EXPENSE LIMITATION AGREEMENT
THIS AGREEMENT, dated as of January 1, 2007, is made and entered into by
and between Security Management Company, LLC (the "Advisor") and each of the
registered investment companies set forth on Schedule A (each such company being
referred to herein as a "Company"). This Agreement shall apply to each
investment portfolio of a Company as set forth in Schedule A (each a "Fund" and
collectively the "Funds").
WHEREAS, the Advisor has been appointed the investment adviser to the Funds
pursuant to investment advisory agreements between each Company and the Advisor
(each such agreement an "Advisory Agreement"); and
WHEREAS, each Company, on its own behalf and on behalf of its investment
portfolios listed in Schedule A, and the Advisor desire to enter into the
arrangements described herein relating to certain expenses of the Funds;
NOW, THEREFORE, it is agreed as follows:
1. The Advisor hereby agrees, subject to Section 2 hereof, to reduce the
fees payable to it under the applicable Advisory Agreement (but not below zero)
and make any additional payments to the extent necessary to limit the ordinary
operating expenses (including Rule 12b-1 fees, but exclusive of brokerage costs,
interest, taxes, litigation, indemnification, and extraordinary expenses (as
determined under generally accepted accounting principles)) ("Operating
Expenses") of each Fund to an annual rate (as a percentage of the Fund's average
daily net assets) as set forth on Schedule A ("Expense Limit") until December
31, 2008.
2. If on any day or month, the estimated annualized Operating Expenses of
the Funds listed in Schedule A as of that day or month are less than the Expense
Limit as of that day or month, the Advisor shall be entitled to reimbursement by
such Fund as set forth below. The applicable Fund shall reimburse Advisory
Agreement fees waived or reduced and other payments remitted by the Advisor to
such Fund pursuant to Section 1 hereof during any of the previous thirty-six
(36) months beginning with the effective date of this Agreement (the
"Reimbursement Amount"), to the extent that the annualized Operating Expenses of
the Fund, plus the amount so reimbursed by the Fund equals, as of that day or
month, the Expense Limit set forth in Schedule A, provided however, that such
amount paid by the Fund to the Advisor will in no event exceed the total of the
Reimbursement Amount and will not include any amounts previously reimbursed by
the Fund. Any amounts reimbursed by the Fund to the Advisor under this Section 2
shall not include any additional charges or fees, such as interest on the
Reimbursement Amount. Amounts so reimbursed by the Fund shall be allocated to
the oldest Reimbursement Amount during the previous thirty-six (36) month period
until fully reimbursed and thereafter (i.e., after the oldest Reimbursement
Amount has been fully reimbursed by the Fund), to the next oldest Reimbursement
Amount, and so on. Periodic adjustments to the Reimbursement Amount and related
reimbursement may be made by the Fund as necessary to ensure that the amount of
Operating Expenses of the Fund during any fiscal year never exceeds the Expense
Limit for such Fund during that fiscal year. In no event will a Fund be
obligated to pay any fees waived or deferred by the Advisor with respect to any
other Fund.
3. (a) This Agreement shall in all cases be interpreted in a manner
consistent with the requirements of Revenue Procedure 96-47, 1996-2 CB 338, and
Revenue Procedure 99-40, I.R.B. 1999-46, 565 so as to avoid any possibility that
any Fund is deemed to have paid a preferential dividend. In the event of any
conflict between any term of this Agreement and the previous sentence, the
previous sentence shall control.
(b) In case a Fund has multiple classes of shares, any amount of fees or
expenses waived, paid or reimbursed pursuant to the terms of this Agreement
shall be allocated among the classes of shares of the Fund in accordance with
the terms of the Fund's multiple class plan pursuant to Rule 18f-3 under the
Investment Company Act of 1940.
4. This Agreement shall terminate as of December 31, 2008.
5. The parties agree that this Agreement shall supersede any prior expense
limitation agreement between a Company and the Advisor with respect to such
Company's Funds listed on Schedule A.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SECURITY EQUITY FUND SECURITY MANAGEMENT COMPANY, LLC
By: /s/ XXXXXXX X. XXXXX By: /s/ XXXXXXX X. XXXXX
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Name: XXXXXXX X. XXXXX Name: XXXXXXX X. XXXXX
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Title: PRESIDENT Title: PRESIDENT
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SECURITY LARGE CAP VALUE FUND SECURITY INCOME FUND
By: /s/ XXXXXXX X. XXXXX By: /s/ XXXXXXX X. XXXXX
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Name: XXXXXXX X. XXXXX Name: XXXXXXX X. XXXXX
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Title: PRESIDENT Title: PRESIDENT
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SCHEDULE A
DATED JANUARY 1, 2007
Registered investment companies to which this Agreement applies, and their
respective Funds:
Security Equity Fund - Select 25 Fund
Security Large Cap Value Fund
Security Income Fund - Diversified Income Fund and High Yield Fund
Expense Limit:
FUND NAME AND SHARE CLASS EXPENSE LIMIT
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Select 25 Fund - Class A 1.35%
Select 25 Fund - Class B 2.10%
Select 25 Fund - Class C 2.10%
Security Large Cap Value Fund - Class A 1.25%
Security Large Cap Value Fund - Class B 2.00%
Security Large Cap Value Fund - Class C 2.00%
Diversified Income Fund - Class A 0.95%
Diversified Income Fund - Class B 1.70%
Diversified Income Fund - Class C 1.70%
Security High Yield Fund - Class A 1.25%
Security High Yield Fund - Class B 2.00%
Security High Yield Fund - Class C 2.00%
