-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N8I/8kOnU3l2xlz30ERO+2jGmbPEtyTu1V25zsD/tdPtADaNNAbeQ5ztZE2yDfWS JSAbZG4Hvk8kGHNnx12wVQ== /in/edgar/work/0000088498-00-000051/0000088498-00-000051.txt : 20001121 0000088498-00-000051.hdr.sgml : 20001121 ACCESSION NUMBER: 0000088498-00-000051 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20001120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SECURITY EQUITY FUND CENTRAL INDEX KEY: 0000088525 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 486104426 STATE OF INCORPORATION: KS FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 002-19458 FILM NUMBER: 773261 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 811-01136 FILM NUMBER: 773262 BUSINESS ADDRESS: STREET 1: SECURITY MANAGEMENT COMPANY, LLC STREET 2: 700 SW HARRISON STREET CITY: TOPEKA STATE: KS ZIP: 66636-0001 BUSINESS PHONE: 7854313127 MAIL ADDRESS: STREET 1: SECURITY MANAGEMENT COMPANY, LLC STREET 2: 700 SW HARRISON STREET CITY: TOPEKA STATE: KS ZIP: 66636-0001 485APOS 1 0001.txt EQUITY FUND - PEA 90 Registration No. 811-1136 Registration No. 2-19458 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_] Post-Effective Amendment No. 90 [X] ------ and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_] Post-Effective Amendment No. 90 [X] ------ (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) [_] on January 31, 2001, pursuant to paragraph (b) [_] 60 days after filing pursuant to paragraph (a)(1) [X] on January 31, 2001, pursuant to paragraph (a)(1) [_] 75 days after filing pursuant to paragraph (a)(2) [_] on January 31, 2001, 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 SECURITY EQUITY FUND FORM N-1A PART B. STATEMENT OF ADDITIONAL INFORMATION ITEM 22. FINANCIAL STATEMENTS To be filed by amendment. SECURITY FUNDS ================================================================================ PROSPECTUS FEBRUARY 1, 2001 * 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 ------------------------------------------------ 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. ------------------------------------------------ TABLE OF CONTENTS ================================================================================ 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............................................................. 8 Foreign Securities........................................................ 8 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.............................................. 17 INVESTMENT MANAGER.......................................................... 22 Management Fees........................................................... 22 Portfolio Managers........................................................ 23 BUYING SHARES............................................................... 24 Class A Shares............................................................ 24 Class A Distribution Plan................................................. 25 Class B Shares............................................................ 25 Class B Distribution Plan................................................. 25 Class C Shares............................................................ 25 Class C Distribution Plan................................................. 25 Class S Shares............................................................ 26 Class S Distribution Plan................................................. 26 Brokerage Enhancement Plan................................................ 26 Waiver of Deferred Sales Charge........................................... 26 Confirmations and Statements.............................................. 27 SELLING SHARES.............................................................. 27 By Mail................................................................... 27 By Telephone.............................................................. 27 By Broker................................................................. 28 Payment of Redemption Proceeds............................................ 28 DIVIDENDS AND TAXES......................................................... 28 Tax on Distributions...................................................... 28 Taxes on Sales or Exchanges............................................... 28 Backup Withholding........................................................ 28 DETERMINATION OF NET ASSET VALUE............................................ 29 SHAREHOLDER SERVICES........................................................ 29 Accumulation Plan......................................................... 29 Systematic Withdrawal Program............................................. 29 Exchange Privilege........................................................ 29 Retirement Plans.......................................................... 30 INVESTMENT POLICIES AND MANAGEMENT PRACTICES................................ 30 Foreign Securities........................................................ 31 Emerging Markets.......................................................... 31 Smaller Companies......................................................... 31 Convertible Securities and Warrants....................................... 31 Restricted Securities..................................................... 32 High Yield Securities..................................................... 32 Cash Reserves............................................................. 32 Borrowing................................................................. 32 Futures and Options....................................................... 33 Swaps, Caps, Floors and Collars........................................... 33 Shares of Other Investment Companies...................................... 33 When-Issued Securities and Forward Commitment Contracts................... 33 Securities Lending........................................................ 33 GENERAL INFORMATION......................................................... 33 Shareholder Inquiries..................................................... 33 FINANCIAL HIGHLIGHTS........................................................ 34 APPENDIX A - REDUCED SALES CHARGES.......................................... 50 Class A Shares............................................................ 50 Rights of Accumulation.................................................... 50 Statement of Intention.................................................... 50 Reinstatement Privilege................................................... 50 Purchases at Net Asset Value.............................................. 50 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 equity securities, which may include ADRs. The Investment Manager, Security Management Company, LLC, typically chooses larger, value-oriented companies. 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 equity securities that provide income will make up at least 25% of the Fund's portfolio. - -------------------------------------------------------------------------------- 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). - -------------------------------------------------------------------------------- The Investment Manager uses a value-oriented strategy to choose equity securities. The Investment Manager identifies equity securities 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 $10 billion or greater at the time of purchase. 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. - -------------------------------------------------------------------------------- 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. 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. - -------------------------------------------------------------------------------- To manage risk in declining or volatile markets, the Investment Manager may invest more in cash, fixed-income securities and equity securities that provide income. Fixed-income securities may include U.S. government securities, foreign debt securities that are denominated in U.S. dollars, high yield securities (also referred to as "junk bonds"), restricted securities eligible for resale under Rule 144A 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 equity securities, which may include ADRs and convertible securities. To choose equity securities, 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 typically invests in the equity securities of companies whose total market value is $10 billion or greater at the time of purchase. 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. - -------------------------------------------------------------------------------- GROWTH-ORIENTED STOCKS are stocks of established companies that typically have a record of consistent earnings growth. - -------------------------------------------------------------------------------- The Fund typically sells a security 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 equity securities of U.S. companies in different capitalization ranges. The Fund may also invest in equity securities 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 equity securities, 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 securities 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 security 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 equity securities that appear undervalued relative to assets, earnings, growth potential or cash flows. Due to the nature of value companies, the securities included in the Fund's portfolio typically consist of small- to medium-sized companies. The Fund may sell a security 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. 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 and/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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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 $10 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 equity securities, 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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 which may include ADRs. The Fund typically invests in 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 portfolio securities. The Investment Manager identifies the securities of companies that are in the early to middle stages of growth and are valued at a reasonable price. Equity securities 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.
- ------------------------------------------------------------------------------------- Growth Small and Total Mid Cap Cap Enhanced Income Equity Global Return Value Growth Index - ------------------------------------------------------------------------------------- Market Risk X X X X X X X - ------------------------------------------------------------------------------------- Smaller Companies X X - ------------------------------------------------------------------------------------- Value Stocks X X X X - ------------------------------------------------------------------------------------- Growth Stocks X X X X X X - ------------------------------------------------------------------------------------- Foreign Securities X X X X X X X - ------------------------------------------------------------------------------------- Emerging Markets X - ------------------------------------------------------------------------------------- Options and Futures X X X X X X X - ------------------------------------------------------------------------------------- Fixed-Income Securities X X - ------------------------------------------------------------------------------------- Non-Diversification - ------------------------------------------------------------------------------------- Investment in Investment Companies X X - ------------------------------------------------------------------------------------- Industry Concentration - ------------------------------------------------------------------------------------- Restricted Securities X - ------------------------------------------------------------------------------------- Active Trading X X - ------------------------------------------------------------------------------------- Focused Investment Strategy - ------------------------------------------------------------------------------------- Technology Stocks - -------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------- Select Large Cap International 25 Growth Technology Ultra - ----------------------------------------------------------------------------- Market Risk X X X X X - ----------------------------------------------------------------------------- Smaller Companies X X - ----------------------------------------------------------------------------- Value Stocks X - ----------------------------------------------------------------------------- Growth Stocks X X X X X - ----------------------------------------------------------------------------- Foreign Securities X X X X X - ----------------------------------------------------------------------------- Emerging Markets X X - ----------------------------------------------------------------------------- Options and Futures X X X X X - ----------------------------------------------------------------------------- Fixed-Income Securities - ----------------------------------------------------------------------------- Non-Diversification X X - ----------------------------------------------------------------------------- Investment in Investment Companies X X - ----------------------------------------------------------------------------- Industry Concentration X X - ----------------------------------------------------------------------------- Restricted Securities X - ----------------------------------------------------------------------------- Active Trading X - ----------------------------------------------------------------------------- Focused Investment Strategy X X - ----------------------------------------------------------------------------- Technology Stocks X - ----------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 equity securities 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 equity securities 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 Large Cap Growth and Technology Funds and all of the Funds' Class S 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, 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, and for Class C shares include the deferred sales charge of 1% in the first year. ================================================================================ SECURITY GROWTH AND INCOME FUND - CLASS A ================================================================================ [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 21.8% 4.8% 8.2% -7.9% 27.8% 12.0% 31.7% -0.3% 2.5% --------------------------------------------------------------- HIGHEST AND LOWEST RETURNS (QUARTERLY 1990-2000) --------------------------------------------------------------- QUARTER ENDED Highest 15.50% September 30, 1997 Lowest -12.32% September 30, 1998 --------------------------------------------------------------- --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 2000) --------------------------------------------------------------- PAST PAST PAST 1 YEAR 5 YEARS 10 YEARS Class A (at NAV)(1) _____% _____% _____% Class A -3.33% 14.09% 9.10% Class B -3.50% 14.06% 9.44%(2) Class C _____% _____%(3) N/A S&P 500 21.02% 28.55% 18.20%(4) --------------------------------------------------------------- 1 Does not reflect deduction of the maximum front end sales charge of 5.75%. 