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Registration No. 811-1136
Registration No. 2-19458
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Post-Effective Amendment No. 89 [X]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Post-Effective Amendment No. 89 [X]
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(Check appropriate box or boxes)
SECURITY EQUITY FUND
(Exact Name of Registrant as Specified in Charter)
700 SW HARRISON STREET, TOPEKA, KANSAS 66636-0001
(Address of Principal Executive Offices/Zip Code)
Registrant's Telephone Number, including area code:
(785) 431-3127
Copies To:
James R. Schmank, President Amy J. Lee, Secretary
Security Equity Fund Security Equity Fund
700 SW Harrison Street 700 SW Harrison Street
Topeka, KS 66636-0001 Topeka, KS 66636-0001
(Name and address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 2000, pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on May 1, 2000, pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on May 1, 2000, pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
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SECURITY EQUITY FUND
FORM N-1A
EXPLANATORY NOTE
This Amendment to the Registration Statement of Security Equity Fund, which
contains multiple series, relates to each series of the Fund other than the
Social Awareness Series. The prospectus for the Social Awareness Series is
incorporated herein by reference to the Registrant's most recent filing under
Rule 497 under the Securities Act of 1933.
PART B. STATEMENT OF ADDITIONAL INFORMATION
ITEM 22. FINANCIAL STATEMENTS
Security Equity Fund's Annual Report for the period ended September 30, 1999 is
incorporated herein by reference to the Registrant's N-30D filing, Registration
No. 2-19458 (filed December 9, 1999).
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SECURITY FUNDS
PROSPECTUS
MAY 1, 2000
* Security Growth and Income Fund
* Security Equity Fund
* Security Global Fund
* Security Total Return Fund
* Security Mid Cap Value Fund (formerly Security Value Fund)
* Security Small Cap Growth Fund (formerly Security Small Company Fund)
* Security Enhanced Index Fund
* Security International Fund
* Security Select 25 Fund
* Security Large Cap Growth Fund
* Security Technology Fund
* Security Ultra Fund
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The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
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[SDI LOGO]
SECURITY DISTRIBUTORS, INC.
A Member of The Security Benefit
Group of Companies
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TABLE OF CONTENTS
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FUNDS' OBJECTIVES...................................... 2
Security Growth and Income Fund.................... 2
Security Equity Fund............................... 2
Security Global Fund............................... 2
Security Total Return Fund......................... 2
Security Mid Cap Value Fund........................ 2
Security Small Cap Growth Fund..................... 2
Security Enhanced Index Fund....................... 2
Security International Fund........................ 2
Security Select 25 Fund............................ 2
Security Large Cap Growth Fund..................... 2
Security Technology Fund........................... 2
Security Ultra Fund................................ 2
FUNDS' PRINCIPAL INVESTMENT STRATEGIES................. 2
Security Growth and Income Fund.................... 2
Security Equity Fund............................... 3
Security Global Fund............................... 3
Security Total Return Fund......................... 4
Security Mid Cap Value Fund........................ 4
Security Small Cap Growth Fund..................... 4
Security Enhanced Index Fund....................... 5
Security International Fund........................ 5
Security Select 25 Fund............................ 6
Security Large Cap Growth Fund..................... 6
Security Technology Fund........................... 6
Security Ultra Fund................................ 7
MAIN RISKS............................................. 8
Market Risk........................................ 8
Smaller Companies.................................. 8
Value Stocks....................................... 8
Growth Stocks...................................... 9
Foreign Securities................................. 9
Emerging Markets................................... 9
Options and Futures................................ 9
Fixed-Income Securities............................ 9
Focused Investment Strategy........................ 9
Non-Diversification................................ 9
Investment in Investment Companies................. 9
Industry Concentration............................. 9
Restricted Securities.............................. 9
Active Trading..................................... 10
Technology Stocks.................................. 10
Additional Information............................. 10
PAST PERFORMANCE....................................... 10
FEES AND EXPENSES OF THE FUNDS......................... 14
INVESTMENT MANAGER..................................... 17
Management Fees.................................... 18
Portfolio Managers................................. 19
BUYING SHARES.......................................... 20
Class A Shares..................................... 20
Class A Distribution Plan.......................... 21
Class B Shares..................................... 21
Class B Distribution Plan.......................... 21
Class C Shares..................................... 21
Class C Distribution Plan.......................... 22
Brokerage Enhancement Plan......................... 22
Waiver of Deferred Sales Charge.................... 22
Confirmations and Statements....................... 22
SELLING SHARES......................................... 22
By Mail............................................ 23
By Telephone....................................... 23
By Broker.......................................... 23
Payment of Redemption Proceeds..................... 23
DIVIDENDS AND TAXES.................................... 23
Tax on Distributions............................... 24
Taxes on Sales or Exchanges........................ 24
Backup Withholding................................. 24
DETERMINATION OF NET ASSET VALUE....................... 24
SHAREHOLDER SERVICES................................... 25
Accumulation Plan.................................. 25
Systematic Withdrawal Program...................... 25
Exchange Privilege................................. 25
Retirement Plans................................... 26
INVESTMENT POLICIES AND MANAGEMENT PRACTICES........... 26
Foreign Securities................................. 26
Emerging Markets................................... 27
Smaller Companies.................................. 27
Convertible Securities and Warrants................ 27
Restricted Securities.............................. 27
High Yield Securities.............................. 27
Cash Reserves...................................... 28
Borrowing.......................................... 28
Futures and Options................................ 28
Swaps, Caps, Floors and Collars.................... 28
Shares of Other Investment Companies............... 28
When-Issued Securities and
Forward Commitment Contracts..................... 29
GENERAL INFORMATION.................................... 29
Shareholder Inquiries.............................. 29
FINANCIAL HIGHLIGHTS................................... 30
APPENDIX A - REDUCED SALES CHARGES..................... 46
Class A Shares..................................... 46
Rights of Accumulation............................. 46
Statement of Intention............................. 46
Reinstatement Privilege............................ 46
Purchases at Net Asset Value....................... 46
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FUNDS' OBJECTIVES
Described below are the investment objectives for each of the Funds. Each Fund's
Board of Directors may change their investment objectives without shareholder
approval. As with any investment, there can be no guarantee the Funds will
achieve their investment objectives.
SECURITY GROWTH AND INCOME FUND -- The Growth and Income Fund seeks long-term
growth of capital with secondary emphasis on income.
SECURITY EQUITY FUND -- The Equity Fund seeks long-term capital growth.
SECURITY GLOBAL FUND -- The Global Fund seeks long-term growth of capital
primarily through investment in securities of companies in foreign countries and
the United States.
SECURITY TOTAL RETURN FUND -- The Total Return Fund seeks high total return,
consisting of capital appreciation and current income.
SECURITY MID CAP VALUE FUND -- The Mid Cap Value Fund seeks long-term growth of
capital.
SECURITY SMALL CAP GROWTH FUND -- The Small Cap Growth Fund seeks long-term
growth of capital.
SECURITY ENHANCED INDEX FUND -- The Enhanced Index Fund seeks to outperform the
S&P 500 Index through stock selection resulting in different weightings of
common stocks relative to the index.
SECURITY INTERNATIONAL FUND -- The International Fund seeks long-term capital
appreciation primarily by investing in non-U.S. equity securities and other
securities with equity characteristics.
SECURITY SELECT 25 FUND -- The Select 25 Fund seeks long-term growth of capital.
SECURITY LARGE CAP GROWTH FUND -- The Large Cap Growth Fund seeks long-term
capital growth.
SECURITY TECHNOLOGY FUND -- The Technology Fund seeks long-term capital
appreciation by investing in the equity securities of technology companies.
SECURITY ULTRA FUND -- The Ultra Fund seeks capital appreciation.
FUNDS' PRINCIPAL INVESTMENT STRATEGIES
SECURITY GROWTH AND INCOME FUND -- The Fund pursues its objective by investing,
under normal circumstances, in a well-diversified portfolio of stocks that the
Investment Manager, Security Management Company, LLC, believes are attractively
valued with above-average growth potential. The Fund may also invest in
fixed-income securities, which are less volatile than stocks, to adjust the risk
characteristics of the portfolio. Fixed-income securities and stocks that
provide income will make up at least 25 percent of the Fund's portfolio.
The Fund also may invest a portion of its assets in options and futures
contracts. These instruments may be used to hedge the Fund's portfolio, to
increase returns, or to maintain exposure to the equity markets.
The Fund may invest in a variety of investment companies, including those that
seek to track the composition and performance of a specific index. The Fund may
use these index-based investments as a way of managing its cash position, to
gain exposure to the equity markets, or a particular sector of the equity
market, while maintaining liquidity.
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INDEX-BASED INVESTMENTS, such as S&P Depositary Receipts (SPDRs), hold
substantially all of their assets in securities representing a specific index.
In the case of SPDRs the index represented is the S&P 500.
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The Investment Manager uses a value-oriented strategy to choose stocks. The
Investment Manager identifies stocks that are undervalued in terms of price or
other financial measurements with above average growth potential. The Fund
typically invests in the common stock of companies whose total market value is
$5 billion or greater at the time of purchase.
To manage risk in declining or volatile markets, the Investment Manager may
invest more in cash, fixed-income securities and stocks that provide income.
Fixed-income securities may include U.S. government securities, high yield
securities (also referred to as "junk bonds") and other corporate debt
securities.
The Fund typically sells an investment when the reasons for buying no longer
apply, or when the company or issuer begins to show deteriorating fundamentals
or, when a stock has met the price objective set by the Investment Manager.
Under adverse market conditions, the Fund could invest some or all of its assets
in government bonds or money market securities. Although the Fund would do this
only in seeking to avoid losses, the Fund may be unable to pursue its investment
objective during that time, and it could reduce the benefit from any upswing in
the market.
SECURITY EQUITY FUND -- The Fund pursues its objective by investing, under
normal circumstances, at least 65% of its total assets in a widely-diversified
portfolio of stocks.
To choose stocks, the Investment Manager uses a blended approach, investing in
growth stocks and value stocks. The Investment Manager typically chooses larger,
growth-oriented companies. The Investment Manager will also invest in
value-oriented stocks to attempt to reduce the Fund's potential volatility. In
choosing the balance of growth stocks and value stocks, the Investment Manager
compares the potential risks and rewards of each category.
The Fund also may invest a portion of its assets in options and futures
contracts. These instruments may be used to hedge the Fund's portfolio, to
maintain exposure to the equity markets or to increase returns.
The Fund may invest in a variety of investment companies, including those that
seek to track the composition and performance of a specific index. The Fund may
use these index-based investments as a way of managing its cash position, to
gain exposure to the equity markets, or a particular sector of the equity
market, while maintaining liquidity.
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GROWTH-ORIENTED STOCKS are stocks of established companies that typically have a
record of consistent earnings growth.
VALUE-ORIENTED STOCKS are stocks of companies that are believed to be
undervalued in terms of price or other financial measurements and that are
believed to have above average growth potential.
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The Fund typically sells a stock when the reasons for buying it no longer apply,
or when the company begins to show deteriorating fundamentals or poor relative
performance.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, the Fund may be unable to pursue its investment
objective during that time, and it could reduce the benefit from any upswing in
the market.
SECURITY GLOBAL FUND -- The Fund pursues its objective by investing, under
normal circumstances, in a diversified portfolio of securities with at least 65%
of its total assets in at least three countries, one of which may be the United
States. The Fund primarily invests in foreign and domestic common stocks or
convertible stocks of growth-oriented companies considered to have appreciation
possibilities. The Fund may actively trade its investments without regard to the
length of time they have been owned by the Fund. Investments in debt securities
may be made when market conditions are uncertain. The Fund also may invest some
assets in options, futures contracts and foreign currencies, which may be used
to hedge the Fund's portfolio, to increase returns or to maintain exposure to
the equity markets.
The Sub-Adviser, OppenheimerFunds, Inc., uses a disciplined theme approach to
choose securities in foreign and U.S. markets. By considering the effect of key
worldwide growth trends, OppenheimerFunds focuses on areas they believe offer
some of the best opportunities for long-term growth. These trends include: (1)
the growth of mass affluence; (2) the development of new technologies; (3)
corporate restructuring; and (4) demographics.
OppenheimerFunds currently looks for the following:
* Stocks of small, medium and large growth-oriented companies worldwide
* Companies that stand to benefit from one or more global growth trends
* Businesses with strong competitive positions and high demand for their
products or services
* Cyclical opportunities in the business cycle and sectors or industries that
may benefit from those opportunities.
To lower the risks of foreign investing, such as currency fluctuations,
OppenheimerFunds generally diversifies broadly across countries and industries.
Under adverse or unstable market conditions, the Fund could invest some or all
of its assets in cash, repurchase agreements and money market instruments of
foreign or domestic issuers and the U.S. and foreign governments. Although the
Fund would do this only in seeking to avoid losses, the Fund may be unable to
pursue its investment objective during that time, and it could reduce the
benefit from any upswing in the market.
SECURITY TOTAL RETURN FUND -- The Fund pursues its objective by investing, under
normal circumstances, in a well-diversified portfolio of stocks of U.S.
companies in different capitalization ranges. The Fund may also invest in stocks
offering the potential for current income and in fixed income securities
(including restricted securities eligible for resale to qualified institutional
buyers under Rule 144A) in any rating category.
To choose stocks, the Investment Manager uses a blended approach, investing in
growth stocks and in value stocks. The Investment Manager typically chooses
larger, growth-oriented companies. The Investment Manager will also invest in
value-oriented stocks to attempt to reduce the Fund's potential volatility and
possibly add to current income. In choosing the balance of growth stocks and
value stocks, the Investment Manager compares the potential risks and rewards of
each category.
The Fund typically sells a stock when the reasons for buying it no longer apply,
or when the company begins to show deteriorating fundamentals or poor relative
performance.
The Fund also may invest a portion of its assets in options and futures
contracts. These instruments which may be used to hedge the Fund's portfolio, to
increase returns or to maintain exposure to the equity markets.
The Fund may invest in a variety of investment companies, including those that
seek to track the composition and performance of a specific index. The Fund may
use these index-based investments as a way of managing its cash position, to
gain exposure to the equity markets, or a particular sector of the equity
market, while maintaining liquidity.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, the Fund may be unable to pursue its investment
objective during that time, and it could reduce the benefit from any upswing in
the market.
SECURITY MID CAP VALUE FUND -- The Fund pursues its objective by investing,
under normal circumstances, at least 65% of its total assets in a diversified
portfolio of equity securities with total market value of $10 billion or below
at the time of purchase. The Fund may also invest in ADRs.
The Investment Manager typically chooses stocks that appear undervalued relative
to assets, earnings, growth potential or cash flows. The value stocks included
in the Fund's portfolio typically consist of small and mid-sized companies.
The Fund may sell a stock if it is no longer considered undervalued or when the
company begins to show deteriorating fundamentals.
The Fund also may invest a portion of its assets in options and futures
contracts. These instruments may be used to hedge the Fund's portfolio, to
maintain exposure to the equity markets or to increase returns.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, the Fund may be unable to pursue its investment
objective during that time, and it could reduce the benefit from any upswing in
the market.
SECURITY SMALL CAP GROWTH FUND -- The Fund pursues its investment objective by
investing under normal circumstances, at least 65% of its assets in equity
securities of domestic and foreign companies with market capitalizations
substantially similar to that of the companies in the Russell 2000(TM) Growth
Index at the time of purchase. The Fund may also invest in securities of
emerging growth companies. Emerging growth companies include companies that are
past their start-up phase and that show positive earnings and prospects of
achieving significant profit and gain in a relatively short period of time.
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THE RUSSELL 2000(TM) GROWTH INdex is a market capitalization weighted U.S.
equity index published by Frank Russell Company. This index measures the
performance of the companies in the Russell 2000 Index that have higher
price/book ratios and higher forecasted growth rates.
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The Sub-Adviser, Strong Capital Management, Inc., focuses on common stocks of
companies that it believes are reasonably priced and have above-average growth
potential. Strong may decide to sell a stock when the company's growth prospects
become less attractive, but it is not required to do so.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash, fixed-income securities or money market securities. Although the Fund
would do this only in seeking to avoid losses, the Fund may be unable to pursue
its investment objective during that time, and it could reduce the benefit from
any upswing in the market.
SECURITY ENHANCED INDEX FUND -- The Fund pursues its objective by investing,
under normal circumstances in a portfolio of stocks representative of the
holdings in the S&P 500 Index. The stocks are analyzed using a set of
quantitative criteria that is designed to indicate whether a stock will
predictably generate returns that will exceed or be less than the S&P 500 Index.
Based on the quantitative criteria, the Sub-Adviser, Bankers Trust Company,
determines whether the Fund should (1) overweight - invest more in a particular
stock, (2) underweight - invest less in a particular stock or (3) hold a neutral
position in the stock - invest a similar amount in a particular stock, relative
to the proportion of the S&P 500 Index that the stock represents. While the
majority of issues held by the Fund will be similar to those comprising the S&P
500, approximately 100 will be over- or underweighted relative to the index. In
addition, Bankers Trust may determine that certain S&P 500 stocks should not be
held by the Fund in any amount. Under normal market conditions, the Fund will
invest at least 80% of its assets in equity securities of companies in the index
and futures contracts representative of the stocks which make up the index.
Bankers Trust believes that its quantitative criteria will result in a portfolio
with an overall risk similar to that of the S&P 500.
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THE S&P 500 INDEX is a well-known stock market index that includes common stocks
of 500 companies. These companies are from several industrial sectors
representing a significant portion of the market value of all common stocks
publicly traded in the U.S., most of which are listed on the New York Stock
Exchange.
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The Fund also may invest a portion of its assets in options and futures
contracts. These instruments may be used to hedge the Fund's portfolio, to
increase returns or to maintain exposure to the equity markets.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, the Fund may be unable to pursue its investment
objective during that time, and it could reduce the benefit from any upswing in
the market.
SECURITY INTERNATIONAL FUND -- The Fund pursues its objective by investing,
under normal circumstances, at least 65% of its assets in equity securities of
foreign issuers. These issuers are primarily established companies based in
developed countries outside of the United States. However, the Fund may also
invest in securities of issuers based in underdeveloped countries. Investments
in underdeveloped countries will be based on what the Sub-Adviser, Bankers Trust
Company, believes to be an acceptable degree of risk in anticipation of superior
returns. The Fund will, under normal circumstances, be invested in the
securities of issuers based in at least three countries other than the United
States.
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EQUITY SECURITIES may include common stock, preferred stock, trust or limited
partnership interests, rights and warrants and convertible securities
(consisting of debt securities or preferred stock that may be converted into
common stock or that carry the right to purchase common stock).
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The Fund's investments will generally be diversified among several geographic
regions and countries. Bankers Trust uses the following criteria to determine
the appropriate distribution of investments among various countries and regions:
* The prospects for relative growth among foreign countries
* Expected levels of inflation
* Government policies influencing business conditions
* The outlook for currency relationships
* The range of alternative opportunities available to international investors
In countries and regions with well-developed capital markets where more
information is available, Bankers Trust will identify individual investments for
the Fund. Criteria for selection of individual securities include:
* The issuer's competitive position
* Prospects for growth
* Management strength
* Earnings quality
* Underlying asset value
* Relative market value
* Overall marketability
In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, Bankers Trust may choose
to invest only at the market level through use of options or futures based upon
an established index of securities of locally based issuers. Similarly, country
exposure may also be achieved through investments in other registered investment
companies.
The Fund typically sells an investment when the reasons for buying it no longer
apply, or when the issuer begins to show deteriorating fundamentals or poor
relative performance.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, the Fund may be unable to pursue its investment
objective during that time, and it could reduce the benefit from any upswing in
the market.
SECURITY SELECT 25 FUND -- The Fund pursues its objective by focusing its
investments in a core position of 20-30 common stocks of growth companies which
have exhibited consistent above average earnings or revenue growth. The
Investment Manager selects what it believes to be premier growth companies as
the core position for the Fund. The Investment Manager uses a "bottom-up"
approach in selecting growth stocks. Portfolio holdings will be replaced when
one or more of a company's fundamentals have changed and, in the opinion of the
Investment Manager, it is no longer a premier growth company.
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BOTTOM-UP APPROACH means that the Investment Manager primarily analyzes the
fundamentals of individual companies rather than focusing on broader market or
sector themes. Some of the factors which the Investment Manager looks at when
analyzing individual companies include relative earnings growth, profitability
trends, the company's financial strength, valuation analysis and strength of
management.
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The Fund may invest in a variety of investment companies, including those that
seek to track the composition and performance of a specific index. The Fund may
use these index-based investments as a way of managing its cash position, to
gain exposure to the equity markets, or a particular sector of the equity
market, while maintaining liquidity.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, the Fund may be unable to pursue its investment
objective during that time, and it could reduce the benefit from any upswing in
the market.
SECURITY LARGE CAP GROWTH FUND -- The Fund pursues its objective by investing,
under normal circumstances, at least 65% of its total assets in common stock and
other equity securities of large capitalization companies that, in the opinion
of the Investment Manager, have long-term capital growth potential. The Fund
invests primarily in a portfolio of common stocks, which may include American
Depositary Receipts ("ADRs") or securities with common stock characteristics,
such as securities convertible into common stocks. The Fund defines large
capitalization companies as those whose total market value is at least $5
billion at the time of purchase. The Fund is non-diversified as defined in the
Investment Company Act of 1940, which means that it may hold a larger position
in a smaller number of securities than a diversified fund. The Fund may also
concentrate its investments in a particular industry or group of related
industries, although it has no present intention of doing so.
The Investment Manager uses a growth-oriented strategy to choose stocks, which
means that it invests in companies whose earnings are believed to be in a
relatively strong growth trend. In identifying companies with favorable growth
prospects, the Investment Manager considers factors such as prospects for
above-average sales and earnings growth; high return on invested capital;
overall financial strength; competitive advantages, including innovative
products and services; effective research, product development and marketing;
and stable, effective management.
The Fund also may invest a portion of its assets in options and futures
contracts. These instruments may be used to hedge the Fund's portfolio, to
increase returns or to maintain exposure to the equity markets.
The Fund typically sells a stock when the reasons for buying it no longer apply,
or when the company begins to show deteriorating fundamentals or poor relative
performance.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, the Fund may be unable to pursue its investment
objective during that time, and it could reduce the benefit from any upswing in
the market.
SECURITY TECHNOLOGY FUND -- The Fund pursues its objective by investing, under
normal circumstances, at least 80% of its total assets in the equity securities
of technology companies. The Fund is non-diversified and expects to hold
approximately 30 to 50 positions. The Fund may invest up to 40% of its total
assets in foreign securities. The Fund may actively trade its investments
without regard to the length of time they have been owned by the Fund.
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THE TECHNOLOGY SECTOR consists of companies that are engaged in the development,
production, or distribution of technology-related products or services. These
include computer software, computer hardware, semiconductors and equipment,
communication equipment, and Internet and new media companies.
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The Sub-Adviser, Wellington Management Company, LLP, uses fundamental analysis
to choose technology securities in foreign and U.S. markets. The Fund's
investment approach is based on analyzing the competitive outlook for the
technology sector, identifying those industries likely to benefit from the
current and expected future environment, and identifying individual
opportunities. The Sub-Adviser's evaluation of technology companies rests on its
solid knowledge of the overall competitive environment including supply and
demand characteristics, trends, existing product evaluations, and new product
developments within the technology sector. Fundamental research is focused on
direct contact with company management, suppliers, and competitors.
Asset allocation within the Fund reflects the Sub-Adviser's opinion of the
relative attractiveness of stocks within the industries of the technology
sector, near term macroeconomic events that may detract or enhance the an
industry's attractiveness, and the number of undervalued opportunities in each
industry. Opportunities dictate the magnitude and frequency of changes in asset
allocation among industries, but some representation typically is maintained in
each major industry, including computer software, computer hardware,
semiconductors and equipment, communications equipment, and internet and new
media.
Stocks considered for purchase typically share the following attributes:
* A positive change in operating results is anticipated
* Unrecognized or undervalued capabilities are present
* The quality of management indicates that these factors will be converted to
shareholder values.
Stocks will be considered for sale from the Fund when:
* Target prices are achieved
* Earnings and/or return expectations are marked down due to fundamental
changes in the company's operating outlook
* More attractive value in a comparable company is available.
The Fund may invest in securities denominated in any currency. The Fund may
invest a portion of its assets in options, futures and forward currency
contracts. Generally, these derivative instruments involve the obligation, in
the case of futures and forwards, or the right, in the case of options, to
purchase or sell financial instruments in the present or at a future date. These
derivative strategies will be used:
* To adjust the portfolio's exposure to a particular currency
* To manage risk
* As a substitute for purchasing or selling securities
Under adverse market conditions, the Fund could invest some or all of its assets
in cash, fixed-income securities, money market securities or repurchase
agreements. Although the Fund would do this only in seeking to avoid losses, it
could reduce the benefit from any upswing in the market.
SECURITY ULTRA FUND -- The Fund pursues its objective by investing, under normal
circumstances, in a diversified portfolio of equity securities of companies with
total market value of $10 billion or below at the time of purchase. The
Investment Manager selects securities that it believes are attractively valued
with the greatest potential for appreciation.
The Investment Manager uses a "bottom-up" approach to choose stocks. The
Investment Manager identifies the stock of companies that are in the early to
middle stages of growth and are valued at a reasonable price. Stocks considered
to have appreciation potential may include securities of smaller and less mature
companies which have unique proprietary products or profitable market niches and
the potential to grow very rapidly.
The Fund also may invest a portion of its assets in options and futures
contracts. These instruments may be used to hedge the Fund's portfolio, to
increase returns or to maintain exposure to the equity markets.
The Fund may invest in a variety of investment companies, including those that
seek to track the composition and performance of a specific index. The Fund may
use these index-based investments as a way of managing its cash position, to
gain exposure to the equity markets, or a particular sector of the equity
market, while maintaining liquidity.
The Fund typically sells a stock if its growth prospects diminish, or if better
opportunities become available.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, the Fund may be unable to pursue its investment
objective during that time, and it could reduce the benefit from any upswing in
the market.
MAIN RISKS
The following chart indicates which main risks apply to which Fund. However, the
fact that a particular risk is not indicated as a main risk for a Fund does not
mean that the Fund is prohibited from investing its assets in securities which
give rise to that risk. It simply means that the risk is not a main risk for
that Fund. For example, the risk of investing in smaller companies is not listed
as a main risk for Growth and Income Fund. This does not mean that Growth and
Income Fund is prohibited from investing in smaller companies, only that the
risk of smaller companies is not one of the main risks associated with Growth
and Income Fund. The Portfolio Manager for a Fund has considerable leeway in
choosing investment strategies and selecting securities that he or she believes
will help the Fund achieve its investment objective. In seeking to meet its
investment objective, a Fund's assets may be invested in any type of security or
instrument whose investment characteristics are consistent with the Fund's
investment program.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Mid Small Large
and Total Cap Cap Enhanced Select Cap
Income Equity Global Return Value Growth Index International 25 Growth Technology Ultra
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Risk X X X X X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Smaller Companies X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Value Stocks X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Stocks X X X X X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Foreign Securities X X X X X X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Emerging Markets X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Options and Futures X X X X X X X X X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed-Income Securities X X
- ---------------------------------------------------------------------------------------------------------------------------------
Non-Diversification X X
- ---------------------------------------------------------------------------------------------------------------------------------
Investment in Investment
Companies X X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Industry Concentration X X
- ---------------------------------------------------------------------------------------------------------------------------------
Restricted Securities X X
- ---------------------------------------------------------------------------------------------------------------------------------
Active Trading X X X
- ---------------------------------------------------------------------------------------------------------------------------------
Focused Investment Strategy X
- ---------------------------------------------------------------------------------------------------------------------------------
Technology Stocks X
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
An investment in the Funds is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. The value of an investment in the Funds will go up and down, which means
investors could lose money.
- --------------------------------------------------------------------------------
MARKET RISK -- While stocks have historically been a leading choice of long-term
investors, they do fluctuate in price. Their prices tend to fluctuate more
dramatically over the shorter term than do the prices of other asset classes.
These movements may result from factors affecting individual companies, or from
broader influences like changes in interest rates, market conditions, investor
confidence or announcements of economic, political or financial information.
SMALLER COMPANIES -- While potentially offering greater opportunities for
capital growth than larger, more established companies, the stocks of smaller
companies may be particularly volatile, especially during periods of economic
uncertainty. Securities of smaller companies may present additional risks
because their earnings are less predictable, their share prices tend to be more
volatile and their securities often are less liquid than larger, more
established companies, among other reasons.
VALUE STOCKS -- Investments in value stocks are subject to the risk that their
intrinsic values may never be realized by the market, or that their prices may
go down. While the Funds' investments in value stocks may limit downside risk
over time, a Fund may, as a trade-off, produce more modest gains than riskier
stock funds.
GROWTH STOCKS -- While potentially offering greater or more rapid capital
appreciation potential than value stocks, investments in growth stocks may lack
the dividend yield that can cushion stock prices in market downturns. Growth
companies often are expected to increase their earnings at a certain rate. If
expectations are not met, investors can punish the stocks, even if earnings do
increase.
FOREIGN SECURITIES -- Investing in foreign securities involves additional risks
such as currency fluctuations, differences in financial reporting standards, a
lack of adequate company information and political instability. These risks may
be particularly acute in underdeveloped capital markets.
RISKS OF CONVERSION TO EURO. On January 1, 1999, eleven countries in the
European Monetary Union adopted the euro as their official currency. However,
their current currencies (for example, the franc, the mark, and the lira) will
also continue in use until January 1, 2002. After that date, it is expected that
only the euro will be used in those countries. A common currency is expected to
provide some benefits in those markets, by consolidating the government debt
market for those countries and reducing some currency risks and costs. However,
the conversion to the new currency could have a negative impact on the Fund
operationally. The exact impact is not known, but it could affect the value of
some of the Fund's holdings and increase its operational costs.
EMERGING MARKETS -- All of the risks of investing in foreign securities are
heightened by investing in developing countries and emerging markets. The
markets of developing countries historically have been more volatile than the
markets of developed countries with mature economies. These markets often have
provided higher rates of return, and greater risks, to investors.
OPTIONS AND FUTURES -- Options and Futures may be used to hedge a Fund's
portfolio, to increase returns or to maintain exposure to a market without
buying individual Securities. However, there is the risk that such practices
sometimes may reduce returns or increase volatility. These practices also entail
transactional expenses.
FIXED-INCOME SECURITIES -- Fixed-income investing may present risks because the
market value of fixed-income investments generally are affected by changes in
interest rates. When interest rates rise, the market value of a fixed-income
security declines. Generally, the longer a bond's maturity, the greater the
risk. A bond's value can also be affected by changes in the credit rating or
financial condition of its issuer. Investments in higher yielding, high risk
debt securities may present additional risk because these securities may be less
liquid than investment grade bonds. They also tend to be more susceptible to
high interest rates and to real or perceived adverse economic and competitive
industry conditions. Because bond values fluctuate, an investor may receive more
or less money than originally invested.
FOCUSED INVESTMENT STRATEGY -- The typical diversified stock mutual fund might
hold between 80 and 120 stocks in its portfolio. A fund which focuses its
investments in fewer stocks than this can be expected to be more volatile than
the typical diversified stock fund.
NON-DIVERSIFICATION -- A non-diversified Fund may hold larger positions in a
smaller number of securities than a diversified Fund. As a result, a single
security's increase or decrease in value may have a greater impact on a Fund's
net asset value and total return. A non-diversified Fund is expected to be more
volatile than a diversified Fund.
INVESTMENT IN INVESTMENT COMPANIES -- Investment in other investment companies
may include index-based investments such as SPDRs (based on the S&P 500), MidCap
SPDRs (based on the S&P MidCap 400 Index), Select Sector SPDRs (based on sectors
or industries of the S&P 500 Index) Nasdaq-100 Index Tracking Stocks (based on
the Nasdaq-100 index) and DIAMONDS (based on the Dow Jones Industrial Average).
To the extent a Fund invests in other investment companies, it will incur its
pro rata share of the underlying investment companies' expenses. In addition, a
Fund will be subject to the effects of business and regulatory developments that
affect an underlying investment company or the investment company industry
generally.
INDUSTRY CONCENTRATION -- Concentrated investment in sector-specific stocks,
subjects a Fund to industry concentration risk, which is the risk that the
Fund's return could be hurt significantly by problems affecting a particular
sector. Because a sector fund concentrates its investments in a particular
industry or group of related industries, its performance can be significantly
affected, for better or worse, by developments in that sector.
RESTRICTED SECURITIES -- Restricted securities cannot be sold to the public
without registration under the Securities Act of 1933 ("1933 Act"). Unless
registered for sale, restricted securities can be sold only in privately
negotiated transactions or pursuant to an exemption from registration.
Restricted securities are generally considered illiquid and, therefore, subject
to the Fund's limitation on illiquid securities.
Restricted securities (including Rule 144A Securities) may involve a high degree
of business and financial risk which may result in substantial losses. The
securities may be less liquid than publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized from these sales could be less than those originally paid by the Fund.
In particular, Rule 144A Securities may be resold only to qualified
institutional buyers in accordance with Rule 144A under the Securities Act of
1933. Rule 144A permits the resale to "qualified institutional buyers" of
"restricted securities" that, when issued, were not of the same class as
securities listed on a U.S. securities exchange or quoted in the National
Association of Securities Dealers Automated Quotation System ("Rule 144A
Securities").
Investing in Rule 144A Securities and other restricted securities could have the
effect of increasing the amount of a Fund's assets invested in illiquid
securities to the extent that qualified institutional buyers become
uninterested, for a time, in purchasing these securities.
ACTIVE TRADING -- Active Trading will increase the costs a Fund incurs. It may
also increase the amount of tax an investor pays on the Fund's returns.
TECHNOLOGY STOCKS -- Companies in the rapidly changing fields of technology
often face unusually high price volatility, both in terms of gains and losses.
The potential for wide variation in performance is based on the special risks
common to these stocks. For example, products or services that at first appear
promising may not prove commercially successful or may become obsolete quickly.
Earnings disappointments can result in sharp price declines. A portfolio focused
primarily on these stocks is therefore likely to be much more volatile than one
with broader diversification that includes investments across industries and
sectors.
The level of risk will be increased to the extent that the Fund has significant
exposure to smaller or unseasoned companies (those with less than a three-year
operating history), which may not have established products or more experienced
management.
ADDITIONAL INFORMATION -- For more information about the Funds' investment
program, including additional information about the risks of certain types of
investments, please see the "Investment Policies and Management Practices"
section of the prospectus.
PAST PERFORMANCE
The charts and tables below and on the following pages provide some indication
of the risks of investing in the Funds by showing changes in the Funds' Class A
share performance from year to year and by showing how the Funds' average annual
returns have compared to those of broad measures of market performance.
Performance information for the Enhanced Index, International, Select 25, Large
Cap Growth and Technology Funds and all of the Funds' Class C shares are not
included since they each had less than one full calendar year of operating
history. The tables also show how the Funds' average annual total returns for
the periods indicated compare to those of broad measures of market performance.
In addition, some Funds may make a comparison to a narrower index that more
closely mirrors that Fund. As with all mutual funds, past performance is not a
prediction of future results.
The bar charts do not reflect the sales charges applicable to Class A shares
which, if reflected, would lower the returns shown. Average annual total returns
for each Fund's Class A shares include deduction of the 5.75% front-end sales
charge and for Class B shares include the appropriate deferred sales charge,
which is 5% in the first year declining to 0% in the sixth and later years.
================================================================================
SECURITY GROWTH AND INCOME FUND - CLASS A
================================================================================
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1990 -3.0%
1991 21.8%
1992 4.8%
1993 8.2%
1994 -7.9%
1995 27.8%
1996 12.0%
1997 31.7%
1998 -0.3%
1999 2.5%
The total return for the Fund's Class A shares for the period January 1, 2000 to
March 31, 2000 was -5.95%.
- ---------------------------------------------------------------
HIGHEST AND LOWEST RETURNS
(QUARTERLY 1990-1999)
- ---------------------------------------------------------------
QUARTER ENDED
Highest 15.50% September 30, 1997
Lowest -12.32% September 30, 1998
- ---------------------------------------------------------------
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH DECEMBER 31, 1999)
- ---------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
Class A -3.33% 14.09% 9.10%
Class B -3.50% 14.06% 9.44%*
S&P 500 21.02% 28.55% 18.20%*
- ---------------------------------------------------------------
*For the period beginning October 19, 1993 (date of inception)
to December 31, 1999. Index performance information is only
available to the Fund at the beginning of each month. The
performance of the index for the period October 1, 1993 to
December 31, 1999 was 22.95%.
- ---------------------------------------------------------------
================================================================================
SECURITY EQUITY FUND - CLASS A
================================================================================
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1990 -4.6%
1991 35.2%
1992 10.7%
1993 14.6%
1994 -2.5%
1995 38.4%
1996 22.7%
1997 29.6%
1998 26.5%
1999 11.0%
The total return for the Fund's Class A shares for the period January 1, 2000 to
March 31, 2000 was 1.03%.
- ---------------------------------------------------------------
HIGHEST AND LOWEST RETURNS
(QUARTERLY 1990-1999)
- ---------------------------------------------------------------
QUARTER ENDED
Highest 20.90% December 31, 1998
Lowest -15.29% September 30, 1990
- ---------------------------------------------------------------
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH DECEMBER 31, 1999)
- ---------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
Class A 4.59% 23.82% 16.59%
Class B 4.90% 23.83% 18.58%*
S&P 500 21.02% 28.55% 18.20%*
- ---------------------------------------------------------------
*For the period beginning October 19, 1993 (date of inception)
to December 31, 1999. Index performance information is only
available to the Fund at the beginning of each month. The
performance of the index for the period October 1, 1993 to
December 31, 1999 was 22.95%.
- ---------------------------------------------------------------
================================================================================
SECURITY GLOBAL FUND - CLASS A
================================================================================
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1990 N/A
1991 N/A
1992 N/A
1993 N/A
1994 1.3%
1995 10.4%
1996 17.1%
1997 6.9%
1998 19.2%
1999 54.8%
The total return for the Fund's Class A shares for the period January 1, 2000 to
March 31, 2000 was 13.39%.
- ---------------------------------------------------------------
HIGHEST AND LOWEST RETURNS
(QUARTERLY 1994-1999)
- ---------------------------------------------------------------
QUARTER ENDED
Highest 37.45% September 30, 1999
Lowest -11.44% September 30, 1998
- ---------------------------------------------------------------
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH DECEMBER 31, 1999)
- ---------------------------------------------------------------
LIFE OF FUND
PAST 1 YEAR PAST 5 YEARS (SINCE 10/1/93)
Class A 45.90% 19.16% 15.88%
Class B 48.45% 19.21% 16.07%*
MSCI 25.27% 20.23% 17.21%*
- ---------------------------------------------------------------
*For the period beginning October 19, 1993 (date of inception)
to December 31, 1999. Performance information for the index is
only available to the Fund at the beginning of each month.
MSCI performance is for the period October 1, 1993 to December
31, 1999.
- ---------------------------------------------------------------
================================================================================
SECURITY TOTAL RETURN FUND - CLASS A
================================================================================
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1990 N/A
1991 N/A
1992 N/A
1993 N/A
1994 N/A
1995 N/A
1996 13.2%
1997 6.1%
1998 12.1%
1999 15.9%
The total return for the Fund's Class A shares for the period January 1, 2000 to
March 31, 2000 was -0.57%.
- ---------------------------------------------------------------
HIGHEST AND LOWEST RETURNS
(QUARTERLY 1996-1999)
- ---------------------------------------------------------------
QUARTER ENDED
Highest 13.20% December 31, 1998
Lowest -11.47% September 30, 1998
- ---------------------------------------------------------------
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH DECEMBER 31, 1999)
- ---------------------------------------------------------------
LIFE OF FUND
PAST 1 YEAR (SINCE JUNE 1, 1995)
Class A 9.21% 10.55%
Class B 9.82% 10.62%
S&P 500 21.02% 26.98%
- ---------------------------------------------------------------
================================================================================
SECURITY MID CAP VALUE FUND - CLASS A
================================================================================
1990 N/A
1991 N/A
1992 N/A
1993 N/A
1994 N/A
1995 N/A
1996 N/A
1997 N/A
1998 16.1%
1999 21.8%
The total return for the Fund's Class A shares for the period January 1, 2000 to
March 31, 2000 was 10.92%.
- ---------------------------------------------------------------
HIGHEST AND LOWEST RETURNS
(QUARTERLY 1998-1999)
- ---------------------------------------------------------------
QUARTER ENDED
Highest 21.34% December 31, 1998
Lowest -16.06% September 30, 1998
- ---------------------------------------------------------------
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH DECEMBER 31, 1999)
- ---------------------------------------------------------------
LIFE OF FUND
PAST 1 YEAR (SINCE 5/1/97)
Class A 14.81% 22.68%
Class B 15.57% 23.39%
S&P 500 21.02% 27.37%
BARRA Value Index 12.71% 18.32%
- ---------------------------------------------------------------
================================================================================
SECURITY SMALL CAP GROWTH FUND - CLASS A
================================================================================
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1990 N/A
1991 N/A
1992 N/A
1993 N/A
1994 N/A
1995 N/A
1996 N/A
1997 N/A
1998 10.4%
1999 87.2%
The total return for the Fund's Class A shares for the period January 1, 2000 to
March 31, 2000 was 26.98%.
- ---------------------------------------------------------------
HIGHEST AND LOWEST RETURNS
(QUARTERLY 1998-1999)
- ---------------------------------------------------------------
QUARTER ENDED
Highest 53.00% December 31, 1999
Lowest -17.30% September 30, 1998
- ---------------------------------------------------------------
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH DECEMBER 31, 1999)
- ---------------------------------------------------------------
LIFE OF FUND
PAST 1 YEAR** (SINCE 10/15/97)
Class A 76.36% 32.77%
Class B 79.54% 33.82%
Russell 2000 Index 24.36% 5.63%*
- ---------------------------------------------------------------
*Index performance information is only available to the Fund
at the beginning of each month. The Russell 2000 Index is for
the period October 1, 1997 to December 31, 1999.
**The Small Cap Growth Fund participates in the initial public
offering ("IPO") market which may have a significant impact
on its total return during the time it has a small asset
base. There can be no assurance that IPOs will continue to
have the same impact on the Fund's performance as the Fund's
assets grow.
- ---------------------------------------------------------------
================================================================================
SECURITY ULTRA FUND - CLASS A
================================================================================
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1990 -27.4%
1991 59.7%
1992 7.7%
1993 9.9%
1994 -6.6%
1995 19.3%
1996 18.0%
1997 17.8%
1998 16.7%
1999 59.7%
The total return for the Fund's Class A shares for the period January 1, 2000 to
March 31, 2000 was 19.64%.
- ---------------------------------------------------------------
HIGHEST AND LOWEST RETURNS
(QUARTERLY 1990-1999)
- ---------------------------------------------------------------
QUARTER ENDED
Highest 37.08% December 31, 1999
Lowest -41.16% September 30, 1990
- ---------------------------------------------------------------
- ---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH DECEMBER 31, 1999)
- ---------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
Class A 50.51% 23.85% 14.08%
Class B 53.02% 23.86% 17.80%*
S&P MidCap 400 14.72% 23.05% 17.32%*
- ---------------------------------------------------------------
*For the period beginning October 19, 1993 (date of inception)
to December 31, 1999. Index performance information is only
available to the Fund at the beginning of each month. The
performance of the index for the period October 1, 1993 to
December 31, 1999 was 17.85%.
- ---------------------------------------------------------------
FEES AND EXPENSES OF THE FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUNDS.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (ALL FUNDS) (fees paid directly from your investment)
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A SHARES CLASS B SHARES(1) CLASS C SHARES
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) None(2) 5%(3) 1%(4)
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Class B shares convert tax-free to Class A shares automatically after eight years.
2 Purchases of Class A shares in amounts of $1,000,000 or more are not subject to an initial sales load; however, a deferred
sales charge of 1% is imposed in the event of redemption within one year of purchase.
3 5% during the first year, decreasing to 0% in the sixth and following years.
4 A deferred sales charge of 1% is imposed in the event of redemption within one year of purchase.
</FN>
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A
---------------------------------------------------------------------------------------------------------
ESTIMATED TOTAL ANNUAL TOTAL ANNUAL FUND
BROKERAGE PLAN FUND OPERATING EXPENSES
MANAGEMENT DISTRIBUTION DISTRIBUTION OTHER OPERATING TOTAL WAIVERS WITH WAIVERS AND
FEES (12B-1) FEES (12B-1) FEES(5) EXPENSES(6) EXPENSES AND REDUCTIONS REDUCTIONS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund 1.22% None 0.03% 0.00% 1.25% 0.00% 1.25%
- ---------------------------------------------------------------------------------------------------------------------------------
Equity Fund 1.02% None 0.01% 0.00% 1.03% 0.00% 1.03%
- ---------------------------------------------------------------------------------------------------------------------------------
Global Fund 2.00% None 0.00% 0.00% 2.00% 0.00% 2.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return Fund 0.75% None 0.02% 1.35% 2.12%(7, 8) 0.00% 2.12%(7, 8)
- ---------------------------------------------------------------------------------------------------------------------------------
Mid Cap Value Fund 1.00% None 0.04% 0.33% 1.37% 0.00% 1.37%
- ---------------------------------------------------------------------------------------------------------------------------------
Small Cap Growth Fund 1.00% 0.25% 0.00% 0.49% 1.74%(7) 0.00% 1.74%(7)
- ---------------------------------------------------------------------------------------------------------------------------------
Enhanced Index Fund 0.75% 0.25% 0.00% 0.48% 1.48% 0.00% 1.48%
- ---------------------------------------------------------------------------------------------------------------------------------
International Fund 1.10% 0.25% 0.00% 3.34% 4.69% 2.19% 2.50%(10)
- ---------------------------------------------------------------------------------------------------------------------------------
Select 25 Fund 0.75% 0.25% 0.01% 0.48% 1.49% 0.00% 1.49%
- ---------------------------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund 1.00% 0.25% 0.00% 0.62% 1.87% 0.00% 1.87%
- ---------------------------------------------------------------------------------------------------------------------------------
Technology Fund 1.00% 0.25% 0.00% 1.21% 2.46%(9) 0.00% 2.46%(9)
- ---------------------------------------------------------------------------------------------------------------------------------
Ultra Fund 1.21% None 0.01% 0.00% 1.22% 0.00% 1.22%
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
5 Amounts included as distribution expenses under this caption are estimates of the amounts to be received by the Fund's
distributor under the Brokerage Plan in the current fiscal year in connection with the purchase or sale of securities held by
the Fund.
6 "Other Expense" for Large Cap Growth Fund and Technology Fund are based on estimates for the current fiscal year.
7 Total Return and Small Cap Growth Fund's total annual operating expenses for the most recent fiscal year were less than the
amount shown because of voluntary fee waivers and/or reimbursement of expenses by the Funds' Investment Manager. These
voluntary waivers and reimbursements may be eliminated at any time without notice to shareholders. With the fee waiver and/or
reimbursement, the Total Return and Small Cap Growth Funds' actual total annual fund operating expenses for the year ended
September 30, 1999, were as follows: Total Return Fund - 2.00%, Small Cap Growth Fund - .49%.
8 The total annual operating expenses of the Total Return Fund have been restated to reflect the reduction in the Fund's
management fee from 1.00% to .75%.
9 The total annual operating expenses for the Technology Fund is estimated to be less than the amount shown because of
voluntary fee waivers and/or reimbursement of expense by the Investment Manager. These voluntary waivers and reimbursements
may be eliminated at any time without notice to shareholders. With fee waivers and/or reimbursements, it is estimated that
the actual total annual fund operating expenses for the Technology Fund for the fiscal year ended September 30, 2000 will be
2.25%.
10 The Investment Manager has contractually agreed to limit the total annual expenses of the International Fund to 2.25% of its
average daily net assets, exclusive of interest, taxes, extraordinary expenses, brokerage fees and commissions and 12b-1
fees.
</FN>
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
---------------------------------------------------------------------------------------------------------
ESTIMATED TOTAL ANNUAL TOTAL ANNUAL FUND
BROKERAGE PLAN FUND OPERATING EXPENSES
MANAGEMENT DISTRIBUTION DISTRIBUTION OTHER OPERATING TOTAL WAIVERS WITH WAIVERS AND
FEES (12B-1) FEES (12B-1) FEES(1) EXPENSES(2) EXPENSES AND REDUCTIONS REDUCTIONS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund 1.22% 1.00% 0.03% 0.00% 2.25% 0.00% 2.25%
- ---------------------------------------------------------------------------------------------------------------------------------
Equity Fund 1.02% 1.00% 0.01% 0.00% 2.03% 0.00% 2.03%
- ---------------------------------------------------------------------------------------------------------------------------------
Global Fund 2.00% 1.00% 0.00% 0.00% 3.00% 0.00% 3.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return Fund 0.75% 1.00% 0.02% 1.30% 3.07%(3, 4) 0.00% 3.07%(3, 4)
- ---------------------------------------------------------------------------------------------------------------------------------
Mid Cap Value Fund 1.00% 1.00% 0.04% 0.37% 2.41% 0.00% 2.41%
- ---------------------------------------------------------------------------------------------------------------------------------
Small Cap Growth Fund 1.00% 1.00% 0.00% 0.94% 2.94%(3) 0.00% 2.94%(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Enhanced Index Fund 0.75% 1.00% 0.00% 0.45% 2.20% 0.00% 2.20%
- ---------------------------------------------------------------------------------------------------------------------------------
International Fund 1.10% 1.00% 0.00% 3.27% 5.37% 2.19% 3.19%(6)
- ---------------------------------------------------------------------------------------------------------------------------------
Select 25 Fund 0.75% 1.00% 0.01% 0.44% 2.20% 0.00% 2.20%
- ---------------------------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund 1.00% 1.00% 0.00% 0.62% 2.62% 0.00% 2.62%
- ---------------------------------------------------------------------------------------------------------------------------------
Technology Fund 1.00% 1.00% 0.00% 1.21% 3.21%(5) 0.00% 3.21%(5)
- ---------------------------------------------------------------------------------------------------------------------------------
Ultra Fund 1.21% 1.00% 0.01% 0.00% 2.22% 0.00% 2.22%
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Amounts included as distribution expenses under this caption are estimates of the amounts to be received by the Fund's
distributor under the Brokerage Plan in the current fiscal year in connection with the purchase or sale of securities held by
the Fund.
2 "Other Expense" for Large Cap Growth Fund and Technology Fund are based on estimates for the current fiscal year.
3 Total Return and Small Cap Growth Fund's total annual operating expenses for the most recent fiscal year were less than the
amount shown because of voluntary fee waivers and/or reimbursement of expenses by the Funds' Investment Manager. These
voluntary waivers and reimbursements may be eliminated at any time without notice to shareholders. With the fee waiver and/or
reimbursement, the Total Return and Small Cap Growth Funds' actual total annual fund operating expenses for the year ended
September 30, 1999, were as follows: Total Return Fund - 2.94%, Small Cap Growth Fund - 1.94%.
4 The total annual operating expenses of the Total Return Fund have been restated to reflect the reduction in the Fund's
management fee from 1.00% to .75%.
5 The total annual operating expenses for the Technology Fund is estimated to be less than the amount shown because of voluntary
fee waivers and/or reimbursement of expense by the Investment Manager. These voluntary waivers and reimbursements may be
eliminated at any time without notice to shareholders. With fee waivers and/or reimbursements, it is estimated that the actual
total annual fund operating expenses for the Technology Fund for the fiscal year ended September 30, 2000 will be 3.00%.
6 The Investment Manager has contractually agreed to limit the total annual expenses of the International Fund to 2.25% of its
average daily net assets, exclusive of interest, taxes, extraordinary expenses, brokerage fees and commissions and 12b-1 fees.
</FN>
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
---------------------------------------------------------------------------------------------------------
ESTIMATED TOTAL ANNUAL TOTAL ANNUAL FUND
BROKERAGE PLAN FUND OPERATING EXPENSES
MANAGEMENT DISTRIBUTION DISTRIBUTION OTHER OPERATING TOTAL WAIVERS WITH WAIVERS AND
FEES (12B-1) FEES (12B-1) FEES(1) EXPENSES(2) EXPENSES AND REDUCTIONS REDUCTIONS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund 1.22% 1.00% 0.03% 0.00% 2.25% 0.00% 2.25%
- ---------------------------------------------------------------------------------------------------------------------------------
Equity Fund 1.02% 1.00% 0.01% 0.00% 2.03% 0.00% 2.03%
- ---------------------------------------------------------------------------------------------------------------------------------
Global Fund 2.00% 1.00% 0.00% 0.00% 3.00% 0.00% 3.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return Fund 0.75% 1.00% 0.02% 1.18% 2.95%(3, 4) 0.00% 2.95%(3, 4)
- ---------------------------------------------------------------------------------------------------------------------------------
Mid Cap Value Fund 1.00% 1.00% 0.04% 0.38% 2.42% 0.00% 2.42%
- ---------------------------------------------------------------------------------------------------------------------------------
Small Cap Growth Fund 1.00% 1.00% 0.00% 0.47% 2.47%(3) 0.00% 2.47%(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Enhanced Index Fund 0.75% 1.00% 0.00% 0.30% 2.05% 0.00% 2.05%
- ---------------------------------------------------------------------------------------------------------------------------------
International Fund 1.10% 1.00% 0.00% 2.87% 4.97% 2.19% 2.78%(6)
- ---------------------------------------------------------------------------------------------------------------------------------
Select 25 Fund 0.75% 1.00% 0.01% 0.32% 2.08% 0.00% 2.08%
- ---------------------------------------------------------------------------------------------------------------------------------
Large Cap Growth Fund 1.00% 1.00% 0.00% 0.62% 2.62% 0.00% 2.62%
- ---------------------------------------------------------------------------------------------------------------------------------
Technology Fund 1.00% 1.00% 0.00% 1.21% 3.21%(5) 0.00% 3.21%(5)
- ---------------------------------------------------------------------------------------------------------------------------------
Ultra Fund 1.21% 1.00% 0.01% 0.00% 2.22% 0.00% 2.22%
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
1 Amounts included as distribution expenses under this caption are estimates of the amounts to be received by the Fund's
distributor under the Brokerage Plan in the current fiscal year in connection with the purchase or sale of securities held by
the Fund.
2 "Other Expense" for Large Cap Growth Fund and Technology Fund are based on estimates for the current fiscal year.
3 Total Return and Small Cap Growth Fund's total annual operating expenses for the most recent fiscal year were less than the
amount shown because of voluntary fee waivers and/or reimbursement of expenses by the Funds' Investment Manager. These
voluntary waivers and reimbursements may be eliminated at any time without notice to shareholders. With the fee waiver and/or
reimbursement, the Total Return and Small Cap Growth Funds' actual total annual fund operating expenses for the year ended
September 30, 1999, were as follows: Total Return Fund - 2.93%, Small Cap Growth Fund - 1.47%.
4 The total annual operating expenses of the Total Return Fund have been restated to reflect the reduction in the Fund's
management fee from 1.00% to .75%.
5 The total annual operating expenses for the Technology Fund is estimated to be less than the amount shown because of voluntary
fee waivers and/or reimbursement of expense by the Investment Manager. These voluntary waivers and reimbursements may be
eliminated at any time without notice to shareholders. With fee waivers and/or reimbursements, it is estimated that the actual
total annual fund operating expenses for the Technology Fund for the fiscal year ended September 30, 2000 will be 3.00%.
6 The Investment Manager has contractually agreed to limit the total annual expenses of the International Fund to 2.25% of its
average daily net assets, exclusive of interest, taxes, extraordinary expenses, brokerage fees and commissions and 12b-1 fees.
</FN>
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds.
Each Example assumes that you invest $10,000 in a Fund for the time periods
indicated. Each Example also assumes that your investment has a 5% return each
year and that the Funds' operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
You would pay the following expenses if you redeemed your shares at the end of
each period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------- ------------------------ ------------------------ ------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund $ 695 $ 728 $328 $ 949 $1,003 $ 703 $1,222 $1,405 $1,205 $1,999 $2,333 $2,585
Equity Fund 674 706 306 884 937 637 1,111 1,293 1,093 1,762 2,101 2,358
Global Fund 766 803 403 1,166 1,227 927 1,591 1,777 1,577 2,768 3,083 3,318
Total Return Fund 778 810 398 1,201 1,248 913 1,649 1,811 1,552 2,886 3,162 3,271
Mid Cap Value Fund 706 744 345 984 1,051 755 1,282 1,485 1,291 2,127 2,488 2,756
Small Cap Growth Fund 742 797 350 1,091 1,210 770 1,464 1,748 1,316 2,509 2,978 2,806
Enhanced Index Fund 717 723 308 1,016 988 643 --- --- --- --- --- ---
International Fund 1,018 1,036 597 1,907 1,902 1,492 --- --- --- --- --- ---
Select 25 Fund 718 723 311 1,019 988 652 --- --- --- --- --- ---
Large Cap Growth Fund 754 765 365 1,129 1,114 814 --- --- --- --- --- ---
Technology Fund 810 824 424 1,297 1,289 989 --- --- --- --- --- ---
Ultra Fund 692 725 325 940 994 694 1,207 1,390 1,190 1,967 2,301 2,554
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------- ------------------------ ------------------------ ------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund $ 695 $228 $228 $ 949 $ 703 $ 703 $ 1,222 $1,205 $1,205 $1,999 $2,333 $2,585
Equity Fund 674 206 206 884 637 637 1,111 1,093 1,093 1,762 2,101 2,358
Global Fund 766 303 303 1,166 927 927 1,591 1,577 1,577 2,768 3,083 3,318
Total Return Fund 778 310 298 1,201 948 913 1,649 1,611 1,552 2,886 3,162 3,271
Mid Cap Value Fund 706 244 245 984 751 755 1,282 1,285 1,291 2,127 2,488 2,756
Small Cap Growth Fund 742 297 250 1,091 910 770 1,464 1,548 1,316 2,509 2,978 2,806
Enhanced Index Fund 717 223 208 1,016 688 643 --- --- --- --- --- ---
International Fund 1,018 536 497 1,907 1,602 1,492 --- --- --- --- --- ---
Select 25 Fund 718 223 211 1,019 688 652 --- --- --- --- --- ---
Large Cap Growth Fund 754 265 265 1,129 814 814 --- --- --- --- --- ---
Technology Fund 810 324 324 1,297 989 989 --- --- --- --- --- ---
Ultra Fund 692 225 225 940 694 694 1,207 1,190 1,190 1,967 2,301 2,544
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT MANAGER
Security Management Company, LLC (the "Investment Manager"), 700 SW Harrison
Street, Topeka, Kansas 66636, is the Funds' investment manager. On December 31,
1999, the aggregate assets of all of the mutual funds under the investment
management of the Investment Manager were approximately $6.3 billion.
The Investment Manager has engaged OppenheimerFunds, Inc., Two World Trade
Center, New York, New York 10048, to provide investment advisory services to
Global Fund. OppenheimerFunds, Inc. has operated as an investment advisor since
January 1960. OppenheimerFunds, Inc. (including subsidiaries and affiliates)
managed more than $120 billion assets as of March 31, 2000, including other
mutual funds with more than 5 million shareholder accounts.
The Investment Manager has engaged Strong Capital Management, Inc., 100 Heritage
Reserve, Menomonee Falls, Wisconsin 53051, to provide investment advisory
services to the Small Cap Growth Fund. Strong was established in 1974 and as of
December 31, 1999, manages over $38 billion in assets.
The Investment Manager has engaged Bankers Trust Company, 130 Liberty Street,
New York, New York 10006, to provide investment advisory services to the
Enhanced Index Fund and International Fund. Bankers Trust was founded in 1903
and manages over $300 billion in assets.
Prior to June 4, 1999, Bankers Trust Company was a wholly owned subsidiary of
Bankers Trust Corporation. On June 4, 1999, Bankers Trust Corporation merged
with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major
global banking institution that is engaged in a wide range of financial
services, including investment management, mutual funds, retail and commercial
banking, investment banking and insurance.
On March 11, 1999, Bankers Trust announced that it had reached an agreement with
the United States Attorney's Office in the Southern District of New York to
resolve an investigation concerning inappropriate transfers of unclaimed funds
and related record-keeping problems that occurred between 1994 and early 1996.
These past events led to a guilty plea by Bankers Trust, but did not arise out
of the investment advisory or mutual fund management activities of Bankers Trust
or its affiliates.
Pursuant to its agreement with the U.S. Attorney's Office, Bankers Trust pleaded
guilty to misstating entries in the bank's books and records and agreed to pay a
$60 million fine to federal authorities. Separately, Bankers Trust agreed to pay
a $3.5 million fine to the State of New York.
The SEC has granted a temporary order to permit Bankers Trust and its affiliates
to continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order. As a
result of the plea, absent an order from the SEC, Bankers Trust would not be
able to continue to provide investment advisory services to the Enhanced Index
Fund and the International Fund.
The Investment Manager has engaged Wellington Management Company, LLP, 75 State
Street, Boston, Massachusetts, 02109 to provide investment advisory services to
the Technology Fund.
Wellington Management is a limited liability partnership which traces its
origins to 1928. It currently manages over $248 billion in assets on behalf of
investment companies, employee benefit plans, endowments, foundations and other
institutions and individuals.
The Investment Manager and the Funds have received from the Securities and
Exchange Commission an exemptive order for a multi-manager structure that allows
the Investment Manager to hire, replace or terminate sub-advisors without the
approval of shareholders. The order also allows the Investment Manager to revise
a sub-advisory agreement with the approval of Fund Directors, but without
shareholder approval. If a new sub-advisor is hired, shareholders will receive
information about the new sub-advisor within 90 days of the change. The order
allows the Funds to operate more efficiently and with greater flexibility. The
Investment Manager provides the following oversight and evaluation services to
the Funds which use a sub-advisor:
* performing initial due diligence on prospective sub-advisors for the Funds
* monitoring the performance of the sub-advisors
* communicating performance expectations to the sub-advisors
* ultimately recommending to the Board of Directors whether a sub-advisor's
contract should be renewed, modified or terminated.
The Investment Manager does not expect to recommend frequent changes of
sub-advisors. Although the Investment Manager will monitor the performance of
the sub-advisors, there is no certainty that any sub-advisor or Fund will obtain
favorable results at any given time.
MANAGEMENT FEES -- The following chart shows the investment management fees paid
by each Fund during the last fiscal year, except as otherwise indicated.
- ----------------------------------------------------------
MANAGEMENT FEES
(expressed as a percentage of average net assets)
- ----------------------------------------------------------
Growth and Income Fund....................... 1.22%
Equity Fund.................................. 1.02%
Global Fund.................................. 2.00%
Total Return Fund............................ 0.75%
Mid Cap Value Fund........................... 1.00%
Small Cap Growth Fund........................ 1.00%
Enhanced Index Fund.......................... 0.75%
International Fund........................... 1.10%
Select 25 Fund............................... 0.75%
Large Cap Growth Fund*....................... 1.00%
Technology Fund*............................. 1.00%
Ultra Fund................................... 1.21%
- ----------------------------------------------------------
*These Funds were not available until May 1, 2000.
- ----------------------------------------------------------
The Investment Manager may waive some or all of its management fee to limit the
total operating expenses of a Fund to a specified level. The Investment Manager
also may reimburse expenses of a Fund from time to time to help it maintain
competitive expense ratios. These arrangements are voluntary and may be
terminated at any time. The fees without waivers or reimbursements are shown in
the fee table on page 14.
PORTFOLIO MANAGERS -- DEAN S. BARR, Managing Director and Head of Global
Quantitative Index Strategies, has been co-manager of Enhanced Index Fund since
he joined Bankers Trust in September 1999. Prior to joining Bankers Trust, he
was Chief Investment Officer of Active Quantitative Strategies at State Street
Global Advisors. He has a bachelor's degree from Cornell University and an MBA
in finance from New York University Graduate School of Business.
MANISH KESHIVE, Vice President Bankers Trust, has been co-manager of Enhanced
Index Fund since September, 1999. He joined Bankers Trust in 1996. Prior to
joining Bankers Trust, he was a student earning a B.S. degree in Technology from
the Indian Institute of Technology in 1993 and an M.S. degree from the
Massachusetts Institute of Technology in 1995.
MICHAEL LEVY, Managing Director of Bankers Trust, has been co-lead manager of
International Fund since its inception in January 1999. He has been a portfolio
manager of other investment products with similar investment objectives since
joining Bankers Trust in 1993. Mr. Levy is Bankers Trust's International Equity
Strategist and is head of the international equity team. He has served in each
of these capacities since 1993. The international equity team is responsible for
the day-to-day management of the Fund as well as other international equity
portfolios managed by Bankers Trust. Mr. Levy's experience prior to joining
Bankers Trust includes senior equity analyst with Oppenheimer & Company, as well
as positions in investment banking, technology and manufacturing enterprises. He
has 28 years of business experience, of which 18 years have been in the
investment industry.
TERRY A. MILBERGER, Senior Portfolio Manager of the Investment Manager, has been
the manager of Equity Fund since 1981 and Growth and Income Fund since March
2000. He has been the lead manager of Select 25 Fund since its inception in
January 1999 and of Total Return Fund since May 1999. He has more than 20 years
of investment experience. He began his career as an investment analyst in the
insurance industry, and from 1974 through 1978, he served as an assistant
portfolio manager for the Investment Manager. He was then employed as Vice
President of Texas Commerce Bank and managed its pension assets until he
returned to the Investment Manager in 1981. Mr. Milberger holds a bachelor's
degree in business and an M.B.A. from the University of Kansas and is a
Chartered Financial Analyst.
RONALD C. OGNAR, Portfolio Manager of Strong, has been the manager of Small Cap
Growth Fund since its inception in 1997. He is a Chartered Financial Analyst
with more than 30 years of investment experience. Mr. Ognar joined Strong in
April 1993 after two years as a principal and portfolio manager with RCM Capital
Management. For approximately 3 years prior to his position at RCM Capital
Management, he was a portfolio manager at Kemper Financial Services in Chicago.
Mr. Ognar began his investment career in 1968 at LaSalle National Bank. He is a
graduate of the University of Illinois with a bachelor's degree in accounting.
ROBERT REINER, Managing Director at Bankers Trust, has been co-lead manager of
International Fund since its inception in January 1999. He has been a portfolio
manager of other investment products with similar investment objectives since
joining Bankers Trust in 1994. At Bankers Trust, he has been involved in
developing analytical and investment tools for the group's international equity
team. His primary focus has been on Japanese and European markets. Prior to
joining Bankers Trust, he was an equity analyst and also provided macroeconomic
coverage for Scudder, Stevens & Clark from 1993 to 1994. He previously served as
Senior Analyst at Sanford C. Bernstein & Co. from 1991 to 1992, and was
instrumental in the development of Bernstein's International Value Fund. Mr.
Reiner spent more than nine years at Standard & Poor's Corporation, where he was
a member of its international ratings group. His tenure included managing the
day-to-day operations of the Standard & Poor's Corporation Tokyo office for
three years.
WELLINGTON MANAGEMENT COMPANY'S GLOBAL TECHNOLOGY TEAM has managed the
Technology Fund since its inception in May of 2000. The Global Technology Team
is comprised of a group of global industry analysts who focus on various
sub-sectors of the Technology industry. The Global Technology Team is supported
by a significant number of specialized fundamental, quantitative and technical
analysts; macro-economic analysts and traders.
JAMES P. SCHIER, Senior Portfolio Manager of the Investment Manager, has been
the manager of Mid Cap Value Fund since its inception in 1997 and has managed
Ultra Fund since January 1998. He has 17 years experience in the investment
field and is a Chartered Financial Analyst. While employed by the Investment
Manager, he also served as a research analyst. Prior to joining the Investment
Manager in 1995, he was a portfolio manager for Mitchell Capital Management from
1993 to 1995. From 1988 to 1993 he served as Vice President and Portfolio
Manager for Fourth Financial. Prior to 1988, Mr. Schier served in various
positions in the investment field for Stifel Financial, Josepthal & Company and
Mercantile Trust Company. Mr. Schier earned a bachelor of business degree from
the University of Notre Dame and an M.B.A. from Washington University.
CINDY L. SHIELDS, Portfolio Manager of the Investment Manager, has managed the
Large Cap Growth Fund since its inception in May of 2000. She joined the
Investment Manager in 1989 and has been a portfolio manager of other mutual
funds for the Investment Manager since 1994. Ms. Shields graduated from Washburn
University with a bachelor of business administration degree, majoring in
finance and economics. She is a Chartered Financial Analysts with ten years of
investment experience.
JULIE WANG, Director at Bankers Trust, has been co-manager of International Fund
since its inception in January 1999. She has been a manager of other investment
products with similar investment objectives since joining Bankers Trust in 1994.
Ms. Wang has primary focus on the Asia-Pacific region and the Fund's emerging
market exposure. Prior to joining Bankers Trust, Ms. Wang was an investment
manager at American International Group, where she assisted in the management of
$7 billion of assets in Southeast Asia, including private and listed equities,
bonds, loans and structured products. Ms. Wang received her B.A. (economics)
from Yale University and her M.B.A. from the Wharton School.
FRANK WHITSELL, Research Analyst of the Investment Manager, has co-managed Total
Return Fund since May 1999 and has co-managed Select 25 Fund since February
2000. He joined the Investment Manager in 1994. Mr. Whitsell graduated from
Washburn University with a bachelor of business administration degree, majoring
in accounting and finance, and an MBA.
WILLIAM L. WILBY, Senior Vice President and Director of International Equities
of OppenheimerFunds, became the manager of Global Fund in November 1998. Prior
to joining Oppenheimer in 1991, he was an international investment strategist at
Brown Brothers Harriman & Co. Prior to Brown Brothers, Mr. Wilby was a managing
director and portfolio manager at AIG Global Investors. He joined AIG from
Northern Trust Bank in Chicago, where he was an international pension manager.
Before starting his career in portfolio management, Mr. Wilby was an
international financial economist at Northern Trust Bank and at the Federal
Reserve Bank in Chicago. Mr. Wilby is a graduate of the United States Military
Academy and holds an M.A. and a Ph.D. in International Monetary Economics from
the University of Colorado. He is a Chartered Financial Analyst.
BUYING SHARES
Shares of the Funds are available through broker/dealers, banks, and other
financial intermediaries that have an agreement with the Funds' Distributor,
Security Distributors, Inc.
There are three different ways to buy shares of the Funds--Class A shares, Class
B shares or Class C shares. The different classes of a Fund differ primarily
with respect to the sales charges and Rule 12b-1 distribution fees to which they
are subject. The minimum initial investment is $100. Subsequent investments must
be $100 (or $20 under an Accumulation Plan). The Funds reserve the right to
reject any order to purchase shares.
CLASS A SHARES -- Class A shares are subject to a sales charge at the time of
purchase. An order for Class A shares will be priced at a Fund's net asset value
per share (NAV), plus the sales charge set forth below. The NAV, plus the sales
charge, is the "offering price." A Fund's NAV is generally calculated as of the
close of trading on every day the New York Stock Exchange is open. An order for
Class A shares is priced at the NAV next calculated after the order is accepted
by the Fund, plus the sales charge.
- ---------------------------------------------------------------
SALES CHARGE
-------------------------------------
AS A PERCENTAGE
AS A PERCENTAGE OF NET AMOUNT
AMOUNT OF ORDER OF OFFERING PRICE INVESTED
- ---------------------------------------------------------------
Less than $50,000 5.75% 6.10%
$50,000 to $99,999 4.75% 4.99%
$100,000 to $249,999 3.75% 3.90%
$250,000 to $499,999 2.75% 2.83%
$500,000 to $999,999 2.00% 2.04%
$1,000,000 or more* None None
- ---------------------------------------------------------------
*Purchases of $1,000,000 or more are not subject to a sales
charge at the time of purchase, but are subject to a deferred
sales charge of 1.00% if redeemed within one year following
purchase. The deferred sales charge is a percentage of the
lesser of the NAV of the shares redeemed or the net cost of
such shares. Shares that are not subject to a deferred sales
charge are redeemed first.
- ---------------------------------------------------------------
Please see Appendix A for options that are available for reducing the sales
charge applicable to purchases of Class A shares.
CLASS A DISTRIBUTION PLAN -- The Small Cap Growth, International, Enhanced
Index, Select 25, Large Cap Growth and Technology Funds have adopted Class A
Distribution Plans that allow each of these Funds to pay distribution fees to
the Funds' Distributor. The Distributor uses the fees to pay for activities
related to the sale of Class A shares and services provided to shareholders. The
distribution fee is equal to 0.25% of the average daily net assets of the Fund's
Class A shares. Because the distribution fees are paid out of the Fund's assets
on an ongoing basis, over time these fees will increase the cost of a
shareholder's investment and may cost an investor more than paying other types
of sales charges.
CLASS B SHARES -- Class B shares are not subject to a sales charge at the time
of purchase. An order for Class B shares will be priced at the Fund's NAV next
calculated after the order is accepted by the Fund. A Fund's NAV is generally
calculated as of the close of trading on every day the New York Stock Exchange
is open.
Class B shares are subject to a deferred sales charge if redeemed within 5 years
from the date of purchase. The deferred sales charge is a percentage of the NAV
of the shares at the time they are redeemed or the original purchase price,
whichever is less. Shares that are not subject to the deferred sales charge are
redeemed first. Then, shares held the longest will be the first to be redeemed.
The amount of the deferred sales charge is based upon the number of years since
the shares were purchased, as follows:
- --------------------------------------------
NUMBER OF YEARS SINCE DEFERRED
PURCHASE SALES CHARGE
- --------------------------------------------
1 5%
2 4%
3 3%
4 3%
5 2%
6 and more 0%
- --------------------------------------------
The Distributor will waive the deferred sales charge under certain
circumstances. See "Waiver of the Deferred Sales Charge," page 22.
CLASS B DISTRIBUTION PLAN -- The Funds have adopted Class B Distribution Plans
that allow each of the Funds to pay distribution fees to the Distributor. The
Distributor uses the fees to finance activities related to the sale of Class B
shares and services to shareholders. The distribution fee is equal to 1.00% of
the average daily net assets of the Fund's Class B shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
Class B shares automatically convert to Class A shares on the eighth anniversary
of purchase. This is advantageous to such shareholders because Class A shares
are subject to a lower distribution fee than Class B shares (or in some cases,
no distribution fee). A pro rata amount of Class B shares purchased through the
reinvestment of dividends or other distributions is also converted to Class A
shares each time that shares purchased directly are converted.
CLASS C SHARES -- Class C shares are not subject to a sales charge at the time
of purchase. An order for Class C shares will be priced at a Fund's NAV next
calculated after the order is accepted by the Fund. A Fund's NAV is generally
calculated as of the close of trading on every day the New York Stock Exchange
is open.
Class C shares are subject to a deferred sales charge of 1.00% if redeemed
within one year from the date of purchase. The deferred sales charge is a
percentage of the NAV of the shares at the time they are redeemed or the
original purchase price, whichever is less. Shares that are not subject to the
deferred sales charge are redeemed first. Then, shares held the longest will be
the first to be redeemed. The Distributor will waive the deferred sales charge
under certain circumstances. See "Waiver of the Deferred Sales Charge" below.
CLASS C DISTRIBUTION PLAN -- The Funds have adopted Class C Distribution Plans
that allow each of the Funds to pay distribution fees to the Distributor. The
Distributor uses the fees to finance activities related to the sale of Class C
shares and services to shareholders. The distribution fee is equal to 1.00% of
the average daily net assets of the Fund's Class C shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
BROKERAGE ENHANCEMENT PLAN -- The Funds have adopted, in accordance with the
provisions of Rule 12b-1 under the Investment Company Act of 1940, a Brokerage
Enhancement Plan (the "Plan"). The Plan uses available brokerage commissions to
promote the sale and distribution of Fund shares.
Under the Plan, the Funds may direct the Investment Manager or a sub-advisor to
use certain broker-dealers for securities transactions. (The duty of best price
and execution still applies to these transactions.) These are broker-dealers
that have agreed either (1) to pay a portion of their commission from the sale
and purchase of securities to the Distributor or other introducing brokers
("Brokerage Payments"), or (2) to provide brokerage credits, benefits or
services ("Brokerage Credits"). The Distributor will use all Brokerage Payments
and Credits (other than a minimal amount to defray its legal and administrative
costs) to finance activities that are meant to result in the sale of the Funds'
shares, including:
* holding or participating in seminars and sales meetings promoting the sale
of the Funds' shares
* paying marketing fees requested by broker-dealers who sell the Funds
* training sales personnel
* creating and mailing advertising and sales literature
* financing any other activity that is intended to result in the sale of the
Funds' shares.
The Plan permits the Brokerage Payments and Credits generated by securities
transactions from one Series of a Fund to inure to the benefit of other Series
as well. The Plan is not expected to increase the brokerage costs of the Funds.
For more information about the Plan, please read the "Allocation of Portfolio
Brokerage" section of the Statement of Additional Information.
WAIVER OF DEFERRED SALES CHARGE -- The Distributor will waive the deferred sales
charge under the following circumstances:
* Upon the death of the shareholder if shares are redeemed within one year of
the shareholder's death
* Upon the disability of the shareholder prior to age 65 if shares are
redeemed within one year of the shareholder becoming disabled and the
shareholder was not disabled when the shares were purchased
* In connection with required minimum distributions from a retirement plan
qualified under Section 401(a), 401(k), 403(b) or 408 of the Internal
Revenue Code
* In connection with distributions from retirement plans qualified under
Section 401(a), 401(k) or 403(b) of the Internal Revenue Code for:
* returns of excess contributions to the plan
* retirement of a participant in the plan
* a loan from the plan (loan repayments are treated as new sales for
purposes of the deferred sales charge)
* financial hardship (as defined in regulations under the Code) of a
participant in a plan
* termination of employment of a participant in a plan
* any other permissible withdrawal under the terms of the plan.
CONFIRMATIONS AND STATEMENTS -- The Funds will send you a confirmation statement
after every transaction that affects your account balance or registration.
However, certain automatic transactions may be confirmed on a quarterly basis
including systematic withdrawals, automatic purchases and reinvested dividends.
Each shareholder will receive a quarterly statement setting forth a summary of
the transactions that occurred during the preceding quarter.
SELLING SHARES
Selling your shares of a Fund is called a "redemption," because the Fund buys
back its shares. A shareholder may sell shares at any time. Shares will be
redeemed at the NAV next determined after the order is accepted by the Fund's
transfer agent, less any applicable deferred sales charge. A Fund's NAV is
generally calculated as of the close of trading on every day the New York Stock
Exchange is open. Any share certificates representing Fund shares being sold
must be returned with a request to sell the shares.
When redeeming recently purchased shares, if the Fund has not collected payment
for the shares, it may delay sending the proceeds until it has collected
payment, which may take up to 15 days.
BY MAIL -- To sell shares by mail, send a letter of instruction that includes:
* The name and signature of the account owner(s)
* The name of the Fund
* The dollar amount or number of shares to sell
* Where to send the proceeds
* A signature guarantee if
* The check will be mailed to a payee or address different than that of
the account owner, or
* The sale of shares is more than $10,000.
- --------------------------------------------------------------------------------
A SIGNATURE GUARANTEE helps protect against fraud. Banks, brokers, credit
unions, national securities exchanges and savings associations provide signature
guarantees. A notary public is not an eligible signature guarantor. For joint
accounts, both signatures must be guaranteed.
- --------------------------------------------------------------------------------
Mail your request to:
Security Management Company, LLC
P.O. Box 750525
Topeka, KS 66675-9135
Signature requirements vary based on the type of account you have:
* INDIVIDUAL OR JOINT TENANTS: Written instructions must be signed by an
individual shareholder, or in the case of joint accounts, all of the
shareholders, exactly as the name(s) appears on the account.
* UGMA OR UTMA: Written instructions must be signed by the custodian as it
appears on the account.
* SOLE PROPRIETOR OR GENERAL PARTNER: Written instructions must be signed by
an authorized individual as it appears on the account.
* CORPORATION OR ASSOCIATION: Written instructions must be signed by the
person(s) authorized to act on the account. A certified resolution dated
within six months of the date of receipt, authorizing the signer to act,
must accompany the request if not on file with the Funds.
* TRUST: Written instructions must be signed by the trustee(s). If the name of
the current trustee(s) does not appear on the account, a certified
certificate of incumbency dated within 60 days must also be submitted.
* RETIREMENT: Written instructions must be signed by the account owner.
BY TELEPHONE -- If you selected this option on your account application, you may
make redemptions from your account by calling 1-800-888-2461, extension 3127, on
weekdays (except holidays) between 7:00 a.m. and 6:00 p.m. Central time. The
Funds require that requests for redemptions over $10,000 be in writing with
signatures guaranteed. You may not close your account by telephone or redeem
shares for which a certificate has been issued. If you would like to establish
this option on an existing account, please call 1-800-888-2461, extension 3127.
Shareholders may not redeem shares held in an Individual Retirement Account
("IRA") or 403(b)(7) account by telephone.
BY BROKER -- You may redeem your shares through your broker. Brokers may charge
a commission upon the redemption of shares.
PAYMENT OF REDEMPTION PROCEEDS -- Payments may be made by check.
The Funds may suspend the right of redemption during any period when trading on
the New York Stock Exchange is restricted or such Exchange is closed for other
than weekends or holidays, or any emergency is deemed to exist by the Securities
and Exchange Commission.
BY CHECK. Redemption proceeds will be sent to the shareholder(s) of record at
the address on our records generally within seven days after receipt of a valid
redemption request. For a charge of $15 deducted from redemption proceeds, the
Investment Manager will provide a certified or cashier's check, or send the
redemption proceeds by express mail, upon the shareholder's request.
DIVIDENDS AND TAXES
Each Fund pays its shareholders dividends from its net investment income, and
distributes any net capital gains that it has realized, at least annually. Your
dividends and distributions will be reinvested in the Fund, unless you instruct
the Investment Manager otherwise. There are no fees or sales charges on
reinvestments.
TAX ON DISTRIBUTIONS -- Fund dividends and distributions are taxable to
shareholders (unless your investment is in an IRA or other tax-advantaged
retirement account) whether you reinvest your dividends or distributions or take
them in cash.
In addition to federal tax, dividends and distributions may be subject to state
and local taxes. If a Fund declares a dividend or distribution in October,
November or December but pays it in January, you may be taxed on that dividend
or distribution as if you received it in the previous year. In general,
dividends and distributions from the Funds are taxable as follows:
- --------------------------------------------------------
TYPE OF TAX RATE FOR TAX RATE FOR 28%
DISTRIBUTION 15% BRACKET BRACKET OR ABOVE
- --------------------------------------------------------
Income Ordinary Ordinary
dividends Income rate Income rate
Short-term Ordinary Ordinary
capital gains Income rate Income rate
Long-term 10% 20%
capital gains
- --------------------------------------------------------
Tax-deferred retirement accounts generally do not generate a tax liability
unless you are taking a distribution or making a withdrawal.
The Fund has "short-term capital gains" when it sells shares within 12 months
after buying them. The Fund has "long-term capital gains" when it sells shares
that it has owned for more than 12 months. The Funds expect that their
distributions will consist primarily of net long-term capital gains.
The Fund will mail you information concerning the tax status of the
distributions for each calendar year on or before January 31 of the following
year.
TAXES ON SALES OR EXCHANGES -- You may be taxed on any sale or exchange of Fund
shares. The amount of gain or loss will depend primarily upon how much you pay
for the shares, how much you sell them for, and how long you hold them.
The previous table can provide a guide for your potential tax liability when
selling or exchanging Fund shares. "Short-term capital gains" applies to Fund
shares sold or exchanged up to one year after buying them. "Long-term capital
gains" applies to shares held for more than one year.
BACKUP WITHHOLDING -- As with all mutual funds, a Fund may be required to
withhold U.S. federal income tax at the rate of 31% of all taxable distributions
payable to you if you fail to provide the Fund with your correct taxpayer
identification number or to make required certifications, or if you have been
notified by the Internal Revenue Service that you are subject to backup
withholding. Backup withholding is not an additional tax; rather, it is a way in
which the Internal Revenue Service ensures it will collect taxes otherwise due.
Any amounts withheld may be credited against your U.S. federal income tax
liability.
You should consult your tax professional about federal, state and local tax
consequences to you of an investment in the Fund. Please see the Statement of
Additional Information for additional tax information.
DETERMINATION OF NET ASSET VALUE
The net asset value per share (NAV) of each Fund is computed as of the close of
regular trading hours on the New York Stock Exchange (normally 3 p.m. Central
time) on days when the Exchange is open. The Exchange is open Monday through
Friday, except on observation of the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Each Fund's NAV is generally based upon the market value of securities held in
the Fund's portfolio. If market prices are not available, the fair value of
securities is determined using procedures approved by each Fund's Board of
Directors.
Foreign securities are valued based on quotations from the primary market in
which they are traded, and are converted from the local currency into U.S.
dollars using current exchange rates. Foreign securities may trade in their
primary markets on weekends or other days when the Fund does not price its
shares. Therefore, the NAV of Funds holding foreign securities may change on
days when shareholders will not be able to buy or sell shares of the Funds.
SHAREHOLDER SERVICES
ACCUMULATION PLAN -- An investor may choose to invest in one of the Funds
through a voluntary Accumulation Plan. This allows for an initial investment of
$100 minimum and subsequent investments of $20 minimum at any time. An
Accumulation Plan involves no obligation to make periodic investments, and is
terminable at will.
Payments are made by sending a check to the Distributor who (acting as an agent
for the dealer) will purchase whole and fractional shares of the Fund as of the
close of business on such day as the payment is received. The investor will
receive a confirmation and statement after each investment.
Investors may also choose to use "Secur-O-Matic" (automatic bank draft) to make
Fund purchases. There is no additional charge for choosing to use Secur-O-Matic.
Withdrawals from your bank account may occur up to 3 business days before the
date scheduled to purchase Fund shares. An application for Secur-O-Matic may be
obtained from the Funds.
SYSTEMATIC WITHDRAWAL PROGRAM -- Shareholders who wish to receive regular
monthly, quarterly, semiannual, or annual payments of $25 or more may establish
a Systematic Withdrawal Program. A shareholder may elect a payment that is a
specified percentage of the initial or current account value or a specified
dollar amount. A Systematic Withdrawal Program will be allowed only if shares
with a current aggregate net asset value of $5,000 or more are deposited with
the Investment Manager, which will act as agent for the shareholder under the
Program. Shares are liquidated at net asset value. The Program may be terminated
on written notice, or it will terminate automatically if all shares are
liquidated or redeemed from the account.
A shareholder may establish a Systematic Withdrawal Program with respect to
Class B and Class C shares without the imposition of any applicable contingent
deferred sales charge, provided that such withdrawals do not in any 12-month
period, beginning on the date the Program is established, exceed 10 percent of
the value of the account on that date ("Free Systematic Withdrawals"). Free
Systematic Withdrawals are not available if a Program established with respect
to Class B or Class C shares provides for withdrawals in excess of 10 percent of
the value of the account in any Program year and, as a result, all withdrawals
under such a Program would be subject to any applicable contingent deferred
sales charge. Free Systematic Withdrawals will be made first by redeeming those
shares that are not subject to the contingent deferred sales charge and then by
redeeming shares held the longest. The contingent deferred sales charge
applicable to a redemption of Class B or Class C shares requested while Free
Systematic Withdrawals are being made will be calculated as described under
"Waiver of Deferred Sales Charges," page 22. A Systematic Withdrawal form may be
obtained from the Funds.
EXCHANGE PRIVILEGE -- Shareholders who own shares of the Funds may exchange
those shares for shares of another of the Funds, for shares of the other mutual
funds distributed by the Distributor or for shares of Security Cash Fund at net
asset value per share. The other funds currently distributed by the Distributor
include Security Social Awareness, Diversified Income, High Yield and Municipal
Bond Funds. Exchanges may be made only in those states where shares of the fund
into which an exchange is to be made are qualified for sale. No service fee or
sales charge is presently imposed on such an exchange. Shares of a particular
class of the Funds may be exchanged only for shares of the same class of another
fund distributed by the Distributor or for shares of Security Cash Fund, a money
market fund that offers a single class of shares. At present, Municipal Bond and
Cash Funds do not offer Class C shares. Any applicable contingent deferred sales
charge will be imposed upon redemption and calculated from the date of the
initial purchase without regard to the time shares were held in Security Cash
Fund. For tax purposes, an exchange is a sale of shares which may result in a
taxable gain or loss. Special rules may apply to determine the amount of gain or
loss on an exchange occurring within ninety days after the exchanged shares were
acquired. Exchanges are made upon receipt of a properly completed Exchange
Authorization form. A current prospectus of the fund into which an exchange is
made will be given to each shareholder exercising this privilege.
To exchange shares by telephone, a shareholder must hold shares in
non-certificate form and must either have completed the Telephone Exchange
section of the application or a Telephone Transfer Authorization form which may
be obtained from the Investment Manager. Once authorization has been received by
the Investment Manager, a shareholder may exchange shares by telephone by
calling the Funds at 1-800-888-2461, extension 3127, on weekdays (except
holidays) between the hours of 7:00 a.m. and 6:00 p.m. Central time. Exchange
requests received by telephone after the close of the New York Stock Exchange
(normally 3 p.m. Central time) will be treated as if received on the next
business day. The exchange privilege, including telephone exchanges, may be
changed or discontinued at any time by either the Investment Manager or the
Funds upon 60 days' notice to shareholders.
RETIREMENT PLANS -- The Funds have available tax-qualified retirement plans for
individuals, prototype plans for the self-employed, pension and profit sharing
plans for corporations and custodial accounts for employees of public school
systems and organizations meeting the requirements of Section 501(c)(3) of the
Internal Revenue Code. Further information concerning these plans is contained
in the Funds' Statement of Additional Information.
INVESTMENT POLICIES AND MANAGEMENT PRACTICES
This section takes a detailed look at some of the types of securities the Funds
may hold in their respective portfolios and the various kinds of management
practices that may be used in the portfolios. The Funds' holdings of certain
types of investments cannot exceed a maximum percentage of net assets. These
percentage limitations are set forth in the Statement of Additional Information.
While the percentage limitations provide a useful level of detail about the
Funds' investment program, they should not be viewed as an accurate gauge of the
potential risk of the investment. For example, in a given period, a 5%
investment in futures contracts could have significantly more of an impact on a
Fund's share price than its weighting in the portfolio. The net effect of a
particular investment depends on its volatility and the size of its overall
return in relation to the performance of all the Fund's other investments. The
Portfolio Managers of the Funds have considerable leeway in choosing investment
strategies and selecting securities they believe will help the Fund achieve its
objective. In seeking to meet its investment objective, the Funds may invest in
any type of security or instrument whose investment characteristics are
consistent with that Fund's investment program.
The Funds are subject to certain investment policy limitations referred to as
"fundamental policies." The fundamental policies cannot be changed without
shareholder approval. Please refer to the Statement of Additional Information
for a complete list of the fundamental policies applicable to each of the Funds.
Some of the more important fundamental policies are outlined below. The Funds
will not:
* with respect to 75% of their respective assets invest more than 5% of the
value of their assets in any one issuer other than the U.S. Government or
its instrumentalities (this limitation does not apply to the Large Cap
Growth Fund or the Technology Fund);
* with respect to 75% of their respective assets purchase more than 10% of the
outstanding voting securities of any one issuer (this limitation does not
apply to the Large Cap Growth Fund or the Technology Fund);
* invest 25% or more of its total assets in any one industry (this limitation
does not apply to the Large Cap Growth Fund or the Technology Fund).
The following pages describe some of the investments which may be made by the
Funds, as well as some of the management practices of the Funds.
FOREIGN SECURITIES -- Foreign investments involve certain special risks,
including, but not limited to, (i) unfavorable changes in currency exchange
rates; (ii) adverse political and economic developments; (iii) unreliable or
untimely information; (iv) limited legal recourse; (v) limited markets; and (vi)
higher operational expenses. Each of the other Funds may invest in foreign
securities denominated in U.S. dollars.
Foreign investments are normally issued and traded in foreign currencies. As a
result, their values may be affected by changes in the exchange rates between
particular foreign currencies and the U.S. dollar. Foreign investments may be
subject to the risks of seizure by a foreign government, imposition of
restrictions on the exchange or transport of foreign currency, and tax
increases. There may also be less information publicly available about a foreign
company than about most U.S. companies, and foreign companies are usually not
subject to accounting, auditing and financial reporting standards and practices
comparable to those in the United States. The legal remedies for investors in
foreign investments may be more limited than those available in the United
States. Certain foreign investments may be less liquid (harder to buy and sell)
and more volatile than domestic investments, which means a Fund may at times be
unable to sell its foreign investments at desirable prices. For the same reason,
a Fund may at times find it difficult to value its foreign investments.
Brokerage commissions and other fees are generally higher for foreign
investments than for domestic investments. The procedures and rules for settling
foreign transactions may also involve delays in payment, delivery or recovery of
money or investments. Foreign withholding taxes may reduce the amount of income
available to distribute to shareholders of the Funds. Each of the Funds may
invest in foreign securities.
EMERGING MARKETS -- The risks associated with foreign investments are typically
increased in less developed and developing countries, which are sometimes
referred to as emerging markets. For example, political and economic structures
in these countries may be young and developing rapidly, which can cause
instability. These countries are also more likely to experience high levels of
inflation, deflation or currency devaluation, which could hurt their economies
and securities markets. For these and other reasons, investments in emerging
markets are often considered speculative. The Global, International, Small Cap
Growth and Technology Funds may invest in emerging market foreign securities.
SMALLER COMPANIES -- Small- or medium-sized companies are more likely than
larger companies to have limited product lines, markets or financial resources,
or to depend on a small, inexperienced management group. Stocks of these
companies may trade less frequently and in limited volume, and their prices may
fluctuate more than stocks of other companies. Stocks of these companies may
therefore be more vulnerable to adverse developments than those of larger
companies. Each of the funds may invest in small or medium-sized companies.
CONVERTIBLE SECURITIES AND WARRANTS -- Each of the Funds may invest in debt or
preferred equity securities convertible into, or exchangeable for, equity
securities. Traditionally, convertible securities have paid dividends or
interest at rates higher than common stocks but lower than nonconvertible
securities. They generally participate in the appreciation or depreciation of
the underlying stock into which they are convertible, but to a lesser degree. In
recent years, convertible securities have been developed which combine higher or
lower current income with options and other features. Warrants are options to
buy a stated number of shares of common stock at a specified price anytime
during the life of the warrants (generally, two or more years).
RESTRICTED SECURITIES -- Restricted securities cannot be sold to the public
without registration under the Securities Act of 1933 ("1933 Act"). Unless
registered for sale, restricted securities can be sold only in privately
negotiated transactions or pursuant to an exemption from registration.
Restricted securities are generally considered illiquid and, therefore, subject
to the Fund's limitation on illiquid securities.
Restricted securities (including Rule 144A Securities) may involve a high degree
of business and financial risk which may result in substantial losses. The
securities may be less liquid than publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized from these sales could be less than those originally paid by the Fund.
In particular, Rule 144A Securities may be resold only to qualified
institutional buyers in accordance with Rule 144A under the Securities Act of
1933. Rule 144A permits the resale to "qualified institutional buyers" of
"restricted securities" that, when issued, were not of the same class as
securities listed on a U.S. securities exchange or quoted in the National
Association of Securities Dealers Automated Quotation System (the "Rule 144A
Securities"). A "qualified institutional buyer" is defined by Rule 144A
generally as an institution, acting for its own account or for the accounts of
other qualified institutional buyers, that in the aggregate owns and invests on
a discretionary basis at least $100 million in securities of issuers not
affiliated with the institution. A dealer registered under the Securities and
Exchange Act of 1934 (the "Exchange Act"), acting for its own account or the
accounts of other qualified institutional buyers, that in the aggregate owns and
invests on a discretionary basis at least $10 million in securities of issuers
not affiliated with the dealer may also qualify as a qualified institutional
buyer, as well as an Exchange Act registered dealer acting in a riskless
principal transaction on behalf of a qualified institutional buyer.
Investing in Rule 144A Securities and other restricted securities could have the
effect of increasing the amount of a Fund's assets invested in illiquid
securities to the extent that qualified institutional buyers become
uninterested, for a time, in purchasing these securities. Each of the Funds may
invest in restricted securities.
HIGH YIELD SECURITIES -- Higher yielding debt securities in the lower rating
(higher risk) categories of the recognized rating services are commonly referred
to as "junk bonds". The total return and yield of junk bonds can be expected to
fluctuate more than the total return and yield of higher-quality bonds. Junk
bonds (those rated below BBB or in default) are regarded as predominantly
speculative with respect to the issuer's continuing ability to meet principal
and interest payments. Successful investment in lower-medium- and low-quality
bonds involves greater investment risk and is highly dependent on the Investment
Manager's credit analysis. A real or perceived economic downturn or higher
interest rates could cause a decline in high-yield bond prices by lessening the
ability of issuers to make principal and interest payments. These bonds are
often thinly traded and can be more difficult to sell and value accurately than
high-quality bonds. Because objective pricing data may be less available,
judgment may play great role in the valuation process. In addition, the entire
junk bond market can experience sudden and sharp price swings due to a variety
of factors, including changes in economic forecasts, stock market activity,
large or sustained sales by major investors, a high-profile default, or just a
change in the market's psychology. This type of volatility is usually associated
more with stocks than bonds, but junk bond investors should be prepared for it.
The Growth and Income, Global, International, Small Cap Growth and Total Return
Funds may invest in high-yield securities.
CASH RESERVES -- Cash reserves maintained by a Fund may include domestic, and
for certain Funds, foreign money market instruments, as well as certificates of
deposit, bank demand accounts and repurchase agreements. The Funds may establish
and maintain reserves as the Investment Manager or Sub-Adviser believes is
advisable to facilitate the Fund's cash flow needs (e.g., redemptions, expenses
and purchases of portfolio securities) or for temporary, defensive purposes.
BORROWING -- Borrowings may be collateralized with Fund assets. To the extent
that a Fund purchases securities while it has outstanding borrowings, it is
using leverage, i.e., using borrowed funds for investment. Leveraging will
exaggerate the effect on net asset value of any increase or decrease in the
market value of the Fund's portfolio. Money borrowed for leveraging will be
subject to interest costs that may or may not be recovered by appreciation of
the securities purchased; in certain cases, interest costs may exceed the return
received on the securities purchased. A Fund also may be required to maintain
minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
FUTURES AND OPTIONS -- Each of the Funds may utilize futures contracts, options,
on futures and may purchase call and put options and write call and put options
on a "covered" basis. Futures (a type of potentially high-risk derivative) are
often used to manage or hedge risk because they enable the investor to buy or
sell an asset in the future at an agreed-upon price. Options (another type of
potentially high-risk derivative) give the investor the right (where the
investor purchases the options), or the obligation (where the investor writes
(sells) the options), to buy or sell an asset at a predetermined price in the
future. Those Funds which invest in non-dollar denominated foreign securities
may also engage in forward foreign currency transactions. The instruments listed
above may be bought or sold for any number of reasons, including: to manage
exposure to changes in securities prices and foreign currencies, to manage
exposure to changes in interest rates and bond prices, as an efficient means of
adjusting overall exposure to certain markets, in an effort to enhance income,
to protect the value of portfolio securities, and to adjust portfolio duration.
Futures contracts and options may not always be successful hedges; their prices
can be highly volatile. Using them could lower a Fund's total return, and the
potential loss from the use of futures can exceed the Fund's initial investment
in such contracts.
SWAPS, CAPS, FLOORS AND COLLARS -- Interest rate and/or index swaps, and the
purchase or sale of related caps, floors and collars are used primarily to
preserve a return or spread on a particular investment or portion of its
portfolio as a technique for managing the portfolio's duration (i.e. the price
sensitivity to changes in interest rates) or to protect against any increase in
the price of securities the Fund anticipates purchasing at a later date. To the
extend a Fund enters into these types of transactions, it will be done to hedge
and not as a speculative investment, and the Fund will not sell interest rate
caps or floors if it does not own securities or other instruments providing the
income the Fund may be obligated to pay. Interest rate swaps involve the
exchange by the Series with another party of their respective commitments to pay
or receive interest on a notional amount of principal. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling the cap to the extent that a specified index exceeds a
predetermined interest rate. The purchase of an interest rate floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling the floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values. The Small Cap Growth Fund may enter into these types of
transactions.
SHARES OF OTHER INVESTMENT COMPANIES -- A Fund's investment in shares of other
investment companies may not exceed immediately after purchase 10% of the Fund's
total assets and no more than 5% of its total assets may be invested in the
shares of any one investment company. Investment in the shares of other
investment companies has the effect of requiring shareholders to pay the
operating expenses of two mutual funds. Each of the Funds may invest in the
shares of other investment companies.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENT CONTRACTS -- The price of "when
issued," "forward commitment" or "delayed delivery" securities is fixed at the
time of the commitment to buy, but delivery and payment can take place a month
or more later. During the interim period, the market value of the securities can
fluctuate, and no interest accrues to the purchaser. At the time of delivery,
the value of the securities may be more or less than the purchase or sale price.
When a Fund purchases securities on this basis, there is a risk that the
securities may not be delivered and that the Fund may incur a loss. Each of the
Funds may purchase or sell securities on a when-issued, forward commitment or
delayed delivery basis.
