensation for the investment advisory services to be rendered by
SMC to Global Series, Social Awareness Series, Mid Cap Value Series,
Small Cap Growth Series, Large Cap Growth Series and Technology
Series, for each of the years this Agreement is in effect, each of the
foregoing Series shall pay SMC an annual fee equal to 1.00% of its
respective average daily net assets. Such fee shall be calculated
daily and payable monthly. As compensation for the investment advisory
services to be rendered by SMC to International Series for each of the
years this Agreement is in effect, the International Series shall pay
SMC an annual fee equal to 1.10% of its average daily net assets. Such
fee shall be calculated daily and payable monthly. As compensation for
the investment advisory services to be rendered by SMC to Equity
Series, Total Return Series, Enhanced Index Series and Select 25
Series for each of the years this Agreement is in effect, each of the
foregoing Series shall pay SMC an annual fee equal to 0.75% of its
respective 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 Global, International and Technology
Series, each of the foregoing Series shall pay SMC an annual fee equal
to 0.045% of its average daily net assets, plus the greater of 0.10%
of its average daily net assets or $60,000. Such fees shall be
calculated daily and payable monthly. As compensation for the
administrative services to be rendered by SMC to each of the other
Series of the Fund, each such Series 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 each 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 Fund's shares as described
in the Fund's prospectus.
For transfer agency services provided by SMC to each Series of the
Fund, each Series 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 each
Series, 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 this Agreement remains in force,
SMC agrees that if total annual expenses of any Series of the Fund,
exclusive of interest and taxes, extraordinary expenses (such as
litigation) and 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 such
Series of the Fund are then qualified for sale, as such regulations
may be amended from time to time, SMC will contribute to such Series
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 Series' 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
a Series 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 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 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 any series of the Fund. Each
Subadviser shall have investment discretion with respect to the assets
of the series 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 affected
series.
(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 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 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 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 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 or 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 agreement, to an affiliated company, whether or not by formal
written agreement, or to any third party, provided that such
arrangement with a third party has been approved by the Board of
Directors of the Fund. 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 their own accounts or for the accounts of others for whom they 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 on or before that date it has been
approved by the holders of a majority of the outstanding voting securities
of each series of the Fund. This Agreement shall continue in force until
May 1, 2004, and for successive 12-month periods thereafter, unless
terminated, provided each such continuance is specifically approved at
least annually by (a) the vote of a majority of the entire Board of
Directors of the Fund, and the vote of a majority of the directors of the
Fund who are not parties to this Agreement or interested persons (as such
terms are defined in the Investment Company Act of 1940) of any such party
cast in person at a meeting of such directors called for the purpose of
voting upon such approval, or (b) by the vote of the holders of a majority
of the outstanding voting securities of each series of the Fund (as defined
in the 1940 Act). In the event a majority of the outstanding shares of one
series vote for continuance of the Agreement, it will be continued for that
series even though the Agreement is not approved by either a majority of
the outstanding shares of any other series or by a majority of outstanding
shares of the Fund.