2 For the period beginning October 19, 1993 (date of inception) to December 31, 2000. 3 For the period beginning January 29, 1999 (date of inception) to December 31, 2000. 4 Index performance information is only available to the Fund at the beginning of each month. The S&P 500 performance for the period October 1, 1993 to December 31, 2000 was ______% and the period January 1, 1999 to December 31, 2000 was ______%. --------------------------------------------------------------- ================================================================================ SECURITY EQUITY FUND - CLASS A ================================================================================ [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 35.2% 10.7% 14.6% -2.5% 38.4% 22.7% 29.6% 26.5% 11.0% --------------------------------------------------------------- HIGHEST AND LOWEST RETURNS (QUARTERLY 1990-2000) --------------------------------------------------------------- QUARTER ENDED Highest 20.90% December 31, 1998 Lowest -15.29% September 30, 1990 --------------------------------------------------------------- --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 2000) --------------------------------------------------------------- PAST PAST PAST 1 YEAR 5 YEARS 10 YEARS Class A (at NAV)(1) _____% _____% _____% Class A 4.59% 23.82% 16.59% Class B 4.90% 23.83% 18.58%(2) Class C _____% _____%(3) N/A S&P 500 21.02% 28.55% 18.20%(4) --------------------------------------------------------------- 1 Does not reflect deduction of the maximum front end sales charge of 5.75%. 2 For the period beginning October 19, 1993 (date of inception) to December 31, 2000. 3 For the period beginning January 29, 1999 (date of inception) to December 31, 2000. 4 Index performance information is only available to the Fund at the beginning of each month. The S&P 500 performance for the period October 1, 1993 to December 31, 2000 was ______%. --------------------------------------------------------------- ================================================================================ SECURITY GLOBAL FUND - CLASS A ================================================================================ [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 1994 1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- ---- 1.3% 10.4% 17.1% 6.9% 19.2% 54.8% --------------------------------------------------------------- HIGHEST AND LOWEST RETURNS (QUARTERLY 1994-2000) --------------------------------------------------------------- QUARTER ENDED Highest 37.45% September 30, 1999 Lowest -11.44% September 30, 1998 --------------------------------------------------------------- --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 2000) --------------------------------------------------------------- PAST PAST LIFE OF FUND 1 YEAR 5 YEARS (SINCE 10/1/93) Class A (at NAV)(1) _____% _____% _____% Class A 45.90% 19.16% 15.88% Class B 48.45% 19.21% 16.07%(2) Class C _____% _____%(3) N/A MSCI 25.27% 20.23% 17.21%(4) --------------------------------------------------------------- 1 Does not reflect deduction of the maximum front end sales charge of 5.75%. 2 For the period beginning October 19, 1993 (date of inception) to December 31, 2000. 3 For the period beginning January 29, 1999 (date of inception) to December 31, 2000. 4 Index performance information is only available to the Fund at the beginning of each month. MSCI performance is for the period October 1, 1993 to December 31, 2000. --------------------------------------------------------------- ================================================================================ SECURITY TOTAL RETURN FUND - CLASS A ================================================================================ [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- 7.8% 13.2% 6.1% 12.1% 15.9% --------------------------------------------------------------- HIGHEST AND LOWEST RETURNS (QUARTERLY 1996-2000) --------------------------------------------------------------- QUARTER ENDED Highest 13.20% December 31, 1998 Lowest -11.47% September 30, 1998 --------------------------------------------------------------- --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 2000) --------------------------------------------------------------- PAST LIFE OF FUND 1 YEAR (SINCE JUNE 1, 1995) Class A (at NAV)(1) _____% _____% Class A 9.21% 10.55% Class B 9.82% 10.62% Class C _____% _____%(2) S&P 500 21.02% 26.98%(3) --------------------------------------------------------------- 1 Does not reflect deduction of the maximum front end sales charge of 5.75%. 2 For the period beginning January 29, 1999 (date of inception) to December 31, 2000. 3 Index performance information is only available to the Fund at the beginning of each month. The S&P 500 performance for the period January 1, 1999 to December 31, 2000 was ______%. --------------------------------------------------------------- ================================================================================ SECURITY MID CAP VALUE FUND - CLASS A ================================================================================ [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 1998 1999 2000 ---- ---- ---- 16.1% 21.8% --------------------------------------------------------------- HIGHEST AND LOWEST RETURNS (QUARTERLY 1998-2000) --------------------------------------------------------------- QUARTER ENDED Highest 21.34% December 31, 1998 Lowest -16.06% September 30, 1998 --------------------------------------------------------------- --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 2000) --------------------------------------------------------------- LIFE OF FUND PAST 1 YEAR (SINCE 5/1/97) Class A (at NAV)(1) _____% _____% Class A 14.81% 22.68% Class B 15.57% 23.39% Class C _____% _____%(2) S&P 500 21.02% 27.37%(3) BARRA Value Index 12.71% 18.32%(3) --------------------------------------------------------------- 1 Does not reflect deduction of the maximum front end sales charge of 5.75%. 2 For the period beginning January 29, 1999 (date of inception) to December 31, 2000. 3 Index performance information is only available to the Fund at the beginning of each month. The S&P 500 and the BARRA Value Index performance for the period January 1, 1999 to December 31, 2000 was ______% and ______% respectively. --------------------------------------------------------------- ================================================================================ SECURITY SMALL CAP GROWTH FUND - CLASS A ================================================================================ [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 1998 1999 2000 ---- ---- ---- 10.4% 87.2% --------------------------------------------------------------- HIGHEST AND LOWEST RETURNS (QUARTERLY 1998-2000) --------------------------------------------------------------- QUARTER ENDED Highest 53.00% December 31, 1999 Lowest -17.30% September 30, 1998 --------------------------------------------------------------- --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 2000) --------------------------------------------------------------- LIFE OF FUND PAST 1 YEAR(1) (SINCE 10/15/97) Class A (at NAV)(2) _____% _____% Class A 76.36% 32.77% Class B 79.54% 33.82% Class C _____% _____%(3) Russell 2000 Index 24.36% 5.63%(4) --------------------------------------------------------------- 1 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. 2 Does not reflect deduction of the maximum front end sales charge of 5.75%. 3 For the period beginning January 29, 1999 (date of inception) to December 31, 2000. 4 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, 2000. The Russell 2000 Index performance for the period January 1, 1999 to December 31, 2000 was ______%. --------------------------------------------------------------- ================================================================================ SECURITY ENHANCED INDEX - CLASS A ================================================================================ [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 2000 ---- --------------------------------------------------------------- HIGHEST AND LOWEST RETURNS (QUARTERLY 2000) --------------------------------------------------------------- QUARTER ENDED Highest Lowest --------------------------------------------------------------- --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 2000) --------------------------------------------------------------- LIFE OF FUND PAST 1 YEAR (SINCE 1/29/99) Class A (at NAV)(1) _____% _____% Class A _____% _____% Class B _____% _____% Class C _____% _____% S&P 500 _____% _____%(2) --------------------------------------------------------------- 1 Does not reflect deduction of the maximum front end sales charge of 5.75%. 2 Index performance information is only available to the Fund at the beginning of each month. The S&P 500 performance is for the period January 1, 1999 to December 31, 2000. --------------------------------------------------------------- ================================================================================ SECURITY INTERNATIONAL FUND - CLASS A ================================================================================ [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 2000 ---- --------------------------------------------------------------- HIGHEST AND LOWEST RETURNS (QUARTERLY 2000) --------------------------------------------------------------- QUARTER ENDED Highest Lowest --------------------------------------------------------------- --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 2000) --------------------------------------------------------------- LIFE OF FUND PAST 1 YEAR (SINCE 1/29/99) Class A (at NAV)(1) _____% _____% Class A _____% _____% Class B _____% _____% Class C _____% _____% MSCI EAFE Index _____% _____%(2) --------------------------------------------------------------- 1 Does not reflect deduction of the maximum front end sales charge of 5.75%. 2 Index performance information is only available to the Fund at the beginning of each month. The MSCI EAFE Index is for the period January 1, 1999 to December 31, 2000. --------------------------------------------------------------- ================================================================================ SECURITY SELECT 25 FUND - CLASS A ================================================================================ [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 2000 ---- --------------------------------------------------------------- HIGHEST AND LOWEST RETURNS (QUARTERLY 2000) --------------------------------------------------------------- QUARTER ENDED Highest Lowest --------------------------------------------------------------- --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 2000) --------------------------------------------------------------- LIFE OF FUND PAST 1 YEAR (SINCE 1/29/99) Class A (at NAV)(1) _____% _____% Class A _____% _____% Class B _____% _____% Class C _____% _____% S&P 500 Index _____% _____%(2) --------------------------------------------------------------- 1 Does not reflect deduction of the maximum front end sales charge of 5.75%. 2 Index performance information is only available to the Fund at the beginning of each month. The S&P 500 Index is for the period January 1, 1999 to December 31, 2000. --------------------------------------------------------------- ================================================================================ SECURITY ULTRA FUND - CLASS A ================================================================================ [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 59.7% 7.7% 9.9% -6.6% 19.3% 18.0% 17.8% 16.7% 59.7% --------------------------------------------------------------- HIGHEST AND LOWEST RETURNS (QUARTERLY 1990-2000) --------------------------------------------------------------- QUARTER ENDED Highest 37.08% December 31, 1999 Lowest -41.16% September 30, 1990 --------------------------------------------------------------- --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 2000) --------------------------------------------------------------- PAST PAST PAST 1 YEAR 5 YEARS 10 YEARS Class A (at NAV)(1) _____% _____% _____% Class A 50.51% 23.85% 14.08% Class B 53.02% 23.86% 17.80%(2) Class C _____% _____%(3) N/A S&P MidCap 400 14.72% 23.05% 17.32%(4) --------------------------------------------------------------- 1 Does not reflect deduction of the maximum front end sales charge of 5.75%. 2 For the period beginning October 19, 1993 (date of inception) to December 31, 2000. 3 For the period beginning January 29, 1999 (date of inception) to December 31, 2000. 4 Index performance information is only available to the Fund at the beginning of each month. The S&P MidCap 400 performance for the period October 1, 1993 to December 31, 2000 was ______%. --------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- SHAREHOLDER FEES (ALL FUNDS) (fees paid directly from your investment) - -------------------------------------------------------------------------------- CLASS A CLASS B CLASS C CLASS S SHARES SHARES(1) SHARES SHARES - -------------------------------------------------------------------------------- Maximum Sales Charge Imposed on Purchases (as a percentage 5.75% None None None of offering price) - -------------------------------------------------------------------------------- Maximum Deferred Sales Charge (as a percentage of original purchase price or redemption None(2) 5%(3) 1%(4) 6%(5) proceeds, whichever is lower) - -------------------------------------------------------------------------------- 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. 