GENERAL INFORMATION
SHAREHOLDER INQUIRIES -- Shareholders who have questions concerning their
account or wish to obtain additional information, may call the Funds (see back
cover for address and telephone numbers), or contact their securities dealer.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand certain of the
Funds' financial performance for their Class A shares and Class B shares during
the past five years or, the period since commencement of a Fund. Financial
performance for Class C shares is for the period January 29, 1999 to September
30, 1999. Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate that an investor would
have earned (or lost) on an investment in the Fund assuming reinvestment of all
dividends and distributions. This information has been derived from financial
statements that have been audited by Ernst & Young LLP, whose report, along with
the Funds' financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY GROWTH AND INCOME FUND (CLASS A)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
----------------------------------------------------------------------
1999(b) 1998(b) 1997(b) 1996(b) 1995(b)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 7.68 $ 11.14 $ 9.05 $ 7.93 $ 6.96
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. 0.12 0.13 0.15 0.18 0.16
Net gain (loss) on securities (realized & unrealized)..... 0.75 (0.87) 2.81 1.37 1.18
------ ------- ------- ------ -----
Total from investment operations.......................... 0.87 (0.74) 2.96 1.55 1.34
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... (0.04) (0.13) (0.16) (0.16) (0.16)
Distributions (from realized gains)....................... (1.34) (2.59) (0.71) (0.27) (0.21)
------ ------- ------- ------ ------
Total distributions....................................... (1.38) (2.72) (0.87) (0.43) (0.37)
------ ------- ------- ------ ------
Net asset value end of period............................. $ 7.17 $ 7.68 $11.14 $ 9.05 $ 7.93
====== ======= ====== ====== =====
Total return (a).......................................... 12.00% (7.95)% 35.31% 20.31% 20.25%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $74,796 $76,371 $91,252 $73,273 $67,430
Ratio of expenses to average net assets................... 1.22% 1.21% 1.24% 1.29% 1.31%
Ratio of net investment income (loss) to average net
assets................................................. 1.63% 1.49% 1.53% 2.09% 2.21%
Portfolio turnover rate................................... 98% 144% 124% 69% 130%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY GROWTH AND INCOME FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------
1999(b) 1998(b) 1997(b) 1996(b) 1995(B)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 7.54 $10.99 $ 8.94 $ 7.85 $ 6.90
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. 0.05 0.05 0.05 0.09 0.08
Net gain (loss) on securities (realized & unrealized)..... 0.73 (0.88) 2.77 1.35 1.18
------ ------- ------- ------ -----
Total from investment operations.......................... 0.78 (0.83) 2.82 1.44 1.26
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... (0.03) (0.03) (0.06) (0.08) (0.09)
Distributions (from realized gains)....................... (1.34) (2.59) (0.71) (0.27) (0.22)
------ ------- ------- ------ ------
Total distributions....................................... (1.37) (2.62) (0.77) (0.35) (0.31)
------ ------- ------- ------ ------
Net asset value end of period............................. $ 6.95 $ 7.54 $10.99 $ 8.94 $ 7.85
====== ======= ====== ====== =====
Total return (a).......................................... 10.93% (8.95)% 34.01% 19.01% 19.07%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $9,829 $9,257 $6,737 $2,247 $1,130
Ratio of expenses to average net assets................... 2.22% 2.21% 2.24% 2.29% 2.31%
Ratio of net investment income (loss) to average net
assets................................................. 0.63% 0.59% 0.53% 1.09% 1.21%
Portfolio turnover rate................................... 98% 144% 124% 69% 130%
</TABLE>
- --------------------------------------------------------------------------------
SECURITY GROWTH AND INCOME FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(g)
PER SHARE DATA
Net asset value beginning of period....................... $6.87
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. 0.03
Net gain (loss) on securities (realized & unrealized)..... 0.21
----
Total from investment operations.......................... 0.24
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
------
Total distributions....................................... ---
------
Net asset value end of period............................. $7.11
====
Total return (a).......................................... 3.49%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $297
Ratio of expenses to average net assets................... 2.22%
Ratio of net investment income (loss) to average net
assets................................................. 0.62%
Portfolio turnover rate................................... 90%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY FUND (CLASS A)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------
1999(B) 1998(B) 1997(B) 1996(B) 1995(B)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 8.86 $ 9.09 $ 7.54 $ 6.55 $ 5.54
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. 0.02 0.04 0.04 0.05 0.04
Net gain (loss) on securities (realized & unrealized)..... 1.80 0.56 2.20 1.48 1.38
------ ------ ------ ------ -----
Total from investment operations.......................... 1.82 0.60 2.24 1.53 1.42
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... (0.04) (0.03) (0.04) (0.06) ---
Distributions (from realized gains)....................... (0.68) (0.80) (0.65) (0.48) (0.41)
------ ------ ------ ------ ------
Total distributions....................................... (0.72) (0.83) (0.69) (0.54) (0.41)
------ ------ ------ ------ ------
Net asset value end of period............................. $ 9.96 $ 8.86 $ 9.09 $ 7.54 $ 6.55
====== ====== ====== ====== =====
Total return (a).......................................... 20.66% 7.38% 32.08% 24.90% 27.77%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $917,179 $773,606 $757,520 $575,680 $440,339
Ratio of expenses to average net assets................... 1.02% 1.02% 1.03% 1.04% 1.05%
Ratio of net investment income (loss) to average net
assets................................................. 0.19% 0.39% 0.46% 0.75% 0.87%
Portfolio turnover rate................................... 36% 47% 66% 64% 95%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------
1999(b) 1998(b) 1997(b) 1996(b) 1995(b)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 8.52 $ 8.82 $ 7.36 $ 6.43 $ 5.49
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.08) (0.05) (0.04) (0.02) (0.01)
Net gain (loss) on securities (realized & unrealized)..... 1.71 0.55 2.15 1.45 1.36
------ ------ ------ ------ -----
Total from investment operations.......................... 1.63 0.50 2.11 1.43 1.35
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... --- --- --- (0.02) ---
Distributions (from realized gains)....................... (0.68) (0.80) (0.65) (0.48) (0.41)
------ ------ ------ ------ ------
Total distributions....................................... (0.68) (0.80) (0.65) (0.50) (0.41)
------ ------ ------ ------ ------
Net asset value end of period............................. $ 9.47 $ 8.52 $ 8.82 $ 7.36 $ 6.43
====== ====== ====== ====== =====
Total return (a).......................................... 19.23% 6.38% 30.85% 23.57% 26.69%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $159,872 $112,978 $89,336 $38,822 $19,288
Ratio of expenses to average net assets................... 2.02% 2.02% 2.03% 2.04% 2.05%
Ratio of net investment income (loss) to average net
assets................................................. (0.82)% (0.61)% (0.54)% (0.25)% (0.13)%
Portfolio turnover rate................................... 36% 47% 66% 64% 95%
</TABLE>
- --------------------------------------------------------------------------------
SECURITY EQUITY FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(g)
PER SHARE DATA
Net asset value beginning of period....................... $10.13
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.05)
Net gain (loss) on securities (realized & unrealized)..... (0.19)
-------
Total from investment operations.......................... (0.24)
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $ 9.89
======
Total return (a).......................................... (2.37)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $4,507
Ratio of expenses to average net assets................... 2.02%
Ratio of net investment income (loss) to average net
assets................................................. (0.89)%
Portfolio turnover rate................................... 45%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY GLOBAL FUND (CLASS A)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------
1999(b) 1998(b) 1997(b) 1996(b) 1995(b)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $11.23 $13.56 $12.42 $10.94 $10.84
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. 0.01 0.02 0.01 0.01 (0.02)
Net gain on securities (realized & unrealized)............ 3.71 (1.19) 2.29 1.87 0.31
------- ------- ------- ------- ------
Total from investment operations.......................... 3.72 (1.17) 2.30 1.88 0.29
LESS DISTRIBUTIONS
Dividends (from net investment income).................... (0.01) (0.09) (0.38) (0.25) ---
In excess of net investment income........................ (0.04) --- --- --- ---
Distributions (from capital gains)........................ (0.91) (1.07) (0.78) (0.15) (0.19)
------- ------- ------- ------- -------
Total distributions....................................... (0.96) (1.16) (1.16) (0.40) (0.19)
------- ------- ------- ------- -------
Net asset value end of period............................. $13.99 $11.23 $13.56 $12.42 $10.94
====== ====== ====== ====== =====
Total return (a).......................................... 34.39% (8.47)% 20.22% 17.73% 2.80%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $28,292 $18,941 $24,193 $19,644 $16,261
Ratio of expenses to average net assets................... 2.00% 2.00% 2.00% 2.00% 2.00%
Ratio of net investment income (loss) to average net
assets................................................. 0.11% 0.15% 0.07% 0.07% (0.17)%
Portfolio turnover rate................................... 141% 122% 132% 142% 141%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY GLOBAL FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------
1999(b) 1998(b) 1997(b) 1996(b) 1995(b)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $10.89 $13.22 $12.18 $10.74 $10.75
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.11) (0.10) (0.11) (0.10) (0.12)
Net gain on securities (realized & unrealized)............ 3.58 (1.16) 2.24 1.84 0.30
------- ------- ------- ------- ------
Total from investment operations.......................... 3.47 (1.26) 2.13 1.74 0.18
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... --- --- (0.31) (0.14) ---
Distributions (from realized gains)....................... (0.91) (1.07) (0.78) (0.16) (0.19)
------- ------- ------- ------- -------
Total distributions....................................... (0.91) (1.07) (1.09) (0.30) (0.19)
------- ------- ------- ------- -------
Net asset value end of period............................. $13.45 $10.89 $13.22 $12.18 $10.74
====== ====== ====== ====== =====
Total return (a).......................................... 33.04% (9.43)% 19.01% 16.57% 1.79%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $20,591 $12,619 $13,061 $7,285 $5,433
Ratio of expenses to average net assets................... 3.00% 3.00% 3.00% 3.00% 3.00%
Ratio of net investment income (loss) to average net
assets................................................. (0.87)% (0.85)% (0.93)% (0.93)% (1.17)%
Portfolio turnover rate................................... 141% 122% 132% 142% 141%
</TABLE>
- --------------------------------------------------------------------------------
SECURITY GLOBAL FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(g)
PER SHARE DATA
Net asset value beginning of period....................... $12.68
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.03)
Net gain (loss) on securities (realized & unrealized)..... 1.25
------
Total from investment operations.......................... 1.22
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $13.90
=====
Total return (a).......................................... 9.62%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $202
Ratio of expenses to average net assets................... 3.00%
Ratio of net investment income (loss) to average net
assets................................................. (0.49)%
Portfolio turnover rate................................... 90%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY TOTAL RETURN FUND (CLASS A)
- -------------------------------------------------------------------------------------------------------------------------------
FISCAL PERIOD ENDED SEPTEMBER 30
-----------------------------------------------------------------------
1999(b)(d) 1998(b)(d) 1997(b)(d) 1996(b)(d) 1995(b)(d)(f)
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $10.73 $12.58 $11.06 $10.54 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.03) 0.08 0.17 0.25 0.04
Net gain (loss) on securities (realized & unrealized)..... 1.90 (0.98) 1.86 0.77 0.50
------- ------- ------- ------- ------
Total from investment operations.......................... 1.87 (0.90) 2.03 1.02 0.54
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... (0.16) (0.20) (0.26) (0.33) ---
Distributions (from realized gains)....................... (0.75) (0.75) (0.25) (0.17) ---
------- ------- ------- ------- --------
Total distributions....................................... (0.91) (0.95) (0.51) (0.50) ---
------- ------- ------- ------- --------
Net asset value end of period............................. $11.69 $10.73 $12.58 $11.06 $10.54
====== ====== ====== ====== =====
Total return (a).......................................... 17.84% (7.19)% 19.00% 10.01% 5.40%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $3,587 $3,294 $3,906 $2,449 $1,906
Ratio of expenses to average net assets................... 2.00% 2.00% 1.68% 2.00% 2.00%
Ratio of net investment income (loss) to average net
assets................................................. (0.29)% 0.65% 1.52% 2.32% 1.33%
Portfolio turnover rate................................... 121% 45% 79% 75% 129%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY TOTAL RETURN FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL PERIOD ENDED SEPTEMBER 30
-----------------------------------------------------------------------
1999(b)(d) 1998(b)(d) 1997(b)(d) 1996(b)(d) 1995(b)(d)(f)
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $10.62 $12.45 $10.97 $10.50 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.14) (0.03) 0.07 0.14 0.01
Net gain (loss) on securities (realized & unrealized)..... 1.88 (0.96) 1.84 0.77 0.49
------- ------- ------- ------- ------
Total from investment operations.......................... 1.74 (0.99) 1.91 0.91 0.50
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... (0.05) (0.09) (0.18) (0.27) ---
Distributions (from realized gains)....................... (0.75) (0.75) (0.25) (0.17) ---
------- ------- ------- ------- --------
Total distributions....................................... (0.80) (0.84) (0.43) (0.44) ---
------- ------- ------- -------- --------
Net asset value end of period............................. $11.56 $10.62 $12.45 $10.97 $10.50
====== ====== ====== ====== =====
Total return (a).......................................... 16.68% (7.99)% 17.95% 8.97% 5.00%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $3,652 $3,304 $3,851 $2,781 $1,529
Ratio of expenses to average net assets .................. 2.94% 2.94% 2.58% 3.00% 3.00%
Ratio of net investment income (loss) to average net
assets................................................. (1.23)% (0.29)% 0.61% 1.32% 0.31%
Portfolio turnover rate................................... 121% 45% 79% 75% 129%
</TABLE>
- --------------------------------------------------------------------------------
SECURITY TOTAL RETURN FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(d)(g)
PER SHARE DATA
Net asset value beginning of period....................... $11.48
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.11)
Net gain (loss) on securities (realized & unrealized)..... 0.21
------
Total from investment operations.......................... 0.10
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $11.58
=====
Total return (a).......................................... 0.87%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $8
Ratio of expenses to average net assets................... 2.93%
Ratio of net investment income (loss) to average net
assets................................................. (1.84)%
Portfolio turnover rate................................... 149%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY MID CAP VALUE FUND (CLASS A)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL PERIOD ENDED SEPTEMBER 30
-------------------------------------------
1999(b) 1998(b)(d) 1997(b)(c)(d)
------- ---------- -------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $12.07 $12.95 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.07) (0.02) 0.05
Net gain (loss) on securities (realized & unrealized)..... 4.65 (0.53) 2.90
------- ------- ------
Total from investment operations.......................... 4.58 (0.55) 2.95
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... --- (0.05) ---
Distributions (from realized gains)....................... (0.05) (0.28) ---
------- ------- --------
Total distributions....................................... (0.05) (0.33) ---
------- ------- --------
Net asset value end of period............................. $16.60 $12.07 $12.95
====== ====== =====
Total return (a).......................................... 38.06% (4.31)% 29.50%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $22,804 $10,901 $4,631
Ratio of expenses to average net assets................... 1.33% 1.27% 1.10%
Ratio of net investment income (loss) to average net
assets................................................. (0.44)% (0.13)% 1.43%
Portfolio turnover rate................................... 79% 98% 35%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY MID CAP VALUE FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL PERIOD ENDED SEPTEMBER 30
-------------------------------------------
1999(B) 1998(B)(D) 1997(B)(C)(D)
------- ---------- -------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $11.94 $12.91 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.22) (0.15) 0.01
Net gain (loss) on securities (realized & unrealized)..... 4.59 (0.54) 2.90
------- ------- ------
Total from investment operations.......................... 4.37 (0.69) 2.91
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... --- --- ---
Distributions (from realized gains)....................... (0.05) (0.28) ---
------- ------- --------
Total distributions....................................... (0.05) (0.28) ---
------- ------- --------
Net asset value end of period............................. $16.26 $11.94 $12.91
====== ====== =====
Total return (a).......................................... 36.71% (5.38)% 29.10%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $9,682 $6,615 $3,572
Ratio of expenses to average net assets .................. 2.37% 2.33% 2.26%
Ratio of net investment income (loss) to average net
assets................................................. (1.50)% (1.19)% 0.27%
Portfolio turnover rate................................... 79% 98% 35%
</TABLE>
- --------------------------------------------------------------------------------
SECURITY MID CAP VALUE FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(g)
PER SHARE DATA
Net asset value beginning of period....................... $14.54
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.13)
Net gain (loss) on securities (realized & unrealized)..... 2.10
------
Total from investment operations.......................... 1.97
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $16.51
=====
Total return (a).......................................... 13.55%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $1,138
Ratio of expenses to average net assets................... 2.38%
Ratio of net investment income (loss) to average net
assets................................................. (1.36)%
Portfolio turnover rate................................... 92%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SECURITY SMALL CAP GROWTH FUND (CLASS A)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL PERIOD ENDED
SEPTEMBER 30
-----------------------------
1999(b)(d) 1998(b)(d)(e)
<S> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 8.70 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. --- (0.03)
Net gain (loss) on securities (realized & unrealized)..... 4.28 (1.26)
------ -------
Total from investment operations.......................... 4.28 (1.29)
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... --- (0.01)
Distributions (from realized gains)....................... --- ---
-------- --------
Total distributions....................................... --- (0.01)
-------- -------
Net asset value end of period............................. $12.98 $ 8.70
===== ======
Total return (a).......................................... 49.20% (12.95)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $16,877 $2,677
Ratio of expenses to average net assets .................. 0.49% 1.39%
Ratio of net investment income (loss) to average net
assets................................................. 0.03% (0.35)%
Portfolio turnover rate................................... 361% 366%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY SMALL CAP GROWTH FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL PERIOD ENDED
SEPTEMBER 30
-----------------------------
1999(b)(d) 1998(b)(d)(e)
<S> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 8.63 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.14) (0.13)
Net gain (loss) on securities (realized & unrealized)..... 4.20 (1.24)
------- -------
Total from investment operations.......................... 4.06 (1.37)
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... --- ---
Distributions (from realized gains)....................... --- ---
--------- --------
Total distributions....................................... --- ---
--------- --------
Net asset value end of period............................. $12.69 $ 8.63
====== ======
Total return (a).......................................... 47.05% (13.70)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $2,430 $1,504
Ratio of expenses to average net assets .................. 1.94% 2.38%
Ratio of net investment income (loss) to average net
assets................................................. (1.41)% (1.34)%
Portfolio turnover rate................................... 361% 366%
</TABLE>
- --------------------------------------------------------------------------------
SECURITY SMALL CAP GROWTH FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(d)(g)
PER SHARE DATA
Net asset value beginning of period....................... $11.16
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.07)
Net gain (loss) on securities (realized & unrealized)..... 1.77
------
Total from investment operations.......................... 1.70
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $12.86
=====
Total return (a).......................................... 15.23%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $890
Ratio of expenses to average net assets................... 1.47%
Ratio of net investment income (loss) to average net
assets................................................. (0.95)%
Portfolio turnover rate................................... 374%
- --------------------------------------------------------------------------------
ENHANCED INDEX FUND (CLASS A)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(h)
PER SHARE DATA
Net asset value beginning of period....................... $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. 0.03
Net gain (loss) on securities (realized & unrealized)..... 0.01
------
Total from investment operations.......................... 0.04
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $10.04
=====
Total return (a).......................................... 0.40%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $7,589
Ratio of expenses to average net assets................... 1.48%
Ratio of net investment income (loss) to average net
assets................................................. 0.39%
Portfolio turnover rate................................... 68%
- --------------------------------------------------------------------------------
ENHANCED INDEX FUND (CLASS B)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(h)
PER SHARE DATA
Net asset value beginning of period....................... $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.02)
Net gain (loss) on securities (realized & unrealized)..... 0.01
------
Total from investment operations.......................... (0.01)
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $ 9.99
======
Total return (a).......................................... (0.10)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $9,591
Ratio of expenses to average net assets................... 2.20%
Ratio of net investment income (loss) to average net
assets................................................. (0.33)%
Portfolio turnover rate................................... 68%
- --------------------------------------------------------------------------------
ENHANCED INDEX FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(g)(h)
PER SHARE DATA
Net asset value beginning of period....................... $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.01)
Net gain (loss) on securities (realized & unrealized)..... 0.01
------
Total from investment operations.......................... 0.00
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $10.00
=====
Total return (a).......................................... 0.00%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $5,205
Ratio of expenses to average net assets................... 2.05%
Ratio of net investment income (loss) to average net
assets................................................. (0.18)%
Portfolio turnover rate................................... 68%
- -------------------------------------------------------------------------------
INTERNATIONAL FUND (CLASS A)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(d)(h)
PER SHARE DATA
Net asset value beginning of period....................... $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.03)
Net gain (loss) on securities (realized & unrealized)..... (0.28)
-------
Total from investment operations.......................... (0.31)
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $ 9.69
======
Total return (a).......................................... (3.10)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $2,928
Ratio of expenses to average net assets................... 2.50%
Ratio of net investment income (loss) to average net
assets................................................. (0.41)%
Portfolio turnover rate................................... 115%
- --------------------------------------------------------------------------------
INTERNATIONAL FUND (CLASS B)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(d)(h)
PER SHARE DATA
Net asset value beginning of period....................... $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.07)
Net gain (loss) on securities (realized & unrealized)..... (0.28)
-------
Total from investment operations.......................... (0.35)
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $ 9.65
======
Total return (a).......................................... (3.50)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $2,028
Ratio of expenses to average net assets................... 3.19%
Ratio of net investment income (loss) to average net
assets................................................. (1.09)%
Portfolio turnover rate................................... 115%
- --------------------------------------------------------------------------------
INTERNATIONAL FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999
(b)(d)(g)(h)
PER SHARE DATA
Net asset value beginning of period....................... $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.04)
Net gain (loss) on securities (realized & unrealized)..... (0.28)
-------
Total from investment operations.......................... (0.32)
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $ 9.68
======
Total return (a).......................................... (3.20)%
RATIOS/SUPPLEMENTAL DATA
et assets end of period (thousands)...................... $2,493
Ratio of expenses to average net assets................... 2.78%
Ratio of net investment income (loss) to average net
assets................................................. (0.71)%
Portfolio turnover rate................................... 115%
- --------------------------------------------------------------------------------
SELECT 25 FUND (CLASS A)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(h)
PER SHARE DATA
Net asset value beginning of period....................... $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.05)
Net gain (loss) on securities (realized & unrealized)..... 0.58
------
Total from investment operations.......................... 0.53
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $10.53
=====
Total return (a).......................................... 5.30%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $13,975
Ratio of expenses to average net assets................... 1.48%
Ratio of net investment income (loss) to average net
assets................................................. (0.75)%
Portfolio turnover rate................................... 14%
- --------------------------------------------------------------------------------
SELECT 25 FUND (CLASS B)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(h)
PER SHARE DATA
Net asset value beginning of period....................... $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.09)
Net gain (loss) on securities (realized & unrealized)..... 0.61
------
Total from investment operations.......................... 0.52
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $10.52
=====
Total return (a).......................................... 5.20%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $12,938
Ratio of expenses to average net assets................... 2.19%
Ratio of net investment income (loss) to average net
assets................................................. (1.47)%
Portfolio turnover rate................................... 14%
- --------------------------------------------------------------------------------
SELECT 25 FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(g)(h)
PER SHARE DATA
Net asset value beginning of period....................... $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.09)
Net gain (loss) on securities (realized & unrealized)..... 0.64
------
Total from investment operations.......................... 0.55
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
--------
Total distributions....................................... ---
--------
Net asset value end of period............................. $10.55
=====
Total return (a).......................................... 5.50%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $4,442
Ratio of expenses to average net assets................... 2.07%
Ratio of net investment income (loss) to average net
assets................................................. (1.34)%
Portfolio turnover rate................................... 14%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY ULTRA FUND (CLASS A)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------
1999(b) 1998(b) 1997(b) 1996(b) 1995(b)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 7.65 $ 9.24 $ 8.25 $ 8.20 $ 6.82
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.06) (0.06) (0.08) (0.05) (0.02)
Net gain (loss) on securities (realized & unrealized)..... 3.51 (1.06) 1.65 1.10 1.54
------ ------ ------ ------ -----
Total from investment operations.......................... 3.45 (1.12) 1.57 1.05 1.52
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... --- --- --- --- ---
Distributions (from realized gains)....................... (1.91) (0.47) (0.58) (1.00) (0.14)
------ ------ ------ ------ ------
Total distributions....................................... (1.91) (0.47) (0.58) (1.00) (0.14)
------ ------ ------ ------ ------
Net asset value end of period............................. $ 9.19 $ 7.65 $ 9.24 $ 8.25 $ 8.20
====== ====== ====== ====== =====
Total return (a).......................................... 50.91% (12.45)% 20.57% 15.36% 22.69%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $96,238 $67,554 $84,504 $74,230 $66,052
Ratio of expenses to average net assets................... 1.21% 1.23% 1.71% 1.31% 1.32%
Ratio of net investment income (loss) to average net
assets................................................. (0.77)% (0.64)% (1.01)% (0.61)% (0.31)%
Portfolio turnover rate................................... 54% 116% 68% 161% 180%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY ULTRA FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------
1999(b) 1998(b) 1997(b) 1996(b) 1995(b)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 7.28 $ 8.90 $ 8.03 $ 8.11 $ 6.81
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.14) (0.14) (0.15) (0.13) (0.09)
Net gain (loss) on securities (realized & unrealized)..... 3.31 (1.01) 1.60 1.05 1.53
------ ------ ------ ------ -----
Total from investment operations.......................... 3.17 (1.15) 1.45 0.92 1.44
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... --- --- --- --- ---
Distributions (from realized gains)....................... (1.91) (0.47) (0.58) (1.00) (0.14)
------ ------ ------ ------ ------
Total distributions....................................... (1.91) (0.47) (0.58) (1.00) (0.14)
------ ------ ------ ------ ------
Net asset value end of period............................. $ 8.54 $ 7.28 $ 8.90 $ 8.03 $ 8.11
====== ====== ====== ====== =====
Total return (a).......................................... 49.39% (13.30)% 19.58% 13.81% 21.53%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $7,818 $5,610 $5,964 $2,698 $5,428
Ratio of expenses to average net assets................... 2.21% 2.23% 2.71% 2.31% 2.32%
Ratio of net investment income (loss) to average net
assets................................................. (1.77)% (1.64)% (2.01)% (1.61)% (1.31)%
Portfolio turnover rate................................... 54% 116% 68% 161% 180%
</TABLE>
- --------------------------------------------------------------------------------
SECURITY ULTRA FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
---------------
1999(b)(g)
PER SHARE DATA
Net asset value beginning of period....................... $ 8.20
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.07)
Net gain (loss) on securities (realized & unrealized)..... 0.98
-----
Total from investment operations.......................... 0.91
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... ---
Distributions (from realized gains)....................... ---
-------
Total distributions....................................... ---
-------
Net asset value end of period............................. $ 9.11
=====
Total return (a).......................................... 11.10%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $95
Ratio of expenses to average net assets................... 2.21%
Ratio of net investment income (loss) to average net
assets................................................. (1.75)%
Portfolio turnover rate................................... 54%
- --------------------------------------------------------------------------------
(a) Total return information does not take into account any sales charge at
time of purchase for Class A shares or upon redemption for Class B or Class
C shares.
(b) Net investment income (loss) was computed using average shares outstanding
throughout the period.
(c) Security Mid Cap Value Fund was initially capitalized on May 1, 1997, with a
net asset value of $10 per share. Percentage amounts have been annualized,
except for total return.
(d) Fund expenses were reduced by the Investment Manager during the period, and
expense ratios absent such reimbursement would have been as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999
----------------- ----------------- ---------------- ----------------- ------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS ACLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Return Fund 3.60% 4.70% 3.10% 3.90% 2.40% 3.30% 2.50% 3.40% 2.29% 3.23% 3.23%
Mid Cap Value Fund --- --- --- --- 1.90% 2.80% 1.51% 2.59% --- --- ---
Small Cap Growth --- --- --- --- --- --- 2.40% 3.38% 1.49% 2.94% 2.47%
Fund
International Fund --- --- --- --- --- --- --- --- 4.69% 5.37% 4.97%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(e) Security Small Cap Growth Fund was initially capitalized on October 15,
1997, with a net asset value of $10 per share. Percentage amounts for the
period have been annualized, except for total return.
(f) Security Total Return Fund was initially capitalized on June 1, 1995, with a
net asset value of $10 per share. Percentage amounts for the period have
been annualized, except for total return.
(g) Class "C" Shares were initially offered for sale on January 29, 1999.
Percentage amounts for the period, except total return, have been
annualized.
(h) Security Enhanced Index Fund, Security International Fund and Security
Select 25 Fund were initially capitalized on January 29, 1999, with a net
asset value of $10 per share. Percentage amounts for the period, except for
total return, have been annualized.
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
REDUCED SALES CHARGES
CLASS A SHARES -- Initial sales charges may be reduced or eliminated for persons
or organizations purchasing Class A shares of the Funds alone or in combination
with Class A shares of other Security Funds.
For purposes of qualifying for reduced sales charges on purchases made pursuant
to Rights of Accumulation or a Statement of Intention, the term "Purchaser"
includes the following persons: an individual, his or her spouse and children
under the age of 21; a trustee or other fiduciary of a single trust estate or
single fiduciary account established for their benefit; an organization exempt
from federal income tax under Section 501(c)(3) or (13) of the Internal Revenue
Code; or a pension, profit-sharing or other employee benefit plan whether or not
qualified under Section 401 of the Internal Revenue Code.
RIGHTS OF ACCUMULATION -- To reduce sales charges on purchases of Class A shares
of a Fund, a Purchaser may combine all previous purchases of the Funds with a
contemplated current purchase and receive the reduced applicable front-end sales
charge. The Distributor must be notified when a sale takes place which might
qualify for the reduced charge on the basis of previous purchases.
Rights of accumulation also apply to purchases representing a combination of the
Class A shares of the Funds, and other Security Funds, except Security Cash
Fund, in those states where shares of the fund being purchased are qualified for
sale.
STATEMENT OF INTENTION -- A Purchaser may choose to sign a Statement of
Intention within 90 days after the first purchase to be included thereunder,
which will cover future purchases of Class A shares of the Funds, and other
Security Funds, except Security Cash Fund. The amount of these future purchases
shall be specified and must be made within a 13-month period (or 36-month period
for purchases of $1 million or more) to become eligible for the reduced
front-end sales charge applicable to the actual amount purchased under the
Statement. Shares equal to five percent (5%) of the amount specified in the
Statement of Intention will be held in escrow until the statement is completed
or terminated. These shares may be redeemed by the Fund if the Purchaser is
required to pay additional sales charges.
A Statement of Intention may be revised during the 13-month (or, if applicable,
36-month) period. Additional Class A shares received from reinvestment of income
dividends and capital gains distributions are included in the total amount used
to determine reduced sales charges. A Statement of Intention may be obtained
from the Funds.
REINSTATEMENT PRIVILEGE -- Shareholders who redeem their Class A shares of the
Funds have a one-time privilege (1) to reinstate their accounts by purchasing
Class A shares without a sales charge up to the dollar amount of the redemption
proceeds; or (2) to the extent the redeemed shares would have been eligible for
the exchange privilege, to purchase Class A shares of another of the Security
Funds, without a sales charge up to the dollar amount of the redemption
proceeds. To exercise this privilege, a shareholder must provide written notice
and a check in the amount of the reinvestment within thirty days after the
redemption request; the reinstatement will be made at the net asset value on the
date received by the Fund or the Security Funds, as appropriate.
PURCHASES AT NET ASSET VALUE -- Class A shares of the Funds may be purchased at
net asset value by (1) directors, officers and employees of the Funds, the
Funds' Investment Manager or Distributor; directors, officers and employees of
Security Benefit Life Insurance Company and its subsidiaries; agents licensed
with Security Benefit Life Insurance Company; spouses or minor children of any
such agents; as well as the following relatives of any such directors, officers
and employees (and their spouses): spouses, grandparents, parents, children,
grandchildren, siblings, nieces and nephews; (2) any trust, pension, profit
sharing or other benefit plan established by any of the foregoing corporations
for persons described above; (3) retirement plans where third party
administrators of such plans have entered into certain arrangements with the
Distributor or its affiliates provided that no commission is paid to dealers;
and (4) officers, directors, partners or registered representatives (and their
spouses and minor children) of broker-dealers who have a selling agreement with
the Distributor. Such sales are made upon the written assurance of the purchaser
that the purchase is made for investment purposes and that the securities will
not be transferred or resold except through redemption or repurchase by or on
behalf of the Funds.
Class A shares of the Funds may be purchased at net asset value when the
purchase is made on the recommendation of (i) a registered investment adviser,
trustee or financial intermediary who has authority to make investment decisions
on behalf of the investor; or (ii) a certified financial planner or registered
broker-dealer who either charges periodic fees to its customers for financial
planning, investment advisory or asset management services, or provides such
services in connection with the establishment of an investment account for which
a comprehensive "wrap fee" is imposed. Class A shares of the Funds may also be
purchased at net asset value when the purchase is made by retirement plans that
(i) buy shares of the Security Funds worth $500,000 or more; (ii) have 100 or
more eligible employees at the time of purchase; (iii) certify it expects to
have annual plan purchases of shares of Security Funds of $200,000 or more; (iv)
are provided administrative services by certain third-party administrators that
have entered into a special service arrangement with the Security Funds relating
to such plans; or (v) have at the time of purchase, aggregate assets of at least
$1,000,000. Purchases made pursuant to this provision may be subject to a
deferred sales charge of up to 1% in the event of a redemption within one year
of the purchase.
The Distributor must be notified when a purchase is made that qualifies under y
of the above provisions.
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
BY TELEPHONE -- Call 1-800-888-2461.
BY MAIL -- Write to:
Security Management Company, LLC
700 SW Harrison
Topeka, KS 66636-0001
ON THE INTERNET -- Reports and other information about the Funds can be viewed
online or downloaded from:
SEC: On the EDGAR Database at http://www.sec.gov
SMC, LLC: http://www.securitybenefit.com
Additional information about the Funds (including the Statement of Additional
Information) can be reviewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, DC. Information about the
operation of the Public Reference Room may be obtained by calling the
Commission at 1-202-942-8090. Copies may be obtained, upon payment of a
duplicating fee, by electronic request at the following e-mail address:
[email protected] or by writing the Public Reference Section of the
Commission, Washington, DC 20549-0102.
ANNUAL/SEMI-ANNUAL REPORT -- Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
the Funds' annual reports, you will find a discussion of the market conditions
and investment strategies that significantly affected each Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION -- The Funds' Statement of Additional
Information and the Funds' annual or semi-annual reports are available, without
charge upon request by calling the Funds' toll-free telephone number
1-800-888-2461, extension 3127. Shareholder inquiries should be addressed to
SMC, LLC, 700 SW Harrison Street, Topeka, Kansas 66636-0001, or by calling the
Funds' toll-free telephone number listed above. The Funds' Statement of
Additional Information is incorporated into this prospectus by reference.
Each Fund's Investment Company Act file number is listed below:
Security Equity Fund...................... 811-1136
* Security Equity Series
* Security Global Series
* Security Total Return Series
* Security Mid Cap Value Series
* Security Small Cap Growth Series
* Security Enhanced Index Series
* Security International Series
* Security Select 25 Series
* Security Large Cap Growth Series
* Security Technology Series
Security Growth and Income Fund........... 811-0487
Security Ultra Fund....................... 811-1316
<PAGE>
SECURITY GROWTH AND INCOME FUND
SECURITY EQUITY FUND
* EQUITY SERIES
* GLOBAL SERIES
* TOTAL RETURN SERIES
* SOCIAL AWARENESS SERIES
* MID CAP VALUE SERIES (FORMERLY THE VALUE SERIES)
* SMALL CAP GROWTH SERIES (FORMERLY THE SMALL COMPANY SERIES)
* ENHANCED INDEX SERIES
* INTERNATIONAL SERIES
* SELECT 25 SERIES
* LARGE CAP GROWTH SERIES
* TECHNOLOGY SERIES
SECURITY ULTRA FUND
Members of The Security Benefit Group of Companies
700 SW Harrison, Topeka, Kansas 66636-0001
(785) 431-3127
(800) 888-2461
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus dated May 1, 2000 as it may be supplemented
from time to time. A prospectus may be obtained by writing Security
Distributors, Inc., 700 SW Harrison Street, Topeka, Kansas 66636-0001, or by
calling (785) 431-3127 or (800) 888-2461, ext. 3127. The Funds' September 30,
1999 Annual Report is incorporated herein by reference.
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
RELATING TO THE PROSPECTUS DATED May 1, 2000,
AS IT MAY BE SUPPLEMENTED FROM TIME TO TIME
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
Security Management Company, LLC
700 SW Harrison Street
Topeka, Kansas 66636-0001
UNDERWRITER
Security Distributors, Inc.
700 SW Harrison Street
Topeka, Kansas 66636-0001
CUSTODIANS
UMB Bank, N.A.
928 Grand Avenue
Kansas City, Missouri 64106
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245
State Street Bank and Trust Company
225 Franklin
Boston, Massachusetts 02110
INDEPENDENT AUDITORS
Ernst & Young LLP
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105-2143
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION......................................................... 3
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS.............................. 4
Security Growth and Income Fund.......................................... 4
Security Equity Fund..................................................... 6
Security Ultra Fund...................................................... 18
INVESTMENT METHODS AND RISK FACTORS......................................... 19
Shares of Other Investment Companies..................................... 19
Repurchase Agreements.................................................... 19
When Issued and Forward Commitment Securities............................ 19
American Depositary Receipts............................................. 19
Restricted Securities.................................................... 20
Real Estate Securities................................................... 20
Zero Coupon Securities................................................... 21
Foreign Investment Risks................................................. 21
Risks of Conversion to Euro.............................................. 21
Brady Bonds.............................................................. 21
Emerging Countries....................................................... 22
Political and Economic Risks............................................. 22
Religious and Ethnic Instability......................................... 22
Foreign Investment Restrictions.......................................... 22
Non-Uniform Corporate Disclosure Standards and Governmental Regulation... 23
Adverse Market Characteristics........................................... 23
Non-U.S. Withholding Taxes............................................... 23
Currency Risk............................................................ 23
Put and Call Options..................................................... 23
INVESTMENT POLICY LIMITATIONS............................................... 35
Fundamental Policies..................................................... 35
Operating Policies....................................................... 36
OFFICERS AND DIRECTORS...................................................... 36
REMUNERATION OF DIRECTORS AND OTHERS........................................ 38
PRINCIPAL HOLDERS OF SECURITIES............................................. 38
HOW TO PURCHASE SHARES...................................................... 39
Alternative Purchase Options............................................. 40
Class A Shares........................................................... 40
Security Equity Fund's Class A Distribution Plan......................... 41
Class B Shares........................................................... 41
Class B Distribution Plan................................................ 42
Class C Shares........................................................... 42
Class C Distribution Plan................................................ 42
Calculation and Waiver of Contingent Deferred Sales Charges.............. 43
Arrangements With Broker-Dealers and Others.............................. 43
Purchases at Net Asset Value............................................. 44
Purchases for Employer-Sponsored Retirement Plans........................ 44
ACCUMULATION PLAN........................................................... 45
SYSTEMATIC WITHDRAWAL PROGRAM............................................... 45
INVESTMENT MANAGEMENT....................................................... 46
Portfolio Management..................................................... 50
Code of Ethics........................................................... 51
DISTRIBUTOR................................................................. 52
ALLOCATION OF PORTFOLIO BROKERAGE........................................... 52
BROKERAGE ENHANCEMENT PLAN.................................................. 54
HOW NET ASSET VALUE IS DETERMINED........................................... 55
HOW TO REDEEM SHARES........................................................ 55
Telephone Redemptions.................................................... 56
HOW TO EXCHANGE SHARES...................................................... 57
Exchange by Telephone.................................................... 57
DIVIDENDS AND TAXES......................................................... 58
Passive Foreign Investment Companies..................................... 60
Options, Futures and Forward Contracts and Swap Agreements............... 60
Market Discount.......................................................... 61
Original Issue Discount.................................................. 61
Constructive Sales....................................................... 61
Foreign Taxation......................................................... 61
Foreign Currency Transactions............................................ 62
Other Taxes.............................................................. 62
ORGANIZATION................................................................ 62
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-PAYING AGENT......................... 62
INDEPENDENT AUDITORS........................................................ 63
PERFORMANCE INFORMATION..................................................... 63
RETIREMENT PLANS............................................................ 64
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) ...................................... 65
ROTH IRAS................................................................... 65
EDUCATION IRAS.............................................................. 65
SIMPLE IRAS................................................................. 66
PENSION AND PROFIT-SHARING PLANS............................................ 66
403(B) RETIREMENT PLANS..................................................... 66
SIMPLIFIED EMPLOYEE PENSION PLANS (SEPPS) .................................. 66
FINANCIAL STATEMENTS........................................................ 66
APPENDIX A.................................................................. 67
APPENDIX B.................................................................. 68
<PAGE>
GENERAL INFORMATION
Security Growth and Income Fund, Security Equity Fund and Security Ultra Fund
were organized as Kansas corporations on February 2, 1944, November 27, 1961 and
April 20, 1965, respectively. The name of Security Growth and Income Fund
(formerly Security Investment Fund) was changed effective July 6, 1993. The
Funds are registered with the Securities and Exchange Commission ("SEC") as
investment companies. Such registration does not involve supervision by the SEC
of the management or policies of the Funds. The Funds are open-end investment
companies that, upon the demand of the investor, must redeem their shares and
pay the investor the current net asset value thereof. (See "How to Redeem
Shares," page 55.)
Each of Security Growth and Income Fund ("Growth and Income Fund"), the Equity
Series ("Equity Fund"), Global Series ("Global Fund"), Total Return Series
("Total Return Fund"), Social Awareness Series ("Social Awareness Fund"), Mid
Cap Value Series ("Mid Cap Value Fund"), Small Cap Growth Series ("Small Cap
Growth Fund"), Enhanced Index Series ("Enhanced Index Fund"), International
Series ("International Fund"), Select 25 Series ("Select 25 Fund"), Large Cap
Growth Series ("Large Cap Growth Fund") and Technology Series ("Technology
Fund") of Security Equity Fund, and Security Ultra Fund ("Ultra Fund")
(collectively, the "Funds") has its own investment objective and policies which
are described on the following pages. While there is no present intention to do
so, the investment objective and policies of each Fund, unless otherwise noted,
may be changed by its Board of Directors without the approval of stockholders.
Each of the Funds is also required to operate within limitations imposed by its
fundamental investment policies which may not be changed without stockholder
approval. These limitations are set forth under "Investment Policy Limitations,"
beginning on page 35. An investment in one of the Funds does not constitute a
complete investment program.
The value of the shares of each Fund fluctuates, reflecting fluctuations in the
value of the portfolio securities and, to the extent it is invested in foreign
securities, its net currency exposure. Each Fund may realize losses or gains
when it sells portfolio securities and will earn income to the extent that it
receives dividends or interest from its investments. (See "Dividends and Taxes,"
page 58.)
The Funds' shares are sold to the public at net asset value, plus a sales
commission which is allocated between the principal underwriter and dealers who
sell the shares ("Class A Shares"), or at net asset value with a contingent
deferred sales charge ("Class B Shares and Class C Shares"). (See "How to
Purchase Shares," page 39.)
Professional investment advice is provided to each Fund by Security Management
Company, LLC (the "Investment Manager"). The Investment Manager has engaged
OppenheimerFunds, Inc. ("Oppenheimer") to provide investment advisory services
to Global Fund, Strong Capital Management, Inc. ("Strong") to provide investment
advisory services to Small Cap Growth Fund, Bankers Trust Company ("Bankers
Trust") to provide investment advisory services to Enhanced Index Fund and
International Fund and Wellington Management Company, LLP ("Wellington") to
provide investment advisory services to Technology Fund.
The Funds receive investment advisory, administrative, accounting, and transfer
agency services from the Investment Manager for a fee. The fee for each of the
Growth and Income, Equity and Ultra Funds, on an annual basis, is 2% of the
first $10 million of the average net assets, 1 1/2% of the next $20 million of
the average net assets and 1% of the remaining average net assets of the
respective Funds, determined daily and payable monthly. The fee paid by Global
Fund, on an annual basis, is 2% of the first $70 million of the average net
assets, and 1 1/2% of the remaining average net assets, determined daily and
payable monthly.
Separate fees are paid by Total Return, Social Awareness, Mid Cap Value, Small
Cap Growth, Enhanced Index, International, Select 25, Large Cap Growth and
Technology Funds, to the Investment Manager for investment advisory,
administrative and transfer agency services. The investment advisory fee for
Social Awareness, Mid Cap Value, Small Cap Growth, Large Cap Growth and
Technology Funds on an annual basis is equal to 1% of the average daily net
assets of each Fund, calculated daily and payable monthly. The investment
advisory fee for Enhanced Index, Total Return and Select 25 Funds is equal to
.75% of the average daily net assets of each Fund, calculated daily and payable
monthly. The investment advisory fee for International Fund is equal to 1.10% of
the average daily net assets of the Fund, calculated daily and payable monthly.
The administrative fee for the Total Return, Social Awareness, Mid Cap Value,
Small Cap Growth, Enhanced Index, Select 25 and Large Cap Growth Funds on an
annual basis is equal to .09% of the average daily net assets of each respective
Fund. The administrative fee for International Fund on an annual basis is equal
to .045% of the average daily net assets of the Fund plus the greater of .10% of
its average net assets or (i) $45,000 in the year ending January 31, 2001; or
(ii) $60,000 in the year ending January 31, 2002 and thereafter. The
administrative fee for Technology Fund on an annual basis is equal to .045% of
the average daily net assets of the Fund plus the greater of .10% of its average
net assets or (i) $30,000 in the year ending April 30, 2001; (ii) $45,000 in the
year ending April 30, 2002 or (iii) $60,000 thereafter. The transfer agency fee
for the Total Return, Social Awareness, Mid Cap Value, Small Cap Growth,
Enhanced Index, International, Select 25, Large Cap Growth and Technology Funds
consists of an annual maintenance fee of $8.00 per account, and a transaction
fee of $1.00 per transaction.
The Investment Manager bears all expenses of the Funds (except Total Return,
Social Awareness, Mid Cap Value, Small Cap Growth, Enhanced Index,
International, Select 25, Large Cap Growth and Technology Funds) except for its
fees and the expenses of brokerage commissions, interest, taxes, Class B and
Class C distribution fees, and extraordinary expenses approved by the Board of
Directors of the Funds. The Total Return, Social Awareness, Mid Cap Value, Small
Cap Growth, Enhanced Index, International, Select 25, Large Cap Growth and
Technology Funds pay all of their expenses not assumed by the Investment Manager
or Security Distributors, Inc. (the "Distributor") as described under
"Investment Management," page 46.
The Investment Manager has agreed that the total annual expenses of any class or
Series of a Fund (including the management fee and its other fees, but excluding
interest, taxes, brokerage commissions, extraordinary expenses and Class B and
Class C distribution fees) will not exceed any expense limitation imposed by any
state. See "Investment Management," page 46 for a discussion of the Investment
Manager and the Investment Management and Services Agreements.
Under a Distribution Plan adopted with respect to the Class A shares of Small
Cap Growth, Enhanced Index, International, Select 25, Large Cap Growth and
Technology Funds, pursuant to Rule 12b-1 under the Investment Company Act of
1940, each such Fund is authorized to pay the Distributor an annual fee of .25%
of the average daily net assets of the Class A shares of the respective Funds to
finance various distribution and servicerelated activities. Under Distribution
Plans adopted with respect to the Class B shares and Class C shares of the
Funds, pursuant to Rule 12b-1, each Fund is authorized to pay the Distributor an
annual fee of 1.00% of the average daily net assets of the Class B shares and
Class C shares, respectively, of the Funds to finance various distribution and
servicerelated activities. (See "Class A Distribution Plan," page 41, "Class B
Distribution Plan," page 42 and "Class C Distribution Plan," page 42.)
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS
SECURITY GROWTH AND INCOME FUND -- The investment objective of Growth and Income
Fund is long-term growth of capital with a secondary emphasis on income. The
value of Growth and Income Fund's shares will fluctuate with changes in the
market value of the Fund's investments. The investment objective and policies of
Growth and Income Fund may be altered by the Board of Directors without the
approval of stockholders of the Fund. There can be no assurance that the stated
investment objective will be achieved.
The policy of Growth and Income Fund is to invest in a diversified portfolio
which will ordinarily consist principally of common stocks (which may include
American Depositary Receipts ("ADRs")), but may also include other securities
when deemed advisable. Such other securities may include (i) securities
convertible into common stocks; (ii) preferred stocks; (iii) debt securities
issued by U.S. corporations; (iv) securities issued by the U.S. Government or
any of its agencies or instrumentalities, including Treasury bills, certificates
of indebtedness, notes and bonds; (v) securities issued by foreign governments,
their agencies, and instrumentalities, and foreign corporations, provided that
such securities are denominated in U.S. dollars; (vi) higher yielding, high risk
debt securities (commonly referred to as "junk bonds"); and (vii) zero coupon
securities. The Fund may also invest in warrants. However, as an operating
policy such investment may not exceed 5% of its total assets valued at the lower
of cost or market. Included in that amount, but not to exceed 2% of the value of
the Fund's assets may be warrants which are not listed on the New York or
American Stock Exchange. Warrants acquired by the Fund in units or attached to
securities may be deemed to be without value. In the selection of securities for
investment, the potential for appreciation and future dividends is given more
weight than current dividends. The Fund may also invest in any other type of
security or instrument whose investment characteristics are consistent with the
Fund's investment program.
Except when in a temporary defensive position, Growth and Income Fund will
maintain at least 25% of its assets invested in securities selected for their
capital growth potential, principally common stocks, and at least another 25% of
its total assets invested in securities which provide income.
With respect to Growth and Income Fund's investment in debt securities, there is
no percentage limitation on the amount of the Fund's assets that may be invested
in securities within any particular rating classification (see Appendix A for a
more complete description of the corporate bond ratings), and the Fund may
invest without limit in unrated securities. Growth and Income Fund may invest in
securities rated Baa by Moody's Investors Service, Inc., or BBB by Standard &
Poor's Corporation. Baa securities are considered to be "medium grade"
obligations by Moody's and BBB is the lowest classification which is still
considered an "investment grade" rating by Standard & Poor's. Bonds rated Baa by
Moody's or BBB by Standard & Poor's have speculative characteristics and may be
more susceptible than higher grade bonds to adverse economic conditions or other
adverse circumstances which may result in a weakened capacity to make principal
and interest payments. In addition, the Fund may invest in higher yielding,
longer-term debt securities in the lower rating (higher risk) categories of the
recognized rating services (commonly referred to as "junk bonds"). These include
securities rated Ba or lower by Moody's or BB or lower by Standard & Poor's and
are regarded as predominantly speculative with respect to the ability of the
issuer to meet principal and interest payments. However, the Investment Manager
will not rely principally on the ratings assigned by the rating services.
Because Growth and Income Fund may invest in lower rated securities and unrated
securities of comparable quality, the achievement of the Fund's investment
objective may be more dependent on the Investment Manager's own credit analysis
than would be the case if investing in higher rated securities.
As discussed above, Growth and Income Fund may invest in foreign debt securities
that are denominated in U.S. dollars. Such foreign debt securities may include
debt of foreign governments, including Brady Bonds, and debt of foreign
corporations. The Fund expects to limit its investment in foreign debt
securities, excluding Canadian securities, to not more than 15% of its total
assets and its investment in debt securities of issuers in emerging markets,
excluding Brady Bonds, to not more than 5% of its net assets. See the discussion
of the risks associated with investing in foreign securities and, in particular,
Brady Bonds and emerging markets under "Investment Methods and Risk Factors."
Growth and Income Fund may purchase securities on a "when issued," "forward
commitment" or "delayed delivery" basis in excess of customary settlement
periods for the type of security involved. As an operating policy, the Fund may
not invest more than 10% of its total assets in securities which are restricted
as to disposition under the federal securities laws. The Fund may purchase
without regard to this limitation, restricted securities which are eligible for
resale pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A
Securities") subject to the Fund's policy that not more than 15% of its net
assets may be invested in illiquid securities. From time to time, Growth and
Income Fund may purchase government bonds or commercial notes for temporary
defensive purposes. The Fund may also utilize repurchase agreements on an
overnight basis or bank demand accounts, pending investment in securities or to
meet potential redemptions or expenses. See the discussion of when issued
securities, restricted securities, and repurchase agreements under "Investment
Methods and Risk Factors" and see the discussion of restricted securities under
the same heading in the prospectus.
The Fund may enter into futures contracts (a type of derivative) to hedge all or
a portion of its portfolio, as an efficient means of adjusting its exposure to
the stock market or to increase returns. The Fund will limit its use of futures
contracts so that initial margin deposits or premiums on such contracts used for
non-hedging purposes will not equal more than 5% of the Fund's net asset value.
The Fund may also invest in options contracts and in other investment companies,
such as index-based securities. See "Investment Methods and Risk Factors."
The Fund may invest in real estate investment trusts ("REITs") and other real
estate industry companies or companies with substantial real estate investments.
See the discussion of real estate securities under "Investment Methods and Risk
Factors."
The Fund may also invest in zero coupon securities which are debt securities
that pay no cash income but are sold at substantial discounts from their face
value. Certain zero coupon securities also provide for the commencement of
regular interest payments at a deferred date. See "Investment Methods and Risk
Factors" for a discussion of zero coupon securities.
Growth and Income Fund's policy is to diversify its investments among various
industries, but freedom of action is reserved (at times when deemed appropriate
for the attainment of its investment objectives) to invest up to 25% of its
assets in one industry. This is a fundamental policy of Growth and Income Fund
which cannot be changed without stockholder approval.
There is no restriction on Growth and Income Fund's portfolio turnover, but it
is the Fund's practice to invest its funds for long-term growth and secondarily
for income. Portfolio turnover is the percentage of the lower of security sales
or purchases to the average portfolio value and would be 100% if all securities
in the Fund were replaced within a period of one year. The Fund will not usually
trade securities for short-term profits.
SPECIAL RISKS OF HIGH YIELD INVESTING. Because Growth and Income Fund invests in
the high yield, high risk debt securities (commonly referred to as "junk bonds")
described above, its share price and yield are expected to fluctuate more than
the share price and yield of a fund investing in higher quality, shorter-term
securities. High yield bonds may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
bonds. A projection of an economic downturn, or higher interest rates, for
example, could cause a decline in high yield bond prices because an advent of
such events could lessen the ability of highly leveraged companies to make
principal and interest payments on its debt securities. In addition, the
secondary trading market for high yield bonds may be less liquid than the market
for higher grade bonds, which can adversely affect the ability of Growth and
Income Fund to dispose of its portfolio securities. Bonds for which there is
only a "thin" market can be more difficult to value inasmuch as objective
pricing data may be less available and judgment may play a greater role in the
valuation process. Debt securities issued by governments in emerging markets can
differ from debt obligations issued by private entities in that remedies from
defaults generally must be pursued in the courts of the defaulting government,
and legal recourse is therefore somewhat diminished. Political conditions, in
terms of a government's willingness to meet the terms of its debt obligations,
also are of considerable significance. There can be no assurance that the
holders of commercial bank debt may not contest payments to the holders of debt
securities issued by governments in emerging markets in the event of default by
the governments under commercial bank loan agreements.
SECURITY EQUITY FUND -- Security Equity Fund currently issues its shares in
eleven series--Equity Series ("Equity Fund"), Global Series ("Global Fund"),
Total Return Series ("Total Return Fund"), Social Awareness Series ("Social
Awareness Fund"), Mid Cap Value Series ("Mid Cap Value Fund"), Small Cap Growth
Series ("Small Cap Growth Fund"), Enhanced Index Series ("Enhanced Index Fund"),
International Series ("International Fund"), Select 25 Series ("Select 25
Fund"), Large Cap Growth Series ("Large Cap Growth Fund") and Technology Series
("Technology Fund"). The assets of each Series are held separate from the assets
of the other Series and each Series has an investment objective which differs
from that of the other Series. The investment objective and policies of each
Series are described below. There are risks inherent in the ownership of any
security and there can be no assurance that such investment objective will be
achieved.
Although there is no present intention to do so, the investment objective of the
Funds may be altered by the Board of Directors without the approval of
stockholders of the Fund.
EQUITY FUND. The investment objective of Equity Fund is to provide a medium for
investment in equity securities to complement fixed-obligation types of
investments. Emphasis will be placed upon selection of those securities which in
the opinion of the Investment Manager offer basic value and have the most
long-term capital growth potential. Income potential will be considered in
selecting investments, to the extent doing so is consistent with the Fund's
investment objective of long-term capital growth.
Equity Fund ordinarily will have at least 65% of its total assets invested in a
broadly diversified selection of common stocks (which may include ADRs) and of
preferred stocks convertible into common stocks. However, the Fund reserves the
right to invest temporarily in fixed income securities or in cash and money
market instruments. The Fund may also invest in any other type of security or
instrument whose investment characteristics are consistent with the Fund's
investment program. The Fund may invest in certificates of deposit issued by
banks or other bank demand accounts, pending investment in other securities or
to meet potential redemptions or expenses. Equity Fund's investment policy, with
emphasis on investing in securities for potential capital enhancement
possibilities, may involve a more rapid portfolio turnover than other investment
companies.
Portfolio turnover is the percentage of the lower of security sales or purchases
to the average portfolio value and would be 100% if all securities in the Fund
were replaced within a period of one year.
It is not the policy of Equity Fund to purchase securities for trading purposes.
Nevertheless, securities may be disposed of without regard to the length of time
held if such sales are deemed advisable in order to meet the Fund's investment
objective. Equity Fund does not intend to purchase restricted stock.
The Fund may invest in options, futures and other investment companies (such as
index-based securities). See "Investment Methods and Risk Factors."
GLOBAL FUND. The investment objective of Global Fund is to seek long-term growth
of capital primarily through investment in securities of companies domiciled in
foreign countries and the United States. Global Fund will seek to achieve its
objective through investment in a diversified portfolio of securities which
under normal circumstances will consist primarily of various types of common
stocks and equivalents (the following constitute equivalents: convertible debt
securities, REITs, warrants and options). The Fund may also invest in preferred
stocks, bonds and other debt obligations, which include money market instruments
of foreign and domestic companies and the U.S. Government and foreign
governments, governmental agencies and international organizations. The Fund may
also invest in any other type of security or instrument whose investment
characteristics are consistent with the Fund's investment program. For a full
description of the Fund's investment objective and policies, see the prospectus.
In seeking to achieve its investment objective, Global Fund can, but is not
required to, engage in the following investment practices:
SETTLEMENT TRANSACTIONS. Global Fund can, for a fixed amount of United States
dollars, enter into a forward foreign exchange contract for the purchase or sale
of the amount of foreign currency involved in the underlying securities
transactions. In so doing, the Fund will attempt to insulate itself against
possible losses and gains resulting from a change in the relationship between
the United States dollar and the foreign currency during the period between the
date a security is purchased or sold and the date on which payment is made or
received. This process is known as "transaction hedging."
To effect the translation of the amount of foreign currencies involved in the
purchase and sale of foreign securities and to effect the "transaction hedging"
described above, the Fund may purchase or sell foreign currencies on a "spot"
(i.e. cash) basis or on a forward basis whereby the Fund purchases or sells a
specific amount of foreign currency, at a price set at the time of the contract,
for receipt of delivery at a specified date which may be any fixed number of
days in the future.
Such spot and forward foreign exchange transactions may also be utilized to
reduce the risk inherent in fluctuations in the exchange rate between the United
States dollar and the relevant foreign currency when foreign securities are
purchased or sold for settlement beyond customary settlement time (as described
below). Neither type of foreign currency transaction will eliminate fluctuations
in the prices of the Fund's portfolio or securities or prevent loss if the price
of such securities should decline.
PORTFOLIO HEDGING. When, in the opinion of the Fund's Sub-Adviser, Oppenheimer,
it is desirable to limit or reduce exposure in a foreign currency in order to
moderate potential changes in the United States dollar value of the portfolio,
Global Fund can enter into a forward foreign currency exchange contract by which
the United States dollar value of the underlying foreign portfolio securities
can be approximately matched by an equivalent United States dollar liability.
The Fund can also enter into forward currency exchange contracts to increase its
exposure to a foreign currency that OppenheimerFunds expects to increase in
value relative to the United States dollar. The Fund will not attempt to hedge
all of its portfolio positions and will enter into such transactions only to the
extent, if any, deemed appropriate by OppenheimerFunds. Hedging against a
decline in the value of currency does not eliminate fluctuations in the prices
of portfolio securities or prevent losses if the prices of such securities
decline. The Fund seeks to limit its exposure in foreign currency exchange
contracts in a particular foreign currency to the amount of its assets
denominated in that currency or a closely-correlated currency. The precise
matching of the amounts under forward contracts and the value of its securities
involved will not be possible because the future value of securities denominated
in foreign currencies will change as a consequence of market movements between
the date the forward contract is entered into and the date it is sold.
FORWARD COMMITMENTS. Global Fund may make contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments") because new issues of securities are typically offered to
investors on that basis. Forward commitments involve a risk of loss if the value
of the security to be purchased declines prior to the settlement date. This risk
is in addition to the risk of decline in value of the Fund's other assets.
Although the Fund will enter into such contracts with the intention of acquiring
the securities, it may dispose of a commitment prior to settlement if
OppenheimerFunds deems it appropriate to do so.
COVERED CALL OPTIONS. Global Fund may seek to preserve capital by writing
covered call options on securities which it owns. Such an option on an
underlying security would obligate the Fund to sell, and give the purchaser of
the option the right to buy, that security at a stated exercise price at any
time until a stated expiration date of the option.
REPURCHASE AGREEMENTS. A repurchase agreement is a contract under which Global
Fund would acquire a security for a relatively short period (usually not more
than 7 days) subject to the obligation of the seller to repurchase and the Fund
to resell such security at a fixed time and price (representing the Fund's cost
plus interest). Although the Fund may enter into repurchase agreements with
respect to any portfolio securities which it may acquire consistent with its
investment policies and restrictions, it is the Fund's present intention to
enter into repurchase agreements only with respect to obligations of the United
States Government or its agencies or instrumentalities to meet anticipated
redemptions or pending investment or reinvestment of Fund assets in portfolio
securities. The Fund will enter into repurchase agreements only with member
banks of the Federal Reserve System and with "primary dealers" in U.S.
Government securities. Repurchase agreements will be fully collateralized
including interest earned thereon during the entire term of the agreement. If
the institution defaults on the repurchase agreement, the Fund will retain
possession of the underlying securities. If bankruptcy proceedings are commenced
with respect to the seller, realization on the collateral by Global Fund may be
delayed or limited and the Fund may incur additional costs. In such case, the
Fund will be subject to risks associated with changes in market value of the
collateral securities. The Fund may enter into repurchase agreements only with
(a) securities dealers that have a total capitalization of at least $40,000,000
and a ratio of aggregate indebtedness to net capital of no more than 4 to 1, or,
alternatively, net capital equal to 6% of aggregate debit balances, or (b) banks
that have at least $1,000,000,000 in assets and a net worth of at least
$100,000,000 as of its most recent annual report. In addition, the aggregate
repurchase price of all repurchase agreements held by the Fund with any broker
shall not exceed 15% of the total assets of the Fund or $5,000,000, whichever is
greater. The Fund will not enter into repurchase agreements maturing in more
than seven days if the aggregate of such repurchase agreements and other
illiquid investments would exceed 10%. The operating expenses of Global Fund can
be expected to be higher than those of an investment company investing
exclusively in United States securities.
RULE 144A SECURITIES. As an operating policy, the Fund may not invest more than
10% of its total assets in securities which are restricted as to disposition
under the federal securities laws. The Fund may purchase without regard to this
limitation, restricted securities which are eligible for resale pursuant to Rule
144A under the Securities Act of 1933 ("Rule 144A Securities") subject to the
Fund's policy that not more than 15% of its net assets may be invested in
illiquid securities. Portfolio turnover is the percentage of the lower of
security sales or purchases to the average portfolio value and would be 100% if
all securities in the Fund were replaced within a period of one year.
TOTAL RETURN FUND. The investment objective of Total Return Fund is to seek high
total return, consisting of capital appreciation and current income. The Fund
seeks this objective by investing, under normal circumstances, in a
well-diversified portfolio of stocks of U.S. companies in different
capitalization ranges. The Fund may also invest in stocks offering the potential
for current income and in fixed income securities in any rating category. As an
operating policy, the Fund may not invest more than 10% of its total assets in
securities which are restricted as to disposition under the federal securities
laws. The Fund may purchase without regard to this limitation, restricted
securities which are eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 ("Rule 144A Securities") subject to the Fund's policy
that not more than 15% of its net assets may be invested in illiquid securities.
The Total Return Fund may also invest in (i) preferred stocks; (ii) warrants;
and (iii) dollar denominated foreign securities. The Fund may purchase
securities on a "when-issued," "forward commitment" or "delayed delivery" basis
in excess of customary settlement periods for the type of security involved. The
Fund may also invest in any other type of security or instrument whose
investment characteristics are consistent with the Fund's investment program.
The Fund reserves the right to invest its assets temporarily in cash or money
market instruments when, in the opinion of the Investment Manager, it is
advisable to do so on account of current or anticipated market conditions. The
Fund may utilize repurchase agreements on an overnight basis or bank demand
accounts, pending investment in securities or to meet potential redemptions or
expenses. See the discussion of when-issued securities, restricted securities
and repurchase agreements under "Investment Methods and Risk Factors."
To choose stocks, the Investment Manager uses a blended approach, investing in
growth stocks and in value stocks. The Investment Manager will also invest in
value-oriented stocks to attempt to reduce the Fund's potential volatility and
possibly add to current income. In choosing the balance of growth stocks and
value stocks, the Investment Manager compares the potential risks and rewards of
each category.
The Fund typically sells a stock when the reasons for buying it no longer apply,
or when the company begins to show deteriorating fundamentals or poor relative
performance.
The Fund also may invest a portion of its assets in options and futures, which
are used to hedge the Fund's portfolio, to increase returns or to maintain
exposure to the equity markets.
SOCIAL AWARENESS FUND. The investment objective of Social Awareness Fund is to
seek capital appreciation by investing in various types of securities which meet
certain social criteria established for the Fund. Social Awareness Fund will
invest in a diversified portfolio of common stocks (which may include ADRs),
convertible securities, preferred stocks and debt securities. See "Investment
Methods and Risk Factors" - "American Depositary Receipts." From time to time,
the Fund may purchase government bonds or commercial notes on a temporary basis
for defensive purposes. The Fund may also invest in any other type of security
or instrument whose investment characteristics are consistent with the Fund's
investment program, including any company in the Domini 400 Social Index.
Securities selected for their appreciation possibilities will be primarily
common stocks or other securities having the investment characteristics of
common stocks, such as securities convertible into common stocks. Securities
will be selected on the basis of their appreciation and growth potential.
Securities considered to have capital appreciation and growth potential will
often include securities of smaller and less mature companies. Such companies
may present greater opportunities for capital appreciation because of high
potential earnings growth, but may also involve greater risk. They may have
limited product lines, markets or financial resources, and they may be dependent
on a limited management group. Their securities may trade less frequently and in
limited volume, and only in the OTC market or on smaller securities exchanges.
As a result, the securities of smaller companies may have limited marketability
and may be subject to more abrupt or erratic changes in value than securities of
larger, more established companies. The Fund may also invest in larger companies
where opportunities for above-average capital appreciation appear favorable and
the Fund's social criteria are satisfied.
The Social Awareness Fund may enter into futures contracts (a type of
derivative) (or options thereon) to hedge all or a portion of its portfolio, as
an efficient means of adjusting its exposure to the stock market or to increase
returns. The Fund will limit its use of futures contracts so that initial margin
deposits or premiums on such contracts used for non-hedging purposes will not
equal more than 5% of the Fund's net assets. The Fund may also write call and
put options on a covered basis and purchase put and call options on securities
and financial indices. The value of all call and put options held by the Fund
will not exceed 5% of the Fund's total assets. Under normal circumstances, the
Fund will invest all of its assets in issuers that meet its social criteria as
set forth below and that offer investment potential. Because of the limitations
on investment imposed by the social criteria, the availability of investment
opportunities for the Fund may be limited as compared to those of similar funds
which do not impose such restrictions on investment.
The Social Awareness Fund will not invest in securities of companies that engage
in the production of nuclear energy, alcoholic beverages or tobacco products.
In addition, the Fund will not invest in securities of companies that
significantly engage in: (1) the manufacture of weapon systems; (2) practices
that, on balance, have a detrimental effect on the environment; or (3) the
gambling industry. The Fund will monitor the activities identified above to
determine whether they are significant to an issuer's business. Significance may
be determined on the basis of the percentage of revenue generated by, or the
size of operations attributable to, such activities. The Fund may invest in an
issuer that engages in the activities set forth above, in a degree that is not
deemed significant by the Investment Manager. In addition, the Fund will seek
out companies that have contributed substantially to the communities in which
they operate, have a positive record on employment relations, have made
substantial progress in the promotion of women and minorities or in the
implementation of benefit policies that support working parents, or have taken
notably positive steps in addressing environmental challenges.
The Investment Manager will evaluate an issuer's activities to determine whether
it engages in any practices prohibited by the Fund's social criteria. In
addition to its own research with respect to an issuer's activities, the
Investment Manager will also rely on other organizations that publish
information for investors concerning the social policy implications of corporate
activities. The Investment Manager may rely upon information provided by
advisory firms that provide social research on U.S. corporations, such as
Kinder, Lydenberg & Domini & Co., Inc., Franklin Insight, Inc. and
Prudential-Bache Capital Funding. Investment selection on the basis of social
attributes is a relatively new practice and the sources for this type of
information are not well established. The Investment Manager will continue to
identify and monitor sources of such information to screen issuers which do not
meet the social investment restrictions of the Fund.
If after purchase of an issuer's securities by Social Awareness Fund, it is
determined that such securities do not comply with the Fund's social criteria,
the securities will be eliminated from the Fund's portfolio within a reasonable
time. This requirement may cause the Fund to dispose of a security at a time
when it may be disadvantageous to do so. All companies in the DSI 400 will be
deemed to comply with the Fund's social criteria. Portfolio turnover is the
percentage of the lower of security sales or purchases to the average portfolio
value and would be 100% if all securities in the Fund were replaced within a
period of one year.
MID CAP VALUE FUND (FORMERLY VALUE FUND). The investment objective of Mid Cap
Value Fund is to seek long-term growth of capital. The Fund will seek to achieve
its objective through investment in a diversified portfolio of securities. Under
normal circumstances the Fund will consist primarily of various types of common
stock, which may include ADRs, and securities convertible into common stocks
which the Investment Manager believes are undervalued relative to assets,
earnings, growth potential or cash flows. See the discussion of ADRs under
"Investment Methods and Risk Factors." Under normal circumstances, the Fund will
invest at least 65% of its total assets in the securities of companies which the
Investment Manager believes are undervalued.
The Mid Cap Value Fund may also invest in (i) preferred stocks; (ii) warrants;
and (iii) investment grade debt securities (or unrated securities of comparable
quality). The Fund may purchase securities on a "when-issued," "forward
commitment" or "delayed delivery" basis in excess of customary settlement
periods for the type of security involved. As an operating policy, the Fund may
not invest more than 10% of its total assets in securities which are restricted
as to disposition under the federal securities laws. The Fund may purchase
without regard to this limitation, restricted securities which are eligible for
resale pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A
Securities") subject to the Fund's policy that not more than 15% of its net
assets may be invested in illiquid securities. The Fund may also invest in any
other type of security or instrument whose investment characteristics are
consistent with the Fund's investment program. The Fund reserves the right to
invest its assets temporarily in cash and money market instruments when, in the
opinion of the Investment Manager, it is advisable to do so on account of
current or anticipated market conditions. The Fund may utilize repurchase
agreements on an overnight basis or bank demand accounts, pending investment in
securities or to meet potential redemptions or expenses. See the discussion of
when-issued securities, restricted securities and repurchase agreements under
"Investment Methods and Risk Factors."
Portfolio turnover is the percentage of the lower of security sales or purchases
to the average portfolio value and would be 100% if all securities in the Fund
were replaced within a period of one year. A 100% turnover rate is substantially
greater than that of most mutual funds.
SMALL CAP GROWTH FUND (FORMERLY SMALL COMPANY FUND). The investment objective of
Small Cap Growth Fund is to seek long-term growth of capital. The Fund invests
primarily in equity securities of small market capitalization companies ("small
company stocks"). Market capitalization means the total market value of a
company's outstanding common stock. The Fund anticipates that under normal
market conditions, the Fund will invest at least 65% of its assets in equity
securities of domestic and foreign companies with market capitalizations
substantially similar to that of the companies in the Russell 2000 Growth Index
at the time of purchase. The equity securities in which the Fund may invest
include common stocks, preferred stocks (both convertible and non-convertible),
warrants and rights. It is anticipated that the Fund will invest primarily in
companies whose securities are traded on foreign or domestic stock exchanges or
in the OTC market. The Fund also may invest in securities of emerging growth
companies. Emerging growth companies are companies which have passed their
start-up phase and which show positive earnings and prospects of achieving
significant profit and gain in a relatively short period of time.
Under normal conditions, the Fund intends to invest primarily in small company
stocks; however, the Fund is also permitted to invest up to 35% of its assets in
equity securities of domestic and foreign issuers with market capitalizations
which exceed that of companies in the Russell 2000 Growth Index, debt
obligations and domestic and foreign money market instruments, including bankers
acceptances, certificates of deposit and discount notes of U.S. Government
securities. Debt obligations in which the Fund may invest will be investment
grade debt obligations, although the Fund may invest up to 5% of its assets in
non-investment grade debt obligations. In addition, for temporary or emergency
purposes, the Fund can invest up to 100% of total assets in cash, cash
equivalents, U.S. Government securities, commercial paper and certain other
money market instruments, as well as repurchase agreements collateralized by
these types of securities. The Fund also may invest in reverse repurchase
agreements and shares of non-affiliated investment companies. The Fund may also
invest in any other type of security or instrument whose investment
characteristics are consistent with the Fund's investment program. See the
discussion of such securities under "Investment Methods and Risk Factors."
The Fund may purchase an unlimited number of foreign securities, including
securities of companies in emerging markets. The Fund may invest in foreign
securities, either directly or indirectly through the use of depositary
receipts. Depositary receipts, including ADRs, European Depository Receipts
("EDRs") and American Depository Shares are generally issued by banks or trust
companies and evidence ownership of underlying foreign securities. The Fund also
may invest in securities of foreign investment funds or trusts (including
passive foreign investment companies). See the discussion of foreign securities,
emerging growth stocks, currency risk and ADRs under "Investment Methods and
Risk Factors."
Some of the countries in which the Fund may invest may not permit direct
investment by outside investors. Investment in such countries may only be
permitted through foreign government-approved or government-authorized
investment vehicles, which may include other investment companies. Investing
through such vehicles may involve frequent or layered fees or expenses and may
also be subject to limitation under the Investment Company Act of 1940. See
"Investment Methods and Risk Factors" - "Shares of Other Investment Companies"
for more information.
The Fund may purchase and sell foreign currency on a spot basis and may engage
in forward currency contracts, currency options and futures transactions for
hedging or risk management purposes. See the discussion of currency risk under
"Investment Methods and Risk Factors."
At various times the Fund may invest in derivative instruments for hedging or
risk management purposes or for any other permissible purpose consistent with
the Fund's investment objective. Derivative transactions in which the Fund may
engage include the writing of covered put and call options on securities and the
purchase of put and call options thereon, the purchase of put and call options
on securities indexes and exchange-traded options on currencies and the writing
of put and call options on securities indexes. The Fund may enter into spread
transactions and swap agreements. The Fund also may buy and sell financial
futures contracts which may include interest-rate futures, futures on currency
exchanges, and stock and bond index futures contracts. The Fund may enter into
any futures contracts and related options without limit for "bona fide hedging"
purposes (as defined in the Commodity Futures Trading Commission regulations)
and for other permissible purposes, provided that aggregate initial margin and
premiums on positions engaged in for purposes other than "bona fide hedging"
will not exceed 5% of its net asset value, after taking into account unrealized
profits and losses on such contracts. See "Investment Methods and Risk Factors"
for more information on options, futures (and options thereon) and other
derivative instruments.
The Fund may acquire warrants which are securities giving the holder the right,
but not the obligation, to buy the stock of an issuer at a given price
(generally higher than the value of the stock at the time of issuance), on a
specified date, during a specified period, or perpetually. Warrants may be
acquired separately or in connection with the acquisition of securities. As an
operating policy, the Fund may purchase warrants, valued at the lower of cost or
market value, of up to 5% of the Fund's net assets. Included in that amount, but
not to exceed 2% of the Fund's net assets, may be warrants that are not listed
on any recognized U.S. or foreign stock exchange. Warrants acquired by the Fund
in units or attached to securities are not subject to these restrictions.
The Fund may engage in short selling against the box, provided that no more that
15% of the value of the Fund's net assets is in deposits on short sales against
the box at any one time. The Fund also may invest in REITs and other real estate
industry companies or companies with substantial real estate investments. See
the discussion of real estate securities under "Investment Methods and Risk
Factors."
As an operating policy, the Fund may not invest more than 10% of its total
assets in securities which are restricted as to disposition under the federal
securities laws. The Fund may purchase without regard to this limitation,
restricted securities which are eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 ("Rule 144A Securities") subject to the Fund's policy
that not more than 15% of its net assets may be invested in illiquid securities.
See the discussion of restricted securities under "Investment Methods and Risk
Factors." The Fund also may invest without limitation in securities purchased on
a "when-issued," "forward commitment" or "delayed delivery" basis as discussed
under "Investment Methods and Risk Factors."
While there is careful selection and constant supervision by the Fund's
Sub-Adviser, Strong, there can be no guarantee that the Fund's objective will be
achieved. Strong invests in companies whose earnings are believed to be in a
relatively strong growth trend, and, to a lesser extent, in companies in which
significant further growth is not anticipated but which are perceived to be
undervalued. In identifying companies with favorable growth prospects, Strong
considers factors such as prospects for above-average sales and earnings growth;
high return on invested capital; overall financial strength; competitive
advantages, including innovative products and services; effective research,
product development and marketing; and stable, capable management.
Investing in securities of small-sized and emerging growth companies may involve
greater risks than investing in larger, more established issuers since these
securities may have limited marketability and, thus, they may be more volatile
than securities of larger, more established companies or the market averages in
general. Because small-sized companies normally have fewer shares outstanding
than larger companies, it may be more difficult for the Fund to buy or sell
significant numbers of such shares without an unfavorable impact on prevailing
prices. Small-sized companies may have limited product lines, markets or
financial resources and may lack management depth. In addition, small-sized
companies are typically subject to wider variations in earnings and business
prospects than are larger, more established companies. There is typically less
publicly available information concerning small-sized companies than for larger,
more established ones.
Securities of issuers in "special situations" also may be more volatile, since
the market value of these securities may decline in value if the anticipated
benefits do not materialize. Companies in "special situations" include, but are
not limited to, companies involved in an acquisition or consolidation;
reorganization; recapitalization; merger, liquidation or distribution of cash,
securities or other assets; a tender or exchange offer, a breakup or workout of
a holding company; litigation which, if resolved favorably, would improve the
value of the companies' securities; or a change in corporate control.
Although investing in securities of emerging growth companies or issuers in
"special situations" offers potential for above-average returns if the companies
are successful, the risk exists that the companies will not succeed and the
prices of the companies' shares could significantly decline in value. Therefore,
an investment in the Fund may involve a greater degree of risk than an
investment in other mutual funds that seek long-term growth of capital by
investing in better-known, larger companies.
Portfolio turnover is the percentage of the lower of securities sales or
purchases to the average portfolio value and would be 100% if all securities in
the Fund were replaced within a period of one year. A 100% turnover rate is
substantially greater than that of most mutual funds.
ENHANCED INDEX FUND. The investment objective of the Enhanced Index Fund is to
outperform the Standard & Poor's 500 Composite Stock Price index (the "S&P
500(R) Index") through stock selection resulting in different weightings of
common stocks relative to the index.
The Fund will include the common stock of companies included in the S&P 500. The
S&P 500 is an index of 500 common stocks, most of which trade on the New York
Stock Exchange Inc. (the "NYSE"). The Sub-Adviser, Bankers Trust, believes that
the S&P 500 is representative of the performance of publicly traded common
stocks in the U.S. in general.
In seeking to outperform the S&P 500, the Sub-Adviser starts with a portfolio of
stocks representative of the holdings of the Index. It then uses a set of
quantitative criteria that are designed to indicate whether a particular stock
will predictably generate returns that will exceed or be less than the
performance of the S&P 500. Based on these criteria, the Sub-Adviser determines
whether the Fund should overweight, underweight or hold a neutral position in
the stock relative to the proportion of the S&P 500 that the stock represents.
While the majority of the issues held by the Fund will have neutral weightings
to the S&P 500, approximately 100 will be over or underweighted relative to the
index. In addition, the Sub-Adviser may determine based on the quantitative
criteria that certain S&P 500 stocks should not be held by the Fund in any
amount. The Fund may also invest in any other type of security or instrument
whose investment characteristics are consistent with the Fund's investment
program. As an operating policy, under normal market conditions, the Fund will
invest at least 80% of its assets in equity securities of companies in the index
and in futures contracts representative of the stocks in the index. The
Sub-Adviser intends to monitor the sector and security weightings of the Fund
relative to the composition of the S&P 500 Index. As noted in the prospectus,
the Sub-Adviser will overweight and underweight securities in the index based on
whether they believe a stock will generate returns that will exceed or be less
than the Index. While the Fund seeks to modestly outperform the S&P 500 Index,
the Fund expects that its returns will have a coefficient correlation of .90% or
better to the S&P 500 Index. The Sub-Adviser believes that the various
quantitative criteria used to determine which issues to over or underweight will
balance each other so that the overall risk of the Fund will not be materially
different than risk of the S&P 500 itself.
ABOUT THE S&P 500. The S&P 500 is a well-known stock market index that includes
common stocks of 500 companies from several industrial sectors representing a
significant portion of the market value of all common stocks publicly traded in
the United States, most of which are listed on the NYSE. Stocks in the S&P 500
are weighted according to their market capitalization (i.e., the number of
shares outstanding multiplied by the stock's current price). The composition of
the S&P 500 is determined by S&P and is based on such factors as the market
capitalization and trading activity of each stock and its adequacy as a
representation of stocks in a particular industry group, and may be changed from
time to time. "Standard & Poor's(R)", "S&P 500(R)", "Standard & Poor's 500", and
"500" are trademarks of the McGraw-Hill Companies, Inc. The Fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's, a division of the
McGraw-Hill Companies, Inc. ("S&P").
INVESTMENT CONSIDERATIONS. The Fund may be appropriate for investors who are
willing to endure stock market fluctuations in pursuit of potentially higher
long-term returns. The Fund invests primarily for growth. The Fund is intended
to be a long-term investment vehicle and is not designed to provide investors
with a means of speculating on short-term market movements.
As a mutual fund investing primarily in common stocks, the Fund is subject to
market risk--i.e., the possibility that common stock prices will decline over
short or even extended periods. The U.S. stock market tends to be cyclical, with
periods when stock prices generally rise and periods when prices generally
decline.
As a diversified mutual fund, no more than 5% of the assets of the Fund may be
invested in the securities of one issuer (other than U.S. Government
securities), except that up to 25% of the Fund's assets may be invested without
regard to this limitation. The Fund will not invest more than 25% of its assets
in the securities of issuers in any one industry. In the unlikely event that the
S&P 500 should concentrate to an extent greater than that amount, the Fund's
ability to achieve its objective may be impaired. No more than 15% of the
Portfolio's net assets may be invested in illiquid or not readily marketable
securities (including repurchase agreements and time deposits with maturities of
more than seven days).
The Fund may maintain up to 25% of its assets in short-term debt securities and
money market instruments to meet redemption requests or to facilitate investment
in the securities of the S&P 500. Securities index futures contracts and related
options, warrants and convertible securities may be used for several reasons: to
simulate full investment in the S&P 500 while retaining a cash fund for
management purposes, to facilitate trading, to reduce transaction costs or to
seek higher investment returns when a futures contract, option, warrant or
convertible security is priced more attractively than the underlying equity
security or S&P 500. These instruments may be considered derivatives. See
"Investment Methods and Risk Factors" for more information about futures,
options and warrants.
The following discussion contains more detailed information about types of
instruments in which the Fund may invest and strategies the Sub-Adviser may
employ in pursuit of the Fund's investment objective.
OTHER EQUITY SECURITIES. As part of one of the strategies used to outperform the
S&P 500, the Fund may invest in the equity securities of companies that are not
included in the S&P 500. These equity securities may include securities of
companies that are the subject of publicly announced acquisitions or other major
corporate transactions. Securities of some of these companies may perform much
like a fixed income investment because the market anticipates that the
transaction will likely be consummated, resulting in a cash payment for the
securities. In such cases, the Fund may enter into securities index futures
contracts and/or related options as described in this statement of additional
information in order to maintain its exposure to the equity markets when
investing in these companies. While this strategy is intended to generate
additional gains for the Fund without materially increasing the risk to which
the Fund is subject, there can be no assurance that the strategy will achieve
its intended results.
SHORT-TERM INSTRUMENTS. When the Fund experiences large cash inflows through the
sale of securities and desirable equity securities that are consistent with the
Fund's investment objective are unavailable in sufficient quantities or at
attractive prices, the Fund may hold short-term investments for a limited time
pending availability of such equity securities. Short-term instruments consist
of: (i) short-term obligations issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities or by any of the states; (ii) other
short-term debt securities rated AA or higher by S&P or Aa or higher by Moody's
or, if unrated, of comparable quality in the opinion of the Sub-Adviser; (iii)
commercial paper; (iv) bank obligations, including negotiable certificates of
deposit, time deposits and bankers' acceptances; and (v) repurchase agreements.
At the time the Fund invests in commercial paper, bank obligations or repurchase
agreements, the issuer or the issuer's parent must have outstanding debt rated
AA or higher by S&P or Aa or higher by Moody's or outstanding commercial paper
or bank obligations rated A-1 by S&P or Prime-1 by Moody's; or, if no such
ratings are available, the instrument must be of comparable quality in the
opinion of the Sub-Adviser.
U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations issued or
guaranteed by U.S. Government, its agencies or instrumentalities. These
obligations may or may not be backed by the "full faith and credit" of the
United States. In the case of securities not backed by the full faith and credit
of the United States, the Fund must look principally to the federal agency
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments. Securities in which the Fund
may invest that are not backed by the full faith and credit of the United States
include, but are not limited to, obligations of the Tennessee Valley Authority,
the Federal Home Loan Mortgage Corporation and the U.S. Postal Service, each of
which has the right to borrow from the U.S. Treasury to meet its obligations,
and obligations of the Federal Farm Credit System and the Federal Home Loan
Banks, both of whose obligations may be satisfied only by the individual credits
of each issuing agency. Securities which are backed by the full faith and credit
of the United States include obligations of the Government National Mortgage
Association, the Farmers Home Administration, and the Export-Import Bank.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Funds may purchase securities
on a "when-issued" or "delayed delivery" basis. For example, delivery of and
payment for these securities can take place a month or more after the date of
the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
the settlement date is fixed. The value of such securities is subject to market
fluctuation and no interest accrues to the Portfolio until settlement takes
place. See "Investment Methods and Risk Factors" - "When Issued Securities" for
more information.
EQUITY INVESTMENTS. The Fund may invest in equity securities listed on any
domestic securities exchange or traded in the OTC market as well as certain
restricted or unlisted securities. They may or may not pay dividends or carry
voting rights. Common stock occupies the most junior position in a company's
capital structure.
REVERSE REPURCHASE AGREEMENTS. The Fund may borrow funds for temporary or
emergency purposes, such as meeting larger than anticipated redemption requests,
and not for leverage, by among other things, agreeing to sell portfolio
securities to financial institutions such as banks and broker-dealers and to
repurchase them at a mutually agreed date and price (a "reverse repurchase
agreement"). At the time the Fund enters into a reverse repurchase agreement it
will place in a segregated custodial account cash or other liquid assets having
a value equal to the repurchase price, including accrued interest. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by the Fund may decline below the repurchase price of those securities.
Reverse repurchase agreements are considered to be borrowings by the Fund.
CONVERTIBLE SECURITIES. Convertible securities may be debt securities or
preferred stocks that may be converted into common stock or that carry the right
to purchase common stock. Convertible securities entitle the holder to exchange
the securities for a specified number of shares of common stock, usually of the
same company, at specified prices within a certain period of time.
The terms of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holders' claims on assets and earnings are subordinated to the claims of other
creditors, and are senior to the claims of preferred and common shareholders. In
the case of preferred stock, the holders' claims on assets and earnings are
subordinated to the claims of all creditors and are senior to the claims of
common shareholders.
DERIVATIVES. The Fund may invest in various instruments that are commonly known
as derivatives. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use
them. There are a range of risks associated with those uses. Futures and options
are commonly used for traditional hedging purposes to attempt to protect a fund
from exposure to changing interest rates, securities prices or currency exchange
rates and as a low cost method of gaining exposure to a particular securities
market without investing directly in those securities.
The Fund will only use derivatives for hedging purposes. While derivatives can
be used as leveraged investments, the Fund may not use them to leverage its net
assets. Derivatives will not be used to increase portfolio risk above the level
that would be achieved using only traditional investment securities or to
acquire exposure to changes in the value of assets or indices that by themselves
would not be purchased for the Fund. The Fund will not invest in such
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect against potential market declines. See
"Investment Methods and Risk Factors" for more information about options and
futures.
INTERNATIONAL FUND. The investment objective of International Fund is long-term
capital appreciation from investment in foreign equity securities (or other
securities with equity characteristics); the production of any current income is
incidental to this objective. The Fund invests primarily in established
companies based in developed countries outside the United States, but may also
invest in emerging market securities. There can be no assurance that the
investment objective of the Fund will be achieved.
The Fund is designed for investors who are willing to accept short-term domestic
and/or foreign stock market fluctuations in pursuit of potentially higher
long-term returns.
The Fund is not itself a balanced investment plan. Investors should consider
their investment objective and tolerance for risk when making an investment
decision.
The value of the Fund's investments varies based upon many factors. Stock values
fluctuate, sometimes dramatically, in response to the activities of individual
companies and general market and economic conditions. Over time, however, stocks
have shown greater long-term growth potential than other types of securities.
Lower quality securities offer higher yields, but also carry more risk. Because
many foreign investments are denominated in foreign currencies, changes in the
value of these currencies can significantly affect the Fund's share price.
General economic factors in the various world markets can also impact the value
of an investor's investment. When an investor sells his or her shares, they may
be worth more or less than what the investor paid for them.
The following is a discussion of the various investments of and techniques
employed by the Fund. Additional information about the investment policies of
the Fund appears in "Investment Methods and Risk Factors" herein.
Under normal circumstances, the Fund will invest at least 65% of the value of
its total assets in the equity securities of foreign issuers, consisting of
common stock and other securities with equity characteristics. These issuers are
primarily established companies based in developed countries outside the United
States. However the Fund may also invest in securities of issuers in
underdeveloped countries. Investments in these countries will be based upon what
the Sub-Adviser, Bankers Trust, believes to be an acceptable degree of risk in
anticipation of superior returns. The Fund will at all times be invested in the
securities of issuers based in at least three countries other than the United
States. For further discussion of the unique risks associated with investing in
foreign securities in both developed and underdeveloped countries, see
"Investment Objectives and Risk Factors" - "Certain Risks of Foreign Investing".
The Fund's investment will generally be diversified among several geographic
regions and countries. Criteria for determining the appropriate distribution of
investments among various countries and regions include the prospects for
relative growth among foreign countries, expected levels of inflation,
government policies influencing business conditions, the outlook for currency
relationships and the range of alternative opportunities available to
international investors.
In countries and regions with well-developed capital markets where more
information is available, Bankers Trust will seek to select individual
investments for the Fund. Criteria for selection of individual securities
include the issuer's competitive position, prospects for growth, management
strength, earnings quality, underlying asset value, relative market value and
overall marketability. The Fund may invest in securities of companies having
various levels of net worth, including smaller companies whose securities may be
more volatile than securities offered by larger companies with higher levels of
net worth.
In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, the Fund may choose to
invest only at the market level. Here the Fund may seek to achieve country
exposure through use of options or futures based upon an established index of
securities issued by local issuers. Similarly, country exposure may also be
achieved through investments in other registered investment companies.
Restrictions on both these types of investment are more fully described below.
The remainder of the Fund's assets will be invested in dollar and non-dollar
denominated short-term instruments. These investments are subject to the
conditions discussed in more detail below.
The Fund invests primarily in common stocks and other securities with equity
characteristics. For purposes of the Fund's policy of investing at least 65% of
the value of its total assets in the equity securities of foreign issuers,
"equity securities" are defined as common stock, preferred stock, trust or
limited partnership interests, rights and warrants, and convertible securities
(consisting of debt securities or preferred stock that may be converted into
common stock or that carry the right to purchase common stock). The Fund invests
in securities listed on foreign or domestic securities exchanges and securities
traded in foreign or domestic over-the-counter markets and may invest in
restricted or unlisted securities.
As an operating policy, the Fund may not invest more than 10% of its total
assets in securities which are restricted as to disposition under the federal
securities laws. The Fund may purchase without regard to this limitation,
restricted securities which are eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 ("Rule 144A Securities") subject to the Fund's policy
that not more than 15% of its total assets may be invested in illiquid
securities.
The Fund may also utilize the following investments and investment techniques
and practices: American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRS"), European Depositary Receipts ("EDRs"), when-issued and delayed
delivery securities, securities lending, repurchase agreements, foreign currency
exchange transactions, options on stocks, options on foreign stock indices,
futures contracts on foreign stock indices, and options on futures contracts.
The Fund may also invest in any other type of security or instrument whose
investment characteristics are consistent with the Fund's investment program.
See "Investment Methods and Risk Factors" for further information.
The Fund intends to stay invested in the securities described above to the
extent practical in light of its objective and long-term investment perspective.
However the Fund assets may be invested in short-term instruments with remaining
maturities of 397 days or less (or in money market mutual funds) to meet
anticipated redemptions and expenses or for day-to-day operating purposes and
when, in the Sub-Adviser's opinion, it is advisable to adopt a temporary
defensive position because of unusual or adverse conditions affecting the equity
markets. In addition, when the Fund experiences large cash inflows through the
sale of securities, and desirable equity securities that are consistent with the
Fund's investment objective are unavailable in sufficient quantities or at
attractive prices, the Fund may hold short-term investments for a limited time
pending availability of such equity securities. Short-term instruments consist
of foreign and domestic: (i) short-term obligations of sovereign governments,
their agencies, instrumentalities, authorities or political subdivisions; (ii)
other short-term debt securities rated Aa or higher by Moody's Investors
Service, Inc. ("Moody's") or AA or higher by Standard & Poor's Ratings Services
("S&P") or, if unrated, of comparable quality in the opinion of the Sub-Adviser;
(iii) commercial paper; (iv) bank obligations, including negotiable certificates
of deposit, time deposits and bankers' acceptances; and (v) repurchase
agreements. At the time the Fund invests in commercial paper, bank obligations
or repurchase agreements, the issuer or the issuer's parent must have
outstanding commercial paper or bank obligations rated Prime-1 by Moody's or A-1
by S&P; or, if no such ratings are available, the instrument must be of
comparable quality in the opinion of the Sub-Adviser. These instruments may be
denominated in U.S. dollars or in foreign currencies that have been determined
to be of high quality by a nationally recognized statistical rating
organization, or if unrated, by the Sub-Adviser. For more information on these
rating categories see "Appendix A."
As a diversified mutual fund, no more than 5% of the assets of the Fund may be
invested in the securities of one issuer (other than U.S. Government
securities), except that up to 25% of the Fund's assets may be invested without
regard to this limitation. The Fund will not invest more than 25% of its assets
in the securities of issuers in any one industry. No more than 15% of the Fund's
net assets may be invested in illiquid or not readily marketable securities
(including repurchase agreements and time deposits maturing in more than seven
calendar days).
SELECT 25 FUND. The investment objective of Select 25 Fund is to seek long-term
growth of capital. It is a diversified fund that pursues its objective by
normally concentrating its investments in a core position of 20-30 common stocks
of growth companies which have exhibited consistent above average earnings
growth. The Investment Manager selects as the core position for the Fund, what
it believes to be premier growth companies. The Investment Manager uses a
"bottom-up" approach in selecting growth stocks. Portfolio holdings will be
replaced when one or more of the companies' fundamentals have changed and, in
the opinion of the Investment Manager, it is no longer a premier growth company.
There can be no assurance that the Fund's objective will be achieved.
The Fund may invest in (i) common stocks; (ii) preferred stocks; (iii) foreign
securities (including ADRs); and (iv) investment grade debt securities (or
unrated securities of comparable quality). The Fund may purchase securities on a
"when-issued" or "delayed delivery" basis in excess of customary settlement
periods for the type of security involved. As an operating policy, the Fund may
not invest more than 10% of its total assets in securities which are restricted
as to disposition under the federal securities laws. The Fund may purchase
without regard to this limitation, restricted securities which are eligible for
resale pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A
Securities") subject to the Fund's policy that not more than 15% of its net
assets may be invested in illiquid securities. The Fund may also invest in any
other type of security or instrument whose investment characteristics are
consistent with the Fund's investment program. The Select 25 Fund reserves the
right to invest its assets temporarily in cash and money market instruments
when, in the opinion of the Investment Manager, it is advisable to do so on
account of current or anticipated market conditions. The Fund may utilize
repurchase agreements on an overnight basis or bank demand accounts, pending
investment in securities or to meet potential redemptions or expenses. See the
discussion of foreign securities, when issued securities, restricted securities
and repurchase agreements under "Investment Methods and Risk Factors."
LARGE CAP GROWTH FUND. The investment objective of the Large Cap Growth Fund is
long-term capital growth. It pursues this objective by primarily investing in
common stock and other equity securities of large capitalization companies that,
in the opinion of the Investment Manager, have long-term capital growth
potential. The Fund invests primarily in a portfolio of common stocks, which may
include American Depository Receipts ("ADRs") or securities with common stock
characteristics, such as securities convertible to common stocks. The Fund also
may invest in preferred stocks, bonds and other debt securities. Since
investments are made based on their potential for long-term capital growth, any
current income that the Fund may earn is expected to be incidental to the
objective of long-term capital growth. The Fund invests for long-term growth of
capital and does not intend to place emphasis upon short-term trading profits.
The Fund defines large capitalization companies as those whose total market
value is at least $5 billion at the time of purchase. The Fund is
non-diversified within the meaning of the Investment Company Act of 1940, which
means that it may hold a larger position in a smaller number of securities than
a diversified fund. The Fund may also concentrate its investments in a
particular industry or group of related industries, although it has no present
intention of doing so.
The Investment Manager uses a growth-oriented strategy to choose stocks, which
means that it invests in companies whose earnings are believed to be in a
relatively strong growth trend. In identifying companies with favorable growth
prospects, the Investment Manager considers factors such as prospects for
above-average sales and earnings growth; high return on invested capital;
overall financial strength; competitive advantages, including innovative
products and services; effective research, product development and marketing;
and stable, capable management.
To manage risk in declining or volatile markets, the Investment Manager may
invest more in cash, fixed-income securities and stocks that provide income.
Fixed-income securities include U.S. government securities, foreign debt
securities that are denominated in U.S. dollars and high yield securities (also
referred to as "junk bonds"). Although the Fund would do this only in seeking to
avoid losses, the Fund may be unable to pursue its investment objective during
that time, and it could reduce the benefit from any upswing in the market.
The Large Cap Growth Fund may purchase securities that have not been registered
under the federal securities laws, provided that the securities are eligible for
resale pursuant to Rule 144A.
The Large Cap Growth Fund may enter into futures contracts (a type of
derivative) (or options thereon) to hedge all or a portion of its portfolio or
as an efficient means of adjusting its exposure to the stock market or to
increase returns. The Fund may also write call and put options on a covered
basis and purchase put and call options on securities and financial indices.
From time to time, the Fund may purchase securities on a "when-issued" or
"delayed delivery" basis in excess of customary settlement periods for the type
of security involved. Securities purchased on a when-issued basis are subject to
market fluctuation and no interest or dividends accrue to the Fund prior to the
settlement date. The Fund will establish a segregated account in which it will
maintain cash or liquid securities equal in value to commitments for such
when-issued or delayed delivery securities. Such segregated account may either
be maintained with the Fund's custodian bank or may simply be maintained on the
Fund's books. The Fund also may invest in warrants (other than those attached to
other securities) which entitle the holder to buy equity securities at a
specific price during or at the end of a particular period. A warrant ceases to
have value if it is not exercised prior to its expiration date. For a discussion
of the risks associated with the securities and investment techniques available
to the Large Cap Growth Fund, see the "Investment Methods and Risk Factors"
section of this statement of additional information.
TECHNOLOGY FUND. The objective of the Technology Fund is long-term capital
appreciation. The Fund pursues its objective by investing, under normal
circumstances, at least 80% of its total assets in the equity securities of
technology companies. The Fund will be concentrated and expects to hold
approximately 30 to 50 positions. The Fund is non-diversified within the meaning
of the Investment Company Act of 1940. The Fund may invest up to 40% of its
total assets in foreign securities. The Fund may actively trade its investments
without regard to the length of time they have been owned by the Fund.
The Sub-Adviser, Wellington Management Company, LLP, uses fundamental analysis
to choose technology securities in foreign and U.S. markets. The Funds'
investment approach is based on analyzing the competitive outlook for the
technology sector, identifying those industries likely to benefit from the
current and expected future environment, and identifying individual
opportunities. The Sub-adviser's evaluation of technology companies rests on its
solid knowledge of the overall competitive environment including supply and
demand characteristics, trends, existing product evaluations, and new product
developments within the technology sector. Fundamental research is focused on
direct contact with company management, suppliers, and competitors.
Asset allocation within the Fund reflects the Sub-adviser's opinion of the
relative attractiveness of stocks within the industries of the technology
sector, near term macroeconomic events that may detract or enhance an industry's
attractiveness, and the number of undervalued opportunities in each industry.
Opportunities dictate the magnitude and frequency of changes in asset allocation
among industries, but some representation typically is maintained in each major
industry, including computer software, computer hardware, semiconductors and
equipment, communications equipment, and internet and new media.
Stocks considered for purchase typically share the following
attributes:
* A positive change in operating results is anticipated
* Unrecognized or undervalued capabilities are present
* The quality of management indicates that these factors will be converted to
shareholder values.
Stocks will be considered for sale from the Fund when:
* Target prices are achieved
* Earnings and/or return expectations are marked down due to fundamental
changes in the company's operating outlook
* More attractive value in a comparable company is available.
The Fund may invest in securities denominated in any currency. The Fund may
invest a portion of its assets in options, futures and forward currency
contracts. Generally, these derivative instruments involve the obligation, in
the case of futures and forwards, or the right, in the case of options, to
purchase or sell financial instruments in the present or at a future date. These
derivatives strategies will be used:
* To adjust the portfolio's exposure to a particular currency
* To manage risk
* As a substitute for purchasing or selling securities
The Fund intends to enter into repurchase agreements only with banks and
broker/dealers believed by the Sub-Adviser to present minimal credit risks in
accordance with guidelines approved by the Fund's Board of Directors. The
Sub-Adviser will review and monitor the creditworthiness of such counterparties.