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 as to any series of the Fund
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 applicable series 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 EQUITY FUND
By XXXXX X. XXXXXXX
-----------------------------
Xxxxx X. Xxxxxxx
Title: President
ATTEST:
XXX X. XXX
-----------------------------
Xxx X. Xxx
Secretary
SECURITY MANAGEMENT COMPANY, LLC
By XXXXX X. XXXXXXX
-----------------------------
Xxxxx X. Xxxxxxx
Title: President
ATTEST:
XXX X. XXX
-----------------------------
Xxx X. Xxx
Secretary
SCHEDULE A
INVESTMENT MANAGEMENT AND SERVICES 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
provisions 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
--------------------------- ---------------------------
Xxxxx X. Xxxxxxx Xxxxx X. Xxxxxxx
AMENDMENT TO
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Management Company, LLC
("SMC, LLC") are parties to an Agreement, made and entered into January 27,
2000, and amended and restated effective as of May 1, 2002 (the "Agreement"),
under which SMC, LLC agrees to provide investment research and advice, general
administrative, fund accounting, transfer agency and dividend disbursing
services to the Fund in return for the compensation specified in the Agreement;
WHEREAS, on November 8, 2002, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Alpha
Opportunity Series, in addition to its presently offered series of common stock,
with each series representing separate interests in a separate portfolio of
securities and other assets; and
WHEREAS, on November 8, 2002, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Alpha Opportunity Series in three
classes, designated as Class A shares, Class B shares, and Class C shares; and
WHEREAS, on May 2, 2003, the Board of Directors of the Fund approved the
amendment of the Agreement to provide that SMC, LLC would provide investment
advisory and business management services to each class of common stock of the
Alpha Opportunity Series of the Fund under the terms and conditions of the
Agreement;
NOW, THEREFORE, IT IS BY THE PARTIES HERETO AGREED that the Agreement is hereby
amended effective June 1, 2003, to provide that SMC, LLC shall provide all
investment advisory services, general administrative, fund accounting, transfer
agency and dividend disbursing services to the Alpha Opportunity Series of the
Fund pursuant to the terms set forth in the Agreement, as follows:
Section 3 shall be deleted in its entirety and the following new Section 3
inserted in lieu thereof:
3. COMPENSATION OF SMC, LLC.
(a) As compensation for the investment advisory services to be rendered by
SMC, LLC to Global Series, Social Awareness Series, Mid Cap Value
Series, Small Cap Growth Series, Large Cap Growth Series and
Technology Series, for each of the years this Agreement is in effect,
each of the foregoing Series shall pay SMC, LLC an annual fee equal to
1.00% of its respective average daily net assets. Such fee shall be
calculated daily and payable monthly. As compensation for the
investment advisory services to be rendered by SMC, LLC to
International Series for each of the years this Agreement is in
effect, the International Series shall pay SMC, LLC an annual fee
equal to 1.10% of its average daily net assets. Such fee shall be
calculated daily and payable monthly. As compensation for the
investment advisory services to be rendered by SMC, LLC to Equity
Series, Enhanced Index Series and Select 25 Series for each of the
years this Agreement is in effect, each of the foregoing Series shall
pay SMC, LLC an annual fee equal to 0.75% of its respective average
daily net assets. Such fee shall be calculated daily and payable
monthly. As compensation for the investment advisory services to be
rendered by SMC, LLC to Alpha Opportunity Series, Alpha Opportunity
Series shall pay SMC, LLC a fee as described in paragraphs 3(c) and
3(d) below. As compensation for the administrative services to be
rendered by SMC, LLC to Global, International and Technology Series,
each of the foregoing Series shall pay SMC, LLC an annual fee equal to
0.045% of its average daily net assets, plus the greater of 0.10% of
its average daily net assets or $60,000.00. Such fees shall be
calculated daily and payable monthly. As compensation for the
administrative services to be rendered by SMC, LLC to Alpha
Opportunity Series, the Alpha Opportunity Series shall pay SMC, LLC an
annual fee equal to 0.145% of its average daily net assets. Such fees
shall be calculated daily and payable monthly. As compensation for the
administrative services to be rendered by SMC, LLC to each of the
other Series of the Fund, each such Series shall pay SMC, LLC 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, LLC's
compensation for said year shall be prorated for such portion. For
purposes of this Section 3, the value of the net assets of each 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 Fund's shares as described
in the Fund's prospectus.
For transfer agency services provided by SMC, LCC to each Series of
the Fund, each Series 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 each Series, SMC, LLC may count as a shareholder account each
person that holds a beneficial interest in an omnibus account
maintained on SMC, LLC's transfer agency system by a third-party
administrator, broker/dealer, bank, insurance company or other entity;
provided that SMC, LLC 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 this Agreement remains in force,
SMC, LLC agrees that if total annual expenses of any Series of the
Fund, exclusive of interest and taxes, extraordinary expenses (such as
litigation) and distribution fees paid under the Fund's Class A, Class
B and Class C Distribution Plans, but inclusive of SMC, LLC's
compensation, exceed any expense limitation imposed by state
securities law or regulation in any state in which shares of such
Series of the Fund are then qualified for sale, as such regulations
may be amended from time to time, SMC, LLC will contribute to such
Series 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 Series' 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 a Series shall not be deemed to be expenses within the
meaning of this paragraph (b).