5 6% during the first year, decreasing to 0% in the eighth and following years. - --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - --------------------------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------------ TOTAL TOTAL ANNUAL ANNUAL FUND OPERATING DISTRIBUTION FUND TOTAL EXPENSES WITH MANAGEMENT (12B-1) OTHER OPERATING WAIVERS AND WAIVERS AND FEES FEES(1) EXPENSES(2) EXPENSES REDUCTIONS REDUCTIONS - --------------------------------------------------------------------------------------------- Growth and Income Fund 1.22% None 0.00% 1.22% 0.00% 1.22% - --------------------------------------------------------------------------------------------- Equity Fund 1.02% None 0.00% 1.02% 0.00% 1.02% - --------------------------------------------------------------------------------------------- Global Fund 2.00% None 0.00% 2.00% 0.00% 2.00% - --------------------------------------------------------------------------------------------- Total Return Fund 0.75% None 1.35% 2.10%(3,4) 0.00% 2.10%(3,4) - --------------------------------------------------------------------------------------------- Mid Cap Value Fund 1.00% None 0.33% 1.33% 0.00% 1.33% - --------------------------------------------------------------------------------------------- Small Cap Growth Fund 1.00% 0.25% 0.49% 1.74%(3) 0.00% 1.74%(3) - --------------------------------------------------------------------------------------------- Enhanced Index Fund 0.75% 0.25% 0.48% 1.48% 0.00% 1.48% - --------------------------------------------------------------------------------------------- International Fund 1.10% 0.25% 3.34% 4.69% 2.19% 2.50%(5) - --------------------------------------------------------------------------------------------- Select 25 Fund 0.75% 0.25% 0.48% 1.48% 0.00% 1.48% - --------------------------------------------------------------------------------------------- Large Cap Growth Fund 1.00% 0.25% 0.62% 1.87% 0.00% 1.87% - --------------------------------------------------------------------------------------------- Technology Fund 1.00% 0.25% 1.21% 2.46%(6) 0.00% 2.46%(6) - --------------------------------------------------------------------------------------------- Ultra Fund 1.21% None 0.00% 1.21% 0.00% 1.21% - --------------------------------------------------------------------------------------------- 1 The Funds have also adopted a Brokerage Enhancement Plan under Rule 12b-1, but have not yet implemented the Plan. If the Brokerage Enhancement Plan is implemented, it is not expected that the amounts received by the Fund's distributor would exceed 0.05% of any Fund's average net assets. 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, 2000, were as follows: Total Return Fund - 2.00%, Small Cap Growth Fund - .49%. 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 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. 6 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, 2001 will be 2.25%. - ---------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - --------------------------------------------------------------------------------------------- CLASS B ------------------------------------------------------------------------------ TOTAL TOTAL ANNUAL ANNUAL FUND OPERATING DISTRIBUTION FUND TOTAL EXPENSES WITH MANAGEMENT (12B-1) OTHER OPERATING WAIVERS AND WAIVERS AND FEES FEES(1) EXPENSES(2) EXPENSES REDUCTIONS REDUCTIONS - --------------------------------------------------------------------------------------------- Growth and Income Fund 1.22% 1.00% 0.00% 2.22% 0.00% 2.22% - --------------------------------------------------------------------------------------------- Equity Fund 1.02% 1.00% 0.00% 2.02% 0.00% 2.02% - --------------------------------------------------------------------------------------------- Global Fund 2.00% 1.00% 0.00% 3.00% 0.00% 3.00% - --------------------------------------------------------------------------------------------- Total Return Fund 0.75% 1.00% 1.30% 3.05%(3,4) 0.00% 3.05%(3,4) - --------------------------------------------------------------------------------------------- Mid Cap Value Fund 1.00% 1.00% 0.37% 2.37% 0.00% 2.37% - --------------------------------------------------------------------------------------------- Small Cap Growth Fund 1.00% 1.00% 0.94% 2.94%(3) 0.00% 2.94%(3) - --------------------------------------------------------------------------------------------- Enhanced Index Fund 0.75% 1.00% 0.45% 2.20% 0.00% 2.20% - --------------------------------------------------------------------------------------------- International Fund 1.10% 1.00% 3.27% 5.37% 2.19% 3.19%(5) - --------------------------------------------------------------------------------------------- Select 25 Fund 0.75% 1.00% 0.44% 2.19% 0.00% 2.19% - --------------------------------------------------------------------------------------------- Large Cap Growth Fund 1.00% 1.00% 0.62% 2.62% 0.00% 2.62% - --------------------------------------------------------------------------------------------- Technology Fund 1.00% 1.00% 1.21% 3.21%(6) 0.00% 3.21%(6) - --------------------------------------------------------------------------------------------- Ultra Fund 1.21% 1.00% 0.00% 2.21% 0.00% 2.21% - --------------------------------------------------------------------------------------------- 1 The Funds have also adopted a Brokerage Enhancement Plan under Rule 12b-1, but have not yet implemented the Plan. If the Brokerage Enhancement Plan is implemented, it is not expected that the amounts received by the Fund's distributor would exceed 0.05% of any Fund's average net assets. 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, 2000, 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 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. 6 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, 2001 will be 3.00%. - ---------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - --------------------------------------------------------------------------------------------- CLASS C ------------------------------------------------------------------------------ TOTAL TOTAL ANNUAL ANNUAL FUND OPERATING DISTRIBUTION FUND TOTAL EXPENSES WITH MANAGEMENT (12B-1) OTHER OPERATING WAIVERS AND WAIVERS AND FEES FEES(1) EXPENSES(2) EXPENSES REDUCTIONS REDUCTIONS - --------------------------------------------------------------------------------------------- Growth and Income Fund 1.22% 1.00% 0.00% 2.22% 0.00% 2.22% - --------------------------------------------------------------------------------------------- Equity Fund 1.02% 1.00% 0.00% 2.02% 0.00% 2.02% - --------------------------------------------------------------------------------------------- Global Fund 2.00% 1.00% 0.00% 3.00% 0.00% 3.00% - --------------------------------------------------------------------------------------------- Total Return Fund 0.75% 1.00% 1.18% 2.93%(3,4) 0.00% 2.93%(3,4) - --------------------------------------------------------------------------------------------- Mid Cap Value Fund 1.00% 1.00% 0.38% 2.38% 0.00% 2.38% - --------------------------------------------------------------------------------------------- Small Cap Growth Fund 1.00% 1.00% 0.47% 2.47%(3) 0.00% 2.47%(3) - --------------------------------------------------------------------------------------------- Enhanced Index Fund 0.75% 1.00% 0.30% 2.05% 0.00% 2.05% - --------------------------------------------------------------------------------------------- International Fund 1.10% 1.00% 2.87% 4.97% 2.19% 2.78%(5) - --------------------------------------------------------------------------------------------- Select 25 Fund 0.75% 1.00% 0.32% 2.07% 0.00% 2.07% - --------------------------------------------------------------------------------------------- Large Cap Growth Fund 1.00% 1.00% 0.62% 2.62% 0.00% 2.62% - --------------------------------------------------------------------------------------------- Technology Fund 1.00% 1.00% 1.21% 3.21%(6) 0.00% 3.21%(6) - --------------------------------------------------------------------------------------------- Ultra Fund 1.21% 1.00% 0.00% 2.21% 0.00% 2.21% - --------------------------------------------------------------------------------------------- 1 The Funds have also adopted a Brokerage Enhancement Plan under Rule 12b-1, but have not yet implemented the Plan. If the Brokerage Enhancement Plan is implemented, it is not expected that the amounts received by the Fund's distributor would exceed 0.05% of any Fund's average net assets. 2 "Other Expenses" 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, 2000, 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 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. 6 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, 2001 will be 3.00%. - ---------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - --------------------------------------------------------------------------------------------- CLASS S ------------------------------------------------------------------------------ TOTAL TOTAL ANNUAL ANNUAL FUND OPERATING DISTRIBUTION FUND TOTAL EXPENSES WITH MANAGEMENT (12B-1) OTHER OPERATING WAIVERS AND WAIVERS AND FEES FEES(1) EXPENSES(2) EXPENSES REDUCTIONS REDUCTIONS - --------------------------------------------------------------------------------------------- Growth and Income Fund 1.22% 1.00% 0.00% 2.22% 0.00% 2.22% - --------------------------------------------------------------------------------------------- Equity Fund 1.02% 1.00% 0.00% 2.02% 0.00% 2.02% - --------------------------------------------------------------------------------------------- Global Fund 2.00% 1.00% 0.00% 3.00% 0.00% 3.00% - --------------------------------------------------------------------------------------------- Total Return Fund 0.75% 1.00% 1.18% 2.93%(3,4) 0.00% 2.93%(3,4) - --------------------------------------------------------------------------------------------- Mid Cap Value Fund 1.00% 1.00% 0.38% 2.38% 0.00% 2.38% - --------------------------------------------------------------------------------------------- Small Cap Growth Fund 1.00% 1.00% 0.47% 2.47%(3) 0.00% 2.47%(3) - --------------------------------------------------------------------------------------------- Enhanced Index Fund 0.75% 1.00% 0.30% 2.05% 0.00% 2.05% - --------------------------------------------------------------------------------------------- International Fund 1.10% 1.00% 2.87% 4.97% 2.19% 2.78%(5) - --------------------------------------------------------------------------------------------- Select 25 Fund 0.75% 1.00% 0.32% 2.07% 0.00% 2.07% - --------------------------------------------------------------------------------------------- Large Cap Growth Fund 1.00% 1.00% 0.62% 2.62% 0.00% 2.62% - --------------------------------------------------------------------------------------------- Technology Fund 1.00% 1.00% 1.21% 3.21%(6) 0.00% 3.21%(6) - --------------------------------------------------------------------------------------------- Ultra Fund 1.21% 1.00% 0.00% 2.21% 0.00% 2.21% - --------------------------------------------------------------------------------------------- 1 The Funds have also adopted a Brokerage Enhancement Plan under Rule 12b-1, but have not yet implemented the Plan. If the Brokerage Enhancement Plan is implemented, it is not expected that the amounts received by the Fund's distributor would exceed 0.05% of any Fund's average net assets. 2 "Other Expenses" 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, 2000, 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 0.75%. 5 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. 6 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, 2001 will be 3.00%. - ---------------------------------------------------------------------------------------------
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. - -------------------------------------------------------------------------------- 1 YEAR ------------------------------------------- CLASS A CLASS B CLASS C CLASS S Growth and Income Fund ........... $ 695 $ 728 $328 Equity Fund ...................... 674 706 306 Global Fund ...................... 766 803 403 Total Return Fund ................ 778 810 398 Mid Cap Value Fund ............... 706 744 345 Small Cap Growth Fund ............ 742 797 350 Enhanced Index Fund .............. 717 723 308 International Fund ............... 1,018 1,036 597 Select 25 Fund ................... 718 723 311 Large Cap Growth Fund ............ 754 765 365 Technology Fund .................. 810 824 424 Ultra Fund ....................... 692 725 325 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3 YEARS ------------------------------------------- CLASS A CLASS B CLASS C CLASS S Growth and Income Fund ........... $ 949 $1,003 $ 703 Equity Fund ...................... 884 937 637 Global Fund ...................... 1,166 1,227 927 Total Return Fund ................ 1,201 1,248 913 Mid Cap Value Fund ............... 984 1,051 755 Small Cap Growth Fund ............ 1,091 1,210 770 Enhanced Index Fund .............. 1,016 988 643 International Fund ............... 1,907 1,902 1,492 Select 25 Fund ................... 1,019 988 652 Large Cap Growth Fund ............ 1,129 1,114 814 Technology Fund .................. 1,297 1,289 989 Ultra Fund ....................... 940 994 694 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5 YEARS ------------------------------------------- CLASS A CLASS B CLASS C CLASS S Growth and Income Fund ........... $1,222 $1,405 $1,205 Equity Fund ...................... 1,111 1,293 1,093 Global Fund ...................... 1,591 1,777 1,577 Total Return Fund ................ 1,649 1,811 1,552 Mid Cap Value Fund ............... 1,282 1,485 1,291 Small Cap Growth Fund ............ 1,464 1,748 1,316 Enhanced Index Fund .............. --- --- --- International Fund ............... --- --- --- Select 25 Fund ................... --- --- --- Large Cap Growth Fund ............ --- --- --- Technology Fund .................. --- --- --- Ultra Fund ....................... 1,207 1,390 1,190 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 10 YEARS ------------------------------------------- CLASS A CLASS B CLASS C CLASS S Growth and Income Fund ........... $1,999 $2,333 $2,585 Equity Fund ...................... 