The Fund will not enter into a repurchase agreement with a maturity of more than
seven days if, as a result, more than 15% of the value of its total net assets
would be invested in such repurchase agreements and other illiquid investments
and securities for which no readily available market exists.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash, fixed-income securities, money market securities or repurchase
agreements. Although the Fund would do this only in seeking to avoid losses, it
could reduce the benefit from any upswing in the market. For a discussion of the
risks associated with the securities and investment techniques available to the
Technology Fund, see the "Investment Methods and Risk Factors" section of this
statement of additional information.
SECURITY ULTRA FUND -- The investment objective of Ultra Fund is to seek capital
appreciation. Investment securities will be selected on the basis of their
appreciation possibilities. Current income will not be a factor in selecting
investments and any such income should be considered incidental.
There can be no assurance that the investment objective of Ultra Fund will be
achieved. Nevertheless, the Fund hopes, by careful selection of individual
securities and by supervision of the investment portfolio, to increase the value
of the Fund's shares.
Stocks considered to have growth potential will include securities of newer,
unseasoned companies and may involve greater risks than investments in companies
with demonstrated earning power. At times Ultra Fund may invest in warrants to
purchase (or securities convertible into) common stocks or in other classes of
securities which the Investment Manager believes will contribute to the
attainment of its investment objective. The Fund may also invest in any other
type of security or instrument whose investment characteristics are consistent
with the Fund's investment program. Securities other than common stock may be
held, but Ultra Fund will not normally invest in fixed income securities except
for defensive purposes or to employ uncommitted cash balances. Ultra Fund
expects that it may invest in certificates of deposit issued by banks or other
bank demand accounts, pending investment in other securities or to meet
potential redemptions or expenses. Ultra Fund will not concentrate its
investments in a particular industry or group of industries. As an operating
policy, the Fund may not invest more than 10% of its total assets in securities
which are restricted as to disposition under the federal securities laws. The
Fund may purchase without regard to this limitation, restricted securities which
are eligible for resale pursuant to Rule 144A under the Securities Act of 1933
("Rule 144A Securities") subject to the Fund's policy that not more than 15% of
its net assets may be invested in illiquid securities.
The Fund may enter into futures contracts to hedge all or a portion of its
portfolio, as an efficient means of adjusting its exposure to the stock market
or to increase returns. The Fund will limit its use of futures contracts so that
initial margin deposits or premiums on such contracts used for non-hedging
purposes will not equal more than 5% of the Fund's net asset value. The Fund may
also invest in options contracts. See "Investment Methods and Risk Factors."
The Fund may invest in a variety of investment companies, including those that
seek to track the composition and performance of a specific index. The Fund may
use these index-based investments as a way of managing its cash position, to
gain exposure to the equity markets, or a particular sector of the equity
market, while maintaining liquidity.
In seeking capital appreciation, Ultra Fund expects to trade to a substantial
degree in securities for the short term. That is, Ultra Fund will be engaged
essentially in trading operations based on short term market considerations, as
distinct from long-term investments, based upon fundamental evaluation of
securities. Investments for long-term profits are made when such action is
considered to be sound and helpful to Ultra Fund's overall objective. This
investment policy is very speculative and involves substantial risk. An investor
should not consider a purchase of Ultra Fund's shares as equivalent to a
complete investment program.
Since Ultra Fund will trade securities for the short term, the annual portfolio
turnover rate generally may be expected to be greater than 100%. Portfolio
turnover is the percentage of the lower of security sales or purchases to the
average portfolio value and would be 100% if all securities in Ultra Fund were
replaced within a period of one year. A 100% turnover rate is substantially
greater than that of most mutual funds. Short-term investments increase
portfolio turnover and brokerage costs to Ultra Fund and thus to its
stockholders. Moreover, to the extent short-term transactions result in the
realization of net gains in securities held less than one year, Ultra Fund's
stockholders will be taxed on any such gains at ordinary income tax rates.
Ultra Fund will not make short sales of securities unless at the time of such
sales it owns or has the right to acquire, as a result of the ownership of
convertible or exchangeable securities and without the payment of further
consideration, an equal amount of such securities, and it will retain such
securities so long as it is in a short position as to them. Should such
securities be sold short, the underlying security will be valued at the asked
price. Such short sales will be used by Ultra Fund only for the purpose of
deferring recognition of gain or loss for federal income tax purposes.
The foregoing investment objective and policies of Ultra Fund may be altered by
the Board of Directors without the approval of stockholders.
INVESTMENT METHODS AND RISK FACTORS
Some of the risk factors related to certain securities, instruments and
techniques that may be used by one or more of the Funds are described in the
"Main Risks" and "Investment Policies and Management Practices" sections of the
applicable prospectus and in this Statement of Additional Information. The
following is a description of certain additional risk factors related to various
securities, instruments and techniques. The risks so described only apply to
those Funds which may invest in such securities and instruments or which use
such techniques. Also included is a general description of some of the
investment instruments, techniques and methods which may be used by one or more
of the Funds. The methods described only apply to those Funds which may use such
methods. Although a Fund may employ the techniques, instruments and methods
described below, consistent with its investment objective and policies and any
applicable law, no Fund will be required to do so.
SHARES OF OTHER INVESTMENT COMPANIES -- Each of the Funds may invest in shares
of other investment companies. Investment in the shares of other investment
companies has the effect of requiring shareholders to pay the operating expenses
of two mutual funds.
REPURCHASE AGREEMENTS -- Each of the Funds may utilize repurchase agreements on
an overnight basis (or with maturities of up to seven days in the case of
Global, Small Cap Growth, Enhanced Index International and Technology Funds)
wherein the Fund acquires a debt instrument for the short period, subject to the
obligation of the seller to repurchase and the Fund to resell such debt
instrument at a fixed price. Although each of the Funds may enter into
repurchase agreements with respect to any portfolio securities which it may
acquire consistent with its investment policies and restrictions, it is the
intention of each Fund, except Small Cap Growth, Enhanced Index International
and Technology Funds to enter into repurchase agreements only with respect to
obligations of the United States Government or its agencies or instrumentalities
to meet anticipated redemptions or pending investment or reinvestment of Fund
assets in portfolio securities. The Funds, except the Enhanced Index
International and Technology Funds, will enter into repurchase agreements only
with (i) banks which are members of the Federal Reserve System, or (ii)
securities dealers (if permitted to do so under the Investment Company Act of
1940) who are members of a national securities exchange or market makers in
government securities. The Enhanced Index and International Funds may enter into
repurchase agreements only with issuers who, individually or with the issuer's
parent, have outstanding debt rated AA or higher by S&P or Aa or higher by
Moody's or outstanding commercial paper or bank obligations rated A-1 by S&P or
Prime-1 by Moody's; or if no such ratings are available, the instrument must be
of comparable quality in the opinion of Bankers Trust. Such repurchase
agreements may subject the Funds to the risks that (i) they may not be able to
liquidate the securities immediately upon the insolvency of the other party, or
(ii) that amounts received in closing out a repurchase transaction might be
deemed voidable preferences upon the bankruptcy of the other party. In the
opinion of the Investment Manager, such risks are not material.
WHEN ISSUED AND FORWARD COMMITMENT SECURITIES -- Purchase or sale of securities
on a "forward commitment" basis may be used to hedge against anticipated changes
in interest rates and prices. The price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. When issued securities and forward
commitments may be sold prior to the settlement date, but the Funds will enter
into when issued and forward commitments only with the intention of actually
receiving or delivering the securities, as the case may be; however, a Fund may
dispose of a commitment prior to settlement if the Investment Manager deems it
appropriate to do so. No income accrues on securities which have been purchased
pursuant to a forward commitment or on a when issued basis prior to delivery of
the securities. If a Fund disposes of the right to acquire a when issued
security prior to its acquisition or disposes of its right to deliver or receive
against a forward commitment, it may incur a gain or loss. At the time a Fund
enters into a transaction on a when issued or forward commitment basis, a
segregated account consisting of cash or liquid securities equal to the value of
the when issued or forward commitment securities will be established and
maintained with its custodian and will be marked to market daily. There is a
risk that the securities may not be delivered and that the Fund may incur a
loss.
AMERICAN DEPOSITARY RECEIPTS -- Each of the Funds may purchase ADRs which are
dollar-denominated receipts issued generally by U.S. banks and which represent
the deposit with the bank of a foreign company's securities. ADRs are publicly
traded on exchanges or over-the-counter in the United States. Investors should
consider carefully the substantial risks involved in investing in securities
issued by companies of foreign nations, which are in addition to the usual risks
inherent in domestic investments. ADRs, European Depositary Receipts ("EDRs")
and Global Depository Receipts ("GDRs") or other securities convertible into
securities of issuers based in foreign countries are not necessarily denominated
in the same currency as the securities into which they may be converted. In
general, ADRs, in registered form, are denominated in U.S. dollars and are
designed for use in the U.S. securities markets, while EDRs (also referred to as
Continental Depositary Receipts ("CDRs"), in bearer form, may be denominated in
other currencies and are designed for use in European securities markets. ADRs
are receipts typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities. EDRs are European receipts evidencing a
similar arrangement. GDRs are global receipts evidencing a similar arrangement.
For purposes of the Fund's investment policies, ADRs, EDRs and GDRs are deemed
to have the same classification as the underlying securities they represent.
Thus, an ADR, EDR or GDR representing ownership of common stock will be treated
as common stock.
Depositary receipts are issued through "sponsored" or "unsponsored" facilities.
A sponsored facility is established jointly by the issuer of the underlying
security and a depositary, whereas a depositary may establish an unsponsored
facility without participation by the issuer of the deposited security. Holders
of unsponsored depositary receipts generally bear all the cost of such
facilities and the depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through voting rights to the holders of such
receipts in respect of the deposited securities.
RESTRICTED SECURITIES -- Restricted securities cannot be sold to the public
without registration under the Securities Act of 1933 ("1933 Act"). Unless
registered for sale, restricted securities can be sold only in privately
negotiated transactions or pursuant to an exemption from registration.
Restricted securities are generally considered illiquid and, therefore, subject
to the Fund's limitation on illiquid securities.
Restricted securities (including Rule 144A Securities) may involve a high degree
of business and financial risk which may result in substantial losses. The
securities may be less liquid than publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized from these sales could be less than those originally paid by the Fund.
In particular, Rule 144A Securities may be resold only to qualified
institutional buyers in accordance with Rule 144A under the Securities Act of
1933. Rule 144A permits the resale to "qualified institutional buyers" of
"restricted securities" that, when issued, were not of the same class as
securities listed on a U.S. securities exchange or quoted in the National
Association of Securities Dealers Automated Quotation System (the "Rule 144A
Securities"). A "qualified institutional buyer" is defined by Rule 144A
generally as an institution, acting for its own account or for the accounts of
other qualified institutional buyers, that in the aggregate owns and invests on
a discretionary basis at least $100 million in securities of issuers not
affiliated with the institution. A dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), acting for its own account or the
accounts of other qualified institutional buyers, that in the aggregate owns and
invests on a discretionary basis at least $10 million in securities of issuers
not affiliated with the dealer may also qualify as a qualified institutional
buyer, as well as an Exchange Act registered dealer acting in a riskless
principal transaction on behalf of a qualified institutional buyer.
The Funds' Board of Directors is responsible for developing and establishing
guidelines and procedures for determining the liquidity of Rule 144A Securities.
As permitted by Rule 144A, the Board of Directors has delegated this
responsibility to the Investment Manager or relevant Sub-Adviser. In making the
determination regarding the liquidity of Rule 144A Securities, the Investment
Manager or relevant Sub-Adviser will consider trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security. In
addition, the Investment Manager or relevant Sub-Adviser may consider: (1) the
frequency of trades and quotes; (2) the number of dealers and potential
purchasers; (3) dealer undertakings to make a market; and (4) the nature of the
security and of the market place trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of transfer).
Investing in Rule 144A Securities and other restricted securities could have the
effect of increasing the amount of a Fund's assets invested in illiquid
securities to the extent that qualified institutional buyers become
uninterested, for a time, in purchasing these securities.
REAL ESTATE SECURITIES -- Certain of the Funds may invest in equity securities
of REITs and other real estate industry companies or companies with substantial
real estate investments and therefore, such Funds may be subject to certain
risks associated with direct ownership of real estate and with the real estate
industry in general. These risks include, among others: possible declines in the
value of real estate; possible lack of availability of mortgage funds; extended
vacancies of properties; risks related to general and local economic conditions;
overbuilding; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earthquakes or other natural
disasters; limitations on and variations in rents; and changes in interest
rates.
REITs are pooled investment vehicles which invest primarily in income producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or hybrid REITs. Equity REITs invest
the majority of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage REITs
invest the majority of their assets in real estate mortgages and derive income
from the collection of interest payments. REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the Internal Revenue Code, as amended (the "Code"). Finally, certain REITs may
be self-liquidating in that a specific term of existence is provided for in the
trust document. Such trusts run the risk of liquidating at an economically
inopportune time.
ZERO COUPON SECURITIES -- Certain of the Funds may invest in certain zero coupon
securities that are "stripped" U.S. Treasury notes and bonds. These Funds also
may invest in zero coupon and other deep discount securities issued by foreign
governments and domestic and foreign corporations, including certain Brady Bonds
and other foreign debt and payment-in-kind securities. Zero coupon securities
pay no interest to holders prior to maturity, and payment-in-kind securities pay
interest in the form of additional securities. However, a portion of the
original issue discount on zero coupon securities and the "interest" on
payment-in-kind securities will be included in the investing Fund's income.
Accordingly, for the Fund to qualify for tax treatment as a regulated investment
company and to avoid certain taxes, the Fund may be required to distribute an
amount that is greater than the total amount of cash it actually receives. These
distributions must be made from the Fund's cash assets or, if necessary, from
the proceeds of sales of portfolio securities. The Fund will not be able to
purchase additional income-producing securities with cash used to make such
distributions and its current income ultimately may be reduced as a result. Zero
coupon and payment-in-kind securities usually trade at a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
FOREIGN INVESTMENT RISKS -- Investment in foreign securities involves risks and
considerations not present in domestic investments. Foreign companies generally
are not subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to U.S.
companies. The securities of non-U.S. issuers generally are not registered with
the SEC, nor are the issuers thereof usually subject to the SEC's reporting
requirements. Accordingly, there may be less publicly available information
about foreign securities and issuers than is available with respect to U.S.
securities and issuers. Foreign securities markets, while growing in volume,
have for the most part substantially less volume than United States securities
markets and securities of foreign companies are generally less liquid and at
times their prices may be more volatile than prices of comparable United States
companies. Foreign stock exchanges, brokers and listed companies generally are
subject to less government supervision and regulation than in the United States.
The customary settlement time for foreign securities may be longer than the
customary settlement time for United States securities. A Fund's income and
gains from foreign issuers may be subject to non-U.S. withholding or other
taxes, thereby reducing its income and gains. In addition, with respect to some
foreign countries, there is the increased possibility of expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of
the Fund, political or social instability, or diplomatic developments which
could affect the investments of the Fund in those countries. Moreover,
individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
rate of savings and capital reinvestment, resource self-sufficiency and balance
of payments positions.
RISKS OF CONVERSION TO EURO -- On January 1, 1999, eleven countries in the
European Monetary Union adopted the euro as their official currency. However,
their current currencies (for example, the franc, the mark, and the lira) will
also continue in use until January 1, 2002. After that date, it is expected that
only the euro will be used in those countries. A common currency is expected to
provide some benefits in those markets, by consolidating the government debt
market for those countries and reducing some currency risks and costs. However,
the conversion to the new currency could have a negative impact on the Fund
operationally. The exact impact is not known, but it could affect the value of
some of the Fund's holdings and increase its operational costs.
BRADY BONDS -- Certain Funds may invest in "Brady Bonds," which are debt
restructurings that provide for the exchange of cash and loans for newly issued
bonds. Brady Bonds are securities created through the exchange of existing
commercial bank loans to public and private entities in certain emerging markets
for new bonds in connection with debt restructuring under a debt restructuring
plan introduced by former U.S. Secretary of the Treasury, Nicholas F. Brady.
Brady Bonds recently have been issued by the governments of Argentina, Brazil,
Bulgaria, Costa Rica, Dominican Republic, Jordan, Mexico, Nigeria, The
Philippines, Uruguay, Venezuela, Ecuador and Poland, and are expected to be
issued by other emerging market countries. Investors should recognize that Brady
Bonds have been issued only recently and, accordingly, do not have a long
payment history. Brady Bonds may be collateralized or uncollateralized, are
issued in various currencies (primarily the U.S. dollar) and are actively traded
in the secondary market for Latin American debt. The Salomon Brothers Brady Bond
Index provides a benchmark that can be used to compare returns of emerging
market Brady Bonds with returns in other bond markets, e.g., the U.S. bond
market.
Some Funds invest only in collateralized Brady Bonds denominated in U.S.
dollars. U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed
rate par bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on such bonds generally are collateralized by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of floating rate
bonds, initially is equal to at least one year's rolling interest payments based
on the applicable interest rate at the time and is adjusted at regular intervals
thereafter.
EMERGING COUNTRIES -- Certain Funds may invest in debt securities in emerging
markets. Investing in securities in emerging countries may entail greater risks
than investing in debt securities in developed countries. These risks include
(i) less social, political and economic stability; (ii) the small current size
of the markets for such securities and the currently low or nonexistent volume
of trading, which result in a lack of liquidity and in greater price volatility;
(iii) certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation; and (v) the
absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property.
POLITICAL AND ECONOMIC RISKS -- Investing in securities of non-U.S. companies
may entail additional risks due to the potential political and economic
instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event of such
expropriation, nationalization or other confiscation by any country, a Fund
could lose its entire investment in any such country.
An investment in the Fund is subject to the political and economic risks
associated with investments in emerging markets. Even though opportunities for
investment may exist in emerging markets, any change in the leadership or
policies of the governments of those countries or in the leadership or policies
of any other government which exercises a significant influence over those
countries, may halt the expansion of or reverse the liberalization of foreign
investment policies now occurring and thereby eliminate any investment
opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian regimes,
the governments of a number of emerging market countries previously expropriated
large quantities of real and personal property similar to the property which
will be represented by the securities purchased by the Fund. The claims of
property owners against those governments were never finally settled. There can
be no assurance that any property represented by securities purchased by the
Fund will not also be expropriated, nationalized, or otherwise confiscated. If
such confiscation were to occur, the Fund could lose a substantial portion of
its investments in such countries. The Fund's investments would similarly be
adversely affected by exchange control regulation in any of those countries.
RELIGIOUS AND ETHNIC INSTABILITY -- Certain countries in which the Funds may
invest may have vocal minorities that advocate radical religious or
revolutionary philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for wide-spread
destruction or confiscation of property owned by individuals and entities
foreign to such country and could cause the loss of the Fund's investment in
those countries.
FOREIGN INVESTMENT RESTRICTIONS -- Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as the Funds. As illustrations,
certain countries require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in a particular
company, or limit the investments by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals. Moreover, the national policies
of certain countries may restrict investment opportunities in issuers or
industries deemed sensitive to national interests. In addition, some countries
require governmental approval for the repatriation of investment income, capital
or the proceeds of securities sales by foreign investors. The Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION --
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. companies. In particular, the assets, liabilities and profits appearing
on the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Such securities will not be registered with the SEC or in
some cases regulators of any foreign country, nor will the issuers thereof be
subject to the SEC's reporting requirements. Thus, there will be less available
information concerning foreign issuers of such securities held by Funds that
invest in foreign securities than is available concerning U.S. issuers. In
instances where the financial statements of an issuer are not deemed to reflect
accurately the financial situation of the issuer, the Investment Manager or the
applicable Sub-Adviser will take appropriate steps to evaluate the proposed
investment, which may include interviews with its management and consultations
with accountants, bankers and other specialists. There is substantially less
publicly available information about foreign companies than there are reports
and ratings published about U.S. companies and the U.S. Government. In addition,
where public information is available, it may be less reliable than such
information regarding U.S. issuers.
ADVERSE MARKET CHARACTERISTICS -- Securities of many foreign issuers may be less
liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities exchanges and brokers generally are
subject to less governmental supervision and regulation than in the U.S., and
foreign securities exchange transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign securities exchange transactions may be
subject to difficulties associated with the settlement of such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested and no return is earned thereon. The inability of the Fund to
make intended security purchases due to settlement problems could cause it to
miss attractive opportunities. Inability to dispose of a portfolio security due
to settlement problems either could result in losses to the Fund due to
subsequent declines in value of the portfolio security or, if the Fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser. The Investment Manager or relevant Sub-Adviser will consider
such difficulties when determining the allocation of the Fund's assets.
NON-U.S. WITHHOLDING TAXES -- A Fund's investment income and gains from foreign
issuers may be subject to non-U.S. withholding and other taxes, thereby reducing
the Fund's investment income and gains.
CURRENCY RISK -- Because certain Funds, under normal circumstances, may invest
substantial portions of its total assets in the securities of foreign issuers
which are denominated in foreign currencies, the strength or weakness of the
U.S. dollar against such foreign currencies will account for part of the Fund's
investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
Fund's holdings of securities denominated in such currency and, therefore, will
cause an overall decline in the Fund's net asset value and any net investment
income and capital gains to be distributed in U.S. dollars to shareholders of
the Fund.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the pace of business activity in certain other countries and the U.S.,
and other economic and financial conditions affecting the world economy.
Although the Funds value assets daily in terms of U.S. dollars, the Funds do not
intend to convert holdings of foreign currencies into U.S. dollars on a daily
basis. A Fund will do so from time to time, and investors should be aware of the
costs of currency conversion. Although foreign exchange dealers do not charge a
fee for conversion, they do realize a profit based on the difference ("spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to sell that
currency to the dealer.
PUT AND CALL OPTIONS -- WRITING (SELLING) COVERED CALL OPTIONS. A call option
gives the holder (buyer) the "right to purchase" a security or currency at a
specified price (the exercise price) at any time until a certain date (the
expiration date). So long as the obligation of the writer of a call option
continues, he may be assigned an exercise notice by the broker-dealer through
whom such option was sold, requiring him to deliver the underlying security or
currency against payment of the exercise price. This obligation terminates upon
the expiration of the call option, or such earlier time at which the writer
effects a closing purchase transaction by repurchasing an option identical to
that previously sold.
Certain Funds may write (sell) "covered" call options and purchase options to
close out options previously written by the Fund. In writing covered call
options, the Fund expects to generate additional premium income which should
serve to enhance the Fund's total return and reduce the effect of any price
decline of the security or currency involved in the option. Covered call options
will generally be written on securities or currencies which, in the opinion of
the Investment Manager or relevant Sub-Adviser, are not expected to have any
major price increases or moves in the near future but which, over the long term,
are deemed to be attractive investments for the Fund.
The Fund will write only covered call options. This means that the Fund will own
the security or currency subject to the option or an option to purchase the same
underlying security or currency, having an exercise price equal to or less than
the exercise price of the "covered" option, or will establish and maintain with
its custodian for the term of the option, an account consisting of cash or
liquid securities having a value equal to the fluctuating market value of the
optioned securities or currencies. Fund securities or currencies on which call
options may be written will be purchased solely on the basis of investment
considerations consistent with the Fund's investment objectives. The writing of
covered call options is a conservative investment technique believed to involve
relatively little risk (in contrast to the writing of naked or uncovered
options, which the Fund will not do), but capable of enhancing the Fund's total
return. When writing a covered call option, the Fund, in return for the premium,
gives up the opportunity for profit from a price increase in the underlying
security or currency above the exercise price, but conversely, retains the risk
of loss should the price of the security or currency decline. Unlike one who
owns securities or currencies not subject to an option, the Fund has no control
over when it may be required to sell the underlying securities or currencies,
since it may be assigned an exercise notice at any time prior to the expiration
of its obligations as a writer. If a call option which the Fund has written
expires, the Fund will realize a gain in the amount of the premium; however,
such gain may be offset by a decline in the market value of the underlying
security or currency during the option period. If the call option is exercised,
the Fund will realize a gain or loss from the sale of the underlying security or
currency.
Call options written by the Fund will normally have expiration dates of less
than nine months from the date written. The exercise price of the options may be
below, equal to, or above the current market values of the underlying securities
or currencies at the time the options are written. From time to time, the Fund
may purchase an underlying security or currency for delivery in accordance with
an exercise notice of a call option assigned to it, rather than delivering such
security or currency from its portfolio. In such cases, additional costs may be
incurred.
The premium received is the market value of an option. The premium the Fund will
receive from writing a call option will reflect, among other things, the current
market price of the underlying security or currency, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security or currency, and the length of the option period. Once the
decision to write a call option has been made, the Investment Manager or
relevant Sub-Adviser, in determining whether a particular call option should be
written on a particular security or currency, will consider the reasonableness
of the anticipated premium and the likelihood that a liquid secondary market
will exist for those options. The premium received by the Fund for writing
covered call options will be recorded as a liability of the Fund. This liability
will be adjusted daily to the option's current market value, which will be the
latest sale price at the time at which the net asset value per share of the Fund
is computed (close of the New York Stock Exchange), or, in the absence of such
sale, the latest asked price. The option will be terminated upon expiration of
the option, the purchase of an identical option in a closing transaction, or
delivery of the underlying security or currency upon the exercise of the option.
The Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium received from the
writing of the option. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying security
or currency, any loss resulting from the repurchase of a call option is likely
to be offset in whole or in part by appreciation of the underlying security or
currency owned by the Fund.
WRITING (SELLING) COVERED PUT OPTIONS. A put option gives the purchaser of the
option the right to sell, and the writer (seller) has the obligation to buy, the
underlying security or currency at the exercise price during the option period
(American style) or at the expiration of the option (European style). So long as
the obligation of the writer continues, he may be assigned an exercise notice by
the broker-dealer through whom such option was sold, requiring him to make
payment of the exercise price against delivery of the underlying security or
currency. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
Certain Funds may write American or European style covered put options and
purchase options to close out options previously written by the Fund.
Certain Funds may write put options on a covered basis, which means that the
Fund would either (i) maintain in a segregated account cash or liquid securities
in an amount not less than the exercise price at all times while the put option
is outstanding; (ii) sell short the security or currency underlying the put
option at the same or higher price than the exercise price of the put option; or
(iii) purchase an option to sell the underlying security or currency subject to
the option having an exercise price equal to or greater than the exercise price
of the "covered" option at all times while the put option is outstanding. (The
rules of a clearing corporation currently require that such assets be deposited
in escrow to secure payment of the exercise price.) The Fund would generally
write covered put options in circumstances where the Investment Manager or
relevant Sub-Adviser wishes to purchase the underlying security or currency for
the Fund's portfolio at a price lower than the current market price of the
security or currency. In such event the Fund would write a put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay. Since the Fund would also receive interest
on debt securities or currencies maintained to cover the exercise price of the
option, this technique could be used to enhance current return during periods of
market uncertainty. The risk in such a transaction would be that the market
price of the underlying security or currency would decline below the exercise
price less the premiums received. Such a decline could be substantial and result
in a significant loss to the Fund. In addition, the Fund, because it does not
own the specific securities or currencies which it may be required to purchase
in the exercise of the put, cannot benefit from appreciation, if any, with
respect to such specific securities or currencies.
PREMIUM RECEIVED FROM WRITING CALL OR PUT OPTIONS. A Fund will receive a premium
from writing a put or call option, which increases such Fund's return in the
event the option expires unexercised or is closed out at a profit. The amount of
the premium will reflect, among other things, the relationship of the market
price of the underlying security to the exercise price of the option, the term
of the option and the volatility of the market price of the underlying security.
By writing a call option, a Fund limits its opportunity to profit from any
increase in the market value of the underlying security above the exercise price
of the option. By writing a put option, a Fund assumes the risk that it may be
required to purchase the underlying security for an exercise price higher than
its then current market value, resulting in a potential capital loss if the
purchase price exceeds the market value plus the amount of the premium received,
unless the security subsequently appreciates in value.
CLOSING TRANSACTIONS. Closing transactions may be effected in order to realize a
profit on an outstanding call option, to prevent an underlying security or
currency from being called, or, to permit the sale of the underlying security or
currency. A Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an option having the same terms as the option written. A Fund will realize a
profit or loss from such transaction if the cost of such transaction is less or
more than the premium received from the writing of the option. Because increases
in the market price of a call option will generally reflect increases in the
market price of the underlying security, any loss resulting from the purchase of
a call option is likely to be offset in whole or in part by unrealized
appreciation of the underlying security owned by such Fund.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If the Fund desires to sell
a particular security or currency from its portfolio on which it has written a
call option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security or currency. There is, of course, no
assurance that the Fund will be able to effect such closing transactions at a
favorable price. If the Fund cannot enter into such a transaction, it may be
required to hold a security or currency that it might otherwise have sold. When
the Fund writes a covered call option, it runs the risk of not being able to
participate in the appreciation of the underlying securities or currencies above
the exercise price, as well as the risk of being required to hold on to
securities or currencies that are depreciating in value. This could result in
higher transaction costs. The Fund will pay transaction costs in connection with
the writing of options to close out previously written options. Such transaction
costs are normally higher than those applicable to purchases and sales of
portfolio securities.
PURCHASING CALL OPTIONS. Certain Funds may purchase American or European call
options. The Fund may enter into closing sale transactions with respect to such
options, exercise them or permit them to expire. The Fund may purchase call
options for the purpose of increasing its current return.
Call options may also be purchased by a Fund for the purpose of acquiring the
underlying securities or currencies for its portfolio. Utilized in this fashion,
the purchase of call options enables the Fund to acquire the securities or
currencies at the exercise price of the call option plus the premium paid. At
times the net cost of acquiring securities or currencies in this manner may be
less than the cost of acquiring the securities or currencies directly. This
technique may also be useful to a Fund in purchasing a large block of securities
or currencies that would be more difficult to acquire by direct market
purchases. So long as it holds such a call option rather than the underlying
security or currency itself, the Fund is partially protected from any unexpected
decline in the market price of the underlying security or currency and in such
event could allow the call option to expire, incurring a loss only to the extent
of the premium paid for the option.
As an operating policy, the Funds will purchase a put or call option only if
after such purchase, the value of all call and put options held by the Fund will
not exceed 5% of the Fund's total assets. The Fund may also purchase call
options on underlying securities or currencies it owns in order to protect
unrealized gains on call options previously written by it. Call options may also
be purchased at times to avoid realizing losses. For example, where the Fund has
written a call option on an underlying security or currency having a current
market value below the price at which such security or currency was purchased by
the Fund, an increase in the market price could result in the exercise of the
call option written by the Fund and the realization of a loss on the underlying
security or currency with the same exercise price and expiration date as the
option previously written.
PURCHASING PUT OPTIONS. Certain Funds may purchase put options. The Fund may
enter into closing sale transactions with respect to such options, exercise them
or permit them to expire. A Fund may purchase a put option on an underlying
security or currency (a "protective put") owned by the Fund as a defensive
technique in order to protect against an anticipated decline in the value of the
security or currency. Such hedge protection is provided only during the life of
the put option when the Fund, as the holder of the put option, is able to sell
the underlying security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's exchange value.
The premium paid for the put option and any transaction costs would reduce any
capital gain otherwise available for distribution when the security or currency
is eventually sold.
A Fund may purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund seeks to benefit from a decline in the market
price of the underlying security or currency. If the put option is not sold when
it has remaining value, and if the market price of the underlying security or
currency remains equal to or greater than the exercise price during the life of
the put option, the Fund will lose its entire investment in the put option. In
order for the purchase of a put option to be profitable, the market price of the
underlying security or currency must decline sufficiently below the exercise
price to cover the premium and transaction costs, unless the put option is sold
in a closing sale transaction.
DEALER OPTIONS. Certain Funds may engage in transactions involving dealer
options. Certain risks are specific to dealer options. While the Fund would look
to a clearing corporation to exercise exchange-traded options, if the Fund were
to purchase a dealer option, it would rely on the dealer from whom it purchased
the option to perform if the option were exercised. Exchange-traded options
generally have a continuous liquid market while dealer options have none.
Consequently, the Fund will generally be able to realize the value of a dealer
option it has purchased only by exercising it or reselling it to the dealer who
issued it. Similarly, when the Fund writes a dealer option, it generally will be
able to close out the option prior to its expiration only by entering into a
closing purchase transaction with the dealer to which the Fund originally wrote
the option. While the Fund will seek to enter into dealer options only with
dealers who will agree to and which are expected to be capable of entering into
closing transactions with the Fund, there can be no assurance that the Fund will
be able to liquidate a dealer option at a favorable price at any time prior to
expiration. Failure by the dealer to do so would result in the loss of the
premium paid by the Fund as well as loss of the expected benefit of the
transaction. Until the Fund, as a covered dealer call option writer, is able to
effect a closing purchase transaction, it will not be able to liquidate
securities (or other assets) used as cover until the option expires or is
exercised. In the event of insolvency of the contra party, the Fund may be
unable to liquidate a dealer option. With respect to options written by the
Fund, the inability to enter into a closing transaction may result in material
losses to the Fund. For example, since the Fund must maintain a secured position
with respect to any call option on a security it writes, the Fund may not sell
the assets which it has segregated to secure the position while it is obligated
under the option. This requirement may impair the Fund's ability to sell
portfolio securities at a time when such sale might be advantageous.
The Staff of the SEC has taken the position that purchased dealer options and
the assets used to secure the written dealer options are illiquid securities.
The Fund may treat the cover used for written OTC options as liquid if the
dealer agrees that the Fund may repurchase the OTC option it has written for a
maximum price to be calculated by a predetermined formula. In such cases, the
OTC option would be considered illiquid only to the extent the maximum
repurchase price under the formula exceeds the intrinsic value of the option. To
this extent, the Fund will treat dealer options as subject to the Fund's
limitation on illiquid securities. If the SEC changes its position on the
liquidity of dealer options, the Fund will change its treatment of such
instrument accordingly.
CERTAIN RISK FACTORS IN WRITING CALL OPTIONS AND IN PURCHASING CALL AND PUT
OPTIONS. During the option period, a Fund, as writer of a call option has, in
return for the premium received on the option, given up the opportunity for
capital appreciation above the exercise price should the market price of the
underlying security increase, but has retained the risk of loss should the price
of the underlying security decline. The writer has no control over the time when
it may be required to fulfill its obligation as a writer of the option. The risk
of purchasing a call or put option is that the Fund may lose the premium it paid
plus transaction costs. If the Fund does not exercise the option and is unable
to close out the position prior to expiration of the option, it will lose its
entire investment.
An option position may be closed out only on an exchange which provides a
secondary market. There can be no assurance that a liquid secondary market will
exist for a particular option at a particular time and that the Fund, can close
out its position by effecting a closing transaction. If the Fund is unable to
effect a closing purchase transaction, it cannot sell the underlying security
until the option expires or the option is exercised. Accordingly, the Fund may
not be able to sell the underlying security at a time when it might otherwise be
advantageous to do so. Possible reasons for the absence of a liquid secondary
market include the following: (i) insufficient trading interest in certain
options; (ii) restrictions on transactions imposed by an exchange; (iii) trading
halts, suspensions or other restrictions imposed with respect to particular
classes or Fund of options or underlying securities; (iv) inadequacy of the
facilities of an exchange or the clearing corporation to handle trading volume;
and (v) a decision by one or more exchanges to discontinue the trading of
options or impose restrictions on orders. In addition, the hours of trading for
options may not conform to the hours during which the underlying securities are
traded. To the extent that the options markets close before the markets for the
underlying securities, significant price and rate movements can take place in
the underlying markets that cannot be reflected in the options markets. The
purchase of options is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary Fund
securities transactions.
Each exchange has established limitations governing the maximum number of call
options, whether or not covered, which may be written by a single investor
acting alone or in concert with others (regardless of whether such options are
written on the same or different exchanges or are held or written on one or more
accounts or through one or more brokers). An exchange may order the liquidation
of positions found to be in violation of these limits and it may impose other
sanctions or restrictions.
OPTIONS ON STOCK INDICES. Options on stock indices are similar to options on
specific securities except that, rather than the right to take or make delivery
of the specific security at a specific price, an option on a stock index gives
the holder the right to receive, upon exercise of the option, an amount of cash
if the closing level of that stock index is greater than, in the case of a call,
or less than, in the case of a put, the exercise price of the option. This
amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars multiplied by a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Unlike options on specific
securities, all settlements of options on stock indices are in cash and gain or
loss depends on general movements in the stocks included in the index rather
than price movements in particular stocks. A stock index futures contract is an
agreement in which one party agrees to deliver to the other an amount of cash
equal to a specific amount multiplied by the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made. No physical delivery of securities is
made.
RISK FACTORS IN OPTIONS ON INDICES. Because the value of an index option depends
upon the movements in the level of the index rather than upon movements in the
price of a particular security, whether the Fund will realize a gain or a loss
on the purchase or sale of an option on an index depends upon the movements in
the level of prices in the market generally or in an industry or market segment
rather than upon movements in the price of the individual security. Accordingly,
successful use of positions will depend upon the ability of the Investment
Manager or relevant Sub-Adviser to predict correctly movements in the direction
of the market generally or in the direction of a particular industry. This
requires different skills and techniques than predicting changes in the prices
of individual securities.
Index prices may be distorted if trading of securities included in the index is
interrupted. Trading in index options also may be interrupted in certain
circumstances, such as if trading were halted in a substantial number of
securities in the index. If this occurred, a Fund would not be able to close out
options which it had written or purchased and, if restrictions on exercise were
imposed, might be unable to exercise an option it purchased, which would result
in substantial losses.
Price movements in Fund securities will not correlate perfectly with movements
in the level of the index and therefore, a Fund bears the risk that the price of
the securities may not increase as much as the level of the index. In this
event, the Fund would bear a loss on the call which would not be completely
offset by movements in the prices of the securities. It is also possible that
the index may rise when the value of the Fund's securities does not. If this
occurred, a Fund would experience a loss on the call which would not be offset
by an increase in the value of its securities and might also experience a loss
in the market value of its securities.
Unless a Fund has other liquid assets which are sufficient to satisfy the
exercise of a call on the index, the Fund will be required to liquidate
securities in order to satisfy the exercise.
When a Fund has written a call on an index, there is also the risk that the
market may decline between the time the Fund has the call exercised against it,
at a price which is fixed as of the closing level of the index on the date of
exercise, and the time the Fund is able to sell securities. As with options on
securities, the Investment Manager or relevant Sub-Adviser will not learn that a
call has been exercised until the day following the exercise date, but, unlike a
call on securities where the Fund would be able to deliver the underlying
security in settlement, the Fund may have to sell part of its securities in
order to make settlement in cash, and the price of such securities might decline
before they could be sold.
If a Fund exercises a put option on an index which it has purchased before final
determination of the closing index value for the day, it runs the risk that the
level of the underlying index may change before closing. If this change causes
the exercised option to fall "out-of-the-money" the Fund will be required to pay
the difference between the closing index value and the exercise price of the
option (multiplied by the applicable multiplier) to the assigned writer.
Although the Fund may be able to minimize this risk by withholding exercise
instructions until just before the daily cutoff time or by selling rather than
exercising an option when the index level is close to the exercise price, it may
not be possible to eliminate this risk entirely because the cutoff time for
index options may be earlier than those fixed for other types of options and may
occur before definitive closing index values are announced.
TRADING IN FUTURES. Certain Funds may enter into futures contracts, including
stock and bond index, interest rate and currency futures ("futures" or "futures
contracts"). A futures contract provides for the future sale by one party and
purchase by another party of a specific financial instrument (e.g., units of a
stock index) for a specified price, date, time and place designated at the time
the contract is made. Brokerage fees are incurred when a futures contract is
bought or sold and margin deposits must be maintained. Entering into a contract
to buy is commonly referred to as buying or purchasing a contract or holding a
long position. Entering into a contract to sell is commonly referred to as
selling a contract or holding a short position.
An example of a stock index futures contract follows. The Standard & Poor's 500
Stock Index ("S&P 500 Index") is composed of 500 selected common stocks, most of
which are listed on the New York Stock Exchange. The S&P 500 Index assigns
relative weightings to the common stocks included in the Index, and the Index
fluctuates with changes in the market values of those common stocks. In the case
of the S&P 500 Index, contracts are to buy or sell 500 units. Thus, if the value
of the S&P 500 Index were $150, one contract would be worth $75,000 (500 units x
$150). The stock index futures contract specifies that no delivery of the actual
stock making up the index will take place. Instead, settlement in cash occurs.
Over the life of the contract, the gain or loss realized by the Fund will equal
the difference between the purchase (or sale) price of the contract and the
price at which the contract is terminated. For example, if the Fund enters into
a futures contract to buy 500 units of the S&P 500 Index at a specified future
date at a contract price of $150 and the S&P 500 Index is at $154 on that future
date, the Fund will gain $2,000 (500 units x gain of $4). If the Fund enters
into a futures contract to sell 500 units of the stock index at a specified
future date at a contract price of $150 and the S&P 500 Index is at $152 on that
future date, the Fund will lose $1,000 (500 units x loss of $2).
Unlike when the Fund purchases or sells a security, no price would be paid or
received by the Fund upon the purchase or sale of a futures contract. Upon
entering into a futures contract, and to maintain the Fund's open positions in
futures contracts, the Fund would be required to deposit with its custodian in a
segregated account in the name of the futures broker an amount of cash or liquid
securities known as "initial margin." The margin required for a particular
futures contract is set by the exchange on which the contract is traded, and may
be significantly modified from time to time by the exchange during the term of
the contract. Futures contracts are customarily purchased and sold on margins
that may range upward from less than 5% of the value of the contract being
traded.
Margin is the amount of funds that must be deposited by the Fund with its
custodian in a segregated account in the name of the futures commission merchant
(or, in some cases, may be held on deposit directly with the futures commission
merchant) in order to initiate futures trading and to maintain the Fund's open
position in futures contracts. A margin deposit is intended to ensure the Fund's
performance of the futures contract. The margin required for a particular
futures contract is set by the exchange on which the futures contract is traded,
and may be significantly modified from time to time by the exchange during the
term of the futures contract.
If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if the
value of a position increases because of favorable price changes in the futures
contract so that the margin deposit exceeds the required margin, the broker will
pay the excess to the Fund.
These subsequent payments, called "variation margin," to and from the futures
broker, are made on a daily basis as the price of the underlying assets
fluctuate making the long and short positions in the futures contract more or
less valuable, a process known as "marking to the market." The Fund expects to
earn interest income on its margin deposits.
Although certain futures contracts, by their terms, require actual future
delivery of and payment for the underlying instruments, in practice most futures
contracts are usually closed out before the delivery date. Closing out an open
futures contract sale or purchase is effected by entering into an offsetting
futures contract purchase or sale, respectively, for the same aggregate amount
of the identical securities and the same delivery date. If the offsetting
purchase price is less than the original sale price, the Fund realizes a gain;
if it is more, the Fund realizes a loss. Conversely, if the offsetting sale
price is more than the original purchase price, the Fund realizes a gain; if it
is less, the Fund realizes a loss. The transaction costs must also be included
in these calculations. There can be no assurance, however, that the Fund will be
able to enter into an offsetting transaction with respect to a particular
futures contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund will continue to be required to maintain the
margin deposits on the futures contract.
Options on futures are similar to options on underlying instruments except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract (a long position if the option is a
call and a short position if the option is a put), rather than to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by the delivery of the accumulated balance in the writer's futures
margin account which represents the amount by which the market price of the
futures contract, at exercise, exceeds (in the case of a call) or is less than
(in the case of a put) the exercise price of the option on the futures contract.
Alternatively, settlement may be made totally in cash. Purchasers of options who
fail to exercise their options prior to the exercise date suffer a loss of the
premium paid.
The writer of an option on a futures contract is required to deposit margin
pursuant to requirements similar to those applicable to futures contracts. Upon
exercise of an option on a futures contract, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Commissions on financial futures contracts and related options transactions may
be higher than those which would apply to purchases and sales of securities
directly. From time to time, a single order to purchase or sell futures
contracts (or options thereon) may be made on behalf of the Fund and other
mutual funds or Fund of mutual funds for which the Investment Manager or
relevant Sub-Adviser serves as adviser or sub-adviser, respectively. Such
aggregated orders would be allocated among the Fund and such other mutual funds
or Fund of mutual funds in a fair and non-discriminatory manner.
A public market exists in interest rate futures contracts covering primarily the
following financial instruments: U.S. Treasury bonds; U.S. Treasury notes;
Government National Mortgage Association ("GNMA") modified pass-through
mortgage-backed securities; three-month U.S. Treasury bills; 90-day commercial
paper; bank certificates of deposit; and Eurodollar certificates of deposit. It
is expected that futures contracts trading in additional financial instruments
will be authorized. The standard contract size is generally $100,000 for futures
contracts in U.S. Treasury bonds, U.S. Treasury notes, and GNMA pass-through
securities and $1,000,000 for the other designated futures contracts. A public
market exists in futures contracts covering a number of indexes, including, but
not limited to, the Standard & Poor's 500 Index, the Standard & Poor's 100
Index, the NASDAQ 100 Index, the Value Line Composite Index and the New York
Stock Exchange Composite Index.
Stock index futures contracts may be used to provide a hedge for a portion of
the Fund's portfolio, as a cash management tool, or as an efficient way for the
Investment Manager or relevant Sub-Adviser to implement either an increase or
decrease in portfolio market exposure in response to changing market conditions.
Stock index futures contacts are currently traded with respect to the S&P 500
Index and other broad stock market indices, such as the New York Stock Exchange
Composite Stock Index and the Value Line Composite Stock Index. The Fund may,
however, purchase or sell futures contracts with respect to any stock index.
Nevertheless, to hedge the Fund's portfolio successfully, the Fund must sell
futures contracts with respect to indexes or subindexes whose movements will
have a significant correlation with movements in the prices of the Fund's
securities.
Interest rate or currency futures contracts may be used as a hedge against
changes in prevailing levels of interest rates or currency exchange rates in
order to establish more definitely the effective return on securities or
currencies held or intended to be acquired by the Fund. In this regard, the Fund
could sell interest rate or currency futures as an offset against the effect of
expected increases in interest rates or currency exchange rates and purchase
such futures as an offset against the effect of expected declines in interest
rates or currency exchange rates.
The Fund may enter into futures contracts which are traded on national or
foreign futures exchanges and are standardized as to maturity date and
underlying financial instrument. The principal financial futures exchanges in
the United States are the Board of Trade of the City of Chicago, the Chicago
Mercantile Exchange, the New York Futures Exchange, and the Kansas City Board of
Trade. Futures exchanges and trading in the United States are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC").
Futures are traded in London at the London International Financial Futures
Exchange, in Paris at the MATIF and in Tokyo at the Tokyo Stock Exchange.
Although techniques other than the sale and purchase of futures contracts could
be used for the above-referenced purposes, futures contracts offer an effective
and relatively low cost means of implementing the Fund's objectives in these
areas.
CERTAIN RISKS RELATING TO FUTURES CONTRACTS AND RELATED OPTIONS. There are
special risks involved in futures transactions.
SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS. VOLATILITY AND LEVERAGE. The
prices of futures contracts are volatile and are influenced, among other things,
by actual and anticipated changes in the market and interest rates, which in
turn are affected by fiscal and monetary policies and national and international
policies and economic events.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss or
gain, to the investor. For example, if at the time of purchase, 10% of the value
of the futures contract is deposited as margin, a subsequent 10% decrease in the
value of the futures contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out. A 15% decrease would result in a loss equal to 150% of the
original margin deposit, if the contract were closed out. Thus, a purchase or
sale of a futures contract may result in losses in excess of the amount invested
in the futures contract. However, the Fund would presumably have sustained
comparable losses if, instead of the futures contract, it had invested in the
underlying financial instrument and sold it after the decline. Furthermore, in
the case of a futures contract purchase, in order to be certain that the Fund
has sufficient assets to satisfy its obligations under a futures contract, the
Fund earmarks to the futures contract cash or liquid securities equal in value
to the current value of the underlying instrument less the margin deposit.
LIQUIDITY. The Fund may elect to close some or all of its futures positions at
any time prior to their expiration. The Fund would do so to reduce exposure
represented by long futures positions or increase exposure represented by short
futures positions. The Fund may close its positions by taking opposite positions
which would operate to terminate the Fund's position in the futures contracts.
Final determinations of variation margin would then be made, additional cash
would be required to be paid by or released to the Fund, and the Fund would
realize a loss or a gain.
Futures contracts may be closed out ONLY on the exchange or board of trade where
the contracts were initially traded. For example, stock index futures contracts
can currently be purchased or sold with respect to the S&P 500 Index on the
Chicago Mercantile Exchange, the New York Stock Exchange Composite Stock Index
on the New York Futures Exchange and the Value Line Composite Stock Index on the
Kansas City Board of Trade. Although the Fund intends to purchase or sell
futures contracts only on exchanges or boards of trade where there appears to be
an active market, there is no assurance that a liquid market on an exchange or
board of trade will exist for any particular contract at any particular time. In
such event, it might not be possible to close a futures contract, and in the
event of adverse price movements, the Fund would continue to be required to make
daily cash payments of variation margin. However, in the event futures contracts
have been used to hedge portfolio securities, the Fund would continue to hold
securities subject to the hedge until the futures contracts could be terminated.
In such circumstances, an increase in the price of the securities, if any, might
partially or completely offset losses on the futures contract. However, as
described below, there is no guarantee that the price of the securities will, in
fact, correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.
HEDGING RISK. A decision of whether, when, and how to hedge involves skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or market trends. There are several risks
in connection with the use by the Fund of futures contracts as a hedging device.
One risk arises because of the imperfect correlation between movements in the
prices of the futures and movements in the prices of the underlying instruments
which are the subject of the hedge. The Investment Manager or relevant
Sub-Adviser will, however, attempt to reduce this risk by entering into futures
contracts whose movements, in its judgment, will have a significant correlation
with movements in the prices of the Fund's underlying instruments sought to be
hedged.
Successful use of futures contracts by the Fund for hedging purposes is also
subject to the Investment Manager's or relevant Sub-Adviser's ability to
correctly predict movements in the direction of the market. It is possible that,
when the Fund has sold futures to hedge its portfolio against a decline in the
market, the index, indices, or instruments underlying futures might advance and
the value of the underlying instruments held in the Fund's portfolio might
decline. If this were to occur, the Fund would lose money on the futures and
also would experience a decline in value in its underlying instruments. However,
while this might occur to a certain degree, the Investment Manager believes that
over time the value of the Fund's portfolio will tend to move in the same
direction as the market indices used to hedge the portfolio. It is also possible
that if the Fund were to hedge against the possibility of a decline in the
market (adversely affecting the underlying instruments held in its portfolio)
and prices instead increased, the Fund would lose part or all of the benefit of
increased value of those underlying instruments that it had hedged, because it
would have offsetting losses in its futures positions. In addition, in such
situations, if the Fund had insufficient cash, it might have to sell underlying
instruments to meet daily variation margin requirements. Such sales of
underlying instruments might be, but would not necessarily be, at increased
prices (which would reflect the rising market). The Fund might have to sell
underlying instruments at a time when it would be disadvantageous to do so.
In addition to the possibility that there might be an imperfect correlation, or
no correlation at all, between price movements in the futures contracts and the
portion of the portfolio being hedged, the price movements of futures contracts
might not correlate perfectly with price movements in the underlying instruments
due to certain market distortions. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors might close future contracts
through offsetting transactions which could distort the normal relationship
between the underlying instruments and futures markets. Second, the margin
requirements in the futures market are less onerous than margin requirements in
the securities markets, and as a result the futures market might attract more
speculators than the securities markets do. Increased participation by
speculators in the futures market might also cause temporary price distortions.
Due to the possibility of price distortion in the futures market and also
because of the imperfect correlation between movements in the underlying
instruments and movements in the prices of futures contracts, even a correct
forecast of general market trends by the Investment Manager or relevant
Sub-Adviser might not result in a successful hedging transaction over a very
short time period.
CERTAIN RISKS OF OPTIONS ON FUTURES CONTRACTS. The Fund may seek to close out an
option position by writing or buying an offsetting option covering the same
index, underlying instruments, or contract and having the same exercise price
and expiration date. The ability to establish and close out positions on such
options will be subject to the maintenance of a liquid secondary market. Reasons
for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or Fund of
options, or underlying instruments; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or Fund of options), in which event the
secondary market on that exchange (or in the class or Fund of options) would
cease to exist, although outstanding options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders.
REGULATORY LIMITATIONS. The Funds will engage in transactions in futures
contracts and options thereon only for bona fide hedging, yield enhancement and
risk management purposes, in each case in accordance with the rules and
regulations of the CFTC.
The Funds may not enter into futures contracts or options thereon if, with
respect to positions which do not qualify as bona fide hedging under applicable
CFTC rules, the sum of the amounts of initial margin deposits on the Fund's
existing futures and premiums paid for options on futures would exceed 5% of the
net asset value of the Funds after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into; provided, however,
that in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5% limitation.
To the extent necessary to comply with applicable regulations, in instances
involving the purchase of futures contracts or call options thereon or the
writing of put options thereon by the Fund, an amount of cash or liquid
securities, equal to the market value of the futures contracts and options
thereon (less any related margin deposits), will be identified in an account on
the books of the Fund or with the Fund's custodian to cover the position, or
alternative cover will be employed.
In addition, CFTC regulations may impose limitations on the Funds' ability to
engage in certain yield enhancement and risk management strategies. If the CFTC
or other regulatory authorities adopt different (including less stringent) or
additional restrictions, the Funds would comply with such new restrictions.
FORWARD CURRENCY CONTRACTS AND RELATED OPTIONS. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the Contract.
These contracts are principally traded in the interbank market conducted
directly between currency traders (usually large, commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.
Depending on the investment policies and restrictions applicable to a Fund, a
Fund will generally enter into forward foreign currency exchange contracts under
two circumstances. First, when a Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock in"
the U.S. dollar price of the security. By entering into a forward contract for
the purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying security transactions, the Fund will be able
to protect itself against a possible loss resulting from an adverse change in
the relationship between the U.S. dollar and the subject foreign currency during
the period between the date the security is purchased or sold and the date on
which payment is made or received.
Second, when the Investment Manager or relevant Sub-Adviser believes that the
currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, including the U.S. dollar, it may enter into
a forward contract to sell or buy the amount of the former foreign currency,
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. Alternatively, where appropriate, the Fund
may hedge all or part of its foreign currency exposure through the use of a
basket of currencies or a proxy currency where such currencies or currency act
as an effective proxy for other currencies. In such a case, the Fund may enter
into a forward contract where the amount of the foreign currency to be sold
exceeds the value of the securities denominated in such currency. The use of
this basket hedging technique may be more efficient and economical than entering
into separate forward contracts for each currency held in the Fund. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of short-term currency
market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain.
The Fund will also not enter into such forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate a Fund to deliver an amount of foreign currency in excess of the value
of the Fund's portfolio securities or other assets denominated in that currency.
The Funds, however, in order to avoid excess transactions and transaction costs,
may maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets to which the forward contracts
relate (including accrued interest to the maturity of the forward contract on
such securities) provided the excess amount is "covered" by liquid securities,
denominated in any currency, at least equal at all times to the amount of such
excess. For these purposes the securities or other assets to which the forward
contracts relate may be securities or assets denominated in a single currency,
or where proxy forwards are used, securities denominated in more than one
currency. Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the longer term investment decisions made
with regard to overall diversification strategies. However, the Investment
Manager and relevant Sub-Advisers believe that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of the Fund will be served.
At the maturity of a forward contract, the Fund may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract obligating it to purchase, on
the same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of the forward contract.
Accordingly, it may be necessary for a Fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency the
Fund is obligated to deliver and if a decision is made to sell the security and
make delivery of the foreign currency. Conversely, it may be necessary to sell
on the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. However, as noted, in order to avoid excessive
transactions and transaction costs, the Fund may use liquid securities,
denominated in any currency, to cover the amount by which the value of a forward
contract exceeds the value of the securities to which it relates.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund entering into a forward contract for the sale
of a foreign currency and the date it enters into an offsetting contract for the
purchase of the foreign currency, the Fund will realize a gain to the extent the
price of the currency it has agreed to sell exceeds the price of the currency it
has agreed to purchase. Should forward prices increase, the Fund will suffer a
loss to the extent the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.
The Funds dealing in forward foreign currency exchange contracts will generally
be limited to the transactions described above. However, the Funds reserve the
right to enter into forward foreign currency contracts for different purposes
and under different circumstances. Of course, the Funds are not required to
enter into forward contracts with regard to their foreign currency-denominated
securities and will not do so unless deemed appropriate by the Investment
Manager or relevant Sub-Adviser. It also should be realized that this method of
hedging against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. It simply establishes a
rate of exchange at a future date. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time, they tend to limit any potential gain which might result from
an increase in the value of that currency.
Although the Funds value their assets daily in terms of U.S. dollars, they do
not intend to convert their holdings of foreign currencies into U.S. dollars on
a daily basis. They will do so from time to time, and investors should be aware
of the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one
rate, while offering a lesser rate of exchange should the Fund desire to resell
that currency to the dealer.
PURCHASE AND SALE OF CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. As noted
above, a currency futures contract sale creates an obligation by a Fund, as
seller, to deliver the amount of currency called for in the contract at a
specified future time for a specified price. A currency futures contract
purchase creates an obligation by a Fund, as purchaser, to take delivery of an
amount of currency at a specified future time at a specified price. Although the
terms of currency futures contracts specify actual delivery or receipt, in most
instances the contracts are closed out before the settlement date without the
making or taking of delivery of the currency. Closing out of a currency futures
contract is effected by entering into an offsetting purchase or sale
transaction. Unlike a currency futures contract, which requires the parties to
buy and sell currency on a set date, an option on a currency futures contract
entitles its holder to decide on or before a future date whether to enter into
such a contract. If the holder decides not to enter into the contract, the
premium paid for the option is fixed at the point of sale.
SWAPS, CAPS, FLOORS AND COLLARS. Certain Funds may enter into interest rate,
securities index, commodity, or security and currency exchange rate swap
agreements for any lawful purpose consistent with the Fund's investment
objective, such as for the purpose of attempting to obtain or preserve a
particular desired return or spread at a lower cost to the Fund than if the Fund
had invested directly in an instrument that yielded that desired return or
spread. The Fund also may enter into swaps in order to protect against an
increase in the price of, or the currency exchange rate applicable to,
securities that the Fund anticipates purchasing at a later date. Swap agreements
are two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to several years. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the parties
are calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of securities
representing a particular index. Swap agreements may include interest rate caps,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that interests rates exceed a specified rate, or "cap";
interest rate floors under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates fall below a
specified level, or "floor"; and interest rate collars, under which a party
sells a cap and purchases a floor, or vice versa, in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum
levels.
The "notional amount" of the swap agreement is the agreed upon basis for
calculating the obligations that the parties to a swap agreement have agreed to
exchange. Under most swap agreements entered into by the Funds, the obligations
of the parties would be exchanged on a "net basis." Consequently, the Fund's
obligation (or rights) under a swap agreement will generally be equal only to
the net amount to be paid or received under the agreement based on the relative
value of the positions held by each party to the agreement (the "net amount").
The Fund's obligation under a swap agreement will be accrued daily (offset
against amounts owed to the Fund) and any accrued but unpaid net amounts owed to
a swap counterparty will be covered by the maintenance of a segregated account
consisting of cash or liquid securities.
Whether a Fund's use of swap agreements will be successful in furthering its
investment objective will depend, in part, on the Investment Manager or relevant
Sub-Adviser's ability to predict correctly whether certain types of investments
are likely to produce greater returns than other investments. Swap agreements
may be considered to be illiquid. Moreover, the Fund bears the risk of loss of
the amount expected to be received under a swap agreement in the event of the
default or bankruptcy of a swap agreement counterparty. Certain restrictions
imposed on the Fund's by the Internal Revenue Code may limit a Fund' ability to
use swap agreements. The swaps market is largely unregulated.
The Funds will enter swap agreements only with counterparties that the
Investment Manager or relevant Sub-Adviser reasonably believes are capable of
performing under the swap agreements. If there is a default by the other party
to such a transaction, the Fund will have to rely on its contractual remedies
(which may be limited by bankruptcy, insolvency or similar laws) pursuant to the
agreements related to the transaction.
SPREAD TRANSACTIONS. Certain Funds may purchase covered spread options from
securities dealers. Such covered spread options are not presently
exchange-listed or exchange-traded. The purchase of a spread option gives the
Fund the right to put, or sell, a security that it owns at a fixed dollar spread
or fixed yield spread in relationship to another security that the Fund does not
own, but which is used as a benchmark. The risk to the Funds in purchasing
covered spread options is the cost of the premium paid for the spread option and
any transaction costs. In addition, there is no assurance that closing
transactions will be available. The purchase of spread options will be used to
protect the Fund against adverse changes in prevailing credit quality spreads,
i.e., the yield spread between high quality and lower quality securities. Such
protection is only provided during the life of the spread option.
HYBRID INSTRUMENTS. Hybrid instruments combine the elements of futures contracts
or options with those of debt, preferred equity or a depository instrument
("Hybrid Instruments"). Often these Hybrid Instruments are indexed to the price
of a commodity or particular currency or a domestic or foreign debt or equity
securities index. Hybrid Instruments may take a variety of forms, including, but
not limited to, debt instruments with interest or principal payments or
redemption terms determined by reference to the value of a currency or commodity
at a future point in time, preferred stock with dividend rates determined by
reference to the value of a currency, or convertible securities with the
conversion terms related to a particular commodity. The risks of investing in
Hybrid Instruments reflect a combination of the risks from investing in
securities, futures and currencies, including volatility and lack of liquidity.
Reference is made to the discussion of futures and forward contracts in this
Statement of Additional Information for a discussion of these risks. Further,
the prices of the Hybrid Instrument and the related commodity or currency may
not move in the same direction or at the same time. Hybrid Instruments may bear
interest or pay preferred dividends at below market (or even relatively nominal)
rates. In addition, because the purchase and sale of Hybrid Instruments could
take place in an over-the-counter market or in a private transaction between a
Fund and the seller of the Hybrid Instrument, the creditworthiness of the
contract party to the transaction would be a risk factor which the Fund would
have to consider. Hybrid Instruments also may not be subject to regulation of
the CFTC, which generally regulates the trading of commodity futures by U.S.
persons, the SEC, which regulates the offer and sale of securities by and to
U.S. persons, or any other governmental regulatory authority.
LENDING OF PORTFOLIO SECURITIES. For the purpose of realizing additional income,
the Funds may make secured loans of Fund securities amounting to not more than
33 1/3% of its total assets. Securities loans are made to broker/dealers,
institutional investors, or other persons pursuant to agreements requiring that
the loans be continuously secured by collateral at least equal at all times to
the value of the securities lent marked to market on a daily basis. The
collateral received will consist of cash, U.S. Government securities, letters of
credit or such other collateral as may be permitted under its investment
program. While the securities are being lent, the Fund will continue to receive
the equivalent of the interest or dividends paid by the issuer on the
securities, as well as interest on the investment of the collateral or a fee
from the borrower. The Fund has a right to call each loan and obtain the
securities on five business days' notice or, in connection with securities
trading on foreign markets, within such longer period of time which coincides
with the normal settlement period for purchases and sales of such securities in
such foreign markets. The Fund will not have the right to vote securities while
they are being lent, but it will call a loan in anticipation of any important
vote. The risks in lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving additional collateral or
in the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will only be made to persons deemed
by the Investment Manager or relevant Sub-Adviser to be of good standing and
will not be made unless, in the judgment of the Investment Manager or relevant
Sub-Adviser, the consideration to be earned from such loans would justify the
risk.
INVESTMENT POLICY LIMITATIONS
Each of the Funds operates within certain fundamental policies. These
fundamental policies may not be changed without the approval of the lesser of
(i) 67% or more of the Funds' shares present at a meeting of shareholders if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding voting
shares. Other restrictions in the form of operating policies are subject to
change by the Fund's Board of Directors without shareholder approval. Any
investment restrictions that involve a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowing by, the Fund. Calculation of the Fund's
total assets for compliance with any of the following fundamental or operating
policies or any other investment restrictions set forth in the Fund's prospectus
or Statement of Additional Information will not include cash collateral held in
connection with a Fund's securities lending activities.
FUNDAMENTAL POLICIES -- The fundamental policies of the Funds are:
1. PERCENT LIMIT ON ASSETS INVESTED IN ANY ONE ISSUER Not to invest more than
5% of its total assets in the securities of any one issuer (other than
obligations of, or guaranteed by, the U.S. Government, its agencies and
instrumentalities); provided that this limitation applies only with respect
to 75% of the Fund's total assets. (Fundamental policy number one does not
apply to the Large Cap Growth Fund or to the Technology Fund.)
2. PERCENT LIMIT ON SHARE OWNERSHIP OF ANY ONE ISSUER Not to purchase a
security if, as a result, with respect to 75% of the value of the Fund's
total assets , more than 10% of the outstanding voting securities of any one
issuer would be held by the Fund (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities).
(Fundamental policy number two does not apply to the Large Cap Growth Fund
or to the Technology Fund.)
3. UNDERWRITING Not to act as an underwriter of securities issued by others,
except to the extent that a Fund may considered an underwriter within the
meaning of the Securities Act of 1933 in the disposition of restricted
securities.
4. INDUSTRY CONCENTRATION Not to invest in an amount equal to, or in excess of,
25% or more of the Fund's total assets in a particular industry (other than
securities of the of U.S. Government, its agencies or instrumentalities);
provided however, that this policy does not apply to the Large Cap Growth
Fund or to the Technology Fund which are permitted to invest more than 25%
of their respective total assets in a particular industry or group of
industries.
5. REAL ESTATE Not to purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not prevent
a Fund from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business).
6. COMMODITIES Not to purchase or sell physical commodities, except that a Fund
may enter into futures contracts and options thereon.
7. LOANS Not to lend any security or make any other loan if, as a result, more
than 33 1/3% of an Fund's total assets would be lent to other parties,
except, (i) through the purchase of a portion of an issue of debt securities
in accordance with its investment objectives and policies, or (ii) by
engaging in repurchase agreements with respect to portfolio securities.
8. BORROWING Not to borrow in excess of 33 1/3% of a Fund's total assets.
9. SENIOR SECURITIES Not to issue senior securities, except as permitted under
the Investment Company Act of 1940.
For the purposes of Fundamental Policies (2) and (4) above, each governmental
subdivision, i.e., state, territory, possession of the United States or any
political subdivision of any of the foregoing, including agencies, authorities,
instrumentalities, or similar entities, or of the District of Columbia shall be
considered a separate issuer if its assets and revenues are separate from those
of the governmental body creating it and the security is backed only by its own
assets and revenues. Further, in the case of an industrial development bond, if
the security is backed only by the assets and revenues of a non-governmental
user, then such non-governmental user will be deemed to be the sole issuer. If
an industrial development bond or government issued security is guaranteed by a
governmental or other entity, such guarantee would be considered a separate
security issued by the guarantor.
OPERATING POLICIES -- The operating policies of the Funds are:
1. LOANS The Funds may not lend assets other than securities to other parties.
(This limitation does not apply to purchases of debt securities or to
repurchase agreements.)
2. BORROWING The Funds may not borrow money or securities for any purposes
except that borrowing up to 10% of the Fund's total assets from commercial
banks is permitted for emergency or temporary purposes.
3. OPTIONS The Funds may buy and sell exchange- traded and over-the-counter put
and call options, including index options, securities options, currency
options and options on futures, provided that a call or put may be purchased
only if after such purchase, the value all call and put options held by a
Fund will not exceed 5% of the Fund's total assets. The Funds may write only
covered put and call options.
4. OIL AND GAS PROGRAMS The Funds may not invest in oil, gas, mineral leases or
other mineral exploration or development of programs.
5. INVESTMENT COMPANIES Except in connection with a merger, consolidation,
acquisition, or reorganization, the Funds may not invest in securities of
other investment companies, except in compliance with the Investment Company
Act of 1940.
6. CONTROL OF PORTFOLIO COMPANIES The Funds may not invest in companies for the
purpose of exercising management or control.
7. SHORT SALES The Funds may not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling securities short.
8. MARGINS The Funds do not intend to purchase securities on margin, except
that the Funds may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments in connection
with futures contracts and options on futures contracts shall not constitute
purchasing securities on margin.
OFFICERS AND DIRECTORS
The officers and directors of the Funds and their principal occupations for at
least the last five years are as follows. Unless otherwise noted, the address of
each officer and director is 700 Harrison Street, Topeka, Kansas 66636-0001.
NAME, ADDRESS, POSITIONS HELD WITH THE FUNDS AND PRINCIPAL OCCUPATIONS DURING
THE PAST FIVE YEARS
JOHN D. CLELAND*
- ----------------
POSITION HELD WITH THE FUND--Chairman of the Board and Director
PRINCIPAL OCCUPATIONS--Senior Vice President and Managing Member Representative,
Security Management Company, LLC; Senior Vice President, Security Benefit Group,
Inc. and Security Benefit Life Insurance Company.
DONALD A. CHUBB, JR.**
- ----------------------
2222 SW 29th Street, Topeka, Kansas 66611
POSITION HELD WITH THE FUND--Director
PRINCIPAL OCCUPATIONS--Business broker, Griffith & Blair Realtors. Prior to
1997, President, Neon Tube Light Company, Inc.
PENNY A. LUMPKIN**
- ------------------
3616 Canterbury Town Road, Topeka, Kansas 66610
POSITION HELD WITH THE FUND--Director
PRINCIPAL OCCUPATIONS--Owner, Vivian's Gift Shop (Corporate Retail). Vice
President, Palmer Companies, Inc. (Small Business and Shopping Center
Development) and Bellairre Shopping Center (Managing and Leasing); Partner,
Goodwin Enterprises (Retail). Prior to 1999, Vice President and Treasurer,
Palmer News, Inc.; Vice President, M/S News, Inc. and Secretary, Kansas City
Periodicals.
MARK L. MORRIS, JR.**
- ---------------------
5500 SW 7th Street, Topeka, Kansas 66606
POSITION HELD WITH THE FUND--Director
PRINCIPAL OCCUPATIONS--Veterinary Nutrition Consultant. Former General Partner,
Mark Morris Associates (Veterinary Research and Education).
MAYNARD F. OLIVERIUS
- --------------------
1500 SW 10th Avenue, Topeka, Kansas 66604
POSITION HELD WITH THE FUND--Director
PRINCIPAL OCCUPATIONS--President and Chief Executive Officer, Stormont-Vail
Health Care.
JAMES R. SCHMANK*
- -----------------
POSITION HELD WITH THE FUND--President and Director
PRINCIPAL OCCUPATIONS--President and Managing Member Representative, Security
Management Company, LLC; Senior Vice President, Security Benefit Group, Inc. and
Security Benefit Life Insurance Company.
TERRY A. MILBERGER
- ------------------
POSITION HELD WITH THE FUND--Vice President (Equity Fund and Growth and Income
Fund)
PRINCIPAL OCCUPATIONS--Senior Vice President and Senior Portfolio Manager,
Security Management Company, LLC; Senior Vice President, Security Benefit Group,
Inc. and Security Benefit Life Insurance Company.
AMY J. LEE
- ----------
POSITION HELD WITH THE FUND--Secretary
PRINCIPAL OCCUPATIONS--Secretary, Security Management Company, LLC; Vice
President, Associate General Counsel and Assistant Secretary, Security Benefit
Group, Inc. and Security Benefit Life Insurance Company.
BRENDA M. HARWOOD
- -----------------
POSITION HELD WITH THE FUND--Treasurer
PRINCIPAL OCCUPATIONS--Assistant Vice President and Treasurer, Security
Management Company, LLC; Assistant Vice President, Security Benefit Group, Inc.
and Security Benefit Life Insurance Company.
CINDY L. SHIELDS
- ----------------
POSITION HELD WITH THE FUND--Vice President (Equity Fund only)
PRINCIPAL OCCUPATIONS--Second Vice President and Portfolio Manager, Security
Management Company, LLC; Second Vice President, Security Benefit Group, Inc. and
Security Benefit Life Insurance Company.
JAMES P. SCHIER
- ---------------
POSITION HELD WITH THE FUND--Vice President (Equity Fund and Ultra Fund only)
PRINCIPAL OCCUPATIONS--Vice President and Senior Portfolio Manager, Security
Management Company, LLC; Vice President, Security Benefit Group, Inc. and
Security Benefit Life Insurance Company. Prior to February 1997, Assistant Vice
President and Senior Research Analyst, Security Management Company, LLC. Prior
to August 1995, Portfolio Manager, Mitchell Capital Management. Prior to March
1993, Vice President and Portfolio Manager, Fourth Financial.
CHRISTOPHER D. SWICKARD
- -----------------------
POSITION HELD WITH THE FUND--Assistant Secretary
PRINCIPAL OCCUPATIONS--Assistant Secretary, Security Management Company, LLC;
Assistant Vice President and Assistant Counsel,
Security Benefit Group, Inc. and Security Benefit Life Insurance Company.
*These directors are deemed to be "interested persons" of the Funds under the
Investment Company Act of 1940, as amended, by reason of their positions with
the Funds' Investment Manager and/or the parent of the Investment Manager.
**These directors serve on the Funds' joint audit committee, the purpose of
which is to meet with the independent auditors, to review the work of the
auditors, and to oversee the handling by Security Management Company, LLC of
the accounting functions for the Funds.
The directors and officers of the Funds hold identical offices in each of the
other Funds managed by the Investment Manager, with the exceptions noted below.
Mr. Milberger is Vice President only of Security Equity Fund, Security Growth
and Income Fund and SBL Fund, Ms. Shields is Vice President only of Security
Equity Fund and SBL Fund; and Mr. Schier is Vice President only of Security
Equity Fund, SBL Fund and Security Ultra Fund. (See the table under "Investment
Management," page 46, for positions held by such persons with the Investment
Manager.) Ms. Lee holds identical offices for the Funds' distributor, Security
Distributors, Inc., and Mr. Cleland serves as Vice President and Director, Mr.
Schmank serves as Director, while Ms. Harwood serves as Director and Treasurer
of the Distributor.
REMUNERATION OF DIRECTORS AND OTHERS
The Funds' directors, except those directors who are "interested persons" of the
Funds, receive from each of Security Growth and Income Fund, Security Equity
Fund and Security Ultra Fund an annual retainer of $2,000 and a fee of $2,500
per meeting, plus reasonable travel costs, for each meeting of the board
attended. In addition, certain directors who are members of the Funds' joint
audit committee receive a fee of $1,500 and reasonable travel costs for each
meeting of the Funds' audit committee attended. Such fees and travel costs are
paid by the Investment Manager for each Fund, except Total Return, Social
Awareness, Mid Cap Value, Small Cap Growth, Enhanced Index, International,
Select 25, Large Cap Growth and Technology Funds, pursuant to its Investment
Management and Services Agreements with the Funds which provide that the
Investment Manager will bear all Fund expenses except for its fee and the
expenses of brokerage commissions, interest, taxes, extraordinary expenses
approved by the Board of Directors and Class B and Class C distribution fees.
Total Return, Social Awareness, Mid Cap Value, Small Cap Growth, Enhanced Index,
International, Select 25, Large Cap Growth and Technology Funds pay their
respective share of directors' fees, audit committee fees and travel costs based
on relative net assets. (See page 46, "Investment Management.")
The Funds do not pay any fees to, or reimburse expenses of, directors who are
considered "interested persons" of the Funds. The aggregate compensation paid by
the Funds to each of the directors during the fiscal year ended September 30,
1999, and the aggregate compensation paid to each of the directors during
calendar year 1999 by all seven of the registered investment companies to which
the Investment Manager provides investment advisory services (collectively, the
"Security Fund Complex"), are set forth below. Each of the directors is a
director of each of the other registered investment companies in the Security
Fund Complex.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
AGGREGATE COMPENSATION
-------------------------------------------- ESTIMATED ANNUAL TOTAL COMPENSATION FROM
NAME OF DIRECTOR SECURITY GROWTH SECURITY SECURITY BENEFITS UPON THE SECURITY FUND COMPLEX,
OF THE FUND AND INCOME FUND EQUITY FUND ULTRA FUND RETIREMENT INCLUDING THE FUNDS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Donald A. Chubb, Jr. $2,249 $2,249 $2,249 $0 $27,000
John D. Cleland 0 0 0 0 0
Penny A. Lumpkin 2,166 2,166 2,166 0 26,000
Mark L. Morris, Jr. 2,249 2,249 2,249 0 27,000
Maynard Oliverius 2,166 2,166 2,166 0 26,000
James R. Schmank 0 0 0 0 0
Harold G. Worswick** 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------
<FN>
**Mr. Worswick retired as a fund director February 1996. No deferred compensation accrued for Mr. Worswick as of
September 30, 1999. Mr. Worswick received deferred compensation in the amount of $8,386 during the fiscal-year ended
September 30, 1999.
</FN>
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Investment Manager compensates its officers and directors who may also serve
as officers or directors of the Funds. On March 31, 2000, the Funds' officers
and directors (as a group) beneficially owned less than one percent of the total
outstanding Class A shares of Growth and Income Fund, Equity Fund, Total Return
Fund, Small Cap Growth Fund, Enhanced Index Fund, International Fund, Global
Fund and Ultra Fund. On March 31, 2000, the officers and directors of Security
Equity Fund (as a group) beneficially owned approximately 1.8% of the total
outstanding Class A shares of the Select 25 Series and 2.3% of the total
outstanding Class A shares of Mid Cap Value Series. On March 31, 2000 the
officers and directors of Security Equity Fund owned 0% of the Class A, Class B
and Class C shares of Social Awareness Series and 0% of the Class B and Class C
shares of Growth and Income Fund, Ultra Fund, Select 25 Series, International
Series, Mid Cap Value Series, Global Series, Total Return Series, Small Cap
Growth Series and Enhanced Index Series.
PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 2000, Security Benefit Life Insurance Company ("SBL"), 700 SW
Harrison Street, Topeka, Kansas, 66636-0001, owned, of record and beneficially,
34.9% of the voting securities of Growth and Income Fund (39.5% of the total
outstanding Class A shares and 0% of the total outstanding Class B and Class C
shares); 25.0% of the voting securities of Mid Cap Value Fund (39.5% of the
total outstanding Class A shares and 0% of the total outstanding Class B and
Class C shares); 49.3% of the voting securities of Small Cap Growth Fund (61.9%
of the total outstanding Class A shares, 0% of the total outstanding Class B and
Class C shares); 44.0% of the voting securities of Enhanced Index Fund (47.3% of
the total outstanding Class A shares, 33.2% of the total outstanding Class B
shares and 59.5% of the total outstanding Class C shares) and 58.4% of the
voting securities of International Fund (50.7% of the total outstanding Class A
shares, 71.6% of the total outstanding Class B shares and 57.8% of the total
outstanding Class C shares). SBL's percentage ownership of Mid Cap Value Fund,
Enhanced Index Fund and International Fund may permit SBL to effectively control
the outcome of any matters submitted to a vote of shareholders of these funds.
SBL is a stock life insurance company and is incorporated under the laws of
Kansas. SBL is ultimately controlled by Security Benefit Mutual Holding Company,
700 SW Harrison Street, Topeka, Kansas, 66636-0001, a mutual holding company
organized under the laws of Kansas.
As of March 31, 2000, Security Benefit Group, Inc. ("SBG"), 700 SW Harrison
Street, Topeka, Kansas, 66636-0001, owned, of record and beneficially, 51.6% of
the voting securities of Total Return Fund (55.9% of the total outstanding Class
A shares and 48.6% of the total outstanding Class B shares and 0% of the total
outstanding Class C shares). SBG's percentage ownership of Total Return Fund may
permit SBG to effectively control the outcome of any matters submitted to a vote
of shareholders of these two funds. SBG is an insurance and financial services
holding company wholly-owned by Security Benefit Life Insurance Company ("SBL"),
700 SW Harrison Street, Topeka, Kansas 66636-0001. SBG and SBL are incorporated
under the laws of Kansas. SBG is ultimately controlled by Security Benefit
Mutual Holding Company, 700 SW Harrison Street, Topeka, Kansas 66636-0001, a
mutual holding company organized under the laws of Kansas.
As of March 31, 2000, the following entities owned, of record and beneficially
unless otherwise indicated, 5% or more of a class of a Fund's outstanding
securities:
- -----------------------------------------------------------------------
CLASS PERCENTAGE
NAME OF STOCKHOLDER FUND OWNED OWNED OWNED
- -----------------------------------------------------------------------
SBL Ultra Class A 16.0
Equity Class A 12.3
Global Class A 7.2
Total Return Class A 55.8
Total Return Class B 48.6
Mid Cap Value Class A 39.6
Mid Cap Value Class B 5.4
Small Cap Growth Class A 66.9
Enhanced Index Class A 45.8
Enhanced Index Class B 33.2
Enhanced Index Class C 59.5
International Class A 73.5
International Class B 71.6
International Class C 57.8
Select 25 Class A 9.3
Growth & Income Class A 36.9
- -----------------------------------------------------------------------
David G. and Tammy S. Kotcher Total Return Class B 5.4
- -----------------------------------------------------------------------
James and Carol Sherman Enhanced Index Class B 5.4
- -----------------------------------------------------------------------
Eugene L Cantor International Class B 5.9
- -----------------------------------------------------------------------
David A Denherd Ultra Class C 5.9
- -----------------------------------------------------------------------
Nancy A Tewes Ultra Class C 5.6
- -----------------------------------------------------------------------
Donaldson, Lufkin Jenrette
Securities Corporation Ultra Class C 5.6
- -----------------------------------------------------------------------
Pablo J. Quiroga, M.D. Growth & Income Class C 5.4
- -----------------------------------------------------------------------
Gladys Hollant Growth & Income Class C 6.4
- -----------------------------------------------------------------------
William D. McCarthy Growth & Income Class C 15.4
- -----------------------------------------------------------------------
Pat McCreless Growth & Income Class C 16.5
- -----------------------------------------------------------------------
Linda Moore Growth & Income Class C 8.1
- -----------------------------------------------------------------------
Joan Asselta, Trustee
Margaret Papaccio Family Trust Growth & Income Class C 6.7
- -----------------------------------------------------------------------
Judith E. Parks Growth & Income Class C 7.9
- -----------------------------------------------------------------------
Roy O. Derminer Global Class C 9.7
- -----------------------------------------------------------------------
Thomas G. Rasmussen Global Class C 5.7
- -----------------------------------------------------------------------
Larry Rasmussen Global Class C 5.6
- -----------------------------------------------------------------------
David A Denherd Global Class C 5.6
- -----------------------------------------------------------------------
Warner Group, Inc. Global Class C 5.4
- -----------------------------------------------------------------------
Norma J Plonkey Small Cap Growth Class C 10.0
- -----------------------------------------------------------------------
Roy Derminer Small Cap Growth Class C 7.4
- -----------------------------------------------------------------------
Arlene E. Consigli-Hambleton Total Return Class C 10.7
- -----------------------------------------------------------------------
William H. Griffith, III Total Return Class C 9.2
- -----------------------------------------------------------------------
Janice C. Lippincott Total Return Class C 7.2
- -----------------------------------------------------------------------
Donna Burger Total Return Class C 9.1
- -----------------------------------------------------------------------
Donaldson Lufkin Jenrette
Securities Corporation Total Return Class C 47.1
- -----------------------------------------------------------------------
Norma J Plonkey Mid Cap Value Class C 9.9
- -----------------------------------------------------------------------
*owned of record only
- -----------------------------------------------------------------------
HOW TO PURCHASE SHARES
Investors may purchase shares of the Funds through authorized dealers who are
members of the National Association of Securities Dealers, Inc. In addition,
banks and other financial institutions may make shares of the Funds available to
their customers. (Banks and other financial institutions that make shares of the
Funds available to their customers in Texas must be registered with that state
as securities dealers.) The minimum initial investment is $100. The minimum
subsequent investment is $100 unless made through an Accumulation Plan which
allows for subsequent investments of $20. (See "Accumulation Plan," page 45.) An
application may be obtained from the Investment Manager.
As a convenience to investors and to save operating expenses, the Funds do not
issue certificates for full shares except upon written request by the investor
or his or her investment dealer. Certificates will be issued at no cost to the
stockholder. No certificates will be issued for fractional shares and fractional
shares may be withdrawn only by redemption for cash.
Orders for the purchase of shares of the Funds will be confirmed at an offering
price equal to the net asset value per share next determined after receipt of
the order in proper form by Security Distributors, Inc. (the "Distributor")
(generally as of the close of the Exchange on that day) plus the sales charge in
the case of Class A shares. Orders received by dealers or other firms prior to
the close of the Exchange and received by the Distributor prior to the close of
its business day will be confirmed at the offering price effective as of the
close of the Exchange on that day. Dealers and other financial services firms
are obligated to transmit orders promptly.
The Funds reserve the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders.
ALTERNATIVE PURCHASE OPTIONS -- The Funds offer three classes of shares:
CLASS A SHARES - FRONT-END LOAD OPTION. Class A shares are sold with a sales
charge at the time of purchase. Class A shares are not subject to a sales charge
when they are redeemed (except that shares sold in an amount of $1,000,000 or
more without a front-end sales charge will be subject to a contingent deferred
sales charge of 1% for one year). See Appendix B for a discussion of "Rights of
Accumulation" and "Statement of Intention," which options may serve to reduce
the front-end sales charge.
CLASS B SHARES - BACK-END LOAD OPTION. Class B shares are sold without a sales
charge at the time of purchase, but are subject to a deferred sales charge if
they are redeemed within five years of the date of purchase. Class B shares will
automatically convert to Class A shares at the end of eight years after
purchase.
CLASS C SHARES - LEVEL LOAD OPTION. Class C shares are sold without a sales
charge at the time of purchase, but are subject to a contingent deferred sales
charge if they are redeemed within one year of the date of purchase.
The decision as to which class is more beneficial to an investor depends on the
amount and intended length of the investment. Investors who would rather pay the
entire cost of distribution at the time of investment, rather than spreading
such cost over time, might consider Class A shares. Other investors might
consider Class B or Class C shares, in which case 100% of the purchase price is
invested immediately, depending on the amount of the purchase and the intended
length of investment.
Dealers or others may receive different levels of compensation depending on
which class of shares they sell.
CLASS A SHARES -- Class A shares are offered at net asset value plus an initial
sales charge as follows:
- --------------------------------------------------------------------------------
SALES CHARGE
-------------------------------------------
PERCENTAGE PERCENTAGE OF PERCENTAGE
AMOUNT OF PURCHASE OF OFFERING NET AMOUNT REALLOWABLE
AT OFFERING PRICE PRICE INVESTED TO DEALERS
- --------------------------------------------------------------------------------
Less than $50,000.................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000....... 4.75 4.99 4.00
$100, 000 but less than $250,000..... 3.75 3.90 3.00
$250,000 but less than $500,000...... 2.75 2.83 2.25
$500,000 but less than $1,000,000.... 2.00 2.04 1.75
$1,000,000 and over.................. None None (See below)
- --------------------------------------------------------------------------------
The Underwriter will pay a commission to dealers on purchases of $1,000,000 or
more as follows: 1.00% on sales up to $5,000,000, plus .50% on sales of
$5,000,000 or more up to $10,000,000, and .10% on any amount of $10,000,000 or
more. The Underwriter may also pay a commission of up to 1% to dealers who
initiate or are responsible for purchases of $500,000 or more by certain
retirement plans as described under "Purchases at Net Asset Value" in the
prospectus. Such purchases may be subject to a deferred sales charge of up to 1%
in the event of a redemption within one year of the purchase.
The Investment Manager may, at its expense, pay a service fee to dealers who
satisfy certain criteria established by the Investment Manager from time to time
relating to the volume of their sales of Class A shares of the Funds and certain
other Security Funds during prior periods and certain other factors, including
providing to their clients who are stockholders of the Funds certain services,
which include assisting in maintaining records, processing purchase and
redemption requests and establishing shareholder accounts, assisting
shareholders in changing account options or enrolling in specific plans, and
providing shareholders with information regarding the Funds and related
developments. Service fees are paid quarterly and may be discontinued at any
time.
SECURITY EQUITY FUND'S CLASS A DISTRIBUTION PLAN -- As discussed in the
prospectus, Small Cap Growth Fund, Enhanced Index Fund, International Fund,
Select 25 Fund, Large Cap Growth Fund and Technology Fund have a Distribution
Plan for their Class A shares pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The Plan authorizes each such Fund to pay an annual fee to
the Distributor of .25% of the average daily net asset value of the Class A
shares of the Fund to finance various activities relating to the distribution of
such shares of the Fund to investors. These expenses include, but are not
limited to, the payment of compensation (including compensation to securities
dealers and other financial institutions and organizations) to obtain various
administrative services for the Fund. These services include, among other
things, processing new shareholder account applications and serving as the
primary source of information to customers in answering questions concerning the
Fund and their transactions with the Fund. The Distributor is also authorized to
engage in advertising, the preparation and distribution of sales literature and
other promotional activities on behalf of the Fund. The Distributor is required
to report in writing to the Board of Directors of Equity Fund and the board will
review at least quarterly the amounts and purpose of any payments made under the
Plan. The Distributor is also required to furnish the board with such other
information as may reasonably be requested in order to enable the board to make
an informed determination of whether the Plan should be continued.
The Plan will continue from year to year, provided that such continuance is
approved at least annually by a vote of a majority of the Board of Directors of
the Fund, including a majority of the independent directors cast in person at a
meeting called for the purpose of voting on such continuance. The Plan can be
terminated at any time on 60 days' written notice, without penalty, if a
majority of the disinterested directors or the Class A shareholders vote to
terminate the Plan. Any agreement relating to the implementation of the Plan
terminates automatically if it is assigned. The Plan may not be amended to
increase materially the amount of payments thereunder without approval of the
Class A shareholders of the Fund.
Because all amounts paid pursuant to the Distribution Plan are paid to the
Distributor, the Investment Manager and its officers, directors and employees,
including Messrs. Cleland and Schmank (directors of the Fund), Messrs. Swickard,
Milberger, Schier, Ms. Harwood, Ms. Lee and Ms. Shields (officers of the Fund),
all may be deemed to have a direct or indirect financial interest in the
operation of the Distribution Plan. None of the independent directors have a
direct or indirect financial interest in the operation of the Distribution Plan.
Benefits from the Distribution Plan may accrue to the Fund and its stockholders
from the growth in assets due to sales of shares to the public pursuant to the
Distribution Agreement with the Distributor. Increases in the net assets of
Small Cap Growth, Enhanced Index, International, Select 25, Large Cap Growth and
Technology Funds from sales pursuant to their respective Distribution Plans and
Agreements may benefit shareholders by reducing per share expenses, permitting
increased investment flexibility and diversification of such Funds' assets, and
facilitating economies of scale (e.g., block purchases) in the Funds' securities
transactions.
CLASS B SHARES -- Class B shares are offered at net asset value, without an
initial sales charge. With certain exceptions, the Funds may impose a deferred
sales charge on shares redeemed within five years of the date of purchase. No
deferred sales charge is imposed on amounts redeemed thereafter. If imposed, the
deferred sales charge is deducted from the redemption proceeds otherwise payable
to you. The deferred sales charge is retained by the Distributor.
Whether a contingent deferred sales charge is imposed and the amount of the
charge will depend on the number of years since the investor made a purchase
payment from which an amount is being redeemed, according to the following
schedule:
- -------------------------- -------------------------
YEAR SINCE PURCHASE CONTINGENT DEFERRED
PAYMENT WAS MADE SALES CHARGE
- -------------------------- -------------------------
First................. 5%
Second................ 4%
Third................. 3%
Fourth................ 3%
Fifth................. 2%
Sixth and Following... 0%
- -------------------------- -------------------------
Class B shares (except shares purchased through the reinvestment of dividends
and other distributions paid with respect to Class B shares) will automatically
convert, on the eighth anniversary of the date such shares were purchased, to
Class A shares which are subject to a lower distribution fee. This automatic
conversion of Class B shares will take place without imposition of a front-end
sales charge or exchange fee. (Conversion of Class B shares represented by stock
certificates will require the return of the stock certificates to the Investment
Manager.) All shares purchased through reinvestment of dividends and other
distributions paid with respect to Class B shares ("reinvestment shares") will
be considered to be held in a separate subaccount. Each time any Class B shares
(other than those held in the subaccount) convert to Class A shares, a pro rata
portion of the reinvestment shares held in the subaccount will also convert to
Class A shares. Class B shares so converted will no longer be subject to the
higher expenses borne by Class B shares. Because the net asset value per share
of the Class A shares may be higher or lower than that of the Class B shares at
the time of conversion, although the dollar value will be the same, a
shareholder may receive more or less Class A shares than the number of Class B
shares converted. Under current law, it is the Funds' opinion that such a
conversion will not constitute a taxable event under federal income tax law. In
the event that this ceases to be the case, the Board of Directors will consider
what action, if any, is appropriate and in the best interests of the Class B
stockholders.
CLASS B DISTRIBUTION PLAN -- Each Fund bears some of the costs of selling its
Class B shares under a Distribution Plan adopted with respect to its Class B
shares ("Class B Distribution Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 ("1940 Act"). This Plan provides for payments at an annual
rate of 1.00% of the average daily net asset value of Class B shares. Amounts
paid by the Funds are currently used to pay dealers and other firms that make
Class B shares available to their customers (1) a commission at the time of
purchase normally equal to 4.00% of the value of each share sold and (2) a
service fee for account maintenance and personal service to shareholders payable
for the first year, initially, and for each year thereafter, quarterly, in an
amount equal to .25% annually of the average daily net asset value of Class B
shares sold by such dealers and other firms and remaining outstanding on the
books of the Funds.
Rules of the National Association of Securities Dealers, Inc. ("NASD") limit the
aggregate amount that a Fund may pay annually in distribution costs for the sale
of its Class B shares to 6.25% of gross sales of Class B shares since the
inception of the Distribution Plan, plus interest at the prime rate plus 1% on
such amount (less any contingent deferred sales charges paid by Class B
shareholders to the Distributor). The Distributor intends, but is not obligated,
to continue to pay or accrue distribution charges incurred in connection with
the Class B Distribution Plan which exceed current annual payments permitted to
be received by the Distributor from the Funds. The Distributor intends to seek
full payment of such charges from the Fund (together with annual interest
thereon at the prime rate plus 1%) at such time in the future as, and to the
extent that, payment thereof by the Funds would be within permitted limits.
Each Fund's Class B Distribution Plan may be terminated at any time by vote of
its directors who are not interested persons of the Fund as defined in the 1940
Act or by vote of a majority of the outstanding Class B shares. In the event the
Class B Distribution Plan is terminated by the Class B stockholders or the
Funds' Board of Directors, the payments made to the Distributor pursuant to the
Plan up to that time would be retained by the Distributor. Any expenses incurred
by the Distributor in excess of those payments would be absorbed by the
Distributor. The Funds make no payments in connection with the sales of their
shares other than the distribution fee paid to the Distributor.
CLASS C SHARES -- Class C shares are offered at net asset value, without an
initial sales charge. With certain exceptions, the Funds may impose a deferred
sales charge on shares redeemed within one year of the date of purchase. No
deferred sales charge is imposed on amounts redeemed thereafter. If imposed, the
deferred sales charge is deducted from the redemption proceeds otherwise payable
to you. The deferred sales charge is retained by the Distributor.
CLASS C DISTRIBUTION PLAN -- Each Fund bears some of the costs of selling its
Class C shares under a Distribution Plan adopted with respect to its Class C
shares ("Class C Distribution Plan") pursuant to Rule 12b-1 under the Investment
Company Act of 1940 ("1940 Act"). This Plan provides for payments at an annual
rate of 1.00% of the average daily net asset value of Class C shares. Amounts
paid by the Fund are currently used to pay dealers and other firms that make
Class C shares available to their customers (1) a commission at the time of
purchase normally equal to .75% of the value of each share sold, and for each
year thereafter, quarterly, in an amount equal to .75% annually of the average
daily net asset value of Class C shares sold by such dealers and other firms and
remaining outstanding on the books of the Fund and (2) a service fee payable for
the first year initially, and for each year thereafter, quarterly, in an amount
equal to .25% annually of the average daily net asset value of Class C shares
sold by such dealers and other firms and remaining outstanding on the books of
the Fund.
Rules of the NASD limit the aggregate amount that a Fund may pay annually in
distribution costs for the sale of its Class C shares to 6.25% of gross sales of
Class C shares since the inception of the Distribution Plan, plus interest at
the prime rate plus 1% on such amount (less any contingent deferred sales
charges paid by Class C shareholders to the Distributor). The Distributor
intends, but is not obligated, to continue to pay or accrue distribution charges
incurred in connection with the Class C Distribution Plan which exceed current
annual payments permitted to be received by the Distributor from the Funds. The
Distributor intends to seek full payment of such charges from the Fund (together
with annual interest thereon at the prime rate plus 1%) at such time in the
future as, and to the extent that, payment thereof by the Funds would be within
permitted limits.
The Fund's Class C Distribution Plan may be terminated at any time by vote of
its directors who are not interested persons of the Fund as defined in the 1940
Act or by vote of a majority of the outstanding Class C shares. In the event the
Class C Distribution Plan is terminated by the Class C stockholders or the
Fund's Board of Directors, the payments made to the Distributor pursuant to the
Plan up to that time would be retained by the Distributor. Any expenses incurred
by the Distributor in excess of those payments would be absorbed by the
Distributor. The Fund makes no payments in connection with the sales of their
shares other than the distribution fee paid to the Distributor.
CALCULATION AND WAIVER OF CONTINGENT DEFERRED SALES CHARGES -- Any contingent
deferred sales charge imposed upon redemption of Class A shares (purchased in
amounts of $1,000,000 or more), Class B shares and Class C shares is a
percentage of the lesser of (1) the net asset value of the shares redeemed or
(2) the net cost of such shares. No contingent deferred sales charge is imposed
upon redemption of amounts derived from (1) increases in the value above the net
cost of such shares due to increases in the net asset value per share of the
Fund; (2) shares acquired through reinvestment of income dividends and capital
gain distributions; or (3) Class A shares (purchased in amounts of $1,000,000 or
more) or Class C shares held for more than one year or Class B and Class C
shares held for more than five years. Upon request for redemption, shares not
subject to the contingent deferred sales charge will be redeemed first.
Thereafter, shares held the longest will be the first to be redeemed.
The contingent deferred sales charge is waived: (1) following the death of a
stockholder if redemption is made within one year after death; (2) upon the
disability (as defined in section 72(m)(7) of the Internal Revenue Code) of a
stockholder prior to age 65 if redemption is made within one year after the
disability, provided such disability occurred after the stockholder opened the
account; (3) in connection with required minimum distributions in the case of an
IRA, SAR-SEP or Keogh or any other retirement plan qualified under Section
401(a), 401(k) or 403(b) of the Code; and (4) in the case of distributions from
retirement plans qualified under Section 401(a) or 401(k) of the Internal
Revenue Code due to (i) returns of excess contributions to the plan, (ii)
retirement of a participant in the plan, (iii) a loan from the plan (repayment
of loans, however, will constitute new sales for purposes of assessing the
contingent deferred sales charge), (iv) "financial hardship" of a participant in
the plan, as that term is defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time, (v) termination of employment of
a participant in the plan, (vi) any other permissible withdrawal under the terms
of the plan. The contingent deferred sales charge will also be waived in the
case of certain redemptions of Class B shares of the Funds pursuant to a
systematic withdrawal program. (See "Systematic Withdrawal Program," page 45.)
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS -- The Investment Manager or
Distributor, from time to time, will provide promotional incentives or pay a
bonus, to certain dealers whose representatives have sold or are expected to
sell significant amounts of the Funds and/or certain other funds managed by the
Investment Manager. Such promotional incentives will include payment for
attendance (including travel and lodging expenses) by qualifying registered
representatives (and members of their families) at sales seminars at luxury
resorts within or without the United States. Bonus compensation may include
reallowance of the entire sales charge and may also include, with respect to
Class A shares, an amount which exceeds the entire sales charge and, with
respect to Class B or Class C shares, an amount which exceeds the maximum
commission. The Distributor, or the Investment Manager, may also provide
financial assistance to certain dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns, and/or shareholder services and programs regarding one or more
of the funds managed by the Investment Manager. Certain of the promotional
incentives or bonuses may be financed by payments to the Distributor under a
Rule 12b-1 Distribution Plan. The payment of promotional incentives and/or
bonuses will not change the price an investor will pay for shares or the amount
that the Funds will receive from such sale. No compensation will be offered to
the extent it is prohibited by the laws of any state or self-regulatory agency,
such as the NASD. A dealer to whom substantially the entire sales charge of
Class A shares is reallowed may be deemed to be an "underwriter" under federal
securities laws.
The Distributor also may pay banks and other financial services firms that
facilitate transactions in shares of the Funds for their clients a transaction
fee up to the level of the payments made allowable to dealers for the sale of
such shares as described above. Banks currently are prohibited under the
Glass-Steagall Act from providing certain underwriting or distribution services.
If banking firms were prohibited from acting in any capacity or providing any of
the described services, the Fund's Board of Directors would consider what
action, if any, would be appropriate.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
The Investment Manager or Distributor also may pay a marketing allowance to
dealers who meet certain eligibility criteria. This allowance is paid with
reference to new sales of Fund shares in a calendar year and may be discontinued
at any time. To be eligible for this allowance in any given year, the dealer
must sell a minimum of $2,000,000 of Class A, Class B and Class C shares during
that year. The applicable marketing allowance factors are set forth in the
accompanying table.
- ------------------------------------------------------
APPLICABLE
MARKETING
ALLOWANCE
AGGREGATE NEW SALES FACTOR*
- ------------------------------------------------------
Less than $2 million....................... .00%
$2 million but less than $5 million........ .15%
$5 million but less than $10 million....... .25%
$10 million but less than $15 million...... .35%
$15 million but less than $20 million...... .50%
or $20 million or more..................... .75%
- ------------------------------------------------------
*The maximum marketing allowance factor applicable per
this schedule will be applied to all new sales in the
calendar year to determine the marketing allowance
payable for such year.