(c) BASE FEE. As compensation for the investment advisory services to be
rendered by SMC, LLC to Alpha Opportunity Series, the Series shall pay
SMC, LLC at the end of each calendar month, an advisory fee (the "Base
Fee") equal to 2.00%, on an annual basis, of the Alpha Opportunity
Series' average daily net assets. The Base Fee shall be computed daily
and paid monthly. If SMC, LLC shall serve for less than the whole of
any calendar month, the Base Fee shall be calculated on a pro rata
basis for the portion of the month for which it has served as adviser.
During the first 12 months of operations, the fee will be charged at
the Base Fee of 2.00% without any adjustment as discussed in paragraph
(d) below.
(d) BASE FEE ADJUSTMENT. Beginning in the 13th month of operations, the
Base Fee of 2.00% will be adjusted upward or downward on a monthly
basis based upon the performance of the Series relative to the
performance of the S&P 500 Index (the "Index"). The maximum or minimum
adjustment is 0.75% annually. Therefore, the maximum annual fee
payable to SMC, LLC shall be 2.75% of the Series' average daily net
assets, and the minimum annual fee shall be 1.25% of the Series'
average daily net assets. The pro rata adjustment upward or downward
will be determined based upon the performance of the Class A shares of
the Series in excess of, or below, that of the Index. The amount of
any upward adjustment in the Base Fee shall be equal to 0.75%
multiplied by the ratio of the number of percentage points by which
the performance of the Series exceeds the performance of the Index as
compared to 15 percentage points. For example, if the performance of
the Series was 6.6% and that of the Index was 0%, the ratio would be
6.6 to 15, or 44%, times 0.75%, for an upward adjustment of 0.33%. The
amount of any downward adjustment in the Base Fee will be equal to
0.75% multiplied by the ratio of the number of percentage points by
which the performance of the Series is less than the performance of
the Index as compared to 15 percentage points. For example, if the
performance of the Series was --10.0% and that of the Index was 0%,
the ratio would be 10 to 15, or 66.66%, times 0.75%, for a downward
adjustment of 0.50%.
In determining the Base Fee adjustment, if any, applicable during any
month, SMC, LLC will compare the investment performance of the Class A
shares of the Alpha Opportunity Series for the twelve-month period
ending on the last day of the prior month (the "Performance Period")
to the investment record of the Index during the Performance Period.
The investment performance of the Series will be determined by adding
together (i) the change in the net asset value of Class A shares
during the Performance Period, (ii) the value of cash distributions
made by the Series to holders of its Class A shares to the end of the
Performance Period, and (iii) the value of capital gains per share, if
any, paid on undistributed realized long-term gains accumulated to the
end of the Performance Period, and will be expressed as a percentage
of the net asset value per share of the Class A shares at the
beginning of the Performance Period. The investment performance of the
Index will be determined by adding together (i) the change in the
level of the Index during the Performance Period, and (ii) the value,
computed consistently with the Index, of cash distributions made by
companies whose securities comprise the Index accumulated to the end
of the Performance Period, and will be expressed as a percentage of
the Index at the beginning of the Performance Period.
After it determines any Base Fee adjustment, SMC, LLC will determine
the dollar amount of additional fees or fee reductions to be accrued
for each day of a month by multiplying the Base Fee adjustment by the
average daily net assets of the Class A shares of each Fund during the
Performance Period and dividing that number by the number of months in
the Performance Period and then dividing that amount by the number of
days in the current month. The Base Fee, as adjusted, is accrued daily
and paid monthly and shall be prorated in any month for which this
Agreement is not in effect for the entire month.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Investment Management and Services Agreement this ___ day of May, 2003.
SECURITY EQUITY FUND
By:
------------------------------
Xxxxx X. Xxxxxxx, President
ATTEST:
By:
------------------------------
Xxx X. Xxx, Secretary
SECURITY MANAGEMENT COMPANY, LLC
By:
------------------------------
Xxxxx X. Xxxxxxx, President
ATTEST:
By:
------------------------------
Xxx X. Xxx, Secretary