1,762 2,101 2,358 Global Fund ...................... 2,768 3,083 3,318 Total Return Fund ................ 2,886 3,162 3,271 Mid Cap Value Fund ............... 2,127 2,488 2,756 Small Cap Growth Fund ............ 2,509 2,978 2,806 Enhanced Index Fund .............. --- --- --- International Fund ............... --- --- --- Select 25 Fund ................... --- --- --- Large Cap Growth Fund ............ --- --- --- Technology Fund .................. --- --- --- Ultra Fund ....................... 1,967 2,301 2,554 - -------------------------------------------------------------------------------- You would pay the following expenses if you did not redeem your shares. - -------------------------------------------------------------------------------- 1 YEAR ------------------------------------------- CLASS A CLASS B CLASS C CLASS S Growth and Income Fund ........... $ 695 $228 $228 Equity Fund ...................... 674 206 206 Global Fund ...................... 766 303 303 Total Return Fund ................ 778 310 298 Mid Cap Value Fund ............... 706 244 245 Small Cap Growth Fund ............ 742 297 250 Enhanced Index Fund .............. 717 223 208 International Fund ............... 1,018 536 497 Select 25 Fund ................... 718 223 211 Large Cap Growth Fund ............ 754 265 265 Technology Fund .................. 810 324 324 Ultra Fund ....................... 692 225 225 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3 YEARS ------------------------------------------- CLASS A CLASS B CLASS C CLASS S Growth and Income Fund ........... $ 949 $ 703 $ 703 Equity Fund ...................... 884 637 637 Global Fund ...................... 1,166 927 927 Total Return Fund ................ 1,201 948 913 Mid Cap Value Fund ............... 984 751 755 Small Cap Growth Fund ............ 1,091 910 770 Enhanced Index Fund .............. 1,016 688 643 International Fund ............... 1,907 1,602 1,492 Select 25 Fund .................. 1,019 688 652 Large Cap Growth Fund ............ 1,129 814 814 Technology Fund .................. 1,297 989 989 Ultra Fund ....................... 940 694 694 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5 YEARS ------------------------------------------- CLASS A CLASS B CLASS C CLASS S Growth and Income Fund ........... $1,222 $1,205 $1,205 Equity Fund ...................... 1,111 1,093 1,093 Global Fund ...................... 1,591 1,577 1,577 Total Return Fund ................ 1,649 1,611 1,552 Mid Cap Value Fund ............... 1,282 1,285 1,291 Small Cap Growth Fund ............ 1,464 1,548 1,316 Enhanced Index Fund .............. --- --- --- International Fund ............... --- --- --- Select 25 Fund ................... --- --- --- Large Cap Growth Fund ............ --- --- --- Technology Fund .................. --- --- --- Ultra Fund ....................... 1,207 1,190 1,190 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 10 YEARS ------------------------------------------- CLASS A CLASS B CLASS C CLASS S Growth and Income Fund ........... $1,999 $2,333 $2,585 Equity Fund ...................... 1,762 2,101 2,358 Global Fund ...................... 2,768 3,083 3,318 Total Return Fund ................ 2,886 3,162 3,271 Mid Cap Value Fund ............... 2,127 2,488 2,756 Small Cap Growth Fund ............ 2,509 2,978 2,806 Enhanced Index Fund .............. --- --- --- International Fund ............... --- --- --- Select 25 Fund ................... --- --- --- Large Cap Growth Fund ............ --- --- --- Technology Fund .................. --- --- --- Ultra Fund ....................... 1,967 2,301 2,544 - -------------------------------------------------------------------------------- INVESTMENT MANAGER Security Management Company, LLC (the "Investment Manager"), 700 SW Harrison Street, Topeka, Kansas 66636, is the Funds' investment manager. On December 31, 2000, 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 September 30, 2000, manages over $47 billion in assets. The Investment Manager has engaged Bankers Trust Company ("Bankers Trust"), 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 as of September 30, 2000 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. 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 $266 billion in assets on behalf of investment companies, employee benefit plans, endowments, foundations and other institutions. 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. TheInvestment 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 17. 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, Director 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. BRANDON NELSON was named co-manager of the Small Cap Growth Fund in early November 2000. Mr. Nelson has over four years of investment experience. He joined Strong in 1996 after working as a summer intern on Mr. Ognar's team in 1995. He received an M.S. degree in finance from the University of Wisconsin-Madison and participated in the Applied Security Analysis Program. Mr. Nelson also earned a B.B.A. degree in finance from the University of Wisconsin-Madison. 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 11 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, Portfolio Manager 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. A broker/dealer may impose a transaction charge on the purchase of Fund shares. Fund shares purchased directly from the Fund do not contain a transaction charge but may contain a front-end sales charge as noted under "Class A shares". There are four different ways to buy shares of the Funds--Class A shares, Class B shares, Class C or Class S 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 AMOUNT OF ORDER OF OFFERING PRICE NET AMOUNT 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 DEFERRED SINCE 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 26. 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" page 26. 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. CLASS S SHARES -- Class S shares are not subject to a sales charge at the time of purchase. An order for Class S shares will be priced at the Fund's NAV next calculated after the order is accepted by the Fund. The Fund's NAV is generally calculated as of the close of trading on every day the New York Stock Exchange is open. Class S shares are subject to a deferred sales charge if redeemed within seven 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: -------------------------------------------- YEAR SINCE PURCHASE CONTINGENT DEFERRED PAYMENT WAS MADE SALES CHARGE -------------------------------------------- First 6% Second 6% Third 5% Fourth 4% Fifth 3% Sixth 2% Seventh 1% Eighth and Following 0% -------------------------------------------- The Distributor will waive the deferred sales charge under certain circumstances. See "Waiver of the Deferred Sales Charge," page 26. CLASS S DISTRIBUTION PLAN -- The Fund has adopted a Class S Distribution Plan that allows the Fund to pay distribution fees to the Distributor. The Distributor uses the fees to finance activities related to the sale of Class S shares and services to shareholders. The distribution fee is equal to 1.00% of the average daily net assets of the Fund's Class S 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"). However, to date, the Plan has not been implemented. If implemented, the Plan would use 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: - -------------------------------------------------------------------------------- TAX RATE FOR 28% TYPE OF DISTRIBUTION TAX RATE FOR 15% BRACKET BRACKET OR ABOVE - -------------------------------------------------------------------------------- Income dividends Ordinary Income rate Ordinary Income rate Short-term capital gains Ordinary Income rate Ordinary Income rate Long-term capital gains 10% 20% - -------------------------------------------------------------------------------- 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, Class C and Class S 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, Class C or Class S 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 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, Class C or Class S shares requested while Free Systematic Withdrawals are being made will be calculated as described under "Waiver of Deferred Sales Charges," page 26. 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 or for shares of the other mutual funds distributed by the Distributor, which currently include Security Social Awareness, Diversified Income and High Yield Funds. Shareholders who hold their shares in a tax-qualified retirement plan may also exchange shares of the Funds for shares of Security Capital Preservation Fund, but may not exchange shares of the Funds for shares of Security Municipal Bond Fund. Shareholders, except those who have purchased through the following custodial accounts of the Investment Manager, 403(b)(7) accounts, SEPP accounts and SIMPLE Plans, may also exchange their shares for shares of Cash Fund. All exchanges are made at the relative net asset values of the Funds on the date of the exchange. 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, if available. At present, Cash Fund does not offer Class B, Class C or Class S shares. Municipal Bond Fund does not offer Class C or Class S 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 that 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 purchase of the exchanged shares. 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. The terms of an employee-sponsored retirement plan may affect a shareholder's right to exchange shares as described above. Contact your plan sponsor or administrator to determine if all of the exchange options discussed above are available under your plan. 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, dollar cost averaging and asset rebalancing, may be changed or discontinued at any time by either the Investment Manager or the Funds upon 60 days' notice to shareholders. DOLLAR COST AVERAGING. Only for shareholders of a 403(b)(7) account sponsored by the Investment Manager and opened on or after June 5, 2000, a special exchange privilege is available. This privilege allows such shareholders to make periodic exchanges of shares from the Security Capital Preservation Fund (held in non-certificate form) to one or more of the funds available under the exchange privilege as described above. Such periodic exchanges in which securities are purchased at regular intervals are known as "dollar cost averaging." With dollar cost averaging, the cost of the securities gets averaged over time and possibly over various market cycles. Dollar cost averaging does not guarantee profits, nor does it assure that you will not have losses. You may obtain a dollar cost averaging request form from the Investment Manager. You must designate on the form whether amounts are to be exchanged on the basis of a specific dollar amount or a specific number of shares. The Investment Manager will exchange shares as requested on the first business day of the month. The Investment Manager will make exchanges until your account value in the Security Capital Preservation Fund is depleted or until you instruct the Investment Manager to terminate dollar cost averaging. You may instruct the Investment Manager to terminate dollar cost averaging at any time by written request. ASSET REBALANCING. Only for shareholders of a 403(b)(7) account sponsored by the Investment Manager and opened on or after June 5, 2000, a special exchange privilege is available that allows shareholders to automatically exchange shares of the funds on a quarterly basis to maintain a particular percentage allocation among the funds. The available funds are those discussed above under the exchange privilege and shares of such funds must be held in non-certificate form. Your account value allocated to a fund will grow or decline in value at different rates during the selected period, and asset rebalancing will automatically reallocate your account value in the funds to the allocation you select on a quarterly basis. You may obtain an asset rebalancing request form from the Investment Manager. You must designate on the form the applicable funds and the percentage of account value to be maintained in each fund. Thereafter, the Investment Manager will exchange shares of the funds to maintain that allocation on the first business day of each calendar quarter. You may instruct the Investment Manager to terminate asset rebalancing at any time by written request. 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 Fund 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. 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. SECURITIES LENDING -- For purposes of realizing additional income, the Global, International, Large Cap Growth and Technology Funds may lend their portfolio securities to certain borrowers. Any such loan will be continuously secured by collateral at least equal to the value of the security loaned. The risks in lending portfolio securities, as with other extensions of 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 firms deemed by the Investment Manager to be of good standing and will not be made unless, in the judgment of the Investment Manager, the consideration to be earned from such loans would justify the risk. 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, Class B shares and Class C shares during the past five years or, the period since commencement of a Fund or share class. 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. - -------------------------------------------------------------------------------- SECURITY GROWTH AND INCOME FUND (CLASS A) - -------------------------------------------------------------------------------- FISCAL YEAR ENDED SEPTEMBER 30 -------------------------------------------- 2000 1999(b) 1998(b) 1997(b) 1996(b) ---- ------- ------- ------- ------- PER SHARE DATA Net asset value beginning of period............. $ 7.68 $11.14 $ 9.05 $ 7.93 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)...... 0.12 0.13 0.15 0.18 Net gain (loss) on securities (realized and unrealized)....... 0.75 (0.87) 2.81 1.37 ----- ----- ----- ----- Total from investment operations.. 