- ------------------------------------------------------
PURCHASES AT NET ASSET VALUE -- Class A shares of the Funds may be purchased at
net asset value by (1) directors, officers and employees of the Funds, the
Funds' Investment Manager or Distributor; directors, officers and employees of
Security Benefit Life Insurance Company and its subsidiaries; agents licensed
with Security Benefit Life Insurance Company; spouses or minor children of any
such agents; as well as the following relatives of any such directors, officers
and employees (and their spouses): spouses, grandparents, parents, children,
grandchildren, siblings, nieces and nephews; (2) any trust, pension, profit
sharing or other benefit plan established by any of the foregoing corporations
for persons described above; (3) retirement plans where third party
administrators of such plans have entered into certain arrangements with the
Distributor or its affiliates provided that no commission is paid to dealers;
and (4) officers, directors, partners or registered representatives (and their
spouses and minor children) of broker-dealers who have a selling agreement with
the Distributor. Such sales are made upon the written assurance of the purchaser
that the purchase is made for investment purposes and that the securities will
not be transferred or resold except through redemption or repurchase by or on
behalf of the Fund.
Class A shares of the Funds may also be purchased at net asset value when the
purchase is made on the recommendation of (i) a registered investment adviser,
trustee or financial intermediary who has authority to make investment decisions
on behalf of the investor; or (ii) a certified financial planner or registered
broker-dealer who either charges periodic fees to its customers for financial
planning, investment advisory or asset management services, or provides such
services in connection with the establishment of an investment account for which
a comprehensive "wrap fee" is imposed. Class A shares of the Funds may also be
purchased at net asset value when the purchase is made by retirement plans that
(i) buy shares of the Security Funds worth $500,000 or more; (ii) have 100 or
more eligible employees at the time of purchase; (iii) certify it expects to
have annual plan purchases of shares of Security Funds of $200,000 or more; (iv)
are provided administrative services by certain third-party administrators that
have entered into a special service arrangement with the Security Funds relating
to such plans; or (v) have at the time of purchase, aggregate assets of at least
$1,000,000. Purchases made pursuant to this provision may be subject to a
deferred sales charge of up to 1% in the event of a redemption within one year
of the purchase.
The Distributor must be notified when a purchase is made that qualifies under
any of the above provisions.
A stockholder of Equity Fund who formerly invested in the Bondstock Investment
Plans or Life Insurance Investors Investment Plans received Class A shares of
Equity Fund in liquidation of the Plans. Such a stockholder may purchase Class A
shares of Equity Fund at net asset value provided that such stockholder
maintains his or her Equity Fund account.
PURCHASES FOR EMPLOYER-SPONSORED RETIREMENT PLANS -- Security Financial
Resources, Inc., an affiliated company of the Distributor, offers plan
recordkeeping services on a fee basis to employer-sponsored retirement plans.
Employer-sponsored retirement plans that have entered into an agreement to
receive such services from Security Financial Resources, Inc. may purchase Class
A shares of the Funds at net asset value under certain circumstances. Such plans
would first purchase Class C shares of the Funds for an initial period of time
that would vary with the size of the plan, amount of assets flowing into the
plan and level of service provided by the dealer. After that initial period of
time has elapsed, the plan would exchange at net asset value existing Class C
shares for Class A shares of the respective funds, and new purchases under the
plans would be made in Class A shares at net asset value.
The schedule below sets forth the amount of time that retirement plan assets
would remain invested in Class C shares before they would be eligible for
exchange to Class A shares of the respective Funds. The schedule below also sets
forth the commissions paid to dealers in connection with sales of Fund shares
with respect to such retirement plans, which commissions replace those normally
paid in connection with sales of Class C shares.
- ------------------------------------------------------------------
NUMBER COMMISSION BY
OF YEARS YEAR OF PURCHASE*
INVESTED IN -------------------
ELIGIBLE PLANS CLASS C SHARES 1 2 3 4 5+
- ------------------------------------------------------------------
Less than $1.5 mil. in
assets or $400,000 in flow 8 years 5% 4% 3% 2% 1%
- ------------------------------------------------------------------
Less than $1.5 mil. in
assets or $400,000 in flow 8 years 6% 4% 2% 1% 1%
- ------------------------------------------------------------------
Less than $5 mil. in
assets or $1 mil. in flow 6 years 4% 3% 2% 1% 1%
- ------------------------------------------------------------------
Less than $5 mil. in
assets or $1 mil. in flow 5 years 3% 2% 1% 1% 1%
- ------------------------------------------------------------------
Less than $10 mil. in
assets or $2 mil. in flow 3 years 2% 1% 1% 1% 1%
- ------------------------------------------------------------------
Less than $10 mil. in
assets or $2 mil. in flow 0 years** 1%+ 1% 1% 1% 1%
- ------------------------------------------------------------------
*The commission is a percentage of the amount invested. The year
of purchase is measured from the date of the plan's initial
investment in the Funds. Notwithstanding the foregoing schedule,
if 50% or more of the plan assets allocated to the Funds is
redeemed within the four-year period beginning on the date of
the plan's initial investment in the Funds, the commission will
immediately drop to 1% for all subsequent purchases.
**Amounts will be invested in Class A shares at net asset value.
+Certain dealers may receive 1.25% in year 1.
- ------------------------------------------------------------------
In addition to the commissions set forth above, dealers will receive a service
fee payable beginning in the 13th month following the plan's initial investment.
The Distributor pays service fees quarterly, in an amount equal to 0.25%
annually of the average daily net asset value of Class C shares sold by dealers
in connection with such employer-sponsored retirement plans and remaining
outstanding on the books of the Funds.
ACCUMULATION PLAN
Investors may purchase shares on a periodic basis under an Accumulation Plan
which provides for an initial investment of $100 minimum and subsequent
investments of $20 minimum at any time. An Accumulation Plan is a voluntary
program, involving no obligation to make periodic investments, and is terminable
at will. Payments are made by sending a check to the Distributor who (acting as
an agent for the dealer) will purchase whole and fractional shares of the Fund
as of the close of business on the day such payment is received. A confirmation
and statement of account will be sent to the investor following each investment.
Certificates for whole shares will be issued upon request. No certificates will
be issued for fractional shares which may be withdrawn only by redemption for
cash. Investors may choose to use "Secur-O-Matic" (automatic bank draft) to make
their Fund purchases. There is no additional charge for using Secur-O-Matic. An
application may be obtained from the Funds.
SYSTEMATIC WITHDRAWAL PROGRAM
A Systematic Withdrawal Program may be established by stockholders who wish to
receive regular monthly, quarterly, semiannual or annual payments of $25 or
more. A stockholder may elect a payment that is a specified percentage of the
initial or current account value or a specified dollar amount. The Program may
also be based upon the liquidation of a fixed or variable number of shares
provided that the amount withdrawn monthly is at least $25. However, the Funds
do not recommend this (or any other amount) as an appropriate monthly
withdrawal. Shares with a current aggregate offering price of $5,000 or more
must be deposited with the Investment Manager acting as agent for the
stockholder under the Program. There is no service charge on the Program.
Sufficient shares will be liquidated at net asset value to meet the specified
withdrawals. Liquidation of shares may deplete the investment, particularly in
the event of a market decline. Payments cannot be considered as actual yield or
income since part of such payments is a return of capital. Such withdrawals
constitute a taxable event to the stockholder. The maintenance of a Withdrawal
Program concurrently with purchases of additional shares of the Fund would be
disadvantageous because of the sales commission payable in respect to such
purchases. During the withdrawal period, no payments will be accepted under an
Accumulation Plan. Income dividends and capital gains distributions are
automatically reinvested at net asset value. If an investor has an Accumulation
Plan in effect, it must be terminated before a Systematic Withdrawal Program may
be initiated.
A stockholder may establish a Systematic Withdrawal Program with respect to
Class B or Class C shares without the imposition of any applicable contingent
deferred sales charge, provided that such withdrawals do not in any 12-month
period, beginning on the date the Program is established, exceed 10% of the
value of the account on that date ("Free Systematic Withdrawals"). Free
Systematic Withdrawals are not available if a Program established with respect
to Class B or Class C shares provides for withdrawals in excess of 10% of the
value of the account in any Program year and, as a result, all withdrawals under
such a Program are subject to any applicable contingent deferred sales charge.
Free Systematic Withdrawals will be made first by redeeming those shares that
are not subject to the contingent deferred sales charge and then by redeeming
shares held the longest. The contingent deferred sales charge applicable to a
redemption of Class B and Class C shares requested while Free Systematic
Withdrawals are being made will be calculated as described under "Calculation
and Waiver of Contingent Deferred Sales Charges," page 43.
The stockholder receives confirmation of each transaction showing the source of
the payment and the share balance remaining in the Program. A Program may be
terminated on written notice by the stockholder or by the Fund, and it will
terminate automatically if all shares are liquidated or withdrawn from the
account.
INVESTMENT MANAGEMENT
The Investment Manager, located at 700 SW Harrison Street, Topeka, Kansas, has
served as investment adviser to Security Growth and Income Fund (formerly
Security Investment Fund), Security Equity Fund, and Security Ultra Fund,
respectively, since April 1, 1964, January 1, 1964, and April 22, 1965. The
Investment Manager also acts as investment adviser to Security Income Fund,
Security Cash Fund, SBL Fund, and Security Municipal Bond Fund. The Investment
Manager is a limited liability company controlled by its members, Security
Benefit Life Insurance Company and Security Benefit Group, Inc. ("SBG"). SBG is
an insurance and financial services holding company wholly-owned by Security
Benefit Life Insurance Company, 700 SW Harrison Street, Topeka, Kansas
66636-0001. Security Benefit Life, a stock life insurance company and
incorporated under the laws of Kansas, is controlled by Security Benefit Corp.
("SBC"). SBC is wholly-owned by Security Benefit Mutual Holding Company, which
is in turn controlled by Security Benefit Life policyholders. Security Benefit
Life together with its subsidiaries, has over $9.8 billion of assets under
management.
The Investment Manager serves as investment adviser to Security Growth and
Income Fund, Security Equity Fund and Security Ultra Fund, respectively, under
Investment Management and Services Agreements, which were approved by the Fund's
Board of Directors on November 30, 1999 and were approved by the shareholders of
the Funds on January 26, 2000, and which became effective on January 27, 2000.
Pursuant to the Investment Management and Services Agreements, the Investment
Manager furnishes investment advisory, statistical and research services to the
Funds, supervises and arranges for the purchase and sale of securities on behalf
of the Funds, and provides for the compilation and maintenance of records
pertaining to the investment advisory function.
The Investment Manager has entered into a sub-advisory agreement with
OppenheimerFunds, Two World Trade Center, New York, NY 10048-0203, to provide
investment advisory services to Global Fund. Pursuant to this agreement,
OppenheimerFunds furnishes investment advisory, statistical and research
facilities, supervises and arranges for the purchase and sale of securities on
behalf of Global Fund and provides for the compilation and maintenance of
records pertaining to such investment advisory services, subject to the control
and supervision of the Fund's Board of Directors and the Investment Manager. For
such services, the Investment Manager pays OppenheimerFunds an annual fee equal
to a percentage of the average daily closing value of the combined net assets of
Global Fund and another Fund managed by the Investment Manager, SBL Fund, Series
D, computed on a daily basis as follows: 0.35% of the combined average daily net
assets up to $300 million, plus 0.30% of such assets over $300 million up to
$750 million and 0.25% of such assets over $750 million.
OppenheimerFunds is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of OppenheimerFunds and controlled by
Massachusetts Mutual Life Insurance Company. OppenheimerFunds has operated as an
investment advisor since 1960. In addition, OppenheimerFunds and its
subsidiaries and affiliates currently manage investment companies with assets of
more than $120 billion, and more than 5 million shareholder accounts.
The Investment Manager has engaged Strong, 100 Heritage Reserve, Menomonee
Falls, Wisconsin 53051, to provide investment advisory services to the Small Cap
Growth Fund. For such services, the Investment Manager pays Strong, an annual
fee based on the combined average net assets of Small Cap Growth Fund and
another fund for which the Investment Manager has engaged Strong to provide
advisory services. The fee is equal to .50% of the combined average net assets
under $150 million, .45% of the combined average net assets at or above $150
million but less than $500 million, and .40% of the combined average net assets
at or above $500 million. Strong is a privately held corporation which is
controlled by Richard S. Strong. Strong was established in 1974 and as of
December 31, 1999, manages over $38 billion in assets.
The Investment Manager has retained Bankers Trust , 130 Liberty Street, New
York, New York 10006, to provide investment advisory services to Enhanced Index
Fund and International Fund. Pursuant to the agreement, Bankers Trust furnishes
investment advisory, statistical and research facilities, supervises and
arranges for the purchase and sale of securities on behalf of the Funds and
provides for the compilation and maintenance of records pertaining to such
investment advisory services, subject to the control and supervision of the
Fund's Board of Directors and the Investment Manager. For such services to
Enhanced Index Fund, the Investment Manager pays Bankers Trust an annual fee
equal to a percentage of the average daily closing value of the combined net
assets of Enhanced Index Fund and another fund, computed on a daily basis as
follows: 0.20% of the combined average daily net assets of $100 million or less;
and 0.15% of the combined average daily net assets of more than $100 million but
less than $300 million; and 0.13% of the combined average daily net assets of
more than $300 million. The Investment Manager also will pay Bankers Trust the
following minimum fees with respect to the Enhanced Index Fund: (i) no minimum
fee in the first year the Enhanced Index Fund begins operations; (ii) $100,000
in the Fund's second year of operations; and (iii) $200,000 in the third and
following years of the Fund's operations. For the services provided to the
International Fund, the Investment Manager pays Bankers Trust an annual fee
equal to a percentage of the average daily closing value of the combined net
assets of International Fund and another fund managed by the Investment Manager,
computed on a daily basis as follows: 0.60% of the combined average daily net
assets of $200 million or less and 0.55% of the combined average daily net
assets of more than $200 million.
Bankers Trust is a wholly owned subsidiary of Bankers Trust Corporation and an
indirect subsidiary of Deutsche Bank AG ("Deutsche Bank"). Bankers Trust has
more than 50 years of experience managing retirement assets for the nation's
largest corporations and institutions. Deutsche Bank is split into 5 business
divisions, including Deutsche Asset Management, which encompasses the investment
management capabilities of Bankers Trust. As of December 31, 1999, Deutsche
Asset Management had $580 billion in assets under management globally; and in
the U.S., Deutsche Asset Management is responsible for $287 billion in client
assets. Bankers Trust managed $270.5 billion of the $287 billion in client
assets.
The Investment Manager has engaged Wellington Management Company, LLP, 75 State
Street, Boston, Massachusetts, 02109 to provide investment advisory services to
the Technology Fund.
Wellington Management is a limited liability partnership which traces its
origins to 1928. It currently manages over $248 billion in assets on behalf of
investment companies, employee benefit plans, endowments, foundations and other
institutions and individuals.
For the services provided to the Technology Fund, the Investment Manager pays
Wellington an annual fee equal to .50% of the average daily closing value of the
combined net assets of Technology Fund and Series T of SBL Fund, another fund
managed by the Investment Manager.
Pursuant to the Investment Management and Services Agreements, the Investment
Manager also performs administrative functions and the bookkeeping, accounting
and pricing functions for the Funds, and performs all shareholder servicing
functions, including transferring record ownership, processing purchase and
redemption transactions, answering inquiries, mailing shareholder communications
and acting as the dividend disbursing agent.
The Investment Manager has also agreed to arrange for others (or itself) to
provide to the Funds, except Total Return, Social Awareness, Mid Cap Value,
Small Cap Growth, Enhanced Index, International, Select 25, Large Cap Growth and
Technology Funds, all other services, including custodian and independent
accounting services, required by the Funds. The Investment Manager will, when
necessary, engage the services of third parties such as a custodian bank or
independent auditors, in accordance with applicable legal requirements,
including approval by the Funds' Board of Directors. The Investment Manager
bears the expenses of providing the services it is required to furnish under the
Agreement for each Fund, except Total Return, Social Awareness, Mid Cap Value,
Small Cap Growth Enhanced Index, International, Select 25, Large Cap Growth and
Technology Funds. Thus, those Funds' expenses include only fees paid to the
Investment Manager as well as expenses of brokerage commissions, interest,
taxes, extraordinary expenses approved by the Board of Directors, and Class A,
Class B and Class C distribution fees.
Total Return, Social Awareness, Mid Cap Value, Small Cap Growth, Enhanced Index,
International, Select 25, Large Cap Growth and Technology Funds will pay all of
their respective expenses not assumed by the Investment Manager or the
Distributor, including organization expenses; directors' fees; fees of its
custodian; taxes and governmental fees; interest charges; any membership dues;
brokerage commissions; expenses of preparing and distributing reports to
shareholders; costs of shareholder and other meetings; Class A, Class B and
Class C distribution fees; and legal, auditing and accounting expenses. Total
Return, Social Awareness, Mid Cap Value, Small Cap Growth, Enhanced Index,
International, Select 25, Large Cap Growth and Technology Funds will also pay
for the preparation and distribution of the prospectus to their shareholders and
all expenses in connection with registration under the Investment Company Act of
1940 and the registration of their capital stock under federal and state
securities laws. Total Return, Social Awareness, Mid Cap Value, Small Cap
Growth, Enhanced Index, International, Select 25, Large Cap Growth and
Technology Funds will pay nonrecurring expenses as may arise, including
litigation expenses affecting them.
The Investment Manager has agreed to reimburse the Funds or waive a portion of
its management fee for any amount by which the total annual expenses of the
Funds (including management fees, but excluding interest, taxes, brokerage
commissions, extraordinary expenses and Class A, Class B and Class C
distribution fees) for any fiscal year that exceeds the level of expenses which
the Funds are permitted to bear under the most restrictive expense limitation
imposed by any state in which shares of the Funds are then qualified for sale.
(The Investment Manager is not aware of any state that currently imposes limits
on the level of mutual fund expenses.) The Investment Manager, as part of the
investment advisory agreement with Security Equity Fund, has agreed to cap the
total annual expenses of Enhanced Index Fund and Select 25 Fund to 1.75% and
International Fund to 2.25%, in each case exclusive of interest, taxes,
extraordinary expenses, brokerage fees and commissions and 12b-1 fees.
As compensation for its services, the Investment Manager receives with respect
to Growth and Income, Equity and Ultra Funds, on an annual basis, 2% of the
first $10 million of the average net assets, 1 1/2% of the next $20 million of
the average net assets and 1% of the remaining average net assets of the Funds,
determined daily and payable monthly. The Investment Manager receives with
respect to the Global Fund, on an annual basis, 2% of the first $70 million of
the average net assets and 1 1/2% of the remaining average net assets,
determined daily and payable monthly.
Separate fees are paid by Total Return, Social Awareness, Mid Cap Value, Small
Cap Growth, Enhanced Index, International, Select 25, Large Cap Growth and
Technology Funds to the Investment Manager for investment advisory,
administrative and transfer agency services. With respect to the Social
Awareness, Mid Cap Value, Small Cap Growth, Large Cap Growth and Technology
Funds, the Investment Manager receives, on an annual basis, an investment
advisory fee equal to 1% of the average daily net assets of the respective
Funds, calculated daily and payable monthly. The investment advisory fee for
Enhanced Index, Total Return and Select 25 Funds is equal to 0.75% of the
average daily net assets of each Fund, calculated daily and payable monthly. The
investment advisory fee for International Fund is equal to 1.10% of the average
daily net assets of the Fund, calculated daily and payable monthly. The
Investment Manager also receives, on an annual basis, an administrative fee
equal to .09% of the average daily net assets of the Social Awareness, Total
Return, Mid Cap Value, Small Cap Growth, Enhanced Index, Select 25 and Large Cap
Growth Funds. The Investment manager receives, on an annual basis, an
administrative fee equal to 0.045% of the average daily net assets of
International Fund plus the greater of 0.10% of its average net assets or (i)
$45,000 in the year ending January 31, 2001; or (ii) $60,000 in the year ending
January 31, 2002 and thereafter. The administrative fee for Technology Fund on
an annual basis is equal to .045% of the average daily net assets of the Fund
plus the greater of .10% of its average net assets or (i) $30,000 in the year
ending April 30, 2001; (ii) $45,000 in the year ending April 30, 2002 or (iii)
$60,000 thereafter. For transfer agency services provided to each of the Total
Return, Social Awareness, Mid Cap Value, Small Cap Growth, Enhanced Index,
International and Select 25 Funds, the Investment Manager receives an annual
maintenance fee of $8.00 per account, and a transaction fee of $1.00 per
transaction.
During the fiscal years ended September 30, 1999, 1998 and 1997 the Funds paid
the following amounts to the Investment Manager for its services:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INVESTMENT ADMINISTRATIVE TRANSFER AGENCY
ADVISORY ADVISORY FEES SERVICE FEES SERVICE FEES
FEES PAID TO WAIVED BY PAID TO PAID TO TOTAL EXPENSE RATIO
INVESTMENT INVESTMENT INVESTMENT INVESTMENT -------------------------------
FUND YEAR MANAGER MANAGER MANAGER MANAGER CLASS A CLASS B CLASS C6
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and 1999 $1,101,276 $ 0 $ 0 $ 0 1.22% 2.22% 2.22%
Income Fund 1998 1,168,375 0 0 0 1.21% 2.21%
1997 1,024,369 0 0 0 1.24% 2.24%
- ---------------------------------------------------------------------------------------------------------------------------
Equity Fund 1999 11,048,439 0 0 0 1.02% 2.02% 2.02%
1998 9,261,209 0 0 0 1.02% 2.02%
1997 7,375,751 0 0 0 1.03% 2.03%
- ---------------------------------------------------------------------------------------------------------------------------
Global Fund 1999 835,806 0 0 0 2.00% 3.00% 3.00%
1998 670,488 0 0 0 2.00% 3.00%
1997 642,585 0 0 0 2.00% 3.00%
- ---------------------------------------------------------------------------------------------------------------------------
Total Return Fund 1999(1) 67,956 0 49,157 10,768 2.00% 2.94% 2.93%
1998 72,662 36,703 63,270 12,372 2.00% 2.94%
1997 62,322 45,581 53,010 7,611 1.68% 2.58%
- ---------------------------------------------------------------------------------------------------------------------------
Social Awareness 1999 189,229 0 16,807 29,225 1.42% 2.51% 2.66%
Fund 1998 120,016 34,388 10,801 14,440 1.22% 2.20%
1997(2) 0 50,880 4,579 3,925 0.67% 1.84%
- ---------------------------------------------------------------------------------------------------------------------------
Mid Cap Value Fund 1999 258,906 0 23,301 31,436 1.33% 2.37% 2.38%
1998 144,005 35,151 19,523 12,984 1.27% 2.33%
1997(3) 0 17,003 1,530 1,345 1.10% 2.26%
- ---------------------------------------------------------------------------------------------------------------------------
Small Cap 1999 0 114,419 9,398 9,645 0.49% 1.94% 1.47%
Growth Fund 1998(4) 0 33,554 3,020 4,672 1.39% 2.38%
- ---------------------------------------------------------------------------------------------------------------------------
Enhanced Index Fund 1999(5) 82,418 0 9,890 4,312 1.48% 2.20% 2.05%
- ---------------------------------------------------------------------------------------------------------------------------
International Fund 1999(5) 44,906 0 21,837 1,425 2.50% 3.19% 2.78%
- ---------------------------------------------------------------------------------------------------------------------------
Select 25 Fund 1999(5) 95,115 0 11,414 16,830 1.48% 2.19% 2.07%
- ---------------------------------------------------------------------------------------------------------------------------
Ultra Fund 1999 1,137,409 0 0 0 1.21% 2.21% 2.21%
1998 1,068,177 0 0 0 1.23% 2.23%
1997 985,285 0 0 0 1.71% 2.71%
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
1 For the fiscal years ended September 30, 1998 and 1999, the Investment Manager reimbursed the Total Return Fund $21,941
and $20,929, respectively, of the Fund's administrative and transfer agency fees.
2 Social Awareness Fund's figures are based on the period November 1, 1996 (date of inception) to September 30, 1997.
3 Mid Cap Value Fund's figures are based on the period May 1, 1997 (date of inception) to September 30, 1997.
4 Small Cap Growth Fund's figures are based on the period October 15, 1997 (date of inception) to September 30, 1998.
Percentage amounts for the period have been annualized.
5 Enhanced Index, International and Select 25 Funds' figures are based on the period January 29, 1999 (date of inception)
to September 30, 1999. Percentage amounts for the period have been annualized.
6 Class C shares were initially offered for sale on January 29, 1999. Percentage amounts for the period have been
annualized.
</FN>
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Funds' Investment Management and Services Agreements are renewable annually
by the Funds' Board of Directors or by a vote of a majority of the individual
Fund's outstanding securities and, in either event, by a majority of the board
who are not parties to the Agreement or interested persons of any such party.
The Agreements provide that they may be terminated without penalty at any time
by either party on 60 days' notice and are automatically terminated in the event
of assignment.
The following persons are affiliated with the Funds and also with the Funds'
investment adviser, Security Management Company, LLC, in these capacities:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
NAME POSITION(S) WITH THE FUNDS POSITION(S) WITH SECURITY MANAGEMENT COMPANY, LLC
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
James R. Schmank President and Director President and Managing Member Representative
John D. Cleland Chairman of the Board and Director Senior Vice President and Managing Member Representative
Terry A. Milberger Vice President (Equity Fund and Senior Vice President and Senior Portfolio Manager
Growth and Income Fund)
Amy J. Lee Secretary Secretary
Brenda M. Harwood Treasurer Assistant Vice President and Treasurer
Cindy L. Shields Vice President (Equity Fund only) Second Vice President and Portfolio Manager
Christopher D. Swickard Assistant Secretary Assistant Secretary
James P. Schier Vice President Vice President and Senior Portfolio Manager
(Equity Fund and Ultra Fund only)
Frank Whitsell Not Applicable Research Analyst
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO MANAGEMENT --
DEAN S. BARR, Managing Director and Head of Global Quantitative Index
Strategies, has been co-manager of Enhanced Index Fund since he joined Bankers
Trust in September 1999. Prior to joining Bankers Trust, he was Chief Investment
Officer of Active Quantitative Strategies at State Street Global Advisors. He
has a bachelor's degree from Cornell University and an MBA in finance from New
York University Graduate School of Business.
MANISH KESHIVE, Vice President of Bankers Trust, has been co-manager of Enhanced
Index Fund since September 1999. He joined Bankers Trust in 1996. Prior to
joining Bankers Trust, he was a student earning a B.S. degree in Technology from
the Indian Institute of Technology in 1993 and an M.S. degree from the
Massachusetts Institute of Technology in 1995.
MICHAEL LEVY, Managing Director of Bankers Trust, has been co-lead manager of
the International Fund since its inception in January 1999. He has been a
portfolio manager of other investment products with similar investment
objectives since joining Bankers Trust in 1993. Mr. Levy is Bankers Trust's
International Equity Strategist and is head of the international equity team. He
has served in each of these capacities since 1993. The international equity team
is responsible for the day-to-day management of the Fund as well as other
international equity portfolios managed by Bankers Trust. Mr. Levy's experience
prior to joining Bankers Trust includes serving as senior equity analyst with
Oppenheimer & Company, as well as positions in investment banking, technology
and manufacturing enterprises. He has 28 years of business experience, of which
18 years have been in the investment industry.
TERRY A. MILBERGER, Senior Portfolio Manager of the Investment Manager, has
managed Equity Fund since 1981 and Growth and Income Fund since March 2000. He
has been the lead manager of Select 25 Fund since its inception in January 1999
and of Total Return Fund since May 1999. He has more than 20 years of investment
experience. He began his career as an investment analyst in the insurance
industry, and from 1974 through 1978, he served as an assistant portfolio
manager for the Investment Manager. He was then employed as Vice President of
Texas Commerce Bank and managed its pension assets until he returned to the
Investment Manager in 1981. Mr. Milberger holds a bachelor's degree in business
and an M.B.A. from the University of Kansas and is a Chartered Financial
Analyst.
RONALD C. OGNAR, Portfolio Manager of Strong, has managed Small Cap Growth Fund
since its inception in 1997. He is a Chartered Financial Analyst with more than
30 years of investment experience. Mr. Ognar joined Strong in April 1993 after
two years as a principal and portfolio manager with RCM Capital Management. For
approximately 3 years prior to his position at RCM Capital Management, he was a
portfolio manager at Kemper Financial Services in Chicago. Mr. Ognar began his
investment career in 1968 at LaSalle National Bank. He is a graduate of the
University of Illinois with a bachelor's degree in accounting.
ROBERT REINER, Managing Director at Bankers Trust, has been co-lead manager of
the International Fund since its inception in January 1999. He has been a
portfolio manager of other investment products with similar investment
objectives since joining Bankers Trust in 1994. At Bankers Trust, he has been
involved in developing analytical and investment tools for the group's
international equity team. His primary focus has been on Japanese and European
markets. Prior to joining Bankers Trust, he was an equity analyst and also
provided macroeconomic coverage for Scudder, Stevens & Clark from 1993 to 1994.
He previously served as Senior Analyst at Sanford C. Bernstein & Co. from 1991
to 1992, and was instrumental in the development of Bernstein's International
Value Fund. Mr. Reiner spent more than nine years at Standard & Poor's
Corporation, where he was a member of its international ratings group. His
tenure included managing the day-to-day operations of the Standard & Poor's
Corporation Tokyo office for three years.
WELLINGTON MANAGEMENT COMPANY'S GLOBAL TECHNOLOGY TEAM has managed the
Technology Fund since its inception in May of 2000. The Technology Team is
comprised of a group of global industry analysts who focus on various industries
of the Technology sector. The Technology Team is supported by a significant
number of specialized fundamental, quantitative and technical analysts;
macro-economic analysts and traders.
JAMES P. SCHIER, Senior Portfolio Manager of the Investment Manager, has managed
Mid Cap Value Fund since its inception in 1997 and Ultra Fund since January
1998. He has 17 years experience in the investment field and is a Chartered
Financial Analyst. While employed by the Investment Manager, he also served as
research analyst. Prior to joining the Investment Manager in 1995, he was a
portfolio manager for Mitchell Capital Management from 1993 to 1995. From 1988
to 1995 he served as Vice President and Portfolio Manager for Fourth Financial.
Prior to 1988, Mr. Schier served in various positions in the investment field
for Stifel Financial, Josepthal & Company and Mercantile Trust Company. Mr.
Schier earned a Bachelor of Business degree from the University of Notre Dame
and an M.B.A. from Washington University.
CINDY L. SHIELDS, Portfolio Manager of the Investment Manager, has managed
Social Awareness Fund since its inception in 1996 and Large Cap Growth since its
inception in May, 2000. Ms. Shields has eight years experience in the securities
field and joined the Investment Manager in 1989. She has been a portfolio
manager since 1994, and prior to that time, she served as a research analyst for
the Investment Manager. Ms. Shields graduated from Washburn University with a
bachelor of business administration degree, majoring in finance and economics.
She is a Chartered Financial Analyst.
JULIE WANG, Director at Bankers Trust, has been co-lead manager of the
International Fund since its inception in January 1999. She has been a manager
of other investment products with similar investment objectives since joining
Bankers Trust in 1994. Ms. Wang has primary focus on the Asia-Pacific region and
the Fund's emerging market exposure. Prior to joining Bankers Trust, Ms. Wang
was an investment manager at American International Group, where she advised in
the management of $7 billion of assets in Southeast Asia, including private and
listed equities, bonds, loans and structured products. Ms. Wang received her
B.A. degree in economics from Yale University and her M.B.A. from the Wharton
School.
FRANK WHITSELL, Research Analyst of the Investment Manager, has co-managed Total
Return Fund since May 1999 and has co-managed Select 25 Fund since February
2000. He joined the Investment Manager in 1994. Mr. Whitsell graduated from
Washburn University with a bachelor of business administration degree, majoring
in accounting and finance, and an MBA.
WILLIAM L. WILBY, Senior Vice President of Oppenheimer, became the manager of
Global Fund in November 1998. Prior to joining Oppenheimer in 1991, he was an
international investment strategist at Brown Brothers Hamman & Co. Prior to
Brown Brothers, Mr. Wilby was a managing director and portfolio manager at AIG
Global Investors. He joined AIG from Northern Trust Bank in Chicago, where he
was an international pension manager. Before starting his career in portfolio
management, Mr. Wilby was an international financial economist at Northern Trust
Bank and at the Federal Reserve Bank in Chicago. Mr. Wilby is a graduate of the
United States Military Academy and holds an M.A. and a Ph.D. in International
Monetary Economics from the University of Colorado. He is a Chartered Financial
Analyst.
CODE OF ETHICS -- The Funds, the Investment Manager and the Distributor each has
adopted a written code of ethics (the "Code of Ethics") which governs the
personal securities transactions of "access persons" of the Funds. Access
persons may invest in securities, including securities that may be purchased or
held by the Funds; provided that they obtain prior clearance before engaging in
securities transactions. Access persons include officers and directors of the
Funds and Investment Manager and employees that participate in, or obtain
information regarding, the purchase or sale of securities by the Funds or whose
job relates to the making of any recommendations with respect to such purchases
or sales. All access persons must report their personal securities transactions
within ten days of the end of each calendar quarter. Access persons will not be
permitted to effect transactions in a security if it: (a) is being considered
for purchase or sale by the Funds; (b) is being purchased or sold by the Funds;
or (c) is being offered in an initial public offering. Portfolio managers are
also prohibited from purchasing or selling a security within seven calendar days
before or after a Fund that he or she manages trades in that security. Any
material violation of the Code of Ethics is reported to the Board of the Funds.
The Board also reviews the administration of the Code of Ethics on an annual
basis. In addition, each Sub-Adviser has adopted its own code of ethics to which
the personal securities transactions of its portfolio managers and other access
persons are subject. The Code of Ethics is on public file with the Securities
Exchange Commission and is available from the Commission.
DISTRIBUTOR
The Distributor, a Kansas corporation and wholly-owned subsidiary of Security
Benefit Group, Inc., serves as the principal underwriter for shares of Growth
and Income Fund, Equity Fund, Global Fund, Total Return Fund, Social Awareness
Fund, Mid Cap Value Fund, Small Cap Growth Fund, Enhanced Index Fund,
International Fund, Select 25 Fund, Large Cap Growth Fund, Technology Fund and
Ultra Fund pursuant to Distribution Agreements with the Funds. The Distributor
also acts as principal underwriter for Security Income Fund, Security Municipal
Bond Fund and SBL Fund.
The Distributor receives a maximum commission on sales of Class A shares of
5.75% and allows a maximum discount of 5% from the offering price to authorized
dealers on the Fund shares sold. The discount is the same for all dealers, but
the Distributor at its discretion may increase the discount for specific
periods. Salespersons employed by dealers may also be licensed to sell insurance
with Security Benefit Life.
For the fiscal years ended September 30, 1997, 1998 and 1999, the Distributor
(i) received gross underwriting commissions on Class A shares, (ii) retained net
underwriting commissions on Class A shares, and (iii) received contingent
deferred sales charges on redemptions of Class B shares in the amounts set forth
in the table below.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
GROSS UNDERWRITING COMMISSIONS NET UNDERWRITING COMMISSIONS COMPENSATION ON REDEMPTIONS
----------------------------------- ----------------------------- --------------------------------
1997 1998 1999 1997 1998 1999 1997 1998 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund $ 62,437 $ 161,083 $ 63,182 $ 6,497 $ 11,930 $ 10,480 $ 1,741 $ 12,982 $ 20,267
- -----------------------------------------------------------------------------------------------------------------------------
Equity Fund 799,937 1,586,589 1,361,567 21,344 137,516 160,666 31,015 123,648 162,305
- -----------------------------------------------------------------------------------------------------------------------------
Ultra Fund 34,612 51,626 52,603 5,388 3,908 7,112 20,208 19,376 4,914
- -----------------------------------------------------------------------------------------------------------------------------
Global Fund 29,789 16,810 28,694 2,930 66 3,301 13,291 24,076 17,455
- -----------------------------------------------------------------------------------------------------------------------------
Total Return Fund 28,996 14,300 6,452 3,114 728 1,156 1,692 7,197 2,420
- -----------------------------------------------------------------------------------------------------------------------------
Social Awareness Fund 61,945(1) 73,830 353,066 7,639(1) 4,310 193,400 267(1) 4,833 7,142
- -----------------------------------------------------------------------------------------------------------------------------
Mid Cap Value Fund 74,602(2) 176,512 73,459 2,015(2) 4,530 8,929 2(2) 5,438 26,386
- -----------------------------------------------------------------------------------------------------------------------------
Small Cap Growth Fund --- 29,790(3) 10,311 --- 28(3) 266 --- 2,250(3) 1,025
- -----------------------------------------------------------------------------------------------------------------------------
Enhanced Index Fund(4) --- --- 103,177 --- --- 2,153 --- --- 3,015
- -----------------------------------------------------------------------------------------------------------------------------
International Fund(4) --- --- 16,430 --- --- 1,422 --- --- 50
- -----------------------------------------------------------------------------------------------------------------------------
Select 25(4) --- --- 346,485 --- --- 10,249 --- --- 11,783
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
1 For the period November 1, 1996 (date of inception) to September 30, 1997.
2 For the period May 1, 1997 (date of inception) to September 30, 1997.
3 For the period October 15, 1997 (date of inception) to September 30, 1998.
4 For the period January 28, 1999 (date of inception) to September 30, 1999.
</FN>
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Distributor, on behalf of the Funds, may act as a broker in the purchase and
sale of securities, provided that any such transactions and any commissions
shall comply with requirements of the Investment Company Act of 1940 and all
rules and regulations of the SEC. The Distributor has not acted as a broker.
The Funds' Distribution Agreements are renewable annually either by the Board of
Directors or by the vote of a majority of the Fund's outstanding securities,
and, in either event, by a majority of the board who are not parties to the
contract or interested persons of any such party. The contract may be terminated
by either party upon 60 days' written notice.
ALLOCATION OF PORTFOLIO BROKERAGE
Transactions in portfolio securities shall be effected in such manner as deemed
to be in the best interests of the respective Funds. In reaching a judgment
relative to the qualifications of a broker-dealer ("broker") to obtain the best
execution of a particular transaction, all relevant factors and circumstances
will be taken into account by the Investment Manager or relevant Sub-Adviser,
including the overall reasonableness of commissions paid to a broker, the firm's
general execution and operational capabilities, and its reliability and
financial condition. Subject to the foregoing considerations, the execution of
portfolio transactions may be directed to brokers who furnish investment
information or research services to the Investment Manager or relevant
Sub-Adviser. Such investment information and research services include advice as
to the value of securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities and purchasers or sellers
of securities, and furnishing analyses and reports concerning issues,
industries, securities, economic factors and trends, portfolio strategy and
performance of accounts. Such investment information and research services may
be furnished by brokers in many ways, including: (1) on-line data base systems,
the equipment for which is provided by the broker, that enable the Investment
Manager to have real-time access to market information, including quotations;
(2) economic research services, such as publications, chart services and advice
from economists concerning macroeconomic information; and (3) analytical
investment information concerning particular corporations. If a transaction is
directed to a broker supplying such information or services, the commission paid
for such transaction may be in excess of the commission another broker would
have charged for effecting that transaction provided that the Investment Manager
or relevant Sub-Adviser shall have determined in good faith that the commission
is reasonable in relation to the value of the investment information or the
research services provided, viewed in terms of either that particular
transaction or the overall responsibilities of the Investment Manager or
relevant Sub-Adviser with respect to all accounts as to which it exercises
investment discretion. The Investment Manager or relevant Sub-Adviser may use
all, none, or some of such information and services in providing investment
advisory services to each of the mutual funds under its management, including
the Funds. Portfolio transactions, may also be placed with the Distributor or
with a sub-adviser's affiliated broker/dealer to the extent and in the manner
permitted by applicable law.
In addition, brokerage transactions may be placed with broker-dealers who sell
shares of the Funds managed by the Investment Manager and who may or may not
also provide investment information and research services. The Investment
Manager may, consistent with the NASD's Conduct Rules, consider sales of shares
of the Funds in the selection of a broker.
The Funds may also buy securities from, or sell securities to, dealers acting as
principals or market makers. The Investment Manager generally will not purchase
investment information or research services in connection with such principal
transactions.
Securities held by the Funds may also be held by other investment advisory
clients of the Investment Manager and/or relevant Sub-Adviser, including other
investment companies. In addition, Security Benefit Life Insurance Company
("SBL"), may also hold some of the same securities as the Funds. When selecting
securities for purchase or sale for a Fund, the Investment Manager may at the
same time be purchasing or selling the same securities for one or more of such
other accounts. Subject to the Investment Manager's obligation to seek best
execution, such purchases or sales may be executed simultaneously or "bunched."
It is the policy of the Investment Manager not to favor one account over the
other. Any purchase or sale orders executed simultaneously (which may also
include orders from SBL) are allocated at the average price and as nearly as
practicable on a pro rata basis (transaction costs will also be shared on a pro
rata basis) in proportion to the amounts desired to be purchased or sold by each
account. In those instances where it is not practical to allocate purchase or
sale orders on a pro rata basis, then the allocation will be made on a rotating
or other equitable basis. While it is conceivable that in certain instances this
procedure could adversely affect the price or number of shares involved in the
Fund's transaction, it is believed that the procedure generally contributes to
better overall execution of the Fund's portfolio transactions. With respect to
the allocation of initial public offerings ("IPOs"), the Investment Manager may
determine not to purchase such offerings for certain of its clients (including
investment company clients) due to the limited number of shares typically
available to the Investment Manager in an IPO.
The following table sets forth the brokerage fees paid by the Funds during the
last three fiscal years and certain other information:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FUND TRANSACTIONS DIRECTED TO AND
FUND BROKERAGE COMMISSIONS PAID TO BROKER-DEALERS
COMMISSIONS PAID WHO ALSO PERFORMED SERVICES
FUND TOTAL TO SECURITY ----------------------------------
BROKERAGE DISTRIBUTORS, INC., BROKERAGE
FUND YEAR COMMISSIONS PAID THE UNDERWRITER TRANSACTIONS COMMISSIONS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Growth and Income 1999 $ 283,962 $0 $ 52,804,552 $ 95,172
Fund 1998 332,718 0 68,503,622 105,204
1997 251,945 0 26,335,380 40,539
- -----------------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 1,061,580 0 242,335,957 371,592
Equity Fund 1998 1,099,219 0 263,017,019 359,314
1997 1,111,928 0 234,139,342 301,670
- -----------------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 205,358 0 19,042,698 41,461
Global Fund 1998 218,464 0 21,465,232 59,626
1997 270,065 0 14,817,527 39,165
- -----------------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 25,284 0 15,281,864 25,284
Total Return Fund 1998 9,871 0 3,474,334 7,670
1997 18,571 0 6,075,844 15,313
- -----------------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 18,988 0 5,210,696 7,612
Social Awareness Fund 1998 10,661 0 1,418,953 1,722
1997(1) 12,365 0 6,419,564 8,327
- -----------------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 128,100 0 6,287,986 18,084
Mid Cap Value Fund 1998 64,157 0 8,264,311 14,947
1997(2) 15,192 0 3,606,587 7,392
- -----------------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 74,858 0 0 0
Small Cap Growth Fund 1998(3) 22,215 0 3,087,031 6,947
- -----------------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999(4) 15,495 0 0 0
Enhanced Index Fund
- -----------------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999(4) 43,773 0 0 0
International Fund
- -----------------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999(4) 27,042 0 26,372,448 27,042
Select 25
- -----------------------------------------------------------------------------------------------------------------------
Security Ultra Fund 1999 150,072 0 14,817,087 41,430
1998 268,722 0 39,308,363 69,536
1997 83,841 0 22,060,304 41,217
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Social Awareness Fund's figures are based on the period November 1, 1996
(date of inception) to September 30, 1997.
2 Mid Cap Value Fund's figures are based on the period May 1, 1997 (date of
inception) to September 30, 1997.
3 Small Cap Growth Fund's figures are based on the period October 15, 1997
(date of inception) to September 30, 1998.
4 Enhanced Index, International and Select 25 Funds' figures are based on the
period January 29, 1999 (date of inception) to September 30, 1999.
- --------------------------------------------------------------------------------
<PAGE>
BROKERAGE ENHANCEMENT PLAN
The Boards of Directors of the Funds, including all of the Directors who are not
"interested persons" (as defined in the Investment Company Act of 1940) of the
Funds, the Investment Manager the Distributor (referred to as the "Independent
Directors"), and each Fund's (or Series thereof, as applicable), shareholders
have voted pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 to adopt a Brokerage Enhancement Plan (the "Plan") for the purpose
of utilizing the Funds' brokerage commissions, to the extent available, to
promote the sale and distribution of the Funds' shares.
Under the Plan, the Distributor, on behalf of the Funds is authorized to direct
the Investment Manager or a Sub-adviser to effect brokerage transactions in
portfolio securities through certain broker-dealers, consistent with the
obligation to achieve best price and execution. These broker-dealers have agreed
either (i) to pay a portion of their commission from the purchase and sale of
securities to the Distributor or other introducing brokers ("Brokerage
Payments") that provide distribution activities, or (ii) or to provide brokerage
credits, benefits or other services ("Brokerage Credits") to be used for
distribution activities in addition to the execution of the trade. The
Distributor will use a part of the Brokerage Payments to defray legal and
administrative costs associated with implementation of the Plan. These expenses
are expected to be minimal. The remainder of the Brokerage Payments or Brokerage
Credits generated will be used by the Distributor to finance activities
principally intended to result in the sale of the Funds' shares. These
activities will include, but are not limited to:
* holding or participating in seminars and sales meetings promoting the sale
of the Funds' shares
* paying marketing fees requested by broker-dealers who sell the Funds
* training sales personnel
* creating and mailing advertising and sales literature
* financing any other activity that is intended to result in the sale of the
Funds' shares.
The Distributor is obligated to use all amounts generated under the Plan for
distribution expenses, except for a small amount to be used to defray the
incidental costs associated with implementation of the Plan. The Plan may
indirectly benefit the Distributor in that amounts expended under the Plan may
help defray, in whole or in part, distribution expenses that otherwise might be
borne by the Distributor or an affiliate.
The Plan provides (i) that it will be subject to annual approval by the
Directors and the Independent Directors; (ii) that the Distributor must provide
the Directors a quarterly written report of payments made under the Plan and the
purpose of the payments; and (iii) that the Plan may be terminated at any time
by the vote of a majority of the Independent Directors. The Plan may not be
amended to increase materially the amount to be spent for distribution without
shareholder approval, and all material Plan amendments must be approved by a
vote of the Independent Directors. In addition, the selection and nomination of
the Independent Directors must be committed to the Independent Directors.
HOW NET ASSET VALUE IS DETERMINED
The per share net asset value of each Fund is determined by dividing the total
value of its securities and other assets, less liabilities, by the total number
of shares outstanding. The public offering price for each Fund is its net asset
value per share plus, in the case of Class A shares, the applicable sales
charge. The net asset value and offering price are computed once daily as of the
close of regular trading hours on the New York Stock Exchange (normally 3:00
p.m. Central time) on each day the Exchange is open for trading, which is Monday
through Friday, except for the following dates when the exchange is closed in
observance of federal holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The offering price determined at the close of business on the New York Stock
Exchange on each day on which the Exchange is open will be applicable to all
orders for the purchase of Fund shares received by the dealer prior to such
close of business and transmitted to the Funds prior to the close of their
business day (normally 5:00 p.m. Central time unless the Exchange closes early).
Orders accepted by the dealer after the close of business of the Exchange or on
a day when the Exchange is closed will be filled on the basis of the offering
price determined as of the close of business of the Exchange on the next day on
which the Exchange is open. It is the responsibility of the dealer to promptly
transmit orders to the Funds.
In determining net asset value, securities listed or traded on a national
securities exchange are valued on the basis of the last sale price. If there are
no sales on a particular day, then the securities shall be valued at the last
bid price. All other securities for which market quotations are available are
valued on the basis of the last current bid price. If there is no bid price, or
if the bid price is deemed to be unsatisfactory by the Board of Directors or the
Funds' Investment Manager, then the securities shall be valued in good faith by
such method as the Board of Directors determines will reflect their fair market
value.
Because the expenses of distribution are borne by Class A shares through a
front-end sales charge and by Class B and Class C shares through an ongoing
distribution fee, the expenses attributable to each class of shares will differ,
resulting in different net asset values. The net asset value of Class B and
Class C shares will generally be lower than the net asset value of Class A
shares as a result of the distribution fee charged to Class B and Class C
shares. It is expected, however, that the net asset value per share will tend to
converge immediately after the payment of dividends which will differ in amount
for Class A, B and C shares by approximately the amount of the different
distribution expenses attributable to Class A, B and C shares.
HOW TO REDEEM SHARES
Stockholders may turn in their shares directly to the Investment Manager for
redemption at net asset value (which may be more or less than the investor's
cost, depending upon the market value of the portfolio securities at the time of
redemption). The redemption price in cash will be the net asset value next
determined after the time when such shares are tendered for redemption.
Shares will be redeemed on request of the stockholder in proper order to the
Investment Manager, which serves as the Funds' transfer agent. A request is made
in proper order by submitting the following items to the Investment Manager: (1)
a written request for redemption signed by all registered owners exactly as the
account is registered, including fiduciary titles, if any, and specifying the
account number and the dollar amount or number of shares to be redeemed; (2) a
guarantee of all signatures on the written request or on the share certificate
or accompanying stock power; (3) any share certificates issued for any of the
shares to be redeemed; and (4) any additional documents which may be required by
the Investment Manager for redemption by corporations or other organizations,
executors, administrators, trustees, custodians or the like. Transfers of shares
are subject to the same requirements. A signature guarantee is not required for
redemptions of $10,000 or less, requested by and payable to all stockholders of
record for an account, to be sent to the address of record. The signature
guarantee must be provided by an eligible guarantor institution, such as a bank,
broker, credit union, national securities exchange or savings association. The
Investment Manager reserves the right to reject any signature guarantee pursuant
to its written procedures which may be revised in the future. To avoid delay in
redemption or transfer, stockholders having questions should contact the
Investment Manager.
The Articles of Incorporation of Security Equity Fund provide that the Board of
Directors, without the vote or consent of the stockholders, may adopt a plan to
redeem at net asset value all shares in any stockholder account in which there
has been no investment (other than the reinvestment of income dividends or
capital gains distributions) for the last six months and in which there are
fewer than 25 shares or such fewer number of shares as may be specified by the
Board of Directors. Any plan of involuntary redemption adopted by the Board of
Directors shall provide that the plan is in the economic best interests of the
Fund or is necessary to reduce disproportionately burdensome expenses in
servicing stockholder accounts. Such plan shall further provide that prior
notice of at least six months shall be given to a stockholder before involuntary
redemption, and that the stockholder will have at least six months from the date
of the notice to avoid redemption by increasing his or her account to at least
the minimum number of shares established in the Articles of Incorporation, or
such fewer shares as are specified in the plan.
When investing in the Funds, stockholders are required to furnish their tax
identification number and to state whether or not they are subject to
withholding for prior underreporting, certified under penalties of perjury as
prescribed by the Internal Revenue Code. To the extent permitted by law, the
redemption proceeds of stockholders who fail to furnish this information will be
reduced by $50 to reimburse for the IRS penalty imposed for failure to report
the tax identification number on information reports.
Payment in cash of the amount due on redemption, less any applicable deferred
sales charge, for shares redeemed will be made within seven days after tender,
except that the Funds may suspend the right of redemption during any period when
trading on the New York Stock Exchange is restricted or such Exchange is closed
for other than weekends or holidays, or any emergency is deemed to exist by the
Securities and Exchange Commission. When a redemption request is received, the
redemption proceeds are deposited into a redemption account established by the
Distributor and the Distributor sends a check in the amount of redemption
proceeds to the stockholder. The Distributor earns interest on the amounts
maintained in the redemption account. Conversely, the Distributor causes
payments to be made to the Funds in the case of orders for purchase of Fund
shares before it actually receives federal funds.
In addition to the foregoing redemption procedure, the Funds repurchase shares
from broker-dealers at the price determined as of the close of business on the
day such offer is confirmed. The Distributor has been authorized, as agent, to
make such repurchases for the Funds' account. Dealers may charge a commission on
the repurchase of shares.
The repurchase or redemption of shares held in a tax-qualified retirement plan
must be effected through the trustee of the plan and may result in adverse tax
consequences. (See "Retirement Plans," page 64.)
At various times the Funds may be requested to redeem shares for which they have
not yet received good payment. Accordingly, the Funds may delay the mailing of a
redemption check until such time as they have assured themselves that good
payment (e.g., cash or certified check on a U.S. bank) has been collected for
the purchase of such shares.
TELEPHONE REDEMPTIONS -- A stockholder may redeem uncertificated shares in
amounts up to $10,000 by telephone request, provided the stockholder has
completed the Telephone Redemption section of the application or a Telephone
Redemption form which may be obtained from the Investment Manager. The proceeds
of a telephone redemption will be sent to the stockholder at his or her address
as set forth in the application or in a subsequent written authorization with a
signature guarantee. Once authorization has been received by the Investment
Manager, a stockholder may redeem shares by calling the Funds at (800) 888-2461,
extension 3127, on weekdays (except holidays) between the hours of 7:00 a.m. and
6:00 p.m. Central time. Redemption requests received by telephone after the
close of the New York Stock Exchange (normally 3:00 p.m. Central time) will be
treated as if received on the next business day. Telephone redemptions are not
accepted for IRA and 403(b)(7) accounts. A stockholder who authorizes telephone
redemptions authorizes the Investment Manager to act upon the instructions of
any person identifying themselves as the owner of the account or the owner's
broker. The Investment Manager has established procedures to confirm that
instructions communicated by telephone are genuine and may be liable for any
losses due to fraudulent or unauthorized instructions if it fails to comply with
its procedures. The Investment Manager's procedures require that any person
requesting a redemption by telephone provide the account registration and
number, the owner's tax identification number, and the dollar amount or number
of shares to be redeemed, and such instructions must be received on a recorded
line. Neither the Fund, the Investment Manager, nor the Distributor will be
liable for any loss, liability, cost or expense arising out of any redemption
request provided that the Investment Manager complied with its procedures. Thus,
a stockholder who authorizes telephone redemptions may bear the risk of loss
from a fraudulent or unauthorized request. The telephone redemption privilege
may be changed or discontinued at any time by the Investment Manager or the
Funds.
During periods of severe market or economic conditions, telephone redemptions
may be difficult to implement and stockholders should make redemptions by mail
as described under "How to Redeem Shares," page 55.
HOW TO EXCHANGE SHARES
Pursuant to arrangements with the Distributor and with Security Cash Fund,
stockholders of the Funds may exchange their shares for shares of another of the
Funds, for shares of the other mutual funds distributed by the Distributor or
for shares of Security Cash Fund at net asset value. The other mutual funds
currently distributed by the Distributor which are eligible for the exchange
offer include Security Diversified Income, High Yield, and Municipal Bond Funds.
Exchanges may be made only in those states where shares of the fund into which
an exchange is to be made are qualified for sale.
Class A, Class B and Class C shares of the Funds may be exchanged for Class A,
Class B and Class C shares, respectively, of another Fund distributed by the
Distributor or for shares of Security Cash Fund, a money market fund that offers
a single class of shares. No exchanges are allowed with a Fund that does not
offer Class C shares, except that a stockholder may exchange Class C shares for
shares of Security Cash Fund. Any applicable contingent deferred sales charge
will be imposed upon redemption and calculated from the date of the initial
purchase without regard to the time shares were held in Security Cash Fund. Such
transactions generally have the same tax consequences as ordinary sales and
purchases. No service fee is presently imposed on such an exchange. They are not
tax-free exchanges.
Exchanges are made promptly upon receipt of a properly completed Exchange
Authorization form and (if issued) share certificates in good order for
transfer. If the stockholder is a corporation, partnership, agent, fiduciary or
surviving joint owner, additional documentation of a customary nature, such as a
stock power and guaranteed signature, will be required. (See "How to Redeem
Shares," page 55.)
This privilege may be changed or discontinued at any time at the discretion of
the management of the Funds upon 60 days' notice to stockholders. It is
contemplated, however, that the privilege will be extended in the absence of
objection by regulatory authorities and provided shares of the respective
companies are available and may be legally sold in the jurisdiction in which the
stockholder resides. A current prospectus of the Fund into which an exchange is
made will be given each stockholder exercising this privilege.
EXCHANGE BY TELEPHONE -- To exchange shares by telephone, a shareholder must
have completed either the Telephone Exchange section of the application or a
Telephone Transfer Authorization form which may be obtained from the Investment
Manager. Authorization must be on file with the Investment Manager before
exchanges may be made by telephone. Once authorization has been received by the
Investment Manager, a stockholder may exchange shares by telephone by calling
the Funds at (800) 888-2461, extension 3127 on weekdays (except holidays)
between the hours of 7:00 a.m. and 6:00 p.m. Central time. Exchange requests
received after the close of the New York Stock Exchange (normally 3:00 p.m.
Central time) will be treated as if received on the next business day. Shares
which are held in certificate form may not be exchanged by telephone.
The telephone exchange privilege is only permitted between accounts with
identical registration. The Investment Manager has established procedures to
confirm that instructions communicated by telephone are genuine and may be
liable for any losses due to fraudulent or unauthorized instructions if it fails
to comply with its procedures. The Investment Manager's procedures require that
any person requesting an exchange by telephone provide the account registration
and number, the tax identification number, the dollar amount or number of shares
to be exchanged, and the names of the Security Funds from which and into which
the exchange is to be made, and such instructions must be received on a recorded
line. Neither the Funds, the Investment Manager nor the Distributor will be
liable for any loss, liability, cost or expense arising out of any request,
including any fraudulent request provided the Investment Manager complied with
its procedures. Thus, a stockholder who authorizes telephone exchanges may bear
the risk of loss in the event of a fraudulent or unauthorized request. This
telephone exchange privilege may be changed or discontinued at any time at the
discretion of the management of the Funds. In particular, the Funds may set
limits on the amount and frequency of such exchanges, in general or as to any
individual who abuses such privilege.
DIVIDENDS AND TAXES
It is each Fund's policy to pay dividends from net investment income as from
time to time declared by the Board of Directors, and to distribute realized
capital gains (if any) in excess of any capital losses and capital loss
carryovers, at least once a year. Because Class A shares of the Funds bear most
of the costs of distribution of such shares through payment of a front-end sales
charge, while Class B and Class C shares of the Funds bear such costs through a
higher distribution fee, expenses attributable to Class B and Class C shares,
generally, will be higher and as a result, income distributions paid by the
Funds with respect to Class B and Class C shares generally will be lower than
those paid with respect to Class A shares. Because the value of a share is based
directly on the amount of the net assets rather than on the principle of supply
and demand, any distribution of capital gains or payment of an income dividend
will result in a decrease in the value of a share equal to the amount paid. All
such dividends and distributions are automatically reinvested on the payable
date in shares of the Funds at net asset value as of the record date (reduced by
an amount equal to the amount of the dividend or distribution), unless the
Investment Manager is previously notified in writing by the stockholder that
such dividends or distributions are to be received in cash. A stockholder may
request that such dividends or distributions be directly deposited to the
stockholder's bank account. A stockholder who elected not to reinvest dividends
or distributions paid with respect to Class A shares may, at any time within 30
days after the payment date, reinvest a dividend check without imposition of a
sales charge.
The following summarizes certain federal income tax considerations generally
affecting the Funds and their stockholders. No attempt is made to present a
detailed explanation of the tax treatment of the Funds or their stockholders,
and the discussion here is not intended as a substitute for careful tax
planning. The discussion is based upon present provisions of the Code, the
regulations promulgated thereunder, and judicial and administrative ruling
authorities, all of which are subject to change, which change may be
retroactive. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase, ownership, and
disposition of Fund shares, as well as the tax consequences arising under the
laws of any state, foreign country, or other taxing jurisdiction.
For federal income tax purposes, dividends paid by the Funds from net investment
income may qualify for the corporate stockholder's dividends received deduction
to the extent the Funds designate the amount distributed as a qualified
dividend. The aggregate amount designated as a qualified dividend by the Funds
cannot exceed the aggregate amount of dividends received by the Funds from
domestic corporations for the taxable year. The corporate dividends received
deduction will be limited if the shares with respect to which the dividends are
received are treated as debt-financed or are deemed to have been held less than
46 days. In addition, a corporate stockholder must hold Fund shares for at least
46 days to be eligible to claim the dividends received deduction. All dividends
from net investment income, together with distributions of any realized net
short-term capital gains, whether paid direct to the stockholder or reinvested
in shares of the Funds, are taxable as ordinary income.
The excess of net long-term capital gains over short-term capital losses
realized and distributed by the Funds or reinvested in Fund shares will
generally be taxable to shareholders as long-term gain. Net capital gains from
assets held for one year or less will be taxed as ordinary income. Distributions
will be subject to these capital gains rates regardless of how long a
shareholder has held Fund shares. Advice as to the tax status of each year's
dividends and distributions will be mailed annually. A purchase of shares
shortly before payment of a dividend or distribution is disadvantageous because
the dividend or distribution to the purchaser has the effect of reducing the per
share net asset value of the shares by the amount of the dividends or
distributions. In addition, all or a portion of such dividends or distributions
(although in effect a return of capital) may be taxable.
Each Fund intends to qualify annually and to elect to be treated as a regulated
investment company under the Code.
To qualify as a regulated investment company, each Fund must, among other
things: (i) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income derived with respect to its business of investing in
such stock, securities, or currencies ("Qualifying Income Test"); (ii) diversify
its holdings so that, at the end of each quarter of the taxable year, (a) at
least 50% of the market value of the Fund's assets is represented by cash, cash
items, U.S. Government securities, the securities of other regulated investment
companies, and other securities, with such other securities of any one issuer
limited for the purposes of this calculation to an amount not greater than 5% of
the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (b) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), or of two or more issuers which the Fund controls (as that term is
defined in the relevant provisions of the Code) and which are determined to be
engaged in the same or similar trades or businesses or related trades or
businesses; and (iii) distribute at least 90% of the sum of its investment
company taxable income (which includes, among other items, dividends, interest,
and net short-term capital gains in excess of any net long-term capital losses)
and its net tax-exempt interest each taxable year. The Treasury Department is
authorized to promulgate regulations under which foreign currency gains would
constitute qualifying income for purposes of the Qualifying Income Test only if
such gains are directly related to investing in securities (or options and
futures with respect to securities). To date, no such regulations have been
issued.
Certain requirements relating to the qualification of a Fund as a regulated
investment company may limit the extent to which a Fund will be able to engage
in certain investment practices, including transactions in futures contracts and
other types of derivative securities transactions. In addition, if a Fund were
unable to dispose of portfolio securities due to settlement problems relating to
foreign investments or due to the holding of illiquid securities, the Fund's
ability to qualify as a regulated investment company might be affected.
A Fund qualifying as a regulated investment company generally will not be
subject to U.S. federal income tax on its investment company taxable income and
net capital gains (any net long-term capital gains in excess of the net
short-term capital losses), if any, that it distributes to shareholders. Each
Fund intends to distribute to its shareholders, at least annually, substantially
all of its investment company taxable income and any net capital gains.
Generally, regulated investment companies, like the Fund, must distribute
amounts on a timely basis in accordance with a calendar year distribution
requirement in order to avoid a nondeductible 4% excise tax. Generally, to avoid
the tax, a regulated investment company must distribute during each calendar
year, (i) at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, (ii) at least 98% of its capital
gains in excess of its capital losses (adjusted for certain ordinary losses) for
the 12-month period ending on October 31 of the calendar year, and (iii) all
ordinary income and capital gains for previous years that were not distributed
during such years. To avoid application of the excise tax, each Fund intends to
make its distributions in accordance with the calendar year distribution
requirement. A distribution is treated as paid on December 31 of the calendar
year if it is declared by a Fund in October, November or December of that year
to shareholders of record on a date in such a month and paid by the Fund during
January of the following calendar year. Such distributions are taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
If, as a result of exchange controls or other foreign laws or restrictions
regarding repatriation of capital, a Fund was unable to distribute an amount
equal to substantially all of its investment company taxable income (as
determined for U.S. tax purposes) within applicable time periods, the Fund would
not qualify for the favorable federal income tax treatment afforded regulated
investment companies, or, even if it did so qualify, it might become liable for
federal taxes on undistributed income. In addition, the ability of a Fund to
obtain timely and accurate information relating to its investments is a
significant factor in complying with the requirements applicable to regulated
investment companies in making tax-related computations. Thus, if a Fund were
unable to obtain accurate information on a timely basis, it might be unable to
qualify as a regulated investment company, or its tax computations might be
subject to revisions (which could result in the imposition of taxes, interest
and penalties).
Generally, gain or loss realized upon the sale or redemption of shares
(including the exchange of shares for shares of another fund) will be capital
gain or loss if the shares are capital assets in the shareholder's hands, and
will be taxable to stockholders as long-term capital gains if the shares had
been held for more than one year at the time of sale or redemption. Net capital
gains on shares held for less than one year will be taxable to shareholders as
ordinary income. Investors should be aware that any loss realized upon the sale
or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to the shareholder with respect to such shares. In addition, any loss
realized on a sale or exchange of shares will be disallowed to the extent the
shares disposed of are replaced within a period of 61 days, beginning 30 days
before and ending 30 days after the date the shares are disposed of, such as
pursuant to the reinvestment of dividends. In such case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
Under certain circumstances, the sales charge incurred in acquiring Class A
shares of the Funds may not be taken into account in determining the gain or
loss on the disposition of those shares. This rule applies in circumstances when
shares of the Fund are exchanged within 90 days after the date they were
purchased and new shares in a regulated investment company are acquired without
a sales charge or at a reduced sales charge. In that case, the gain or loss
recognized on the exchange will be determined by excluding from the tax basis of
the shares exchanged all or a portion of the sales charge incurred in acquiring
those shares. This exclusion applies to the extent that the otherwise applicable
sales charge with respect to the newly acquired shares is reduced as a result of
having incurred the sales charge initially. Instead, the portion of the sales
charge affected by this rule will be treated as an amount paid for the new
shares.
The Funds are required by law to withhold 31% of taxable dividends and
distributions to shareholders who do not furnish their correct taxpayer
identification numbers, or are otherwise subject to the backup withholding
provisions of the Code.
Each Series of Security Equity Fund will be treated separately in determining
the amounts of income and capital gains distributions. For this purpose, each
Fund will reflect only the income and gains, net of losses of that Fund.
PASSIVE FOREIGN INVESTMENT COMPANIES -- Some of the Funds may invest in stocks
of foreign companies that are classified under the Code as passive foreign
investment companies ("PFICs"). In general, a foreign company is classified as a
PFIC if at least one half of its assets constitutes investment-type assets or
75% or more of its gross income is investment-type income. Under the PFIC rules,
an "excess distribution" received with respect to PFIC stock is treated as
having been realized ratably over a period during which the Fund held the PFIC
stock. The Fund itself will be subject to tax on the portion, if any, of the
excess distribution that is allocated to the Fund's holding period in prior
taxable years (an interest factor will be added to the tax, as if the tax had
actually been payable in such prior taxable years) even though the Fund
distributes the corresponding income to shareholders. Excess distributions
include any gain from the sale of PFIC stock as well as certain distributions
from a PFIC. All excess distributions are taxable as ordinary income.
A Fund may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that currently may be available, a Fund generally would
be required to include in its gross income its share of the earnings of a PFIC
on a current basis, regardless of whether any distributions are received from
the PFIC. If this election is made, the special rules, discussed above, relating
to the taxation of excess distributions, would not apply. In addition, another
election may be available that would involve marking to market a Fund's PFIC
stock at the end of each taxable year (and on certain other dates prescribed in
the Code), with the result that unrealized gains are treated as though they were
realized. If this election were made, tax at the Fund level under the PFIC rules
would be eliminated, but a Fund could, in limited circumstances, incur
nondeductible interest charges. A Fund's intention to qualify annually as a
regulated investment company may limit the Fund's elections with respect to PFIC
stock.
Because the application of the PFIC rules may affect, among other things, the
character of gains, the amount of gain or loss and the timing of the recognition
of income with respect to PFIC stock, as well as subject a Fund itself to tax on
certain income from PFIC stock, the amount that must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a fund that did not invest in PFIC stock.
OPTIONS, FUTURES AND FORWARD CONTRACTS AND SWAP AGREEMENTS -- Certain options,
futures contracts, and forward contracts in which a Fund may invest may be
"Section 1256 contracts." Gains or losses on Section 1256 contracts generally
are considered 60% long-term and 40% short-term capital gains or losses;
however, foreign currency gains or losses arising from certain Section 1256
contracts may be treated as ordinary income or loss. Also, Section 1256
contracts held by a Fund at the end of each taxable year (and at certain other
times as prescribed pursuant to the Code) are "marked to market" with the result
that unrealized gains or losses are treated as though they were realized.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund. In addition, losses
realized by a Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which such losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences of transactions in options, futures, forward
contracts, swap agreements and other financial contracts to a Fund are not
entirely clear. The transactions may increase the amount of short-term capital
gain realized by a Fund which is taxed as ordinary income when distributed to
shareholders.
A Fund may make one or more of the elections available under the Code which are
applicable to straddles. If a Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains or
losses, defer losses and/or accelerate the recognition of gains or losses from
the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased as compared to a fund that
did not engage in such hedging transactions.
Because only a few regulations regarding the treatment of swap agreements, and
related caps, floors and collars, have been implemented, the tax consequences of
such transactions are not entirely clear. The Funds intend to account for such
transactions in a manner deemed by them to be appropriate, but the Internal
Revenue Service might not necessarily accept such treatment. If it did not, the
status of a Fund as a regulated investment company might be affected.
The requirements applicable to a Fund's qualification as a regulated investment
company may limit the extent to which a Fund will be able to engage in
transactions in options, futures contracts, forward contracts, swap agreements
and other financial contracts.
MARKET DISCOUNT -- If a Fund purchases a debt security at a price lower than the
stated redemption price of such debt security, the excess of the stated
redemption price over the purchase amount is "market discount". If the amount of
market discount is more than a DE MINIMIS amount, a portion of such market
discount must be included as ordinary income (not capital gain) by the Fund in
each taxable year in which the Fund owns an interest in such debt security and
receives a principal payment on it. In particular, the Fund will be required to
allocate that principal payment first to a portion of the market discount on the
debt security that has accrued but has not previously been includable in income.
In general, the amount of market discount that must be included for each period
is equal to the lesser of (i) the amount of market discount accruing during such
period (plus any accrued market discount for prior periods not previously taken
into account) or (ii) the amount of the principal payment with respect to such
period. Generally, market discount accrues on a daily basis for each day the
debt security is held by a Fund at a constant rate over the time remaining to
the debt security's maturity or, at the election of the Fund, at a constant
yield to maturity which takes into account the semi-annual compounding of
interest, gain realized on the disposition of a market discount obligation must
be recognized as ordinary interest income (not capital gain) to the extent of
the "accrued market discount."
ORIGINAL ISSUE DISCOUNT -- Certain debt securities acquired by the Funds may be
treated as debt securities that were originally issued at a discount. Very
generally, original issue discount is defined as the difference between the
price at which a security was issued and its stated redemption price at
maturity. Although no cash income on account of such discount is actually
received by a Fund, original issue discount that accrues on a debt security in a
given year generally is treated for federal income tax purposes as interest and,
therefore, such income would be subject to the distribution requirements
applicable to regulated investment companies.
Some debt securities may be purchased by the Funds at a discount that exceeds
the original issue discount on such debt securities, if any. This additional
discount represents market discount for federal income tax purposes (see above).
CONSTRUCTIVE SALES -- Recently enacted rules may affect timing and character of
gain if a Fund engages in transactions that reduce or eliminate its risk of loss
with respect to appreciated financial positions. If the Fund enters into certain
transactions in property while holding substantially identical property, the
Fund would be treated as if it had sold and immediately repurchased the property
and would be taxed on any gain (but not loss) from the constructive sale. The
character of gain from a constructive sale would depend upon the Fund's holding
period in the property. Loss from a constructive sale would be recognized when
the property was subsequently disposed of, and its character would depend on the
Fund's holding period and the application of various loss deferral provisions of
the Code.
FOREIGN TAXATION -- Income received by a Fund from sources within a foreign
country may be subject to withholding and other taxes imposed by that country.
Tax conventions between certain countries and the U.S. may reduce or eliminate
such taxes.
The payment of such taxes will reduce the amount of dividends and distributions
paid to the Fund's stockholders. So long as a Fund qualifies as a regulated
investment company, certain distribution requirements are satisfied, and more
than 50% of such Fund's assets at the close of the taxable year consists of
securities of foreign corporations, the Fund may elect, subject to limitation,
to pass through its foreign tax credits to its stockholders.
FOREIGN CURRENCY TRANSACTIONS -- Under the Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time a Fund accrues
income or other receivables or accrues expenses or other liabilities denominated
in a foreign currency and the time that a Fund actually collects such
receivables or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of certain futures contracts, forward
contracts and options, gains or losses attributable to fluctuations in the value
of foreign currency between the date of acquisition of the security or contract
and the date of disposition also are treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "Section 988" gains or losses,
may increase or decrease the amount of a Fund's investment company taxable
income to be distributed to its shareholders as ordinary income.
OTHER TAXES -- The foregoing discussion is general in nature and is not intended
to provide an exhaustive presentation of the tax consequences of investing in a
Fund. Distributions may also be subject to additional state, local and foreign
taxes, depending on each shareholder's particular situation. Depending upon the
nature and extent of a Fund's contacts with a state or local jurisdiction, the
Fund may be subject to the tax laws of such jurisdiction if it is regarded under
applicable law as doing business in, or as having income derived from, the
jurisdiction. Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund.
ORGANIZATION
The Articles of Incorporation of each Fund provide for the issuance of an
indefinite number of shares of common stock in one or more classes or Fund.
Security Equity Fund has authorized capital stock of $.25 par value and
currently issues its shares in eleven Funds, Equity Fund, Global Fund, Total
Return Fund, Social Awareness Fund, Mid Cap Value Fund, Small Cap Growth Fund,
Enhanced Index Fund, International Fund, Select 25 Fund, Large Cap Growth Fund
and Technology Fund. The shares of each Fund of Security Equity Fund represent a
pro rata beneficial interest in that Fund's net assets and in the earnings and
profits or losses derived from the investment of such assets. Growth and Income
and Ultra Funds have not issued shares in any additional fund at the present
time. Growth and Income and Ultra Funds each have authorized capital stock of
$1.00 par value and $.50 par value, respectively.
Each of the Funds currently issues three classes of shares which participate
proportionately based on their relative net asset values in dividends and
distributions and have equal voting, liquidation and other rights except that
(i) expenses related to the distribution of each class of shares or other
expenses that the Board of Directors may designate as class expenses from time
to time, are borne solely by each class; (ii) each class of shares has exclusive
voting rights with respect to any Distribution Plan adopted for that class;
(iii) each class has different exchange privileges; and (iv) each class has a
different designation. When issued and paid for, the shares will be fully paid
and nonassessable by the Funds. Shares may be exchanged as described under "How
to Exchange Shares," page 57, but will have no other preference, conversion,
exchange or preemptive rights. Shares are transferable, redeemable and
assignable and have cumulative voting privileges for the election of directors.
On certain matters, such as the election of directors, all shares of the Fund of
Security Equity Fund, Equity Fund, Global Fund, Total Return Fund, Social
Awareness Fund, Mid Cap Value Fund, Small Cap Growth Fund, Enhanced Index Fund,
International Fund, Select 25 Fund, Large Cap Growth Fund and Technology Fund,
vote together, with each share having one vote. On other matters affecting a
particular Fund, such as the investment advisory contract or the fundamental
policies, only shares of that Fund are entitled to vote, and a majority vote of
the shares of that Fund is required for approval of the proposal.
The Funds do not generally hold annual meetings of stockholders and will do so
only when required by law. Stockholders may remove directors from office by vote
cast in person or by proxy at a meeting of stockholders. Such a meeting will be
called at the written request of 10% of a Fund's outstanding shares.
CUSTODIANS, TRANSFER AGENT AND DIVIDEND-PAYING AGENT
UMB Bank, N.A., 928 Grand Avenue, Kansas City, Missouri 64106, acts as the
custodian for the portfolio securities of Growth and Income Fund, Equity Fund,
Social Awareness Fund, Mid Cap Value Fund, Small Cap Growth Fund, Enhanced Index
Fund, Select 25 Fund, Total Return Fund, Large Cap Growth Fund and Ultra Fund.
Chase Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, New York 11245 acts as
custodian for the portfolio securities of Global, Technology and International
Funds, including those held by foreign banks and foreign securities depositories
which qualify as eligible foreign custodians under the rules adopted by the SEC.
State Street Bank and Trust Company, acts as custodian for the portfolio
securities of Large Cap Growth and Technology Funds, including those held by
foreign banks and foreign securities depositories which qualify as eligible
foreign custodians under the rules adopted by the SEC. Security Management
Company, LLC acts as the Funds' transfer and dividend-paying agent.
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP, One Kansas City Place, 1200 Main Street, Kansas
City, Missouri 64105-2143, has been selected by the Funds' Board of Directors to
serve as the Funds' independent auditors, and as such, will perform the annual
audit of the Funds' financial statements.
PERFORMANCE INFORMATION
The Funds may, from time to time, include performance information in
advertisements, sales literature or reports to shareholders or prospective
investors. Performance information in advertisements or sales literature may be
expressed as average annual total return or aggregate total return.
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Funds over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:
P(1 + T)^n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of the maximum initial sales load of
5.75% in the case of quotations of performance of Class A shares or the
applicable contingent deferred sales charge in the case of quotations of
performance of Class B and Class C shares and a proportional share of Fund
expenses on an annual basis, and assume that all dividends and distributions are
reinvested when paid.
For the 1-, 5- and 10-year periods ended September 30, 1999 the average annual
total return for each Fund was the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
--------------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund 5.54% 5.93% 2.49%(7) 13.74% 13.67% --- 9.37% 10.02%(1) ---
Equity Fund 13.73% 14.23% (3.34)%(7) 22.81% 20.85% --- 14.88% 17.37%(1) ---
Global Fund 26.61% 28.04% 8.62%(7) 11.03% 10.96% --- 10.58%(2) 10.76%(1) ---
Ultra Fund 42.18% 44.39% 10.10%(7) 16.26% 16.24% --- 9.70% 12.54%(1) ---
Total Return Fund 11.11% 11.68% (0.13)%(7) 8.47%(3) 8.58%(3) --- --- --- ---
Social Awareness Fund 18.88% 19.81% (3.43)%(7) 15.90%(4) 16.27%(4) --- --- --- ---
Mid Cap Value Fund 30.08% 31.71% 12.55%(7) 21.83%(5) 22.69%(5) --- --- --- ---
Small Cap Growth Fund 40.63% 42.05% 14.23%(7) 10.86%(6) 11.08%(6) --- --- --- ---
Enhanced Index Fund (5.37)%(7) (5.10)%(7) (1.00)%(7) --- --- --- --- --- ---
International Fund (8.67)%(7) (8.33)%(7) (4.17)%(7) --- --- --- --- --- ---
Select 25 Fund (0.75)%(7) 0.20%(7) 4.50%(7) --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------
<FN>
1 From October 19, 1993 (date of inception) to September 30, 1999
2 From October 1, 1993 (date of inception) to September 30, 1999
3 From June 1, 1995 (date of inception) to September 30, 1999
4 From November 1, 1996 (date of inception) to September 30, 1999
5 From May 1, 1997 (date of inception) to September 30, 1999
6 From October 15, 1997 (date of inception) to September 30, 1999
7 From January 29, 1999 (date of inception) to September 30, 1999, percentage
amounts are not annualized
</FN>
- --------------------------------------------------------------------------------
</TABLE>
Quotations of aggregate total return will be calculated for any specified period
pursuant to the following formula:
ERV - P
------- = T
P
(where P = a hypothetical initial payment of $1,000, T = the total return, and
ERV = the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). All total return figures will assume that all
dividends and distributions are reinvested when paid. The Funds may, from time
to time, include quotations of aggregate total return that do not reflect
deduction of the sales load. The sales load, if reflected, would reduce the
total return.
The aggregate total return on an investment for each Fund calculated as
described above was as indicated in the accompanying table. Unless otherwise
noted, the total return numbers are for the ten-year period ended September 30,
1999.
- -----------------------------------------------------------------
CLASS A CLASS B CLASS C
- -----------------------------------------------------------------
Growth and Income Fund 144.95%(1) 76.50%(2) 2.49%(8)
Equity Fund 300.39%(1) 159.41%(2) (3.44)%(8)
Global Fund 82.87%(3) 83.67%(2) 8.62%(8)
Ultra Fund 152.49%(1) 101.99%(2) 10.10%(8)
Total Return Fund 42.25%(4) 42.89%(4) (0.13)%(8)
Social Awareness Fund 53.76%(5) 55.18%(5) (3.43)%(8)
Mid Cap Value Fund 61.25%(6) 66.99%(6) 12.55%(8)
Small Cap Growth Fund 22.41%(7) 22.90%(7) 14.23%(8)
Enhanced Index Fund (5.37)%(8) (5.10)%(8) (0.90)%(8)
International Fund (8.67)%(8) (8.33)%(8) (4.17)%(8)
Select 25 Fund (0.75)%(8) 0.20%(8) 4.50%(8)
- -----------------------------------------------------------------
1 From September 30, 1989
2 From October 19, 1993
3 From October 1, 1993
4 From June 1, 1995
5 From November 1, 1996 (date of inception)
6 From May 1, 1997 (date of inception)
7 From October 15, 1997 (date of inception)
8 From January 29, 1999 (date of inception)
- -----------------------------------------------------------------
These figures reflect deduction of the maximum sales load. Fee waivers for the
Total Return, Social Awareness, Mid Cap Value and Small Cap Growth Funds reduced
Fund expenses and in the absence of such waiver, the average annual total return
and aggregate total return would be reduced.
In addition, quotations of total return will also be calculated for several
consecutive one-year periods, expressing the total return as a percentage
increase or decrease in the value of the investment for each year relative to
the ending value for the previous year.
Quotations of average annual total return and aggregate total return will
reflect only the performance of a hypothetical investment in the Funds during
the particular time period shown. Such quotations for the Funds will vary based
on changes in market conditions and the level of the Funds' expenses, and no
reported performance figure should be considered an indication of performance
which may be expected in the future.
In connection with communicating its average annual total return or aggregate
total return to current or prospective shareholders, the Funds also may compare
these figures to the performance of other mutual funds tracked by mutual fund
rating services or to other unmanaged indexes which may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs. Such mutual fund rating services include the following: Lipper
Analytical Services; Morningstar, Inc.; Investment Company Data; Schabacker
Investment Management; Wiesenberger Investment Companies Service; Computer
Directions Advisory (CDA); and Johnson's Charts. Such unmanaged indexes include,
but are not limited to, the following: S&P 500; the Dow Jones Industrial
Average; NASDAQ 100 and NASDAQ 200; Russell 2000 and Russell 2500; the Wilshire
1750 and Wilshire 4500; and the Domini Social Index. When comparing the Funds'
performance with that of other alternatives, investors should understand that
shares of the Funds may be subject to greater market risks than are certain
other types of investments.
RETIREMENT PLANS
The Funds offer tax-qualified retirement plans for individuals (Individual
Retirement Accounts, known as IRAs), several prototype retirement plans for the
self-employed (Keogh plans), pension and profit-sharing plans for corporations,
and custodial account plans for employees of public school systems and
organizations meeting the requirements of Section 501(c)(3) of the Internal
Revenue Code. Actual documents and detailed materials about the plans will be
provided upon request to the Distributor.
Purchases of the Funds' shares under any of these plans are made at the public
offering price next determined after contributions are received by the
Distributor. The Funds' shares owned under any of the plans have full dividend,
voting and redemption privileges. Depending on the terms of the particular plan,
retirement benefits may be paid in a lump sum or in installment payments over a
specified period. There are possible penalties for premature distributions from
such plans.
Security Management Company, LLC is available to act as custodian for the plans
on a fee basis. For IRAs, SIMPLE IRAs, Roth IRAs, Education IRAs, Section 403(b)
Retirement Plans, and Simplified Employee Pension Plans (SEPPs), service fees
for such custodial services currently are: (1) $10 for annual maintenance of the
account and (2) benefit distribution fee of $5 per distribution. Service fees
for other types of plans will vary. These fees will be deducted from the plan
assets. Optional supplemental services are available from Security Benefit Life
Insurance Company for additional charges.
Retirement investment programs involve commitments covering future years. It is
important that the investment objectives and structure of the Funds be
considered by the investors for such plans. A brief description of the available
tax-qualified retirement plans is provided below. However the tax rules
applicable to such qualified plans vary according to the type of plan and the
terms and conditions of the plan itself. Therefore, no attempt is made to
provide more than general information about the various types of qualified
plans.
Investors are urged to consult their own attorneys or tax advisers when
considering the establishment and maintenance of any such plans.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
Individual Retirement Account Custodial Agreements are available to provide
investment in shares of the Funds or in other Funds in the Security Group. An
individual may initiate an IRA through the Underwriter by executing the
custodial agreement and making a minimum initial investment of at least $100. A
$10 annual fee is charged for maintaining the account.
An individual may make a contribution to a traditional IRA each year of up to
the lesser of $2,000 or 100% of earned income under current tax law. The IRAs
described in this paragraph are called "traditional IRAs" to distinguish them
from the "Roth IRAs" which became available in 1998. Roth IRAs are described
below. Spousal IRAs allow an individual and his or her spouse to contribute up
to $2,000 to their respective IRAs so long as a joint tax return is filed and
joint income is $4,000 or more. The maximum amount the higher compensated spouse
may contribute for the year is the lesser of $2,000 or 100% of that spouse's
compensation. The maximum the lower compensated spouse may contribute is the
lesser of (i) $2,000 or (ii) 100% of that spouse's compensation plus the amount
by which the higher compensated spouse's compensation exceeds the amount the
higher compensated spouse contributes to his or her IRA.
Generally if a taxpayer is not covered by an employer-sponsored retirement plan,
the amount the taxpayer may deduct for federal income tax purposes in a year for
contributions to an IRA is the lesser of $2,000 or the taxpayer's compensation
for the year. If the taxpayer is covered by an employer-sponsored retirement
plan, the amount of IRA contributions the taxpayer may deduct in a year may be
reduced or eliminated based on the taxpayer's adjusted gross income for the
year. The adjusted gross income level at which a single taxpayer's deduction for
1999 is affected, $31,000, will increase annually to $50,000 in the year 2005.
The adjusted gross income level at which the deduction for 1999 for a married
taxpayer (who does not file a separate return) is affected, $51,000, will
increase annually to $80,000 in the year 2007. If the taxpayer is married, files
a separate tax return, and is covered by a qualified retirement plan, the
taxpayer may not make a deductible contribution to an IRA if the taxpayer's
income exceeds $10,000. If the taxpayer is not covered by an employer-sponsored
retirement plan, but the taxpayer's spouse is, the amount the taxpayer may
deduct for IRA contributions will be phased out if the taxpayer's adjusted gross
income is between $150,000 and $160,000.
Contributions must be made in cash no later than April 15 following the close of
the tax year. No annual contribution is permitted for the year in which the
investor reaches age 70 1/2 or any year thereafter.
In addition to annual contributions, total distributions and certain partial
distributions from certain employer-sponsored retirement plans may be eligible
to be reinvested into a traditional IRA if the reinvestment is made within 60
days of receipt of the distribution by the taxpayer. Such rollover contributions
are not subject to the limitations on annual IRA contributions described above.
ROTH IRAS
Section 408A of the Code permits eligible individuals to establish a Roth IRA, a
new type of IRA which became available in 1998. Contributions to a Roth IRA are
not deductible, but withdrawals that meet certain requirements are not subject
to federal income tax. The maximum annual contribution amount of $2,000 is
phased out if the individual is single and has an adjusted gross income between
$95,000 and $110,000, or if the individual is married and the couple has a
combined adjusted gross income between $150,000 and $160,000. In general, Roth
IRAs are subject to certain required distribution requirements. Unlike a
traditional IRA, Roth IRAs are not subject to minimum required distribution
rules during the owner's lifetime. Generally, however, the amount in a remaining
Roth IRA must be distributed by the end of the fifth year after the death of the
owner.
Beginning in 1998 the owner of a traditional IRA may convert the traditional IRA
into a Roth IRA under certain circumstances. The conversion of a traditional IRA
to a Roth IRA will subject the amount of the converted traditional IRA to
federal income tax. If a traditional IRA is converted to a Roth IRA, the taxable
amount of the owner's traditional IRA will be considered taxable income for
federal income tax purposes for the year of conversion. Generally, all amounts
in a traditional IRA are taxable except for the owner's prior non-deductible
contributions to the traditional IRA.
EDUCATION IRAS
Section 530 of the Code permits eligible individuals to establish an Education
IRA on behalf of a beneficiary for tax years beginning in 1998. Contributions to
an Education IRA are not deductible, but qualified distributions to the
beneficiary are not subject to federal income tax. The maximum annual
contribution amount of $500 is phased out if the individual is single and has an
adjusted gross income between $95,000 and $110,000, or if the individual is
married and the couple has a combined adjusted gross income between $150,000 and
$160,000. Education IRAs are subject to certain required distribution
requirements. Generally, the amount remaining in an Education IRA must be
distributed by the beneficiary's 30th birthday or rolled into a new Education
IRA for another eligible beneficiary.
SIMPLE IRAS
The Small Business Job Protection Act of 1996 created a retirement plan, the
Savings Incentive Match Plan for Employees of Small Employers (SIMPLE Plans) for
tax years beginning in 1997. SIMPLE Plan participants must establish a SIMPLE
IRA into which plan contributions will be deposited.
The Investment Manager makes available SIMPLE IRAs to provide investment in
shares of the Funds. Contributions to a SIMPLE IRA may be either salary deferral
contributions or employer contributions. Contributions must be made in cash and
cannot exceed the maximum amount allowed under the Internal Revenue Code. On a
pre-tax basis, up to $6,000 of compensation (through salary deferrals) may be
contributed to a SIMPLE IRA. In addition, employers are required to make either
(1) a dollar-for-dollar matching contribution or (2) a nonelective contribution
to each participant's account each year. In general, matching contributions must
equal up to 3% of compensation, but under certain circumstances, employers may
make lower matching contributions. Instead of the match, employers may make a
nonelective contribution equal to 2% of compensation (compensation for purposes
of any nonelective contribution is limited to $160,000, as indexed).
Distributions from a SIMPLE IRA are (1) taxed as ordinary income; (2) includable
in gross income; and (3) subject to applicable state tax laws.
Distributions prior to age 59 1/2 may be subject to a 10% penalty tax which
increases to 25% for distributions made before a participant has participated in
the SIMPLE Plan for at least two years. An annual fee of $10 is charged for
maintaining the SIMPLE IRA.
PENSION AND PROFIT SHARING PLANS
Prototype corporate pension or profit-sharing plans meeting the requirements of
Internal Revenue Code Section 401(a) are available. Information concerning these
plans may be obtained from the Distributor.
403(B) RETIREMENT PLANS
Employees of public school systems and tax-exempt organizations meeting the
requirements of Internal Revenue Code Section 501(c)(3) may purchase shares of
the Funds or of the other Funds in the Security Group under a Section 403(b)
Plan. Section 403(b) Plans are subject to numerous restrictions on the amount
that may be contributed, the persons who are eligible to participate and on the
time when distributions may commence.
SIMPLIFIED EMPLOYEE PENSION PLANS (SEPPS)
A prototype SEPP is available for corporations, partnerships or sole proprietors
desiring to adopt such a plan for purchases of IRAs for their employees.
Employers establishing a SEPP may contribute a maximum of $30,000 a year to an
IRA for each employee. This maximum is subject to a number of limitations.
FINANCIAL STATEMENTS
The audited financial statement of the Funds, which are contained in the Funds'
September 30, 1999 Annual Report are incorporated herein by reference. Copies of
the Annual Report are provided to every person requesting a Statement of
Additional Information.
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. -- AAA. Bonds which are rated Aaa are judged to
be of the best quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt-edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
AA. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA. Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
STANDARD & POOR'S CORPORATION -- AAA. Bonds rated AAA have the highest rating
assigned by Standard & Poor's to a debt obligation. Capacity to pay interest and
repay principal is extremely strong.
AA. Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A. Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB. Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC. Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominately speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C. The rating C is reserved for income bonds on which no interest is being paid.
D. Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
<PAGE>
APPENDIX B
- --------------------------------------------------------------------------------
REDUCED SALES CHARGES
CLASS A SHARES -- Initial sales charges may be reduced or eliminated for persons
or organizations purchasing Class A shares of the Funds alone or in combination
with Class A shares of certain other Security Funds.
For purposes of qualifying for reduced sales charges on purchases made pursuant
to Rights of Accumulation or a Statement of Intention (also referred to as a
"Letter of Intent"), the term "Purchaser" includes the following persons: an
individual, his or her spouse and children under the age 21; a trustee or other
fiduciary of a single trust estate or single fiduciary account established for
their benefit; an organization exempt from federal income tax under Section
501(c)(3) or (13) of the Internal Revenue Code; or a pension, profit-sharing or
other employee benefit plan whether or not qualified under Section 401 of the
Internal Revenue Code.
RIGHTS OF ACCUMULATION -- A Purchaser may combine all previous purchases with
his or her contemplated current purchases of Class A Shares of a Fund, for the
purpose of determining the sales charge applicable to the current purchase. For
example, an investor who already owns Class A shares of a Fund either worth
$30,000 at the applicable current offering price or purchased for $30,000 and
who invests an additional $25,000, is entitled to a reduced front-end sales
charge of 4.75% on the latter purchase. The Underwriter must be notified when a
sale takes place which would qualify for the reduced charge on the basis of
previous purchases subject to confirmation of the investor's holding through the
Fund's records. Rights of accumulation apply also to purchases representing a
combination of the Class A shares of the Funds, Security Income Fund or Security
Municipal Bond Fund in those states where shares of the Fund being purchased are
qualified for sale.
STATEMENT OF INTENTION -- A Purchaser may sign a Statement of Intention, which
may be signed within 90 days after the first purchase to be included thereunder,
in the form provided by the Underwriter covering purchases of Class A shares of
the Funds, Security Income Fund or Security Municipal Bond Fund to be made
within a period of 13 months (or a 36-month period for purchases of $1 million
or more) and thereby become eligible for the reduced front-end sales charge
applicable to the actual amount purchased under the Statement. Five percent of
the amount specified in the Statement of Intention will be held in escrow shares
until the Statement is completed or terminated. The shares so held may be
redeemed by the Funds if the investor is required to pay additional sales
charges which may be due if the amount of purchases made by the Purchaser during
the period the Statement is effective is less than the total specified in the
Statement of Intention.
A Statement of Intention may be revised during the 13-month period (or a
36-month period for purchases of $1 million or more). Additional Class A shares
received from reinvestment of income dividends and capital gains distributions
are included in the total amount used to determine reduced sales charges. The
Statement is not a binding obligation upon the investor to purchase or any Fund
to sell the full indicated amount. A Statement of Intention form may be obtained
from the Funds. An investor considering signing such an agreement should read
the Statement of Intention carefully.
REINSTATEMENT PRIVILEGE -- Stockholders who redeem their Class A shares of the
Funds have a one-time privilege (1) to reinstate their accounts by purchasing
shares without a sales charge up to the dollar amount of the redemption
proceeds, or (2) to the extent the redeemed shares would have been eligible for
the exchange privilege, to purchase Class A shares of another of the Funds,
Security Income Fund and Security Municipal Bond Fund, without a sales charge up
to the dollar amount of the redemption proceeds. Written notice and a check in
the amount of the reinvestment from eligible stockholders wishing to exercise
this reinstatement privilege must be received by a fund within 30 days after the
redemption request was received (or such longer period as may be permitted by
rules and regulations promulgated under the Investment Company Act of 1940). The
reinstatement or exchange will be made at the net asset value next determined
after the reinvestment is received by the Fund. Stockholders making use of the
reinstatement privilege should note that any gains realized upon the redemption
will be taxable while any losses may be deferred under the "wash sale" provision
of the Internal Revenue Code.
<PAGE>
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Articles of Incorporation
(b) Bylaws(5)
(c) Specimen copy of share certificates for Fund's shares of capital stock
(d) (1) Investment Management and Services Agreement
(2) Sub-Advisory Contract - Oppenheimer(2)
(3) Sub-Advisory Contract - Strong(1)
(4) Sub-Advisory Contract - Bankers Trust(5)
(5) Sub-Advisory Contract - Wellington(8)
(e) (1) Distribution Agreement
(2) Class B Distribution Agreement
(3) Class C Distribution Agreement
(4) Underwriter-Dealer Agreement(3)
(f) Not applicable
(g) (1) Custodian Agreement - UMB Bank
(2) Custodian Agreement - Chase Manhattan Bank
(3) Form of Custodian Agreement - State Street
(h) Not applicable
(i) Legal Opinion(7)
(j) Consent of Independent Auditors
(k) Not applicable
(l) Not applicable
(m) (1) Class A Distribution Plan
(2) Class B Distribution Plan
(3) Class C Distribution Plan
(4) Brokerage Enhancement Plan
(n) Multiple Class Plan(4)
(o) RESERVED
(p) Code of Ethics(6)
(1) Incorporated herein by reference from the Exhibits filed with the
Registrant's Post-Effective Amendment No. 80 to Registration Statement
2-19458 (filed October 15, 1997).
(2) Incorporated herein by reference from the Exhibits filed with the
Registrant's Post-Effective Amendment No. 83 to Registration Statement
2-19458 (filed November 13, 1998).
(3) Incorporated herein by reference from the Exhibits filed with the
Registrant's Post-Effective Amendment No. 84 to Registration Statement
2-19458 (filed January 28, 1999).
(4) Incorporated herein by reference to the Exhibits filed with Security Income
Fund's Post-Effective Amendment No. 64 to Registration Statement 2-38414
(filed November 29, 1999).
(5) Incorporated herein by reference from the Exhibits filed with the
Registrant's Post-Effective Amendment No. 86 to Registration Statement
2-19458 (filed November 29, 1999).
(6) Incorporated herein by reference from the Exhibits filed with the
Registrant's Post-Effective Amendment No. 87 to Registration Statement
2-19458 (filed January 28, 2000).
(7) Incorporated herein by reference from the Exhibits filed with the
Registrant's Post-Effective Amendment No. 88 to Registration Statement
2-19458 (filed February 16, 2000).
(8) Incorporated herein by reference to the Exhibits filed with SBL Fund's
Post-Effective Amendment No. 41 to Registration Statement 2-59353 (filed May
1, 2000).
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH FUND
Not applicable.
ITEM 25. INDEMNIFICATION
A policy of insurance covering Security Management Company, LLC, its affiliate
Security Distributors, Inc., and all of the registered investment companies
advised by Security Management Company, LLC insures the Registrant's directors
and officers against liability arising by reason of an alleged breach of duty
caused by any negligent act, error or accidental omission in the scope of their
duties.
Article Tenth of Registrant's Articles of Incorporation provides in relevant
part as follows:
"(5) Each director and officer (and his heirs, executors and administrators)
shall be indemnified by the Corporation against reasonable costs and
expenses incurred by him in connection with any action, suit or proceeding
to which he is made a party by reason of his being or having been a
Director or officer of the Corporation, except in relation to any action,
suit or proceeding in which he has been adjudged liable because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. In the absence of an
adjudication which expressly absolves the Director or officer of liability
to the Corporation or its stockholders for willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office, or in the event of a settlement, each Director and
officer (and his heirs, executors and administrators) shall be indemnified
by the Corporation against payment made, including reasonable costs and
expenses, provided that such indemnity shall be conditioned upon a written
opinion of independent counsel that the Director or officer has no
liability by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office. The
indemnity provided herein shall, in the event of settlement of any such
action, suit or proceeding, not exceed the costs and expenses (including
attorneys' fees) which would reasonably have been incurred if such action,
suit or proceeding had been litigated to a final conclusion. Such a
determination by independent counsel and the payment of amounts by the
Corporation on the basis thereof shall not prevent a stockholder from
challenging such indemnification by appropriate legal proceeding on the
grounds that the officer or Director was liable because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The foregoing rights and
indemnification shall not be exclusive of any other rights to which the
officers and Directors may be entitled according to law."
Article Sixteenth of Registrant's Articles of Incorporation, as amended December
10, 1987, provides as follows:
"A director shall not be personally liable to the corporation or to its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that this sentence shall not eliminate nor limit the liability of a
director:
A. for any breach of his or her duty of loyalty to the corporation or to its
stockholders;
B. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
C. for an unlawful dividend, stock purchase or redemption under the provisions
of Kansas Statutes Annotated (K.S.A.) 17-6424 and amendments thereto; or
D. for any transaction from which the director derived an improper personal
benefit."
Item Thirty of Registrant's Bylaws, dated February 3, 1995, provides, in
relevant part, as follows:
"Each person who is or was a Director or officer of the Corporation or is or was
serving at the request of the Corporation as a Director or officer of another
corporation (including the heirs, executors, administrators and estate of such
person) shall be indemnified by the Corporation as of right to the full extent
permitted or authorized by the laws of the State of Kansas, as now in effect and
is hereafter amended, against any liability, judgment, fine, amount paid in
settlement, cost and expense (including attorneys' fees) asserted or threatened
against and incurred by such person in his/her capacity as or arising out of
his/her status as a Director or officer of the Corporation or, if serving at the
request of the Corporation, as a Director or officer of another corporation. The
indemnification provided by this bylaw provision shall not be exclusive of any
other rights to which those indemnified may be entitled under the Articles of
Incorporation, under any other bylaw or under any agreement, vote of
stockholders or disinterested directors or otherwise, and shall not limit in any
way any right which the Corporation may have to make different or further
indemnification with respect to the same or different persons or classes of
persons.
No person shall be liable to the Corporation for any loss, damage, liability or
expense suffered by it on account of any action taken or omitted to be taken by
him/her as a Director or officer of the Corporation or of any other corporation
which (s)he serves as a Director or officer at the request of the Corporation,
if such person (a) exercised the same degree of care and skill as a prudent
person would have exercised under the circumstances in the conduct of his/her
own affairs, or (b) took or omitted to take such action in reliance upon advice
of counsel for the Corporation, or for such other corporation, or upon statement
made or information furnished by Directors, officers, employees or agents of the
Corporation, or of such other corporation, which (s)he had no reasonable grounds
to disbelieve.