0.87 (0.74) 2.96 1.55 LESS DISTRIBUTIONS: Dividends (from net investment income).............. (0.04) (0.13) (0.16) (0.16) Distributions (from realized gains)........... (1.34) (2.59) (0.71) (0.27) ----- ----- ----- ----- Total distributions............... (1.38) (2.72) (0.87) (0.43) ----- ----- ----- ----- Net asset value end of period..... $ 7.17 $ 7.68 $11.14 $ 9.05 ===== ===== ===== ===== Total return (a).................. 12.00% (7.95)% 35.31% 20.31% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands).............. $74,796 $76,371 $91,252 $73,273 Ratio of expenses to average net assets.............. 1.22% 1.21% 1.24% 1.29% Ratio of net investment income (loss) to average net assets.... 1.63% 1.49% 1.53% 2.09% Portfolio turnover rate........... 98% 144% 124% 69% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY GROWTH AND INCOME FUND (CLASS B) - -------------------------------------------------------------------------------- FISCAL YEAR ENDED SEPTEMBER 30 -------------------------------------------- 2000 1999(b) 1998(b) 1997(b) 1996(b) ---- ------- ------- ------- ------- PER SHARE DATA Net asset value beginning of period............. $ 7.54 $10.99 $ 8.94 $ 7.85 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)...... 0.05 0.05 0.05 0.09 Net gain (loss) on securities (realized and unrealized)....... 0.73 (0.88) 2.77 1.35 ----- ----- ----- ----- Total from investment operations.. 0.78 (0.83) 2.82 1.44 LESS DISTRIBUTIONS: Dividends (from net investment income).............. (0.03) (0.03) (0.06) (0.08) Distributions (from realized gains)........... (1.34) (2.59) (0.71) (0.27) ----- ----- ----- ----- Total distributions............... (1.37) (2.62) (0.77) (0.35) ----- ----- ----- ----- Net asset value end of period..... $ 6.95 $ 7.54 $10.99 $ 8.94 ===== ===== ===== ===== Total return (a).................. 10.93% (8.95)% 34.01% 19.01% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands).............. $9,829 $9,257 $6,737 $2,247 Ratio of expenses to average net assets.............. 2.22% 2.21% 2.24% 2.29% Ratio of net investment income (loss) to average net assets.... 0.63% 0.59% 0.53% 1.09% Portfolio turnover rate........... 98% 144% 124% 69% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY GROWTH AND INCOME FUND (CLASS C) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------- 2000 1999(b)(f) ---- ---------- 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 and 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% - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------- SECURITY EQUITY FUND (CLASS A) - ---------------------------------------------------------------------------------- FISCAL YEAR ENDED SEPTEMBER 30 ------------------------------------------------ 2000 1999(b) 1998(b) 1997(b) 1996(b) ---- ------- ------- ------- ------- PER SHARE DATA Net asset value beginning of period............. $ 8.86 $ 9.09 $ 7.54 $ 6.55 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)...... 0.02 0.04 0.04 0.05 Net gain (loss) on securities (realized and unrealized)....... 1.80 0.56 2.20 1.48 ----- ----- ----- ----- Total from investment operations.. 1.82 0.60 2.24 1.53 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) ----- ----- ----- ----- Total distributions............... (0.72) (0.83) (0.69) (0.54) ----- ----- ----- ----- Net asset value end of period..... $ 9.96 $ 8.86 $ 9.09 $ 7.54 ===== ===== ===== ===== Total return (a).................. 20.66% 7.38% 32.08% 24.90% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands).............. $917,179 $773,606 $757,520 $575,680 Ratio of expenses to average net assets.............. 1.02% 1.02% 1.03% 1.04% Ratio of net investment income (loss) to average net assets.... 0.19% 0.39% 0.46% 0.75% Portfolio turnover rate........... 36% 47% 66% 64% - ----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- SECURITY EQUITY FUND (CLASS B) - -------------------------------------------------------------------------------- FISCAL YEAR ENDED SEPTEMBER 30 ---------------------------------------------- 2000 1999(b) 1998(b) 1997(b) 1996(b) ---- ------- ------- ------- ------- PER SHARE DATA Net asset value beginning of period............. $ 8.52 $ 8.82 $ 7.36 $ 6.43 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)...... (0.08) (0.05) (0.04) (0.02) Net gain (loss) on securities (realized and unrealized)....... 1.71 0.55 2.15 1.45 ----- ----- ----- ----- Total from investment operations.. 1.63 0.50 2.11 1.43 LESS DISTRIBUTIONS: Dividends (from net investment income).............. --- --- --- (0.02) Distributions (from realized gains)........... (0.68) (0.80) (0.65) (0.48) ----- ----- ----- ----- Total distributions............... (0.68) (0.80) (0.65) (0.50) ----- ----- ----- ----- Net asset value end of period..... $ 9.47 $ 8.52 $ 8.82 $ 7.36 ===== ===== ===== ===== Total return (a).................. 19.23% 6.38% 30.85% 23.57% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands).............. $159,872 $112,978 $89,336 $38,822 Ratio of expenses to average net assets.............. 2.02% 2.02% 2.03% 2.04% Ratio of net investment income (loss) to average net assets.... (0.82)% (0.61)% (0.54)% (0.25)% Portfolio turnover rate........... 36% 47% 66% 64% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY EQUITY FUND (CLASS C) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------- 2000 1999(b)(f) ---- ---------- 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 and 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% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY GLOBAL FUND (CLASS A) - -------------------------------------------------------------------------------- FISCAL YEAR ENDED SEPTEMBER 30 -------------------------------------------- 2000 1999(b) 1998(b) 1997(b) 1996(b) ---- ------- ------- ------- ------- PER SHARE DATA Net asset value beginning of period............. $11.23 $13.56 $12.42 $10.94 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)...... 0.01 0.02 0.01 0.01 Net gain on securities (realized and unrealized)....... 3.71 (1.19) 2.29 1.87 ----- ----- ----- ----- Total from investment operations.. 3.72 (1.17) 2.30 1.88 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) ----- ----- ----- ----- Total distributions............... (0.96) (1.16) (1.16) (0.40) ----- ----- ----- ----- Net asset value end of period..... $13.99 $11.23 $13.56 $12.42 ===== ===== ===== ===== Total return (a).................. 34.39% (8.47)% 20.22% 17.73% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands).............. $28,292 $18,941 $24,193 $19,644 Ratio of expenses to average net assets.............. 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% Portfolio turnover rate........... 141% 122% 132% 142% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY GLOBAL FUND (CLASS B) - -------------------------------------------------------------------------------- FISCAL YEAR ENDED SEPTEMBER 30 -------------------------------------------- 2000 1999(b) 1998(b) 1997(b) 1996(b) ---- ------- ------- ------- ------- PER SHARE DATA Net asset value beginning of period............. $10.89 $13.22 $12.18 $10.74 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)...... (0.11) (0.10) (0.11) (0.10) Net gain on securities (realized and unrealized)....... 3.58 (1.16) 2.24 1.84 ----- ----- ----- ----- Total from investment operations.. 3.47 (1.26) 2.13 1.74 LESS DISTRIBUTIONS: Dividends (from net investment income).............. --- --- (0.31) (0.14) Distributions (from realized gains)........... (0.91) (1.07) (0.78) (0.16) ----- ----- ----- ----- Total distributions............... (0.91) (1.07) (1.09) (0.30) ----- ----- ----- ----- Net asset value end of period..... $13.45 $10.89 $13.22 $12.18 ===== ===== ===== ===== Total return (a).................. 33.04% (9.43)% 19.01% 16.57% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands).............. $20,591 $12,619 $13,061 $7,285 Ratio of expenses to average net assets.............. 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)% Portfolio turnover rate........... 141% 122% 132% 142% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY GLOBAL FUND (CLASS C) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------- 2000 1999(b)(f) ---- ---------- 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 and 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% - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------ SECURITY TOTAL RETURN FUND (CLASS A) - ------------------------------------------------------------------------------------------ FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------------------------------- 2000 1999(b)(d) 1998(b)(d) 1997(b)(d) 1996(b)(d) ---- ---------- ---------- ---------- ---------- PER SHARE DATA Net asset value beginning of period............. $10.73 $12.58 $11.06 $10.54 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)...... (0.03) 0.08 0.17 0.25 Net gain (loss) on securities (realized and unrealized)....... 1.90 (0.98) 1.86 0.77 ----- ----- ----- ----- Total from investment operations.. 1.87 (0.90) 2.03 1.02 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 ===== ===== ===== ===== Total return (a).................. 17.84% (7.19)% 19.00% 10.01% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands).............. $3,587 $3,294 $3,906 $2,449 Ratio of expenses to average net assets.............. 2.00% 2.00% 1.68% 2.00% Ratio of net investment income (loss) to average net assets.... (0.29)% 0.65% 1.52% 2.32% Portfolio turnover rate........... 121% 45% 79% 75% - ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------ SECURITY TOTAL RETURN FUND (CLASS B) - ------------------------------------------------------------------------------------------ FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------------------------------- 2000 1999(b)(d) 1998(b)(d) 1997(b)(d) 1996(b)(d) ---- ---------- ---------- ---------- ---------- PER SHARE DATA Net asset value beginning of period............. $10.62 $12.45 $10.97 $10.50 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)...... (0.14) (0.03) 0.07 0.14 Net gain (loss) on securities (realized and unrealized)....... 1.88 (0.96) 1.84 0.77 ----- ----- ----- ----- Total from investment operations.. 1.74 (0.99) 1.91 0.91 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 ===== ===== ===== ===== Total return (a).................. 16.68% (7.99)% 17.95% 8.97% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands).............. $3,652 $3,304 $3,851 $2,781 Ratio of expenses to average net assets ............. 2.94% 2.94% 2.58% 3.00% Ratio of net investment income (loss) to average net assets.... (1.23)% (0.29)% 0.61% 1.32% Portfolio turnover rate........... 121% 45% 79% 75% - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- SECURITY TOTAL RETURN FUND (CLASS C) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------- 2000 1999(b)(d)(f) ------------------ 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 and 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% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY MID CAP VALUE FUND (CLASS A) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 ------------------------------------------- 2000 1999(b) 1998(b)(d) 1997(b)(c)(d) ---- ------- ---------- ------------- 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 and 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% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY MID CAP VALUE FUND (CLASS B) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------------------- 2000 1999(b) 1998(b)(d) 1997(b)(c)(d) ---- ------- ---------- ------------- 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 and 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% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY MID CAP VALUE FUND (CLASS C) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------- 2000 1999(b)(f) ---- ---------- 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 and 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% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY SMALL CAP GROWTH FUND (CLASS A) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 --------------------------------- 2000 1999(b)(d) 1998(b)(d)(e) ---- ---------- ------------- 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 and 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% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY SMALL CAP GROWTH FUND (CLASS B) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 --------------------------------- 2000 1999(b)(d) 1998(b)(d)(e) ---- ---------- ------------- 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 and 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% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY SMALL CAP GROWTH FUND (CLASS C) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------- 2000 1999(b)(d)(f) ---- ------------- 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 and 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 -------------------------------- 2000 1999(b)(g) ---- ---------- 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 and 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 -------------------------------- 2000 1999(b)(g) ---- ---------- 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 and 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 -------------------------------- 2000 1999(b)(f)(g) ---- ------------- 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 and 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 -------------------------------- 2000 1999(b)(d)(g) ---- ------------- 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 and 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 -------------------------------- 2000 1999(b)(d)(g) ---- ------------- 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 and 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 -------------------------------- 2000 1999(b)(d)(f)(g) ---- ---------------- 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 and 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 Net 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 -------------------------------- 2000 1999(b)(g) ---- ---------- 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 and 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 -------------------------------- 2000 1999(b)(g) ---- ---------- 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 and 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 -------------------------------- 2000 1999(b)(f)(g) ---- ------------- 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 and 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% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY ULTRA FUND (CLASS A) - -------------------------------------------------------------------------------- FISCAL YEAR ENDED SEPTEMBER 30 --------------------------------------------- 2000 1999(b) 1998(b) 1997(b) 1996(b) ---- ------- ------- ------- ------- PER SHARE DATA Net asset value beginning of period............. $ 7.65 $ 9.24 $ 8.25 $ 8.20 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)...... (0.06) (0.06) (0.08) (0.05) Net gain (loss) on securities (realized and unrealized)....... 