In the event any provision of this section 30 shall be in violation of the
Investment Company Act of 1940, as amended, or of the rules and regulations
promulgated thereunder, such provisions shall be void to the extent of such
violations."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 26. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER
Security Management Company, LLC also acts as investment adviser to Security
Income Fund, SBL Fund, Security Cash Fund, Security Growth and Income Fund,
Security Municipal Bond Fund, and Security Ultra Fund.
NAME, BUSINESS* AND OTHER CONNECTIONS OF THE EXECUTIVE OFFICERS AND DIRECTORS OF
REGISTRANT'S ADVISER
JAMES R. SCHMANK
- ----------------
PRESIDENT AND MANAGING MEMBER REPRESENTATIVE--Security Management Company, LLC
SENIOR VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit
Group, Inc.
PRESIDENT AND DIRECTOR--Security Growth and Income Fund; Security Cash Fund;
Security Municipal Bond Fund; Security Ultra Fund; Security Equity Fund;
Security Income Fund; SBL Fund; Advisor's Fund
DIRECTOR--Security Distributors, Inc.
VICE PRESIDENT AND TREASURER--First Security Benefit Life Insurance and Annuity
Company of New York
DIRECTOR--Stormont-Vail Foundation, 1500 SW 10th, Topeka, Kansas 66604
PRESIDENT AND DIRECTOR--Auburn-Washburn Public Schools Foundation, 5928 SW 53rd,
Topeka, Kansas 66610
TRUSTEE--Eugene P. Mitchell Charitable Remainder Unit Trust (Family Trust)
DIRECTOR--Business Improvement District, 906 S. Kansas Avenue, Topeka, Kansas
66612
JOHN D. CLELAND
- ---------------
SENIOR VICE PRESIDENT AND MANAGING MEMBER REPRESENTATIVE--Security Management
Company, LLC
CHAIRMAN OF THE BOARD AND DIRECTOR--Security Cash Fund; Security Income Fund;
Security Municipal Bond Fund; SBL Fund; Security Growth and Income Fund;
Security Equity Fund; Security Ultra Fund; Advisor's Fund
SENIOR VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit
Group, Inc.
VICE PRESIDENT AND DIRECTOR--Security Distributors, Inc.
TRUSTEE AND TREASURER--Mount Hope Cemetery Corporation, 4700 SW 17th, Topeka,
Kansas
TRUSTEE AND INVESTMENT COMMITTEE CHAIRMAN--Topeka Community Foundation, 5100 SW
10th, Topeka, Kansas
CHAIRMAN, POOLED MONEY INVESTMENT BOARD--State of Kansas, Topeka, Kansas
EXECUTIVE BOARD MEMBER--Jayhawk Area Council of the Boy Scouts of America, 1020
SE Monroe, Topeka, Kansas
CHAIRMAN OF THE ENDOWMENT TRUSTEES--Jayhawk Area Council of the Boy Scouts of
America, 1020 SE Monroe, Topeka, Kansas
MARK E. YOUNG
- -------------
VICE PRESIDENT--Security Management Company, LLC
SECOND VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit
Group, Inc.
VICE PRESIDENT AND DIRECTOR--Security Distributors, Inc.
TRUSTEE--Topeka Zoological Foundation, Topeka, Kansas
TERRY A. MILBERGER
- ------------------
SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER--Security Management Company,
LLC
SENIOR VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit
Group, Inc.
VICE PRESIDENT--Security Equity Fund; SBL Fund
JANE A. TEDDER
- --------------
VICE PRESIDENT AND SENIOR ECONOMIST--Security Management Company, LLC
VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit Group,
Inc.
AMY J. LEE
- ----------
VICE PRESIDENT, ASSOCIATE GENERAL COUNSEL AND ASSISTANT SECRETARY--Security
Benefit Life Insurance Company; Security Benefit Group, Inc.
SECRETARY--Security Management Company, LLC; Security Distributors, Inc.;
Security Cash Fund; Security Equity Fund; Security Municipal Bond Fund;
Security Ultra Fund; SBL Fund; Security Growth and Income Fund; Security
Income Fund; Advisor's Fund; SFR Collective Investments, LLC
DIRECTOR--Midland Hospice Care, Inc., 200 SW Frazier Court, Topeka, Kansas 66606
BRENDA M. HARWOOD
- -----------------
ASSISTANT VICE PRESIDENT AND TREASURER--Security Management Company, LLC
TREASURER--Security Equity Fund; Security Ultra Fund; Security Growth and Income
Fund; Security Income Fund; Security Cash Fund; SBL Fund; Security Municipal
Bond Fund; Advisor's Fund; Security Distributors, Inc.
ASSISTANT VICE PRESIDENT--Security Benefit Life Insurance Company; Security
Benefit Group, Inc.
DIRECTOR--Security Distributors, Inc.
STEVEN M. BOWSER
- ----------------
VICE PRESIDENT AND PORTFOLIO MANAGER--Security Management Company, LLC
VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit Group,
Inc., Security Income Fund; SBL Fund
THOMAS A. SWANK
- ---------------
SENIOR VICE PRESIDENT AND DIRECTOR OF FIXED INCOME--Security Management Company,
LLC
SENIOR VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit
Group, Inc.
VICE PRESIDENT--SBL Fund; Security Income Fund
CINDY L. SHIELDS
- ----------------
SECOND VICE PRESIDENT AND PORTFOLIO MANAGER--Security Management Company, LLC
SECOND VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit
Group, Inc.
VICE PRESIDENT--SBL Fund; Security Equity Fund
DIRECTOR--ERC Resource and Referral, 1710 SW 10th, Topeka, Kansas
JAMES P. SCHIER
- ---------------
VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER--Security Management Company, LLC
VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit Group,
Inc.; SBL Fund; Security Equity Fund; Security Ultra Fund
CHRISTOPHER D. SWICKARD
- -----------------------
ASSISTANT SECRETARY--Security Management Company, LLC; Security Cash Fund;
Security Equity Fund; Security Municipal Bond Fund; Security Ultra Fund; SBL
Fund; Security Growth and Income Fund; Security Income Fund; Advisor's Fund
ASSISTANT VICE PRESIDENT AND ASSISTANT COUNSEL--Security Benefit Life Insurance
Company; Security Benefit Group, Inc.
DIRECTOR AND SECRETARY--Security Benefit Academy, Inc.
*Located at 700 SW Harrison, Topeka, Kansas 66636-0001
OPPENHEIMERFUNDS, INC.
There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
CHARLES E. ALBERS
- -----------------
SENIOR VICE PRESIDENT--OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds (since April
1998); a Chartered Financial Analyst; formerly, a Vice President and
portfolio manager for Guardian Investor Services, the investment management
subsidiary of The Guardian Life Insurance Company (since 1972).
EDWARD AMBERGER
- ---------------
ASSISTANT VICE PRESIDENT--OppenheimerFunds, Inc.
Formerly Assistant Vice President, Securities Analyst for Morgan Stanley Dean
Witter (May 1997 - April 1998); and Research Analyst (July 1996 - May 1997),
Portfolio Manager (February 1992 - July 1996) and Department Manager (June
1988 to February 1992) for The Bank of New York.
PETER M. ANTOS
- --------------
SENIOR VICE PRESIDENT--OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds; a Chartered
Financial Analyst; Senior Vice President of HarbourView Asset Management
Corporation; prior to March 1996 he was the senior equity portfolio manager
for the Panorama Series Fund, Inc. (the "Company") and other mutual funds and
pension funds managed by G.R. Phelps & Co. Inc. ("G.R. Phelps"), the
Company's former investment adviser, which was a subsidiary of Connecticut
Mutual Life Insurance Company; he was also responsible for managing the
common stock department and common stock investments of Connecticut Mutual
Life Insurance Co.
JANETTE APRILANTE
- -----------------
ASSISTANT VICE PRESIDENT--OppenheimerFunds, Inc.
VICTOR BABIN
- ------------
SENIOR VICE PRESIDENT--OppenheimerFunds, Inc.
BRUCE BARTLETT
- --------------
SENIOR VICE PRESIDENT--OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds. Formerly, a
Vice President and Senior Portfolio Manager at First of America Investment
Corp.
GEORGE BATEJAN
- --------------
EXECUTIVE VICE PRESIDENT AND CHIEF INFORMATION OFFICER--OppenheimerFunds, Inc.
Formerly Senior Vice President, Group Executive, and Senior Systems Officer
for American International Group (October 1994 - May 1998).
CONNIE BECHTOLT
- ---------------
ASSISTANT VICE PRESIDENT--OppenheimerFunds, Inc.
KATHLEEN BEICHERT
- -----------------
VICE PRESIDENT--OppenheimerFunds, Inc.
RAJEEV BHAMAN
- -------------
VICE PRESIDENT--OppenheimerFunds, Inc.
Formerly, Vice President (January 1992 - February, 1996) of Asian Equities
for Barclays de Zoete Wedd, Inc.
ROBERT J. BISHOP
- ----------------
VICE PRESIDENT--OppenheimerFunds, Inc.
Vice President of Mutual Fund Accounting (since May 1996); an officer of
other Oppenheimer funds; formerly, an Assistant Vice President of
OppenheimerFunds, Inc./Mutual Fund Accounting (April 1994 - May 1996), and a
Fund Controller for OppenheimerFunds, Inc.
MARK BINNING
- ------------
ASSISTANT VICE PRESIDENT INTERNATIONAL TRADER--OppenheimerFunds, Inc.
JOHN R. BLOMFIELD
- -----------------
VICE PRESIDENT--OppenheimerFunds, Inc.
Formerly Senior Product Manager (November 1995 - August 1997) of
International Home Foods and American Home Products (March 1994 - October
1996).
CHAD BOLL
- ---------
ASSISTANT VICE PRESIDENT--OppenheimerFunds, Inc.
SCOTT BROOKS
- ------------
VICE PRESIDENT--OppenheimerFunds, Inc.
JEFFREY BURNS
- -------------
VICE PRESIDENT ASSISTANT COUNSEL--OppenheimerFunds, Inc.
Stradley, Ronen Stevens and Young, LLP (February 1998-September 1999). Morgan
Lewis and Bockius, LLP (April 1995- February 1998)
ADELE CAMPBELL
- --------------
ASSISTANT VICE PRESIDENT & ASSISTANT TREASURER: ROCHESTER DIVISION -
OppenheimerFunds, Inc.
Formerly, Assistant Vice President of Rochester Fund Services, Inc.
MICHAEL CARBUTO
- ---------------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds; Vice
President of Centennial Asset Management Corporation.
JOHN CARDILLO
- -------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
ELISA CHRYSANTHIS
- -----------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
H.C. DIGBY CLEMENTS
- -------------------
VICE PRESIDENT: ROCHESTER DIVISION - OppenheimerFunds, Inc.
MARK CURRY
- ----------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
O. LEONARD DARLING
- ------------------
EXECUTIVE VICE PRESIDENT AND CHIEF INVESTMENT OFFICER - OppenheimerFunds, Inc.
Chief Investment Officer (since 6/99); Chief Executive Officer and Senior
Manager of HarbourView Asset Management Corporation; Trustee (1993 - present)
of Awhtolia College - Greece; formerly Chief Executive Officer (1993-June
1999).
JOHN DAVIS
- ----------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
EAB Financial (April 1998-February 1999) and South Carolina Credit Union
(August 1996-April 1998).
WILLIAM DEJIANNE
- ----------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
ROBERT A. DENSEN
- ----------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
RUGGERO DE ROSI
- ---------------
VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly, Chief Strategist at ING Barings (July 1998 - March 2000) and Vice
President/Global Markets at Citicorp Securities (May 1995 - July 1998).
SHERI DEVEREUX
- --------------
VICE PRESIDENT - OppenheimerFunds, Inc.
MAX DIETSHE
- -----------
VICE PRESIDENT - OppenheimerFunds, Inc.
Deloitte & Touche LLP (1989-1999).
CRAIG P. DINSELL
- ----------------
EXECUTIVE VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly, Senior Vice President of Human Resources for Fidelity
Investments-Retail Division (January 1995 - January 1996), Fidelity
Investments FMR Co. (January 1996 - June 1997) and Fidelity Investments FTPG
(June 1997 - January 1998).
JOHN DONEY
- ----------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds.
ANDREW J. DONOHUE
- -----------------
EXECUTIVE VICE PRESIDENT, General Counsel and Director - OppenheimerFunds, Inc.
Executive Vice President (since September 1993), and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel
and a director of HarbourView Asset Management Corporation Shareholder
Services, Inc., Shareholder Financial Services, Inc. and Oppenheimer
Partnership Holdings, Inc. since (September 1995); President and a director
of Centennial Asset Management Corporation (since September 1995); President
and a director of Oppenheimer Real Asset Management, Inc (since July 1996);
General Counsel (since May 1996) and Secretary (since April 1997) of
Oppenheimer Acquisition Corp.; Vice President and Director of
OppenheimerFunds International, Ltd. and Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
BRUCE DUNBAR
- ------------
VICE PRESIDENT - OppenheimerFunds, Inc.
DANIEL ENGSTROM
- ---------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
GEORGE EVANS
- -----------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds.
EDWARD EVERETT
- --------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
GEORGE FAHEY
- ------------
VICE PRESIDENT - OppenheimerFunds, Inc.
LESLIE A. FALCONIO
- ------------------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds (since
6/99).
SCOTT FARRAR
- ------------
VICE PRESIDENT - OppenheimerFunds, Inc.
Assistant Treasurer of Oppenheimer Millennium Funds plc (since October 1997);
an officer of other Oppenheimer funds; formerly an Assistant Vice President
of OppenheimerFunds, Inc./Mutual Fund Accounting (April 1994 - May 1996), and
a Fund Controller for OppenheimerFunds, Inc.
KATHERINE P. FELD
- -----------------
VICE PRESIDENT AND SECRETARY - OppenheimerFunds, Inc.
Vice President and Secretary of the Distributor; Secretary of HarbourView
Asset Management Corporation, and Centennial Asset Management Corporation;
Secretary, Vice President and Director of Centennial Capital Corporation;
Vice President and Secretary of Oppenheimer Real Asset Management, Inc.
RONALD H. FIELDING
- ------------------
SENIOR VICE PRESIDENT; CHAIRMAN: ROCHESTER DIVISION - OppenheimerFunds, Inc.
An officer, Director and/or portfolio manager of certain Oppenheimer funds;
Presently he holds the following other positions: Director (since 1995) of
ICI Mutual Insurance Company; Governor (since 1994) of St. John's College;
Director (since 1994 - present) of International Museum of Photography at
George Eastman House. Formerly, he held the following positions: formerly,
Chairman of the Board and Director of Rochester Fund Distributors, Inc.
("RFD"); President and Director of Fielding Management Company, Inc. ("FMC");
President and Director of Rochester Capital Advisors, Inc. ("RCAI"); Managing
Partner of Rochester Capital Advisors, L.P., President and Director of
Rochester Fund Services, Inc. ("RFS"); President and Director of Rochester
Tax Managed Fund, Inc.; Director (1993 - 1997) of VehiCare Corp.; Director
(1993 - 1996) of VoiceMode.
DAVID FOXHOVEN
- --------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly Manager, Banking Operations Department (July 1996 - November 1998).
DAN GANGEMI
- -----------
VICE PRESIDENT - OppenheimerFunds, Inc.
ERIN GARDINER
- -------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
SUBRATA GHOSE
- -------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly, Equity Analyst at Fidelity Investments (1995 - March 2000).
HARLES GILBERT
- ---------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
ALAN GILSTON
- ------------
VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly, Vice President (1987 - 1997) for Schroder Capital Management
International.
JILL GLAZERMAN
- --------------
VICE PRESIDENT - OppenheimerFunds, Inc.
MIKHAIL GOLDVERG
- ----------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
JEREMY GRIFFITHS
- ----------------
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND DIRECTOR -
OppenheimerFunds, Inc.
Chief Financial Officer and Treasurer (since March 1998) of Oppenheimer
Acquisition Corp.; a Member and Fellow of the Institute of Chartered
Accountants; formerly, an accountant for Arthur Young (London, U.K.).
ROBERT GRILL
- ------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly, Marketing Vice President for Bankers Trust Company (1993 - 1996);
Steering Committee Member, Subcommittee Chairman for American Savings
Education Council (1995 - 1996).
ROBERT GUY
- ----------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
ROBERT HALEY
- ------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly, Vice President of Information Services for Bankers Trust Company
(January 1991 - November 1997).
THOMAS B. HAYES
- ---------------
VICE PRESIDENT - OppenheimerFunds, Inc.
BARBARA HENNIGAR
- ----------------
CHAIRMAN OF OPPENHEIMERFUNDS SERVICES, A DIVISION OF OFI - OppenheimerFunds,
Inc.
Formerly Executive Vice President and Chief Executive Officer of
OppenheimerFunds Services, a division of the Manager.
DOROTHY HIRSHMAN
- ----------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
MERRYL HOFFMAN
- --------------
VICE PRESIDENT AND SENIOR COUNSEL - OppenheimerFunds, Inc.
MERRELL HORA
- ------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
Research Fellow for the University of Minnesota (July 1997- July 1998).
SCOTT T. HUEBL
- --------------
VICE PRESIDENT - OppenheimerFunds, Inc.
JAMES HYLAND
- ------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly Manager of Customer Research for Prudential Investments (February
1998 - July 1999).
KATHLEEN T. IVES
- ----------------
VICE PRESIDENT - OppenheimerFunds, Inc.
WILLIAM JAUME
- -------------
VICE PRESIDENT - OppenheimerFunds, Inc.
FRANK JENNINGS
- --------------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds.
ANDREW JORDAN
- -------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
DEBORAH KABACK
- --------------
VICE PRESIDENT AND SENIOR COUNSEL - OppenheimerFunds, Inc.
Senior Vice President and Deputy General Counsel of Oppenheimer Capital
(April 1989-November 1999).
LEWIS KAMMAN
- ------------
VICE PRESIDENT - OppenheimerFunds, Inc.
Senior Consultant for Bell Atlantic Network Integration, Inc. (June
1997-December 1998) and Vice President for JP Morgan, Inc. (August 1994-June
1997).
THOMAS W. KEFFER
- ----------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
ERICA KLEIN
- -----------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
WALTER KONOPS
- -------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
AVRAM KORNBERG
- --------------
VICE PRESIDENT - OppenheimerFunds, Inc.
JIMMY KOURKOULAKOS
- ------------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
JOHN KOWALIK
- ------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager for certain OppenheimerFunds; formerly,
Managing Director and Senior Portfolio Manager at Prudential Global Advisors
(1989 - 1998).
JOSEPH KRIST
- ------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
MICHAEL LEVINE
- --------------
VICE PRESIDENT - OppenheimerFunds, Inc.
SHANQUAN LI
- -----------
VICE PRESIDENT - OppenheimerFunds, Inc.
STEPHEN F. LIBERA
- -----------------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager for certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice President of HarbourView Asset Management
Corporation; prior to March 1996, the senior bond portfolio manager for
Panorama Series Fund Inc., other mutual funds and pension accounts managed by
G.R. Phelps; also responsible for managing the public fixed-income securities
department at Connecticut Mutual Life Insurance Co.
MITCHELL J. LINDAUER
- --------------------
VICE PRESIDENT AND ASSISTANT GENERAL COUNSEL - OppenheimerFunds, Inc.
DAVID MABRY
- -----------
VICE PRESIDENT - OppenheimerFunds, Inc.
STEVE MACCHIA
- -------------
VICE PRESIDENT - OppenheimerFunds, Inc.
BRIDGET MACASKILL
- -----------------
PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR - OppenheimerFunds, Inc.
Chief Executive Officer (since September 1995); President and director (since
June 1991) of HarbourView Asset Management Corporation; and a director of
Shareholder Services, Inc. (since August 1994), and Shareholder Financial
Services, Inc. (September 1995); President (since September 1995) and a
director (since October 1990) of Oppenheimer Acquisition Corp.; President
(since September 1995) and a director (since November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding company subsidiary of OppenheimerFunds,
Inc.; a director of Oppenheimer Real Asset Management, Inc. (since July
1996); President and a director (since October 1997) of OppenheimerFunds
International Ltd., an offshore fund manager subsidiary of OppenheimerFunds,
Inc. and Oppenheimer Millennium Funds plc (since October 1997); President and
a director of other Oppenheimer funds; a director of Hillsdown Holdings plc
(a U.K. food company); formerly, an Executive Vice President of OFI.
PHILIP T. MASTERSON
- -------------------
VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly an Associate at Davis, Graham, & Stubbs (January 1998 - July 1998);
Associate; Myer, Swanson, Adams & Wolf, P.C. (May 1996 - June 1998).
LORETTA MCCARTHY
- ----------------
EXECUTIVE VICE PRESIDENT - OppenheimerFunds, Inc.
LISA MIGAN
- ----------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
ANDREW J. MIKA
- --------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly a Second Vice President for Guardian Investments (June 1990 -
October 1999).
DENIS R. MOLLEUR
- ----------------
VICE PRESIDENT AND SENIOR COUNSEL - OppenheimerFunds, Inc.
NIKOLAOS MONOYIOS
- -----------------
VICE PRESIDENT - OppenheimerFunds, Inc.
A Vice President and/or portfolio manager of certain Oppenheimer funds (since
April 1998); a Certified Financial Analyst; formerly, a Vice President and
portfolio manager for Guardian Investor Services, the management subsidiary
of The Guardian Life Insurance Company (since 1979).
LINDA MOORE
- -----------
VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly, Marketing Manager (July 1995 -November 1996) for Chase Investment
Services Corp.
KENNETH NADLER
- --------------
VICE PRESIDENT - OppenheimerFunds, Inc.
DAVID NEGRI
- -----------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds.
BARBARA NIEDERBRACH
- -------------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
ROBERT A. NOWACZYK
- ------------------
VICE PRESIDENT - OppenheimerFunds, Inc.
RAY OLSON
- ---------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
RICHARD M. O'SHAUGNESSY
- -----------------------
ASSISTANT VICE PRESIDENT: ROCHESTER DIVISION - OppenheimerFunds, Inc.
GINA M. PALMIERI
- ----------------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds (since
6/99).
ROBERT E. PATTERSON
- -------------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds.
FRANK PAVLAK
- ------------
VICE PRESIDENT - OppenheimerFunds, Inc.
Branch Chief of Investment Company Examinations at U.S. Securities and
Exchange Commission (January 1981 - December 1998).
JAMES PHILLIPS
- --------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
DAVID PELLEGRINO
- ----------------
VICE PRESIDENT - OppenheimerFunds, Inc.
JANE PUTNAM
- -----------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds.
MICHAEL QUINN
- -------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly, Assistant Vice President (April 1995 - January 1998) of Van Kampen
American Capital.
JULIE RADTKE
- ------------
VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly Assistant Vice President and Business Analyst for Pershing, Jersey
City (August 1997 -November 1997); Senior Business Consultant, American
International Group (January 1996 - July 1997).
RUSSELL READ
- ------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
Vice President of Oppenheimer Real Asset Management, Inc. (since March 1995).
THOMAS REEDY
- ------------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds; formerly, a
Securities Analyst for the Manager.
JOHN REINHARDT
- --------------
VICE PRESIDENT: ROCHESTER DIVISION - OppenheimerFunds, Inc.
JEFFREY ROSEN
- -------------
VICE PRESIDENT - OppenheimerFunds, Inc.
MARCI ROSSELL
- -------------
VICE PRESIDENT AND CORPORATE ECONOMIST - OppenheimerFunds, Inc.
Economist with Federal Reserve Bank of Dallas (April 1996 - March 1999).
RICHARD H. RUBINSTEIN
- ---------------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds.
LAWRENCE RUDNICK,
- ----------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
JAMES RUFF
- ----------
EXECUTIVE VICE PRESIDENT & DIRECTOR - OppenheimerFunds, Inc.
ANDREW RUOTOLO
- --------------
EXECUTIVE VICE PRESIDENT OF OPPENHEIMER FUNDS SERVICES, A DIVISION OF OFI -
OppenheimerFunds, Inc.
Formerly Chief Operations Officer for American International Group
(1997-August 1999).
ROHIT SAH
- ---------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
VALERIE SANDERS
- ---------------
VICE PRESIDENT - OppenheimerFunds, Inc.
JEFF SCHNEIDER
- --------------
VICE PRESIDENT - OppenheimerFunds, Inc.
Director, Personal Decisions International.
ELLEN SCHOENFELD
- ----------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
DAVID SCHULTZ
- -------------
SENIOR VICE PRESIDENT AND CHIEF EXECUTIVE OFFICER - OppenheimerFunds, Inc.
Senior Managing Director, President (since April 1999) and Chief Executive
Officer of HarbourView Asset Management Corporation (since June 1999).
STEPHANIE SEMINARA
- ------------------
VICE PRESIDENT - OppenheimerFunds, Inc.
JENNIFER SEXTON
- ---------------
VICE PRESIDENT - OppenheimerFunds, Inc.
MARTHA SHAPIRO
- --------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
CHRISTIAN D. SMITH
- ------------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
Formerly Co-head of the Municipal Portfolio Management Team, Portfolio
Manager for Prudential Global Asset Management (January 1990 - September
1999).
CONNIE SONG
- -----------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
RICHARD SOPER
- -------------
VICE PRESIDENT - OppenheimerFunds, Inc.
KEITH SPENCER
- -------------
VICE PRESIDENT - OppenheimerFunds, Inc.
Equity trader.
CATHLEEN STAHL
- --------------
VICE PRESIDENT - OppenheimerFunds, Inc.
Assistant Vice President & Manager of Women & Investing Program
RICHARD A. STEIN
- ----------------
VICE PRESIDENT: ROCHESTER DIVISION - OppenheimerFunds, Inc.
Assistant Vice President (since 1995) of Rochester Capitol Advisors, L.P.
ARTHUR STEINMETZ
- ----------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds.
JAYNE STEVLINGSON
- -----------------
VICE PRESIDENT - OppenheimerFunds, Inc.
MARLO STIL
- ----------
VICE PRESIDENT - OppenheimerFunds, Inc.
Investment Specialist and Career Agent/Registered Representative for MML
Investor services, Inc.
JOHN STOMA
- ----------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
MICHAEL C. STRATHEARN
- ---------------------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of HarbourView Asset Management
Corporation.
KEVIN SURRETT
- -------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
Assistant Vice President of Product Development At Evergreen Investor
Services, Inc. (June 1995 - May 1999).
WAYNE STRAUSS
- -------------
ASSISTANT VICE PRESIDENT: ROCHESTER DIVISION - OppenheimerFunds, Inc.
Formerly Senior Editor, West Publishing Company (January 1997 - March 1997).
JAMES C. SWAIN
- --------------
VICE CHAIRMAN OF THE BOARD - OppenheimerFunds, Inc.
Chairman, CEO and Trustee, Director or Managing Partner of the Denver-based
Oppenheimer Funds; formerly, President and Director of Centennial Asset
Management Corporation and Chairman of the Board of Shareholder Services,
Inc.
SUSAN SWITZER
- -------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
ANTHONY A. TANNER
- -----------------
VICE PRESIDENT: ROCHESTER DIVISION - OppenheimerFunds, Inc.
JAY TRACEY
- ----------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds.
JAMES TURNER
- ------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
ANGELA UTTARO
- -------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
MARK VANDEHEY
- -------------
VICE PRESIDENT - OppenheimerFunds, Inc.
MAUREEN VANNORSTRAND
- --------------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
ANNETTE VON BRANDIS
- -------------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
PHILLIP VOTTIERO
- ----------------
VICE PRESIDENT - OppenheimerFunds, Inc.
Chief Financial officer for the Sovlink Group (April 1996 - June 1999).
TERESA WARD
- -----------
VICE PRESIDENT - OppenheimerFunds, Inc.
JERRY WEBMAN
- ------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
Director of New York-based tax-exempt fixed income Oppenheimer funds.
BARRY WEISS
- -----------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
Fitch IBCA (1996 - January 2000)
CHRISTINE WELLS
- ---------------
VICE PRESIDENT - OppenheimerFunds, Inc.
JOSEPH WELSH
- ------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
KENNETH B. WHITE
- ----------------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds; a Chartered
Financial Analyst; Vice President of HarbourView Asset Management
Corporation.
WILLIAM L. WILBY
- ----------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds; Vice
President of HarbourView Asset Management Corporation.
DONNA WINN
- ----------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
Senior Vice President/Distribution Marketing.
BRIAN W. WIXTED
- ---------------
SENIOR VICE PRESIDENT AND TREASURER - OppenheimerFunds, Inc.
Formerly Principal and Chief Operating Officer, Bankers Trust Company -
Mutual Fund Services Division (March 1995 - March 1999); Vice President and
Chief Financial Officer of CS First Boston Investment Management Corp.
(September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
CAROL WOLF
- ----------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds; Vice
President of Centennial Asset Management Corporation; Vice President, Finance
and Accounting; Point of Contact: Finance Supporters of Children; Member of
the Oncology Advisory Board of the Childrens Hospital.
CALEB WONG
- ----------
VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds (since
6/99).
ROBERT G. ZACK
- --------------
SENIOR VICE PRESIDENT AND ASSISTANT SECRETARY, ASSOCIATE GENERAL COUNSEL -
OppenheimerFunds, Inc.
Assistant Secretary of Shareholder Services, Inc. (since May 1985),
Shareholder Financial Services, Inc. (since November 1989), OppenheimerFunds
International Ltd. (since 1998), Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds.
JILL ZACHMAN
- ------------
ASSISTANT VICE PRESIDENT: ROCHESTER DIVISION - OppenheimerFunds, Inc.
MARK ZAVANELLI
- --------------
ASSISTANT VICE PRESIDENT - OppenheimerFunds, Inc.
ARTHUR J. ZIMMER
- ----------------
SENIOR VICE PRESIDENT - OppenheimerFunds, Inc.
An officer and/or portfolio manager of certain Oppenheimer funds; Vice
President of Centennial Asset Management Corporation.
STRONG CAPITAL MANAGEMENT, INC.
Name, Business* and Other Connections of the Executive Officers and Directors of
Registrant's Adviser
RICHARD S. STRONG
- -----------------
DIRECTOR, CHAIRMAN, CHIEF INVESTMENT OFFICER AND PORTFOLIO MANAGER--Strong
Capital Management, Inc.
RICHARD T. WEISS
- ----------------
DIRECTOR AND PORTFOLIO MANAGER--Strong Capital Management, Inc.
STEPHEN J. SHENKENBERG
- ----------------------
VICE PRESIDENT, SECRETARY, DEPUTY GENERAL COUNSEL AND CHIEF COMPLIANCE
OFFICER--Strong Capital Management, Inc.
THOMAS M. ZOELLER
- -----------------
SENIOR VICE PRESIDENT OFFICE OF THE CHIEF EXECUTIVE AND CHIEF FINANCIAL
OFFICER--Strong Capital Management, Inc.
ELIZABETH N. COHERNOUR
- ----------------------
SENIOR VICE PRESIDENT AND GENERAL COUNSEL--Strong Capital Management, Inc.
BRADLEY C. TANK
- ---------------
OFFICE OF THE CHIEF EXECUTIVE, FIXED INCOME MANAGER, AND PORTFOLIO
MANAGER--Strong Capital Management, Inc.
DAVID A. BRAATEN
- ----------------
OFFICE OF THE CHIEF EXECUTIVE--Strong Capital Management, Inc.
ANTHONY J. D'AMATO
- ------------------
SENIOR VICE PRESIDENT, RETIREMENT PLAN SERVICES MANAGER, AND OFFICE OF THE CHIEF
EXECUTIVE--Strong Capital Management, Inc.
*Located at 100 Heritage Reserve, Menomonee Falls, WI 53051
WELLINGTON MANAGEMENT COMPANY, LLP
Wellington Management Company, LLP ("Wellington Management") is the Sub-Adviser
for the Registrant's Series K, Series M and Series T. The principal business
address of Wellington Management is 75 State Street, Boston, Massachusetts
02109. Wellington Management is an investment adviser registered under the
Investment Advisers Act of 1940.
NAME, BUSINESS AND OTHER CONNECTIONS OF THE EXECUTIVE OFFICERS AND DIRECTORS OF
THE SUB-ADVISER.
KENNETH LEE ABRAMS
- ------------------
GENERAL PARTNER - Wellington Management Company, LLP
NICHOLAS CHARLES ADAMS
- ----------------------
GENERAL PARTNER - Wellington Management Company, LLP
SR.VICE PRESIDENT - Wellington Hedge Management, Inc. and Wellington Global
Administrator, Ltd.
RAND LAWRENCE ALEXANDER
- -----------------------
GENERAL PARTNER - Wellington Management Company, LLP
DEBORAH LOUISE ALLINSON
- -----------------------
GENERAL PARTNER - Wellington Management Company, LLP
VICE PRESIDENT - Wellington Trust Company, NA
JAMES HALSEY AVERILL
- --------------------
GENERAL PARTNER - Wellington Management Company, LLP
KARL E. BANDTEL
- ---------------
GENERAL PARTNER - Wellington Management Company, LLP
SR.VICE PRESIDENT - Wellington Hedge Management, Inc., Wellington Global
Holdings, Ltd., and Wellington Global Administrator, Ltd.
MARK JAMES BECKWITH
- -------------------
GENERAL PARTNER - Wellington Management Company, LLP
MARIE-CLAUDE PETIT BERNAL
- -------------------------
GENERAL PARTNER - Wellington Management Company, LLP
WILLIAM NICHOLAS BOOTH
- ----------------------
GENERAL PARTNER - Wellington Management Company, LLP
PAUL BRAVERMAN
- --------------
GENERAL PARTNER - Wellington Management Company, LLP
DIRECTOR - Wellington International Management Company Pte Ltd.
GENERAL PARTNER & CFO - Wellington Management International
PRESIDENT AND TREASURER - Wellington Sales Corporation
VICE PRESIDENT AND TREASURER/CASHIER - Wellington Trust Company, NA
SR.VICE PRESIDENT & TREASURER - Wellington Hedge Management, Inc. Wellington
Global Holdings, Ltd., Wellington Global Administrator, Ltd., and Wellington
Management Global Holdings, Ltd.
ROBERT A. BRUNO
- ---------------
GENERAL PARTNER - Wellington Management Company, LLP
MARYANN EVELYN CARROLL
- ----------------------
GENERAL PARTNER - Wellington Management Company, LLP
PAMELA DIPPEL
- -------------
GENERAL PARTNER - Wellington Management Company, LLP
ROBERT LLOYD EVANS
- ------------------
GENERAL PARTNER - Wellington Management Company, LLP
LISA DE LA FUENTE FINKEL
- ------------------------
GENERAL PARTNER - Wellington Management Company, LLP
SR. VICE PRESIDENT & DIRECTOR - Wellington Sales Corporation
SR. VICE PRESIDENT - Wellington Hedge Management, Inc.
CHARLES TOWNSEND FREEMAN
- ------------------------
GENERAL PARTNER - Wellington Management Company, LLP
LAURIE ALLEN GABRIEL
- --------------------
MANAGING PARTNER - Wellington Management Company, LLP
DIRECTOR - Wellington Hedge Management, Inc.
VICE PRESIDENT - Wellington Trust Company, NA
JOHN HERRICK GOOCH
- ------------------
GENERAL PARTNER - Wellington Management Company, LLP and Wellington Management
International
DIRECTOR & VICE PRESIDENT - Wellington Trust Company, NA
PRESIDENT - Wellington Hedge Management, Inc.
DIRECTOR & PRESIDENT - Wellington Global Holdings, Ltd., Wellington Global
Administrator, Ltd., and Wellington Management Global Holdings, Ltd.
NICHOLAS PETER GREVILLE
- -----------------------
GENERAL PARTNER - Wellington Management Company, LLP and Wellington Management
International
DIRECTOR - Wellington International Management Company Pte Ltd.
SR.VICE PRESIDENT - Wellington Global Holdings, Ltd. and Wellington Global
Administrator, Ltd.
PAUL J. HAMEL
- -------------
GENERAL PARTNER - Wellington Management Company, LLP
LUCIUS TUTTLE HILL, III
- -----------------------
GENERAL PARTNER - Wellington Management Company, LLP
PAUL DAVID KAPLAN
- -----------------
GENERAL PARTNER - Wellington Management Company, LLP
DIRECTOR - Wellington Global Holdings, Ltd., Wellington Global Administrator,
Ltd., and Wellington Management Global Holdings, Ltd.
JOHN CHARLES KEOGH
- ------------------
GENERAL PARTNER - Wellington Management Company, LLP
VICE PRESIDENT - Wellington Trust Company, NA
GEORGE CABOT LODGE, JR.
- -----------------------
GENERAL PARTNER - Wellington Management Company, LLP
SR.VICE PRESIDENT - Wellington Global Holdings, Ltd. and Wellington Global
Administrator, Ltd.
NANCY THERESE LUKITSH
- ---------------------
GENERAL PARTNER - Wellington Management Company, LLP
DIRECTOR & VICE PRESIDENT - Wellington Trust Company, NA
SR.VICE PRESIDENT - Wellington Hedge Management, Inc. and Wellington Global
Administrator, Ltd.
MARK THOMAS LYNCH
- -----------------
GENERAL PARTNER - Wellington Management Company, LLP
SR. VICE PRESIDENT - Wellington Hedge Management, Inc.
CHRISTINE SMITH MANFREDI
- ------------------------
GENERAL PARTNER - Wellington Management Company, LLP
VICE PRESIDENT - Wellington Trust Company, NA
SR.VICE PRESIDENT - Wellington Hedge Management, Inc., Wellington Global
Holdings, Ltd., and Wellington Global Administrator, Ltd.
PATRICK JOHN MCCLOSKEY
- ----------------------
GENERAL PARTNER - Wellington Management Company, LLP
EARL EDWARD MCEVOY
- ------------------
GENERAL PARTNER - Wellington Management Company, LLP
DUNCAN MATHIEU MCFARLAND
- ------------------------
MANAGING PARTNER - Wellington Management Company, LLP
GENERAL PARTNER - Wellington Management International
DIRECTOR & CHAIRMAN - Wellington Trust Company, NA and Wellington Hedge
Management, Inc.
DIRECTOR - Wellington International Management Company Pte Ltd.
CHAIRMAN & DIRECTOR - Wellington Global Holdings, Ltd., Wellington Global
Administrator, Ltd., and Wellington Management Global Holdings, Ltd.
PAUL MULFORD MECRAY III
- -----------------------
GENERAL PARTNER - Wellington Management Company, LLP
MATTHEW EDWARD MEGARGEL
- -----------------------
GENERAL PARTNER - Wellington Management Company, LLP
JAMES NELSON MORDY
- ------------------
GENERAL PARTNER - Wellington Management Company, LLP
DIANE CAROL NORDIN
- ------------------
GENERAL PARTNER - Wellington Management Company, LLP
SR.VICE PRESIDENT - Wellington Hedge Management, Inc. and Wellington Global
Administrator, Ltd.
STEPHEN T. O'BRIEN
- ------------------
GENERAL PARTNER - Wellington Management Company, LLP
EDWARD PAUL OWENS
- -----------------
GENERAL PARTNER - Wellington Management Company, LLP
SR.VICE PRESIDENT - Wellington Hedge Management, Inc. and Wellington Global
Administrator, Ltd.
SAUL JOSEPH PANNELL
- -------------------
GENERAL PARTNER - Wellington Management Company, LLP
SR.VICE PRESIDENT - Wellington Hedge Management, Inc. and Wellington Global
Administrator, Ltd.
THOMAS LOUIS PAPPAS
- -------------------
GENERAL PARTNER - Wellington Management Company, LLP
JONATHAN MARTIN PAYSON
- ----------------------
GENERAL PARTNER - Wellington Management Company, LLP
DIRECTOR & PRESIDENT - Wellington Trust Company, NA
SR. VICE PRESIDENT - Wellington Sales Corporation
DIRECTOR - Wellington Global Holdings, Ltd., Wellington Global Administrator,
Ltd., and Wellington Management Global Holdings, Ltd.
STEPHEN MICHAEL PAZUK
- ---------------------
GENERAL PARTNER - Wellington Management Company, LLP
RETIRED AS PARTNER ON AUGUST 1, 1999 - Wellington Management International
DIRECTOR - Wellington International Management Company Pte Ltd., Wellington
Global Holdings, Ltd., Wellington Global Administrator, Ltd., Wellington
Management Global Holdings, Ltd.
SR.VICE PRESIDENT - Wellington Sales Corporation and Wellington Hedge
Management, Inc.
VICE PRESIDENT - Wellington Trust Company, NA
SUPERVISORY BOARD - Wellington Luxembourg SCA
PHILIP H. PERELMUTER
- --------------------
GENERAL PARTNER - Wellington Management Company, LLP
ROBERT DOUGLAS RANDS
- --------------------
GENERAL PARTNER - Wellington Management Company, LLP
SR.VICE PRESIDENT - Wellington Hedge Management, Inc. and Wellington Global
Administrator, Ltd.
EUGENE EDWARD RECORD, JR.
- -------------------------
GENERAL PARTNER - Wellington Management Company, LLP
VICE PRESIDENT - Wellington Trust Company, NA
JAMES ALBERT RULLO
- ------------------
GENERAL PARTNER - Wellington Management Company, LLP
JOHN ROBERT RYAN
- ----------------
MANAGING PARTNER - Wellington Management Company, LLP
DIRECTOR - Wellington Hedge Management, Inc.
JOSEPH HAROLD SCHWARTZ
- ----------------------
GENERAL PARTNER - Wellington Management Company, LLP
THEODORE SHASTA
- ---------------
GENERAL PARTNER - Wellington Management Company, LLP
SR. VICE PRESIDENT - Wellington Hedge Management, Inc.
BINKLEY CALHOUN SHORTS
- ----------------------
GENERAL PARTNER - Wellington Management Company, LLP
TROND SKRAMSTAD
- ---------------
GENERAL PARTNER - Wellington Management Company, LLP
CATHERINE ANNE SMITH
- --------------------
GENERAL PARTNER - Wellington Management Company, LLP
SR.VICE PRESIDENT - Wellington Hedge Management, Inc. and Wellington Global
Administrator, Ltd.
STEPHEN ALBERT SODERBERG
- ------------------------
GENERAL PARTNER - Wellington Management Company, LLP
ERIC STROMQUIST
- ---------------
GENERAL PARTNER - Wellington Management Company, LLP
SR. VICE PRESIDENT - Wellington Hedge Management, Inc.
BRENDAN JAMES SWORDS
- --------------------
GENERAL PARTNER - Wellington Management Company, LLP
SR. VICE PRESIDENT - Wellington Hedge Management, Inc.
HARRIETT TEE TAGGART
- --------------------
GENERAL PARTNER - Wellington Management Company, LLP
PERRY MARQUES TRAQUINA
- ----------------------
GENERAL PARTNER - Wellington Management Company, LLP
GENE ROGER TREMBLAY
- -------------------
GENERAL PARTNER - Wellington Management Company, LLP
MICHAEL AARON TYLER
- -------------------
GENERAL PARTNER - Wellington Management Company, LLP
MARY ANN TYNAN
- --------------
GENERAL PARTNER - Wellington Management Company, LLP
GENERAL PARTNER & COMPLIANCE OFFICER - Wellington Management International
SR. VICE PRESIDENT, CLERK & DIRECTOR - Wellington Sales Corporation
VICE PRESIDENT, SECRETARY & TRUST OFFICER - Wellington Trust Company, NA
SR. VICE PRESIDENT & CLERK - Wellington Hedge Management, Inc.
SUPERVISORY BOARD - Wellington Luxembourg SCA
CLARE VILLARI
- -------------
GENERAL PARTNER - Wellington Management Company, LLP
SR.VICE PRESIDENT - Wellington Hedge Management, Inc., Wellington Global
Holdings, Ltd., and Wellington Global Administrator, Ltd.
ERNST HANS VON METZSCH
- ----------------------
GENERAL PARTNER - Wellington Management Company, LLP
SR. VICE PRESIDENT - Wellington Hedge Management, Inc., Wellington Global
Holdings, Ltd., and Wellington Global Administrator, Ltd.
JAMES LELAND WALTERS
- --------------------
GENERAL PARTNER - Wellington Management Company, LLP
DIRECTOR & TRUST COUNSEL - Wellington Trust Company, NA
DIRECTOR - Wellington International Management Company Pte Ltd.
SR. VICE PRESIDENT, ASSISTANT CLERK & DIRECTOR - Wellington Sales Corporation
DIRECTOR & DEPUTY CHAIRMAN - Wellington Global Holdings, Ltd. and Wellington
Global Administrator, Ltd.
DIRECTOR, SR. VICE PRESIDENT & DEPUTY CHAIRMAN - Wellington Management Global
Holdings, Inc.
SUPERVISORY BOARD - Wellington Luxembourg SCA
KIM WILLIAMS
- ------------
GENERAL PARTNER - Wellington Management Company, LLP
FRANCIS VINCENT WISNESKI
- ------------------------
GENERAL PARTNER - Wellington Management Company, LLP
Please note the principal business address for Wellington Hedge Management,
Inc., Wellington Management International, Wellington Sales Corporation and
Wellington Trust Company, NA is the same as Wellington Management Company. The
principal business address for Wellington International Management Company, Pte
Ltd. is Six Battery Road, Ste. 17-06, Singapore 049909. The principal business
address for Wellington Global Administrator, Ltd., Wellington Global Holdings
and Wellington Management Global Holdings, Ltd. is Clarendon House, 2 Church
Street, PO Box HM 666, Hamilton HMCX, Bermuda. The principal business address
for Wellington Luxembourg SCA is 33, Boulevard Prince Henri, L-2014 Luxembourg.
BANKERS TRUST COMPANY
Bankers Trust Company ("Bankers Trust") serves as sub-adviser to Enhanced Index
Series and International Series. Bankers Trust, a New York banking corporation,
is a wholly-owned subsidiary of Deutsche Bank AG which conducts a variety of
commercial banking and trust activities and is a major wholesale supplier of
financial services to the international institutional market.
To the knowledge of the Fund, none of the directors or officers of Bankers
Trust, except those set forth below, is engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
directors and officers also hold various positions with and engage in business
for Bankers Trust New York Corporation. Set forth below are the names and
principal businesses of the directors and officers of Bankers Trust who are
engaged in any other business, profession, vocation or employment of a
substantial nature.
NAME AND PRINCIPAL BUSINESS ADDRESS, PRINCIPAL OCCUPATION AND OTHER INFORMATION
DR. JOSEF ACKERMAN
- ------------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER--Bankers Trust Company;
Bankers Trust Corporation
MEMBER, BOARD OF MANAGING DIRECTORS - Deutsche Bank AG
DIRECTOR--Deutsche Bank Americas Holding Corp.
MEMBER, SUPERVISORY BOARD--EUREX Frankfurt AG; EUREX Zurich AG; Linde AG; Stora
Enso Oyj; Mannesmann AG
HANS ANGERMUELLER
- -----------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
DIRECTOR--Bankers Trust Company; Bankers Trust Corporation
OF COUNSEL--Shearman & Sterling
GEORGE BEITZEL
- --------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
DIRECTOR--Bankers Trust Company; Bankers Trust Corporation; Computer Task Group,
Inc.; Bitstream, Inc.; Staff Leasing, Inc.
PRIVATE INVESTOR
WILLIAM HOWELL
- --------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
DIRECTOR--Bankers Trust Company; Bankers Trust Corporation; Exxon Corporation;
Halliburton Company; Warner-Lambert Company; The Williams Companies, Inc.;
Central and South West Corporation
CHAIRMAN EMERITUS--J.C. Penney Company, Inc.
HERMANN-JOSEF LAMBERTI
- ----------------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
DIRECTOR AND VICE CHAIRMAN--Bankers Trust Corporation
EXECUTIVE VICE PRESIDENT--Deutsche Bank AG
DIRECTOR - Bankers Trust Company; Deutsche Bank Americas Holding Corp.
BOARD MEMBER--Euroclear plc (London); Euroclear sc. (Brussels)
MEMBER, SUPERVISORY BOARD--GZS (Frankfurt); The European Transaction Bank
(e.t.b.)
TROLAND S. LINK
- ---------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
MANAGING DIRECTOR AND GENERAL COUNSEL--Bankers Trust Company
GENERAL COUNSEL - Bankers Trust Corporation; Deutsche Bank North America
DIRECTOR--The French American Foundation
TRUSTEE--The American University (Cairo); The New York Downtown Hospital
RODNEY MCLAUCHLAN
- -----------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
EXECUTIVE VICE PRESIDENT--Bankers Trust Corporation; Bankers Trust Company
JOHN ROSS
- ---------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
PRESIDENT AND DIRECTOR--Bankers Trust Company; Bankers Trust Corporation
CHIEF EXECUTIVE OFFICER OF THE AMERICAS--Deutsche Bank AG
PRESIDENT AND CHIEF EXECUTIVE OFFICER--Deutsche Bank Americas Holding Corp.
DIRECTOR--Deutsche Bank Securities, Inc.; DB Alex. Brown LLC
RONALDO SCHMITZ
- ---------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
DIRECTOR--Bankers Trust Company; Bankers Trust Corporation; Deutsche Bank
Americas Holding Corp.
MEMBER OF THE GROUP BOARD--Deutsche Bank AG
NON-EXECUTIVE DIRECTORSHIP--Bertelsmann AG; Glaxo Wellcome plc; Rohm & Haas Co.
YVES C. DE BALMANN
- ------------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
VICE CHAIRMAN--Bankers Trust Corporation
CO-CHAIRMAN AND CO-CHIEF EXECUTIVE OFFICER--DB Alex. Brown LLC; Deutsche Bank
Securities, Inc.
DIRECTOR--Bankers Trust International, plc; Aerospatiale Matra
MAYO A. SHATTUCK III
- --------------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
CO-CHAIRMAN AND CO-CHIEF EXECUTIVE OFFICER--DB Alex. Brown LLC; Deutsche Bank
Securities, Inc.
PRESIDENT--South Street Aviation
DIRECTOR AND PRESIDENT--AB Administrative Partner, Inc.; ABFS I Incorporated,
ABS Leasing Services Company; ABS MB Ltd.; Alex. Brown Financial Corporation;
Alex. Brown Financial Services Incorporated; Alex. Brown Investments
Incorporated; Alex. Brown Management Services, Inc.; and Alex. Brown Mortgage
Capital Corporation.
VICE CHAIRMAN--Bankers Trust Corporation
DIRECTOR AND VICE PRESIDENT--Alex. Brown & Sons Holdings Limited
DIRECTOR--Bankers Trust International, plc; Alex. Brown & Sons Holdings Limited;
Alex. Brown & Sons Limited; Alex. Brown Asset Management, Inc.; Alex. Brown
Capital Advisory; Incorporated; Investment Company Capital Corporation;
Constellation Holdings
MICHAEL DOBSON
- --------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
MEMBER OF THE GROUP BOARD--Deutsche Bank AG
DIRECTOR--Bankers Trust Corporation; Bankers Trust Company
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Security Ultra Fund
Security Income Fund
Security Growth & Income Fund
Security Municipal Bond Fund
SBL Fund
Variflex Separate Account (Variflex)
Variflex Separate Account (Variflex ES)
Varilife Variable Annuity Account
Security Varilife Separate Account
SBL Variable Annuity Account VIII (Variflex LS)
SBL Variable Annuity Account VIII (Variflex Signature)
SBL Variable Annuity Account VIII (Variflex Extra Credit)
Parkstone Variable Annuity Account
Variable Annuity Account X
Variable Annuity Account XI
(b) (1) (2) (3)
NAME AND PRINCIPAL POSITION AND OFFICES POSITION AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER WITH REGISTRANT
------------------ -------------------- ------------------
Greg J. Garvin President None
John D. Cleland Vice President and Director President and Director
Richard K Ryan Director None
James R. Schmank Director Vice President and Director
Mark E. Young Director None
Amy J. Lee Secretary Secretary
Brenda M. Harwood Treasurer and Director Treasurer
*700 SW Harrison, Topeka, Kansas 66636-0001
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Certain accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the rules promulgated thereunder are maintained by
Security Management Company, LLC, 700 SW Harrison, Topeka, Kansas 66636-0001;
Lexington Management Corporation, Park 80 West, Plaza Two, Saddle Brook, New
Jersey 07663; Meridian Investment Management Corporation, 12835 East Arapahoe
Road, Tower II, 7th Floor, Englewood, Colorado, 80112; Strong Capital
Management, Inc., 100 Heritage Reserve, Menomonee Falls, Wisconsin, 53051;
Templeton/Franklin Investment Services, Inc., 777 Mariners Island Boulevard, San
Mateo, California 94404; OppenheimerFunds, Inc., Two World Trade Center, New
York, New York 10048; Wellington Management Company, LLP, 75 State Street,
Boston, Massachusetts 02109; and Bankers Trust Company, One Bankers Trust Plaza,
New York, New York 10006. Records relating to the duties of the Registrant's
custodian are maintained by UMB Bank, N.A., 928 Grand Avenue, Kansas City,
Missouri 64106 and Chase Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, New
York 11245.
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Topeka, and State of Kansas on the 25th day of April,
2000.
SECURITY EQUITY FUND
(The Fund)
By: JOHN D. CLELAND
-------------------------------------
John D. Cleland, President
Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed below by the following persons in the capacities and on the date
indicated:
Date: April 25, 2000
-----------------------------------
DONALD A. CHUBB, JR. Director
- ------------------------------
Donald A. Chubb, Jr.
JOHN D. CLELAND President and Director
- ------------------------------
John D. Cleland
PENNY A. LUMPKIN Director
- ------------------------------
Penny A. Lumpkin
MARK L. MORRIS, JR. Director
- ------------------------------
Mark L. Morris, Jr.
JAMES R. SCHMANK Director
- ------------------------------
James R. Schmank
MAYNARD OLIVERIUS Director
- ------------------------------
Maynard Oliverius
BRENDA M. HARWOOD Treasurer (Principal Financial Officer)
- ------------------------------
Brenda M. Harwood
<PAGE>
ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
We, the undersigned incorporators, hereby associate ourselves together
to form and establish a corporation for profit under the laws of the State of
Kansas.
FIRST: The name of the corporation (hereinafter called the
Corporation) is SECURITY EQUITY FUND, INC.
SECOND: The location of its registered office in Kansas is Security
Benefit Life Building, 700 Harrison Street, Topeka, Kansas.
THIRD: The name and address of its registered agent in Kansas is Dean
L. Smith, Security Benefit Life Building, 700 Harrison Street, Topeka, Kansas.
FOURTH: The purposes for which the corporation is formed are as
follows:
(1) To engage in the business of an investment company and to hold,
invest and reinvest its funds, and in connection therewith to hold part or
all of its funds in cash, and to purchase or otherwise acquire, hold for
investment or otherwise, sell, assign, negotiate, transfer, exchange or
otherwise dispose of or turn to account or realize upon, securities (which
term "securities" shall for the purposes of this Article, without
limitation of the generality thereof, be deemed to include any stocks,
shares, bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets) created or issued by any persons, firms, associations,
corporations, syndicates, combinations, organizations, governments or
subdivisions thereof; and to exercise, as owner or holder of any
securities, all rights, powers and privileges in respect thereof; and to do
any and all acts and things for the preservation, protection, improvement
and enhancement in value of any and all such securities; provided, however,
that the Corporation shall not:
(a) purchase any securities on margin except such short-term
credits as are necessary for the clearance of transactions;
(b) effect any short sales of securities;
(c) purchase the securities of any person, firm, association,
corporation, syndicate, combination or organization for the purpose of
gaining or exercising control or management of such person, firm,
association, corporation, syndicate, combination or organization;
(d) purchase the securities of any person, firm, association,
corporation, syndicate, combination, organization, government (other than
the United States of America) or any subdivision thereof, if, immediately
after and as a result of such purchase, more than five percent of its total
assets, determined in such manner as may be approved by the Board of
Directors of the Corporation and applied on a consistent basis, would
consist of the securities of such person, firm, association, corporation,
syndicate, combination, organization, government or subdivision;
(e) lend any of its funds or other assets other than through the
purchase of publicly distributed bonds, debentures, notes and other
evidences of indebtedness as herein authorized;
(f) purchase the securities of any person, firm, association,
corporation, syndicate, combination, organization, government or any
subdivision thereof, if, upon such purchase, the Corporation would own more
than ten percent of any class of the outstanding securities of such person,
firm, association, corporation, syndicate, combination, organization,
government or subdivision. For the purposes of this restriction, all kinds
of securities of a company representing debt shall be deemed to constitute
a single class, regardless of relative priorities, maturities, conversion
rights and other differences, and all kinds of stock of a company preferred
over the common stock as to dividends or in liquidation shall be deemed to
constitute a single class regardless of relative priorities, series
designations, conversion rights and other differences;
(g) purchase the securities of any investment company or
investment trust (as such terms may reasonably be understood by the
Corporation), other than the Corporation;
(h) underwrite the sale of, or participate in any underwriting or
selling group in connection with the public distribution of, any securities
(other than the capital stock of the Corporation), provided, however, that
this provision shall not be construed to prevent or limit in any manner the
right of the Corporation to purchase securities for investment purposes;
(i) purchase or sell any real estate or any commodities or
commodity contracts; or
(j) enter into any loan transaction as borrower unless such
borrowing is undertaken only as a temporary measure for extraordinary and
emergency purposes and then only if, immediately after and as a result of
such transaction, the total loans outstanding against the Corporation shall
be not more than ten percent of its total assets, determined in such manner
as may be approved by the Board of Directors of the Corporation and applied
on a consistent basis.
(2) To issue and sell shares of its own capital stock in such amounts
and on such terms and conditions, for such purposes and for such amount or
kind of consideration (including, without limitation thereof, securities)
now or hereafter permitted by the laws of Kansas, by these Articles of
Incorporation and the Bylaws of the Corporation, as its Board of Directors
may determine.
(3) To purchase or otherwise acquire, hold, dispose of, resell,
transfer, or reissue (all without any vote or consent of stockholders of
the Corporation) shares of its capital stock, in any manner and to the
extent now or hereafter permitted by the laws of the State of Kansas, by
these Articles of Incorporation and by the Bylaws of the Corporation.
(4) To conduct its business in all its branches at one or more offices
in Kansas and elsewhere in any part of the world, without restriction or
limit as to extent.
(5) To carry out all or any of the foregoing purposes as principal or
agent, and alone or with associates or, to the extent now or hereafter
permitted by the laws of Kansas, as a member of, or as the owner or holder
of any stock of, or shares of interest in, any firm, association,
corporation, trust or syndicate; and in connection therewith to make or
enter into such deeds or contracts with any persons, firms, associations,
corporations, syndicates, governments or subdivisions thereof, and to do
such acts and things and to exercise such powers, as a natural person could
lawfully make, enter into, do or exercise.
(6) To do any and all such further acts and things and to exercise any
and all such further powers as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes.
It is the intention that each of the purposes, specified in each of the
paragraphs of this Article FOURTH, shall be in no wise limited or restricted by
reference to or inference from the terms of any other paragraph, but that the
purposes specified in each of the paragraphs of this Article FOURTH shall be
regarded as independent objects, purposes and powers. The enumeration of the
specific purposes of this Article FOURTH shall not be construed to restrict in
any manner the general objects, purposes and powers of this corporation, nor
shall the expression of one thing be deemed to exclude another, although it be
of like nature. The enumeration of purposes herein shall not be deemed to
exclude or in any way limit by inference any objects, purposes or powers which
this corporation has power to exercise, whether expressly or by force of the
laws of the State of Kansas, now or hereafter in effect, or impliedly by any
reasonable construction of such laws.
FIFTH: The aggregate number of shares which the Corporation shall have
authority to issue shall be 1,000,000 shares of capital stock of the par value
of $1.00 per share.
The following provisions are hereby adopted for the purpose of setting
forth the powers, rights, qualifications, limitations or restrictions of the
capital stock of the Corporation:
(1) At all meetings of stockholders each stockholder of the
Corporation shall be entitled to one vote on each matter submitted to a vote at
such meeting for each share of stock standing in his name on the books of the
Corporation on the date, fixed in accordance with the Bylaws, for determination
of stockholders entitled to vote at such meeting. At all elections of directors
each stockholder shall be entitled to as many votes as shall equal the number of
shares of stock multiplied by the number of directors to be elected, and
stockholders may cast all of such votes for a single director or may distribute
them among the number to be voted for, or any two or more of them as they may
see fit.
(2) (a) Each holder of capital stock of the corporation, upon
request to the Corporation accompanied by surrender of the appropriate stock
certificate or certificates in proper form for transfer, shall be entitled to
require the Corporation to repurchase all or any part of the shares of capital
stock standing in the name of such holder on the books of the Corporation, at
the net asset value of such shares, less a charge, not to exceed one percent of
such net asset value, if and as fixed by resolution of the Board of Directors of
the Corporation from time to time. The method of computing such net asset value,
the time as of which such net asset value shall be computed and the time within
which the Corporation shall make payment therefor shall be determined as
hereinafter provided in Article TENTH of these Articles of Incorporation.
Notwithstanding the foregoing, the Board of Directors of the Corporation may
suspend the right of the holders of the capital stock of the Corporation to
require the Corporation to redeem shares of such capital stock:
(i) for any period (A) during which the New York Stock
Exchange is closed other than customary weekend and holiday closings,
or (B) during which trading on the New York Stock Exchange is
restricted;
(ii) for any period during which an emergency, as defined by
rules of the Securities and Exchange Commission or any successor
thereto, exists as a result of which (A) disposal by the Corporation
of securities owned by it is not reasonably practicable or (B) it is
not reasonably practicable for the Corporation fairly to determine the
value of its net assets; or
(iii) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of security holders of the Corporation.
(b) From and after the close of business on the day when the
shares are properly tendered for repurchase the owner shall, with respect of
said shares, cease to be a stockholder of the Corporation and shall have only
the right to receive the repurchase price in accordance with the provisions
hereof. The shares so repurchased may, as the Board of Directors determines, be
held in the treasury of the Corporation and may be resold, or, if the laws of
Kansas shall permit, may be retired. Repurchase of shares is conditional upon
the Corporation having funds or property legally available therefor.
(3) No holder of stock of the Corporation shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation of any class or series which it may issue or sell (whether out of
the number of shares authorized by these Articles of Incorporation, or out of
any shares of the capital stock of the Corporation acquired by it after the
issue thereof, or otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
(4) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of these Articles of Incorporation.
SIXTH: The minimum amount of capital with which the Corporation will
commence business is One Thousand Dollars.
SEVENTH: The names and places of residence of each of the
incorporators are as follows:
NAMES PLACES OF RESIDENCE
Herbert F. Laing 915 Buchanan
Topeka, Kansas
Dean L. Smith 1800 W. 26th
Topeka, Kansas
Robert E. Jacoby 5026 W. 23rd Terrace
Topeka, Kansas
EIGHTH: The duration of corporate existence of the Corporation is one
hundred years.
NINTH: The number of Directors of the Corporation shall be seven.
Unless otherwise provided by the Bylaws of the Corporation, the Directors of the
Corporation need not be stockholders therein.
TENTH: (1) Except as may be otherwise specifically provided by (i)
statute, (ii) the Articles of Incorporation of the corporation as from time to
time amended or (iii) bylaw provisions adopted from time to time by the
stockholders or directors of the corporation, all powers of management,
direction and control of the corporation shall be, and hereby are, vested in the
board of directors.
(2) If the bylaws so provide, the board of directors, by
resolution adopted by a majority of the whole board, may designate two or more
directors to constitute an executive committee, which committee, to the extent
provided in said resolution or in the bylaws of the corporation, shall have and
exercise all of the authority of the board of directors in the management of the
corporation.
(3) Shares of stock in other corporations shall be voted by
the President or a Vice President, or such officer or officers of the
Corporation as the Board of Directors shall from time to time designate for the
purpose, or by a proxy or proxies thereunto duly authorized by the Board of
Directors, except as otherwise ordered by vote of the holders of a majority of
the shares of the capital stock of the Corporation outstanding and entitled to
vote in respect thereto.
(4) Subject only to the provisions of the federal Investment
Company Act of 1940, any Director, officer or employee individually, or any
partnership of which any Director, officer or employee may be a member, or any
corporation or association of which any Director, officer or employee may be an
officer, director, trustee, employee or stockholder, may be a party to, or may
be pecuniarily or otherwise interested in, any contract or transaction of the
Corporation, and in the absence of fraud no contract or other transaction shall
be thereby affected or invalidated; provided that in case a Director, or a
partnership, corporation or association of which a Director is a member,
officer, director, trustee, employee or stockholder is so interested, such fact
shall be disclosed or shall have been known to the Board of Directors or a
majority thereof; and any Director of the Corporation who is so interested, or
who is also a director, officer, trustee, employee or stockholder of such other
corporation or association or a member of such partnership which is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize any
such contract or transaction, and may vote thereat to authorize any such
contract or transaction, with like force and effect as if he were not such
director, officer, trustee, employee or stockholder of such other corporation or
association or not so interested or a member of a partnership so interested.
(5) Each Director and officer (and his heirs, executors and
administrators) shall be indemnified by the Corporation against reasonable costs
and expenses incurred by him in connection with any action, suit or proceeding
to which he is made a party by reason of his being or having been a Director or
officer of the Corporation, except in relation to any action, suit or proceeding
in which he has been adjudged liable because of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. In the absence of an adjudication which expressly absolves the
Director or officer of liability to the Corporation or its stockholders for
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, or in the event of a settlement,
each Director and officer (and his heirs, executors and administrators) shall be
indemnified by the Corporation against payment made, including reasonable costs
and expenses, provided that such indemnity shall be conditioned upon a written
opinion of independent counsel that the Director or officer has no liability by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. The indemnity provided
herein shall, in the event of the settlement of any such action, suit or
proceeding, not exceed the costs and expenses (including attorney's fees) which
would reasonably have been incurred if such action, suit or proceeding had been
litigated to a final conclusion. Such a determination by independent counsel and
the payment of amounts by the Corporation on the basis thereof shall not prevent
a stockholder from challenging such indemnification by appropriate legal
proceeding on the grounds that the officer or Director was liable because of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The foregoing rights and
indemnifications shall not be exclusive of any other right to which the officers
and Directors may be entitled according to law.
(6) The Board of Directors is hereby empowered to authorize
the issuance and sale, from time to time, of shares of the capital stock of the
Corporation, whether for cash at not less than the par value thereof or for such
other consideration including securities as the Board of Directors may deem
advisable, in the manner and to the extent now or hereafter permitted by the
Bylaws of the Corporation and by the laws of Kansas; provided, however, that the
consideration per share to be received by the Corporation upon the sale of any
shares of its capital stock shall not be less than the net asset value per share
of such capital stock outstanding at the time as of which the computation of
such net asset value shall be made. For purposes of the computation of net asset
value, as in these Articles of Incorporation referred to, the following rules
shall apply:
(a) The net asset value of each share of capital stock of the
Corporation surrendered to the Corporation for repurchase
pursuant to the provisions of paragraph (2)(a) of Article FIFTH
of these Articles of Incorporation shall be determined as of the
close of business on the last full business day on which the New
York Stock Exchange is open next succeeding the date on which
such capital stock is so surrendered.
(b) the net asset value of each share of capital stock of the
Corporation for the purpose of issue of such capital stock shall
be determined either as of the close of business on the last
business day on which the New York Stock Exchange was open next
preceding the date on which a subscription to such stock was
accepted, or in accordance with any provision of the Investment
Company Act of 1940, or any rule or regulation thereunder, or any
rule or regulation made or adopted by any securities association
registered under the Securities Exchange Act of 1934.
(c) The net asset value of each share of capital stock of the
Corporation, as of the close of business on any day, shall be the
quotient obtained by dividing the value, as at such close, of the
net assets of the Corporation (i.e., the value of the assets of
the Corporation less its liabilities exclusive of capital stock
and surplus) by the total number of shares of capital stock
outstanding at such close. The assets and liabilities of the
Corporation shall be determined in accordance with generally
accepted accounting principles; provided, however, that in
determining the value of the assets of the Corporation for the
purpose of obtaining the net asset value, each security listed on
the New York Stock Exchange shall be valued on the basis of the
closing sale thereof on the New York Stock Exchange on the
business day as of which such value is being determined. If there
be no such sale on such day, then the security shall be valued on
the basis of the mean between the closing and asked prices upon
such day. If no bid and asked prices are quoted for such day,
then the security shall be valued by such method as the Board of
Directors shall deem to reflect its fair market value. Securities
not listed on the New York Stock Exchange shall be valued in like
manner on the basis of quotations on any other stock exchange
which the Board of Directors may from time to time approve for
that purpose, or by such other method as the Board of Directors
shall deem to reflect their fair market value, and all other
assets of the Corporation shall be valued by such method as they
shall deem to reflect their fair market value.
For the purposes hereof
(A) Capital stock subscribed for shall be deemed to be
outstanding as of the time of acceptance of any subscription and
the entry thereof in the books of the Corporation and the net
price thereof shall be deemed to be an asset of the Corporation;
and
(B) Capital stock surrendered for repurchase by the Corporation
pursuant to the provisions of paragraph (2)(a) of Article FIFTH
of these Articles of Incorporation shall be deemed to be
outstanding until the close of business on the date as of which
such value is being determined as provided in paragraph 6(a) of
this Article TENTH and thereupon and until paid the price thereof
shall be deemed to be a liability of the Corporation.
(d) The net asset value of each share of the capital stock of
the Corporation, as of any time other than the close of
business on any day, may be determined by applying to the
net asset value as of the close of business on the
preceding business day, computed as provided in paragraph
6(c) of this Article TENTH, such adjustments as are
authorized by or pursuant to the directions of the Board
of Directors and designed reasonably to reflect any
material changes in the market value of securities and
other assets held and any other material changes in the
assets or liabilities of the Corporation and in the
number of its outstanding shares which shall have taken
place since the close of business on such preceding
business day.
(e) In addition to the foregoing, the Board of Directors is
empowered, in its absolute discretion, to establish other
bases or times, or both, for determining the net asset
value of each share of capital stock of the Corporation.
(f) Payment of the net asset value of capital stock of the
Corporation surrendered to it for repurchase pursuant to
the provisions of paragraph 2(a) of Article FIFTH of the
Articles of Incorporation shall be made by the
Corporation within seven days after surrender of such
stock to the Corporation for such purposes, to the extent
permitted by law. Any such payment may be made in
portfolio securities of the Corporation or in cash, or in
both portfolio securities and cash, as the Board of
Directors, shall deem advisable, and no stockholder shall
have a right, other than as determined by the Board of
Directors to have his shares repurchased in kind. For the
purpose of determining the amount of any payment to be
made, pursuant to paragraph 2(a) of Article FIFTH, in
portfolio securities, such securities shall be valued as
provided in subdivision (c) of paragraph 6 of this
Article TENTH.
ELEVENTH: The private property of the stockholders shall not be
subject to the payment of the debts of the Corporation.
TWELFTH: The Board of Directors shall have power to make, and from
time to time alter, amend and repeal the Bylaws of the Corporation; provided,
however, that the paramount power to make, alter, amend and repeal the Bylaws,
or any provision thereof, or to adopt new Bylaws, shall always be vested in the
stockholders, which power may be exercised by the affirmative vote of the
holders of a majority of the outstanding shares of stock of the Corporation
entitled to vote, at any annual or special meeting of the stockholders;
provided, further, that thereafter the directors shall have the power to
suspend, repeal, amend or otherwise alter the Bylaws or any portion thereof so
enacted by the stockholders, unless the stockholders in enacting such Bylaws or
portion thereof shall otherwise provide.
THIRTEENTH: In so far as permitted under the laws of Kansas, the
stockholders and directors shall have power to hold their meetings, if the
bylaws so provide, and to keep the books and records of the corporation outside
of the State of Kansas, and to have one or more offices, within or without the
State of Kansas, at such places as may be from time to time designated in the
bylaws or by resolution of the stockholders or directors.
FOURTEENTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them, secured or unsecured,
or between this Corporation and its stockholders, or any class of them, any
court, state or federal, of competent jurisdiction within the State of Kansas
may on the application in a summary way of this corporation, or of any creditor,
secured or unsecured, or stockholders thereof, or on the application of trustees
in dissolution, or on the application of any receiver or receivers appointed for
this corporation by any court, state or federal of competent jurisdiction, order
a meeting of the creditors or class of creditors secured or unsecured or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as said court directs. If a majority in number
representing three fourths in value of the creditors or class of creditors, or
of the stockholders, or class of stockholders of this corporation, as the case
may be, agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
FIFTEENTH: This corporation reserves the right to alter, amend or
repeal any provision contained in these Articles of Incorporation in the manner
now or hereafter prescribed by the statutes of Kansas, and all rights and powers
conferred herein are granted subject to this reservation; and, in particular,
the corporation reserves the right and privilege to amend its Articles of
Incorporation from time to time so as to authorize other or additional classes
of shares of stock, to increase or decrease the number of shares of stock of any
class now or hereafter authorized and to vary the preferences, qualifications,
limitations, restrictions and the special or relative rights or other
characteristics in respect of the shares of each class, in the manner and upon
such minimum vote of the stockholders entitled to vote thereon as may at the
time be prescribed or be permitted by the laws of Kansas, or such larger vote as
may then be required by the Articles of Incorporation of the corporation.
IN WITNESS WHEREOF, we have hereunto subscribed our names this 27th
day of November, 1961.
HERBERT F. LAING
------------------------------
Herbert F. Laing
DEAN L. SMITH
------------------------------
Dean L. Smith
ROBERT E. JACOBY
------------------------------
Robert E. Jacoby
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Personally appeared before me, a notary public in and for Shawnee County,
Kansas, the above named HERBERT F. LAING, DEAN L. SMITH and ROBERT E. JACOBY,
who are personally known to me to be the same persons who executed the foregoing
instrument of writing, and such persons duly acknowledged the execution of the
same.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal this 27th day of November, 1961.
GERALDINE SKINNER
------------------------------
Notary Public
(Notarial Seal)
My commission expires: December 31, 1961.
<PAGE>
Topeka, Kansas November 27, 1961
------------------------------
Date
OFFICE OF SECRETARY OF STATE
RECEIVED OF SECURITY EQUITY FUND, INC.
and deposited in the State Treasury, fees on these Articles of Incorporation as
follows:
Application Fee $25.00
Filing and Recording Fee $2.50
Capitalization Fee $550.00
PAUL R. SHANAHAN
------------------------------
Secretary of State
By: JAMES L. GALBE
------------------------------
Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND, INC.
We, DEAN L. SMITH, President, and WILLIAM J. MILLER, JR., Secretary,
of Security Equity Fund, Inc., a corporation organized and existing under the
laws of the State of Kansas, ( hereinafter sometimes for convenience called the
"Company"), with its principal office in the City of Topeka, Shawnee County,
Kansas, do hereby certify as follows:
FIRST: That the board of directors of the Company at a meeting held on
October 16, 1962, duly adopted the following amendment to the Articles of
Incorporation of the Company, and declared the advisability of said amendment,
said resolution reading as follows:
RESOLVED, that the Articles of Incorporation of Security Equity Fund,
Inc. be amended by deleting the present Article NINTH of said Articles of
Incorporation and inserting in lieu thereof the following Article NINTH:
NINTH: Directors of the corporation shall be nine. Unless otherwise
provided by the Bylaws of the corporation, the directors of the corporation need
not be stockholders therein.
SECOND: That the board of directors of the Company also duly adopted
the following amendment to the Articles of Incorporation of the Company and
declared the advisability of said amendment, said resolution reading as follows:
RESOLVED that the Articles of Incorporation of Security Equity Fund,
Inc. be amended by deleting the present subdivision (a) of paragraph (6) of
Article TENTH of said Articles of Incorporation and inserting in lieu thereof
the following subdivision (a) of paragraph (6) of Article TENTH:
(a) The net asset value of each share of capital stock of the
corporation surrendered to the corporation for repurchase pursuant to the
provisions of paragraph (2)(a) of Article FIFTH of these Articles of
Incorporation shall be determined as of the close of business on the first
full business day on which the New York Stock Exchange is open next
succeeding the date on which such capital stock is so surrendered.
THIRD: That thereafter on the 4th day of December, 1962, upon notice
duly given as provided by law and the bylaws of the Company to each holder of
shares of Capital Stock of the Company entitled to vote on the proposed
amendments of the Articles of Incorporation, the annual meeting of said
stockholders was held and there were present at such meeting in person or by
proxy the holders of more than a majority of the voting stock of the Company.
FOURTH: That at said annual meeting of the stockholders of the
Company, the aforesaid resolutions, set forth in Division FIRST and Division
SECOND hereof, amending the Articles of Incorporation of the Company, were
presented for consideration and a vote of the stockholders present at said
meeting in person and by proxy was taken by ballot for and against each of the
proposed resolutions, which vote was conducted by two Judges, appointed for that
purpose by the officer presiding at such meeting; that the said Judges decided
upon the qualifications of the voters and accepted their votes and when the
voting was completed said Judges counted and ascertained the number of shares
voted respectively for and against each of the proposed amendments to the
Articles of Incorporation and declared that the persons holding a majority of
the Capital Stock of the Company had voted for each of the proposed amendments;
and the said Judges made out a certificate accordingly that the number of shares
of Capital Stock issued and outstanding and entitled to vote on said resolutions
was 23,732 shares of Capital Stock, that 23,533 shares of said stock were voted
for and 100 shares of said stock were voted against the proposed amendment set
forth in Division FIRST hereof, that 23,633 shares of said stock were voted for
and 0 shares of said stock were voted against the proposed amendment set forth
in Division SECOND hereof, and the said Judges subscribed and delivered the said
certificate to the Secretary of the Company.
FIFTH: That a certificate of said Judges having been made, subscribed
and delivered as aforesaid and it appearing by said certificate of the Judges
that the holders of more than a majority of the Capital Stock of the Company
entitled to vote thereon had voted in favor of each of the amendments to the
Articles of Incorporation set forth in Division FIRST and Division SECOND
hereof, the said amendments were declared duly adopted.
SIXTH: That, accordingly, the amendments to Articles NINTH and TENTH
of the Articles of Incorporation of Security Equity Fund, Inc., as heretofore
set forth in Division FIRST and Division SECOND of this certificate, have been
duly adopted in accordance with Article 42 of the General Corporation Code of
Kansas.
SEVENTH: That the capital of the Company will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF we, Dean L. Smith, President, and William J. Miller,
Jr., Secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 4th day of December, 1962.
DEAN L. SMITH
---------------------------------
Dean L. Smith, President
WILLIAM J. MILLER, JR.
---------------------------------
William J. Miller, Jr., Secretary
[Corporate Seal]
<PAGE>
STATE OF KANSAS )
) SS.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 4th day of December, 1962, before me, a
Notary Public in and for the county and state aforesaid, came Dean L. Smith, and
William J. Miller, Jr., President and Secretary respectively, of Security Equity
Fund, Inc., a Kansas corporation, who are personally known to me to be the
President and Secretary, respectively, of said corporation and the same persons
who executed the foregoing instrument and they duly acknowledged the execution
of the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
FLORENCE MCKINSEY
------------------------------
Notary Public
My commission expires: November 21, 1965.
OFFICE OF SECRETARY OF STATE
Topeka, Kansas December 4, 1962
RECEIVED OF SECURITY EQUITY FUND, INC.
Two and fifty/100-------------------------------------------------------Dollars,
fee for filing the within Certificate of Amendment.
PAUL R. SHANAHAN
------------------------------
Secretary of State
By: Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND, INC.
We, DEAN L. SMITH, President, and WILL J. MILLER, JR., Secretary, of
Security Equity Fund, Inc., a corporation organized and existing under the laws
of the State of Kansas, [hereinafter sometimes for convenience called the
"Company"], with its principal office in the City of Topeka, Shawnee County,
Kansas, do hereby certify as follows:
FIRST: That the board of directors of the Company at a meeting held on
December 2, 1963, duly adopted the following amendment to the Articles of
Incorporation of the Company, and declared the advisability of said amendment,
said resolution to read as follows:
FURTHER RESOLVED, That the Articles of Incorporation of the Fund be
amended by deleting the present subdivision (a) of paragraph (6) of Article
TENTH of said Articles of Incorporation and inserting in lieu thereof the
following subdivision (a) of paragraph (6) of Article TENTH:
(a) The net asset value of each share of capital stock of the
Corporation tendered to the Corporation for repurchase pursuant to the
provisions of paragraph (2)(a) of Article FIFTH of these Articles of
Incorporation shall be determined as of the close of business on the
date to which such capital stock is so tendered.
SECOND: That the board of directors of the Company also duly adopted
the following amendment to the Articles of Incorporation of the Company, and
declared the advisability of said amendment, said resolution reading as follows:
FURTHER RESOLVED, That the Articles of Incorporation of Security
Equity Fund, Inc., be amended by deleting the first paragraph only of the
present subdivision (c) of paragraph (6) of Article TENTH of said Articles
of Incorporation and inserting in lieu thereof the following first
paragraph of subdivision (c) of paragraph (6) of Article TENTH:
(c) The net asset value of each share of capital stock of the
Corporation, as of the close of business on any day, shall be the
quotient obtained by dividing the value, as at such close, of the net
assets of the Corporation (i.e., the value of the assets of the
Corporation less its liabilities exclusive of capital stock and
surplus) by the total number of shares of capital stock outstanding at
such close. The assets and liabilities of the Corporation shall be
determined in accordance with generally accepted accounting
principles; provided, however, that in determining the value of the
assets of the Corporation for the purpose of obtaining the net asset
value, each security listed on the New York Stock Exchange shall be
valued on the basis of the closing sale thereof on the New York Stock
Exchange on the business day as of which such value is being
determined. If there be no such sale on such day, then the security
shall be valued on the basis of the closing bid price upon such day.
If no bid price is quoted for such day, then the security shall be
valued by such method as the Board of Directors shall deem to reflect
its fair market value. Securities not listed on the New York Stock
Exchange shall be valued in like manner on the basis of quotations on
any other stock exchange which the Board of Directors may from time to
time approve for that purpose, or by such other method as the Board of
Directors shall deem to reflect their fair market value, and all other
assets of the Corporation shall be valued by such method as they shall
deem to reflect their fair market value.
THIRD: That thereafter on the 20th day of December, 1963, upon notice
duly given as provided by law and the bylaws of the Company to each holder of
shares of Capital Stock of the Company entitled to vote on the proposed
amendments of the Articles of Incorporation, the deferred annual meeting of said
stockholders was held and there were present at such meeting in person or by
proxy the holders of more than a majority of the voting stock of the Company.
FOURTH: That at said deferred annual meeting of the stockholders of
the Company, the aforesaid resolutions, set forth in Division FIRST and Division
SECOND hereof, amending the Articles of Incorporation of the Company, were
presented for consideration and a vote of the stockholders present at said
meeting in person and by proxy was taken by ballot for and against each of the
proposed resolutions, which vote was conducted by two Judges appointed for that
purpose by the officer presiding at such meeting; that the said Judges decided
upon the qualifications of the voters and accepted their votes and when the
voting was completed said Judges counted and ascertained the number of shares
voted respectively for and against each of the proposed amendments to the
Articles of Incorporation and declared that the persons holding a majority of
the Capital Stock of the Company had voted for each of the proposed amendments;
and the said Judges made out a certificate accordingly that the number of shares
of Capital Stock issued and outstanding and entitled to vote on said resolutions
was 41,213 shares of Capital Stock, that 30,185 shares of said stock were voted
for and 0 shares of said stock were voted against the proposed amendments set
forth in Division FIRST hereof, that 30,185 shares of said stock were voted for
and 30,18 shares of said stock were voted against the proposed amendment set
forth in DIVISION SECOND hereof, and the said Judges subscribed and delivered
the said certificate to the Secretary of the Company.
FIFTH: That a certificate of said Judges having been made, subscribed
and delivered as aforesaid and it appearing by said certificate of the Judges
that the holders of more than a majority of the Capital Stock of the Company
entitled to vote thereon had voted in favor of each of the amendments to the
Articles of Incorporation set forth in Division FIRST and Division SECOND
hereof, the said amendments were declared adopted.
SIXTH: That, accordingly, the amendments to Article TENTH of the
Articles of Incorporation of Security Equity Fund, Inc., as heretofore set forth
in Division FIRST and Division SECOND of this certificate, have been duly
adopted in accordance with Article 42 of the General Corporation Code of Kansas.
SEVENTH: That the capital of the Company will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, we, Dean L. Smith, President, and Will J. Miller,
Jr., Secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 20th day of December, 1963.
[Corporate Seal]
DEAN L. SMITH
------------------------------
Dean L. Smith, President
WILL J. MILLER, JR.
------------------------------
Will J. Miller, Jr., Secretary
<PAGE>
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 20th day of December, 1963, before me,
a Notary Public in and for the county and state aforesaid, came Dean L. Smith,
and Will J. Miller, Jr., President and Secretary, respectively, of Security
Equity Fund, Inc. a Kansas corporation, who are personally known to me to be the
President and Secretary, respectively, of said corporation, and the same persons
who executed the foregoing instrument and they duly acknowledged the execution
of the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal on the day and year last above written.
AMELIA F. LETUKS
------------------------------
Notary Public
My commission expires: June 4, 1967
OFFICE OF SECRETARY OF STATE
Topeka, Kansas December 20, 1963
RECEIVED OF SECURITY EQUITY FUND, INC.
Two and fifty/100-------------------------------------------------------Dollars,
fee for filing the within Certificate of Amendment.
PAUL R. SHANAHAN
------------------------------
SECRETARY OF STATE
By: WILLIAM R. STURS
------------------------------
Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND, INC.
We, DEAN L. SMITH, President, and WILL J. MILLER, JR., Secretary, of
Security Equity Fund, Inc., a corporation organized and existing under the laws
of the State of Kansas, (hereinafter sometimes for convenience called the
"Company"), with its principal office in the City of Topeka, Shawnee County,
Kansas, do hereby certify as follows:
FIRST: That the board of directors of the Company at a meeting held on
April 7, 1966, duly adopted the following amendment to the Articles of
Incorporation of the Company, and declared the advisability of said amendment,
said resolution reading as follows:
"RESOLVED, That the Articles of Incorporation of Security Equity Fund,
Inc., as heretofore amended, be further amended by deleting the first
paragraph of the Article Fifth and by inserting in lieu thereof the
following paragraph:
"The aggregate number of shares which the Corporation shall have
authority to issue shall be 5,000,000 shares of capital stock of
the par value of $1.00 per share.""
SECOND: That thereafter on the 9th day of June, 1966, upon notice duly
given as provided by law and the bylaws of the Company to each holder of shares
of Capital Stock of the Company entitled to vote on the proposed amendment of
the Articles of Incorporation, the special meeting of said stockholders was held
and there were present at such meeting in person or by proxy the holders of more
than a majority of the voting stock of the Company.
THIRD: That at the special meeting of the stockholders of the Company,
the aforesaid resolution, set forth in division FIRST hereof, amending the
Articles of Incorporation of the Company, was presented for consideration and a
vote of the stockholders present at said meeting in person and by proxy was
taken by ballot for and against each of the proposed resolution, which vote was
conducted by two Judges appointed for that purpose by the officer presiding at
such meeting; that the said Judges decided upon the qualifications of the voters
and accepted their votes and when the voting was completed said Judges counted
and ascertained the number of shares votes respectively for and against the
proposed amendment to the Articles of Incorporation and declared that the
persons holding a majority of the Capital Stock of the Company had voted for the
proposed amendment; and the said Judges made out a certificate accordingly that
the number of shares of Capital Stock issued and outstanding and entitled to
vote on said resolution was 578,333 shares of Capital Stock, that 335,865 shares
of stock were voted for and 4,199 shares of stock were voted against the
proposed amendment set forth in Division FIRST hereof, and the said Judges
subscribed and delivered the said certificate to the Secretary of the Company.
FOURTH: That a certificate of said Judges having been made, subscribed
and delivered as aforesaid and it appearing by said certificate of the Judges
that the holders of more than a majority of the Capital Stock of the Company
entitled to vote thereon had voted in favor of the amendment to the Articles of
Incorporation set forth in Division FIFTH hereof, the said amendment was
declared duly adopted.
FIFTH: That, accordingly, the amendment to Article FIFTH of the
Articles of Incorporation of Security Equity Fund, Inc., as heretofore set forth
in Division FIRST of this certificate, have been duly adopted in accordance with
Article 42 of the General Corporation Code of Kansas.
SIXTH: That the capital of the Company will not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, we, Dean L. Smith, President, and Will J. Miller
Jr., Secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 9th day of June, 1966.
DEAN L. SMITH
------------------------------
Dean L. Smith, President
WILL J. MILLER, JR.
------------------------------
Secretary
(Corporate Seal)
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 9th day of June, 1966, before me, a Notary
Public in and for the County and State aforesaid, came Dean L. Smith and Will J.
Miller, Jr., President and Secretary, respectively of Security Equity Fund,
Inc., a Kansas corporation, who are personally known to me to be the President
and Secretary, respectively, of said corporation, and the same persons who
executed the foregoing instrument and they duly acknowledged the execution of
the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
LOIS J. HEDRICK
------------------------------
Notary Public
My commission expires January 8, 1968.
OFFICE OF SECRETARY OF STATE
Topeka, Kansas June 13, 1966
RECEIVED OF SECURITY EQUITY FUND, INC.
Two Thousand Fifty Two and fifty/100-----------------------------------Dollars,
fee for filing the within Certificate of Amendment.
Elwill M. Shanahan
------------------------------
Secretary of State
By: William A. Stewart
Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND, INC.
We, DEAN L. SMITH, President, and WILL J. MILLER, JR., Secretary, of
Security Equity Fund, Inc., a corporation organized and existing under the laws
of the State of Kansas, (hereinafter sometimes for convenience called the
"Company"), with its principal office in the City of Topeka, Shawnee County,
Kansas, do hereby certify as follows:
FIRST: That the board of directors of the Company at a meeting held on
July 6, 1967, duly adopted the following amendment to the Articles of
Incorporation of the Company, and declared the advisability of said amendment,
said resolution reading as follows:
"RESOLVED, That the Articles of Incorporation of Security Equity Fund,
Inc., as heretofore amended, be further amended by deleting the first
paragraph of the Article Fifth and by inserting in lieu thereof the
following paragraph:
"The aggregate number of shares which the Corporation shall have
authority to issue shall be 15,000,000 shares of capital stock of
the par value of $1.00 per share.""
SECOND: That thereafter on the 30th day of August, 1967, upon notice
duly given as provided by law and the bylaws of the Company to each holder of
shares of Capital Stock of the Company entitled to vote on the proposed
amendment of the Articles of Incorporation, the special meeting of said
stockholders was held and there were present at such meeting in person or by
proxy the holders of more than a majority of the voting stock of the Company.
THIRD: That at the special meeting of the stockholders of the Company,
the aforesaid resolution, set forth in division FIRST hereof, amending the
Articles of Incorporation of the Company, was presented for consideration and a
vote of the stockholders present at said meeting in person and by proxy was
taken by ballot for and against the proposed resolution, which vote was
conducted by two Judges appointed for that purpose by the officer presiding at
such meeting; that the said Judges decided upon the qualifications of the voters
and accepted their votes and when the voting was completed said Judges counted
and ascertained the number of shares votes respectively for and against the
proposed amendment to the Articles of Incorporation and declared that the
persons holding a majority of the Capital Stock of the Company had voted for the
proposed amendment; and the said Judges made out a certificate accordingly that
the number of shares of Capital Stock issued and outstanding and entitled to
vote on said resolution was 3,118,651 shares of Capital Stock, that 1,613,533
shares of stock were voted for and 45,071 shares of stock were voted against the
proposed amendment set forth in division FIRST hereof, and the said Judges
subscribed and delivered the said certificate to the Secretary of the Company.
FOURTH: That a certificate of said Judges having been made, subscribed
and delivered as aforesaid and it appearing by said certificate of the Judges
that the holders of more than a majority of the Capital Stock of the Company
entitled to vote thereon had voted in favor of the amendment to the Articles of
Incorporation set forth in division FIRST hereof, the said amendment was
declared duly adopted.
FIFTH: That, accordingly, the amendment to Article Fifth of the
Articles of Incorporation of Security Equity Fund, Inc., as heretofore set forth
in Division FIRST of this certificate, have been duly adopted in accordance with
Article 42 of the General Corporation Code of Kansas.
SIXTH: That the capital of the Company will not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, we, Dean L. Smith, President, and Will J. Miller
Jr., Secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 30th day of August, 1967.
DEAN L. SMITH
------------------------------
Dean L. Smith, President
WILL J. MILLER, JR.
------------------------------
Secretary
(Corporate Seal)
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 30th day of August, 1967, before me, a
Notary Public in and for the County and State aforesaid, came Dean L. Smith, and
Will J. Miller, Jr., President and Secretary, respectively, of Security Equity
Fund, Inc., a Kansas corporation, who are personally known to me to be the
President and Secretary, respectively, of said corporation, and the same persons
who executed the foregoing instrument and they duly acknowledged the execution
of the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
LOIS J. HEDRICK
------------------------------
Notary Public
My commission expires: January 8, 1968
OFFICE OF SECRETARY OF STATE
Topeka, Kansas August 30, 1967
RECEIVED OF SECURITY EQUITY FUND, INC.
Five Thousand Fifty Two and fifty/100----------------------------------Dollars,
Fee for filing the within Amendment.
ELWILL M. SHANAHAN
------------------------------
Secretary of State
By: WILLIAM A. STEWART
------------------------------
Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
We, DEAN L. SMITH, President, and WILL J. MILLER, JR., Secretary, of
Security Equity Fund, Inc., a corporation organized and existing under the laws
of the State of Kansas, (hereinafter sometimes for convenience called the
"Company"), with its principal office in the City of Topeka, Shawnee County,
Kansas, do hereby certify as follows:
FIRST: That the board of directors of the Company at a meeting held on
October 10, 1968, duly adopted the following amendment to the Articles of
Incorporation of the Company, and declared the advisability of said amendment,
said resolution reading as follows:
"RESOLVED, That the Articles of Incorporation of Security Equity
Fund, Inc., as heretofore amended, be further amended deleting the
first paragraph of the Article FIFTH and by inserting in lieu thereof
the following paragraph:
"The aggregate number of shares which the Corporation shall
have the authority to issue shall be 100,000,000 shares of
capital stock of the par value of $0.25 (twenty-five cents)
per share. Upon the effectiveness of this amendment:
(a) Each share of capital stock, par value $1.00 per share,
heretofore issued by the Corporation and presently
outstanding shall, without further act or deed, be deemed to
be changed and converted into four shares of capital stock
of the par value of $0.25 each; and
(b) Each stock certificate for shares of capital stock of
the par value of $1.00 per share issued and outstanding
immediately prior to this amendment evidencing shares or
capital stock, par value $1.00 per share, shall be deemed to
evidence an identical number of shares of capital stock of
the par value of $0.25 each."
SECOND: That thereafter on the 12th day of December, 1968 upon notice
duly given as provided by the law and the bylaws of the Company to each holder
of shares of Capital Stock of the Company entitled to vote on the proposed
amendment of the Articles of Incorporation, the annual meeting of said
stockholders was held and there were present at such meeting in person or by
proxy the holders of more than a majority of the voting stock of the Company.
THIRD: That at said annual meeting of the stockholders of the Company,
the foresaid resolution, set forth in division FIRST hereof, amending the
Articles of Incorporation of the Company, was presented for consideration and a
vote of the stockholders present at said meeting in person and by proxy was
taken by ballot for and against the proposed resolution, which vote was
conducted by two Judges appointed for that purpose by the officer presiding at
such meeting; that the said Judges decided upon the qualifications of the voters
and accepted their votes and when the voting was completed said Judges counted
and ascertained the number of shares votes respectively for and against the
proposed amendment to the Articles of Incorporation and declared that the
persons holding a majority of the Capital Stock of the Company had voted for the
proposed amendment; and the said Judges made out a certificate accordingly that
the number of shares of Capital Stock issued and outstanding and entitled to
vote on said resolution was 7,683,768 shares of Capital Stock, that 4,391,182
shares of stock were voted for, and 214,740 shares of stock were voted against
the proposed amendment set forth in division FIRST hereof, and the said Judges
subscribed and delivered the said certificate to the Secretary of the Company.
FOURTH: That a certificate of said Judges having been made, subscribed
and delivered as aforesaid and it appearing by said certificate of the Judges
that the holders of more than a majority of the Capital Stock of the Company
entitled to vote thereon had voted in favor of the amendment to the Articles of
Incorporation set forth in division FIRST hereof, the said amendment was
declared duly adopted.
FIFTH: That, accordingly, the amendment to Article Fifth of the
Articles of Incorporation of Security Equity Fund, Inc., as heretofore set forth
in Division FIRST of this certificate, have been duly adopted in accordance with
Article 42 of the General Corporation Code of Kansas.
SIXTH: That the capital of the Company will not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, we, Dean L. Smith, President, and Will J. Miller
Jr., Secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 31st day of December, 1968.
DEAN L. SMITH
------------------------------
Dean L. Smith, President
WILL J. MILLER, JR.
------------------------------
Secretary
(Corporate Seal)
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 31st day of December, 1968, before me,
a Notary Public in and for the County and State aforesaid, came Dean L. Smith,
and Will J. Miller, Jr., President and Secretary, respectively, of Security
Equity Fund, Inc., a Kansas corporation, who are personally known to me to be
the President and Secretary, respectively, of said corporation, and the same
persons who executed the foregoing instrument and they duly acknowledged the
execution of the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal on the day and year last above written.
Lois J. Hedrick
------------------------------
Notary Public
My commission expires: January 8, 1972
<PAGE>
OFFICE OF SECRETARY OF STATE
Topeka, Kansas December 31, 1968
RECEIVED OF SECURITY EQUITY FUND, INC.
Five Thousand fifty-two and 50/100------------------------------------Dollars,
fee for filing the within Amendment.
ELWILL M. SHANAHAN
------------------------------
Secretary of State
By: HART WORKMAN
------------------------------------------
Hart Workman, Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
We, Dean L. Smith, president, and Will J. Miller, Jr., secretary of
Security Equity Fund, Inc., a corporation organized and existing under the laws
of the State of Kansas, (hereinafter called the "Corporation"), do hereby
certify as follows:
FIRST: That on October 30, 1969, the board of directors of the
Corporation duly adopted the following resolution setting forth the following
proposed amendment to the Articles of Incorporation of the Corporation, and
declared the advisability of said amendment, said resolution reading as follows:
"RESOLVED, that the Articles of Incorporation of Security Equity
Fund, Inc., a Kansas corporation, be amended by deleting the present
first sentence of subparagraph (a) of paragraph (2) of Article FIFTH
thereof in its entirety and substituting in lieu thereof the following
new first sentence of subparagraph (a) of paragraph (2) of Article
FIFTH:
(2)(a) Each holder of capital stock of the Corporation, upon
request to the Corporation accompanied by surrender of the
appropriate stock certificate or certificates in proper form for
transfer, shall be entitled to require the Corporation to
repurchase all or any part of the shares of capital stock
standing in the name of such holder on the books of the
Corporation, at the net asset value of such shares.
SECOND: That on October 30, 1969, the board of directors of the
Corporation also duly adopted the following resolution setting forth the
following proposed amendment to the Articles of Incorporation of the
Corporation, and declared the advisability of said amendment, said resolution
reading as follows:
RESOLVED, that the Articles of Incorporation of Security Equity
Fund, Inc., a Kansas corporation, be amended by deleting the present
first paragraph and subparagraphs (a) and (b) of paragraph (6) of
Article TENTH thereof in their entirety and substituting in lieu
thereof the following new first paragraph and new subparagraphs (a)
and (b) of paragraph (6) of Article TENTH:
(6) The Board of Directors is hereby empowered to authorize
the issuance and sale, from time to time, of shares of the capital
stock of the Corporation, whether for cash at not less than the par
value thereof or for such other consideration including securities as
the Board of Directors may deem advisable, in the manner and to the
extent now or hereafter permitted by the Bylaws of the Corporation and
by the laws of Kansas; provided, however, that the consideration per
share to be received by the Corporation upon the sale of any shares of
its capital stock shall not be less than the net asset value per share
of such capital stock outstanding at the time as of which the
computation of such net asset value shall be made. For the purposes of
the computation of net asset value, as in these Articles of
Incorporation referred to, such computation shall be computed as
provided in the Investment Company Act of 1940 or in any other statute
administered by the Securities and Exchange Commission or any
successor thereto, or in any rule, regulation or order issued under
any such statute and, except as so provided, shall be computed in
accordance with the following rules:
(a) the net asset value of each share of capital stock of
the Corporation surrendered to the Corporation for repurchase pursuant
to the provisions of paragraph (2)(a) of Article FIFTH of these
Articles of Incorporation shall be the net asset value next computed
after the time such share is tendered for redemption.
(b) the net asset value of each share of capital stock of
the Corporation for the purpose of issue of such capital stock shall
be determined at the close of business on the New York Stock Exchange
(the "Exchange") on each day on which the Exchange is open with
respect to all orders accepted prior to such close of business of the
Exchange on that day. Orders accepted after the close of business of
the Exchange will be filled on the basis of the offering price
determined as of the close of business on the Exchange on the next day
on which the Exchange is open.
THIRD: That on December 30, 1969, at the annual meeting of the
stockholders of the Corporation, notice of which annual meeting was duly given
as provided by law and the bylaws of the Corporation to each holder of shares of
capital stock of the Corporation entitled to vote on the proposed amendments of
the Articles of Incorporation, the aforesaid resolutions set forth in Division
FIRST and Division SECOND, amending the Articles of Incorporation of the
Corporation, were presented for consideration, and a vote of the stockholders
present at said meeting in person and by proxy was taken by ballot for and
against each of the proposed resolutions, which votes were conducted by two
judges appointed for that purpose by the officer presiding at such meeting; that
the said judges decided upon the qualifications of the voters and accepted their
votes and when the voting was completed said Judges counted and ascertained the
number of shares votes respectively for and against each of the proposed
amendments to the Articles of Incorporation and declared that the persons
holding a majority of the capital stock of the Corporation had voted for each of
the proposed amendments; and the said judges made out a certificate accordingly
that the number of shares of capital stock issued and outstanding and entitled
to vote on said resolution was 21,222,857 shares of capital stock, that
20,919,065 shares of stock were voted for and 281,869 shares of stock were voted
against the proposed amendment set forth in Division FIRST hereof, that
20,976,162 shares of said stock were voted for and 224,772 shares of said stock
were voted against the proposed amendment set forth in Division SECOND hereof,
and the said judges subscribed and delivered the said certificate to the
secretary of the Corporation.
FOURTH: That the certificate of said judges having been made,
subscribed and delivered as aforesaid, and it appearing by said certificate of
the judges that the holders of more than a majority of the capital stock of the
Corporation entitled to vote thereon had voted in favor of the amendments to the
Articles of Incorporation set forth in Division FIRST and Division SECOND
thereof, the said amendments were declared duly adopted.
FIFTH: That, accordingly, the amendments of the Articles of
Incorporation of the Corporation, as heretofore set forth in Division FIRST and
Division SECOND of this certificate, have been duly adopted in accordance with
Article 42 of the General Corporation Code of Kansas.
SIXTH: That the capital of the Company will not be reduced under or by
reason of said amendments.
IN WITNESS WHEREOF, we, Dean L. Smith, president, and Will J. Miller
Jr., secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 30th day of December, 1969.
DEAN L. SMITH
------------------------------
Dean L. Smith, President
WILL J. MILLER, JR.
------------------------------
Secretary
(Corporate Seal)
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 30th day of December, 1969, before me,
a notary public in and for the County and State aforesaid, came DEAN L. SMITH,
President, and WILL J. MILLER, JR., Secretary, of Security Equity Fund, Inc., a
Kansas corporation, who are personally known to me to be the President and
Secretary, respectively, of said Corporation, and the same persons who executed
the foregoing instrument and they duly acknowledged the execution of the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal on the day and year last above written.
LOIS J. HEDRICK
------------------------------
Notary Public
My commission expires: January 8, 1972
<PAGE>
OFFICE OF SECRETARY OF STATE
Topeka, Kansas DECEMBER 30, 1969
Received of SECURITY EQUITY FUND, INC.
Two and 50/100----------------------------------------------------------Dollars,
fee for filing the within Amendment.
ELWILL M. SHANAHAN
------------------------------
Secretary of State
By: HART WORKMAN
------------------------------
Assistant Secretary of State
<PAGE>
CHANGE OF LOCATION OF REGISTERED OFFICE
AND/OR
CHANGE OF RESIDENT AGENT
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, Dean L. Smith, President and Larry D. Armel, Secretary of Security
Equity Fund, Inc., a corporation organized and existing under and by virtue of
the laws of the State of Kansas, do hereby certify that a regular meeting of the
Board of Directors of said corporation held on the 9th day of July, 1975, the
following resolution was duly adopted.
Be it further resolved that the RESIDENT AGENT of said corporation in the
State of Kansas be changed from Dean L. Smith, Security Benefit Life Bldg., 700
Harrison Street, Topeka, Shawnee, Kansas the same being of record in the office
of Secretary of State of Kansas to Security Management Company, Inc., Security
Benefit Life Bldg., 700 Harrison Street, Topeka, Shawnee, Kansas 66636. The
President and Secretary are hereby authorized to file and record the same in the
manner as required by law:
DEAN L. SMITH
------------------------------
Dean L. Smith, President
LARRY D. ARMEL
------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered that before me Lois J. Hedrick a Notary Public in and for
the County and State aforesaid, came Dean L. Smith President, and Larry D.
Armel, Secretary, of Security Equity Fund, Inc. a corporation, personally known
to me to be the persons who executed the foregoing instrument of writing as
president and secretary respectively, and duly acknowledged the execution of the
same this 9th day of July, 1975.
LOIS J. HEDRICK
------------------------------
Notary Public
My commission expires January 8, 1976
NOTE: This form must be filed in duplicate.
Address of Resident Agent and Registered Office, as set forth above,
must be the same.
The statutory fee for filing is $20.00 and must accompany this form.
<PAGE>
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
STATE OF KANSAS )
) ss.
COUNTY OF Shawnee)
We, Everett S. Gille, President , and Larry D. Armel, Secretary of Security
Equity Fund, Inc., a corporation organized and existing under the laws of the
State of Kansas, and whose registered office is Security Benefit Life Bldg., 700
Harrison Street, Topeka, Shawnee, Kansas do hereby certify that at the regular
meeting of the Board of Directors of said corporation, held on the 13th day of
October, 1976, said board adopted a resolution setting forth the following
amendment to the Articles of Incorporation and declaring its advisability, to
wit:
RESOLVED, that the Articles of Incorporation of Security Equity Fund, Inc.,
a Kansas corporation, be amended by adding the following new subparagraph
(2)(c) to Article FIFTH thereof, such new subparagraph (2)(c) to be
inserted immediately following subparagraph (2)(b) and immediately before
paragraph (3) thereof:
(c) The Corporation, pursuant to a resolution by the Board of
Directors and without the vote or consent of stockholders of the
Corporation, shall have the right to redeem at net asset value
all shares of capital stock of the Corporation in any stockholder
account in which there has been no investment (other than the
reinvestment of income dividends or capital gains distributions)
for at least six months and in which there are fewer than 25
shares or such fewer shares as shall be specified in such
resolution. Such resolution shall set forth that redemption of
shares in such accounts has been determined to be in the economic
best interests of the Corporation or necessary to reduce
disproportionally burdensome expenses in servicing stockholder
accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such
redemption of shares, and that the stockholder will have six
months (or such longer period as specified in the resolution)
from the date of the notice to avoid such redemption by
increasing his account to at least 25 shares, or such fewer
shares as is specified in the resolution.
That thereafter, pursuant to said resolution and in accordance with the
by-laws and the laws of the State of Kansas, said directors called a meeting of
stockholders for the consideration of said amendment, and thereafter, pursuant
to said notice and in accordance with the statutes of the State of Kansas, on
the 9th day of December, 1976, said stockholders met and convened and considered
said proposed amendment.
That at said meeting the stockholders entitled to vote did vote upon said
amendment, and the majority of voting stockholders of the corporation had voted
for the proposed amendment certifying that the votes were 16,855,355 (common)
shares in favor of the proposed amendment and 442,958 (common) shares against
the amendment.
That said amendment was duly adopted in accordance with the provisions of
K.S.A. 17-6602.
That the capital of said corporation will not be reduced under or by reason
of said amendment.
IN WITNESS WHEREOF, we have hereunto set out hands and affixed the seal of
said corporation this 23rd day of December, 1976.
EVERETT S. GILLE
------------------------------
Everett S. Gille, President
LARRY D. ARMEL
------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF Shawnee)
Be it remembered, that before me, Lois J. Hedrick a Notary Public in and
for the County and State, aforesaid, came Everett S. Gille, President, and Larry
D. Armel, Secretary, of Security Equity Fund, Inc. a corporation, personally
known to me to be the persons who executed the foregoing instrument of writing
as president and secretary respectively, and duly acknowledged the execution of
the same this 23rd day of December, 1976.
Lois J. Hedrick
------------------------------
Notary Public
My Commission Expires: January 8, 1980
Submit to this office in duplicate.
A fee of $20.00 must accompany this form.
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
- --------------------------------------------------------------------------------
STATE OF KANSAS )
) ss
COUNTY OF Shawnee)
We, Everett S. Gille, President, and Larry D. Armel Secretary of Security
Equity Fund, Inc., a corporation organized and existing under the laws of the
State of Kansas, and whose registered office is Security Benefit Life Building,
700 Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that at
the regular meeting of the Board of Directors of said corporation held on the
12th day of October, 1979, said board adopted a resolution setting forth the
following amendment to the Articles of Incorporation and declared its
advisability, to wit:
RESOLVED, that whereas the board of directors deems it advisable and in the
best interests of the corporation to increase the authorized capitalization
of the corporation, that the articles of incorporation of Security Equity
Fund, Inc. be amended by deleting the first paragraph [including
sub-paragraphs (a) and (b)] of Article FIFTH in its entirety, and by
inserting, in lieu thereof, the following new first paragraph of Article
FIFTH:
The total number of shares which the Corporation shall have authority
to issue shall be 150,000,000 shares of capital stock, each of the par
value of $0.25 (twenty-five cents)."
FURTHER RESOLVED, that the foregoing proposed amendment to the articles of
incorporation of the Fund be presented to the stockholders of the Fund for
consideration at the annual meeting of stockholders to be held on December
13, 1979.
That thereafter, pursuant to said resolution and in accordance with the by-laws
and the laws of the State of Kansas, said directors called a meeting of
stockholders for the consideration of said amendment, and thereafter, pursuant
to said notice and in accordance with the statutes of the State of Kansas, on
the 13th day of December, 1979, said stockholders met and convened and
considered said proposed amendment.
That at said meeting the stockholders entitled to vote did vote upon said
amendment, and the majority of voting stockholders of the corporation had voted
for the proposed amendment certifying that the votes were 11,600,855 (common)
shares in favor of the proposed amendment and 691,585 (common) shares against
the amendment.
That said amendment was duly adopted in accordance with the provisions of K.S.A.
17-6602, as amended.
That the capital of said corporation will not be reduced under or by reason of
said amendment.
IN WITNESS WHEREOF we have hereunto set out hands and affixed the seal of
said corporation this 18th day of December, 1979.
EVERETT S. GILLE
------------------------------
Everett S. Gille, President
LARRY D. ARMEL
------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss
COUNTY OF Shawnee)
Be it remembered, that before me, Lois J. Hedrick a Notary Public in and for the
County and State aforesaid, came Everett S. Gille, President and Larry D. Armel,
Secretary of Security Equity Fund, Inc. a corporation, personally known to me to
be the persons who executed the foregoing instrument of writing as president and
assistant secretary respectively, and duly acknowledged the execution of the
same this 18th day of December, 1979.
LOIS J. HEDRICK
------------------------------
Notary Public
My commission expires: January 8, 1980.
Submit to this office in duplicate.
A fee of $20.00 must accompany this form.
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
- --------------------------------------------------------------------------------
STATE OF KANSAS )
) ss
COUNTY OF SHAWNEE)
We, Everett S. Gille, President, and Larry D. Armel, Secretary of Security
Equity Fund, Inc., a corporation organized and existing under the laws of the
State of Kansas, and whose registered office is Security Benefit Life Building,
700 Harrison Street, Topeka, Kansas, 66636, do hereby certify that at the
regular meeting of the Board of Directors of said corporation held on the 9th
day of October, 1981, said board adopted a resolution setting forth the
following amendment to the Articles of Incorporation and declared its
advisability, to wit:
RESOLVED, that the Articles of Incorporation of Security Equity Fund, Inc.
as heretofore amended, be further amended by deleting Article FIRST in its
entirety and by inserting, in lieu thereof, the following new Article FIRST:
"FIRST: the name of the corporation (hereinafter called the
"Corporation") is SECURITY EQUITY FUND".
FURTHER RESOLVED, that the board of directors of this corporation hereby
declares the advisability of the foregoing amendment to the articles of
incorporation of this corporation and hereby recommends that the stockholders of
this corporation adopt amendment.
FURTHER RESOLVED, that at the annual meeting of the stockholders of this
corporation to be held at the offices of the corporation in Topeka, Kansas, on
December 10, 1981, beginning at 10:00 A.M. on that day, the matter of the
aforesaid proposed amendment to the articles of incorporation of this
corporation shall be submitted to the stockholders entitled to vote thereon.
FURTHER RESOLVED, that in the event the stockholders of this corporation shall
approve and adopt the proposed amendment to the articles of incorporation of
this corporation as heretofore adopted and recommended by this board of
directors, the appropriate officers of this corporation be, and they hereby are
authorized and directed, for and in behalf of this corporation, to make,
execute, verify, acknowledge and file or record in any and all appropriate
governmental offices any and all certificates and other instruments, and to take
any and all other action as may be necessary to effectuate the said proposed
amendment to the articles of incorporation of this corporation".
That thereafter, pursuant to said resolution and in accordance with the by-laws
of the State of Kansas, said directors called a meeting of stockholders for the
consideration of said amendment, and thereafter, pursuant to said notice and in
accordance with the statutes of the State of Kansas, on the 10th day of
December, 1981, said stockholders met and convened and considered said proposed
amendment.
That at said meeting the stockholders entitled to vote did vote upon said
amendment, and the majority of voting stockholders of the corporation had voted
for the proposed amendment certifying that the votes were 15,967,961 (Common
Stock) shares in favor of the proposed amendment and 842,670 (Common Stock)
shares against the amendment.
That said amendment was duly adopted in accordance with the provisions of K.S.A.
17-6602, as amended.
That the capital of said corporation will not be reduced under or by reason of
said amendment.
IN WITNESS WHEREOF we have hereunto set out hands and affixed the seal of said
corporation this 14th day of December, 1981.
EVERETT S. GILLE
------------------------------
Everett S. Gille, President
LARRY D. ARMEL
------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss
COUNTY OF SHAWNEE)
Be it remembered, that before me, Lois J. Hedrick a Notary Public in and for the
County and State aforesaid, came Everett S. Gille, President, and Larry D. Armel
Secretary, of Security Equity Fund, Inc. a corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as president
and secretary respectively, and duly acknowledged the execution of the same this
14th day of December, 1981.
Lois J. Hedrick
------------------------------
Notary Public
My commission expires January 8, 1984.
Submit to this office in duplicate.
A fee of $20.00 must accompany this form.
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND
- --------------------------------------------------------------------------------
We, Michael J. Provines, President, and Amy J. Lee, Secretary of the above named
corporation organized and existing under the laws of the State of Kansas, do
hereby certify that at a meeting of the Board of Directors of said corporation,
the board adopted a resolution setting forth the following amendment to the
Articles of Incorporation and declaring its advisability:
RESOLVED, that whereas the Corporation's board of directors deems it
advisable and in the best interest of the corporation to increase the
authorized capitalization of the corporation, that the articles of
incorporation of Security Equity Fund be amended by deleting the first
paragraph of Article FIFTH in its entirety, and by inserting in lieu
thereof, the following new first paragraph of Article FIFTH:
"The total number of shares which the Corporation shall have authority
to issue shall be 300,000,000 shares of capital stock, each of the par
value of $0.25 (twenty-five cents) per share."
We further certify that thereafter, pursuant to said resolution, and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at the meeting a majority of the stockholders
entitled to vote voted in favor of the proposed amendment.
We further certify that said amendment was duly adopted in accordance with
the provisions of K.S.A. 17-6602, as amended.
We further certify that the capital of said corporation will not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF we have hereunto set out hands and affixed the seal of
said corporation this 15th day of July, 1987.
MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
<PAGE>
State of Kansas )
) ss
County of Shawnee)
Be it remembered, that before me, a Notary Public in and for the county and
state personally appeared Michael J. Provines, President and Amy J. Lee,
Secretary of the corporation named in this document, who are known to me to be
the persons who executed the foregoing certificate, and duly acknowledged the
execution of the same this 15th day of July, 1987.
GLENDA J. OVERSTREET
------------------------------
Notary Public
My commission expires: February 1, 1990.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE,
WITH $20 FILING FEE, TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-2236
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND
We, Michael J. Provines, President , and Amy J. Lee, Secretary, of the
above named corporation, a corporation organized and existing under the laws of
the State of Kansas, do hereby certify that at a meeting of the Board of
Directors of said corporation, the board adopted a resolution setting forth the
following amendment to the Articles of Incorporation and declaring its
advisability;
RESOLVED, that whereas the Corporation's board of directors deems it
advisable and in the best interest of the corporation that the Articles of
Incorporation be amended by adopting the following Article Sixteenth:
"A director shall not be personally liable to the corporation or to
its stockholders for monetary damages for breach of fiduciary duty as
a director, provided that this sentence shall not eliminate nor limit
the liability of a director:
A. for any breach of his or her duty of loyalty to the corporation or
to its stockholders;
B. for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
C. for an unlawful dividend, stock purchase or redemption under the
provisions of Kansas Statutes Annotated (K.S.A.) 17-6424 and
amendments thereto; or
D. for any transaction from which the director derived an improper
personal benefit."
We further certify that thereafter, pursuant to said resolution, and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at the meeting a majority of the stockholders entitled
to vote voted in favor of the proposed amendment. We further certify that the
amendment was duly adopted in accordance with the provisions of K.S.A. 17-6602,
as amended.
We further certify that the capital of said corporation will not be reduced
under or by reason of said amendment.
In Witness Whereof, we have hereunto set out hands and affixed the seal of said
corporation this 11th day of December, 1987.
MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
State of Kansas )
) ss.
County of Shawnee)
Be it remembered, that before me, a Notary Public in and for the aforesaid
county and state, personally appeared Michael J. Provines, President, and Amy J.
Lee, Secretary, of the corporation named in this document, who are known to me
to be the same persons who executed the foregoing certificate, and duly
acknowledged the execution of the same this 11th day of December, 1987.
GLENDA J. OVERSTREET
------------------------------
Notary Public
My Commission Expires: February 1, 1990.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE,
WITH $20.00 FILING FEE, TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-2236
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND
We, Michael J. Provines, President , and Amy J. Lee, Secretary, of the above
named corporation, corporation organized and existing under the laws of the
State of Kansas, do hereby certify that at a meeting of the Board of Directors
of said corporation, the board adopted a resolution setting forth the following
amendment to the Articles of Incorporation and declaring its advisability:
See attached amendment
We further certify that thereafter, pursuant to said resolution, and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at a meeting a majority of the stockholders entitled to
vote voted in favor of the proposed amendment.
We further certify that the amendment was duly adopted in accordance with the
provisions of K.S.A. 17-6602, as amended.
IN WITNESS WHEREOF, we have hereunto set out hands and affixed the seal of the
corporation this 27th day of July, 1993.
MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
<PAGE>
STATE OF Kansas )
) ss.
COUNTY OF Shawnee)
Be it remembered that before me, a Notary Public in and for the aforesaid
county and state, personally appeared Michael J. Provines, President, and Amy J.
Lee, Secretary, of the corporation named in this document, who are known to me
to be the same persons who executed the foregoing certificate, and duly
acknowledged the execution of the same this 27th day of July, 1993.
PEGGY S. AVEY
------------------------------
Peggy S. Avey Notary Public
(NOTARIAL SEAL)
My appointment or commission expires: November 21, 1996.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE,
WITH $20 FILING FEE, TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-4564
<PAGE>
SECURITY EQUITY FUND
The Board of Directors of Security Equity Fund recommends that the Articles of
Incorporation be amended by deleting Article Fifth in its entirety and by
inserting, in lieu therefor, the following new Article:
FIFTH: The total number of shares of stock which the corporation shall have
authority to issue shall be 300,000,000 shares of capital stock, each of the par
value of $0.25 (twenty-five cents). The board of directors of the Corporation is
expressly authorized to cause shares of capital stock of the Corporation
authorized herein to be issued in one or more classes or series as may be
established from time to time by setting or changing in one or more respects the
voting powers, rights, qualifications, limitations or restrictions of such
shares of stock and to increase or decrease the number of shares so authorized
to be issued in any such class or series.
The following provisions are hereby adopted for the purpose of setting forth the
powers, rights, qualifications, limitations or restrictions of the capital stock
of the Corporation (unless provided otherwise by the board of directors with
respect to any such additional class or series at the time of establishing and
designating such additional class or series):
(1) At all meetings of stockholders each stockholder of the Corporation of any
class or series shall be entitled to one vote on each matter submitted to a
vote at such meeting for each share of stock standing in his name on the
books of the Corporation on the date, fixed in accordance with the Bylaws,
for determination of stockholders entitled to vote at such meeting. At all
elections of directors each stockholder of any class or series shall be
entitled to as many votes as shall equal the number of shares of stock
multiplied by the number of directors to be elected, and stockholders may
cast all of such votes for a single director or may distribute them among
the number to be voted for, or any two or more of them as they may see fit.
(2) (a) Each holder of capital stock of the Corporation, of any class or
series, upon request to the Corporation accompanied by surrender of
the appropriate stock certificate or certificates in proper form for
transfer, shall be entitled to require the Corporation to repurchase
all or any part of the shares of capital stock standing in the name of
such holder on the books of the Corporation, at the net asset value of
such shares. The method of computing such net asset value, the time as
of which such net asset value shall be computed and the time within
which the Corporation shall make payment therefor shall be determined
as hereinafter provided in Article TENTH of these Articles of
Incorporation. Notwithstanding the foregoing, the Board of Directors
of the Corporation may suspend the right of the holders of the capital
stock of the Corporation to require the Corporation to redeem shares
of such capital stock:
(i) for any period (A) during which the New York Exchange is
closed other than customary weekend and holiday closings,
or (B) during which trading on the New York Stock Exchange
is restricted:
(ii) for any period during which an emergency, as defined by
rules of the Securities and Exchange Commission or any
successor thereto, exists as a result of which (A)
disposal by the Corporation of securities owned by it is
not reasonably practicable or (B) it is not reasonably
practicable for the Corporation fairly to determine the
value of its net assets; or
(iii) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit
for the protection of security holders of the Corporation.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the Corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions thereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the Corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the Corporation having funds
or property legally available therefor.
(c) The Corporation, pursuant to a resolution by the Board of Directors
and without the vote or consent of stockholders of the Corporation,
shall have the right to redeem at net asset value all shares of
capital stock of the Corporation in any stockholder account in which
there has been no investment (other than reinvestment of income
dividends or capital gains distributions) for at least six months and
in which there are fewer than 25 shares or such fewer shares as shall
be specified in such resolution. Such resolution shall set forth that
redemption of shares in such accounts has been determined to be in the
economic best interests of the Corporation or necessary to reduce
disproportionately burdensome expenses in that prior notice of at
least six months shall be given to a stockholder before such
redemption of shares, and that the stockholder will have six months
(or such longer period as specified in the resolution) from the date
of the notice to avoid such redemption by increasing his account to at
least 25 shares, or such fewer shares as is specified in the
resolution
(3) No holder of stock of the Corporation of any class or series shall, as such
holder, have any rights to purchase or subscribe for any shares of the
capital stock of the Corporation of any class or series which it may issue
or sell (whether out of the number of shares authorized by these Articles
of Incorporation, or out of any shares of the capital stock of the
Corporation, acquired by it after the issue thereof, or otherwise) other
than such right, if any, as the Board of Directors, in its discretion, may
determine.
(4) All persons who shall acquire stock in the Corporation shall acquire the
same subject to the provisions of these Articles of Incorporation.
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, Michael J. Provines, President, and Amy J. Lee, Secretary, of Security
Equity Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee, Kansas, do hereby certify that pursuant to
authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 23rd day of July, 1993,
adopted resolutions setting forth the preferences, rights, privileges and
restrictions of the separate series of stock of Security Equity Fund, which
resolutions are provided in their entirety as follows:
RESOLVED, that, pursuant to the authority vested in the Board of Directors of
Security Equity Fund by its Articles of Incorporation, the officers of the Fund
are hereby directed and authorized to establish four separate series of common
stock of the corporation, effective October 5, 1993. The first such series shall
be known as the Equity Series A and shall consist of that series of stock
currently being issued by the Fund. The other series shall be new series and
shall be known as Equity Series B, Global Series A and Global Series B. The
officers of the Fund are hereby directed and authorized to establish such series
of common stock allocating 265,000,000 $0.25 par value shares of the
corporation's authorized capital stock of 300,000,000 shares to the Equity
Series A; 20,000,000 $0.25 par value shares to the Equity Series B; 7,500,000
$0.25 par value shares to the Global Series A; and the remaining 7,500,000 $0.25
par value shares to the Global Series B.
FURTHER RESOLVED, that the preferences, rights, privileges and restrictions of
the shares of each series of Security Equity Fund shall be as follows:
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset
value thereof, such redemption and the valuation and payment in
connection therewith to be made in compliance with the provisions of
the Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such few shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder shall have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A and B shall represent a
stockholder interest in a particular fund of assets held by the corporation
which fund shall be invested and reinvested in accordance with policies and
objectives established by the Board of Directors for these series.
Outstanding shares of Global Series A and B shall represent a stockholder
interest in a particular fund of assets held by the corporation which fund
shall be invested and reinvested in accordance with policies and objectives
established by the Board of Directors for these series.
(b) All cash and other property received by the corporation from the sale
of shares of Equity Series A and B and Global Series A and B, respectively,
all securities and other property held as a result of the investment and
reinvestment of such cash and other property, all revenues and income
received or receivable with respect to such cash, other property,
investments and reinvestments, and all proceeds derived from the sale,
exchange, liquidation or other disposition of any of the foregoing, shall
be allocated to the Equity Series A and B or Global Series A and B to which
they relate and held for the benefit of the stockholders owning shares of
such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and charged to
the series to which such loss, liability or expense relates. Where any
loss, liability or expense relates to more than one series, the Board of
Directors shall allocate the same between or among such series pro rata
based on the respective net asset values of such series or on such other
basis as the Board of Directors deems appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Equity Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
will be paid at the same dividend rate except that expenses attributable to
Equity Series A or B and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A and B represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate, except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Whenever dividends are declared and paid with
respect to the Equity Series A and B or the Global Series A and B, the
holders of shares of the other series shall have no rights in or to such
dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
or the Global Series B, those shares (except those purchased through the
reinvestment of dividends and other distributions), shall automatically
convert to Equity Series A or Global Series A shares respectively, at the
relative net asset values of each of the series without the imposition of
any sales load, fee or other charge. All shares in a stockholder's account
that were purchased through the reinvestment of dividends and other
distributions paid with respect to Series B shares will be considered to be
held in a separate sub-account. Each time Series B shares are converted to
Series A shares, a pro rata portion of the Series B shares held in the
sub-account will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands this 5th day of October 1993.
MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
[SEAL]
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Judith M. Ralston a Notary Public in and for
the County and State aforesaid, came Michael J. Provines, President, and Amy J.
Lee, Secretary, of Security Equity Fund, a Kansas corporation, personally known
to me to be the persons who executed the foregoing instrument of writing as
President and Secretary, respectively, and duly acknowledged the execution of
the same this 5th day of October, 1993.
JUDITH M. RALSTON
------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: January 1, 1995.
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND
We, John D. Cleland, President , and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, do hereby certify that at a meeting of the Board of Directors of said
corporation, the board adopted a resolution setting forth the following
amendment to the Articles of Incorporation and declaring its advisability:
See attached amendment
We further certify that thereafter, pursuant to said resolution, and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at a meeting a majority of the stockholders entitled to
vote, voted in favor of the proposed amendment.
We further certify that the amendment was duly adopted in accordance with the
provisions of K.S.A. 17-6602, as amended.
IN WITNESS WHEREOF, we have hereunto set out hands and affixed the seal of the
corporation this 21st day of December, 1994.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
<PAGE>
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that before me, a Notary Public in and for the aforesaid
county and state, personally appeared John D. Cleland, President, and Amy J.
Lee, Secretary, of Security Equity Fund, who are known to me to be the same
persons who executed the foregoing certificate, and duly acknowledged the
execution, of the same this 21st day of December, 1994
JUDITH M. RALSTON
------------------------------
Judith M. Ralston, Notary
(NOTARIAL SEAL)
My commission expires: January 1, 1995.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE, WITH $20 FILING FEE TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-4564
<PAGE>
SECURITY EQUITY FUND
The Board of Directors of Security Equity Fund recommends that the Articles of
Incorporation be amended by deleting the first paragraph of Article Fifth and by
inserting, in lieu thereof, the following new Article:
FIFTH: The total number of shares which this Corporation shall have authority to
issue shall be (5,000,000,000) shares of capital stock, each of the par value of
$0.25 (twenty-five cents). The board of directors of the Corporation is
expressly authorized to cause shares of capital stock in the Corporation
authorized herein to be issued in one or more classes or series as may be
established from time to time by setting or changing in one or more respects the
voting powers, rights, qualifications, limitations or restrictions of such
shares of stock and to increase or decrease the number of shares so authorized
to be issued in any such class or series.
<PAGE>
CERTIFICATE OF
CHANGE OF DESIGNATION
OF COMMON STOCK OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security
Equity Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to the authority expressly vested in the Board of Directors by the provisions of
the corporation's Articles of Incorporation, the Board of Directors of said
corporation at its regular meeting duly convened and held on the 22nd day of
July, 1994, adopted resolutions reallocating the number of existing shares
authorized to be issued in the four separate series of common stock of the
corporation. Resolutions were also adopted which reaffirmed the preferences,
rights, privileges and restrictions of the separate series of stock of Security
Equity Fund, which resolutions are provided in their entirety as follows:
WHEREAS Security Equity Fund issues its common stock in four separate
series designated as Equity Series A, Equity Series B, Global Series A and
Global Series B.
WHEREAS, the Board of Directors wishes to reallocate the 300,000,000,
shares of authorized capital stock among the series.
NOW, THEREFORE, BE IT RESOLVED, that the officers of the corporation are
hereby directed and authorized to allocate the Fund's existing authorized
capital stock of 300,000,000 shares as follows: 290,000,000 $0.25 par value
shares to Equity Series A, 5,000,000 $0.25 par value shares to the Equity
Series B; 3,000,000 $0.25 par value shares to the Global Series A; and the
remaining 2,000,000 $0.25 par value shares to the Global Series B.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the corporation's series of common
stock, as set forth in the minutes of the July 23, 1993, meeting of this
Board of Directors, are hereby reaffirmed and incorporated by reference
into the minutes of this meeting.
FURTHER RESOLVED, that, the appropriate officers of the corporation be, and
they hereby are, authorized and directed to take such action as may be
necessary under the laws of the State of Kansas or as they deem appropriate
to cause the foregoing resolutions to become effective.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 22nd day of July, 1994.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Judith M. Ralston, a Notary Public in and
for the County and State aforesaid, came JOHN D CLELAND, President, and AMY J.
LEE, Secretary, of Security Equity Fund, a Kansas corporation, personally known
to me to be the persons who executed the foregoing instrument of writing as
President and Secretary, respectively, and duly acknowledged the execution of
the same this 22nd day of July, 1994.
JUDITH M. RALSTON
--------------------------------
Judith M. Ralston, Notary Public
(NOTARIAL SEAL)
My commission expires: January 1, 1995.
<PAGE>
CERTIFICATE OF CHANGE OF
DESIGNATION OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee, Kansas, do hereby certify that pursuant to
authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 3rd day of April 1995,
adopted resolutions (i) establishing two new series of common stock in addition
to those four series of common stock currently being issued by the corporation,
and (ii) allocating the corporation's authorized capital stock among the six
series of common stock of the corporation. Resolutions were also adopted which
reaffirmed the preferences, rights, privileges and restrictions of the separate
series of stock of Security Equity Fund, which resolutions are provided in their
entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of two new
series of common stock of Security Equity Fund in addition to the four
separate series of common stock presently issued by the fund designated as
Equity Series A, Equity Series B, Global Series A and Global Series B;
WHEREAS, the Board of Directors wishes to reallocate the 5,000,000,000
shares of authorized capital stock among the series.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation are
hereby directed and authorized to establish two new series of the Security
Equity Fund designated as Asset Allocation Series A and Asset Allocation
Series B.
FURTHER RESOLVED, that, the officers of the corporation are hereby directed
and authorized to allocate the corporation's authorized capital stock of
5,000,000,000 shares as follows: 1,500,000,000 $0.25 par value shares of
the corporation's authorized capital stock to the Equity Series A;
500,000,000 $0.25 par value shares to the Equity Series B; 750,000,000
$0.25 par value shares to each of the Global Series A and Asset Allocation
Series A; 250,000,000 $0.25 par value shares to each of the Global Series B
and Asset Allocation Series B; and 1,000,000,00 shares shall remain
unallocated.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the series of Security Equity Fund
shall be as follows.
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders, each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset
value thereof, such redemption and the valuation and payment in
connection therewith to be made in compliance with the provisions of
the Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such few shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder will have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these series. Outstanding shares of Global Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these series. Outstanding shares of Asset Allocation
Series A and B shall represent a stockholder interest in a particular
fund of assets held by the corporation which fund shall be invested
and reinvested in accordance with policies and objectives established
by the Board of Directors for these series.
(b) All cash and other property received by the corporation from the sale
of shares of the Equity Series A and B, Global Series A and B, and
Asset Allocation Series A and B, respectively, all securities and
other property held as a result of the investment and reinvestment of
such cash and other property, all revenues and income received or
receivable with respect to such cash, other property, investments and
reinvestments, and all proceeds derived from the sale, exchange,
liquidation or other disposition of any of the foregoing, shall be
allocated to the Equity Series A and B, Global Series A and B, or
Asset Allocation Series A and B, to which they relate and held for the
benefit of the stockholders owning shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and
charged to the series to which such loss, liability or expense
relates. Where any loss, liability or expense relates to more than one
series, the Board of Directors shall allocate the same between or
among such series pro rata based on the respective net asset values of
such series or on such other basis as the Board of Directors deems
appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Global Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
will be paid at the same dividend rate except that expenses attributable to
Equity Series A or B and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A and B represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate, except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Asset Allocation Series A and B represent
a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Asset
Allocation Series. Stockholders of the Asset Allocation Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Whenever dividends are
declared and paid with respect to the Equity Series A and B, the Global
Series A and B, or the Asset Allocation Series A and B, the holders of
shares of the other series shall have no rights in or to such dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
the Global Series B, or Asset Allocation Series B, those shares (except
those purchased through the reinvestment of dividends and other
distributions) shall automatically convert to Equity Series A, Global
Series A, or Asset Allocation Series A shares, respectively, at the
relative net asset values of each of the series without the imposition of
any sales load, fee or other charge. All shares in a stockholder's account
that were purchased through the reinvestment of dividends and other
distributions paid with respect to Series B shares will be considered to be
held in a separate sub-account. Each time Series B shares are converted to
Series A shares, a pro rata portion of the Series B shares held in the
sub-account will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 3rd day of April, 1995.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
<PAGE>
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Connie Brungardt, a Notary Public in and for
the County and State aforesaid, came John D. Cleland, President, and Amy J. Lee,
Secretary, of Security Equity Fund, a Kansas corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as President
and Secretary, respectively, and duly acknowledged the execution of the same
this 3rd day of April, 1995.
CONNIE BRUNGARDT
------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: November 30, 1998.
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND
We, John D. Cleland, President , and Amy J. Lee, Secretary of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, do hereby certify that at a regular meeting of the Board of Directors of
said corporation, held on the 2nd day of February, 1996, the board adopted a
resolution setting forth the following amendment to the Articles of
Incorporation and declaring its advisability:
RESOLVED
The Board of Directors of Security Equity Fund recommends that the Articles of
Incorporation be amended by deleting the first paragraph of Article Fifth in its
entirety and by inserting, in lieu thereof, the following new Article:
FIFTH: The corporation shall have authority to issue an indefinite number of
shares of common stock, of the par value of twenty-five cents ($0.25) per share.
The board of directors of the Corporation is expressly authorized to cause
shares of capital stock of the Corporation authorized herein to be issued in one
or more series as may be established from time to time by setting or changing in
one or more respects the voting powers, rights, qualifications, limitations or
restrictions of such shares of stock and to increase or decrease the number of
shares so authorized to be issued in any such series.
We further certify that the amendment was duly adopted in accordance with the
provisions of K.S.A. 17-6602, as amended.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of said
corporation this 2nd day of February, 1996.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
[SEAL]
<PAGE>
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that before me, L. Charmaine Lucas, a Notary Public in and for
the aforesaid county and state, personally appeared John D. Cleland, President,
and Amy J. Lee, Secretary, of Security Equity Fund, who are known to me to be
the same persons who executed the foregoing certificate and duly acknowledged
the execution of the same this 2nd day of February, 1996.
L. CHARMAINE LUCAS
------------------------------
L. Charmaine Lucas, Notary
(NOTARIAL SEAL)
My commission expires: April 1, 1998
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE, WITH $20 FILING FEE TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-4564
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 2nd day of February,
1996, adopted resolutions authorizing the corporation to issue an indefinite
number of shares of capital stock of each of the six series of common stock of
the corporation. Resolutions were also adopted which reaffirmed the preferences,
rights, privileges and restrictions of separate series of stock of Security
Equity Fund, which resolutions are provided in their entirety as follows:
WHEREAS, K.S.A. 17-6602 has been amended to allow the board of directors of
a corporation that is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act") to approve, by
resolution, an amendment of the corporation's Articles of Incorporation, to
allow the issuance of an indefinite number of shares of the capital stock
of the corporation;
WHEREAS, the corporation is registered as an open-end investment company
under the 1940 Act; and
WHEREAS, the Board of Directors desire to authorize the issuance of an
indefinite number of shares of capital stock of each of the six series of
common stock of the corporation;
NOW THEREFORE BE IT RESOLVED, that, the officers of the corporation are
hereby directed and authorized to issue an indefinite number of $0.25 par
value shares of capital stock of each series of the corporation, which
consist of Equity Series A; Equity Series B; Global Series A; Global Series
B; Asset Allocation Series A; and Asset Allocation Series B.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the corporation's series of common
stock, as set forth in the minutes of the April 3, 1995, meeting of this
Board of Directors, are hereby reaffirmed and incorporated by reference
into the minutes of this meeting; and
FURTHER RESOLVED, that, the appropriate officers of the corporation be, and
they hereby are, authorized and directed to take such action as may be
necessary under the laws of the State of Kansas or as they deem appropriate
to cause the foregoing resolutions to become effective.
The undersigned do hereby certify that the foregoing amendment to the
corporation's Articles of Incorporation has been duly adopted in accordance with
the provisions of K.S.A. 17-6602.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 2nd day of February, 1996.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
[SEAL]
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, L. Charmaine Lucas, a Notary Public in and for
the aforesaid County and State aforesaid, came John D. Cleland, President, and
Amy J. Lee, Secretary, of Security Equity Fund, a Kansas corporation, personally
known to me to be the same persons who executed the foregoing instrument of
writing as President and Secretary, respectively, and duly acknowledged the
execution of the same this 2nd day of February, 1996.
L. CHARMAINE LUCAS
---------------------------------
L. Charmaine Lucas, Notary Public
(NOTARIAL SEAL)
My commission expires: April 1, 1998
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 26th day of July, 1996,
adopted resolutions (i) establishing two new series of common stock in addition
to those six series of common stock currently being issued by the corporation,
and (ii) allocating the corporation's authorized capital stock among the eight
series of common stock of the corporation. Resolutions were also adopted which
reaffirmed the preferences, rights, privileges and restrictions of the separate
series of stock of Security Equity Fund, which resolutions are provided in their
entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of two new
series of common stock of Security Equity Fund in addition to the six
separate series of common stock presently issued by the fund designated as
Equity Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A and Asset Allocation Series B;
WHEREAS, the Board of Directors desire to authorize the issuance of an
indefinite number of shares of capital stock of each of the eight series of
common stock of the corporation.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation are
hereby directed and authorized to establish two new series of the Security
Equity Fund designated as Social Awareness Series A and Social Awareness
Series B.
FURTHER RESOLVED, that, the officers of the corporation are hereby directed
and authorized to issue an indefinite number of $0.25 par value shares of
capital stock of each series of the corporation, which consist of Equity
Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A, Asset Allocation Series B, Social Awareness Series A
and Social Awareness Series B.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the series of Security Equity Fund
shall be as follows.
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders, each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset
value thereof, such redemption and the valuation and payment in
connection therewith to be made in compliance with the provisions of
the Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such few shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder will have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these series. Outstanding shares of Global Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these series. Outstanding shares of Asset Allocation
Series A and B shall represent a stockholder interest in a particular
fund of assets held by the corporation which fund shall be invested
and reinvested in accordance with policies and objectives established
by the Board of Directors for these series. Outstanding shares of
Social Awareness Series A and B shall represent a stockholder interest
in a particular fund of assets held by the corporation which fund
shall be invested and reinvested in accordance with policies and
objectives established by the Board of Directors for these Series.
(b) All cash and other property received by the corporation from the sale
of shares of the Equity Series A and B, Global Series A and B, Asset
Allocation Series A and B, and Social Awareness Series A and B,
respectively, all securities and other property held as a result of
the investment and reinvestment of such cash and other property, all
revenues and income received or receivable with respect to such cash,
other property, investments and reinvestments, and all proceeds
derived from the sale, exchange, liquidation or other disposition of
any of the foregoing, shall be allocated to the Equity Series A and B,
Global Series A and B, Asset Allocation Series A and B, or Social
Awareness Series A and B, to which they relate and held for the
benefit of the stockholders owning shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and
charged to the series to which such loss, liability or expense
relates. Where any loss, liability or expense relates to more than one
series, the Board of Directors shall allocate the same between or
among such series pro rata based on the respective net asset values of
such series or on such other basis as the Board of Directors deems
appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Equity Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A and B represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Asset Allocation Series A and B represent
a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Asset
Allocation Series. Stockholders of the Asset Allocation Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Shares of Social Awareness
Series A and B represent a stockholder interest in a particular fund of
assets held by the corporation and, accordingly, dividends shall be
calculated and declared for these series in the same manner, at the same
time, on the same day, and shall be paid at the same dividend rate, except
that expenses attributable to a particular series and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be borne
exclusively by the affected Social Awareness Series. Stockholders of the
Social Awareness Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Whenever dividends are declared and paid with respect to the Equity
Series A and B, the Global Series A and B, the Asset Allocation Series A
and B, or the Social Awareness Series A and B, the holders of shares of the
other series shall have no rights in or to such dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
the Global Series B, the Asset Allocation Series B, or the Social Awareness
Series B, those shares (except those purchased through the reinvestment of
dividends and other distributions) shall automatically convert to Equity
Series A, Global Series A, Asset Allocation Series A or Social Awareness
Series A shares respectively, at the relative net asset values of each of
the series without the imposition of any sales load, fee or other charge.
All shares in a stockholder's account that were purchased through the
reinvestment of dividends and other distributions paid with respect to
Series B shares will be considered to be held in a separate sub-account.
Each time Series B shares are converted to Series A shares, a pro rata
portion of the Series B shares held in the sub-account will also convert to
Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 1st day of August, 1996.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Jana R. Selley, a Notary Public in and for the
County and State aforesaid, came John D. Cleland, President, and Amy J. Lee,
Secretary, of Security Equity Fund, a Kansas corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as President
and Secretary, respectively, and duly acknowledged the execution of the same
this 1st day of August, 1996.
JANA SELLEY
------------------------------
Notary Public
My commission expires: June 14, 2000
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 7th day of February,
1997, adopted resolutions (i) establishing two new series of common stock in
addition to those eight series of common stock currently being issued by the
corporation, and (ii) allocating the corporation's authorized capital stock
among the ten series of common stock of the corporation. Resolutions were also
adopted which reaffirmed the preferences, rights, privileges and restrictions of
the separate series of stock of Security Equity Fund, which resolutions are
provided in their entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of two
new series of common stock of Security Equity Fund in addition to the eight
separate series of common stock presently issued by the fund designated as
Equity Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A, Asset Allocation Series B, Social Awareness Series A
and Social Awareness Series B;
WHEREAS, the Board of Directors desires to authorize the issuance of
an indefinite number of shares of capital stock of each of the ten series
of common stock of the corporation.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation
are hereby directed and authorized to establish two new series of the
Security Equity Fund designated as Value Series A and Value Series B.
FURTHER RESOLVED, that, the officers of the corporation are hereby
directed and authorized to issue an indefinite number of $0.25 par value
shares of capital stock of each series of the corporation, which consist of
Equity Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A, Asset Allocation Series B, Social Awareness Series A,
Social Awareness Series B, Value Series A and Value Series B.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the series of Security Equity Fund
shall be as follows.
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders, each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset
value thereof, such redemption and the valuation and payment in
connection therewith to be made in compliance with the provisions of
the Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such fewer shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder will have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these series. Outstanding shares of Global Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these series. Outstanding shares of Asset Allocation
Series A and B shall represent a stockholder interest in a particular
fund of assets held by the corporation which fund shall be invested
and reinvested in accordance with policies and objectives established
by the Board of Directors for these series. Outstanding shares of
Social Awareness Series A and B shall represent a stockholder interest
in a particular fund of assets held by the corporation which fund
shall be invested and reinvested in accordance with policies and
objectives established by the Board of Directors for these Series.
Outstanding shares of Values Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these Series.
(b) All cash and other property received by the corporation from the sale
of shares of the Equity Series A and B, Global Series A and B, Asset
Allocation Series A and B, Social Awareness Series A and B, and Value
Series A and B, respectively, all securities and other property held
as a result of the investment and reinvestment of such cash and other
property, all revenues and income received or receivable with respect
to such cash, other property, investments and reinvestments, and all
proceeds derived from the sale, exchange, liquidation or other
disposition of any of the foregoing, shall be allocated to the Equity
Series A and B, Global Series A and B, Asset Allocation Series A and
B, Social Awareness Series A and B, or Value Series A and B, to which
they relate and held for the benefit of the stockholders owning shares
of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and
charged to the series to which such loss, liability or expense
relates. Where any loss, liability or expense relates to more than one
series, the Board of Directors shall allocate the same between or
among such series pro rata based on the respective net asset values of
such series or on such other basis as the Board of Directors deems
appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Equity Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A and B represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Asset Allocation Series A and B represent
a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Asset
Allocation Series. Stockholders of the Asset Allocation Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Shares of Social Awareness
Series A and B represent a stockholder interest in a particular fund of
assets held by the corporation and, accordingly, dividends shall be
calculated and declared for these series in the same manner, at the same
time, on the same day, and shall be paid at the same dividend rate, except
that expenses attributable to a particular series and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be borne
exclusively by the affected Social Awareness Series. Stockholders of the
Social Awareness Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Shares of Value Series A and B represent a stockholder interest in
a particular fund of assets held by the corporation and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and shall be paid at the same
dividend rate, except that expenses attributable to a particular series and
payments made pursuant to a 12b-1 Plan or Shareholder Services Plan shall
be borne exclusively by the affected Value Series. Stockholders of the
Value Series shall share in dividends declared and paid with respect to
such series pro rata based on their ownership of shares of such series.
Whenever dividends are declared and paid with respect to the Equity Series
A and B, the Global Series A and B, the Asset Allocation Series A and B,
the Social Awareness Series A and B, or the Value Series A and B, the
holders of shares of the other series shall have no rights in or to such
dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
the Global Series B, the Asset Allocation Series B, the Social Awareness
Series B, or the Value Series B, those shares (except those purchased
through the reinvestment of dividends and other distributions) shall
automatically convert to Equity Series A, Global Series A, Asset Allocation
Series A, Social Awareness Series A, or Value Series A shares respectively,
at the relative net asset values of each of the series without the
imposition of any sales load, fee or other charge. All shares in a
stockholder's account that were purchased through the reinvestment of
dividends and other distributions paid with respect to Series B shares will
be considered to be held in a separate sub-account. Each time Series B
shares are converted to Series A shares, a pro rata portion of the Series B
shares held in the sub-account will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 12th day of March, 1997.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me L. Charmaine Lucas, a Notary Public in and for
the County and State aforesaid, came John D. Cleland, President, and Amy J. Lee,
Secretary, of Security Equity Fund, a Kansas corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as President
and Secretary, respectively, and duly acknowledged the execution of the same
this 12th day of March, 1997.
L. CHARMAINE LUCAS
------------------------------
Notary Public
My commission expires: April 1, 1998
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 25th day of July, 1997,
adopted resolutions (i) establishing two new series of common stock in addition
to those ten series of common stock currently being issued by the corporation,
and (ii) allocating the corporation's authorized capital stock among the twelve
series of common stock of the corporation. Resolutions were also adopted which
reaffirmed the preferences, rights, privileges and restrictions of the separate
series of stock of Security Equity Fund, which resolutions are provided in their
entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of two
new series of common stock of Security Equity Fund in addition to the ten
separate series of common stock presently issued by the fund designated as
Equity Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A, Asset Allocation Series B, Social Awareness Series A,
Social Awareness Series B, Value Series A and Value Series B;
WHEREAS, the Board of Directors desires to authorize the issuance of
an indefinite number of shares of capital stock of each of the twelve
series of common stock of the corporation.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation
are hereby directed and authorized to establish two new series of the
Security Equity Fund designated as Small Company Series A and Small Company
Series B.
FURTHER RESOLVED, that, the officers of the corporation are hereby
directed and authorized to issue an indefinite number of $0.25 par value
shares of capital stock of each series of the corporation, which consist of
Equity Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A, Asset Allocation Series B, Social Awareness Series A,
Social Awareness Series B, Value Series A, Value Series B, Small Company
Series A and Small Company Series B.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the series of Security Equity Fund
shall be as follows.
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders, each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset
value thereof, such redemption and the valuation and payment in
connection therewith to be made in compliance with the provisions of
the Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such fewer shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder will have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these series. Outstanding shares of Global Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these series. Outstanding shares of Asset Allocation
Series A and B shall represent a stockholder interest in a particular
fund of assets held by the corporation which fund shall be invested
and reinvested in accordance with policies and objectives established
by the Board of Directors for these series. Outstanding shares of
Social Awareness Series A and B shall represent a stockholder interest
in a particular fund of assets held by the corporation which fund
shall be invested and reinvested in accordance with policies and
objectives established by the Board of Directors for these Series.
Outstanding shares of Values Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these Series. Outstanding shares of Small Company Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these Series
(b) All cash and other property received by the corporation from the sale
of shares of the Equity Series A and B, Global Series A and B, Asset
Allocation Series A and B, Social Awareness Series A and B, Value
Series A and B, and Small Company Series A and B, respectively, all
securities and other property held as a result of the investment and
reinvestment of such cash and other property, all revenues and income
received or receivable with respect to such cash, other property,
investments and reinvestments, and all proceeds derived from the sale,
exchange, liquidation or other disposition of any of the foregoing,
shall be allocated to the Equity Series A and B, Global Series A and
B, Asset Allocation Series A and B, Social Awareness Series A and B,
Value Series A and B, or Small Company Series A and B, to which they
relate and held for the benefit of the stockholders owning shares of
such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and
charged to the series to which such loss, liability or expense
relates. Where any loss, liability or expense relates to more than one
series, the Board of Directors shall allocate the same between or
among such series pro rata based on the respective net asset values of
such series or on such other basis as the Board of Directors deems
appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Equity Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A and B represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Asset Allocation Series A and B represent
a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Asset
Allocation Series. Stockholders of the Asset Allocation Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Shares of Social Awareness
Series A and B represent a stockholder interest in a particular fund of
assets held by the corporation and, accordingly, dividends shall be
calculated and declared for these series in the same manner, at the same
time, on the same day, and shall be paid at the same dividend rate, except
that expenses attributable to a particular series and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be borne
exclusively by the affected Social Awareness Series. Stockholders of the
Social Awareness Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Shares of Value Series A and B represent a stockholder interest in
a particular fund of assets held by the corporation and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and shall be paid at the same
dividend rate, except that expenses attributable to a particular series and
payments made pursuant to a 12b-1 Plan or Shareholder Services Plan shall
be borne exclusively by the affected Value Series. Stockholders of the
Value Series shall share in dividends declared and paid with respect to
such series pro rata based on their ownership of shares of such series.
Shares of Small Company Series A and B represent a stockholder interest in
a particular fund of assets held by the corporation and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and shall be paid at the same
dividend rate, except that expenses attributable to a particular series and
payments made pursuant to a 12b-1 Plan or Shareholder Services Plan shall
be borne exclusively by the affected Small Company Series. Stockholders of
the Small Company Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Whenever dividends are declared and paid with respect to the Equity
Series A and B, the Global Series A and B, the Asset Allocation Series A
and B, the Social Awareness Series A and B, the Value Series A and B, or
the Small Company Series A and B, the holders of shares of the other series
shall have no rights in or to such dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
the Global Series B, the Asset Allocation Series B, the Social Awareness
Series B, the Value Series B, or the Small Company Series B, those shares
(except those purchased through the reinvestment of dividends and other
distributions) shall automatically convert to Equity Series A, Global
Series A, Asset Allocation Series A, Social Awareness Series A, Value
Series A or Small Company Series A shares respectively, at the relative net
asset values of each of the series without the imposition of any sales
load, fee or other charge. All shares in a stockholder's account that were
purchased through the reinvestment of dividends and other distributions
paid with respect to Series B shares will be considered to be held in a
separate sub-account. Each time Series B shares are converted to Series A
shares, a pro rata portion of the Series B shares held in the sub-account
will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 15th day of September, 1997.
JOHN D. CLELAND
----------------------------------
John D. Cleland, President
AMY J. LEE
----------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Jana R. Selley, a Notary Public in and for the
County and State aforesaid, came John D. Cleland, President, and Amy J. Lee,
Secretary, of Security Equity Fund, a Kansas corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as President
and Secretary, respectively, and duly acknowledged the execution of the same
this 15th day of September, 1997.
JANA R. SELLEY
----------------------------------
Notary Public
My commission expires: June 14, 2000
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
We, James R. Schmank, Vice President, and Amy J. Lee, Secretary, of Security
Equity Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 6th day of November 1998,
adopted resolutions establishing fifteen new series of common stock in addition
to those twelve series of common stock currently being issued by the
corporation. Resolutions were also adopted which reaffirmed the preferences,
rights, privileges and restrictions of the separate series of stock of Security
Equity Fund, which resolutions are provided in their entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of
fifteen new series of common stock of Security Equity Fund in addition to
the twelve separate series of common stock presently issued by the fund
designated as Equity Series A, Equity Series B, Global Series A, Global
Series B, Asset Allocation Series A, Asset Allocation Series B, Social
Awareness Series A, Social Awareness Series B, Value Series A, Value Series
B, Small Company Series A and Small Company Series B;
WHEREAS, the Board of Directors desires to authorize the issuance of an
indefinite number of shares of capital stock of each of the twenty-seven
series of common stock of the corporation.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation
are hereby directed and authorized to establish fifteen new series of the
Security Equity Fund designated as Equity Series C, Global Series C, Asset
Allocation Series C, Social Awareness Series C, Value Series C, Small
Company Series C, Enhanced Index Series A, Enhanced Index Series B,
Enhanced Index Series C, International Series A, International Series B,
International Series C, Select 25 Series A, Select 25 Series B and Select
25 Series C.
FURTHER RESOLVED, that, the officers of the corporation are hereby
directed and authorized to issue an indefinite number of $0.25 par value
shares of capital stock of each series of the corporation, which consist of
Equity Series A, Equity Series B, Equity Series C, Global Series A, Global
Series B, Global Series C, Asset Allocation Series A, Asset Allocation
Series B, Asset Allocation Series C, Social Awareness Series A, Social
Awareness Series B, Social Awareness Series C, Value Series A, Value Series
B, Value Series C, Small Company Series A, Small Company Series B, Small
Company Series C, Enhanced Index Series A, Enhanced Index Series B,
Enhanced Index Series C, International Series A, International Series B,
International Series C, Select 25 Series A, Select 25 Series B and Select
25 Series C.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the series of Security Equity Fund
shall be as follows.
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders, each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset value
thereof, such redemption and the valuation and payment in connection
therewith to be made in compliance with the provisions of the
Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such fewer shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder will have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A, B and C shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these series. Outstanding shares of Global Series A, B and C shall
represent a stockholder interest in a particular fund of assets held by
the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these series. Outstanding shares of Asset Allocation
Series A, B and C shall represent a stockholder interest in a
particular fund of assets held by the corporation which fund shall be
invested and reinvested in accordance with policies and objectives
established by the Board of Directors for these series. Outstanding
shares of Social Awareness Series A, B and C shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these Series. Outstanding shares of Values Series A, B and C shall
represent a stockholder interest in a particular fund of assets held by
the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these Series. Outstanding shares of Small Company Series
A, B and C shall represent a stockholder interest in a particular fund
of assets held by the corporation which fund shall be invested and
reinvested in accordance with policies and objectives established by
the Board of Directors for these Series. Outstanding shares of Enhanced
Index Series A, B and C shall represent a stockholder interest in a
particular fund of assets held by the corporation which fund shall be
invested and reinvested in accordance with policies and objectives
established by the Board of Directors for these series. Outstanding
shares of International Series A, B and C shall repsent a stockholder
interest in a particular fund of assets held by the corporation which
fund shall be invested and reinvested in accordance with policies and
objectives established by the Board of Directors for these Series.
Outstanding shares of Select 25 Series A, B and C shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these Series.
(b) All cash and other property received by the corporation from the sale
of shares of the Equity Series A, B and C, Global Series A, B and C,
Asset Allocation Series A, B and C, Social Awareness Series A, B and C,
Value Series A, B and C, Small Company Series A, B and C, Enhanced
Index Series A, B and C, International Series A, B and C, and Select 25
Series A, B and C, respectively, all securities and other property held
as a result of the investment and reinvestment of such cash and other
property, all revenues and income received or receivable with respect
to such cash, other property, investments and reinvestments, and all
proceeds derived from the sale, exchange, liquidation or other
disposition of any of the foregoing, shall be allocated to the Equity
Series A, B and C, Global Series A, B and C, Asset Allocation Series A,
B and C, Social Awareness Series A, B and C, Value Series A, B and C,
Small Company Series A, B and C, Enhanced Index Series A, B and C,
International Series A, B and C or Select 25 Series A, B and C, to
which they relate and held for the benefit of the stockholders owning
shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and charged
to the series to which such loss, liability or expense relates. Where
any loss, liability or expense relates to more than one series, the
Board of Directors shall allocate the same between or among such series
pro rata based on the respective net asset values of such series or on
such other basis as the Board of Directors deems appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Equity Series A, B and C
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A, B and C represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Asset Allocation Series A, B and C
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Asset
Allocation Series. Stockholders of the Asset Allocation Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Shares of Social Awareness
Series A, B and C represent a stockholder interest in a particular fund of
assets held by the corporation and, accordingly, dividends shall be
calculated and declared for these series in the same manner, at the same
time, on the same day, and shall be paid at the same dividend rate, except
that expenses attributable to a particular series and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be borne
exclusively by the affected Social Awareness Series. Stockholders of the
Social Awareness Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Shares of Value Series A, B and C represent a stockholder interest
in a particular fund of assets held by the corporation and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and shall be paid at the same
dividend rate, except that expenses attributable to a particular series and
payments made pursuant to a 12b-1 Plan or Shareholder Services Plan shall
be borne exclusively by the affected Value Series. Stockholders of the
Value Series shall share in dividends declared and paid with respect to
such series pro rata based on their ownership of shares of such series.
Shares of Small Company Series A, B and C represent a stockholder interest
in a particular fund of assets held by the corporation and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and shall be paid at the same
dividend rate, except that expenses attributable to a particular series and
payments made pursuant to a 12b-1 Plan or Shareholder Services Plan shall
be borne exclusively by the affected Small Company Series. Stockholders of
the Small Company Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Shares of Enhanced Index Series A, B and C represent a stockholder
interest in a particular fund of assets held by the corporation and,
accordingly, dividends shall be calculated and declared for these series in
the same manner, at the same time, on the same day, and shall be paid at
the same dividend rate, except that expenses attributable to a particular
series and payments made pursuant to a 12b-1 Plan or Shareholder Services
Plan shall be borne exclusively by the affected Enhanced Index Series.
Stockholders of the Enhanced Index Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of International Series A, B and C represent
a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected
International Series. Stockholders of the International Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Shares of Select 25 Series A,
B and C represent a stockholder interest in a particular fund of assets
held by the corporation and, accordingly, dividends shall be calculated and
declared for these series in the same manner, at the same time, on the same
day, and shall be paid at the same dividend rate, except that expenses
attributable to a particular series and payments made pursuant to a 12b-1
Plan or Shareholder Services Plan shall be borne exclusively by the
affected Select 25 Series. Stockholders of the Select 25 Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Whenever dividends are
declared and paid with respect to the Equity Series A, B and C, the Global
Series A, B and C, the Asset Allocation Series A, B and C, the Social
Awareness Series A, B and C, the Value Series A, B and C, the Small Company
Series A, B and C, the Enhanced Index Series A, B and C, the International
Series A, B and C, or the Select 25 Series A, B and C, the holders of
shares of the other series shall have no rights in or to such dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
the Global Series B, the Asset Allocation Series B, the Social Awareness
Series B, the Value Series B, the Small Company Series B, the Enhanced
Index Series B, the International Series B or the Select 25 Series B, those
shares (except those purchased through the reinvestment of dividends and
other distributions) shall automatically convert to Equity Series A, Global
Series A, Asset Allocation Series A, Social Awareness Series A, Value
Series A, Small Company Series A, Enhanced Index Series A, International
Series A or Select 25 Series A shares respectively, at the relative net
asset values of each of the series without the imposition of any sales
load, fee or other charge. All shares in a stockholder's account that were
purchased through the reinvestment of dividends and other distributions
paid with respect to Series B shares will be considered to be held in a
separate sub-account. Each time Series B shares are converted to Series A
shares, a pro rata portion of the Series B shares held in the sub-account
will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 27th day of January, 1999.
JAMES R. SCHMANK
--------------------------------
James R. Schmank, Vice President
AMY J. LEE
--------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Jana R. Selley, a Notary Public in and for the
County and State aforesaid, came James R. Schmank, Vice President, and Amy J.
Lee, Secretary, of Security Equity Fund, a Kansas corporation, personally known
to me to be the persons who executed the foregoing instrument of writing as
President and Secretary, respectively, and duly acknowledged the execution of
the same this 27th day of January, 1999.
JANA R. SELLEY
--------------------------------
Notary Public
My commission expires: June 14, 2000
<PAGE>
AMENDED CERTIFICATE OF DESIGNATION
CHANGING NAME OF
SERIES OF STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, James R. Schmank, Vice President, and Amy J. Lee, Secretary, of Security
Equity Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 7th day of May, 1999,
adopted resolutions changing the name of Asset Allocation Series A, Asset
Allocation Series B and Asset Allocation Series C, existing series of common
stock of Security Equity Fund, which resolutions are provided in their entirety
as follows:
WHEREAS, the Board of Directors has approved the change in name of an
existing series of common stock, from Asset Allocation Series A, B and C to
Total Return Series A, B and C to more accurately reflect the investment
objectives of the series;
WHEREAS, there are no changes in the voting powers, designations,
preferences and relative, participating, optional or other rights, if any,
or the qualifications, limitations or restrictions of the series requiring
stockholder approval;
NOW, THEREFORE, BE IT RESOLVED, that, the name of Asset Allocation Series
A, Asset Allocation Series B and Asset Allocation Series C of Security
Equity Fund is hereby changed to Total Return Series A, Total Return Series
B and Total Return Series C, respectively;
FURTHER RESOLVED, that, the appropriate officers of the corporation be, and
they hereby are, authorized and directed to take such action as may be
necessary under the laws of the State of Kansas or as they deem appropriate
to cause the foregoing resolutions to become effective.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 7th day of May, 1999.
JAMES R. SCHMANK
--------------------------------
James R. Schmank, Vice President
AMY J. LEE
--------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Annette E. Cripps, a Notary Public in and for
the County and State aforesaid, came James R. Schmank, Vice President, and Amy
J. Lee, Secretary, of Security Equity Fund, a Kansas corporation, personally
known to me to be the persons who executed the foregoing instrument of writing
as President and Secretary, respectively, and duly acknowledged the execution of
the same this 7th day of May, 1999.
ANNETTE E. CRIPPS
--------------------------------
Notary Public
My commission expires: 7/8/2001
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, James R. Schmank, President, and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 4th day of February 2000,
adopted resolutions establishing six new series of common stock in addition to
those twenty-seven series of common stock currently being issued by the
corporation. Resolutions were also adopted which reaffirmed the preferences,
rights, privileges and restrictions of the separate series of stock of Security
Equity Fund, which resolutions are provided in their entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of six new
series of common stock of Security Equity Fund in addition to the
twenty-seven separate series of common stock presently issued by the fund
designated as Equity Series A, Equity Series B, Equity Series C, Global
Series A, Global Series B, Global Series C, Total Return Series A, Total
Return Series B, Total Return Series C, Social Awareness Series A, Social
Awareness Series B, Social Awareness Series C, Value Series A, Value
Series B, Value Series C, Small Company Series A, Small Company Series B,
Small Company Series C, Enhanced Index Series A, Enhanced Index Series B,
Enhanced Index Series C, International Series A, International Series B,
International Series C, Select 25 Series A, Select 25 Series B, Select 25
Series C;
WHEREAS, the Board of Directors desires to authorize the issuance of an
indefinite number of shares of capital stock of each the thirty-three
series of common stock of Security Equity Fund;
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation are
hereby directed and authorized to establish six new series of the Security
Equity Fund designated as Large Cap Growth Series A, Large Cap Growth
Series B, Large Cap Growth Series C, Technology Series A, Technology
Series B, and Technology Series C.
FURTHER RESOLVED, that, the officers of the corporation are hereby
directed and authorized to issue an indefinite number of $0.25 par value
shares of capital stock of each series of the corporation, which consist
of Equity Series A, Equity Series B, Equity Series C, Global Series A,
Global Series B, Global Series C, Total Return Series A, Total Return
Series B, Total Return Series C, Social Awareness Series A, Social
Awareness Series B, Social Awareness Series C, Value Series A, Value
Series B, Value Series C, Small Company Series A, Small Company Series B,
Small Company Series C, Enhanced Index Series A, Enhanced Index Series B,
Enhanced Index Series C, International Series A, International Series B,
International Series C, Select 25 Series A, Select 25 Series B, Select 25
Series C, Large Cap Growth Series A, Large Cap Growth Series B, Large Cap
Growth Series C, Technology Series A, Technology Series B, and Technology
Series C.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the series of Security Equity Fund
shall be as set forth in the minutes of the November 6, 1998 meeting of
this Board of Directors, which preferences, rights, privileges and
restrictions are hereby reaffirmed into the minutes of this meeting.
FURTHER RESOLVED, that, the appropriate officers of the Corporation be,
and they hereby are, authorized and directed to take such action as may be
necessary under the laws of the State of Kansas or as they deem
appropriate to cause the foregoing resolutions to become effective.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 1st day of May, 2000.
JAMES R. SCHMANK
-------------------------------
James R. Schmank, President
AMY J. LEE
-------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Marcia J. Johnson, a Notary Public in and for
the County and State aforesaid, came James R. Schmank, President, and Amy J.
Lee, Secretary, of Security Equity Fund, a Kansas corporation, personally known
to me to be the persons who executed the foregoing instrument of writing as
President and Secretary, respectively, and duly acknowledged the execution of
the same this 1st day of May, 2000.
MARCIA J. JOHNSON
-------------------------------
Notary Public
My commission expires: March 23, 2001
<PAGE>
AMENDED CERTIFICATE OF DESIGNATION
CHANGING NAME OF
SERIES OF STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, James R. Schmank, Vice President, and Amy J. Lee, Secretary, of Security
Equity Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 4th day of February,
2000, adopted resolutions changing the name of Small Company Series A, Small
Company Series B, Small Company Series C, Value Series A, Value Series B, and
Value Series C, existing series of common stock of Security Equity Fund, which
resolutions are provided in their entirety as follows:
WHEREAS, the Board of Directors of Security Equity Fund desires to change
the name of its existing series of common stock, from Small Company Series
A, B and C to Small Cap Growth Series A, B and C and Value Series A, B and
C to Mid Cap Value Series A, B and C to more accurately reflect the
investment objective of the series;
WHEREAS, there are no changes in the voting powers, designations,
preferences and relative, participating, optional or other rights, if any,
or the qualifications, limitations or restrictions of the series requiring
stockholder approval;
NOW, THEREFORE, BE IT RESOLVED, that, the name of Small Company Series A,
Small Company Series B and Small Company Series C of Security Equity Fund
is hereby changed to Small Cap Growth Series A, Small Cap Growth Series B
and Small Cap Growth Series C, respectively and Value Series A, Value
Series B and Value Series C is hereby changed to Mid Cap Value Series A,
Mid Cap Value Series B and Mid Cap Value Series C, respectively;
FURTHER RESOLVED, that the appropriate officers of Security Equity Fund
be, and they hereby are, authorized and directed to take such action as
may be necessary under the laws of the State of Kansas or as they deem
appropriate to cause the foregoing resolutions to become effective,
including filing an amended certificate of designation with the Kansas
Secretary of State's Office.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 1st day of May, 2000.
JAMES R. SCHMANK
--------------------------------
James R. Schmank, Vice President
AMY J. LEE
--------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Marcia J. Johnson, a Notary Public in and for
the County and State aforesaid, came James R. Schmank, Vice President, and Amy
J. Lee, Secretary, of Security Equity Fund, a Kansas corporation, personally
known to me to be the persons who executed the foregoing instrument of writing
as President and Secretary, respectively, and duly acknowledged the execution of
the same this 1st day of May, 2000.
MARCIA J. JOHNSON
--------------------------------
Notary Public
My commission expires: March 23, 2001
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an indefinite number of shares.
EQUITY SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Capital Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
The face of this document has a security void background pattern
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an indefinite number of shares.
GLOBAL SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Capital Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
The face of this document has a security void background pattern
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an indefinite number of shares.
TOTAL RETURN SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Capital Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
The face of this document has a security void background pattern
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an indefinite number of shares.
SOCIAL AWARENESS SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Capital Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
The face of this document has a security void background pattern
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an indefinite number of shares.
MID CAP VALUE SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Capital Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
The face of this document has a security void background pattern
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an indefinite number of shares.
SMALL CAP GROWTH SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Capital Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
The face of this document has a security void background pattern
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an indefinite number of shares.
ENHANCED INDEX SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Capital Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
The face of this document has a security void background pattern
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an indefinite number of shares.
INTERNATIONAL SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Capital Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
The face of this document has a security void background pattern
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an indefinite number of shares.
SELECT 25 SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Capital Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
The face of this document has a security void background pattern
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an indefinite number of shares.
LARGE CAP GROWTH SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Capital Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
The face of this document has a security void background pattern
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an indefinite number of shares.
TECHNOLOGY SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Capital Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
The face of this document has a security void background pattern
<PAGE>
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
This Agreement, made and entered into this 27th day of January, 2000, 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. SMC shall bear the expense of providing such other
services to the Equity and Global Series. Total Return Series, Social
Awareness Series, Value Series, Small Company Series, International Series,
Enhanced Index Series and Select 25 Series shall bear the expense of such
other services and all other expenses of the Series. 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 with
respect to the Equity and Global Series, 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 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 and
Class C Distribution Plans.
and, in addition to those expenses set forth above, Total Return
Series, Social Awareness Series, Value Series, Small Company Series,
International Series, Enhanced Index Series and Select 25 Series shall
pay all expenses of the Series 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 Investment
Company Act of 1940 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. Notwithstanding the foregoing, SMC shall pay all expenses
related to the initial registration and qualification of the Class C
shares of Total Return Series, Social Awareness Series, Value Series,
Small Company Series, International Series, Enhanced Index Series and
Select 25 Series, under the Blue Sky laws of the states where such
class of stock is offered.
(c) EXPENSE CAP. For each of the Fund's full fiscal years 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 or
Class C Distribution Plans, but inclusive of SMC's compensation,
exceeds the amount set forth below (the "Expense Cap"), SMC will
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 will 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 and C shares - 2.25% Enhanced
Index Series, Class A, B and C shares - 1.75% Select 25 Series,
Class A, B and C shares - 1.75%
3. COMPENSATION OF SMC.
(a) As compensation for the services to be rendered by SMC to Equity
Series and Global Series as provided for herein, for each of the years
this Agreement is in effect, the Fund shall pay SMC an annual fee
equal to (1) 2 percent of the first $10 million of the average daily
net assets, 1 1/2 percent of the next $20 million of the average daily
net assets, and 1 percent of the remaining average daily net assets of
the Equity Series of the Fund for any fiscal year, and (2) 2 percent
of the first $70 million of the average daily net assets and 1 1/2
percent of the remaining average daily net assets of the Global Series
of the Fund for any fiscal year. Such fees shall be determined daily
and payable monthly. As compensation for the investment advisory
services to be rendered by SMC to Social Awareness Series, Value
Series and Small Company Series, for each of the years this Agreement
is in effect, the Social Awareness Series, Value Series and Small
Company Series shall each pay SMC an annual fee equal to 1% of their
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 Total Return
Series, Enhanced Index Series and Select 25 Series for each of the
years this Agreement is in effect, the Total Return Series, Enhanced
Index Series and Select 25 Series shall each pay SMC an annual fee
equal to .75% of their 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 International Series,
the International Series shall pay SMC an annual fee equal to .05% of
the average daily net assets of International Series, plus the greater
of .10% of its average daily net assets or (i) $30,000 in the year
ended January 31, 2000; (ii) $45,000 in the year ending January 31,
2001 and (iii) $60,000 thereafter. Such fees shall be calculated daily
and payable monthly. As compensation for the administrative services
to be rendered by SMC to Total Return Series, Social Awareness Series,
Value Series, Small Company Series, Enhanced Index Series and Select
25 Series, each such Series shall pay SMC an annual fee equal to .09%
of their respective 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 Total Return Series,
Social Awareness Series, Value Series, Small Company Series,
International Series, Enhanced Index Series, and Select 25 Series,
each such Series shall pay a Maintenance Fee of $8.00 per account, a
Transaction Fee of $1.00 per account and a Dividend Fee of $1.00 per
account.
(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 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 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 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 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 effected
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 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 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 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 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 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 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 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 January 27, 2002, 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 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 JOHN D. CLELAND
---------------------------------
Title: President
ATTEST:
AMY J. LEE
- ----------------------------------
Secretary
SECURITY MANAGEMENT COMPANY, LLC
By JAMES R. SCHMANK
---------------------------------
Title: President
ATTEST:
AMY J. LEE
- ----------------------------------
Secretary
<PAGE>
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, prospectus 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 service.
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 reconciliation's 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; an
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 JOHN D. CLELAND SMC JAMES R. SCHMANK
----------------------------- ----------------------------
<PAGE>
AMENDMENT TO
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Management Company, LLC
("SMC") are parties to an Investment Management and Services Agreement, dated
January 27, 2000, (the "Agreement"), under which SMC, 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 February 4, 2000, the Board of Directors of the Fund authorized the
Fund to offer its common stock in two new series designated as the Large Cap
Growth Series and Technology Series, with each series representing separate
interests in a separate portfolio of securities and other assets;
WHEREAS, on February 4, 2000, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Large Cap Growth Series and
Technology Series in three classes, designated Class A shares, Class B shares,
and Class C shares;
WHEREAS, on February 4, 2000, the Board of Directors of the Fund approved the
amendment of the Agreement to provide that SMC, would provide investment
advisory and business management services to each class of common stock of the
Large Cap Growth Series and Technology Series of the Fund under the terms and
conditions of the Agreement; and
WHEREAS, this amendment to the Agreement is subject to the approval of the
initial shareholder of the Large Cap Growth Series and Technology Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and SMC, hereby amend the
Agreement, effective May 1, 2000, to provide that SMC, shall provide all
investment advisory services, general administrative, fund accounting, transfer
agency and dividend disbursing services to the Large Cap Growth Series and
Technology Series of the Fund pursuant to the terms set forth in the Agreement,
as follows.
Paragraph 1 is deleted in its entirety and the following paragraph inserted in
lieu thereof:
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. SMC shall bear the expense of providing
such other services to the Equity and Global Series. All other Series of
the Fund shall bear the expense of such other services and all other
expenses of such Series. 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.
Paragraph 2(b) shall be deleted in its entirety and the following
paragraph shall be inserted in lieu thereof:
2. ALLOCATION OF EXPENSES AND CHARGES.
(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 and
Class C Distribution Plans; and, in addition to those expenses
set forth above, Total Return Series, Social Awareness Series,
Mid Cap Value Series, Small Cap Growth Series, International
Series, Enhanced Index Series, Select 25 Series, Large Cap
Growth Series, and Technology Series shall pay all expenses of
the Series 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 Investment Company Act of 1940 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.
Paragraph 3(a) shall be deleted in its entirety and the
following paragraph inserted in lieu thereof:
3. COMPENSATION OF SMC.
(a) As compensation for the services to be rendered by SMC to Equity
Series and Global Series as provided for herein, for each of the
years this Agreement is in effect, the Fund shall pay SMC an annual
fee equal to (1) 2 percent of the first $10 million of the average
daily net assets, 1 1/2 percent of the next $20 million of the
average daily net assets, and 1 percent of the remaining average
daily net assets of the Equity Series of the Fund for any fiscal
year, and (2) 2 percent of the first $70 million of the average
daily net assets and 1 1/2 percent of the remaining average daily
net assets of the Global Series of the Fund for any fiscal year.
Such fees shall be determined daily and payable monthly. As
compensation for the investment advisory services to be rendered by
SMC to Total Return Series, Enhanced Index Series and Select 25
Series for each of the years this Agreement is in effect, such
Series shall each pay SMC an annual fee equal to .75% of their
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 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, such Series shall each pay SMC an annual fee equal to
1% of their 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 administrative services to
be rendered by SMC to the International Series, the International
Series shall pay SMC an annual fee equal to .045% of the average
daily net assets of International Series, plus the greater of .10%
of its average daily net assets or (i) $45,000 in the year ending
January 31, 2001 and (ii) $60,000 thereafter. Such fees shall be
calculated daily and payable monthly. As compensation for the
administrative services to be rendered by SMC to the Technology
Series, the Technology Series shall pay SMC an annual fee equal to
.045% of the average daily net assets of International Series, plus
the greater of .10% of its average daily net assets or (i) $30,000
in the year ending April 30, 2001, (ii) $45,000 in the year ending
April 30, 2002 and (iii) $60,000 thereafter. Such fees shall be
calculated daily and payable monthly. As compensation for the
administrative services to be rendered by SMC to Total Return
Series, Social Awareness Series, Mid Cap Value Series, Small Cap
Growth Series, Enhanced Index Series, Select 25 Series, and Large
Cap Growth Series, each such Series shall pay SMC an annual fee
equal to .09% of their respective 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 other
than Equity and Global Series, such Series shall pay a Maintenance
Fee of $8.00 per account, a Transaction Fee of $1.00 per account and
a Dividend Fee of $1.00 per account.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Investment Management and Services Agreement this 1st day of May, 2000.
SECURITY EQUITY FUND
By: JOHN D. CLELAND
------------------------------------
John D. Cleland, President
ATTEST:
By: AMY J. LEE
-------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY, LLC
By: JAMES R. SCHMANK
------------------------------------
James R. Schmank, President
ATTEST:
By: AMY J. LEE
-------------------------
Amy J. Lee, Secretary
<PAGE>
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, prospectus 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 service.
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;
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 JOHN D. CLELAND SMC JAMES R. SCHMANK
------------------------- -----------------------------
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT, dated as of 1 January 1964, between SECURITY EQUITY FUND,
INC., a Kansas corporation with offices in Topeka, Kansas, Party of the First
Part (hereinafter sometimes called the "Company"), and SECURITY DISTRIBUTORS,
INC., a Kansas corporation with offices in Topeka, Kansas, Party of the Second
Part (hereinafter sometimes called the "Distributor").
WITNESSETH:
1. The Company hereby covenants and agrees that during the term of this
Agreement, and any renewal or extension thereof, or until any prior termination
thereof, the Distributor shall have the exclusive right to offer for sale and to
distribute any and all shares of capital stock issued or to be issued by the
Company.
2. The Distributor hereby covenants and agrees to act as the distributor of
the shares issued or to be issued by the Company during the period this
Agreement is in effect and agrees during such period to offer for sale such
shares as long as such shares remain available for sale, unless the Distributor
is unable legally to make such offer for sale as the result of any governmental
law or regulation.
3. Prior to the issuance of any shares by the Company pursuant to any
subscription tendered by or through the Distributor and confirmed for sale to or
through the Distributor, the Distributor shall pay or cause to be paid to the
Custodian of the Company in cash, an amount equal to the net asset value of such
shares at the time of acceptance of each such subscription and confirmation by
the Company of the sale of such shares. The Distributor shall be entitled to
charge a commission on each such sale of shares in the amount set forth in the
prospectus of the Company, such commission to be an amount equal to the
difference between the net asset value and the offering price of the shares, as
such offering price may from time to time be determined by the board of
directors of the Company. All shares of the Company shall be sold to the public
only at their public offering price at the time of such sale, and the Company
shall receive not less than the full net asset value thereof.
4. The Distributor agrees that, during the period this Agreement is in
effect and to the extent hereinafter in this Section 4 provided, it will
reimburse the Company for or pay -
(a) All Costs, expenses and fees incurred in connection with the
registration and qualification of the Company's shares under the Federal
Securities Act of 1933 and under the applicable "Blue Sky" laws of the
states in which the Company wishes to distribute its shares;
(b) All costs and expenses of all prospectuses, advertising material, sales
literature, circulars and other material used or to be used in connection
with the offering for sale of the shares of the Company;
(c) All costs, expenses and fees in connection with the printing of
application and confirmation forms; and
(d) All clerical and administrative costs in processing the applications
for and in connection with the sale of shares of the Company.
The Distributor agrees to submit to the Company for its prior approval all
advertising material, sales literature, circulars and any other material which
the Distributor proposes to use in connection with the offering for sale of the
Company's shares.
5. Notwithstanding any other provisions of this Agreement, it is understood
and agreed that the Distributor may act as a broker, on behalf of the Company,
in the purchase and sale of securities not effected on a securities exchange,
provided that any such transactions and any commission paid in connection
herewith shall comply in every respect with the requirements of the Federal
Investment Company Act of 1940 and in particular with Section 17(e) of said
statute and the Rules and Regulations of the Securities and Exchange Commission
promulgated thereunder.
6. The parties hereto agree that all provisions of this Agreement will be
performed in strict accordance with the requirements of the Investment Company
Act of 1940, the Securities Act of 1933, the Securities Exchange Act of 1934,
and the rules and regulations of the Securities and Exchange Commission under
said statutes, in strict accordance with all applicable state "Blue Sky" laws
and the rules and regulations thereunder, and in strict accordance with the
provisions of the Articles of Incorporation and Bylaws of the Company.
7. This Agreement shall become effective on January 1, 1964, or as soon
thereafter as an amendment to the Company's prospectus, reflecting the
underwriting arrangements provided by this Agreement, shall become effective
under the Securities Act of 1933.
8. Upon becoming effective as provided in the preceding Section 7, this
Agreement shall continue in effect until the close of business on December 31,
1964, and thereafter from year to year, provided that such continuance for each
successive year after December 31, 1964, is specifically approved in advance at
least annually by the board of directors (including approval by a majority of
the directors who are not parties to the Agreement or affiliated persons of any
such party) or by the vote of a majority of the outstanding voting securities of
the Company. Written notice of any such approval by the board of directors or by
the holders of a majority of the outstanding voting securities of the Company
shall be given promptly to the Distributor.
9. This Agreement may be terminated by the Company at any time by giving
the Distributor at least sixty (60) days previous written notice of such
intention to terminate. This Agreement may be terminated by the Distributor at
any time by giving the Company at least sixty (60) days previous written notice
of such intention to terminate.
This Agreement shall terminate automatically in the event of its assignment
by the Distributor. As used in the preceding sentence, the word "assignment"
shall have the meaning set forth in Section 2(a) (4) of the Investment Company
Act of 1940.
10. No provision of this Agreement is intended to or shall be construed as
protecting the Distributor against any liability to the Company or to the
Company's security holders to which the Distributor would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of the Distributor's reckless disregard
of its obligations and duties under this Agreement.
11. Terms or words used in this Agreement, which also occur in the Articles
of Incorporation or Bylaws of the Company, shall have the same meaning herein as
given to such terms or words in Articles of Incorporation or Bylaws of the
Company.
12. The Distributor shall be deemed to be an independent contractor and,
except as expressly provided or authorized by the Company, shall have no
authority to act for or represent the Company.
13. Any notice required or permitted to be given hereunder to either of the
parties hereto shall be deemed to have been given if mailed by certified mail in
a postage prepaid envelope addressed to the respective party as follows, unless
any such party has notified the other party hereto that notices thereafter
intended for such party shall be mailed to some other address, in which event
notices thereafter shall be addressed to such party at the address designated in
such request:
Security Equity Fund, Inc.
Security Benefit Life Building
700 Harrison Street
Topeka, Kansas
Security Distributors, Inc.
Security Benefit Life Building
700 Harrison Street
Topeka, Kansas
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
SECURITY EQUITY FUND, INC.
By: Dean L. Smith
-------------------------
President
ATTEST:
Will J. Miller, Jr.
- -------------------------
Secretary
(SEAL)
SECURITY DISTRIBUTORS, INC.
By: Robert E. Jacoby
-------------------------
President
ATTEST:
Will J. Miller, Jr.
- -------------------------
Secretary
(SEAL)
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund, Inc. (the "Company") and Security
Distributors, Inc. (the "Distributor") are parties to a Distribution Agreement
dated as of January 1, 1964, (the "Distribution Agreement") under which the
Distributor agrees to act as principal underwriter in connection with sales of
the shares of the Company's capital stock; and
WHEREAS, certain provisions of the Federal Investment Company Act of 1940
have been amended, and those amendments have an effect upon the relationship
between the Company and the Distributor, and the Distribution Agreement; and
WHEREAS, the Company and the Distributor wish to amend the Distribution
Agreement to conform to the requirements of the Federal Investment Company Act
of 1940, as amended;
NOW, THEREFORE, the Company and Distributor hereby amend the Distribution
Agreement, effective immediately, as follows:
1. Section 8 of the Distribution Agreement is amended to provide as
follows:
"8. Upon becoming effective as provided in the preceding Section 7,
this Agreement shall continue in effect until the close of business on
December 31, 1964, and thereafter from year to year, provided that such
continuance for each successive year after December 31, 1964, is
specifically approved in advance at least annually by the vote of the board
of directors (including approval by the vote of a majority of the directors
of the Company who are not parties to the Agreement or interested persons
of any such party) cast in person at a meeting called for the purpose of
voting upon such approval, or by the vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding voting securities of the
Company and by such a vote of the board of directors. As used in the
preceding sentence, the words "interested persons" shall have the meaning
set forth in Section 2(a) (19) of the Investment Company Act of 1940.
Written notice of any such approval by the board of directors or by the
holders of a majority of the outstanding voting securities of the Company
shall be given promptly to the Distributor."
2. The second paragraph of Section 9 of the Distribution Agreement is
amended to provide as follows:
"This Agreement shall terminate automatically in the event of its
assignment. As used in the preceding sentence, the word "assignment" shall
have the meaning set forth in Section 2(a) (4) of the Investment Company
Act of 1940."
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Distribution Agreement this 9th day of December, 1971.
SECURITY EQUITY FUND, INC.
By: Dean L. Smith
---------------------------
Dean L. Smith, President
ATTEST:
Will J. Miller, Jr.
- -------------------------
Will J. Miller, Jr., Secretary
(SEAL)
SECURITY DISTRIBUTORS, INC.
By: Dave E. Davidson
---------------------------
Dave E. Davidson, President
ATTEST:
Will J. Miller, Jr.
- -------------------------
Will J. Miller, Jr., Secretary
<PAGE>
AMENDMENT NO. 2 TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund, Inc., a Kansas corporation (the "Company"),
and Security Distributors, Inc., a Kansas corporation (the "Distributor"), are
parties to a Distribution Agreement dated as of January 1, 1964, under which the
Distributor has agreed to act as principal underwriter in connection with sales
of shares of the Company's stock, which Distribution Agreement has heretofore
been amended on December 9, 1971; and
WHEREAS the Company and the Distributor wish to further amend the
Distribution Agreement to omit the provision that the Distributor shall
reimburse the Company for or pay all costs, expenses and fees incurred in
connection with the registration of the Company's shares under the Securities
Act of 1933;
NOW, THEREFORE, the Company and the Distributor hereby amend Section 4(a)
of the Distribution Agreement as follows:
"4. The Distributor agrees that, during the period this Agreement is
in effect and to the extent hereinafter in this Section 4
provided, it will reimburse the Company for or pay -
(a) All costs, expenses and fees incurred in connection with the
registration and qualification of the Company's shares under
the applicable "Blue Sky" laws of the states in which the
Company wishes to distribute its shares;"
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
the Distribution Agreement to be duly executed this 9th day of October, 1974.
(Corporate Seal)
SECURITY EQUITY FUND, INC.
By: Dean L. Smith
------------------------------
Dean L. Smith, President
ATTEST:
Will J. Miller, Jr.
- ------------------------------
Will J. Miller, Jr., Secretary
(Corporate Seal)
SECURITY DISTRIBUTORS, INC.
By: Dave E. Davidson
------------------------------
Dave E. Davidson, President
ATTEST:
Will J. Miller, Jr.
- ------------------------------
Will J. Miller, Jr., Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Company") and Security Distributors,
Inc. (the "Distributor") are parties to a Distribution Agreement dated as of
January 1, 1964 and amended as of December 9, 1971 and October 9, 1974, (the
"Distribution Agreement") under which the Distributor agrees to act as principal
underwriter in connection with sales of the shares of the Company's capital
stock; and,
WHEREAS, The Company and the Distributor wish to amend Section 4 of the
Distribution Agreement pertaining to the allocation of expenses and charges.
NOW, THEREFORE, The Company and Distributor hereby amend said Section 4 of
the Distribution Agreement, effective as of January 31, 1984, as follows:
4. During the period this Agreement is in effect, the Company shall pay
all costs and expenses in connection with the registration of shares
under the Securities Act of 1933, including all expenses in connection
with the preparation and printing of any registration statements and
prospectuses necessary for registration thereunder but excluding any
additional costs and expenses incurred in furnishing the Distributor
with prospectuses.
The company will also pay all costs, expenses and fees incurred in
connection with the qualification of the shares under the applicable
Blue Sky laws of the states in which the shares are offered.
During the period this agreement is in effect the Distributor
will pay or reimburse the Company for:
(a) All costs and expenses of printing and mailing prospectuses
(other than to existing shareholders) and confirmations, and all
costs and expenses of preparing, printing and mailing advertising
material sales literature, circulars, applications, and other
materials used or to be used in connection with the offering for
sale and the sale of shares; and
(b) All clerical and administrative costs in processing the
application for and in connection with the sale of shares.
The Distributor agrees to submit to the Company for its prior
approval all advertising material, sales literature, circulars and any
other material which the Distributor proposes to use in connection
with the offering for sale of shares.
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Distribution Agreement this 31st day of January, 1984.
SECURITY EQUITY FUND, INC.
By: Everett S. Gille
-------------------------------
Everett S. Gille, President
ATTEST:
Tad Patton
- -------------------------------
Tad Patton, Assistant Secretary
(SEAL)
SECURITY DISTRIBUTORS, INC.
By: Gordon Evans
-------------------------------
Gordon Evans, President
ATTEST:
Tad Patton
- -------------------------------
Tad Patton, Assistant Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Company") and Security Distributors, Inc.
(the "Distributor") are parties to a Distribution Agreement dated January 1,
1964, as amended (the "Distribution Agreement"), under which the Distributor has
agreed to act as principal underwriter in connection with sales of the shares of
the Company's capital stock; and
WHEREAS, the Company expects to receive an exemptive order from the Securities
and Exchange Commission allowing the Company to issue and offer for sale two or
more classes of the Company's capital stock; and
WHEREAS, the Company and the Distributor wish to amend the Distribution
Agreement to clarify that the Distribution Agreement applies only to the sale of
Class A shares of the capital stock of the Equity Series and Global Series of
the Company and the Class A shares of all other Series subsequently established
by the Company:
NOW THEREFORE, the Company and Distributor hereby amend the Distribution
Agreement, effective immediately, as follows:
1. The term "Shares" as referred to in the Distribution Agreement shall refer
to the Class A Shares of the Company's $.25 par value stock.
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Distribution Agreement this 1st day of October, 1993.
SECURITY EQUITY FUND
By: M. J. Provines
-------------------------------
President
ATTEST:
By: Amy J. Lee
-------------------------------
Secretary
(SEAL)
SECURITY DISTRIBUTORS, INC.
By: Howard R. Fricke
-------------------------------
President
ATTEST:
By: Amy J. Lee
-------------------------------
Secretary
(SEAL)
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated January 1, 1964, as
amended (the "Distribution Agreement"), under which the Distributor has agreed
to act as principal underwriter in connection with sales of the shares of the
Fund's Class A common stock;
WHEREAS, on April 3, 1995, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Asset
Allocation Series, in addition to its presently offered series of common stock
of Equity Series and Global Series;
WHEREAS, on April 3, 1995, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Asset Allocation Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on April 3, 1995, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Asset Allocation Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Distribution Agreement to include the sale of Class A shares of the Asset
Allocation Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 18th day of April, 1995.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated January 1, 1964, as
amended (the "Distribution Agreement"), under which the Distributor has agreed
to act as principal underwriter in connection with sales of the shares of the
Fund's Class A common stock;
WHEREAS, on July 26, 1996, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Social
Awareness Series, in addition to its presently offered series of common stock of
Equity Series, Global Series and Asset Allocation Series;
WHEREAS, on July 26, 1996, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Social Awareness Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on July 26, 1996, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Social Awareness Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Distribution Agreement to include the sale of Class A shares of the Social
Awareness Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 1st day of August, 1996.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated January 1, 1964, as
amended (the "Distribution Agreement"), under which the Distributor has agreed
to act as principal underwriter in connection with sales of the shares of the
Fund's Class A common stock;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Value Series,
in addition to its presently offered series of common stock of Equity Series,
Global Series, Asset Allocation Series and Social Awareness Series;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Value Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on February 7, 1997, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Value Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Distribution Agreement to include the sale of Class A shares of the Value Series
of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 12th day of March, 1997.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated January 1, 1964, as
amended (the "Distribution Agreement"), under which the Distributor has agreed
to act as principal underwriter in connection with sales of the shares of the
Fund's Class A common stock;
WHEREAS, on July 25, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Small Company
Series, in addition to its presently offered series of common stock of Equity
Series, Global Series, Asset Allocation Series, Social Awareness Series and
Value Series;
WHEREAS, on July 25, 1997, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Small Company Series in two classes, designated
Class A shares and Class B shares; and
WHEREAS, on July 25, 1997, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Small Company Series.
WHEREAS, on July 25, 1997, the Board of Directors of the Fund approved a Class A
Distribution Plan (the "Class A Plan") with respect to the Small Company Series
pursuant to Rule 12b-1 under the Investment Company Act of 1940, the provisions
of which have an effect upon the relationship between the Fund and the
Distributor, and the Distribution Agreement; and
WHEREAS, the Fund and Distributor wish to amend the Distribution Agreement to
incorporate the necessary provisions of the Class A Plan into the Agreement.
NOW, THEREFORE, the Fund and Distributor hereby amend the Distribution Agreement
to include the sale of Class A shares of the Small Company Series of the Fund.
The Fund and Distributor hereby further amend the Distribution Agreement,
effective October 15, 1997, by adding new Section 5A, which provides as follows:
5A. (a) Pursuant to a Class A Distribution Plan adopted by the Fund
with respect to the Small Company Series (the "Series"), the Fund
agrees to make monthly payments to the Distributor in an amount
computed at an annual rate of .25 of 1% of the Series' average daily
net assets, to finance activities undertaken by the Distributor for
the purpose of distributing the Series' shares to investors. The
Distributor is obligated to and hereby agrees to use the entire amount
of said fee to finance the following distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus
and Statement of Additional Information and any supplement
thereto used in connection with the offering of the
Series' shares to the public;
(ii) Printing of additional copies for use by the Distributor
as sales literature, of reports and other communications
which were prepared by the Fund for distribution to
existing shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of the
Series' shares to the public;
(iv) Expenses incurred in advertising, promoting and selling
shares of the Series to the public;
(v) Any fees paid by the Distributor to securities dealers who
have executed a Dealer's Distribution Agreement with the
Distributor for account maintenance and personal service
to shareholders of the Series (a "Service Fee");
(vi) Commissions to sales personnel for selling shares of the
Series and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the
Series by securities dealers, including the costs of
preparation of materials for presentations, travel
expenses, costs of entertainment, and other expenses
incurred in connection with promoting sales of the Series
shares by dealers.
(b) All payments to the Distributor pursuant to this paragraph are
subject to the following conditions being met by the Distributor.
The Distributor shall furnish the Fund with quarterly reports of
its expenditures and such other information relating to
expenditures or to the other distribution-related activities
undertaken or proposed to be undertaken by the Distributor during
such fiscal year under its Distribution Agreement with the Fund
as the Fund may reasonably request;
(c) The Dealer's Distribution Agreement (the "Agreement")
contemplated by paragraph 5A(a)(v) above shall permit payments to
securities dealers by the Distributor only in accordance with the
provisions of this paragraph and shall have the approval of the
majority of the Board of Directors of the Fund including a
majority of the directors who are not interested persons of the
Fund as required by the Rule. The Distributor may pay to the
other party to any Dealer's Distribution Agreement a quarterly
fee for distribution and marketing services provided by such
other party. Such quarterly fee shall be payable in arrears in an
amount equal to such percentage (not in excess of .000685% per
day) of the aggregate net asset value of the Series' shares held
by such other party's customers or clients at the close of
business each day as determined from time to time by the
Distributor. The distribution and marketing services contemplated
hereby shall include, but are not limited to, answering inquiries
regarding the Series, account designations and addresses,
maintaining the investment of such other party's customers or
clients in the Series and similar services. In determining the
extent of such other party's assistance in maintaining such
investment by its customers or clients, the Distributor may take
into account the possibility that the shares held by such
customer or client would be redeemed in the absence of such
quarterly fee.
(d) The provisions of the Distribution Plan approved by the Board of
Directors of the Fund on July 25, 1997, are fully incorporated
herein by reference. In the event the Class A Distribution Plan
is terminated by the Board of Directors or Shareholders of the
Series as provided therein, this paragraph shall no longer be
effective.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 15th day of September, 1997.
SECURITY EQUITY FUND
By: JAMES R. SCHMANK
-------------------------------------
James R. Schmank,
Vice President and Treasurer
ATTEST:
By: AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: RICHARD K RYAN
-------------------------------------
Richard K Ryan, President
ATTEST:
By: AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated January 1, 1964, as
amended (the "Distribution Agreement"), under which the Distributor has agreed
to act as principal underwriter in connection with sales of the shares of the
Fund's Class A common stock;
WHEREAS, on November 6, 1998, the Board of Directors of the Fund authorized the
Fund to offer its common stock in three new series designated as the
International Series, Enhanced Index Series and Select 25 Series, in addition to
its presently offered series of common stock of Equity Series, Global Series,
Asset Allocation Series, Social Awareness Series, Value Series, and Small
Company Series;
WHEREAS, on November 6, 1998, the Board of Directors of the Fund further
authorized the Fund to offer shares of the International Series, Enhanced Index
Series and Select 25 Series in three classes, designated Class A shares, Class B
shares, and Class C shares; and
WHEREAS, on November 6, 1998, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the International Series, Enhanced Index
Series and Select 25 Series.
WHEREAS, on November 6, 1998, the Board of Directors of the Fund approved a
Class A Distribution Plan (the"Class A Plan") with respect to the International
Series, Enhanced Index Series and Select 25 Series pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "Rule"), the provisions of which have an
effect upon the relationship between the Fund and the Distributor, and the
Distribution Agreement; and
WHEREAS, the Fund and Distributor wish to amend the Distribution Agreement to
incorporate the necessary provisions of the Class A Plan into the Distribution
Agreement.
NOW, THEREFORE, the Fund and Distributor hereby amend the Distribution Agreement
to include the sale of Class A shares of the International Series, Enhanced
Index Series and Select 25 Series of the Fund.
The Fund and Distributor hereby further amend the Distribution Agreement,
effective January 28, 1999, by deleting Section 5A in its entirety and replacing
it with the following new Section 5A:
5A. (a) Pursuant to a Class A Distribution Plan adopted by the Fund with
respect to the Small Company Series, International Series, Enhanced Index
Series and Select 25 Series (the "Series"), the Fund agrees to make monthly
payments to the Distributor in an amount computed at an annual rate of .25
of 1% of each Series' average daily net assets, to finance activities
undertaken by the Distributor for the purpose of distributing the Series'
shares to investors. The Distributor is obligated to and hereby agrees to
use the entire amount of said fee to finance the following
distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus and
Statement of Additional Information and any supplement thereto
used in connection with the offering of the Series' shares to
the public;
(ii) Printing of additional copies for use by the Distributor as
sales literature, of reports and other communications which
were prepared by the Fund for distribution to existing
shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of the Series'
shares to the public;
(iv) Expenses incurred in advertising, promoting and selling shares
of the Series to the public;
(v) Any fees paid by the Distributor to securities dealers who have
executed a Dealer's Distribution Agreement with the Distributor
for account maintenance and personal service to shareholders of
the Series (a "Service Fee");
(vi) Commissions to sales personnel for selling shares of the Series
and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the Series by
securities dealers, including the costs of preparation of
materials for presentations, travel expenses, costs of
entertainment, and other expenses incurred in connection with
promoting sales of the Series shares by dealers.
(b) All payments to the Distributor pursuant to this paragraph are subject
to the following conditions being met by the Distributor. The
Distributor shall furnish the Fund with quarterly reports of its
expenditures and such other information relating to expenditures or to
the other distribution-related activities undertaken or proposed to be
undertaken by the Distributor during such fiscal year under its
Distribution Agreement with the Fund as the Fund may reasonably
request;
(c) The Dealer's Distribution Agreement (the "Agreement") contemplated by
paragraph 5A(a)(v) above shall permit payments to securities dealers by
the Distributor only in accordance with the provisions of this
paragraph and shall have the approval of the majority of the Board of
Directors of the Fund including a majority of the directors who are not
interested persons of the Fund as required by the Rule. The Distributor
may pay to the other party to any Dealer's Distribution Agreement a
quarterly fee for distribution and marketing services provided by such
other party. Such quarterly fee shall be payable in arrears in an
amount equal to such percentage (not in excess of .000685% per day) of
the aggregate net asset value of the Series' shares held by such other
party's customers or clients at the close of business each day as
determined from time to time by the Distributor. The distribution and
marketing services contemplated hereby shall include, but are not
limited to, answering inquiries regarding the Series, account
designations and addresses, maintaining the investment of such other
party's customers or clients in the Series and similar services. In
determining the extent of such other party's assistance in maintaining
such investment by its customers or clients, the Distributor may take
into account the possibility that the shares held by such customer or
client would be redeemed in the absence of such quarterly fee.
(d) The provisions of the Distribution Plan approved by the Board of
Directors of the Fund on November 6, 1998, are fully incorporated
herein by reference. In the event the Class A Distribution Plan is
terminated by the Board of Directors or Shareholders of the Series as
provided therein, this paragraph shall no longer be effective.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 28th day of January, 1999.