3.51 (1.06) 1.65 1.10 ----- ----- ----- ----- Total from investment operations.. 3.45 (1.12) 1.57 1.05 LESS DISTRIBUTIONS: Dividends (from net investment income).............. --- --- --- --- Distributions (from realized gains)........... (1.91) (0.47) (0.58) (1.00) ----- ----- ----- ----- Total distributions............... (1.91) (0.47) (0.58) (1.00) ----- ----- ----- ----- Net asset value end of period..... $ 9.19 $ 7.65 $ 9.24 $ 8.25 ===== ===== ===== ===== Total return (a).................. 50.91% (12.45)% 20.57% 15.36% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands).............. $96,238 $67,554 $84,504 $74,230 Ratio of expenses to average net assets.............. 1.21% 1.23% 1.71% 1.31% Ratio of net investment income (loss) to average net assets.... (0.77)% (0.64)% (1.01)% (0.61)% Portfolio turnover rate........... 54% 116% 68% 161% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY ULTRA FUND (CLASS B) - -------------------------------------------------------------------------------- FISCAL YEAR ENDED SEPTEMBER 30 --------------------------------------------- 2000 1999(b) 1998(b) 1997(b) 1996(b) ---- ------- ------- ------- ------- PER SHARE DATA Net asset value beginning of period............. $ 7.28 $ 8.90 $ 8.03 $ 8.11 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)...... (0.14) (0.14) (0.15) (0.13) Net gain (loss) on securities (realized and unrealized)....... 3.31 (1.01) 1.60 1.05 ----- ----- ----- ----- Total from investment operations.. 3.17 (1.15) 1.45 0.92 LESS DISTRIBUTIONS: Dividends (from net investment income).............. --- --- --- --- Distributions (from realized gains)........... (1.91) (0.47) (0.58) (1.00) ----- ----- ----- ----- Total distributions............... (1.91) (0.47) (0.58) (1.00) ----- ----- ----- ----- Net asset value end of period..... $ 8.54 $ 7.28 $ 8.90 $ 8.03 ===== ===== ===== ===== Total return (a).................. 49.39% (13.30)% 19.58% 13.81% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands).............. $7,818 $5,610 $5,964 $2,698 Ratio of expenses to average net assets.............. 2.21% 2.23% 2.71% 2.31% Ratio of net investment income (loss) to average net assets.... (1.77)% (1.64)% (2.01)% (1.61)% Portfolio turnover rate........... 54% 116% 68% 161% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITY ULTRA FUND (CLASS C) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------- 2000 1999(b)(f) ---- ---------- 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 and 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: --------------------------------------------------------------------------- 1995 1996 1997 ---------------- ---------------- ---------------- CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B Total Return Fund 3.60% 4.70% 3.10% 3.90% 2.40% 3.30% Mid Cap Value Fund --- --- --- --- 1.90% 2.80% Small Cap Growth Fund --- --- --- --- --- --- International Fund --- --- --- --- --- --- --------------------------------------------------------------------------- ------------------------------------------------------------------- 1998 1999 ---------------- ------------------------- CLASS A CLASS B CLASS A CLASS B CLASS C Total Return Fund 2.50% 3.40% 2.29% 3.23% 3.23% Mid Cap Value Fund 1.51% 2.59% --- --- --- Small Cap Growth Fund 2.40% 3.38% 1.49% 2.94% 2.47% International Fund --- --- 4.69% 5.37% 4.97% ------------------------------------------------------------------- (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) Class "C" Shares were initially offered for sale on January 29, 1999. Percentage amounts for the period, except total return, have been annualized. (g) 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. 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 any of the above provisions. 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: publicinfo@sec.gov 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 www.securitybenefit.com [SDI LOGO] SECURITY DISTRIBUTORS, INC. A Member of The Security Benefit Group of Companies 700 SW Harrison St., Topeka, Kansas 66636-0001 SECURITY FUNDS PROSPECTUS FEBRUARY 1, 2001 * Security Social Awareness Fund ------------------------------------------------ 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. ------------------------------------------------ TABLE OF CONTENTS ================================================================================ OBJECTIVE................................................................... 2 PRINCIPAL INVESTMENT STRATEGIES............................................. 2 MAIN RISKS.................................................................. 3 Market Risk............................................................... 3 Social Investing.......................................................... 3 Value Stocks.............................................................. 4 Growth Stocks............................................................. 4 Additional Information.................................................... 4 PAST PERFORMANCE............................................................ 4 FEES AND EXPENSES OF THE FUND............................................... 6 INVESTMENT MANAGER.......................................................... 7 Management Fees........................................................... 7 Portfolio Managers........................................................ 8 BUYING SHARES............................................................... 8 Class A Shares............................................................ 8 Class B Shares............................................................ 8 Class B Distribution Plan................................................. 9 Class C Shares............................................................ 9 Class C Distribution Plan................................................. 9 Class S Shares............................................................ 10 Class S Distribution Plan................................................. 10 Brokerage Enhancement Plan................................................ 10 Waiver of Deferred Sales Charge........................................... 11 Confirmations and Statements.............................................. 11 SELLING SHARES.............................................................. 11 By Mail................................................................... 12 By Telephone.............................................................. 12 By Broker................................................................. 13 Payment of Redemption Proceeds............................................ 13 DIVIDENDS AND TAXES......................................................... 13 Tax on Distributions...................................................... 13 Taxes on Sales or Exchanges............................................... 14 Backup Withholding........................................................ 14 DETERMINATION OF NET ASSET VALUE............................................ 14 SHAREHOLDER SERVICES........................................................ 14 Accumulation Plan......................................................... 14 Systematic Withdrawal Program............................................. 15 Exchange Privilege........................................................ 15 Retirement Plans.......................................................... 17 GENERAL INFORMATION......................................................... 17 Shareholder Inquiries..................................................... 17 INVESTMENT POLICIES AND MANAGEMENT PRACTICES................................ 17 Foreign Securities........................................................ 18 Smaller Companies......................................................... 18 Convertible Securities and Warrants....................................... 18 Restricted Securities..................................................... 18 Cash Reserves............................................................. 18 Borrowing................................................................. 19 Futures and Options....................................................... 19 When-Issued Securities and Forward Commitment Contracts................... 19 FINANCIAL HIGHLIGHTS........................................................ 19 APPENDIX A - REDUCED SALES CHARGES.......................................... 23 Class A Shares............................................................ 23 Rights of Accumulation.................................................... 23 Statement of Intention.................................................... 23 Reinstatement Privilege................................................... 23 OBJECTIVE Described below is the investment objective for Security Social Awareness Fund. The Fund's Board of Directors may change its investment objective without shareholder approval. As with any investment, there can be no guarantee the Fund will achieve its investment objective. The Security Social Awareness Fund seeks capital appreciation. PRINCIPAL INVESTMENT STRATEGIES The Fund pursues its objective by investing, under normal circumstances, in a well-diversified portfolio of equity securities that the Investment Manager, Security Management Company, LLC, believes have above-average earnings potential and which meet certain established social criteria. Under normal circumstances the Fund will invest all of its assets in issuers that meet its social criteria and that offer investment potential. The Fund also may invest in companies that are included in the Domini 400 Social Index(SM), which companies will be deemed to comply with Fund's social criteria. - -------------------------------------------------------------------------------- The DOMINI 400 SOCIAL INDEX(SM) (DSI) is a market capitalization-weighted common stock index. It monitors the performance of 400 U.S. corporations that pass multiple, broad-based social screens. The DSI 400 consists of approximately 250 companies included in the Standard & Poor's 500 Index, approximately 100 additional large companies not included in the S&P but providing industry representation, and approximately 50 additional companies with particularly strong social characteristics. The DSI is maintained by Kinder, Lydenberg, Domini & Co., Inc. - -------------------------------------------------------------------------------- The Investment Manager uses a "bottom-up" approach when selecting growth-oriented and value-oriented stocks. The Fund typically invests in the common stock of companies whose total market value is $10 billion or greater at the time of purchase. - -------------------------------------------------------------------------------- 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. GROWTH-ORIENTED STOCKS are stocks of established companies that typically have a record of consistent growth. VALUE-ORIENTED STOCKS are stocks of companies that are believed to be undervalued in terms of price or other financial measurements and that have above average growth potential. - -------------------------------------------------------------------------------- After identifying potential investments, the Investment Manager determines if the securities meet the Fund's established social criteria. The Fund does not invest in securities of companies that engage in the production of: * Nuclear energy * Alcoholic beverages * Tobacco products Additionally, the Fund does not invest in companies that significantly engage in: * The manufacture of weapons * Practices that have a detrimental effect on the environment * The gambling industry The Fund seeks out companies that: * Contribute substantially to the communities in which they operate * Demonstrate a positive record on employment relations * Demonstrate substantial progress in the promotion of women and minorities or in the implementation of benefit policies that support working parents * Take notably positive steps in addressing environmental challenges The Investment Manager continues to evaluate an issuer's activities to determine whether it engages in any practices prohibited by the Fund's social criteria. If the Investment Manager determines that a security held by the Fund does not comply with its social criteria, the security is sold within a reasonable time. Under adverse market conditions, the Fund could invest some or all of its assets in cash and 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 - -------------------------------------------------------------------------------- An investment in the Fund 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 Fund will go up and down, which means investors could lose money. - -------------------------------------------------------------------------------- MARKET RISK -- While equity securities 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. SOCIAL INVESTING -- Investment in companies that must meet the Fund's established social criteria may present additional risks because it will limit the availability of investment opportunities compared to those of similar funds which do not impose such restrictions on investment. In addition, if the Investment Manager determines that a security held by the Fund does not comply with its social criteria, the Fund must sell the security at a time when it may be disadvantageous to do so. 