SECURITY EQUITY FUND
By: JAMES R. SCHMANK
---------------------------------
James R. Schmank,
Vice President
ATTEST:
By: AMY J. LEE
---------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: RICHARD K RYAN
---------------------------------
Richard K Ryan, President
ATTEST:
By: AMY J. LEE
---------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") is an open-end, diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of beneficial interest
("Shares") in separate series (the "Series") with each such Series representing
interests in a separate portfolio of securities and other assets; and
WHEREAS, the Fund is further authorized to issues the Shares of the Series in
multiple classes; and
WHEREAS, Security Distributors, Inc. is the principal underwriter of each such
Series and class thereof pursuant to agreements dated January 1, 1964, as
amended, for the Class A shares, October 1, 1993, as amended, for the Class B
shares and January 28, 1999 for the Class C shares (collectively referred to as
the "Agreements"); and
WHEREAS, pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a
Brokerage Enhancement Plan (the "Brokerage Plan" or the "Plan"), under which the
Fund may, subject to the requirement to seek best price and execution, direct
Security Management Company, LLC or any sub-adviser of a Series (each a
"Sub-Advisor") to allocate brokerage in a manner intended to increase the
distribution of the Fund's shares; and
WHEREAS, the Brokerage Plan applies to the Fund and the Series and the effect of
the Plan does not vary based upon a class of a Series; and
WHEREAS, the Board of Directors of the Fund deem it to be in the best interest
of the Fund and its shareholders to amend the Agreements by adding the following
provisions to each such agreement in order to implement the purposes of the
Brokerage Plan;
NOW THEREFORE, the Agreements are hereby amended to add the following
provisions:
1. Brokerage Plan.
(a) The Fund may direct SDI to take appropriate actions to effect the
purposes of the Brokerage Plan, as may be amended from time to time,
and SDI, when so directed by the Fund, shall take such actions, which
may include, but are not necessarily limited to, directing, on behalf
of the Fund or a Series, and subject to the standards described in the
Brokerage Plan, Security Management Company, LLC or a Sub-Advisor to
allocate transactions for the purchase or sale of portfolio securities
in a manner intended to increase the distribution of the Fund's shares.
(b) In accordance with the terms of the Brokerage Plan, the Fund, on behalf
of a Series, shall make available to SDI, amounts derived from
brokerage commissions paid by the Series in connection with its
portfolio transactions. Such amounts shall be expended by SDI to
finance the distribution related activities described in the Plan. The
Fund, on behalf of a Series, shall also make available to SDI, the
brokerage credits, benefits or other services received from
broker-dealers executing portfolio transactions on behalf of a Series.
Such credits, benefits or other services shall be used by SDI to
finance the distribution related activities described in the Plan.
2. Reports. SDI shall prepare reports for the Board of Directors of the Fund on
a quarterly basis showing such information as shall be reasonably requested
by the Board from time to time.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to the
Agreements to be executed by their officers designated below as of the day and
year indicated below.
SECURITY EQUITY FUND
By: JAMES R. SCHMANK
-----------------------------
Name: James R. Schmank
Title: Vice President
Date: January 27, 2000
ATTEST:
By: AMY J. LEE
--------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: RICHARD K RYAN
-----------------------------
Name: Richard K Ryan
Title: President
Date: January 27, 2000
ATTEST:
By: AMY J. LEE
--------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated January 1, 1964, as
amended (the "Distribution Agreement"), under which the Distributor has agreed
to act as principal underwriter in connection with sales of the shares of the
Fund's Class A common stock;
WHEREAS, on February 4, 2000, the Board of Directors of the Fund authorized the
Fund to offer its common stock in two new series designated as the Large Cap
Growth Series and Technology Series;
WHEREAS, on February 4, 2000, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Large Cap Growth Series and
Technology Series in three classes, designated Class A shares, Class B shares,
and Class C shares; and
WHEREAS, on February 4, 2000, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Large Cap Growth Series and Technology
Series.
WHEREAS, on February 4, 2000, the Board of Directors of the Fund approved a
Class A Distribution Plan (the "Class A Plan") with respect to the Large Cap
Growth Series and Technology Series pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "Rule"), the provisions of which have an effect upon
the relationship between the Fund and the Distributor, and the Distribution
Agreement; and
WHEREAS, the Fund and Distributor wish to amend the Distribution Agreement to
incorporate the necessary provisions of the Class A Plan into the Distribution
Agreement.
NOW, THEREFORE, the Fund and Distributor hereby amend the Distribution Agreement
to include the sale of Class A shares of the Large Cap Growth Series and
Technology Series of the Fund.
The Fund and Distributor hereby further amend the Distribution Agreement,
effective May 1, 2000, by deleting Section 5A in its entirety and replacing it
with the following new Section 5A:
5A. (a) Pursuant to a Class A Distribution Plan adopted by the Fund with
respect to the Small Cap Growth Series, International Series, Enhanced Index
Series, Select 25 Series, Large Cap Growth Series, and Technology Series
(the "Series"), the Fund agrees to make monthly payments to the Distributor
in an amount computed at an annual rate of .25 of 1% of each Series' average
daily net assets, to finance activities undertaken by the Distributor for
the purpose of distributing the Series' shares to investors and/or providing
shareholder services to the Series' shareholders. The Distributor is
obligated to and hereby agrees to use the entire amount of said fee to
finance the following distribution-related or shareholder service related
activities:
(i) Preparation, printing and distribution of the Prospectus and
Statement of Additional Information and any supplement
thereto used in connection with the offering of the Series'
shares to the public;
(ii) Printing of additional copies for use by the Distributor as
sales literature, of reports and other communications which
were prepared by the Fund for distribution to existing
shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of the
Series' shares to the public;
(iv) Expenses incurred in advertising, promoting and selling
shares of the Series to the public;
(v) Any fees paid by the Distributor to securities dealers who
have executed a Dealer's Distribution Agreement with the
Distributor for account maintenance and personal service to
shareholders of the Series (a "Service Fee");
(vi) Commissions to sales personnel for selling shares of the
Series and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the Series
by securities dealers, including the costs of preparation of
materials for presentations, travel expenses, costs of
entertainment, and other expenses incurred in connection with
promoting sales of the Series shares by dealers.
(b) All payments to the Distributor pursuant to this paragraph are
subject to the following conditions being met by the Distributor.
The Distributor shall furnish the Fund with quarterly reports of
its expenditures and such other information relating to
expenditures or to the other distribution-related activities
undertaken or proposed to be undertaken by the Distributor during
such fiscal year under its Distribution Agreement with the Fund as
the Fund may reasonably request;
(c) The Dealer's Distribution Agreement (the "Agreement") contemplated
by paragraph 5A(a)(v) above shall permit payments to securities
dealers by the Distributor only in accordance with the provisions
of this paragraph and shall have the approval of the majority of
the Board of Directors of the Fund including a majority of the
directors who are not interested persons of the Fund as required by
the Rule. The Distributor may pay to the other party to any
Dealer's Distribution Agreement a quarterly fee for distribution,
marketing, and/or shareholder services provided by such other
party. Such quarterly fee shall be payable in arrears in an amount
equal to such percentage (not in excess of .000685% per day) of the
aggregate net asset value of the Series' shares held by such other
party's customers or clients at the close of business each day as
determined from time to time by the Distributor. The distribution,
marketing, and shareholder services contemplated hereby shall
include, but are not limited to, answering inquiries regarding the
Series, account designations and addresses, maintaining the
investment of such other party's customers or clients in the Series
and similar services. In determining the extent of such other
party's assistance in maintaining such investment by its customers
or clients, the Distributor may take into account the possibility
that the shares held by such customer or client would be redeemed
in the absence of such quarterly fee.
(d) The provisions of the Distribution Plan approved by the Board of
Directors of the Fund on February 4, 2000, are fully incorporated
herein by reference. In the event the Class A Distribution Plan is
terminated by the Board of Directors or Shareholders of the Series
as provided therein, this paragraph shall no longer be effective.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 1st day of May, 2000.
SECURITY EQUITY FUND
By: JAMES R. SCHMANK
--------------------------------
James R. Schmank, Vice President
ATTEST:
By: AMY J. LEE
-----------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: GREGORY J. GARVIN
--------------------------------
Gregory J. Garvin, President
ATTEST:
By: AMY J. LEE
-----------------------------
Amy J. Lee, Secretary
<PAGE>
CLASS B
DISTRIBUTION AGREEMENT
THIS AGREEMENT, made this 1st day of October 1993, between Security Equity Fund,
a Kansas corporation (hereinafter referred to as the "Company"), and Security
Distributors, Inc., a Kansas corporation (hereinafter referred to as the
"Distributor").
WITNESSETH:
WHEREAS, the Company is engaged in business as an open-end, management
investment company registered under the federal Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, the Distributor is willing to act as principal underwriter for the
Company to offer for sale, sell and deliver after sale, the Class B Shares of
the Company's $.25 par value common stock (hereinafter referred to as the
"Shares") on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
set forth, the parties hereto agree as follows:
1. EMPLOYMENT OF DISTRIBUTOR. The Company hereby employs the Distributor to
act as principal underwriter for the Company with respect to its Class B Shares
and hereby agrees that during the term of this Agreement, and any renewal or
extension thereof, or until any prior termination thereof, the Distributor shall
have the exclusive right to offer for sale and to distribute any and all of its
Class B Shares issued or to be issued by the Company. The Distributor hereby
accepts such employment and agrees to act as the distributor of the Class B
Shares issued or to be issued by the Company during the period this Agreement is
in effect and agrees during such period to offer for sale such Shares as long as
such Shares remain available for sale, unless the Distributor is unable legally
to make such offer for sale as the result of any law or governmental regulation.
2. OFFERING PRICE AND COMMISSIONS. Prior to the issuance of any Shares by
the Company pursuant to any subscription tendered by or through the Distributor
and confirmed for sale to or through the Distributor, the Distributor shall pay
or cause to be paid to the custodian of the Company in cash, an amount equal to
the net asset value of such Shares at the time of acceptance of each such
subscription and confirmation by the Company of the sale of such Shares. All
Shares shall be sold to the public only at their public offering price at the
time of such sale, and the Company shall receive not less than the full net
asset value thereof.
3. ALLOCATION OF EXPENSES AND CHARGES. During this period this Agreement is
in effect, the Company shall pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933 (the "1933 Act"),
including all expenses in connection with the preparation and printing of any
registration statements and prospectuses necessary for registration thereunder
but excluding any additional costs and expenses incurred in furnishing the
Distributor with prospectuses.
The Company will also pay all costs, expenses and fees incurred in connection
with the qualification of the Shares under the applicable Blue Sky laws of the
states in which the Shares are offered.
During the period this Agreement is in effect, the Distributor will pay or
reimburse the Company for:
(a) All costs and expenses of printing and mailing prospectuses (other
than to existing shareholders) and confirmations, and all costs and
expenses of preparing, printing and mailing advertising material,
sales literature, circulars, applications, and other materials used or
to be used in connection with the offering for sale and the sale of
Shares; and
(b) All clerical and administrative costs in processing the applications
for and in connection with the sale of Shares.
The Distributor agrees to submit to the Company for its prior approval all
advertising material, sales literature, circulars and any other material which
the Distributor proposes to use in connection with the offering for sale of
Shares.
4. REDEMPTION OF SHARES. The Distributor, as agent of and for the account
of the Fund, may redeem Shares of the Fund offered for resale to it at the net
asset value of such Shares (determined as provided in the Articles of
Incorporation or Bylaws) and not in excess of such maximum amounts as may be
fixed from time to time by an officer of the Fund. Whenever the officers of the
Fund deem it advisable for the protection of the shareholders of the Fund, they
may suspend or cancel such authority.
5. SALES CHARGES. A contingent deferred sales charge shall be retained by
the Distributor from the net asset value of Shares of the Fund that it has
redeemed, it being understood that such amounts will not be in excess of that
set forth in the then-current registration statement of the Fund. Furthermore,
the Distributor may retain any amounts authorized for payment to it under the
Fund's Distribution Plan.
6. DISTRIBUTOR MAY ACT AS BROKER AND RECEIVE COMMISSIONS. Notwithstanding
any other provisions of this Agreement, it is understood and agreed that the
Distributor may act as a broker, on behalf of the Company, in the purchase and
sale of securities not effected on a securities exchange, provided that any such
transactions and any commission paid in connection therewith shall comply in
every respect with the requirements of the 1940 Act and in particular with
Section 17(e) of that Act and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
7. AGREEMENTS SUBJECT TO APPLICABLE LAW AND REGULATIONS. The parties hereto
agree that all provisions of this Agreement will be performed in strict
accordance with the requirements of: the 1940 Act, the 1933 Act, the Securities
Exchange Act of 1934, the rules and regulations of the Securities and Exchange
Commission under said statutes, all applicable state Blue Sky laws and the rules
and regulations thereunder, the rules of the National Association of Securities
Dealers, Inc., and, in strict accordance with, the provisions of the Articles of
Incorporation and Bylaws of the Company.
8. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective at the date and time that the Company's prospectus, reflecting the
underwriting arrangements provided by this Agreement, shall become effective
under the 1933 Act, and shall, unless terminated as provided herein, continue in
force for two years from that date, and from year to year thereafter, provided
that such continuance for each successive year is specifically approved in
advance at least annually by either the Board of Directors or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
the Company and, in either event, by the vote of a majority of the directors of
the Company who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting upon
such approval. As used in the preceding sentence, the words "interested persons"
shall have the meaning set forth in Section 2(a)(19) of the 1940 Act. Written
notice of any such approval by the Board of Directors or by the holders of a
majority of the outstanding voting securities of the Company and by the
directors who are not such interested persons shall be given promptly to the
Distributor.
This Agreement may be terminated at any time without the payment of any penalty
by the Company by giving the Distributor at least sixty (60) days' previous
written notice of such intention to terminate. This Agreement must be terminated
by the Distributor at any time by giving the Company at least sixty (60) days'
previous written notice of such intention to terminate.
This Agreement shall terminate automatically in the event of its assignment. As
used in the preceding sentence, the word "assignment" shall have the meaning set
forth in Section 2(a)(4) of the 1940 Act.
9. CONSTRUCTION OF AGREEMENT. No provision of this Agreement is intended to
or shall be construed as protecting the Distributor against any liability to the
Company or to the Company's security holders to which the Distributor would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties under this Agreement.
Terms or words used in the Agreement, which also occur in the Articles of
Incorporation or Bylaws of the Company, shall have the same meaning herein as
given to such terms or words in the Articles of Incorporation or Bylaws of the
Company.
10. DISTRIBUTOR AN INDEPENDENT CONTRACTOR. The Distributor shall be deemed
to be an independent contractor and, except as expressly provided or authorized
by the Company, shall have no authority to act for or represent the Company.
11. NOTICE. Any notice required or permitted to be given hereunder to
either of the parties hereto shall be deemed to have been given if mailed by
certified mail in a postage-prepaid envelope addressed to the respective party
as follows, unless any such party has notified the other party hereto that
notices thereafter intended for such party shall be mailed to some other
address, in which event notices thereafter shall be addressed to such party at
the address designated in such request:
Security Equity Fund
Security Benefit Group Building
700 Harrison
Topeka, Kansas
Security Distributors, Inc.
Security Benefit Group Building
700 Harrison
Topeka, Kansas
12. AMENDMENT OF AGREEMENT. No amendment to this Agreement shall be
effective until approved by (a) a majority of the Board of Directors of the
Company and a majority of the directors of the Company who are not parties to
this Agreement or affiliated persons of any such party, or (B) a vote of the
holders of a majority of the outstanding voting securities of the Company.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective corporate officers thereto duly authorized on the day, month
and year first above written.
SECURITY EQUITY FUND
By: M. J. Provines
-------------------------
President
ATTEST:
Amy J. Lee
- -------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Howard R. Fricke
-------------------------
President
ATTEST:
Amy J. Lee
- -------------------------
Secretary
(SEAL)
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
WHEREAS, on April 3, 1995, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Asset
Allocation Series, in addition to its presently offered series of common stock
of Equity Series and Global Series;
WHEREAS, on April 3, 1995, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Asset Allocation Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on April 3, 1995, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the Asset Allocation
Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
Asset Allocation Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 18th day of April, 1995.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
-------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
-------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
WHEREAS, on July 26, 1996, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Social
Awareness Series, in addition to its presently offered series of common stock of
Equity Series, Global Series and Asset Allocation Series;
WHEREAS, on July 26, 1996, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Social Awareness Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on July 26, 1996, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the Social Awareness
Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
Social Awareness Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 1st day of August, 1996.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
--------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
--------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Value Series,
in addition to its presently offered series of common stock of Equity Series,
Global Series, Asset Allocation Series and Social Awareness Series;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Value Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on February 7, 1997, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the Value Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
Value Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 12th day of March, 1997.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
--------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
--------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
WHEREAS, on July 25, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Small Company
Series, in addition to its presently offered series of common stock of Equity
Series, Global Series, Asset Allocation Series, Social Awareness Series and
Value Series;
WHEREAS, on July 25, 1997, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Small Company Series in two classes, designated
Class A shares and Class B shares; and
WHEREAS, on July 25, 1997, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the Small Company Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
Small Company Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 15th day of September, 1997.
SECURITY EQUITY FUND
By: JAMES R. SCHMANK
------------------------------------
James R. Schmank,
Vice President and Treasurer
ATTEST:
By: AMY J. LEE
------------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: RICHARD K RYAN
------------------------------------
Richard K Ryan, President
ATTEST:
By: AMY J. LEE
------------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
WHEREAS, on November 6, 1998, the Board of Directors of the Fund authorized the
Fund to offer its common stock in three new series designated as the
International Series, Enhanced Index Series and Select 25 Series, in addition to
its presently offered series of common stock of Equity Series, Global Series,
Asset Allocation Series, Social Awareness Series, Value Series and Small Company
Series; and
WHEREAS, on November 6, 1998, the Board of Directors of the Fund further
authorized the Fund to offer shares of the International Series, Enhanced Index
Series and Select 25 Series in three classes, designated Class A shares, Class B
shares, and Class C shares; and
WHEREAS, on November 6, 1998, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the International Series,
Enhanced Index Series and Select 25 Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
International Series, Enhanced Index Series and Select 25 Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 28th day of January, 1999.
SECURITY EQUITY FUND
By: JAMES R. SCHMANK
-----------------------------------------
James R. Schmank,
Vice President
ATTEST:
By: AMY J. LEE
-----------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: RICHARD K RYAN
-----------------------------------------
Richard K Ryan, President
ATTEST:
By: AMY J. LEE
-----------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993, as amended, (the "Distribution Agreement"), under which the Distributor
has agreed to act as principal underwriter in connection with sales of the
shares of the Fund's Class B common stock;
WHEREAS, on February 4, 2000, the Board of Directors of the Fund authorized the
Fund to offer its common stock in two new series designated as the Large Cap
Growth Series and Technology Series; and
WHEREAS, on February 4, 2000, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Large Cap Growth Series and
Technology Series in three classes, designated Class A shares, Class B shares,
and Class C shares; and
WHEREAS, on February 4, 2000, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the Large Cap Growth Series
and Technology Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
Large Cap Growth Series and Technology Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 1st day of May, 2000.
SECURITY EQUITY FUND
By: JAMES R. SCHMANK
-----------------------------------------
James R. Schmank, Vice President
ATTEST:
By: AMY J. LEE
-----------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: GREGORY J. GARVIN
-----------------------------------------
Gregory J. Garvin, President
ATTEST:
By: AMY J. LEE
-----------------------
Amy J. Lee, Secretary
<PAGE>
CLASS C
DISTRIBUTION AGREEMENT
THIS AGREEMENT, made this 28th day of January, 1999, between Security Equity
Fund, a Kansas corporation (hereinafter referred to as the "Company"), and
Security Distributors, Inc., a Kansas corporation (hereinafter referred to as
the "Distributor").
WITNESSETH:
WHEREAS, the Company is engaged in business as an open-end, management
investment company registered under the federal Investment Company Act of 1940
(the "1940 Act");
WHEREAS, the Company issues its stock in several series; and
WHEREAS, the Distributor is willing to act as principal underwriter for the
Company to offer for sale, sell and deliver after sale, the Class C Shares of
each of the Company's Series of common stock (hereinafter referred to as the
"Shares") on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
set forth, the parties hereto agree as follows:
1. EMPLOYMENT OF DISTRIBUTOR. The Company hereby employs the Distributor to
act as principal underwriter for the Company with respect to its Class C
Shares and hereby agrees that during the term of this Agreement, and any
renewal or extension thereof, or until any prior termination thereof, the
Distributor shall have the exclusive right to offer for sale and to
distribute any and all of the Class C Shares issued or to be issued by the
Company. The Distributor hereby accepts such employment and agrees to act
as the distributor of the Class C Shares issued or to be issued by the
Company during the period this Agreement is in effect and agrees during
such period to offer for sale such Shares as long as such Shares remain
available for sale, unless the Distributor is unable legally to make such
offer for sale as the result of any law or governmental regulation.
2. OFFERING PRICE AND COMMISSIONS. Prior to the issuance of any Shares by the
Company pursuant to any subscription tendered by or through the Distributor
and confirmed for sale to or through the Distributor, the Distributor shall
pay or cause to be paid to the custodian of the Company in cash, an amount
equal to the net asset value of such Shares at the time of acceptance of
each such subscription and confirmation by the Company of the sale of such
Shares. All Shares shall be sold to the public only at their public
offering price at the time of such sale, and the Company shall receive not
less than the full net asset value thereof.
3. ALLOCATION OF EXPENSES AND CHARGES. During the period this Agreement is in
effect, the Company shall pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933 (the "1933 Act"),
including all expenses in connection with the preparation and printing of
any registration statements and prospectuses necessary for registration
thereunder but excluding any additional costs and expenses incurred in
furnishing the Distributor with prospectuses.
The Company also will pay all costs, expenses and fees incurred in
connection with the qualification of the Shares under the applicable Blue
Sky laws of the states in which the Shares are offered.
During the period this Agreement is in effect, the Distributor will pay or
reimburse the Company for:
(a) All costs and expenses of printing and mailing prospectuses (other
than to existing shareholders) and confirmations, and all costs and
expenses of preparing, printing and mailing advertising material,
sales literature, circulars, applications, and other materials used or
to be used in connection with the offering for sale and the sale of
Shares; and
(b) All clerical and administrative costs in processing the applications
for and in connection with the sale of Shares.
The Distributor agrees to submit to the Company for its prior approval all
advertising material, sales literature, circulars and any other material
which the Distributor proposes to use in connection with the offering for
sale of Shares.
4. REDEMPTION OF SHARES. The Distributor, as agent of and for the account of
the Fund, may redeem Shares of the Fund offered for resale to it at the net
asset value of such Shares (determined as provided in the then-current
registration statement of the Fund) and not in excess of such maximum
amounts as may be fixed from time to time by an officer of the Fund.
Whenever the officers of the Fund deem it advisable for the protection of
the shareholders of the Fund, they may suspend or cancel such authority.
5. SALES CHARGES. A contingent deferred sales charge shall be retained by the
Distributor from the net asset value of Shares of the Fund that it has
redeemed, it being understood that such amounts will not be in excess of
that set forth in the then-current registration statement of the Fund.
Furthermore, the Distributor may retain any amounts authorized for payment
to it under the Fund's Distribution Plan.
6. DISTRIBUTOR MAY ACT AS BROKER AND RECEIVE COMMISSIONS. Notwithstanding any
other provisions of this Agreement, it is understood and agreed that the
Distributor may act as a broker, on behalf of the Company, in the purchase
and sale of securities not effected on a securities exchange, provided that
any such transactions and any commission paid in connection therewith shall
comply in every respect with the requirements of the 1940 Act and in
particular with Section 17(e) of that Act and the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
7. AGREEMENTS SUBJECT TO APPLICABLE LAW AND REGULATIONS. The parties hereto
agree that all provisions of this Agreement will be performed in strict
accordance with the requirements of: the 1940 Act, the 1933 Act, the
Securities Exchange Act of 1934, the rules and regulations of the
Securities and Exchange Commission under said statutes, all applicable
state Blue Sky laws and the rules and regulations thereunder, the rules of
the National Association of Securities Dealers, Inc., and, in strict
accordance with, the provisions of the Articles of Incorporation and Bylaws
of the Company.
8. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective at the date and time that the Company's prospectus, reflecting
the underwriting arrangements provided by this Agreement, shall become
effective under the 1933 Act, and shall, unless terminated as provided
herein, continue in force for two years from that date, and from year to
year thereafter, provided that such continuance for each successive year is
specifically approved in advance at least annually by either the Board of
Directors or by the vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Class C shares of the Series and, in
either event, by the vote of a majority of the directors of the Company who
are not parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting upon such
approval. As used in the preceding sentence, the words "interested persons"
shall have the meaning set forth in Section 2(a)(19) of the 1940 Act.
This Agreement may be terminated at any time without the payment of any
penalty by the Company by giving the Distributor at least sixty (60) days'
previous written notice of such intention to terminate. This Agreement may
be terminated by the Distributor at any time by giving the Company at least
sixty (60) days' previous written notice of such intention to terminate.
This Agreement shall terminate automatically in the event of its
assignment. As used in the preceding sentence, the word "assignment" shall
have the meaning set forth in Section 2(a)(4) of the 1940 Act.
9. CONSTRUCTION OF AGREEMENT. No provision of this Agreement is intended to or
shall be construed as protecting the Distributor against any liability to
the Company or to the Company's security holders to which the Distributor
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties under this Agreement.
Terms or words used in the Agreement, which also occur in the Articles of
Incorporation or Bylaws of the Company, shall have the same meaning herein
as given to such terms or words in the Articles of Incorporation or Bylaws
of the Company.
10. DISTRIBUTOR AN INDEPENDENT CONTRACTOR. The Distributor shall be deemed to
be an independent contractor and, except as expressly provided or
authorized by the Company, shall have no authority to act for or represent
the Company.
11. NOTICE. Any notice required or permitted to be given hereunder to either of
the parties hereto shall be deemed to have been given if mailed by
certified mail in a postage-prepaid envelope addressed to the respective
party as follows, unless any such party has notified the other party hereto
that notices thereafter intended for such party shall be mailed to some
other address, in which event notices thereafter shall be addressed to such
party at the address designated in such request:
Security Equity Fund
Security Benefit Group Building
700 Harrison
Topeka, Kansas
Security Distributors, Inc.
Security Benefit Group Building
700 Harrison
Topeka, Kansas
12. AMENDMENT OF AGREEMENT. No amendment to this Agreement shall be effective
until approved by (a) a majority of the Board of Directors of the Company
and a majority of the directors of the Company who are not parties to this
Agreement or affiliated persons of any such party, or (b) a vote of the
holders of a majority of the outstanding voting securities of the Class C
shares of the Series.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective corporate officers thereto duly authorized on the day, month
and year first above written.
SECURITY EQUITY FUND
BY: JAMES R. SCHMANK
--------------------------------
James R. Schmank, Vice President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
SECURITY DISTRIBUTORS, INC.
BY: RICHARD K RYAN
--------------------------------
Richard K Ryan, President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
<PAGE>
AMENDMENT TO CLASS C DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class C Distribution Agreement dated January 28,
1999, as amended, (the "Distribution Agreement"), under which the Distributor
has agreed to act as principal underwriter in connection with sales of the
shares of the Fund's Class C common stock;
WHEREAS, on February 4, 2000, the Board of Directors of the Fund authorized the
Fund to offer its common stock in two new series designated as the Large Cap
Growth Series and Technology Series; and
WHEREAS, on February 4, 2000, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Large Cap Growth Series and
Technology Series in three classes, designated Class A shares, Class B shares,
and Class C shares; and
WHEREAS, on February 4, 2000, the Board of Directors of the Fund approved an
amendment to the Class C Distribution Agreement between the Fund and the
Distributor to include the sale of Class C shares of the Large Cap Growth Series
and Technology Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class C Distribution Agreement to include the sale of Class C shares of the
Large Cap Growth Series and Technology Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
C Distribution Agreement this 1st day of May, 2000.
SECURITY EQUITY FUND
By: JAMES R. SCHMANK
--------------------------------
James R. Schmank, Vice President
ATTEST:
By: AMY J. LEE
-----------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: GREGORY J. GARVIN
--------------------------------
Gregory J. Garvin, President
ATTEST:
By: AMY J. LEE
-----------------------------
Amy J. Lee, Secretary
<PAGE>
CUSTODY AGREEMENT
Dated January 1, 1995
As amended September 24, 1998
Between
UMB BANK, N.A.
and
THE SECURITY FUNDS
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. Appointment of Custodian 1
2. Definitions 1
(a) Securities 1
(b) Assets 1
(c) Instructions and Special Instructions 1
3. Delivery of Corporate Documents 2
4. Powers and Duties of Custodian and Domestic Subcustodian 2
(a) Safekeeping 3
(b) Manner of Holding Securities 3
(c) Free Delivery of Assets 4
(d) Exchange of Securities 4
(e) Purchases of Assets 5
(f) Sales of Assets 5
(g) Options 6
(h) Futures Contracts 6
(i) Segregated Accounts 6
(j) Depositary Receipts 7
(k) Corporate Actions, Put Bonds, Called Bonds, Etc. 7
(l) Interest Bearing Deposits 7
(m) Foreign Exchange Transactions 8
(n) Pledges or Loans of Securities 8
(o) Stock Dividends, Rights, Etc. 9
(p) Routine Dealings 9
(q) Collections 9
(r) Bank Accounts 9
(s) Dividends, Distributions and Redemptions 9
(t) Proceeds from Shares Sold 10
(u) Proxies and Notices; Compliance with the Shareholders 10
Communication Act of 1985
(v) Books and Records 10
(w) Opinion of Fund's Independent Certified Public 10
Accountants
(x) Reports by Independent Certified Public Accountants 10
(y) Bills and Others Disbursements 11
5. Subcustodians 11
(a) Domestic Subcustodians 11
(b) Foreign Subcustodians 11
(c) Interim Subcustodians 12
(d) Special Subcustodians 12
(e) Termination of a Subcustodian 12
(f) Certification Regarding Foreign Subcustodians 12
6. Standard of Care 12
(a) General Standard of Care 12
(b) Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Armed Conflict, Sovereign Risk, etc. 12
(c) Liability for Past Records 13
(d) Advice of Counsel 13
(e) Advice of the Fund and Others 13
(f) Instructions Appearing to be Genuine 13
(g) Exceptions from Liability 13
7. Liability of the Custodian for Actions of Others 14
(a) Domestic Subcustodians 14
(b) Liability for Acts and Omissions of Foreign 14
Subcustodians
(c) Securities Systems, Interim Subcustodians, Special
Subcustodians, Securities Depositories and Clearing 14
Agencies
(d) Defaults or Insolvency's of Brokers, Banks, Etc. 14
(e) Reimbursement of Expenses 14
8. Indemnification 14
(a) Indemnification by Fund 14
(b) Indemnification by Custodian 15
9. Advances 15
10. Liens 15
11. Compensation 16
12. Powers of Attorney 16
13. Termination and Assignment 16
14. Additional Funds 16
15. Notices 16
16. Miscellaneous 17
<PAGE>
CUSTODY AGREEMENT
This agreement made as of this 1st day of January, 1995, as amended
September 24, 1998, between UMB Bank, n.a., a national banking association with
its principal place of business located in Kansas City, Missouri (hereinafter
"Custodian"), and each of the Funds which have executed the signature page
hereof, together with such additional Funds which shall be made parties to this
Agreement by the execution of a separate signature page hereto (individually, a
"Fund" and collectively, the "Funds").
WITNESSETH:
WHEREAS, each Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, each Fund desires to appoint Custodian as its custodian for the
custody of Assets (as hereinafter defined) owned by such Fund which Assets are
to be held in such accounts as such Fund may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto, intending to be legally bound, mutually covenant and agree
as follows:
1. APPOINTMENT OF CUSTODIAN.
Each Fund hereby constitutes and appoints the Custodian as custodian of
Assets belonging to each such Fund which have been or may be from time to time
deposited with the Custodian. Custodian accepts such appointment as a custodian
and agrees to perform the duties and responsibilities of Custodian as set forth
herein on the conditions set forth herein.
2. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings so indicated:
(a) "Security" or "Securities" shall mean stocks, bonds, bills, rights,
script, warrants, interim certificates, registered investment company shares and
all negotiable or nonnegotiable paper commonly known as Securities and other
instruments or obligations.
(b) "Assets" shall mean Securities, monies and other property held by the
Custodian for the benefit of a Fund.
(c)(1) "Instructions", as used herein, shall mean: (i) a tested telex, a
written (including, without limitation, facsimile transmission) request,
direction, instruction or certification signed or initialed by or on behalf of a
Fund by an Authorized Person; (ii) a telephonic or other oral communication from
a person the Custodian reasonably believes to be an Authorized Person; or (iii)
a communication effected directly between an electro-mechanical or electronic
device or system (including, without limitation, computers) on behalf of a Fund.
Instructions in the form of oral communications shall be confirmed by the
appropriate Fund by tested telex or in writing in the manner set forth in clause
(i) above, but the lack of such confirmation shall in no way affect any action
taken by the Custodian in reliance upon such oral Instructions prior to the
Custodian's receipt of such confirmation. Each Fund authorizes the Custodian to
record any and all telephonic or other oral Instructions communicated to the
Custodian.
(c)(2) "Special Instructions", as used herein, shall mean Instructions
countersigned or confirmed in writing by the Treasurer or any Assistant
Treasurer of a Fund or any other person designated by the Treasurer of such Fund
in writing, which countersignature or confirmation shall be included on the same
instrument containing the Instructions or on a separate instrument relating
thereto.
(c)(3) Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, facsimile transmission or telex
number agreed upon from time to time by the Custodian and each Fund.
(c)(4) Where appropriate, Instructions and Special Instructions shall
be continuing instructions.
3. DELIVERY OF CORPORATE DOCUMENTS.
Each of the parties to this Agreement represents that its execution does
not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.
Each Fund has furnished the Custodian with copies, properly certified or
authenticated, with all amendments or supplements thereto, of the following
documents:
(a) Certificate of Incorporation (or equivalent document) of the Fund
as in effect on the date hereof;
(b) By-Laws of the Fund as in effect on the date hereof;
(c) Resolutions of the Board of Directors of the Fund appointing the
Custodian and approving the form of this Agreement; and
(d) The Fund's current prospectus and statements of additional
information.
Each Fund shall promptly furnish the Custodian with copies of any updates,
amendments or supplements to the foregoing documents.
In addition, each Fund has delivered or will promptly deliver to the
Custodian, copies of the Resolution(s) of its Board of Directors or Trustees and
all amendments or supplements thereto, properly certified or authenticated,
designating certain officers or employees of each such Fund who will have
continuing authority to certify to the Custodian: (a) the names, titles,
signatures and scope of authority of all persons authorized to give Instructions
or any other notice, request, direction, instruction, certificate or instrument
on behalf of each Fund, and (b) the names, titles and signatures of those
persons authorized to countersign or confirm Special Instructions on behalf of
each Fund (in both cases collectively, the "Authorized Persons" and
individually, an "Authorized Person"). Such Resolutions and certificates may be
accepted and relied upon by the Custodian as conclusive evidence of the facts
set forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar Resolution or certificate to the
contrary. Upon delivery of a certificate which deletes or does not include the
name(s) of a person previously authorized to give Instructions or to countersign
or confirm Special Instructions, such persons shall no longer be considered an
Authorized Person authorized to give Instructions or to countersign or confirm
Special Instructions. Unless the certificate specifically requires that the
approval of anyone else will first have been obtained, the Custodian will be
under no obligation to inquire into the right of the person giving such
Instructions or Special Instructions to do so. Notwithstanding any of the
foregoing, no Instructions or Special Instructions received by the Custodian
from a Fund will be deemed to authorize or permit any director, trustee,
officer, employee, or agent of such Fund to withdraw any of the Assets of such
Fund upon the mere receipt of such authorization, Special Instructions or
Instructions from such director, trustee, officer, employee or agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.
Except for Assets held by any Subcustodian appointed pursuant to Sections
5(b), (c), or (d) of this Agreement, the Custodian shall have and perform the
powers and duties hereinafter set forth in this Section 4. For purposes of this
Section 4 all references to powers and duties of the "Custodian" shall also
refer to any Domestic Subcustodian appointed pursuant to Section 5(a).
(a) Safekeeping.
The Custodian will keep safely the Assets of each Fund which are delivered
to it from time to time. The Custodian shall not be responsible for any property
of a Fund held or received by such Fund and not delivered to the Custodian.
(b) Manner of Holding Securities.
(1) The Custodian shall at all times hold Securities of each Fund
either: (i) by physical possession of the share certificates or other
instruments representing such Securities in registered or bearer form; (ii) in
book-entry form by a Securities System (as hereinafter defined) in accordance
with the provisions of sub-paragraph (3) below; or (iii) with the transfer
agents for other registered investment companies (in the case of registered
investment company shares owned by a Fund) in accordance with the provisions of
sub-paragraph (4) below.
(2) The Custodian may hold registrable portfolio Securities which have
been delivered to it in physical form, by registering the same in the name of
the appropriate Fund or its nominee, or in the name of the Custodian or its
nominee, for whose actions such Fund and Custodian, respectively, shall be fully
responsible. Upon the receipt of Instructions, the Custodian shall hold such
Securities in street certificate form, so called, with or without any indication
of fiduciary capacity. However, unless it receives Instructions to the contrary,
the Custodian will register all such portfolio Securities in the name of the
Custodian's authorized nominee. All such Securities shall be held in an account
of the Custodian containing only assets of the appropriate Fund or only assets
held by the Custodian as a fiduciary, provided that the records of the Custodian
shall indicate at all times the Fund or other customer for which such Securities
are held in such accounts and the respective interests therein.
(3) The Custodian may deposit and/or maintain domestic Securities
owned by a Fund in, and each Fund hereby approves use of: (a) The Depository
Trust Company; (b) The Participants Trust Company; and (c) any book-entry system
as provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii)
Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or
(iii) the book-entry regulations of federal agencies substantially in the form
of 31 CFR 306.115. Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by a Fund in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred to in
this Agreement as a "Securities System", and all such Securities Systems shall
be listed on the attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
(i) The Custodian may deposit the Securities directly or through
one or more agents or Subcustodians which are also qualified to act as
custodians for investment companies.
(ii) The Custodian shall deposit and/or maintain the Securities
in a Securities System, provided that such Securities are represented in an
account ("Account") of the Custodian in the Securities System that includes only
assets held by the Custodian as a fiduciary, custodian or otherwise for
customers.
(iii) The books and records of the Custodian shall at all times
identify those Securities belonging to any one or more Funds which are
maintained in a Securities System.
(iv) The Custodian shall pay for Securities purchased for the
account of a Fund only upon (a) receipt of advice from the Securities System
that such Securities have been transferred to the Account of the Custodian in
accordance with the rules of the Securities System, and (b) the making of an
entry on the records of the Custodian to reflect such payment and transfer for
the account of such Fund. The Custodian shall transfer Securities sold for the
account of a Fund only upon (a) receipt of advice from the Securities System
that payment for such Securities has been transferred to the Account of the
Custodian in accordance with the rules of the Securities System, and (b) the
making of an entry on the records of the Custodian to reflect such transfer and
payment for the account of such Fund. Copies of all advices from the Securities
System relating to transfers of Securities for the account of a Fund shall be
maintained for such Fund by the Custodian. The Custodian shall deliver to a Fund
on the next succeeding business day, daily transaction reports that shall
include each day's transactions in the Securities System for the account of such
Fund. Such transaction reports shall be delivered to such Fund or any agent
designated by such Fund pursuant to Instructions, by computer or in such other
manner as such Fund and Custodian may agree.
(v) The Custodian shall, if requested by a Fund pursuant to
Instructions, provide such Fund with reports obtained by the Custodian or any
Subcustodian with respect to a Securities System's accounting system, internal
accounting control and procedures for safeguarding Securities deposited in the
Securities System.
(vi) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any Securities System on behalf of a Fund as promptly as
practicable and shall take all actions reasonably practicable to safeguard the
Securities of such Fund maintained with such Securities System.
(4) The Custodian may hold shares of other registered investment
companies ("Underlying Funds") which are owned by a Fund with the transfer
agents for such Underlying Funds. In maintaining shares of Underlying Funds with
such transfer agents, each Fund investing in such shares and the Custodian shall
adhere to the following procedures designed to comply with the requirements of
Rule 17f-4 of the 1940 Act:
(i) The Custodian may deposit the shares directly or through one
or more agents or Subcustodians which are also qualified to act as custodians
for investment companies.
(ii) The Custodian shall hold the shares in accounts with the
transfer agents of the Underlying Funds, provided such accounts are maintained
by such transfer agents as segregated accounts containing only assets held for
the Custodian as Custodian of a Fund.
(iii) The books and records of the Custodian shall at all times
identify those shares of Underlying Funds belonging to one or more Funds which
are held by the transfer agents of such Underlying Funds.
(iv) The Custodian shall provide notice to the Funds of all
transfers to or from the account of a Fund held at the transfer agent of an
Underlying Fund.
(v) The Custodian shall, if reasonably requested by a Fund
pursuant to Instructions, provide such Fund with reports obtained by the
Custodian or any Subcustodian with respect to the internal accounting control
maintained by the transfer agent for an Underlying Fund.
(c) Free Delivery of Assets.
Notwithstanding any other provision of this Agreement and except as
provided in Sections 3 and 4 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with a Fund's transactions and
to transfer such Assets to such broker, dealer, Subcustodian, bank, agent,
Securities System or otherwise as specified in such Special Instructions.
(d) Exchange of Securities.
Upon receipt of Instructions, the Custodian will exchange portfolio
Securities held by it for a Fund for other Securities or cash paid in connection
with any reorganization, recapitalization, merger, consolidation, or conversion
of convertible Securities, and will deposit any such Securities in accordance
with the terms of any reorganization or protective plan.
Without Instructions, the Custodian is authorized to exchange Securities
held by it in temporary form for Securities in definitive form, to surrender
Securities for transfer into a name or nominee name as permitted in Section
4(b)(2), to effect an exchange of shares in a stock split or when the par value
of the stock is changed, to sell any fractional shares, and, upon receiving
payment therefor, to surrender bonds or other Securities held by it at maturity
or call.
(e) Purchases of Assets.
(1) Securities Purchases. In accordance with Instructions, the
Custodian shall, with respect to a purchase of Securities, pay for such
Securities out of monies held for a Fund's account for which the purchase was
made, but only insofar as monies are available therein for such purpose, and
receive the portfolio Securities so purchased. Unless the Custodian has received
Special Instructions to the contrary, such payment will be made only upon
receipt of Securities by the Custodian, a clearing corporation of a national
Securities exchange of which the Custodian is a member, or a Securities System
in accordance with the provisions of Section 4(b)(3) hereof. Notwithstanding the
foregoing, upon receipt of Instructions: (i) in connection with a repurchase
agreement, the Custodian may release funds to a Securities System prior to the
receipt of advice from the Securities System that the Securities underlying such
repurchase agreement have been transferred by book-entry into the Account
maintained with such Securities System by the Custodian, provided that the
Custodian's instructions to the Securities System require that the Securities
System may make payment of such funds to the other party to the repurchase
agreement only upon transfer by book-entry of the Securities underlying the
repurchase agreement into such Account; (ii) in the case of Interest Bearing
Deposits, currency deposits, and other deposits, foreign exchange transactions,
futures contracts or options, pursuant to Sections 4(g), 4(h), 4(l), and 4(m)
hereof, the Custodian may make payment therefor before receipt of an advice of
transaction; (iii) in the case of Securities as to which payment for the
Security and receipt of the instrument evidencing the Security are under
generally accepted trade practice or the terms of the instrument representing
the Security expected to take place in different locations or through separate
parties, such as commercial paper which is indexed to foreign currency exchange
rates, derivatives and similar Securities, the Custodian may make payment for
such Securities prior to delivery thereof in accordance with such generally
accepted trade practice or the terms of the instrument representing such
Security; and (iv) in the case of shares of Underlying Funds maintained with
transfer agents for such Underlying Funds pursuant to Section 4(b)(4) hereof,
payment for shares purchased shall be in accordance with the procedures of such
transfer agent.
(2) Other Assets Purchased. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall pay for and receive other Assets
for the account of a Fund as provided in Instructions.
(f) Sales of Assets.
(1) Securities Sold. In accordance with Instructions, the Custodian
will, with respect to a sale, deliver or cause to be delivered the Securities
thus designated as sold to the broker or other person specified in the
Instructions relating to such sale. Unless the Custodian has received Special
Instructions to the contrary, such delivery shall be made only upon receipt of
payment therefor in the form of: (a) cash, certified check, bank cashier's
check, bank credit, or bank wire transfer; (b) credit to the account of the
Custodian with a clearing corporation of a national Securities exchange of which
the Custodian is a member; or (c) credit to the Account of the Custodian with a
Securities System, in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing: (i) Securities held in physical form may be
delivered and paid for in accordance with "street delivery custom" to a broker
or its clearing agent, against delivery to the Custodian of a receipt for such
Securities, provided that the Custodian shall have taken reasonable steps to
ensure prompt collection of the payment for, or return of, such Securities by
the broker or its clearing agent, and provided further that the Custodian shall
not be responsible for the selection of or the failure or inability to perform
of such broker or its clearing agent or for any related loss arising from
delivery or custody of such Securities prior to receiving payment therefor; and
(ii) in the case of shares of Underlying Funds maintained with transfer agents
for such Underlying Funds pursuant to Section 4(b)(4) hereof, delivery of shares
sold shall be in accordance with the procedures of such transfer agent.
(2) Other Assets Sold. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall receive payment for and deliver
other Assets for the account of a Fund as provided in Instructions.
(g) Options.
(1) Upon receipt of Instructions relating to the purchase of an option
or sale of a covered call option, the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the purchase or writing of
the option by a Fund; (b) if the transaction involves the sale of a covered call
option, deposit and maintain in a segregated account the Securities (either
physically or by book-entry in a Securities System) subject to the covered call
option written on behalf of such Fund; and (c) pay, release and/or transfer such
Securities, cash or other Assets in accordance with any notices or other
communications evidencing the expiration, termination or exercise of such
options which are furnished to the Custodian by the Options Clearing Corporation
(the "OCC"), the securities or options exchanges on which such options were
traded, or such other organization as may be responsible for handling such
option transactions.
(2) Upon receipt of Instructions relating to the sale of a naked
option (including stock index and commodity options), the Custodian, the
appropriate Fund and the broker-dealer shall enter into an agreement to comply
with the rules of the OCC or of any registered national securities exchange or
similar organizations(s). Pursuant to that agreement and such Fund's
Instructions, the Custodian shall: (a) receive and retain confirmations or other
documents, if any, evidencing the writing of the option; (b) deposit and
maintain in a segregated account, Securities (either physically or by book-entry
in a Securities System), cash and/or other Assets; and (c) pay, release and/or
transfer such Securities, cash or other Assets in accordance with any such
agreement and with any notices or other communications evidencing the
expiration, termination or exercise of such option which are furnished to the
Custodian by the OCC, the securities or options exchanges on which such options
were traded, or such other organization as may be responsible for handling such
option transactions. The appropriate Fund and the broker-dealer shall be
responsible for determining the quality and quantity of assets held in any
segregated account established in compliance with applicable margin maintenance
requirements and the performance of other terms of any option contract.
(h) Futures Contracts.
Upon receipt of Instructions, the Custodian shall enter into a futures
margin procedural agreement among the appropriate Fund, the Custodian and the
designated futures commission merchant (a "Procedural Agreement"). Under the
Procedural Agreement the Custodian shall: (a) receive and retain confirmations,
if any, evidencing the purchase or sale of a futures contract or an option on a
futures contract by such Fund; (b) deposit and maintain in a segregated account
cash, Securities and/or other Assets designated as initial, maintenance or
variation "margin" deposits intended to secure such Fund's performance of its
obligations under any futures contracts purchased or sold, or any options on
futures contracts written by such Fund, in accordance with the provisions of any
Procedural Agreement designed to comply with the provisions of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s), regarding
such margin deposits; and (c) release Assets from and/or transfer Assets into
such margin accounts only in accordance with any such Procedural Agreements. The
appropriate Fund and such futures commission merchant shall be responsible for
determining the type and amount of Assets held in the segregated account or paid
to the broker-dealer in compliance with applicable margin maintenance
requirements and the performance of any futures contract or option on a futures
contract in accordance with its terms.
(i) Segregated Accounts.
Upon receipt of Instructions, the Custodian shall establish and maintain
on its books a segregated account or accounts for and on behalf of a Fund, into
which account or accounts may be transferred Assets of such Fund, including
Securities maintained by the Custodian in a Securities System pursuant to
Paragraph (b)(3) of this Section 4 and shares maintained by the Custodian with
the transfer agents for Underlying Funds pursuant to Paragraph (b)(4) of this
Section 4, said account or accounts to be maintained (i) for the purposes set
forth in Sections 4(g), 4(h) and 4(n) and (ii) for the purpose of compliance by
such Fund with the procedures required by the SEC Investment Company Act Release
Number 10666 or any subsequent release or releases relating to the maintenance
of segregated accounts by registered investment companies, or (iii) for such
other purposes as may be set forth, from time to time, in Special Instructions.
The Custodian shall not be responsible for the determination of the type or
amount of Assets to be held in any segregated account referred to in this
paragraph, or for compliance by the Fund with required procedures noted in (ii)
above.
(j) Depositary Receipts.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered Securities to the depositary used for such Securities by an issuer
of American Depositary Receipts or International Depositary Receipts
(hereinafter referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the organization surrendering the same that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such Securities in the
name of the Custodian or a nominee of the Custodian, for delivery in accordance
with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the organization surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
Securities underlying such ADRs in accordance with such instructions.
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
Upon receipt of Instructions, the Custodian shall: (a) deliver warrants,
puts, calls, rights or similar Securities to the issuer or trustee thereof (or
to the agent of such issuer or trustee) for the purpose of exercise or sale,
provided that the new Securities, cash or other Assets, if any, acquired as a
result of such actions are to be delivered to the Custodian; and (b) deposit
Securities upon invitations for tenders thereof, provided that the consideration
for such Securities is to be paid or delivered to the Custodian, or the tendered
Securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Instructions, to comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall notify the appropriate Fund of such action in writing by
facsimile transmission or in such other manner as such Fund and Custodian may
agree in writing.
The Fund agrees that if it gives an Instruction for the performance of an
act on the last permissible date of a period established by any optional offer
or on the last permissible date for the performance of such act, the Fund shall
hold the Bank harmless from any adverse consequences in connection with acting
upon or failing to act upon such Instructions.
(l) Interest Bearing Deposits.
Upon receipt of Instructions directing the Custodian to purchase interest
bearing fixed term and call deposits (hereinafter referred to, collectively, as
"Interest Bearing Deposits") for the account of a Fund, the Custodian shall
purchase such Interest Bearing Deposits in the name of such Fund with such banks
or trust companies, including the Custodian, any Subcustodian or any subsidiary
or affiliate of the Custodian (hereinafter referred to as "Banking
Institutions"), and in such amounts as such Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in U.S. dollars
or other currencies, as such Fund may determine and direct pursuant to
Instructions. The responsibilities of the Custodian to a Fund for Interest
Bearing Deposits issued by the Custodian shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than those
issued by the Custodian, (a) the Custodian shall be responsible for the
collection of income and the transmission of cash to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or for the failure of such Banking Institution to pay upon
demand.
(m) Foreign Exchange Transactions.
(l) Each Fund may from time to time appoint the Custodian as its agent
in the execution of currency exchange transactions. The Custodian agrees to
provide exchange rate and U.S. Dollar information, electronically or in writing,
to the Funds prior to the value date of said foreign exchange transaction. The
Fund agrees to provide the Custodian with information necessary to complete the
foreign exchange transaction two business days prior to the value date of said
transaction.
(2) Upon receipt of Instructions, the Custodian shall settle foreign
exchange contracts or options to purchase and sell foreign currencies for spot
and future delivery on behalf of and for the account of a Fund with such
currency brokers or Banking Institutions as such Fund may determine and direct
pursuant to Instructions. If, in its Instructions, a Fund does not direct the
Custodian to utilize a particular currency broker or Banking Institution, the
Custodian is authorized to select such currency broker or Banking Institution as
it deems appropriate to execute the Fund's foreign currency transaction.
(3) Each Fund accepts full responsibility for its use of third party
foreign exchange brokers and for execution of said foreign exchange contracts
and understands that the Fund shall be responsible for any and all costs and
interest charges which may be incurred as a result of the failure or delay of
its third party broker to deliver foreign exchange. The Custodian shall have no
responsibility or liability with respect to the selection of the currency
brokers or Banking Institutions with which a Fund deals or the performance of
such brokers or Banking Institutions.
(4) Notwithstanding anything to the contrary contained herein, upon
receipt of Instructions the Custodian may, in connection with a foreign exchange
contract, make free outgoing payments of cash in the form of U.S. Dollars or
foreign currency prior to receipt of confirmation of such foreign exchange
contract or confirmation that the countervalue currency completing such contract
has been delivered or received.
(5) The Custodian shall not be obligated to enter into foreign
exchange transactions as principal. However, if the Custodian has made available
to a Fund its services as a principal in foreign exchange transactions and
subject to any separate agreement between the parties relating to such
transactions, the Custodian shall enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of the Fund, with the Custodian as principal.
(n) Pledges or Loans of Securities.
(1) Upon receipt of Instructions from a Fund, the Custodian will
release or cause to be released Securities held in custody to the pledgees
designated in such Instructions by way of pledge or hypothecation to secure
loans incurred by such Fund with various lenders including but not limited to
UMB Bank, n.a.; provided, however, that the Securities shall be released only
upon payment to the Custodian of the monies borrowed, except that in cases where
additional collateral is required to secure existing borrowings, further
Securities may be released or delivered, or caused to be released or delivered
for that purpose upon receipt of Instructions. Upon receipt of Instructions, the
Custodian will pay, but only from funds available for such purpose, any such
loan upon re-delivery to it of the Securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing such loan. In lieu of
delivering collateral to a pledgee, the Custodian, on the receipt of
Instructions, shall transfer the pledged Securities to a segregated account for
the benefit of the pledgee.
(2) Upon receipt of Special Instructions, and execution of a separate
Securities Lending Agreement, the Custodian will release Securities held in
custody to the borrower designated in such Instructions and may, except as
otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the appropriate Fund to the borrower
thereof only upon receipt of the collateral for such borrowing. The Custodian
shall have no responsibility or liability for any loss arising from the delivery
of Securities prior to the receipt of collateral. Upon receipt of Instructions
and the loaned Securities, the Custodian will release the collateral to the
borrower.
(o) Stock Dividends, Rights, Etc.
The Custodian shall receive and collect all stock dividends, rights, and
other items of like nature and, upon receipt of Instructions, take action with
respect to the same as directed in such Instructions.
(p) Routine Dealings.
The Custodian will, in general, attend to all routine and mechanical
matters in accordance with industry standards in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings with Securities or
other property of each Fund except as may be otherwise provided in this
Agreement or directed from time to time by Instructions from any particular
Fund. The Custodian may also make payments to itself or others from the Assets
for disbursements and out-of-pocket expenses incidental to handling Securities
or other similar items relating to its duties under this Agreement, provided
that all such payments shall be accounted for to the appropriate Fund.
(q) Collections.
The Custodian shall (a) collect amounts due and payable to each Fund with
respect to portfolio Securities and other Assets; (b) promptly credit to the
account of each Fund all income and other payments relating to portfolio
Securities and other Assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in writing by the
Custodian and any particular Fund; (c) promptly endorse and deliver any
instruments required to effect such collection; and (d) promptly execute
ownership and other certificates and affidavits for all federal, state, local
and foreign tax purposes in connection with receipt of income or other payments
with respect to portfolio Securities and other Assets, or in connection with the
transfer of such Securities or other Assets; provided, however, that with
respect to portfolio Securities registered in so-called street name, or physical
Securities with variable interest rates, the Custodian shall use its best
efforts to collect amounts due and payable to any such Fund. The Custodian shall
notify a Fund in writing by facsimile transmission or in such other manner as
such Fund and Custodian may agree in writing if any amount payable with respect
to portfolio Securities or other Assets is not received by the Custodian when
due. The Custodian shall not be responsible for the collection of amounts due
and payable with respect to portfolio Securities or other Assets that are in
default.
(r) Bank Accounts.
Upon Instructions, the Custodian shall open and operate a bank account or
accounts on the books of the Custodian; provided that such bank account(s) shall
be in the name of the Custodian or a nominee thereof, for the account of one or
more Funds, and shall be subject only to draft or order of the Custodian. The
responsibilities of the Custodian to any one or more such Funds for deposits
accepted on the Custodian's books shall be that of a U.S.
bank for a similar deposit.
(s) Dividends, Distributions and Redemptions.
To enable each Fund to pay dividends or other distributions to
shareholders of each such Fund and to make payment to shareholders who have
requested repurchase or redemption of their shares of each such Fund
(collectively, the "Shares"), the Custodian shall release cash or Securities
insofar as available. In the case of cash, the Custodian shall, upon the receipt
of Instructions, transfer such funds by check or wire transfer to any account at
any bank or trust company designated by each such Fund in such Instructions. In
the case of Securities, the Custodian shall, upon the receipt of Special
Instructions, make such transfer to any entity or account designated by each
such Fund in such Special Instructions.
(t) Proceeds from Shares Sold.
The Custodian shall receive funds representing cash payments received for
shares issued or sold from time to time by each Fund, and shall credit such
funds to the account of the appropriate Fund. The Custodian shall notify the
appropriate Fund of Custodian's receipt of cash in payment for shares issued by
such Fund by facsimile transmission or in such other manner as such Fund and the
Custodian shall agree. Upon receipt of Instructions, the Custodian shall: (a)
deliver all federal funds received by the Custodian in payment for shares as may
be set forth in such Instructions and at a time agreed upon between the
Custodian and such Fund; and (b) make federal funds available to a Fund as of
specified times agreed upon from time to time by such Fund and the Custodian, in
the amount of checks received in payment for shares which are deposited to the
accounts of such Fund.
(u) Proxies and Notices; Compliance with the Shareholders Communication
Act of 1985.
The Custodian shall deliver or cause to be delivered to the appropriate
Fund all forms of proxies, all notices of meetings, and any other notices or
announcements affecting or relating to Securities owned by such Fund that are
received by the Custodian, any Subcustodian, or any nominee of either of them,
and, upon receipt of Instructions, the Custodian shall execute and deliver, or
cause such Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Instructions,
neither the Custodian nor any Subcustodian or nominee shall vote upon any such
Securities, or execute any proxy to vote thereon, or give any consent or take
any other action with respect thereto.
The Custodian will not release the identity of any Fund to an issuer which
requests such information pursuant to the Shareholder Communications Act of 1985
for the specific purpose of direct communications between such issuer and any
such Fund unless a particular Fund directs the Custodian otherwise in writing.
(v) Books and Records.
The Custodian shall maintain such records relating to its activities under
this Agreement as are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 ("the 1940 Act") and to preserve them for the
periods prescribed in Rule 31a-2 under the 1940 Act. These records shall be open
for inspection by duly authorized officers, employees or agents (including
independent public accountants) of the appropriate Fund during normal business
hours of the Custodian.
The Custodian shall provide accountings relating to its activities under
this Agreement as shall be agreed upon by each Fund and the Custodian.
(w) Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as each Fund may request to
obtain from year to year favorable opinions from each such Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder and in connection with the preparation of each such Fund's periodic
reports to the SEC and with respect to any other requirements of the SEC.
(x) Reports by Independent Certified Public Accountants.
At the request of a Fund, the Custodian shall deliver to such Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, Securities and
other Assets, including cash, Securities and other Assets deposited and/or
maintained in a Securities System, with a transfer agent for an Underlying Fund
or with a Subcustodian. Such report shall be of sufficient scope and in
sufficient detail as may reasonably be required by such Fund and as may
reasonably be obtained by the Custodian.
(y) Bills and Other Disbursements.
Upon receipt of Instructions, the Custodian shall pay, or cause to be
paid, all bills, statements, or other obligations of a Fund.
5. SUBCUSTODIANS.
From time to time, in accordance with the relevant provisions of this
Agreement, the Custodian may appoint one or more Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians, or Interim Subcustodians (as each are
hereinafter defined) to act on behalf of any one or more Funds. A Domestic
Subcustodian, in accordance with the provisions of this Agreement, may also
appoint a Foreign Subcustodian, Special Subcustodian, or Interim Subcustodian to
act on behalf of any one or more Funds. For purposes of this Agreement, all
Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians and Interim
Subcustodians shall be referred to collectively as "Subcustodians".
(a) Domestic Subcustodians.
The Custodian may, at any time and from time to time, appoint any bank as
defined in Section 2(a)(5) of the 1940 Act or any trust company or other entity,
any of which meet the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder, to act for the Custodian on
behalf of any one or more Funds as a subcustodian for purposes of holding Assets
of such Fund(s) and performing other functions of the Custodian within the
United States (a "Domestic Subcustodian"). Each Fund shall approve in writing
the appointment of the proposed Domestic Subcustodian; and the Custodian's
appointment of any such Domestic Subcustodian shall not be effective without
such prior written approval of the Fund(s). Each such duly approved Domestic
Subcustodian shall be listed on Appendix A attached hereto, as it may be
amended, from time to time.
(b) Foreign Subcustodians.
The Custodian may at any time appoint, or cause a Domestic Subcustodian to
appoint, any bank, trust company or other entity meeting the requirements of an
"eligible foreign custodian" under Section 17(f) of the 1940 Act and the rules
and regulations thereunder to act for the Custodian on behalf of any one or more
Funds as a subcustodian or sub-subcustodian (if appointed by a Domestic
Subcustodian) for purposes of holding Assets of the Fund(s) and performing other
functions of the Custodian in countries other than the United States of America
(hereinafter referred to as a "Foreign Subcustodian" in the context of either a
subcustodian or a sub-subcustodian); provided that the Custodian shall have
obtained written confirmation from each Fund of the approval of the Board of
Directors or other governing body of each such Fund (which approval may be
withheld in the sole discretion of such Board of Directors or other governing
body or entity) with respect to (i) the identity of any proposed Foreign
Subcustodian (including branch designation), (ii) the country or countries in
which, and the securities depositories or clearing agencies (hereinafter
"Securities Depositories and Clearing Agencies"), if any, through which, the
Custodian or any proposed Foreign Subcustodian is authorized to hold Securities
and other Assets of each such Fund, and (iii) the form and terms of the
subcustodian agreement to be entered into with such proposed Foreign
Subcustodian. Each such duly approved Foreign Subcustodian and the countries
where and the Securities Depositories and Clearing Agencies through which they
may hold Securities and other Assets of the Fund(s) shall be listed on Appendix
A attached hereto, as it may be amended, from time to time. Each Fund shall be
responsible for informing the Custodian sufficiently in advance of a proposed
investment which is to be held in a country in which no Foreign Subcustodian is
authorized to act, in order that there shall be sufficient time for the
Custodian, or any Domestic Subcustodian, to effect the appropriate arrangements
with a proposed Foreign Subcustodian, including obtaining approval as provided
in this Section 5(b). In connection with the appointment of any Foreign
Subcustodian, the Custodian shall, or shall cause the Domestic Subcustodian to,
enter into a subcustodian agreement with the Foreign Subcustodian in form and
substance approved by each such Fund. The Custodian shall not consent to the
amendment of, and shall cause any Domestic Subcustodian not to consent to the
amendment of, any agreement entered into with a Foreign Subcustodian, which
materially affects any Fund's rights under such agreement, except upon prior
written approval of such Fund pursuant to Special Instructions.
(c) Interim Subcustodians.
Notwithstanding the foregoing, in the event that a Fund shall invest in an
Asset to be held in a country in which no Foreign Subcustodian is authorized to
act, the Custodian shall notify such Fund in writing by facsimile transmission
or in such other manner as such Fund and the Custodian shall agree in writing of
the unavailability of an approved Foreign Subcustodian in such country; and upon
the receipt of Special Instructions from such Fund, the Custodian shall, or
shall cause its Domestic Subcustodian to, appoint or approve an entity (referred
to herein as an "Interim Subcustodian") designated in such Special Instructions
to hold such Security or other Asset.
(d) Special Subcustodians.
Upon receipt of Special Instructions, the Custodian shall, on behalf of a
Fund, appoint one or more banks, trust companies or other entities designated in
such Special Instructions to act for the Custodian on behalf of such Fund as a
subcustodian for purposes of: (i) effecting third-party repurchase transactions
with banks, brokers, dealers or other entities through the use of a common
custodian or subcustodian; (ii) providing depository and clearing agency
services with respect to certain variable rate demand note Securities, (iii)
providing depository and clearing agency services with respect to dollar
denominated Securities, and (iv) effecting any other transactions designated by
such Fund in such Special Instructions. Each such designated subcustodian
(hereinafter referred to as a "Special Subcustodian") shall be listed on
Appendix A attached hereto, as it may be amended from time to time. In
connection with the appointment of any Special Subcustodian, the Custodian shall
enter into a subcustodian agreement with the Special Subcustodian in form and
substance approved by the appropriate Fund in Special Instructions. The
Custodian shall not amend any subcustodian agreement entered into with a Special
Subcustodian, or waive any rights under such agreement, except upon prior
approval pursuant to Special Instructions.
(e) Termination of a Subcustodian.
The Custodian may, at any time in its discretion upon notification to the
appropriate Fund(s), terminate any Subcustodian of such Fund(s) in accordance
with the termination provisions under the applicable subcustodian agreement, and
upon the receipt of Special Instructions, the Custodian will terminate any
Subcustodian in accordance with the termination provisions under the applicable
subcustodian agreement.
(f) Certification Regarding Foreign Subcustodians.
Upon request of a Fund, the Custodian shall deliver to such Fund a
certificate stating: (i) the identity of each Foreign Subcustodian then acting
on behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agencies through which each such Foreign Subcustodian
is then holding cash, Securities and other Assets of such Fund; and (iii) such
other information as may be requested by such Fund, and as the Custodian shall
be reasonably able to obtain, to evidence compliance with rules and regulations
under the 1940 Act.
6. STANDARD OF CARE.
(a) General Standard of Care.
The Custodian shall be liable to a Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by such Fund resulting from
the negligence or willful misfeasance of the Custodian; provided, however, in no
event shall the Custodian be liable for special, indirect or consequential
damages arising under or in connection with this Agreement.
(b) Actions Prohibited by Applicable Law, Events Beyond Custodian's
Control, Sovereign Risk, Etc.
In no event shall the Custodian or any Domestic Subcustodian incur
liability hereunder (i) if the Custodian or any Subcustodian or Securities
System, or any subcustodian, transfer agent, Securities System, Securities
Depository or Clearing Agency utilized by the Custodian or any such
Subcustodian, or any nominee of the Custodian or any Subcustodian (individually,
a "Person") is prevented, forbidden or delayed from performing, or omits to
perform, any act or thing which this Agreement provides shall be performed or
omitted to be performed, by reason of: (a) any provision of any present or
future law or regulation or order of the United States of America, or any state
thereof, or of any foreign country, or political subdivision thereof or of any
court of competent jurisdiction (and neither the Custodian nor any other Person
shall be obligated to take any action contrary thereto); or (b) any event beyond
the control of the Custodian or other Person such as armed conflict, riots,
strikes, lockouts, labor disputes, equipment or transmission failures, natural
disasters, or failure of the mails, transportation, communications or power
supply; or (ii) for any loss, damage, cost or expense resulting from "Sovereign
Risk." A "Sovereign Risk" shall mean nationalization, expropriation, currency
devaluation, revaluation or fluctuation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting a Fund's Assets; or acts of armed conflict,
terrorism, insurrection or revolution; or any other act or event beyond the
Custodian's or such other Person's control.
(c) Liability for Past Records.
Neither the Custodian nor any Domestic Subcustodian shall have any
liability in respect of any loss, damage or expense suffered by a Fund, insofar
as such loss, damage or expense arises from the performance of the Custodian or
any Domestic Subcustodian in reliance upon records that were maintained for such
Fund by entities other than the Custodian or any Domestic Subcustodian prior to
the Custodian's employment hereunder.
(d) Advice of Counsel.
The Custodian and all Domestic Subcustodians shall be entitled to receive
and act upon advice of counsel of its own choosing on all matters. The Custodian
and all Domestic Subcustodians shall be without liability for any actions taken
or omitted in good faith pursuant to the advice of counsel.
(e) Advice of the Fund and Others.
The Custodian and any Domestic Subcustodian may rely upon the advice of
any Fund and upon statements of such Fund's accountants and other persons
believed by it in good faith to be expert in matters upon which they are
consulted, and neither the Custodian nor any Domestic Subcustodian shall be
liable for any actions taken or omitted, in good faith, pursuant to such advice
or statements.
(f) Instructions Appearing to be Genuine.
The Custodian and all Domestic Subcustodians shall be fully protected and
indemnified in acting as a custodian hereunder upon any Resolutions of the Board
of Directors or Trustees, Instructions, Special Instructions, advice, notice,
request, consent, certificate, instrument or paper appearing to it to be genuine
and to have been properly executed and shall, unless otherwise specifically
provided herein, be entitled to receive as conclusive proof of any fact or
matter required to be ascertained from any Fund hereunder a certificate signed
by any officer of such Fund authorized to countersign or confirm Special
Instructions.
(g) Exceptions from Liability.
Without limiting the generality of any other provisions hereof, neither
the Custodian nor any Domestic Subcustodian shall be under any duty or
obligation to inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased by or for
any Fund, the legality of the purchase thereof or evidence of ownership required
to be received by any such Fund, or the propriety of the decision to purchase or
amount paid therefor;
(ii) the legality of the sale of any Securities by or for any Fund,
or the propriety of the amount for which the same were sold; or
(iii) any other expenditures, encumbrances of Securities, borrowings
or similar actions with respect to any Fund's Assets;
and may, until notified to the contrary, presume that all Instructions or
Special Instructions received by it are not in conflict with or in any way
contrary to any provisions of any such Fund's Declaration of Trust, Partnership
Agreement, Articles of Incorporation or By-Laws or votes or proceedings of the
shareholders, trustees, partners or directors of any such Fund, or any such
Fund's currently effective Registration Statement on file with the SEC.
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.
(a) Domestic Subcustodians
The Custodian shall be liable for the acts or omissions of any Domestic
Subcustodian to the same extent as if such actions or omissions were performed
by the Custodian itself.
(b) Liability for Acts and Omissions of Foreign Subcustodians.
The Custodian shall be liable to a Fund for any loss or damage to such
Fund caused by or resulting from the acts or omissions of any Foreign
Subcustodian to the extent that, under the terms set forth in the subcustodian
agreement between the Custodian or a Domestic Subcustodian and such Foreign
Subcustodian, the Foreign Subcustodian has failed to perform in accordance with
the standard of conduct imposed under such subcustodian agreement and the
Custodian or Domestic Subcustodian recovers from the Foreign Subcustodian under
the applicable subcustodian agreement.
(c) Securities Systems, Transfer Agents for Underlying funds, Interim
Subcustodians, Special Subcustodians, Securities Depositories and Clearing
Agencies.
The Custodian shall not be liable to any Fund for any loss, damage or
expense suffered or incurred by such Fund resulting from or occasioned by the
actions or omissions of a Securities System, transfer agent for an Underlying
Fund, Interim Subcustodian, Special Subcustodian, or Securities Depository and
Clearing Agency unless such loss, damage or expense is caused by, or results
from, the negligence or willful misfeasance of the Custodian.
(d) Defaults or Insolvency's of Brokers, Banks, Etc.
The Custodian shall not be liable for any loss, damage or expense suffered
or incurred by any Fund resulting from or occasioned by the actions, omissions,
neglects, defaults or insolvency of any broker, bank, trust company or any other
person with whom the Custodian may deal (other than any of such entities acting
as a Subcustodian, Securities System or Securities Depository and Clearing
Agency, for whose actions the liability of the Custodian is set out elsewhere in
this Agreement) unless such loss, damage or expense is caused by, or results
from, the negligence or willful misfeasance of the Custodian.
(e) Reimbursement of Expenses.
Each Fund agrees to reimburse the Custodian for all out-of-pocket expenses
incurred by the Custodian in connection with this Agreement, but excluding
salaries and usual overhead expenses.
8. INDEMNIFICATION.
(a) Indemnification by Fund.
Subject to the limitations set forth in this Agreement, each Fund agrees
to indemnify and hold harmless the Custodian and its nominees from all losses,
damages and expenses (including attorneys' fees) suffered or incurred by the
Custodian or its nominee caused by or arising from actions taken by the
Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement; provided, however, that such indemnity shall not apply
to the extent the Custodian is liable under Sections 6 or 7 hereof.
If any Fund requires the Custodian to take any action with respect to
Securities, which action involves the payment of money or which may, in the
opinion of the Custodian, result in the Custodian or its nominee assigned to
such Fund being liable for the payment of money or incurring liability of some
other form, such Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
(b) Indemnification by Custodian.
Subject to the limitations set forth in this Agreement and in addition to
the obligations provided in Sections 6 and 7, the Custodian agrees to indemnify
and hold harmless each Fund from all losses, damages and expenses suffered or
incurred by each such Fund caused by the negligence or willful misfeasance of
the Custodian.
9. ADVANCES.
In the event that, pursuant to Instructions, the Custodian or any
Subcustodian, Securities System, transfer agent for an Underlying Fund, or
Securities Depository or Clearing Agency acting either directly or indirectly
under agreement with the Custodian (each of which for purposes of this Section 9
shall be referred to as "Custodian"), makes any payment or transfer of funds on
behalf of any Fund as to which there would be, at the close of business on the
date of such payment or transfer, insufficient funds held by the Custodian on
behalf of any such Fund, the Custodian may, in its discretion without further
Instructions, provide an advance ("Advance") to any such Fund in an amount
sufficient to allow the completion of the transaction by reason of which such
payment or transfer of funds is to be made. In addition, in the event the
Custodian is directed by Instructions to make any payment or transfer of funds
on behalf of any Fund as to which it is subsequently determined that such Fund
has overdrawn its cash account with the Custodian as of the close of business on
the date of such payment or transfer, said overdraft shall constitute an
Advance. Any Advance shall be payable by the Fund on behalf of which the Advance
was made on demand by Custodian, unless otherwise agreed by such Fund and the
Custodian, and shall accrue interest from the date of the Advance to the date of
payment by such Fund to the Custodian at a rate agreed upon in writing from time
to time by the Custodian and such Fund. It is understood that any transaction in
respect of which the Custodian shall have made an Advance, including but not
limited to a foreign exchange contract or transaction in respect of which the
Custodian is not acting as a principal, is for the account of and at the risk of
the Fund on behalf of which the Advance was made, and not, by reason of such
Advance, deemed to be a transaction undertaken by the Custodian for its own
account and risk. The Custodian and each of the Funds which are parties to this
Agreement acknowledge that the purpose of Advances is to finance temporarily the
purchase or sale of Securities for prompt delivery in accordance with the
settlement terms of such transactions or to meet emergency expenses not
reasonably foreseeable by a Fund. The Custodian shall promptly notify the
appropriate Fund of any Advance. Such notification shall be sent by facsimile
transmission or in such other manner as such Fund and the Custodian may agree.
10. LIENS.
The Bank shall have a lien on the Property in the Custody Account to
secure payment of fees and expenses for the services rendered under this
Agreement. If the Bank advances cash or securities to the Fund for any purpose
or in the event that the Bank or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of its duties hereunder, except such as may arise from its or
its nominee's negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the Custody Account shall be security therefor
and the Fund hereby grants a security interest therein to the Bank. The Fund
shall promptly reimburse the Bank for any such advance of cash or securities or
any such taxes, charges, expenses, assessments, claims or liabilities upon
request for payment, but should the Fund fail to so reimburse the Bank, the Bank
shall be entitled to dispose of such Property to the extent necessary to obtain
reimbursement. The Bank shall be entitled to debit any account of the Fund with
the Bank including, without limitation, the Custody Account, in connection with
any such advance and any interest on such advance as the Bank deems reasonable.
11. COMPENSATION.
Each Fund will pay to the Custodian such compensation as is agreed to in
writing by the Custodian and each such Fund from time to time. Such
compensation, together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 7(e), shall be billed to each such Fund
and paid in cash to the Custodian.
12. POWERS OF ATTORNEY.
Upon request, each Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
13. TERMINATION AND ASSIGNMENT.
Any Fund or the Custodian may terminate this Agreement by notice in
writing, delivered or mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date upon which such
termination shall take effect. Upon termination of this Agreement, the
appropriate Fund shall pay to the Custodian such fees as may be due the
Custodian hereunder as well as its reimbursable disbursements, costs and
expenses paid or incurred. Upon termination of this Agreement, the Custodian
shall deliver, at the terminating party's expense, all Assets held by it
hereunder to the appropriate Fund or as otherwise designated by such Fund by
Special Instructions. Upon such delivery, the Custodian shall have no further
obligations or liabilities under this Agreement except as to the final
resolution of matters relating to activity occurring prior to the effective date
of termination.
This Agreement may not be assigned by the Custodian or any Fund without
the respective consent of the other, duly authorized by a resolution by its
Board of Directors or Trustees.
14. ADDITIONAL FUNDS.
An additional Fund or Funds may become a party to this Agreement after the
date hereof by an instrument in writing to such effect signed by such Fund or
Funds and the Custodian. If this Agreement is terminated as to one or more of
the Funds (but less than all of the Funds) or if an additional Fund or Funds
shall become a party to this Agreement, there shall be delivered to each party
an Appendix B or an amended Appendix B, signed by each of the additional Funds
(if any) and each of the remaining Funds as well as the Custodian, deleting or
adding such Fund or Funds, as the case may be. The termination of this Agreement
as to less than all of the Funds shall not affect the obligations of the
Custodian and the remaining Funds hereunder as set forth on the signature page
hereto and in Appendix B as revised from time to time.
15. NOTICES.
As to each Fund, notices, requests, instructions and other writings
delivered to The Security Benefit Group of Companies, 700 Harrison, Topeka,
Kansas 66636-0001, postage prepaid, or to such other address as any particular
Fund may have designated to the Custodian in writing, shall be deemed to have
been properly delivered or given to a Fund.
Notices, requests, instructions and other writings delivered to the
Securities Administration department of the Custodian at its office at 928 Grand
Blvd., 10th Floor, Attn: Debbie Cadwell, Kansas City, Missouri 64106, or mailed
postage prepaid, to the Custodian's Securities Administration department, Post
Office Box 226, Attn: Debbie Cadwell, Kansas City, Missouri 64141, or to such
other addresses as the Custodian may have designated to each Fund in writing,
shall be deemed to have been properly delivered or given to the Custodian
hereunder; provided, however, that procedures for the delivery of Instructions
and Special Instructions shall be governed by Section 2(c) hereof.
16. MISCELLANEOUS.
(a) This Agreement is executed and delivered in the State of Missouri and
shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement shall be binding
upon, and inure to the benefit of, and be enforceable by the respective
successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended, modified or waived, in
any manner except in writing, properly executed by both parties hereto;
provided, however, Appendix A may be amended from time to time as Domestic
Subcustodians, Foreign Subcustodians, Special Subcustodians, and Securities
Depositories and Clearing Agencies are approved or terminated
according to the terms of this Agreement.
(d) The captions 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 or effect.
(e) This Agreement shall be effective as of the date of execution hereof.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning of this
Agreement, and the definitions thereof are found in the following sections of
the Agreement:
Term Section
---- -------
Account 4(b)(3)(ii)
ADR'S 4(j)
Advance 9
Assets 2(b)
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2(c)(1)
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
Liens 10
OCC 4(g)(1)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2(a)
Securities Depositories and 5(b)
Clearing Agencies
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2(c)(2)
Special Subcustodian 5(d)
Subcustodian 5
1940 Act 4(v)
Underlying Funds 4(b)(4)
(h) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid by any court of competent
jurisdiction, the remaining portion or portions shall be considered severable
and shall not be affected, and the rights and obligations of the parties shall
be construed and enforced as if this Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
(i) This Agreement constitutes the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof, and accordingly
supersedes, as of the effective date of this Agreement, any custodian agreement
heretofore in effect between the Fund and the Custodian.
IN WITNESS WHEREOF, the parties hereto have caused this Custody Agreement
to be executed by their respective duly authorized officers.
SECURITY ULTRA FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY EQUITY FUND
- Equity Series
- Social Awareness Series
- Value Series
- Small Company Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SBL FUND
- Series A, B, C, E, J, P, S, V and X
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY INCOME FUND
- Corporate Bond Series
- U. S. Government Series
- Limited Maturity Bond Series
- High Yield Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY GROWTH AND INCOME FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY MUNICIPAL BOND FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
ADVISOR'S FUND
- PCG Growth Series
- PCG Aggressive Growth Series
- SIM Growth Series
- SIM Conservative Growth Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY MANAGEMENT COMPANY, LLC
(Corporate Account)
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: Senior Vice President
Date: September 24, 1998
SECURITY CASH FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
UMB BANK, N.A.
ATTEST: R. WM. BLOOM By: RALPH R. SANTORO
---------------------------- -------------------------------
Name: Ralph R. Santoro
Title: Senior Vice President
Date: September 24, 1998
<PAGE>
APPENDIX A
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
United Missouri Trust Company of New York
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant Trust Company
SPECIAL SUBCUSTODIANS:
The Bank of New York
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS CLEARING AGENCIES
Euroclear
SECURITY ULTRA FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY EQUITY FUND
- Equity Series
- Social Awareness Series
- Value Series
- Small Company Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SBL FUND
- Series A, B, C, E, J, P, S, V and X
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY INCOME FUND
- Corporate Bond Series
- U. S. Government Series
- Limited Maturity Bond Series
- High Yield Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY GROWTH AND INCOME FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY MUNICIPAL BOND FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY CASH FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
ADVISOR'S FUND
- PCG Growth Series
- PCG Aggressive Growth Series
- SIM Growth Series
- SIM Conservative Growth Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY MANAGEMENT COMPANY, LLC
(Corporate Account)
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: Senior Vice President
Date: September 24, 1998
UMB BANK, N.A.
ATTEST: R. WM. BLOOM By: RALPH R. SANTOROO
---------------------------- -------------------------------
Name: Ralph R. Santoro
Title: Senior Vice President
Date: September 24, 1998
<PAGE>
AMENDMENT TO CUSTODY AGREEMENT
The following open-end management investment companies ("Funds") are hereby made
parties to the Custody Agreement dated January 1, 1995, as amended September 24,
1998, with UMB Bank, n.a. ("Custodian"), and agree to be bound by all the terms
and conditions contained in said Agreement:
List of Funds:
Security Equity Fund, Enhanced Index Series
Security Equity Fund, Select 25 Series
ATTEST: SECURITY EQUITY FUND
- Enhanced Index Series
- Select 25 Series
AMY J. LEE By: JAMES R. SCHMANK
- ------------------------------------- --------------------------------
Amy J. Lee Title: Vice President
ATTEST: UMB Bank, n.a.
By: RALPH R. SANTORO
- ------------------------------------- --------------------------------
Title: Senior Vice President
Date: February 16, 1999
<PAGE>
AMENDMENT TO APPENDIX A
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
United Missouri Trust Company of New York
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant Trust Company
SPECIAL SUBCUSTODIANS:
The Bank of New York
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS CLEARING AGENCIES
Euroclear
SECURITY EQUITY FUND
- Enhanced Index Series
- Select 25 Series
ATTEST: AMY J. LEE By: JAMES R. SCHMANK
------------------------------ --------------------------------
Name: James R. Schmank
Title: Vice President
Date: January 27, 1999
UMB BANK, N.A.
ATTEST: By: RALPH R. SANTORO
------------------------------ --------------------------------
Name: Ralph R. Santoro
Title: Senior Vice President
Date: February 16, 1999
<PAGE>
AMENDMENT TO CUSTODY AGREEMENT
The following open-end management investment companies ("Funds") are hereby made
parties to the Custody Agreement dated January 1, 1995, as amended September 24,
1998, with UMB Bank, n.a. ("Custodian"), and agree to be bound by all the terms
and conditions contained in said Agreement:
List of Funds:
SBL Fund, Series H
SBL Fund, Series Y
Security Income Fund, Capital Preservation Series
ATTEST: SBL FUND
- Series H
- Series Y
AMY J. LEE By: JAMES R. SCHMANK
- ------------------------------ ------------------------------------
Amy J. Lee, Secretary Title: Vice President
ATTEST: SECURITY INCOME FUND
- Capital Preservation Series
AMY J. LEE By: JOHN D. CLELAND
- ------------------------------ ------------------------------------
Amy J. Lee, Secretary John D. Cleland
Title: Vice President
ATTEST: UMB Bank, n.a.
R. W. BLOEMKER By: RALPH R. SANTORO
- ------------------------------ ------------------------------------
R. William Bloemker Title: Senior Vice President
Assistant Secretary Date: April 26, 1999
<PAGE>
AMENDMENT TO APPENDIX A
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
United Missouri Trust Company of New York
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant Trust Company
SPECIAL SUBCUSTODIANS:
The Bank of New York
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS CLEARING AGENCIES
Euroclear
SBL FUND
- Series H
- Series Y
ATTEST: AMY J. LEE By: JAMES R. SCHMANK
------------------------------ -----------------------------------
Name: James R. Schmank
Title: Vice President
Date: April 30, 1999
-------------------------------
SECURITY INCOME FUND
- Capital Preservation Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
------------------------------ -----------------------------------
Name: John D. Cleland
Title: President
Date: April 30, 1999
UMB BANK, N.A.
ATTEST: R. W. BLOEMKER By: RALPH R. SANTORO
------------------------------ -----------------------------------
R. William Bloemker Name: Ralph R. Santoro
Assistant Secretary Title: Senior Vice President
Date: April 26, 1999
<PAGE>
[CHASE LOGO]
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective May 1st, 1991, and is between THE CHASE MANHATTAN
BANK ("Bank") and each of the portfolios listed on Exhibit 1 hereto (each a
"Customer").
With respect to any obligations of a particular Customer arising hereunder,
Bank shall look for payment or satisfaction of any such obligation solely to
that Customer and the Assets of such Customer and Customer's Accounts to which
such obligation relates as though that Customer had separately contracted with
Bank by separate written agreement with respect to such Accounts. The rights and
benefits to which a given Customer is entitled hereunder shall be solely those
of such Customer and no other Customer hereunder shall receive such benefits.
1. CUSTOMER ACCOUNTS.
Bank, acting as "Securities Intermediary" (as defined in Section 15(g)
hereof) shall establish and maintain the following accounts ("Accounts"):
(a) a Custody Account (as defined in Section 15(b) hereof) in the name of
Customer for Financial Assets, which shall, except as modified by Section 15(d)
hereof, mean stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by Bank or its Subcustodian (as defined in
Section 3 hereof) for the account of Customer, including as an "Entitlement
Holder" as defined in Section 15(c) hereof); and
(b) an account in the name of Customer ("Deposit Account") for any and all
cash in any currency received by Bank or its Subcustodian for the account of
Customer, which cash shall not be subject to withdrawal by draft or check.
Customer warrants its authority to: 1) deposit the cash and Financial
Assets (collectively "Assets") received in the Accounts and 2) give Instructions
(as defined in Section 11 hereof) concerning the Accounts. Bank may deliver
Financial Assets of the same class in place of those deposited in the Custody
Account.
Upon written agreement between Bank and Customer, additional Accounts
may be established and separately accounted for as additional Accounts
hereunder.
2. MAINTENANCE OF FINANCIAL ASSETS AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to Bank:
(a) Financial Assets shall be held in the country or other jurisdiction
in which the principal trading market for such Financial Assets is located,
where such Financial Assets are to be presented for payment or where such
Financial Assets are acquired; and
(b) Cash shall be credited to an account in a country or other jurisdiction
in which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or non-interest
bearing accounts as may be available for the particular currency. To the extent
Instructions are issued and Bank can comply with such Instructions, Bank is
authorized to maintain cash balances on deposit for Customer with itself or one
of its "Affiliates" at such reasonable rates of interest as may from time to
time be paid on such accounts, or in non-interest bearing accounts as Customer
may direct, if acceptable to Bank. For purposes hereof, the term "Affiliate"
shall mean an entity controlling, controlled by, or under common control with,
Bank.
If Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by Bank and Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Bank may act hereunder through the subcustodians listed in Schedule A hereof
with which Bank has entered into subcustodial agreements ("Subcustodians").
Customer authorizes Bank to hold Assets in the Accounts in accounts which Bank
has established with one or more of its branches or Subcustodians. Bank and
Subcustodians are authorized to hold any of Financial Assets in their account
with any securities depository in which they participate.
Bank reserves the right to add new, replace or remove Subcustodians. Customer
shall be given reasonable notice by Bank of any amendment to Schedule A. Upon
request by Customer, Bank shall identify the name, address and principal place
of business of any Subcustodian of Customer's Assets and the name and address of
the governmental agency or other regulatory authority that supervises or
regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) Bank shall identify the Assets on its books as belonging to Customer.
(b) A Subcustodian shall hold such Assets together with assets belonging to
other customers of Bank in accounts identified on such Subcustodian's books as
custody accounts for the exclusive benefit of customers of Bank.
(c) Any Assets in the Accounts held by a Subcustodian shall be subject only
to the instructions of Bank or its agent. Any Financial Assets held in a
securities depository for the account of a Subcustodian shall be subject only to
the instructions of such Subcustodian.
(d) Any agreement Bank enters into with a Subcustodian for holding Bank's
customers' assets shall provide that such assets shall not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets shall be freely transferable without the payment of
money or value other than for safe custody or administration, or, in the case of
cash deposits, except for liens or rights in favor of creditors of the
Subcustodian arising under bankruptcy, insolvency or similar laws. Where
Securities are deposited by a Subcustodian with a securities depository, Bank
shall cause the Subcustodian to identify on its books as belonging to Bank, as
agent, the Securities shown on the Subcustodian's account on the books of such
securities depository. The foregoing shall not apply to the extent of any
special agreement or arrangement made by Customer with any particular
Subcustodian.
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) Bank or its Subcustodians shall make payments from the Deposit Account
upon receipt of Instructions which include all information required by Bank.
(b) In the event that any payment to be made under this Section 5 exceeds the
funds available in the Deposit Account, Bank, in its discretion, may advance
Customer such excess amount which shall be deemed a loan payable on demand,
bearing interest at the rate customarily charged by Bank on similar loans.
(c) If Bank credits the Deposit Account on a payable date, or at any time
prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, Customer shall
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If Customer does not promptly return any
amount upon such notification, Bank shall be entitled, upon oral or written
notification to Customer, to reverse such credit by debiting the Deposit Account
for the amount previously credited. Bank or its Subcustodian shall have no duty
or obligation to institute legal proceedings, file a claim or a proof of claim
in any insolvency proceeding or take any other action with respect to the
collection of such amount, but may act for Customer upon Instructions after
consultation with Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Financial Assets shall be transferred, exchanged or delivered by Bank or
its Subcustodian upon receipt by Bank of Instructions which include all
information required by Bank. Settlement and payment for Financial Assets
received for, and delivery of Financial Assets out of, the Custody Account may
be made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
Financial Assets to a purchaser, dealer or their agents against a receipt with
the expectation of receiving later payment and free delivery. Delivery of
Financial Assets out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to Bank.
(b) Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Financial Assets with respect to any
sale, exchange or purchase of Financial Assets. Otherwise, such transactions
shall be credited or debited to the Accounts on the date cash or Financial
Assets are actually received by Bank and reconciled to the Account.
(i) Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Financial Assets delivered pursuant to this Section 6 are
returned by the recipient thereof, Bank may reverse the credits and
debits of the particular transaction at any time.
7. ACTIONS OF BANK.
Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, Bank shall:
(a) Present for payment any Financial Assets which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that Bank or Subcustodian is
actually aware of such opportunities.
(b) Execute in the name of Customer such ownership and other certificates as
may be required to obtain payments in respect of Financial Assets.
(c) Exchange interim receipts or temporary Financial Assets for definitive
Financial Assets.
(d) Appoint brokers and agents for any transaction involving the Financial
Assets, including, without limitation, Affiliates of Bank or any Subcustodian.
(e) Issue statements to Customer, at times mutually agreed upon, identifying
the Assets in the Accounts.
Bank shall send Customer an advice or notification of any transfers of Assets
to or from the Accounts. Such statements, advices or notifications shall
indicate the identity of the entity having custody of the Assets. Unless
Customer sends Bank a written exception or objection to any Bank statement
within sixty (60) days of receipt, Customer shall be deemed to have approved
such statement. In such event, or where Customer has otherwise approved any such
statement, Bank shall, to the extent permitted by law, be released, relieved and
discharged with respect to all matters set forth in such statement or reasonably
implied therefrom as though it had been settled by the decree of a court of
competent jurisdiction in an action where Customer and all persons having or
claiming an interest in Customer or Customer's Accounts were parties.
All collections of funds or other property paid or distributed in respect of
Financial Assets in the Custody Account shall be made at the risk of Customer.
Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by Bank or by its Subcustodians of any payment, redemption or
other transaction regarding Financial Assets in the Custody Account in respect
of which Bank has agreed to take any action hereunder.
8. CORPORATE ACTIONS; PROXIES; TAX RECLAIMS.
(a) CORPORATE ACTIONS. Whenever Bank receives information concerning the
Financial Assets which requires discretionary action by the beneficial owner of
the Financial Assets (other than a proxy), such as subscription rights, bonus
issues, stock repurchase plans and rights offerings, or legal notices or other
material intended to be transmitted to securities holders ("Corporate Actions"),
Bank shall give Customer notice of such Corporate Actions to the extent that
Bank's central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, Bank shall endeavor to obtain Instructions from
Customer or its Authorized Person (as defined in Section 10 hereof), but if
Instructions are not received in time for Bank to take timely action, or actual
notice of such Corporate Action was received too late to seek Instructions, Bank
is authorized to sell such rights entitlement or fractional interest and to
credit the Deposit Account with the proceeds or take any other action it deems,
in good faith, to be appropriate in which case it shall be held harmless for any
such action.
(b) PROXY VOTING. Bank shall provide proxy voting services, if elected by
Customer, in accordance with the terms of the proxy voting services rider
hereto. Proxy voting services may be provided by Bank or, in whole or in part,
by one or more third parties appointed by Bank (which may be Affiliates of
Bank).
(c) TAX RECLAIMS.
(i) Subject to the provisions hereof, Bank shall apply for a reduction of
withholding tax and any refund of any tax paid or tax credits which apply
in each applicable market in respect of income payments on Financial
Assets for Customer's benefit which Bank believes may be available to
Customer.
(ii) The provision of tax reclaim services by Bank is conditional upon
Bank's receiving from Customer or, to the extent the Financial Assets are
beneficially owned by others, from each beneficial owner, A) a
declaration of the beneficial owner's identity and place of residence and
(B) certain other documentation (pro forma copies of which are available
from Bank). Customer acknowledges that, if Bank does not receive such
declarations, documentation and information Bank shall be unable to
provide tax reclaim services.
(iii) Bank shall not be liable to Customer or any third party for any
taxes, fines or penalties payable by Bank or Customer, and shall be
indemnified accordingly, whether these result from the inaccurate
completion of documents by Customer or any third party, or as a result of
the provision to Bank or any third party of inaccurate or misleading
information or the withholding of material information by Customer or any
other third party, or as a result of any delay of any revenue authority
or any other matter beyond Bank's control.
(iv) Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to
Customer from time to time and Bank may, by notification in writing, at
Bank's absolute discretion, supplement or amend the markets in which tax
reclaim services are offered. Other than as expressly provided in this
sub-clause, Bank shall have no responsibility with regard to Customer's
tax position or status in any jurisdiction.
(v) Customer confirms that Bank is authorized to disclose any information
requested by any revenue authority or any governmental body in relation
to Customer or the securities and/or cash held for Customer.
(vi) Tax reclaim services may be provided by Bank or, in whole or in
part, by one or more third parties appointed by Bank (which may be Bank's
affiliates); provided that Bank shall be liable for the performance of
any such third party to the same extent as Bank would have been if Bank
performed such services.
(d) TAX OBLIGATIONS.
(i) Customer confirms that Bank is authorized to deduct from any cash
received or credited to the Deposit Account any taxes or levies required
by any revenue or governmental authority for whatever reason in respect
of the Custody Account.
(ii) If Bank does not receive appropriate declarations, documentation and
information that additional United Kingdom taxation shall be deducted
from all income received in respect of the Financial Assets issued
outside the United Kingdom and any applicable United States withholding
tax shall be deducted from income received from the Financial Assets.
Customer shall provide to Bank such documentation and information as Bank
may require in connection with taxation, and warrants that, when given,
this information shall be true and correct in every respect, not
misleading in any way, and contain all material information. Customer
undertakes to notify Bank immediately if any such information requires
updating or amendment.
(iii) Customer shall be responsible for the payment of all taxes relating
to the Financial Assets in the Custody Account, and Customer agrees to
pay, indemnify and hold Bank harmless from and against any and all
liabilities, penalties, interest or additions to tax with respect to or
resulting from, any delay in, or failure by, Bank (1) to pay, withhold or
report any U.S. federal, state or local taxes or foreign taxes imposed
on, or (2) to report interest, dividend or other income paid or credited
to the Deposit Account, whether such failure or delay by Bank to pay,
withhold or report tax or income is the result of (x) Customer's failure
to comply with the terms of this paragraph, or (y) Bank's own acts or
omissions; provided however, Customer shall not be liable to Bank for any
penalty or additions to tax due as a result of Bank's failure to pay or
withhold tax or to report interest, dividend or other income paid or
credited to the Deposit Account solely as a result of Bank's negligent
acts or omissions.
9. NOMINEES.
Financial Assets which are ordinarily held in registered form may be
registered in a nominee name of Bank, Subcustodian or securities depository, as
the case may be. Bank may without notice to Customer cause any such Financial
Assets to cease to be registered in the name of any such nominee and to be
registered in the name of Customer. In the event that any Financial Assets
registered in a nominee name are called for partial redemption by the issuer,
Bank may allot the called portion to the respective beneficial holders of such
class of security in any manner Bank deems to be fair and equitable. Customer
shall hold Bank, Subcustodians, and their respective nominees harmless from any
liability arising directly or indirectly from their status as a mere record
holder of Financial Assets in the Custody Account.
10. AUTHORIZED PERSONS.
As used herein, the term "Authorized Person" means employees or agents
including investment managers as have been designated by written notice from
Customer or its designated agent to act on behalf of Customer hereunder. Such
persons shall continue to be Authorized Persons until such time as Bank receives
Instructions from Customer or its designated agent that any such employee or
agent is no longer an Authorized Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person
received by Bank, via telephone, telex, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to Bank which Bank believes in good faith to have been given by
Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which Bank may specify. Unless
otherwise expressly provided, all Instructions shall continue in full force and
effect until canceled or superseded. The term "Instructions" includes, without
limitation, instructions to sell, assign, transfer, deliver, purchase or receive
for the Custody Account, any and all stocks, bonds and other Financial Assets or
to transfer funds in the Deposit Account.)
Any Instructions delivered to Bank by telephone shall promptly thereafter be
confirmed in writing by an Authorized Person (which confirmation may bear the
facsimile signature of such Person), but Customer shall hold Bank harmless for
the failure of an Authorized Person to send such confirmation in writing, the
failure of such confirmation to conform to the telephone instructions received
or Bank's failure to produce such confirmation at any subsequent time. Bank may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account. Customer shall be
responsible for safeguarding any testkeys, identification codes or other
security devices which Bank shall make available to Customer or its Authorized
Persons.
12. STANDARD OF CARE; LIABILITIES.
(a) Bank shall be responsible for the performance of only such duties as are
set forth herein or expressly contained in Instructions which are consistent
with the provisions hereof as follows:
(i) Notwithstanding any other provisions of this Agreement, Bank's
responsibilities shall be limited to the exercise of reasonable care with
respect to its obligations hereunder. Bank shall only be liable to
Customer for any loss which shall occur as the result of the failure of a
Subcustodian to exercise reasonable care with respect to the safekeeping
of such Assets where such loss results directly from the failure by the
Subcustodian to use reasonable care in the provision of custodial
services by it in accordance with the standards prevailing in its local
market or from the willful default of such Subcustodian in the provision
of custodial services by it. In the event of any loss to Customer which
is compensable hereunder (i.e. a loss arising by reason of willful
misconduct or the failure of Bank or its Subcustodian to use reasonable
care), Bank shall be liable to Customer only to the extent of Customer's
direct damages, to be determined based on the market value of the
property which is the subject of the loss at the date of discovery of
such loss and without reference to any special conditions or
circumstances. Bank shall have no liability whatsoever for any
consequential, special, indirect or speculative loss or damages
(including, but not limited to, lost profits) suffered by Customer in
connection with the transactions and services contemplated hereby and the
relationship established hereby even if Bank has been advised as to the
possibility of the same and regardless of the form of the action.
(ii) Bank shall not be responsible for the insolvency of any Subcustodian
which is not a branch or Affiliate of Bank. Bank shall not be responsible
for any act, omission, default or the solvency of any broker or agent
which it or a Subcustodian appoints unless such appointment was made
negligently or in bad faith.
(iii) (A) Customer shall indemnify and hold Bank and its directors,
officers, agents and employees (collectively the "Indemnitees") harmless
from and against any and all claims, liabilities, losses, damages, fines,
penalties, and expenses, including out-of-pocket and incidental expenses
and legal fees ("Losses") that may be imposed on, incurred by, or
asserted against, the Indemnitees or any of them for following any
instructions or other directions upon which Bank is authorized to rely
pursuant to the terms of this Agreement. (B) In addition to and not in
limitation of the preceding subparagraph, Customer shall also indemnify
and hold the Indemnitees and each of them harmless from and against any
and all Losses that may be imposed on, incurred by, or asserted against,
the Indemnitees or any of them in connection with or arising out of
Bank's performance under this Agreement, provided the Indemnitees have
not acted with negligence or engaged in willful misconduct. (C) In
performing its obligations hereunder, Bank may rely on the genuineness of
any document which it believes in good faith to have been validly
executed.
(iv) Customer shall pay for and hold Bank harmless from any liability or
loss resulting from the imposition or assessment of any taxes or other
governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(v) Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice.
(vi) Bank need not maintain any insurance for the benefit of Customer.
(vii) Without limiting the foregoing, Bank shall not be liable for any
loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from malfunction, interruption of or error
in the transmission of information caused by any machines or system or
interruption of communication facilities, abnormal operating conditions,
nationalization, expropriation or other governmental actions; regulation
of the banking or securities industry; currency restrictions,
devaluations or fluctuations; and market conditions which prevent the
orderly execution of securities transactions or affect the value of
Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war (whether declared or undeclared) or terrorism,
insurrection, revolution, nuclear fusion, fission or radiation, or acts
of God.
(b) Consistent with and without limiting the first paragraph of this Section
12, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or the
retention of Financial Assets;
(iii) advise Customer or an Authorized Person regarding any default in
the payment of principal or income of any security other than as provided
in Section 5(c) hereof;
(iv) evaluate or report to Customer or an Authorized Person regarding the
financial condition of any broker, agent or other party to which
Financial Assets are delivered or payments are made pursuant hereto; and
(v) review or reconcile trade confirmations received from brokers.
Customer or its Authorized Persons issuing Instructions shall bear any
responsibility to review such confirmations against Instructions issued
to and statements issued by Bank.
(c) Customer authorizes Bank to act hereunder notwithstanding that Bank or
any of its divisions or Affiliates may have a material interest in a
transaction, or circumstances are such that Bank may have a potential conflict
of duty or interest including the fact that Bank or any of its Affiliates may
provide brokerage services to other customers, act as financial advisor to the
issuer of Financial Assets, act as a lender to the issuer of Financial Assets,
act in the same transaction as agent for more than one customer, have a material
interest in the issue of Financial Assets, or earn profits from any of the
activities listed herein.
13. FEES AND EXPENSES.
Customer shall pay Bank for its services hereunder the fees set forth in
Schedule B hereto or such other amounts as may be agreed upon in writing,
together with Bank's reasonable out-of-pocket or incidental expenses, including,
but not limited to, legal fees. Bank shall have a lien on and is authorized to
charge any Accounts of Customer for any amount owing to Bank under any provision
hereof
14. MISCELLANEOUS.
(a) FOREIGN EXCHANGE TRANSACTIONS. To facilitate the administration of
Customer's trading and investment activity, when instructed by specific or
standing Instruction, Bank is authorized to enter into spot or forward foreign
exchange contracts with Customer or an Authorized Person for Customer and may
also provide foreign exchange through its subsidiaries, Affiliates or
Subcustodians. Instructions, may be issued with respect to such contracts but
Bank may establish rules or limitations concerning any foreign exchange facility
made available. In all cases where Bank, its subsidiaries, Affiliates or
Subcustodians enter into a separate master foreign exchange contract with
Customer that covers foreign exchange transactions for the Accounts, the terms
and conditions of that foreign exchange contract, and to the extent not
inconsistent, this Agreement, shall apply to such transactions.
(b) CERTIFICATION OF RESIDENCY, ETC. Customer certifies that it is a resident
of the United States and shall notify Bank of any changes in residency. Bank may
rely upon this certification or the certification of such other facts as may be
required to administer Bank's obligations hereunder. Customer shall indemnify
Bank against all losses, liability, claims or demands arising directly or
indirectly from any such certifications.
(c) ACCESS TO RECORDS. Bank shall allow Customer's independent public
accountant reasonable access to the records of Bank relating to the Assets as is
required in connection with their examination of books and records pertaining to
Customer's affairs. Subject to restrictions under applicable law, Bank shall
also obtain an undertaking to permit Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the examination
of Customer's books and records.
(d) GOVERNING LAW; SUCCESSORS AND ASSIGNS, Captions THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN NEW YORK and shall not be assignable by either party, but
shall bind the successors in interest of Customer and Bank. The captions given
to the sections and subsections of this Agreement are for convenience of
reference only and are not to be used to interpret this Agreement.
(e) ENTIRE AGREEMENT; APPLICABLE RIDERS. Customer represents that the Assets
deposited in the Accounts are (Check one):
X Investment Company assets subject to certain U.S. Securities
------- and Exchange Commission rules and regulations;
------- Other (specify)
This Agreement consists exclusively of this document together with
Schedules A and B, Exhibits I - _______ and the following Rider(s)
[Check applicable rider(s)]:
X INVESTMENT COMPANY
-------
PROXY VOTING
-------
X SPECIAL TERMS AND CONDITIONS
-------
There are no other provisions hereof and this Agreement supersedes any other
agreements, whether written or oral, between the parties. Any amendment hereto
must be in writing, executed by both parties.
(f) SEVERABILITY. In the event that one or more provisions hereof are held
invalid, illegal or unenforceable in any respect on the basis of any particular
circumstances or in any jurisdiction, the validity, legality and enforceability
of such provision or provisions under other circumstances or in other
jurisdictions and of the remaining provisions shall not in any way be affected
or impaired.
(g) WAIVER. Except as otherwise provided herein, no failure or delay on the
part of either party in exercising any power or right hereunder operates as a
waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right. No
waiver by a party of any provision hereof, or waiver of any breach or default,
is effective unless in writing and signed by the party against whom the waiver
is to be enforced.
(h) REPRESENTATIONS AND WARRANTIES. (i) Customer hereby represents and
warrants to Bank that: (A) it has full authority and power to deposit and
control the Financial Assets and cash deposited in the Accounts; (B) it has all
necessary authority to use Bank as its custodian; (C) this Agreement constitutes
its legal, valid and binding obligation, enforceable in accordance with its
terms; (D) it shall have full authority and power to borrow moneys and enter
into foreign exchange transactions; and (E) it has not relied on any oral or
written representation made by Bank or any person on its behalf, and
acknowledges that this Agreement sets out to the fullest extent the duties of
Bank. (ii) Bank hereby represents and warrants to Customer that: (A) it has the
full power and authority to perform its obligations hereunder, (B) this
Agreement constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms; and (C) that it has taken all necessary action to
authorize the execution and delivery hereof.
(i) NOTICES. All notices hereunder shall be effective when actually received.
Any notices or other communications which may be required hereunder are to be
sent to the parties at the following addresses or such other addresses as may
subsequently be given to the other party in writing: (a) Bank: The Chase
Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, N.Y. 11245, Attention:
Global Investor Services, Investment Management Group; and (b) Customer:
Security Funds. 700 SW Harrison Street, Topeka, KS 66636-0001, Attention: Brenda
M. Harwood.
(j) TERMINATION. This Agreement may be terminated by Customer or Bank by
giving sixty (60) days written notice to the other, provided that such notice to
Bank shall specify the names of the persons to whom Bank shall deliver the
Assets in the Accounts. If notice of termination is given by Bank, Customer
shall, within sixty (60) days following receipt of the notice, deliver to Bank
Instructions specifying the names of the persons to whom Bank shall deliver the
Assets. In either case Bank shall deliver the Assets to the persons so
specified, after deducting any amounts which Bank determines in good faith to be
owed to it under Section 13. If within sixty (60) days following receipt of a
notice of termination by Bank, Bank does not receive Instructions from Customer
specifying the names of the persons to whom Bank shall deliver the Assets, Bank,
at its election, may deliver the Assets to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions hereof, or to Authorized Persons, or may continue to hold the Assets
until Instructions are provided to Bank.
(k) MONEY LAUNDERING. Customer warrants and undertakes to Bank for itself and
its agents that all Customer's customers are properly identified in accordance
with U.S. Money Laundering Regulations as in effect from time to time.
(l) Imputation of certain information. Bank shall not be held responsible for
and shall not be required to have regard to information held by any person by
imputation or information of which Bank is not aware by virtue of a "Chinese
Wall" arrangement. If Bank becomes aware of confidential information which in
good faith it feels inhibits it from effecting a transaction hereunder Bank may
refrain from effecting it.
15. DEFINITIONS.
As used herein, the following terms shall have the meaning hereinafter
stated:
a) "Certificated Security" shall mean a security that is represented by a
certificate.
b) "Custody Account" means each Securities custody account on Bank's records to
which Financial Assets are or may be credited pursuant hereto.
c) "Entitlement Holder" shall mean the person on the records of a Securities
Intermediary as the person having a Securities Entitlement against the
Securities Intermediary.
d) "Financial Asset" shall mean, as the context requires, either the asset
itself or the means by which a person's claim to it is evidenced, including
a Certificated Security or Uncertificated Security, a security certificate,
or a Securities Entitlement.
e) "Securities" means stocks, bonds, rights, warrants and other negotiable and
non-negotiable paper whether issued as Certificated Securities or
Uncertificated Securities and commonly traded or dealt in on securities
exchanges or financial markets, and other obligations of an issuer, or
shares, participations and interests in an issuer recognized in an area in
which it is issued or dealt in as a medium for investment and any other
property as shall be acceptable to Bank for the Custody Account.
f) "Securities Entitlement" shall mean the rights and property interest of an
Entitlement Holder with respect to a Financial Asset as set forth in Part 5
of the Uniform Commercial Code.
g) "Securities Intermediary" shall mean Bank, a Subcustodian, a securities
depository, and any other financial institution which in the ordinary course
of business maintains custody accounts for others and acts in that capacity.
h) "Uncertificated Security" shall mean a security that is not represented by a
certificate.
i) "Uniform Commercial Code" means Article 8 of the Uniform Commercial Code of
the State of New York, as the same may be amended from time to time.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first-above written.
CUSTOMER
SBL FUND
SECURITY EQUITY FUND
SECURITY INCOME FUND
By: AMY J. LEE
------------------------------
Title: Secretary
Date: January 11, 1999
THE CHASE MANHATTAN BANK
By: MATTHEW D. GOAD
-------------------------------
Title: Vice President
Date: January 7, 1999
STATE OF KANSAS )
: ss.
COUNTY OF SHAWNEE )
On this 11th day of January, 1999, before me personally came Amy J. Lee, to
me known, who being by me duly sworn, did depose and say that she resides in
Lawrence, Kansas at 701 Tennessee, that she is Secretary of the entity described
in and which executed the foregoing instrument; that she knows the seal of said
entity, that the seal affixed to said instrument is such seal, that it was so
affixed by order of said entity, and that she signed her name thereto by like
order.
Sworn to before me this 11th
day of January, 1999.
Notary
ANNETTE E. CRIPPS
- ------------------------------
Annette E. Cripps
Notary Public
State of Kansas
My Appt. Expires 7/8/2001
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 7th day of January, 1999, before me personally came Matthew D. Goad,
to me known, who being by me duly sworn, did depose and say that he resides in
Brooklyn at 163 Bond Street; that he is a Vice President of THE CHASE MANHATTAN
BANK, the corporation described in and which executed the foregoing instrument;
that he knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the Board
of Directors of said corporation, and that he signed his name thereto by like
order.
Sworn to before me this 7th
day of January, 1999.
Notary
ANTOINETTE D. TURNER
- -------------------------------
Antoinette D. Turner
Notary Public
State of New York
Commission Expires, January 1, 1999
<PAGE>
Investment Company Rider to Global Custody Agreement
Between The Chase Manhattan Bank and
Each of the Portfolios Listed on Exhibit 1
Effective May 1st, 1991
The following modifications are made to the Agreement:
A. Add a new Section 16 to the Agreement as follows:
"16. Compliance with SEC rule 17f-5.
(a) Customer's board of directors (or equivalent body) (hereinafter `Board')
hereby delegates to Bank, and, except as to the country or countries as to which
Bank may, from time to time, advise Customer that it does not accept such
delegation, Bank hereby accepts the delegation to it, of the obligation to
perform as Customer's `Foreign Custody Manager' (as that term is defined in SEC
rule 17f-5(a)(2)), both for the purpose of selecting Eligible Foreign Custodians
(as that term is defined in SEC rule 17f-5(a)(1), and as the same may be amended
from time to time, or that have otherwise been made exempt pursuant to an SEC
exemptive order) to hold Assets and of evaluating the contractual arrangements
with such Eligible Foreign Custodians (as set forth in SEC rule 17f-5(c)(2));
provided that, the term Eligible Foreign Custodian shall not include any
`Compulsory Depository.' A Compulsory Depository shall mean a securities
depository or clearing agency the use of which is compulsory because: (1) its
use is required by law or regulation, (2) securities cannot be withdrawn from
the depository, or (3) maintaining securities outside the depository is not
consistent with prevailing custodial practices in the country which the
depository serves. Compulsory Depositories used by Bank as of the date hereof
are set forth in Appendix 1-A hereto, and as the same may be amended on notice
to Customer from time to time.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the placement of
Assets with particular Eligible Foreign Custodians and of any material change
in the arrangements with such Eligible Foreign Custodians, with such reports
to be provided to Customer's Board at such times as the Board deems
reasonable and appropriate based on the circumstances of Customer's foreign
custody arrangements (and until further notice from Customer such reports
shall be provided not less than quarterly with respect to the placement of
Assets with particular Eligible Foreign Custodians and with reasonable
promptness upon the occurrence of any material change in the arrangements
with such Eligible Foreign Custodians);
(ii)exercise such reasonable care, prudence and diligence in performing as
Customer's Foreign Custody Manager as a person having responsibility for the
safekeeping of Assets would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have determined that
Assets placed and maintained in the safekeeping of such Eligible Foreign
Custodian shall be subject to reasonable care, based on the standards
applicable to custodians in the relevant market, after having considered all
factors relevant to the safekeeping of such Assets, including, without
limitation, those factors set forth in SEC rule 17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign Custodian
(or, in the case of an Eligible Foreign Custodians that is a securities
depository or clearing agency, such contract, the rules or established
practices or procedures of the depository, or any combination of the
foregoing) requires that the Eligible Foreign Custodian will provide
reasonable care for Assets based on the standards applicable to custodians in
the relevant market.
(v) have established a system to monitor the continued appropriateness of
maintaining Assets with particular Eligible Foreign Custodians and of the
governing contractual arrangements; it being understood, however, that in the
event that Bank shall have determined that the existing Eligible Foreign
Custodian in a given country would no longer afford Assets reasonable care
and that no other Eligible Foreign Custodian in that country would afford
reasonable care, Bank shall promptly so advise Customer and shall then act in
accordance with the Instructions of Customer with respect to the disposition
of the affected Assets.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Assets on behalf of Customer with Eligible Foreign Custodians pursuant to a
written contract deemed appropriate by Bank.
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Assets hereunder complies with the
rules, regulations, interpretations and exemptive orders promulgated by or under
the authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined in Rule
17f-5(a)(7). Customer represents to Bank that: (1) the Assets being placed and
maintained in Bank's custody are subject to the Investment Company Act of 1940,
as amended (the "1940 Act"), as the same may be amended from time to time; (2)
its Board: (i) has determined that it is reasonable to rely on Bank to perform
as Customer's Foreign Custody Manager (ii) or its investment adviser shall have
determined that Customer may maintain Assets in each country in which Customer's
Assets shall be held hereunder and determined to accept the risks arising
therefrom (including, but not limited to, a country's financial infrastructure),
prevailing custody and settlement practices, laws applicable to the safekeeping
and recovery of Assets held in custody, and the likelihood of nationalization,
currency controls and the like) (collectively ("Country Risk")). Nothing
contained herein shall require Bank to make any selection or to engage in any
monitoring on behalf of Customer that would entail consideration of Country
Risk.
(e) Bank shall provide to Customer such information relating to Country Risk
as is specified in Appendix 1-B hereto. Customer hereby acknowledges that: (i)
such information is solely designed to inform Customer of market conditions and
procedures and is not intended as a recommendation to invest or not invest in
particular markets; and (ii) Bank has gathered the information from sources it
considers reliable, but that Bank shall have no responsibility for inaccuracies
or incomplete information.
B. Add the following after the first sentence of Section 3 of the Agreement:
"At the request of Customer, Bank may, but need not, add to Schedule A an
Eligible Foreign Custodian that is either a bank or a non-Compulsory Depository
where Bank has not acted as Foreign Custody Manager with respect to the
selection thereof. Bank shall notify Customer in the event that it elects to add
any such entity."
C. Add the following language to the end of Section 3 of the Agreement:
"The term Subcustodian as used herein shall mean the following:
(a) a U.S. Bank,' which shall mean a U.S. bank as defined in SEC rule
17f-5(a)(7);
(b) an Eligible Foreign Custodian,' which shall mean (i) a banking
institution or trust company, incorporated or organized under the laws of a
country other than the United States, that is regulated as such by that
country's government or an agency thereof, (ii) a majority-owned direct or
indirect subsidiary of a U.S. bank or bank holding company which subsidiary is
incorporated or organized under the laws of a country other than the United
States; (iii) a securities depository or clearing agency, incorporated or
organized under the laws of a country other than the United States (other than a
Compulsory Depository), that acts as a system for the central handling of
securities or equivalent book-entries in that country and that is regulated by a
foreign financial regulatory authority as defined under section 2(a)(50) of the
1940 Act, (iv) a securities depository or clearing agency organized under the
laws of a country other than the United States to the extent acting as a
transnational system for the central handling of securities or equivalent
book-entries, and (v) any other entity that shall have been so qualified by
exemptive order, rule or other appropriate action of the SEC.
For purposes of clarity, it is agreed that as used in Section 12(a)(i), the term
Subcustodian shall not include any Eligible Foreign Custodian as to which Bank
has not acted as Foreign Custody Manager or any Compulsory Depository."
<PAGE>
Appendix 1-A
COMPULSORY DEPOSITORIES
<PAGE>
Appendix 1-B
Information Regarding Country Risk
1. To aid Customer in its determinations regarding Country Risk, Bank shall
furnish annually and upon the initial placing of Assets into a country the
following information (check items applicable):
A. Opinions of local counsel concerning:
X
- ------ i. Whether applicableforeign law would restrict the access afforded
Customer's independent public accountants to books and records kept
by an eligible foreign custodian located in that country.
X
- ------ ii. Whether applicable foreign law would restrict the Customer's ability
to recover its assets in the event of the bankruptcy of an Eligible
Foreign Custodian located in that country.
X
- ------ iii. Whether applicable foreign law would restrict the Customer's ability
to recover assets that are lost while under the control of an
Eligible Foreign Custodian located in the country.
B. Written information concerning:
X
- ------ i. The foreseeability of expropriation, nationalization, freezes, or
confiscation of Customer's assets.
X
- ------ ii. Whether difficulties in converting Customer's cash and cash
equivalents to U.S. dollars are reasonably foreseeable.]
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities settlement and
registration, (v) taxation, and (vi) compulsory depositories (including
depository evaluation).
2. To aid Customer in monitoring Country Risk, Bank shall furnish board the
following additional information:
Market flashes, including with respect to changes in the information in
market reports.
<PAGE>
DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
Domestic Corporate Actions and Proxies
With respect to domestic U.S. and Canadian Financial Assets (the latter if held
in DTC), the following provisions shall apply rather than the pertinent
provisions of Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of Bank's
nominee or the nominee of a central depository) and communications with
respect to Financial Assets in the Custody Account as call for voting
or relate to legal proceedings within a reasonable time after
sufficient copies are received by Bank for forwarding to its customers.
In addition, Bank shall follow coupon payments, redemptions, exchanges
or similar matters with respect to Financial Assets in the Custody
Account and advise Customer or the Authorized Person for such Account
of rights issued, tender offers or any other discretionary rights with
respect to such Financial Assets, in each case, of which Bank has
received notice from the issuer of the Financial Assets, or as to which
notice is published in publications routinely utilized by Bank for this
purpose.
<PAGE>
Exhibit 1
TO CUSTODIAN AGREEMENT
BETWEEN
SBL Fund and The Chase Manhattan Bank
Dated as of May 1st, 1991
The following is a list of Portfolios for which the Custodian shall serve
under a Custodian Agreement dated as of May 1, 1991 (the "Agreement"):
Portfolio Name: Effective as of:
- --------------------------------------------------------------------------------
Series D May 1, 1991
Series I January 28, 1999
Series K May 15, 1995
Series M May 15, 1995
Series N May 15, 1995
Series O May 15, 1995
<PAGE>
Exhibit 1
TO CUSTODIAN AGREEMENT
BETWEEN
Security Equity Fund and The Chase Manhattan Bank
Dated as of May 1, 1991
The following is a list of Portfolios for which the Custodian shall serve
under a Custodian Agreement dated as of May 1, 1991 (the "Agreement"):
Portfolio Name: Effective as of:
- --------------------------------------------------------------------------------
Asset Allocation Fund May 15, 1995
Global Series May 30, 1995
International Series January 28, 1999
<PAGE>
Exhibit 1
TO CUSTODIAN AGREEMENT
BETWEEN
Security Income Fund and The Chase Manhattan Bank
Dated as of May 1st, 1991
The following is a list of Portfolios for which the Custodian shall
serve under a Custodian Agreement dated as of May 1st, 1991 (the "Agreement"):
Portfolio Name: Effective as of:
- --------------------------------------------------------------------------------
Emerging Markets Total Return Series April 9, 1997
Global Asset Allocation Series April 9, 1997
Global High Yield Series May 15, 1995
<PAGE>
Exhibit 1
TO CUSTODIAN AGREEMENT
BETWEEN
Security Equity Fund and The Chase Manhattan Bank
Dated as of May 1, 1991
The following is a list of Portfolios for which the Custodian shall serve
under a Custodian Agreement dated May 1, 1991 (the "Agreement"):
Portfolio Name: Effective as of:
- --------------------------------------------------------------------------------
Global Series May 30, 1995
International Series January 28, 1999
<PAGE>
FORM OF
CUSTODIAN AGREEMENT
This Agreement between each registered investment company listed on Schedule
A hereto, as it may be amended from time to time, incorporated herein by
reference , each a corporation organized and existing under the laws of the
state of Kansas (each a "FUND" and collectively the "FUNDS"), and STATE STREET
BANK and TRUST COMPANY, a Massachusetts trust company (the "CUSTODIAN"),
WITNESSETH:
WHEREAS, each 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, each Fund intends that this Agreement be applicable to the series of
the Fund listed on Schedule I (such series together with all other series
subsequently established by the Fund and made subject to this Agreement in
accordance with Section 18, be referred to herein as the "PORTFOLIO(S)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
Each Fund hereby employs the Custodian as the custodian of the assets of its
respective Portfolios, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("DOMESTIC SECURITIES") and securities it desires to be held outside the United
States ("FOREIGN SECURITIES"). Each Fund on behalf of its respective
Portfolio(s) agrees to deliver to the Custodian all securities and cash of the
Portfolios, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the
Portfolio(s) from time to time, and the cash consideration received by it for
such new or treasury shares of beneficial interest of the Fund representing
interests in the Portfolios ("SHARES") as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of a Portfolio
held or received by the Portfolio and not delivered to the Custodian.
Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in Section 6
hereof), the Custodian shall on behalf of the applicable Portfolio(s) from time
to time employ one or more sub-custodians located in the United States, but only
in accordance with an applicable vote by the Board of Directors of the Fund (the
"BOARD") on behalf of the applicable Portfolio(s), and provided that the
Custodian shall have no more or less responsibility or liability to the Fund on
account of any actions or omissions of any sub-custodian so employed than if the
action or omission was that of the Custodian itself. The Custodian may employ as
sub-custodian for the Fund's foreign securities on behalf of the applicable
Portfolio(s) the foreign banking institutions and foreign securities
depositories designated in Schedules A and B hereto but only in accordance with
the applicable provisions of Sections 3 and 4.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF EACH FUND HELD
BY THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to Section
2.8 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury (each, a
"U.S. SECURITIES SYSTEM") and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("DIRECT PAPER")
which is deposited and/or maintained in the Direct Paper System of the Custodian
(the "DIRECT PAPER SYSTEM") pursuant to Section 2.9.
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("DIRECT PAPER SYSTEM ACCOUNT") only upon
receipt of Proper Instructions on behalf of the applicable Portfolio, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.8 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in
any such case, the cash or other consideration is to be delivered
to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of
the Portfolio or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.7 or into the name or nominee name of any
sub-custodian appointed pursuant to Section 1; or for exchange for
a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
PROVIDED that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility
or liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities except as
may arise from the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, BUT ONLY against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund on
behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its agencies or
instrumentalities, except that in connection with any loans for
which collateral is to be credited to the Custodian's account in
the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible for
the delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowing by the
Fund on behalf of the Portfolio requiring a pledge of assets by the
Fund on behalf of the Portfolio, BUT ONLY against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of 1934
(the "EXCHANGE ACT") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
futures commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity Futures
Trading Commission ("CFTC") and/or any contract market, or any
similar organization or organizations, regarding account deposits
in connection with transactions by the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the Fund
(the "TRANSFER AGENT") for delivery to such Transfer Agent or to
the holders of Shares in connection with distributions in kind, as
may be described from time to time in the currently effective
prospectus and statement of additional information of the Fund
related to the Portfolio (the "PROSPECTUS"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper purpose, BUT ONLY upon receipt of Proper
Instructions from the Fund on behalf of the applicable Portfolio
specifying the securities of the Portfolio to be delivered, setting
forth the purpose for which such delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities shall be
made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, UNLESS the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.7 or in the name or nominee name of
any sub-custodian appointed pursuant to Section 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls, maturities,
tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended (the "1940 ACT"). Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as Custodian in
the Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable; PROVIDED,
however, that every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall on behalf of
each applicable Portfolio be approved by vote of a majority of the Board. Such
funds shall be deposited by the Custodian in its capacity as Custodian and shall
be withdrawable by the Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer domestic securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent thereof
and shall credit such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or data as may
be necessary to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions on
behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Portfolio but only (a) against the delivery of such securities or
evidence of title to such options, futures contracts or options on
futures contracts to the Custodian (or any bank, banking firm or
trust company doing business in the United States or abroad which
is qualified under the 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in the name of a nominee
of the Custodian referred to in Section 2.3 hereof or in proper
form for transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set forth
in Section 2.8 hereof; (c) in the case of a purchase involving the
Direct Paper System, in accordance with the conditions set forth in
Section 2.9; (d) in the case of repurchase agreements entered into
between the Fund on behalf of the Portfolio and the Custodian, or
another bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the Federal
Reserve Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities owned by
the Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Portfolio or (e)
for transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected prior to
receipt of a confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued as set forth in
Section 5 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments for
the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
of the Fund whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of Proper
Instructions from the Fund on behalf of the Portfolio specifying
the amount of such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such
payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or times
in its discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the 1940 Act to act as a custodian, as
its agent to carry out such of the provisions of this Section 2 as the Custodian
may from time to time direct; PROVIDED, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or liabilities
hereunder.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S.
Securities System subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented in
an account of the Custodian in the U.S. Securities System (the
"U.S. SECURITIES SYSTEM ACCOUNT") which account shall not include
any assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the U.S.
Securities System Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for
the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i) receipt
of advice from the U.S. Securities System that payment for such
securities has been transferred to the U.S. Securities System
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Portfolio. Copies of all advices from the U.S. Securities
System of transfers of securities for the account of the Portfolio
shall identify the Portfolio, be maintained for the Portfolio by
the Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account of
the Portfolio in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the U.S.
Securities System for the account of the Portfolio;
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the U.S. Securities System;
5) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or
of any of its or their employees or from failure of the Custodian
or any such agent to enforce effectively such rights as it may have
against the U.S. Securities System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian
with respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Portfolio has not
been made whole for any such loss or damage.
SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The
Custodian may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in the Direct
Paper System Account, which account shall not include any assets of
the Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon the making of an entry
on the records of the Custodian to reflect such transfer and
receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the Direct
Paper System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as the
Fund may reasonably request from time to time.
SECTION 2.10 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions on behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the CFTC or any registered
contract market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Portfolio,
(ii) for purposes of segregating cash or government securities in connection
with options purchased, sold or written by the Portfolio or commodity futures
contracts or options thereon purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release of the SEC,
or interpretative opinion of the staff of the SEC, relating to the maintenance
of segregated accounts by registered investment companies and (iv) for other
proper corporate purposes, BUT ONLY, in the case of clause (iv), upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio, setting
forth the purpose or purposes of such segregated account and declaring such
purpose(s) to be a proper corporate purpose.
SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall
execute ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in connection
with transfers of securities.
SECTION 2.12 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting materials
and all notices relating to such securities.
SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to
the provisions of Section 2.3, the Custodian shall transmit promptly to the Fund
for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action with respect
to any tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS
SECTION 3.1 DEFINITIONS. The following capitalized terms shall have the
indicated meanings:
"COUNTRY RISK" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including any Mandatory Securities Depositories operating in the country);
prevailing or developing custody and settlement practices; and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
"ELIGIBLE FOREIGN CUSTODIAN" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC), or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act, except that the term does not include Mandatory Securities
Depositories.
"FOREIGN ASSETS" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"FOREIGN CUSTODY MANAGER" has the meaning set forth in section (a)(2) of Rule
17f-5.
"MANDATORY SECURITIES DEPOSITORY" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund, on the Portfolios' behalf, determines to place Foreign Assets in a country
outside the United States (i) because required by law or regulation; (ii)
because securities cannot be withdrawn from such foreign securities depository
or clearing agency; or (iii) because maintaining or effecting trades in
securities outside the foreign securities depository or clearing agency is not
consistent with prevailing or developing custodial or market practices.
SECTION 3.2 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. Each
Fund, by resolution adopted by its respective Board, hereby delegates to the
Custodian with respect to the Portfolios, subject to Section (b) of Rule 17f-5,
the responsibilities set forth in this Section 3 with respect to Foreign Assets
of the Portfolios held outside the United States, and the Custodian hereby
accepts such delegation, as Foreign Custody Manager with respect to the
Portfolios.
SECTION 3.3 COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A to this Agreement, which list of countries may be amended
from time to time by the Fund with the Agreement of the Foreign Custody Manager.
The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
Custodians selected by the Foreign Custody Manager to maintain the assets of the
Portfolios, which list of Eligible Foreign Custodians may be amended from time
to time in the sole discretion of the Foreign Custody Manager. Mandatory
Securities Depositories are listed on Schedule B to this Contract, which
Schedule B may be amended from time to time by the Foreign Custody Manager. The
Foreign Custody Manager will provide amended versions of Schedules A and B in
accordance with Section 3.7 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to
open an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund on behalf of the Portfolios of the
applicable account opening requirements for such country, the Foreign Custody
Manager shall be deemed to have been delegated by the Board on behalf of the
Portfolios responsibility as Foreign Custody Manager with respect to that
country and to have accepted such delegation. Following the receipt of Proper
Instructions directing the Foreign Custody Manager to close the account of a
Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody
Manager in a designated country, the delegation by the Board on behalf of the
Portfolios to the Custodian as Foreign Custody Manager for that country shall be
deemed to have been withdrawn and the Custodian shall immediately cease to be
the Foreign Custody Manager of the Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
SECTION 3.4 SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions
of this Section 3, the Portfolios' Foreign Custody Manager may place and
maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time. In performing its delegated responsibilities as
Foreign Custody Manager to place or maintain Foreign Assets with an Eligible
Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign
Assets will be subject to reasonable care, based on the standards applicable to
custodians in the country in which the Foreign Assets will be held by that
Eligible Foreign Custodian, after considering all factors relevant to the
safekeeping of such assets, including, without limitation the factors specified
in Rule 17f-5(c)(1).
3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody
Manager shall determine that the contract (or the rules or established practices
or procedures in the case of an Eligible Foreign Custodian that is a foreign
securities depository or clearing agency) governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
3.4.3. MONITORING. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor (i) the appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (ii) the contract governing the custody
arrangements established by the Foreign Custody Manager with the Eligible
Foreign Custodian (or the rules or established practices and procedures in the
case of an Eligible Foreign Custodian selected by the Foreign Custody Manager
which is a foreign securities depository or clearing agency that is not a
Mandatory Securities Depository). In the event the Foreign Custody Manager
determines that the custody arrangements with an Eligible Foreign Custodian it
has selected are no longer appropriate, the Foreign Custody Manager shall notify
the Board in accordance with Section 3.7 hereunder.
SECTION 3.5 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3, the Board shall be deemed to have considered and
determined to accept such Country Risk as is incurred by placing and maintaining
the Foreign Assets in each country for which the Custodian is serving as Foreign
Custody Manager of the Portfolios. The Fund, on behalf of the Portfolios, and
the Board shall be deemed to be monitoring on a continuing basis such Country
Risk to the extent that the Board considers necessary or appropriate. The Fund
and the Custodian each expressly acknowledge that the Foreign Custody Manager
shall not be delegated any responsibilities under this Section 3 with respect to
Mandatory Securities Depositories.
SECTION 3.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS.
In performing the responsibilities delegated to it, the Foreign Custody Manager
agrees to exercise reasonable care, prudence and diligence such as a person
having responsibility for the safekeeping of assets of management investment
companies registered under the 1940 Act would exercise.
SECTION 3.7 REPORTING REQUIREMENTS. The Foreign Custody Manager shall
report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian
and the placement of such Foreign Assets with another Eligible Foreign Custodian
by providing to the Board amended Schedules A or B at the end of the calendar
quarter in which an amendment to either Schedule has occurred. The Foreign
Custody Manager shall make written reports notifying the Board of any other
material change in the foreign custody arrangements of the Portfolios described
in this Section 3 after the occurrence of the material change.
SECTION 3.8 REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board has determined that it is reasonable for the Board to rely on the
Custodian to perform the responsibilities delegated pursuant to this Agreement
to the Custodian as the Foreign Custody Manager of the Portfolios. Each party
represents that it will in good faith negotiate revised terms for this Agreement
to reflect future amendments to Rule 17f-5 or the regulations thereunder, if
any.
SECTION 3.9 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN
CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign Custody
Manager of the Portfolios shall be effective as of the date of execution of this
Agreement and shall remain in effect until terminated at any time, without
penalty, by written notice from the terminating party to the non-terminating
party. Termination will become effective forty-five (45) days after receipt by
the non-terminating party of such notice. The provisions of Section 3.3 hereof
shall govern the delegation to and termination of the Custodian as Foreign
Custody Manager of the Portfolios with respect to designated countries.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS
HELD OUTSIDE OF THE UNITED STATES
SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall have
the following meanings:
"FOREIGN SECURITIES SYSTEM" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution serving as an
Eligible Foreign Custodian.
SECTION 4.2 HOLDING SECURITIES. The Custodian shall identify on its books
as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, PROVIDED HOWEVER, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3 FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country only through
arrangements implemented by the Foreign Sub-Custodian in such country pursuant
to the terms of this Agreement.
SECTION 4.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN SECURITIES. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by such Foreign Sub-Custodian, or in a Foreign Securities System account,
only upon receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolios in
accordance with commercially reasonable market practice in the
country where such foreign securities are held or traded,
including, without limitation: (A) delivery against predetermined
amount and method of receiving later payment; or (B) in the case of
a sale effected through a Foreign Securities System in accordance
with the rules governing the operation of the Foreign Securities
System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other similar
offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of
the Custodian (or the name of the respective Foreign Sub-Custodian
or of any nominee of the Custodian or such Foreign Sub-Custodian)
or for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units;
(vi) to brokers, clearing banks or other clearing agents for examination
or trade execution in accordance with market custom; PROVIDED that
in any such case the Foreign Sub-Custodian shall have no
responsibility or liability for any loss arising from the delivery
of such securities prior to receiving payment for such securities
except as may arise from the Foreign Sub-Custodian's own negligence
or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by the
Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper purpose, BUT ONLY upon receipt of Proper
Instructions specifying the foreign securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such securities shall be
made.
4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the
respective Foreign Securities System to pay out, monies of a Portfolio in the
following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless
otherwise directed by Proper Instructions, by (A) delivering money
to the seller thereof or to a dealer therefor (or an agent for such
seller or dealer) against expectation of receiving later delivery
of such foreign securities; or (B) in the case of a purchase
effected through a Foreign Securities System, in accordance with
the rules governing the operation of such Foreign Securities
System;
(ii) in connection with the conversion, exchange or surrender of foreign
securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees under
this Agreement, legal fees, accounting fees, and other operating
expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Portfolio, including transactions executed with
or through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii) in connection with the borrowing or lending of foreign securities;
and
(viii) for any other proper purpose, BUT ONLY upon receipt of Proper
Instructions specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
4.4.3. MARKET CONDITIONS. Notwithstanding any provision of this Agreement
to the contrary, settlement and payment for Foreign Assets received for the
account of the Portfolios and delivery of Foreign Assets maintained for the
account of the Portfolios may be effected in accordance with the customary
established securities trading or processing practices and procedures in the
country or market in which the transaction occurs, including, without
limitation, delivering Foreign Assets to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) with the expectation of
receiving later payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to the Board the information with respect to
custody and settlement practices in countries in which the Custodian employs a
Foreign Sub-Custodian, including without limitation information relating to
Foreign Securities Systems, described on Schedule C hereto at the time or times
set forth on such Schedule. The Custodian may revise Schedule C from time to
time, provided that no such revision shall result in the Board being provided
with substantively less information than had been previously provided hereunder.
SECTION 4.5 REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Sub-Custodian (other than bearer
securities) shall be registered in the name of the applicable Portfolio or in
the name of the Custodian or in the name of any Foreign Sub-Custodian or in the
name of any nominee of the foregoing, and the Fund on behalf of such Portfolio
agrees to hold any such nominee harmless from any liability as a holder of
record of such foreign securities. The Custodian or a Foreign Sub-Custodian
shall not be obligated to accept securities on behalf of a Portfolio under the
terms of this Agreement unless the form of such securities and the manner in
which they are delivered are in accordance with reasonable market practice.
SECTION 4.6 BANK ACCOUNTS. The Custodian shall identify on its books as
belonging to the Fund cash (including cash denominated in foreign currencies)
deposited with the Custodian. Where the Custodian is unable to maintain, or
market practice does not facilitate the maintenance of, cash on the books of the
Custodian, a bank account or bank accounts opened and maintained outside the
United States on behalf of a Portfolio with a Foreign Sub-Custodian shall be
subject only to draft or order by the Custodian or such Foreign Sub-Custodian,
acting pursuant to the terms of this Agreement to hold cash received by or from
or for the account of the Portfolio.
SECTION 4.7 COLLECTION OF INCOME. The Custodian shall use reasonable commercial
efforts to collect all income and other payments with respect to the Foreign
Assets held hereunder to which the Portfolios shall be entitled and shall credit
such income, as collected, to the applicable Portfolio. In the event that
extraordinary measures are required to collect such income, the Fund and the
Custodian shall consult as to such measures and as to the compensation and
expenses of the Custodian relating to such measures.
SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities
held pursuant to this Agreement, the Custodian will use reasonable commercial
efforts to facilitate the exercise of voting and other shareholder rights,
subject always to the laws, regulations and practical constraints that may exist
in the country where such securities are issued. The Fund acknowledges that
local conditions, including lack of regulation, onerous procedural obligations,
lack of notice and other factors may have the effect of severely limiting the
ability of the Fund to exercise shareholder rights.
SECTION 4.9 COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian
shall transmit promptly to the Fund written information (including, without
limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of the Portfolios. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund written information so received by
the Custodian from issuers of the foreign securities whose tender or exchange is
sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Portfolios at any time held by it unless (i) the Custodian or
the respective Foreign Sub-Custodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power, and both (i) and (ii) occur
at least three business days prior to the date on which the Custodian is to take
action to exercise such right or power
SECTION 4.10 LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES
SYSTEMS. Each agreement pursuant to which the Custodian employs as a Foreign
Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian
to exercise reasonable care in the performance of its duties and, to the extent
possible, to indemnify, and hold harmless, the Custodian from and against any
loss, damage, cost, expense, liability or claim arising out of or in connection
with the Foreign Sub-Custodian's performance of such obligations. At the Fund's
election, the Portfolios shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a Foreign Sub-Custodian as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Portfolios have not been made whole for any such loss,
damage, cost, expense, liability or claim.
SECTION 4.11 TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the
Portfolios, or imposed on the Custodian solely because it acts as custodian of
the Portfolios, by the tax law of the United States or of any state or political
subdivision thereof. It shall be the responsibility of the Fund to notify the
Custodian of the obligations imposed on the Fund with respect to the Portfolios,
or on the Custodian solely because it acts as custodian of the Portfolios, by
the tax law of countries other than those mentioned in the above sentence,
including responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
SECTION 4.12 CONFLICT. If the Custodian is delegated the responsibilities
of Foreign Custody Manager pursuant to the terms of Section 3 hereof, in the
event of any conflict between the provisions of Sections 3 and 4 hereof, the
provisions of Section 3 shall prevail.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the appropriate Portfolio
such payments as are received for Shares thereof issued or sold from time to
time by the Fund. The Custodian will provide timely notification to the Fund on
behalf of each such Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose, the Custodian shall,
upon receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian
by a holder of Shares, which checks have been furnished by the Fund to the
holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between
the Fund and the Custodian.
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Agreement means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Fund and the
Custodian agree to security procedures, including but not limited to, the
security procedures selected by the Fund in the Funds Transfer Addendum attached
hereto. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any three-party agreement
which requires a segregated asset account in accordance with Section 2.10.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Agreement, PROVIDED that all such payments shall be accounted for
to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except
as otherwise directed by the Board.
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper reasonably believed
by it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Fund ("CERTIFIED RESOLUTION") as
conclusive evidence (a) of the authority of any person to act in accordance with
such resolution or (b) of any determination or of any action by the Board as
described in such resolution, and such resolution may be considered as in full
force and effect until receipt by the Custodian of written notice to the
contrary.
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board to keep the books of account of each
Portfolio and/or compute the net asset value per Share of the outstanding Shares
or, if directed in writing to do so by the Fund on behalf of the Portfolio,
shall itself keep such books of account and/or compute such net asset value per
Share. If so directed, the Custodian shall also calculate daily the net income
of the Portfolio as described in the Prospectus and shall advise the Fund and
the Transfer Agent daily of the total amounts of such net income and, if
instructed in writing by an officer of the Fund to do so, shall advise the
Transfer Agent periodically of the division of such net income among its various
components. The calculations of the net asset value per Share and the daily
income of each Portfolio shall be made at the time or times described from time
to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Agreement in such
manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the SEC and with respect to any
other requirements thereof.
SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a U.S. Securities
System or a Foreign Securities System, relating to the services provided by the
Custodian under this Agreement; such reports, shall be of sufficient scope and
in sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian, and set forth in
a separate fee schedule, incorporated herein by reference.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
Custodian shall at all times use reasonable care and due diligence and act
in good faith in performing its duties under this Agreement. So long as and to
the extent that it is in the exercise of reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any property or
evidence of title thereto received by it or delivered by it pursuant to this
Agreement and shall be held harmless in acting upon any notice, request,
consent, certificate or other instrument reasonably believed by it to be genuine
and to be signed by the proper party or parties, including any futures
commission merchant acting pursuant to the terms of a three-party futures or
options agreement. The Custodian shall be kept indemnified by and shall be
without liability to the Fund for any action taken or omitted by it in good
faith without negligence, provided, however, that the Fund shall not be
responsible for consequential, special or punitive damages. The Custodian shall
be entitled to rely on and may act upon advice of counsel for the Fund with
respect to questions or matters of law, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. The Custodian shall
be without liability to the Fund and the Portfolios for any loss, liability,
claim or expense resulting from or caused by anything which is (A) part of
Country Risk (as defined in Section 3 hereof), including without limitation
nationalization, expropriation, currency restrictions, or acts of war,
revolution, riots or terrorism, or (B) part of the "prevailing country risk" of
the Portfolios, as such term is used in SEC Release Nos. IC-22658; IS-1080 (May
12, 1997) or as such term or other similar terms are now or in the future
officially interpreted by the SEC or by the staff of the Division of Investment
Management thereof through regulation or release.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by; (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, work
stoppages, natural disasters, or other similar events or acts; (ii) errors by
the Fund or the Investment Advisor in their instructions to the Custodian
provided such instructions have been in accordance with this Agreement; (iii)
the insolvency of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the Custodian's sub-custodian
or agent securities purchased or in the remittance or payment made in connection
with securities sold; (v) any delay or failure of any company, corporation, or
other body in charge of registering or transferring securities in the name of
the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or
any consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or
any other country, or political subdivision thereof or of any court of competent
jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the reasonable opinion of the Custodian, result in the
Custodian or its nominee assigned to the Fund or the Portfolio being liable for
the payment of money or incurring liability of some other form, the Fund on
behalf of the Portfolio, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities solely because it
acts as custodian of the Portfolios, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; PROVIDED,
however, that the Fund shall not amend or terminate this Agreement in
contravention of any applicable federal or state regulations, or any provision
of the Fund's Articles of Incorporation, and further provided, that the Fund on
behalf of one or more of the Portfolios may at any time by action of its Board
(i) substitute another bank or trust company for the Custodian by giving notice
as described above to the Custodian, or (ii) immediately terminate this
Agreement in the event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Agreement, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed by
the Board, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities of each applicable Portfolio then held by it hereunder
and shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a Certified Resolution, deliver at the office of
the Custodian and transfer such securities, funds and other properties in
accordance with such resolution.
In the event that no written order designating a successor custodian or
Certified Resolution shall have been delivered to the Custodian on or before the
date when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of each
applicable Portfolio and all instruments held by the Custodian relative thereto
and all other property held by it under this Agreement on behalf of each
applicable Portfolio, and to transfer to an account of such successor custodian
all of the securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Agreement as
may in their joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, PROVIDED that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Fund's Articles of Incorporation. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Agreement.
SECTION 18. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to those set forth on Schedule A with respect to which it desires to
have the Custodian render services as custodian under the terms hereof, it shall
so notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
SECTION 19. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
SECTION 20. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all prior
Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
SECTION 21. NOTICES.
Any notice, instruction or other instrument required to be given hereunder
may be delivered in person to the offices of the parties as set forth herein
during normal business hours or delivered prepaid registered mail or by telex,
cable or telecopy to the parties at the following addresses or such other
addresses as may be notified by any party from time to time.
To the Fund: Security Funds
700 SW Harrison Street
Topeka, KS 66636-0001
Attention: James R. Schmank
Telephone: 785-431-3069
Telecopy: 785-431-3080
With a copy to: Amy J. Lee, Secretary, Security Funds
700 SW Harrison Street
Topeka, KS 66636-0001
Telephone: 785-431-3226
Telecopy: 785-431-3080
To the Custodian: STATE STREET BANK AND TRUST COMPANY
801 Pennsylvania Avenue
Kansas City, MO 64105
Attention: Insurance Services Division
Telephone: 816-871-4100
Telecopy: 816-871-9646
Such notice, instruction or other instrument shall be deemed to have been
served in the case of a registered letter at the expiration of five business
days after posting, in the case of cable twenty-four hours after dispatch and,
in the case of telex, immediately on dispatch and if delivered outside normal
business hours it shall be deemed to have been received at the next time after
delivery when normal business hours commence and in the case of cable, telex or
telecopy on the business day after the receipt thereof. Evidence that the notice
was properly addressed, stamped and put into the post shall be conclusive
evidence of posting.
SECTION 22. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, addenda, exhibits, attachments and
amendments hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 23. DATA ACCESS SERVICES
State Street will provide Fund, and its designated investment advisors,
consultants or other third parties authorized by State Street who agree to abide
by the terms of this Agreement ("Authorized Designees") with access to INSIGHTSM
as described in Exhibit A (the "System") on a remote basis for the purpose of
obtaining and analyzing reports and information (the "Remote Access Services").
State Street may from time to time agree to make available to Fund
additional Systems that are not described in the Exhibits to this Agreement. In
the absence of any other written agreement concerning such additional systems,
the term "System" shall include, and this Agreement shall govern, the Fund's
access to and use of any additional System made available by State Street and/or
accessed by the Fund.
Fund agrees to comply, and to cause its Authorized Designees to comply,
with remote access operating standards and procedures and with user
identification or other password control requirements and other security
procedures as may be issued from time to time by State Street for use of the
System and access to the Remote Access Services. Fund agrees to advise State
Street immediately in the event that it learns or has reason to believe that any
person to whom Fund has given access to the System or the Remote Access Services
has violated or intends to violate the terms of this Agreement and will
cooperate with State Street in seeking injunctive or other equitable relief.
Fund agrees to discontinue use of the System and Remote Access Services, if
requested, for any security reasons cited by State Street.
The System and Remote Access Services described herein and the databases,
computer programs, screen formats, report formats, interactive design
techniques, formulae, processes, systems, software, knowhow, algorithms,
programs, training aids, printed materials, methods, books, records, files,
documentation and other information made available to Fund by State Street as
part of the Remote Access Services and through the use of the System and all
copyrights, patents, trade secrets and other proprietary rights of State Street
related thereto are the exclusive, valuable and confidential property of State
Street and its relevant licensors (the "Proprietary Information"). Fund agrees
on its behalf and on behalf of its Authorized Designees to keep the Proprietary
Information confidential and to limit access to its employees and Authorized
Designees (under a similar duty of confidentiality) who require access to the
System for the purposes intended. In the event of termination of this Agreement,
Fund will return to State Street all copies of documentation and other
Proprietary Information in its possession or in the possession of its Authorized
Designees. The foregoing shall not apply to Proprietary Information in the
public domain or required by law to be made public.
Fund agrees to use the Remote Access Services only in connection with the
proper purposes of this Agreement. Fund will not, and will cause its employees
and Authorized Designees not to, (i) permit any third party to use the System or
the Remote Access Services, (ii) sell, rent, license or otherwise use the System
or the Remote Access Services in the operation of a service bureau or for any
purpose other than as expressly authorized under this Agreement, (iii) use the
System or the Remote Access Services for any fund, trust or other investment
vehicle without the prior written consent of State Street, or (iv) allow or
cause any information transmitted from State Street's databases, including data
from third party sources, available through use of the System or the Remote
Access Services, to be redistributed or retransmitted for other than use for or
on behalf of Fund, as State Street's Customer.
Fund will not, and will cause its employees and Authorized Designees not
to, modify the System in any way, enhance or otherwise create derivative works
based upon the System, nor will Fund or its Authorized Designees reverse
engineer, decompile or otherwise attempt to secure the source code for all or
any part of the System.
Fund acknowledges that the disclosure of any Proprietary Information, or
of any information which at law or equity ought to remain confidential, will
immediately give rise to continuing irreparable injury to State Street
inadequately compensable in damages at law and that State Street shall be
entitled to obtain immediate injunctive relief against the breach or threatened
breach of any of the foregoing undertakings, in addition to any other legal
remedies which may be available.
State Street represents and warrants that it is the owner of and has the
right to grant access to the System and to provide the Remote Access Services
contemplated herein. Because of the nature of computer information technology
and the necessity of relying upon third party sources, and data and pricing
information obtained from third parties, the System and Remote Access Services
are provided "AS IS", and Fund and its Authorized Designees shall be solely
responsible for the investment decisions, regulatory reports and statements
produced using the Remote Access Services. State Street and its relevant
licensors will not be liable to Fund or its Authorized Designees for any direct
or indirect, special, incidental, punitive or consequential damages arising out
of or in any way connected with the System or the Remote Access Services, nor
shall either party be responsible for delays or nonperformance under this
Agreement arising out of any cause or event beyond such party's control.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, STATE STREET FOR ITSELF AND ITS
RELEVANT LICENSORS EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES CONCERNING THE
SYSTEM AND THE SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
State Street will defend or, at its option, settle any claim or action
brought against Fund to the extent that it is based upon an assertion that
access to the System or use of the Remote Access Services by Fund under this
Agreement constitutes direct infringement of any United States patent or
copyright or misappropriation of a trade secret, provided that Fund notifies
State Street promptly in writing of any such claim or proceeding and cooperates
with State Street in the defense of such claim or proceeding. Should the System
or the Remote Access Services or any part thereof become, or in State Street's
opinion be likely to become, the subject of a claim of infringement or the like
under the patent or copyright or trade secret laws of the United States, State
Street shall have the right, at State Street's sole option, to (i) procure for
Fund the right to continue using the System or the Remote Access Services, (ii)
replace or modify the System or the Remote Access Services so that the System or
the Remote Access Services becomes noninfringing, or (iii) terminate this
Agreement without further obligation.
SECTION 24. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's name,
address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of *[date].
*[FUND NAME] FUND SIGNATURE ATTESTED TO BY:
By: By:
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Name: Name:
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Title: Title:
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*[FUND NAME]
By:
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Name:
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Title:
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*[FUND NAME]
By:
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Name:
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Title:
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*[FUND NAME]
By:
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Name:
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Title:
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*[FUND NAME]
By:
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Name:
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Title:
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*[FUND NAME]
By:
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Name:
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Title:
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*[FUND NAME]
By:
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Name:
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Title:
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STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY:
By: By:
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Name: Name:
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Title: Title:
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<PAGE>
SCHEDULE I
<PAGE>
<TABLE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain HSBC Bank Middle East (as delegate of the --
Hongkong and Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Fortis Bank NV/as. --
Bermuda The Bank of Bermuda Limited --
Bolivia Citibank, N.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada State Street Trust Company Canada --
Chile Citibank, N.A. --
People's The Hongkong and Shanghai Banking Corporation --
Republic of Limited, Shanghai and Shenzhen branches
China
Colombia Cititrust Colombia S.A.Sociedad Fiduciaria --
Costa Rica Banco BCT S.A. --
Croatia Privredana Banka Zagreb d.d --
Cyprus The Cyprus Popular Bank Ltd. --
Czech Ceskoslovenska Obchodni Banka, A.S. --
Republic
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt Egyptian British Bank --
(as delegate of The Hongkong and Shanghai Banking
Corporation Limited)
Estonia Hansabank --
Finland Merita Bank Plc --
France Paribas, S.A. --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A Bank of Greece,
System for
Monitoring
Transactions in
Securities in Book-
Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Rt. --
Iceland Icebank Ltd. --
India Deutsche Bank AG --
The Hongkong and Shanghai Banking
Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Paribas, S.A. --
Ivory Coast Societe Generale de Banques en Cote d'Ivoire --
Jamaica Scotiabank Jamaica Trust and Merchant Bank, Ltd. --
Japan The Fuji Bank Limited Japan Securities
The Sumitomo Bank, Limited Depository Center
(JASDEC)
Jordan HSBC Bank Middle East (as delegate of The --
Hongkong and Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of The Hongkong and Shanghai Banking --
Korea Corporation Limited
Latvia A/s Hansabank --
Lebanon HSBC Bank Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank Malaysia Berhad --
Mauritius The Hongkong and Shanghai Banking --
Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa --
Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group (New Zealand) Limited --
Norway Christiania Bank og Kreditkasse, ASA --
Oman HSBC Bank Middle East (as delegate of The --
Hongkong and Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Palestine HSBC Bank Middle East (as delegate of The --
Hongkong and Shanghai Banking Corporation Limited)
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
Poland Citibank (Poland) S.A. --
Portugal Banco Comercial Portugues --
Qatar HSBC Bank Middle East --
Romania ING Bank, N.V. --
Russia Credit Suisse First Boston, AO, Moscow --
(as delegate of Credit Suisse First Boston, Zurich)
Singapore The Development Bank of Singapore Ltd. --
Slovak Ceskoslovenska Obchodna Banka A.S. --
Republic
Slovenia Bank Austria Creditanstalt d.d. Ljubljana --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander Central Hispano, S.A. --
Sri Lanka The Hongkong and Shanghai Banking --
Corporation Limited
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
Taiwan - Central Trust of China --
R.O.C.
Thailand Standard Chartered Bank --
Trinidad Republic Bank Ltd. --
& Tobago
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
Ukraine ING Bank, Ukraine --
United State Street Bank and Trust Company, --
Kingdom London Branch
Uruguay BankBoston N.A. --
Venezuela Citibank, N.A. --
Vietnam The Hongkong and Shanghai --
Banking Corporation Limited
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)/State Street London Limited
Cedelbank, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
</TABLE>
<PAGE>
<TABLE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY DEPOSITORIES
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Argentina -Caja de Valores S.A.
Australia -Austraclear Limited;
-Reserve Bank Information and Transfer System
Austria -Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division)
Belgium -Caisse Interprofessionnelle de Depots et de Virement de Titres S.A.;
-Banque Nationale de Belgique
Brazil -Companhia Brasileira de Liquidacao e Custodia
Bulgaria -Central Depository AD
-Bulgarian National Bank
Canada -The Canadian Depository for Securities Limited
Chile -Deposito Central de Valores S.A.
People's Republic -Shanghai Securities Central Clearing and Registration Corporation;
of China -Shenzhen Securities Central Clearing Co., Ltd.
Colombia -Deposito Centralizado de Valores
Costa Rica -Central de Valores S.A.
Croatia Ministry of Finance; - National Bank of Croatia; Sredisnja Depozitarna Agencija
Czech Republic --Stredisko cennych papiru;
-Czech National Bank
Denmark -Vaerdipapircentralen (The Danish Securities Center)
Egypt -Misr Company for Clearing, Settlement, and Central Depository
Estonia -Eesti Vaartpaberite Keskdepositooruim
Finland -The Finnish Central Securities Depository
France -Societe Interprofessionnelle pour la Compensation des Valeurs Mobilieres
Germany -The Deutscher Borse Clearing AG
Greece -The Central Securities Depository (Apothetirion Titlon AE)
Hong Kong -The Central Clearing and Settlement System;
-Central Money Markets Unit
Hungary -Kozponti Elszamolohaz es Ertekatr (Budapest) Rt. (KELER) [MANDATORY FOR GOV'T BONDS AND
DEMATERIALIZED EQUITIES ONLY; SSB DOES NOT USE FOR OTHER SECURITIES]
India -The National Securities Depository Limited; Central Depository Services India Limited
-Reserve Bank of India
Indonesia -Bank Indonesia
-PT Kustodian Sentral Efek Indonesia
Ireland -The Central Bank of Ireland, Securities Settlement Office
Israel -The Tel Aviv Stock Exchange Clearing House Ltd. (TASE Clearinghouse)
-Bank of Israel (As part of the TASE Clearinghouse system)
Italy -Monte Titoli S.p.A.;
-Banca d'Italia
Ivory Coast -Depositaire Central - Banque de Reglement
Jamaica -Jamaica Central Securities Depository
Japan -Bank of Japan Net System
Kenya -Central Bank of Kenya
Republic of Korea -Korea Securities Depository Corporation
Latvia -The Latvian Central Depository
Lebanon -The Custodian and Clearing Center of Financial Instruments for Lebanon and the Middle East
(MIDCLEAR) S.A.L.; - The Central Bank of Lebanon
Lithuania -The Central Securities Depository of Lithuania
Malaysia -The Malaysian Central Depository Sdn. Bhd.;
-Bank Negara Malaysia, Scripless Securities Trading and Safekeeping Systems
Mauritius -The Central Depository & Settlement Co. Ltd.
Mexico -S.D. INDEVAL, S.A. de C.V.(Instituto para el Deposito de Valores);
Morocco -Maroclear
The Netherlands -Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (NECIGEF)
New Zealand -New Zealand Central Securities Depository Limited
Norway -Verdipapirsentralen (the Norwegian Registry of Securities)
Oman -Muscat Securities Market Depository & Securities Registration Company
Pakistan -Central Depository Company of Pakistan Limited; State Bank of Pakistan
Palestine -The Palestine Stock Exchange
Peru -Caja de Valores y Liquidaciones; CAVALI ICLV S.A.
Philippines -The Philippines Central Depository Inc.
-The Registry of Scripless Securities (ROSS) of the Bureau of the Treasury
Poland -The National Depository of Securities (Krajowy Depozyt Papierow Wartosciowych SA);
-Central Treasury Bills Registrar
Portugal -Central de Valores Mobiliarios
Qatar -Doha Securities Market
Romania -National Securities Clearing, Settlement and Depository Co.;
-Bucharest Stock Exchange Registry Division;
-National Bank of Romania
Singapore -Central Depository (Pte)Limited;
-Monetary Authority of Singapore
Slovak Republic -Stredisko cennych papierov SR Bratislava, a.s.;
-National Bank of Slovakia
Slovenia -Klirinsko Depotna Druzba d.d.
South Africa -The Central Depository Limited; Strate Ltd.
Spain -Servicio de Compensacion y Liquidacion de Valores, S.A.;
-Banco de Espana; Central de Anotaciones en Cuenta
Sri Lanka -Central Depository System (Pvt) Limited
Sweden -Vardepapperscentralen VPC AB (the Swedish Central Securities Depository)
Switzerland -SIS SegaIntersettle
Taiwan - R.O.C. -The Taiwan Securities Central Depository Company, Ltd.
Thailand -Thailand Securities Depository Company Limited
Tunisia - Societe Tunisienne Interprofessionelle de Compensation et de Depot de
Valeurs Mobilieres
Turkey -Takas ve Saklama Bankasi A.S. (TAKASBANK)
-Central Bank of Turkey
Ukrain -The National Bank of Ukraine
United Kingdom -The Bank of England, The Central Gilts Office; The Central Moneymarkets Office
Venezuela -Central Bank of Venezuela
Zambia -LuSE Central Shares Depository Limited
-Bank of Zambia
</TABLE>
*Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice
<PAGE>
THE GUIDE TO CUSTODY IN WORLD MARKETS (annually)
An overview of safekeeping and settlement practices and procedures in each
market in which State Street Bank and Trust Company offers custodial services.
GLOBAL CUSTODY NETWORK REVIEW (annually)
Information relating to the operating history and structure of depositories and
subcustodians located in the markets in which State Street Bank and Trust
Company offers custodial services, including transnational depositories.
GLOBAL LEGAL SURVEY (annually)
With respect to each market in which State Street Bank and Trust Company offers
custodial services, opinions relating to whether local law restricts (i) access
of a fund's independent public accountants to books and records of a Foreign
Sub-Custodian or Foreign Securities Securities System, (ii) the Fund's ability
to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian
or Foreign Securities System, (iii) the Fund's ability to recover in the event
of a loss by a Foreign Foreign Sub-Custodian or Foreign Securities System, and
(iv) the ability of a foreign investor to convert cash and cash equivalents to
U.S. dollars.
SUBCUSTODIAN AGREEMENTS (annually)
Copies of the subcustodian contracts State Street Bank and Trust Company has
entered into with each subcustodian in the markets in which State Street Bank
and Trust Company offers subcustody services to its US mutual fund clients.
Network Bulletins (weekly):
Developments of interest to investors in the markets in which
State Street Bank and Trust Company offers custodial services.
Foreign Custody Advisories (as necessary):
With respect to markets in which State Street Bank and Trust Company offers
custodial services which exhibit special custody risks, developments which may
impact State Street's ability to deliver expected levels of service.
<PAGE>
EXHIBIT A
System Product Description
STATE STREET INSIGHT
STATE STREET InSight provides information delivery and on-line access to State
Street. STATE STREET InSight allows users a single point of entry into the many
views of data created by the diverse systems and applications. Reports and data
from systems such as Investment Policy Monitor, Multicurrency horizon,
Securities Lending, Performance & Analytics can be accessed through STATE STREET
InSight. This Internet-enabled application is designed to run from a Web browser
and perform across low-speed data line or corporate high-speed backbones. STATE
STREET InSight also offers users a flexible toolset, including an ad-hoc query
function, a custom graphics package, a report designer, and a scheduling
capability. Data and reports offered through STATE STREET InSight will continue
to increase in direct proportion with the client roll out, as it is viewed as
the information delivery system that will grow with our clients.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Independent Auditors" in the Statement of
Additional Information and to the incorporation by reference of our report dated
November 12, 1999, in the Registration Statement (Form N-1A) and related
Prospectus of Security Equity Fund filed with the Securities and Exchange
Commission in this Post-Effective Amendment No. 89 under the Securities Act of
1933 (Registration No. 2-19458) and under the Investment Company Act of 1940
(Registration No. 811-1136).
Ernst & Young LLP
Kansas City, Missouri
April 26, 2000
<PAGE>
AMENDED AND RESTATED CLASS A
DISTRIBUTION PLAN
SECURITY EQUITY FUND
WHEREAS, the Security Equity Fund, Small Company Series adopted a Distribution
Plan under Rule 12b-1 of the Investment Company Act of 1940 with respect to its
Class A shares; and
WHEREAS, the Distribution Plan was initially entered into on September 15, 1997;
and
WHEREAS, on November 6, 1998, the Board of Directors of the Security Equity Fund
authorized the issuance of three additional series of Class A common stock of
the Fund, designated as the International Series, Enhanced Index Series and
Select 25 Series; and
WHEREAS, on November 6, 1998, the Board of Directors of the Security Equity Fund
determined that extending the Fund's Class A Distribution Plan to the
International Series, Enhanced Index Series and Select 25 Series was reasonably
likely to benefit each such series and their respective shareholders; and
WHEREAS, in order to extend the Class A Distribution Plan to each such series of
Security Equity Fund, the Board of Directors has determined to amend and restate
the Class A Distribution Plan as follows:
1. THE PLAN. This Distribution Plan (the "Plan"), provides for the financing by
Security Equity Fund (the "Fund") of activities which are, or may be deemed
to be, primarily intended to result in the sale of Class A shares of the
series of the Fund (hereinafter called "distribution-related activities")
set forth in Appendix A to the Plan (collectively referred to herein as the
"Series"). Appendix A, as it may be amended from time to time is
incorporated herein by this reference. The principal purpose of this Plan is
to enable the Fund to supplement expenditures by Security Distributors,
Inc., the Distributor of its shares (the "Distributor") for
distribution-related activities. This Plan is intended to comply with the
requirements of Rule 12b-1 (the "Rule") under the Investment Company Act of
1940 (the "1940 Act").
The Board of Directors, in considering whether the Fund should implement the
Plan, has requested and evaluated such information as it deemed necessary to
make an informed determination as to whether the Plan should be implemented
and has considered such pertinent factors as it deemed necessary to form the
basis for a decision to use assets of the Fund for such purposes.
In voting to approve the implementation of the Plan, the Directors have
concluded, in the exercise of their reasonable business judgment and in
light of their respective fiduciary duties, that there is a reasonable
likelihood that the Plan will benefit the Series and their respective
shareholders.
2. COVERED EXPENSES.
(a) The Fund may make payments under this Plan, or any agreement relating
to the implementation of this Plan, in connection with any activities
or expenses primarily intended to result in the sale of Class A shares
of the Fund, including, but not limited to, the following
distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus and
Statement of Additional Information and any supplement thereto
used in connection with the offering of the Series' shares to
the public;
(ii) Printing of additional copies for use by the Distributor as
sales literature, of reports and other communications which were
prepared by the Fund for distribution to existing shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of the Series'
shares to the public;
(iv) Expenses incurred in advertising, promoting and selling shares
of the Series to the public;
(v) Any fees paid by the Distributor to securities dealers who have
executed a Dealer's Distribution Agreement with the Distributor
for account maintenance and personal service to shareholders of
the Series (a "Service Fee");
(vi) Commissions to sales personnel for selling shares of the Series
and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the Series by
securities dealers, including the costs of preparation of
materials for presentations, travel expenses, costs of
entertainment, and other expenses incurred in connection with
promoting sales of Series shares by dealers.
(b) Any payments for distribution-related activities shall be made pursuant
to an agreement. As required by the Rule, each agreement relating to
the implementation of this Plan shall be in writing and subject to
approval and termination pursuant to the provisions of Section 7 of
this Plan. However, this Plan shall not obligate the Fund or any other
party to enter into such agreement.
3. AGREEMENT WITH DISTRIBUTOR. All payments to the Distributor pursuant to this
Plan shall be subject to and be made in compliance with a written agreement
between the Fund and the Distributor containing a provision that the
Distributor shall furnish the Fund with quarterly written reports of the
amounts expended and the purposes for which such expenditures were made, and
such other information relating to such expenditures or to the other
distribution-related activities undertaken or proposed to be undertaken by
the Distributor during such fiscal year under its Distribution Agreement
with the Fund as the Fund may reasonably request.
4. DEALER'S DISTRIBUTION AGREEMENT. The Dealer's Distribution Agreement (the
"Agreement") contemplated by Section 2(a)(v) above shall permit payment of
Service Fees to securities dealers by the Distributor only in accordance
with the provisions of this paragraph and shall have the approval of the
majority of the Board of Directors of the Fund, including the affirmative
vote of a majority of those Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the operation
of the Plan or any agreement related to the Plan ("Independent Directors"),
as required by the Rule. The Distributor may pay to the other party to any
Agreement a Service Fee for distribution and marketing services provided by
such other party. Such Service Fee shall be payable (a) for the first year,
initially, in an amount equal to .25 percent annually of the aggregate net
asset value of the shares purchased by such other party's customers or
clients, and (b) for each year thereafter, quarterly, in arrears in an
amount equal to such percentage (not in excess of .000685 percent per day or
.25 percent annually) of the aggregate net asset value of the shares held by
such other party's customers or clients at the close of business each day as
determined from time to time by the Distributor. The distribution and
marketing services contemplated hereby shall include, but are not limited
to, answering inquiries regarding the Fund, account designations and
addresses, maintaining the investment of such other party's customers or
clients in the Series and similar services. In determining the extent of
such other party's assistance in maintaining such investment by its
customers or clients, the Distributor may take into account the possibility
that the shares held by such customer or client would be redeemed in the
absence of such fee.
5. LIMITATIONS ON COVERED EXPENSES. The basic limitation on the expenses
incurred by the Fund under Section 2 of this Plan (including Service Fees)
in any fiscal year of the Fund shall be one-quarter of one percent (.25%) of
the Fund's average daily net assets for such fiscal year. The payments to be
paid pursuant to this Plan shall be calculated and accrued daily and paid
monthly or at such other intervals as the Directors shall determine, subject
to any applicable restriction imposed by rules of the National Association
of Securities Dealers, Inc.
6. INDEPENDENT DIRECTORS. While this Plan is in effect, the selection and
nomination of Independent Directors of the Fund shall be committed to the
discretion of the Independent Directors. Nothing herein shall prevent the
involvement of others in such selection and nomination if the final decision
on any such selection and nomination is approved by a majority of the
Independent Directors.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan and each
Agreement relating to the implementation of this Plan shall go into effect
when approved.
(a) By vote of the Fund's Directors, including the affirmative vote of a
majority of the Independent Directors, cast in person at a meeting
called for the purpose of voting on the Plan or the Agreement;
(b) By a vote of holders of at least a majority of the outstanding voting
securities of each Series; and
(c) Upon the effectiveness of an amendment to the Fund's registration
statement, reflecting this Plan, filed with the Securities and Exchange
Commission under the Securities Act of 1933.
This Plan and any Agreements relating to the implementation of this Plan
shall, unless terminated as hereinafter provided, continue in effect from
year to year only so long as such continuance is specifically approved at
least annually by vote of the Fund's Directors, including the affirmative
vote of a majority of its Independent Directors, cast in person at a meeting
called for the purpose of voting on such continuance. This Plan and any
Agreements relating to the implementation of this Plan may be terminated, in
the case of the Plan, at any time or, in the case of any agreements upon not
more than sixty (60) days' written notice to any other party to the
Agreement by vote of a majority of the Independent Directors or by the vote
of the holders of a majority of the outstanding voting securities of the
Fund. Any Agreement relating to the implementation of this Plan shall
terminate automatically in the event it is assigned. Any material amendment
to this Plan shall require approval by vote of the Fund's Directors,
including the affirmative vote of a majority of the Independent Directors,
cast in person at a meeting called for the purpose of voting on such
amendment and, if such amendment materially increases the limitations on
expenses payable under the Plan, it shall also require approval by a vote of
holders of at least a majority of the outstanding voting securities of the
Fund. As applied to the Fund the phrase "majority of the outstanding voting
securities" shall have the meaning specified in Section 2(a) of the 1940
Act.
In the event this Plan should be terminated by the shareholders or Directors
of the Fund, the payments paid to the Distributor pursuant to the Plan up to
the date of termination shall be retained by the Distributor. Any expenses
incurred by the Distributor in excess of those payments will be the sole
responsibility of the Distributor.
8. RECORDS. The Fund shall preserve copies of this Plan and any related
Agreements and all reports made pursuant to Section 3 hereof, for a period
of not less than six (6) years from the date of this Plan, any such
Agreement or any such report, as the case may be, the first two years in an
easily accessible place.
SECURITY EQUITY FUND
Date: January 28, 1999 By: AMY J. LEE
------------------------------ --------------------------------
<PAGE>
Appendix A
1. Small Company Series
2. International Series
3. Enhanced Index Series
4. Select 25 Series
<PAGE>
AMENDMENT TO CLASS A
DISTRIBUTION PLAN
SECURITY EQUITY FUND
WHEREAS, the Security Equity Fund, adopted a Distribution Plan under Rule 12b-1
of the Investment Company Act of 1940 with respect to certain of its Class A
shares; and
WHEREAS, the Class A Distribution Plan was initially entered into on September
15, 1997; and
WHEREAS, on February 4, 2000, the Board of Directors of the Security Equity Fund
authorized the Fund to offer two new series of Class A common stock of the Fund,
designated as the Large Cap Growth Series and Technology Series; and
WHEREAS, on February 4, 2000, the Board of Directors of the Fund determined that
extending the Fund's Class A Distribution Plan to the Class A shares of the
Large Cap Growth Series and the Technology Series of the Fund was reasonably
likely to benefit each such Series and their respective shareholders; and
WHEREAS, the Class A Distribution Plan provides that it may be amended from time
to time by adding or removing a Series of the Fund by an amended Appendix A;
NOW THEREFORE BE IT RESOLVED, that the Fund hereby amends the Class A
Distribution Plan, effective May 1, 2000 as follows:
1. Appendix A shall be deleted in its entirety and the attached Appendix A
inserted in lieu thereof.
SECURITY EQUITY FUND
Date: May 1, 2000 By: AMY J. LEE
------------------------------ ----------------------------------
<PAGE>
APPENDIX A
1. Small Cap Growth Series
2. International Series
3. Enhanced Index Series
4. Select 25 Series
5. Large Cap Growth Series
6. Technology Series
Dated: May 1, 2000
----------------------------
<PAGE>
SECURITY EQUITY FUND
CLASS B
DISTRIBUTION PLAN
1. THE PLAN. This Distribution Plan (the "Plan"), provides for the financing
by Security Equity Fund (the "Fund") of activities which are, or may be
deemed to be, primarily intended to result in the sale of class B shares
of the Fund (hereinafter called "distribution-related activities"). The
principal purpose of this Plan is to enable the Fund to supplement
expenditures by Security Distributors, Inc., the Distributor of its
shares (the "Distributor") for distribution-related activities. This Plan
is intended to comply with the requirements of Rule 12b-1 (the "Rule")
under the Investment Company Act of 1940 (the "1940 Act").
The Board of Directors, in considering whether the Fund should implement
the Plan, has requested and evaluated such information as it deemed
necessary to make an informed determination as to whether the Plan should
be implemented and has considered such pertinent factors as it deemed
necessary to form the basis for a decision to use assets of the Fund for
such purposes.
In voting to approve the implementation of the Plan, the Directors have
concluded, in the exercise of their reasonable business judgment and in
light of their respective fiduciary duties, that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
2. COVERED EXPENSES.
(a) The Fund may make payments under this Plan, or any agreement
relating to the implementation of this Plan, in connection with
any activities or expenses primarily intended to result in the
sale of class B shares of the Fund, including, but not limited to,
the following distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus and
Statement of Additional Information and any supplement
thereto used in connection with the offering of shares to
the public;
(ii) Printing of additional copies for use by the Distributor as
sales literature, of reports and other communications which
were prepared by the Fund for distribution to existing
shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of shares to
the public;
(iv) Expenses incurred in advertising, promoting and selling
shares of the Fund to the public;
(v) Any fees paid by the Distributor to securities dealers who
have executed a Dealer's Distribution Agreement with the
Distributor for account maintenance and personal service to
shareholders (a "Service Fee");
(vi) Commissions to sales personnel for selling shares of the
Fund and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the Fund
by securities dealers, including the costs of preparation of
materials for presentations, travel expenses, costs of
entertainment, and other expenses incurred in connection
with promoting sales of Fund shares by dealers.
(b) Any payments for distribution-related activities shall be made
pursuant to an agreement. As required by the Rule, each agreement
relating to the implementation of this Plan shall be in writing
and subject to approval and termination pursuant to the provisions
of Section 7 of this Plan. However, this Plan shall not obligate
the Fund or any other party to enter into such agreement.
3. AGREEMENT WITH DISTRIBUTOR. All payments to the Distributor pursuant to
this Plan shall be subject to and be made in compliance with a written
agreement between the Fund and the Distributor containing a provision
that the Distributor shall furnish the Fund with quarterly written
reports of the amounts expended and the purposes for which such
expenditures were made, and such other information relating to such
expenditures or to the other distribution-related activities undertaken
or proposed to be undertaken by the Distributor during such fiscal year
under its Distribution Agreement with the Fund as the Fund may reasonably
request.
4. DEALER'S DISTRIBUTION AGREEMENT. The Dealer's Distribution Agreement (the
"Agreement") contemplated by Section 2(a)(v) above shall permit payment
of Service Fees to securities dealers by the Distributor only in
accordance with the provisions of this paragraph and shall have the
approval of the majority of the Board of Directors of the Fund, including
the affirmative vote of a majority of those Directors who are not
interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related
to the Plan ("Independent Directors"), as required by the Rule. The
Distributor may pay to the other party to any Agreement a Service Fee for
distribution and marketing services provided by such other party. Such
Service Fee shall be payable (a) for the first year, initially, in any
amount equal to .25 percent annually of the aggregate net asset value of
the shares purchased by such other party's customers or clients, and (b)
for each year thereafter, quarterly, in arrears in an amount equal to
such percentage (not in excess of .000685 percent per day or .25 percent
annually) of the aggregate net asset value of the shares held by such
other party's customers or clients at the close of business each day as
determined from time to time by the Distributor. The distribution and
marketing services contemplated hereby shall include, but are not limited
to, answering inquiries regarding the Fund, account designations and
addresses, maintaining the investment of such other party's customers or
clients in the Fund and similar services. In determining the extent of
such other party's assistance in maintaining such investment by its
customers or clients, the Distributor may take into account the
possibility that the shares held by such customer or client would be
redeemed in the absence of such fee.
5. LIMITATIONS ON COVERED EXPENSES. The basic limitation on the expenses
incurred by the Fund under Section 2 of this Plan (including Service
Fees) in any fiscal year of the Fund shall be one percent (1.00%) of the
Fund's average daily net assets for such fiscal year. The payments to be
paid pursuant to this Plan shall be calculated and accrued daily and paid
monthly or at such other intervals as the Directors shall determine,
subject to any applicable restriction imposed by rules of the National
Association of Securities Dealers, Inc.
6. INDEPENDENT DIRECTORS. While this Plan is in effect, the selection and
nomination of Independent Directors of the Fund shall be committed to the
discretion of the Independent Directors. Nothing herein shall prevent the
involvement of others in such selection and nomination if the final
decision on any such selection and nomination is approved by a majority
of the Independent Directors.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan and
each Agreement relating to the implementation of this Plan shall go into
effect when approved.
(a) By vote of the Fund's Directors, including the affirmative vote of
a majority of the Independent Directors, cast in person at a
meeting called for the purpose of voting on the Plan or the
Agreement;
(b) By a vote of holders of at least a majority of the outstanding
voting securities of the Fund; and
(c) Upon the effectiveness of an amendment to the Fund's registration
statement, reflecting this Plan, filed with the Securities and
Exchange Commission under the Securities Act of 1933.
This Plan and any Agreements relating to the implementation of this Plan
shall, unless terminated as hereinafter provided, continue in effect from
year to year only so long as such continuance is specifically approved at
least annually by vote of the Fund's Directors, including the affirmative
vote of a majority of its Independent Directors, cast in person at a
meeting called for the purpose of voting on such continuance. This Plan
and any Agreements relating to the implementation of this Plan may be
terminated, in the case of the plan, at any time or, in the case of any
agreements upon not more than sixty (60) days' written notice to any
other party to the Agreement by vote of a majority of the Independent
Directors or by the vote of the holders of a majority of the outstanding
voting securities of the Fund. Any Agreement relating to the
implementation of this Plan shall terminate automatically in the event it
is assigned. Any material amendment to this Plan shall require approval
by vote of the Fund's Directors, including the affirmative vote of a
majority of the Independent Directors, cast in person at a meeting called
for the purpose of voting on such amendment and, if such amendment
materially increases the limitations on expenses payable under the Plan,
it shall also require approval by a vote of holders of at least a
majority of the outstanding voting securities of the Fund. As applied to
the Fund the phrase "majority of the outstanding voting securities" shall
have the meaning specified in Section 2(a) of the 1940 Act.
In the event this Plan should be terminated by the shareholders or
Directors of the Fund, the payments paid to the Distributor pursuant to
the Plan up to the date of termination shall be retained by the
Distributor. Any expenses incurred by the Distributor in excess of those
payments will be the sole responsibility of the Distributor.
8. RECORDS. The Fund shall preserve copies of this Plan and any related
Agreements and all reports made pursuant to Section 3 hereof, for a
period of not less than six (6) years from the date of this Plan, any
such Agreement or any such report, as the case may be, the first two
years in an easily accessible place.
SECURITY EQUITY FUND
Date: September 24, 1993 By: AMY J. LEE
--------------------- -----------------------------
<PAGE>
AMENDMENT TO CLASS B
DISTRIBUTION PLAN
SECURITY EQUITY FUND
WHEREAS, the Security Equity Fund, adopted a Distribution Plan under Rule 12b-1
of the Investment Company Act of 1940 with respect to its Class B shares; and
WHEREAS, the Class B Distribution Plan was initially entered into on September
24, 1993; and
WHEREAS, on February 4, 2000, the Board of Directors of the Security Equity Fund
authorized the issuance of two additional series of Class B common stock of the
Fund, designated as the Large Cap Growth Series and Technology Series; and
WHEREAS, on February 4, 2000, the Board of Directors of Security Equity Fund
determined that extending the Fund's Class B Distribution Plan to the Large Cap
Growth Series and Technology Series was reasonably likely to benefit each such
series and their respective shareholders; and
WHEREAS, the Board determined that it was appropriate and desirable to amend the
Plan by adding an Exhibit A and attaching it to the Plan, which Exhibit may be
amended from time to time;
NOW THEREFORE, BE IT RESOLVED that the Fund's Class B Distribution Plan is
hereby amended effective May 1, 2000 as follows:
1. The accompanying Exhibit A shall specify the Series which are subject to
the Class B Distribution Plan and such Exhibit is hereby made a part of
the Plan for all purposes.
SECURITY EQUITY FUND
Date: May 1, 2000 By: AMY J. LEE
-------------------------------- ------------------------------
<PAGE>
EXHIBIT A
Series of Security Equity Fund:
Equity Series
Global Series
Total Return Series
Social Awareness Series
Mid Cap Value Series
Small Cap Growth Series
Enhanced Index Series
International Series
Select 25 Series
Large Cap Growth Series
Technology Series
Dated: May 1, 2000
----------------------------
<PAGE>
SECURITY EQUITY FUND
CLASS C
DISTRIBUTION PLAN
1. THE PLAN. This Distribution Plan (the "Plan"), provides for the financing by
Security Equity Fund (the "Fund") of activities which are, or may be deemed
to be, primarily intended to result in the sale of class C shares of the
Series of the Fund (hereinafter called "distribution-related activities").
The Fund's Series are listed on Exhibit A to this Plan. The principal
purpose of this Plan is to enable the Fund to supplement expenditures by
Security Distributors, Inc., the Distributor of its shares (the
"Distributor") for distribution-related activities. This Plan is intended to
comply with the requirements of Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940 (the "1940 Act").
The Board of Directors, in considering whether the Fund should implement the
Plan, has requested and evaluated such information as it deemed necessary to
make an informed determination as to whether the Plan should be implemented
and has considered such pertinent factors as it deemed necessary to form the
basis for a decision to use assets of the Fund for such purposes.
In voting to approve the implementation of the Plan, the Directors have
concluded, in the exercise of their reasonable business judgment and in
light of their respective fiduciary duties, that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
2. COVERED EXPENSES.
(a) The Fund may make payments under this Plan, or any agreement relating
to the implementation of this Plan, in connection with any activities
or expenses primarily intended to result in the sale of class C shares
of the Fund, including, but not limited to, the following
distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus and
Statement of Additional Information and any supplement thereto
used in connection with the offering of Fund shares to the
public;
(ii) Printing of additional copies for use by the Distributor as
sales literature, of reports and other communications which were
prepared by the Fund for distribution to existing shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of Fund shares
to the public;
(iv) Expenses incurred in advertising, promoting and selling shares
of the Fund to the public;
(v) Any fees paid by the Distributor to securities dealers who have
executed a Dealer's Distribution Agreement with the Distributor
for account maintenance and personal service to shareholders (a
"Service Fee");
(vi) Commissions to sales personnel for selling shares of the Fund
and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the Fund by
securities dealers, including the costs of preparation of
materials for presentations, travel expenses, costs of
entertainment, and other expenses incurred in connection with
promoting sales of Fund shares by dealers.
(b) Any payments for distribution-related activities shall be made pursuant
to an agreement. As required by the Rule, each agreement relating to
the implementation of this Plan shall be in writing and subject to
approval and termination pursuant to the provisions of Section 7 of
this Plan. However, this Plan shall not obligate the Fund or any other
party to enter into such agreement.
3. AGREEMENT WITH DISTRIBUTOR. All payments to the Distributor pursuant to this
Plan shall be subject to and be made in compliance with a written agreement
between the Fund and the Distributor containing a provision that the
Distributor shall furnish the Fund with quarterly written reports of the
amounts expended and the purposes for which such expenditures were made and
such other information relating to such expenditures or to the other
distribution-related activities undertaken or proposed to be undertaken by
the Distributor during such fiscal year under its Distribution Agreement
with the Fund as the Fund may reasonably request.
4. DEALER'S DISTRIBUTION AGREEMENT. The Dealer's Distribution Agreement (the
"Agreement") contemplated by Section 2(a)(v) above shall permit payment of
Service Fees to securities dealers by the Distributor only in accordance
with the provisions of this paragraph and shall have the approval of the
majority of the Board of Directors of the Fund, including the affirmative
vote of a majority of those Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the operation
of the Plan or any agreement related to the Plan ("Independent Directors"),
as required by the Rule. The Distributor may pay to the other party to any
Agreement a Service Fee for account maintenance and shareholder services
provided by such other party. Such Service Fee shall be payable (a) for the
first year, initially, in an amount equal to 0.25 percent annually of the
aggregate net asset value of the shares purchased by such other party's
customers or clients, and (b) for each year thereafter, quarterly, in
arrears in an amount equal to such percentage (not in excess of .000685
percent per day or 0.25 percent annually) of the aggregate net asset value
of the shares held by such other party's customers or clients at the close
of business each day as determined from time to time by the Distributor. The
distribution and marketing services contemplated hereby shall include, but
are not limited to, answering inquiries regarding the Fund, account
designations and addresses, maintaining the investment of such other party's
customers or clients in the Fund and similar services. In determining the
extent of such other party's assistance in maintaining such investment by
its customers or clients, the Distributor may take into account the
possibility that the shares held by such customer or client would be
redeemed in the absence of such fee.
5. LIMITATIONS ON COVERED EXPENSES. The basic limitation on the expenses
incurred by the Fund under Section 2 of this Plan (including Service Fees)
in any fiscal year of the Fund shall be one percent (1.00%) of the Fund's
average daily net assets for such fiscal year. The payments to be paid
pursuant to this Plan shall be calculated and accrued daily and paid monthly
or at such other intervals as the Directors shall determine, subject to any
applicable restriction imposed by rules of the National Association of
Securities Dealers, Inc.
6. INDEPENDENT DIRECTORS. While this Plan is in effect, the selection and
nomination of Independent Directors of the Fund shall be committed to the
discretion of the Independent Directors. Nothing herein shall prevent the
involvement of others in such selection and nomination if the final decision
on any such selection and nomination is approved by a majority of the
Independent Directors.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan and each
Agreement relating to the implementation of this Plan shall go into effect
when approved.
(a) By vote of the Fund's Directors, including the affirmative vote of a
majority of the Independent Directors, cast in person at a meeting
called for the purpose of voting on the Plan or the Agreement;
(b) By a vote of holders of at least a majority of the outstanding voting
securities of the Series' Class C shares; and
(c) Upon the effectiveness of an amendment to the Fund's registration
statement, reflecting this Plan, filed with the Securities and Exchange
Commission under the Securities Act of 1933.
This Plan and any Agreements relating to the implementation of this Plan
shall, unless terminated as hereinafter provided, continue in effect from
year to year only so long as such continuance is specifically approved at
least annually by vote of the Fund's Directors, including the affirmative
vote of a majority of its Independent Directors, cast in person at a meeting
called for the purpose of voting on such continuance. This Plan and any
Agreements relating to the implementation of this Plan may be terminated, in
the case of the Plan, at any time or, in the case of any Agreements upon not
more than sixty (60) days' written notice to any other party to the
Agreement by vote of a majority of the Independent Directors or by the vote
of the holders of a majority of the outstanding voting securities of the
Series' Class C shares. Any Agreement relating to the implementation of this
Plan shall terminate automatically in the event it is assigned. Any material
amendment to this Plan shall require approval by vote of the Fund's
Directors, including the affirmative vote of a majority of the Independent
Directors, cast in person at a meeting called for the purpose of voting on
such amendment and, if such amendment materially increases the limitations
on expenses payable under the Plan, it shall also require approval by a vote
of holders of at least a majority of the outstanding voting securities of
the Series' Class C shares. As applied to the Fund the phrase "majority of
the outstanding voting securities" shall have the meaning specified in
Section 2(a) of the 1940 Act.
In the event this Plan should be terminated by the shareholders or Directors
of the Fund, the payments paid to the Distributor pursuant to the Plan up to
the date of termination shall be retained by the Distributor. Any expenses
incurred by the Distributor in excess of those payments will be the sole
responsibility of the Distributor.
8. RECORDS. The Fund shall preserve copies of this Plan and any related
Agreements and all reports made pursuant to Section 3 hereof, for a period
of not less than six (6) years from the date of this Plan, any such
Agreement or any such report, as the case may be, the first two years in an
easily accessible place.
SECURITY EQUITY FUND
Date: January 28, 1999 By: AMY J. LEE
--------------------- -------------------------
<PAGE>
EXHIBIT A
Series of Security Equity Fund:
Equity Series
Global Series
Asset Allocation Series
Social Awareness Series
Value Series
Small Company Series
Enhanced Index Series
International Series
Select 25 Series
<PAGE>
AMENDMENT TO SECURITY EQUITY FUND
CLASS C
DISTRIBUTION PLAN
WHEREAS, the Security Equity Fund, adopted a Distribution Plan under Rule 12b-1
of the Investment Company Act of 1940 with respect to its Class C shares; and
WHEREAS, the Class C Distribution Plan was initially entered into on January 28,
1999; and
WHEREAS, on February 4, 2000, the Board of Directors of the Security Equity Fund
authorized the Fund to offer two new series of Class C common stock of the Fund,
designated as the Large Cap Growth Series and Technology Series; and
WHEREAS, on February 4, 2000, the Board of Directors of the Fund determined that
extending the Fund's Class C Distribution Plan to the Class C shares of the
Large Cap Growth Series and the Technology Series of the Fund was reasonably
likely to benefit each such Series and their respective shareholders; and
WHEREAS, the Class C Distribution Plan provides that it may be amended from time
to time by adding or removing a Series of the fund by an amended Exhibit A;
NOW THEREFORE BE IT RESOVLED, that the Fund hereby amends the Class C
Distribution Plan, effective May 1, 2000 as follows:
1. Exhibit A shall be deleted in its entirety and the attached Exhibit A
inserted in lieu thereof.
SECURITY EQUITY FUND
Date: May 1, 2000 By: AMY J. LEE
-------------------------------- --------------------------------
<PAGE>
EXHIBIT A
Series of Security Equity Fund:
Equity Series
Global Series
Total Return Series
Social Awareness Series
Mid Cap Value Series
Small Cap Growth Series
Enhanced Index Series
International Series
Select 25 Series
Large Cap Growth Series
Technology Series
Dated: May 1, 2000
----------------------------
<PAGE>
SECURITY EQUITY FUND
BROKERAGE ENHANCEMENT PLAN
WHEREAS, Security Equity Fund (the "Fund") engages in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act");
WHEREAS, shares of common stock of the Fund are currently divided into series,
listed on Schedule A hereto (the "Series"), which Schedule can be amended to add
or remove a series by an amended schedule;
WHEREAS, shares of common stock of the Series are divided into multiple classes
of shares, and this Plan applies to the Fund and the Series and the effect of
the Plan does not vary based upon a class of a Series;
WHEREAS, the Fund employs Security Distributors, Inc. (the "Distributor") as
distributor of the securities of which the Fund is the issuer;
WHEREAS, the Board of Directors of the Fund (the "Board") has determined that,
subject to the requirement to seek best price and execution, it is appropriate
and desirable for the Fund to use certain brokerage commissions generated on the
purchase and sale of portfolio securities to finance activities that are
primarily intended to result in the sale of its shares (the "Brokerage
Enhancement Plan" or the "Plan");
WHEREAS, any benefits that may be obtained from brokerage commissions are assets
of the Fund, and the Fund wishes, pursuant to Rule 12b-1 under the Act, to
utilize such assets in furtherance of the distribution of the Fund's shares; and
WHEREAS, the Board has determined that, to the extent that the use of these
benefits earned by a Series under this Plan results in the increased
distribution of the Fund's shares, a benefit in the form of potential economies
of scale should inure to that Series and to the other Series offered by the
Fund;
NOW, THEREFORE, this Brokerage Enhancement Plan is adopted by the Fund on behalf
of the Series, in accordance with Rule 12b-l under the Act, on the following
terms and conditions:
1. The Fund is authorized to enter into agreements or arrangements pursuant to
which the Fund may direct Security Management Company, LLC ("SMC"), in its
capacity as the Fund's investment adviser, and each of the sub-advisors
retained by SMC (and approved by the Fund) to manage certain of the Series
(each a "Sub-Advisor"), acting as agents for the Fund or its Series:
a. To place orders for the purchase or sale of portfolio securities with
the Distributor or other introducing broker-dealers who will receive a
portion of the brokerage commission paid by the Series from
broker-dealers executing such portfolio transactions for the benefit of
the Series ("Brokerage Payments") that can be used directly or
indirectly to finance the distribution of the Fund's shares; or
b. To allocate transactions for the purchase or sale of portfolio
securities or other assets to broker-dealers, and receive, in addition
to execution of the brokerage transaction, credits, benefits or other
services from the broker-dealer ("Brokerage Credits") that can be used
directly or indirectly to promote the distribution of the Fund's
shares;
in each case, provided that SMC or the Sub-Advisor must reasonably believe
that the Distributor or broker-dealer (or the clearing broker of either)
will execute the transaction in a manner consistent with standards of best
execution, as described in the Registration Statement for the Fund, as
amended from time to time.
2. The Fund is authorized to expend Brokerage Credits and Brokerage Payments
to compensate the Distributor and other broker-dealers for the cost and
expense of certain distribution-related activities or to procure from, or
otherwise induce, the Distributor and other broker-dealers to provide
services, where such activities or services are intended to promote the
sale of the Fund's shares. Such activities or services may be provided by
the Distributor or broker-dealer to which a purchase or sale transaction
has been allocated (the directed broker-dealer) or by another broker-dealer
or other party at the direction of the Distributor or directed
broker-dealer. The activities or services which may be procured with
Brokerage Credits and Brokerage Payments include, but are not limited to
(i) developing, preparing, printing, and mailing of advertisements, sales
literature and other promotional material describing and/or relating to the
Fund or the Series; (ii) printing and mailing of Fund prospectuses,
statements of additional information, any supplements thereto and
shareholder reports for existing and prospective shareholders; (iii)
holding or participating in seminars and sales meetings designed to promote
the distribution of shares of the Fund or the Series, including materials
intended either for broker-dealer only use or for retail use; (iv)
providing information about the Fund, its Series, or mutual funds in
general, to registered representatives of broker-dealers; (v) providing
assistance to broker-dealers that are conducting due diligence on the Fund
or its Series; (vi) payment or reimbursement of legal and administrative
costs associated with implementing the Plan; (vii) marketing fees requested
by broker-dealers who sell shares of the Fund; (viii) obtaining information
and providing explanations to shareholders regarding the Series'
investments and policies and other information about the Fund and its
Series, including the performance of the Series; (ix) training sales
personnel; (x) personal service and/or maintenance of the shareholder
accounts; (xi) payment of commissions to broker-dealers who sell shares of
the Fund; and (xii) financing any other activity that is intended to result
in the sale of Fund shares.
3. The Fund may direct the Distributor to take appropriate actions to effect
the purposes of this Plan, including, but not limited to, (a) directing on
behalf of the Fund or a Series and subject to the standards described
above, SMC or a Sub-Advisor to allocate transactions for the purchase or
sale of portfolio securities in the manner described in the Plan; (b)
compensating a broker-dealer for the cost and expense of certain
distribution-related activities or procuring from a broker-dealer or
otherwise inducing a broker-dealer to provide services, where such
activities or services are intended to promote the sale of shares of the
Fund or a Series, all on behalf of the Fund or a Series. Subject to the
standards set forth in Section 1, and subject to applicable law, SMC and a
Sub-Advisor may also direct brokerage transactions to a broker-dealer that
is an affiliated person of the Distributor, SMC or a Sub-Advisor. Provided
that any Brokerage Credits or Brokerage Payments directly or indirectly
inure to the benefit of those Series which generated the particular
Brokerage Credit or Brokerage Payment, any such credits or payments may
also inure to the benefit of other Series of the Fund.
4. This Plan shall not take effect with respect to a Series until it has been
approved by (a) a vote of a majority of the outstanding voting securities
of that Series; and, together with any related agreements, has been
approved by (a) the Fund's Board of Directors, and (b) those Directors of
the Fund who are not "interested persons" of the Fund (as defined in the
Act) and who have no direct or indirect financial interest in the operation
of this Plan or any agreements related to it (the "Rule 12b-l Directors"),
cast in person at a meeting (or meetings) called, at least in part, for the
purpose of voting on this Plan and such related agreements. As additional
Series of the Fund are established, this Plan shall not take effect with
respect to such Series until the Plan, together with any related
agreements, has been approved by votes of a majority of both (a) the Fund's
Board of Directors and (b) the Rule 12b-1 Directors cast in person at a
meeting called, at least in part, for the purpose of voting on such
approval.
5. After approval as set forth in paragraph 4, and any other approvals
required pursuant to the Act and Rule 12b-1 thereunder, this Plan shall
take effect at the time specified by the Fund's Board of Directors, or, if
no such time is specified by the Directors, at the time that all approvals
necessary have been obtained. The Plan shall continue in full force and
effect as to a Series for so long as such continuance is specifically
approved at least annually by votes of a majority of both (a) the Board of
Directors and (b) the Rule 12b-1 Directors of the Fund, cast in person at a
meeting called, at least in part, for the purpose of voting on this Plan.
6. The Distributor shall provide to the Directors of the Fund a written report
of the amounts expended or benefits received and the purposes for which
such expenditures were made at such frequency as may be required under Rule
12b-1 of the Act.
7. This Plan may be terminated as to the Fund or each Series at any time,
without payment of any penalty, by vote of the Directors of the Fund, by
vote of a majority of the Rule 12b-l Directors, or by a vote of a majority
of the outstanding voting securities of the Series on not more than 30
days' written notice to any other party to the Plan. In addition, all
Agreements shall provide that such Agreement shall terminate automatically
in the event of its assignment.
8. This Plan may not be amended in any material respect unless such amendment
is approved by a vote of a majority of both (a) the Fund's Board of
Directors and (b) the Rule 12b-1 Directors cast in person at a meeting
called, at least in part, for the purpose of voting on such approval. The
Plan may not be amended to increase materially the amount to be spent for
distribution unless such amendment is approved by a majority of the
outstanding voting securities of the pertinent Series and by a majority of
both (a) the Fund's Board of Directors and (b) the Rule 12b-1 Directors
cast in person at a meeting called, at least in part, for the purpose of
voting on such approval; PROVIDED HOWEVER, that increases in amounts spent
for distribution by virtue of a greater amount of Brokerage Credits or
Brokerage Payments generated by the Fund shall not be deemed to constitute
a material increase in the amount to be spent for distribution.
9. While this Plan is in effect, the selection and nomination of Directors who
are not "interested persons" (as defined in the Act) of the Fund shall be
committed to the discretion of the Directors who are not interested
persons.
10. The Fund shall preserve copies of this Plan and related agreements for a
period of not less than six years from the date of termination of the Plan
or related agreements, the first two years in an easily accessible place;
and shall preserve all reports made pursuant to paragraph 6 hereof for a
period of not less than six, the first two years in an easily accessible
place.
11. The provisions of this Plan are severable as to each Series, and any action
to be taken with respect to this Plan shall be taken separately for each
Series affected by the matter.
Date: January 27, 2000
<PAGE>
SCHEDULE A
Equity Series
Global Series
Total Return Series
Value Series
Social Awareness Series
Small Company Series
Enhanced Index Series
International Series
Select 25 Series
<PAGE>
AMENDMENT TO
BROKERAGE ENHANCEMENT PLAN
WHEREAS, Security Equity Fund (the "Fund") engages in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended;
WHEREAS, the Fund adopted a Brokerage Enhancement Plan (the "Plan") on January
27, 2000, which Plan may be amended to add or remove a Series of the Fund by
amending Schedule A of the Plan;
WHEREAS, on February 4, 2000, the Board of Directors of the Fund authorized the
Fund to offer its common stock in two new series designated as Large Cap Growth
Series and Technology Series;
WHEREAS, on February 4, 2000, the Board of Directors authorized the addition of
Large Cap Growth Series and Technology Series to the Plan;
NOW, THEREFORE BE IT RESOLVED, that the Fund hereby amends the Brokerage
Enhancement Plan, dated January 27, 2000, as follows, effective May 1, 2000:
Schedule A shall be deleted in its entirety and the attached
Schedule A inserted in lieu thereof.
IN WITNESS WHEREOF, the Fund has executed this Amendment to the Brokerage
Enhancement Plan this 1st day of May, 2000.
SECURITY EQUITY FUND
By: JOHN D. CLELAND
-------------------------------
John D. Cleland, President
ATTEST:
AMY J. LEE
- -----------------------------------
Amy J. Lee, Secretary
<PAGE>
SECURITY EQUITY FUND
BROKERAGE ENHANCEMENT PLAN
SCHEDULE A
Equity Series
Global Series
Total Return Series
Social Awareness Series
Mid Cap Value Series
Small Cap Growth Series
Enhanced Index Series
International Series
Select 25 Series
Large Cap Growth Series
Technology Series
DATED: May 1, 2000