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 Fund's investments in value stocks may limit downside risk over time, the 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. ADDITIONAL INFORMATION -- For more information about the Fund's 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 chart and table on the following page provide some indication of the risks of investing in the Fund by showing changes in the Fund's performance from year to year and by showing how the Fund's average annual total returns have compared to those of a broad measure of market performance. In addition, the table compares the Fund to a narrower index that more closely mirrors the Fund. As with all mutual funds, past performance is not a prediction of future results. The bar chart does not reflect the sales charge applicable to Class A shares, which if reflected, would lower the returns shown. Average annual total returns for the 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. The average annual total returns also assume that Class B and Class C shareholders redeem all their shares at the end of the period indicated. Performance information for Class S shares is not included as that share class has less than one year of operating history. ================================================================================ SECURITY SOCIAL AWARENESS FUND - CLASS A ================================================================================ [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 1997 1998 1999 2000 ---- ---- ---- ---- 22.3% 30.4% 15.5% --------------------------------------------------------------- HIGHEST AND LOWEST RETURNS (QUARTERLY 1997-2000) --------------------------------------------------------------- QUARTER ENDED Highest 23.50% December 31, 1998 Lowest -8.59% September 30, 1998 --------------------------------------------------------------- --------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 2000) --------------------------------------------------------------- PAST LIFE OF FUND 1 YEAR (SINCE 11/4/96) Class A (at NAV)(1) Class A 8.87% 19.10% Class B 9.27% 19.40% Class C _____% _____%(2) S&P 500 21.02% 28.07%(3) Domini Social Index 24.49% 32.60%(3) --------------------------------------------------------------- 1 Does not reflect deduction of the maximum front end sales charge of 5.75%. 2 For the period beginning January 29, 1999 (date of inception) to December 31, 2000. 3 Index performance information is only available to the Fund at the beginning of each month. The performance numbers above for the S&P 500 and the Domini Social Index are for the period November 1, 1996 to December 31, 2000. The S&P 500 and the Domini Social Index performance for the period January 1, 1999 to December 31, 2000 were ______% and ______% respectively. --------------------------------------------------------------- FEES AND EXPENSES OF THE FUND THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD SHARES OF THE FUND. - -------------------------------------------------------------------------------- SHAREHOLDER FEES (fees paid directly from your investment) - -------------------------------------------------------------------------------- CLASS A CLASS B CLASS C CLASS S SHARES SHARES(1) SHARES SHARES Maximum Sales Charge Imposed on Purchases (as a percentage 5.75% None None None of offering price) Maximum Deferred Sales Charge (as a percentage of original None(2) 5%(3) 1%(4) 6%(5) purchase price or redemption proceeds, whichever is lower) - -------------------------------------------------------------------------------- 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. 5. 6% during the first year, decreasing to 0% in the eighth and following years. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - -------------------------------------------------------------------------------- MANAGEMENT DISTRIBUTION OTHER TOTAL ANNUAL FUND FEES (12B-1) FEES(1) EXPENSES OPERATING EXPENSES - -------------------------------------------------------------------------------- Class A 1.00% None 0.42% 1.42% Class B 1.00% 1.00% 0.51% 2.51% Class C 1.00% 1.00% 0.66% 2.66% Class S 1.00% 1.00% 0.66%(2) 2.66% - -------------------------------------------------------------------------------- 1 The Funds have also adopted a Brokerage Enhancement Plan under Rule 12b-1, but have not yet implemented the Plan. If the Brokerage Enhancement Plan is implemented, it is not expected that the amounts received by the Fund's distributor would exceed 0.05% of any Fund's average net assets. 2 "Other Expenses" are based on estimates for the current fiscal year. - -------------------------------------------------------------------------------- EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated. The Example also assumes that your investment has a 5% return each year and that the Fund's 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. -------------------------------------------------------- CLASS A CLASS B CLASS C CLASS S -------------------------------------------------------- 1 Year $ 712 $ 755 $ 370 3 Years 1,001 1,085 829 5 Years 1,312 1,540 1,415 10 Years 2,190 2,588 3,003 -------------------------------------------------------- You would pay the following expenses if you did not redeem your shares. ------------------------------------------------------- CLASS A CLASS B CLASS C CLASS S ------------------------------------------------------- 1 Year $ 712 $ 255 $ 270 3 Years 1,001 785 829 5 Years 1,312 1,340 1,415 10 Years 2,190 2,588 3,003 ------------------------------------------------------- INVESTMENT MANAGER Security Management Company, LLC (the "Investment Manager"), 700 SW Harrison Street, Topeka, Kansas 66636, is the Fund's investment manager. On September 30, 2000, the aggregate assets of all of the Funds under the investment management of the Investment Manager were approximately $5.7 billion. Although the Fund has no current plans to use the services of a sub-advisor, it may wish to do so in the future. Accordingly, the Investment Manager and the Fund 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 Fund to operate more efficiently and with greater flexibility. Should the Fund use the service of a sub-advisor in the future, the Investment Manager would anticipate providing the following oversight and evaluation services to the Fund: * performing initial due diligence on prospective sub-advisors for the Fund * monitoring the performance of the sub-advisor(s) * communicating performance expectations to the sub-advisor(s) * 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 it would recommend frequent changes of sub-advisors. MANAGEMENT FEES -- The investment management fees paid by the Fund during the last fiscal year were equal to 1.00% of the Fund's average net assets. The Investment Manager may waive some or all of its management fee to limit the total operating expenses of the Fund to a specified level. The Investment Manager also may reimburse expenses of the Fund from time to time to help it maintain competitive expense ratios. These arrangements are voluntary and may be terminated at any time. PORTFOLIO MANAGER -- CINDY SHIELDS, Second Vice President and Portfolio Manager of the Investment Manager, has managed the Social Awareness Fund since its inception in 1996. She joined the Investment Manager in 1989. Ms. Shields graduated from Washburn University with a bachelor of business administration degree, majoring in finance and economics. She is a Chartered Financial Analyst with 11 years of investment experience. BUYING SHARES Shares of the Fund are available through broker/dealers, banks, and other financial intermediaries that have an agreement with the Fund's Distributor, Security Distributors, Inc. A broker/dealer may impose a transaction charge on the purchase of fund shares. Fund shares purchased directly from the Fund to not contain a transaction charge but may contain a front-end sales charge as noted under "Class A shares". There are four different ways to buy shares of the Fund--Class A shares, Class B shares, Class C shares or Class S 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 Fund reserves 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 the Fund's net asset value per share (NAV), plus the sales charge, set forth in the following table. The NAV, plus the sales charge is the "offering price." The 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 AMOUNT OF ORDER OF OFFERING PRICE NET AMOUNT 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 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. The 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 DEFERRED SINCE 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 11. CLASS B DISTRIBUTION PLAN -- The Fund has adopted a Class B Distribution Plan that allows the Fund 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. 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 the Fund's NAV next calculated after the order is accepted by the Fund. The 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," page 11. CLASS C DISTRIBUTION PLAN -- The Fund has adopted a Class C Distribution Plan that allows the Fund 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. CLASS S SHARES -- Class S shares are not subject to a sales charge at the time of purchase. An order for Class S shares will be priced at the Fund's NAV next calculated after the order is accepted by the Fund. The Fund's NAV is generally calculated as of the close of trading on every day the New York Stock Exchange is open. Class S shares are subject to a deferred sales charge if redeemed within seven 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: -------------------------------------------- YEAR SINCE PURCHASE CONTINGENT DEFERRED PAYMENT WAS MADE SALES CHARGE -------------------------------------------- First 6% Second 6% Third 5% Fourth 4% Fifth 3% Sixth 2% Seventh 1% Eighth and Following 0% -------------------------------------------- The Distributor will waive the deferred sales charge under certain circumstances. See "Waiver of the Deferred Sales Charge," page 11. CLASS S DISTRIBUTION PLAN -- The Fund has adopted a Class S Distribution Plan that allows the Fund to pay distribution fees to the Distributor. The Distributor uses the fees to finance activities related to the sale of Class S shares and services to shareholders. The distribution fee is equal to 1.00% of the average daily net assets of the Fund's Class S 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 Fund has adopted, in accordance with the provisions of Rule 12b-1 under the Investment Company Act of 1940, a Brokerage Enhancement Plan (the "Plan"). However, to date, the Plan has not been implemented. If implemented, the Plan would use available brokerage commissions to promote the sale and distribution of Fund shares. Under the Plan, the Fund 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) or 401(k) 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) * Upon the financial hardship (as defined in regulations under the Code) of a participant in a plan * Upon termination of employment of a participant in a plan * Upon any other permissible withdrawal under the terms of the plan CONFIRMATIONS AND STATEMENTS -- The Fund 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 Fund. * 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 Fund requires 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 Fund 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 the 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, distributions from the Fund are taxable as follows: - -------------------------------------------------------------------------------- TAX RATE FOR 28% TYPE OF DISTRIBUTION TAX RATE FOR 15% BRACKET BRACKET OR ABOVE - -------------------------------------------------------------------------------- Income dividends Ordinary Income rate Ordinary Income rate Short-term capital gains Ordinary Income rate Ordinary Income rate Long-term capital gains 10% 20% - -------------------------------------------------------------------------------- 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 Fund expects that its 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 the 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. The 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 the Fund's Board of Directors. SHAREHOLDER SERVICES ACCUMULATION PLAN -- An investor may choose to invest in the Fund 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 Fund. 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, Class C and Class S 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, Class C or Class S 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 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, Class C or Class S shares requested while Free Systematic Withdrawals are being made will be calculated as described under "Waiver of Deferred Sales Charge," page 11. A Systematic Withdrawal form may be obtained from the Fund. EXCHANGE PRIVILEGE -- Shareholders who own shares of the Fund may exchange those shares for shares of the other mutual funds distributed by the Distributor, which currently include Security Equity, Ultra, Growth and Income, Total Return, Global, Mid Cap Value, Small Cap Growth, Enhanced Index, International, Select 25, Large Cap Growth, Technology, Diversified Income and High Yield Funds. Shareholders who hold their shares in a tax-qualified retirement plan may also exchange shares of the Fund for shares of Security Capital Preservation Fund, but may not exchange shares of the Fund for shares of Security Municipal Bond Fund. Shareholders, except those who have purchased through the following custodial accounts of the Investment Manager, 403(b)(7) accounts, SEPP accounts and SIMPLE Plans, may also exchange their shares for shares of Cash Fund. All exchanges are made at the relative net asset value of the funds on the date of the exchange. 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 Fund may be exchanged only for shares of the same class of another fund distributed by the Distributor or for shares of Security Cash Fund, if available. At present, Cash Fund does not offer Class B, C or S shares and Municipal Bond Fund does not offer Class C or S 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 that 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 purchase of the exchanged shares. 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. The terms of an employee-sponsored retirement plan may affect a shareholder's right to exchange shares as described above. Contact your plan sponsor or administrator to determine if all of the exchange options discussed above are available under your plan. 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 Fund 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, dollar cost averaging and asset rebalancing, may be changed or discontinued at any time by either the Investment Manager or the Fund upon 60 days' notice to shareholders. DOLLAR COST AVERAGING. Only for shareholders of a 403(b)(7) account sponsored by the Investment Manager and opened on or after June 5, 2000, a special exchange privilege is available. This privilege allows such shareholders to make periodic exchanges of shares from Capital Preservation Fund (held in non-certificate form) to one or more of the funds available under the exchange privilege as described above. Such periodic exchanges in which securities are purchased at regular intervals are known as "dollar cost averaging." With dollar cost averaging, the cost of the securities gets averaged over time and possibly over various market cycles. Dollar cost averaging does not guarantee profits, nor does it assure that you will not have losses. You may obtain a dollar cost averaging request form from the Investment Manager. You must designate on the form whether amounts are to be exchanged on the basis of a specific dollar amount or a specific number of shares. The Investment Manager will exchange shares as requested on the first business day of the month. The Investment Manager will make exchanges until your account value in the Capital Preservation Fund is depleted or until you instruct the Investment Manager to terminate dollar cost averaging. You may instruct the Investment Manager to terminate dollar cost averaging at any time by written request. ASSET REBALANCING. Only for shareholders of a 403(b)(7) account sponsored by the Investment Manager and opened on or after June 5, 2000, a special exchange privilege is available that allows shareholders to automatically exchange shares of the funds on a quarterly basis to maintain a particular percentage allocation among the funds. The available funds are those discussed above under the exchange privilege and shares of such funds must be held in non-certificate form. Your account value allocated to a fund will grow or decline in value at different rates during the selected period, and asset rebalancing will automatically reallocate your account value in the funds to the allocation you select on a quarterly basis. You may obtain an asset rebalancing request form from the Investment Manager. You must designate on the form the applicable funds and the percentage of account value to be maintained in each fund. Thereafter, the Investment Manager will exchange shares of the funds to maintain that allocation on the first business day of each calendar quarter. You may instruct the Investment Manager to terminate asset rebalancing at any time by written request. RETIREMENT PLANS -- The Fund has 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 Fund's Statement of Additional Information. GENERAL INFORMATION SHAREHOLDER INQUIRIES -- Shareholders who have questions concerning their account or wish to obtain additional information, may call the Fund (see back cover for address and telephone numbers), or contact their securities dealer. INVESTMENT POLICIES AND MANAGEMENT PRACTICES This section takes a detailed look at some of the types of securities the Fund may hold in its portfolio and the various kinds of management practices that may be used in the portfolio. The Fund's 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 Fund's 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 the 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 Manager of the Fund has considerable leeway in choosing investment strategies and selecting securities she believes will help the Fund achieve its objective. In seeking to meet its investment objective, the Fund may invest in any type of security or instrument whose investment characteristics are consistent with the Fund's investment program. The Fund is subject to certain investment policy limitations referred to as "fundamental policies." The fundamental policies cannot be changed without shareholder approval. Some of the more important fundamental policies are that the Fund will not: * with respect to 75% of its total assets, invest more than 5% of the value of its assets in any one issuer other than the U.S. Government or its instrumentalities * with respect to 75% of its total assets, purchase more than 10% of the outstanding voting securities of any one issuer * invest 25% or more of its total assets in any one industry. The following pages describe some of the investments which may be made by the Fund, as well as some of the management practices of the Funds. FOREIGN SECURITIES -- The Fund may invest in foreign securities denominated in U.S. dollars. Foreign investments increase a Fund's diversification and may enhance return, but they also involve some special risks, such as exposure to potentially adverse local political and economic developments; nationalization and exchange controls; potentially lower liquidity and higher volatility; and possible problems arising from accounting, disclosure, settlement and regulatory practices that differ from U.S. standards. These risks are heightened for investments in developing countries. SMALLER COMPANIES -- The Fund may invest in small- or medium-sized companies. These 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. CONVERTIBLE SECURITIES AND WARRANTS -- The Fund 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 -- The Fund may invest in restricted securities that are eligible for resale under Rule 144A of the Securities Act of 1933. These securities are sold directly to a small number of investors, usually institutions. Unlike public offerings, restricted securities are not registered with the SEC. Although restricted securities which are eligible for resale under Rule 144A may be readily sold to qualified buyers, there may not always be a market for them and their sale may involve substantial delays and additional costs. Some of the management practices of the Fund include: CASH RESERVES -- The Fund may establish and maintain reserves as the Investment Manager 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. Such reserves may include various types of money market instruments, certificates of deposit, bank demand accounts and repurchase agreements. BORROWING -- The Fund may borrow money from banks as a temporary measure for emergency purposes, to facilitate redemption requests, or for other purposes consistent with the Fund's investment objective and program. Such borrowings may be collateralized with Fund assets. To the extent that the 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. The 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 -- The Fund may utilize futures and 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. Futures and options contracts may be bought or sold for any number of reasons, including: to hedge the Fund's portfolio, to increase returns, to maintain exposure to the equity markets to manage exposure to changes in interest rates and bond prices and in an effort to enhance income. Futures contracts and options may not always be successful hedges; their prices can be highly volatile. Using them could lower the Fund's total return, and the potential loss from the use of futures can exceed the Fund's initial investment in such contracts. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENT CONTRACTS -- The Fund may purchase and sell securities on a "when issued," "forward commitment" or "delayed delivery" basis. The price of these 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 the 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. FINANCIAL HIGHLIGHTS The financial highlights table is intended to help you understand the Fund's financial performance for its Class A shares, Class B shares and Class C shares during the past five years or, the period since commencement of the Fund or share class. 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.
- ----------------------------------------------------------------------------------------- SECURITY SOCIAL AWARENESS FUND (CLASS A) - ----------------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------- 2000 1999(c) 1998(b)(c) 1997(b)(c)(d) ---- ------- ---------- ------------- PER SHARE DATA Net asset value beginning of period.... $19.37 $17.99 $15.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)........... (0.05) --- 0.08 Net gain (loss) on securities (realized and unrealized)...................... 5.09 1.42 2.91 ----- ----- ----- Total from investment operations....... 5.04 1.42 2.99 LESS DISTRIBUTIONS: Dividends (from net investment income). --- (0.04) --- Distributions (from realized gains).... (0.36) --- --- ----- ----- ----- Total distributions.................... (0.36) (0.04) --- ----- ----- ----- Net asset value end of period.......... $24.05 $19.37 $17.99 ===== ===== ===== Total return (a)....................... 26.12% 7.89% 19.93% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands)... $13,403 $7,619 $6,209 Ratio of expenses to average net assets 1.42% 1.22% 0.67% Ratio of net investment income (loss) to average net assets................ (0.22)% --- 0.57% Portfolio turnover rate................ 26% 41% 38% - -----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------- SECURITY SOCIAL AWARENESS FUND (CLASS B) - ----------------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 ---------------------------------------------- 2000 1999(c) 1998(b)(c) 1997(b)(c)(d) ---- ------- ---------- ------------- PER SHARE DATA Net asset value beginning of period.... $19.01 $17.81 $15.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)........... (0.30) (0.19) (0.08) Net gain (loss) on securities (realized and unrealized)...................... 5.00 1.39 2.89 ----- ----- ----- Total from investment operations....... 4.70 1.20 2.81 LESS DISTRIBUTIONS: Dividends (from net investment income). --- --- --- Distributions (from realized gains).... (0.36) --- --- ----- ----- ----- Total distributions.................... (0.36) --- --- ----- ----- ----- Net asset value end of period.......... $23.35 $19.01 $17.81 ===== ===== ===== Total return (a)....................... 24.81% 6.74% 18.73% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands)... $9,136 $5,245 $3,641 Ratio of expenses to average net assets 2.51% 2.20% 1.84% Ratio of net investment income (loss) to average net assets................ (1.30)% (0.98)% (0.60)% Portfolio turnover rate................ 26% 41% 38% - -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- SECURITY SOCIAL AWARENESS FUND (CLASS C) - -------------------------------------------------------------------------------- FISCAL PERIOD ENDED SEPTEMBER 30 -------------------------------- 2000 1999(c)(e) ---- ---------- PER SHARE DATA Net asset value beginning of period.... $24.47 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)........... (0.22) Net gain (loss) on securities (realized and unrealized)...................... (0.38) ----- Total from investment operations....... (0.60) LESS DISTRIBUTIONS: Dividends (from net investment income). --- Distributions (from realized gains).... --- ----- Total distributions.................... --- ----- Net asset value end of period.......... $23.87 ===== Total return (a)....................... (2.45)% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands)... $405 Ratio of expenses to average net assets 2.66% Ratio of net investment income (loss) to average net assets................ (1.46)% Portfolio turnover rate................ 33% - -------------------------------------------------------------------------------- (a) Total return information does not reflect deduction of any sales charge imposed at the time of purchase for Class A shares or upon redemption for Class B or Class C shares. (b) Fund expenses were reduced by the Investment Manager during the period, and expense ratios absent such reimbursement would have been as follows: --------------------------- 1997 1998 --------------------------- Class A 1.70% 1.51% Class B 2.80% 2.48% --------------------------- (c) Net investment income was computed using the average month-end shares outstanding throughout the period. (d) Social Awareness Fund was initially capitalized on November 1, 1996, with a net asset value of $15 per share. Percentage amounts for the period have been annualized, except for total return. (e) Class "C" Shares were initially offered for sale on January 29, 1999. Percentage amounts for the period, except total return, have been annualized. 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 Fund 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 the Fund, a Purchaser may combine all previous purchases of the Fund 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 Fund, 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 Fund, 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 Fund. REINSTATEMENT PRIVILEGE -- Shareholders who redeem their Class A shares of the Fund 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 per share 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 any of the above provisions. 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 Fund 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 Fund (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: publicinfo@sec.gov or by writing the Public Reference Section of the Commission, Washington, DC 20549-0201. - -------------------------------------------------------------------------------- ANNUAL/SEMI-ANNUAL REPORT -- Additional information about the Fund's investments is available in the Fund's annual and semi-annual reports to shareholders. In the Fund's annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. STATEMENT OF ADDITIONAL INFORMATION -- The Fund's Statement of Additional Information and the Fund's annual or semi-annual report 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 Fund's toll-free telephone number listed above. The Fund's Statement of Additional Information is incorporated into this prospectus by reference. The Fund's Investment Company Act file number is listed below: Security Equity Fund..... 811-1136 www.securitybenefit.com [SDI LOGO] Security Distributors, Inc. A Member of The Security Benefit Group of Companies 700 SW Harrison St., Topeka, Kansas 66636-0001 - -------------------------------------------------------------------------------- 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 February 1, 2001 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. STATEMENT OF ADDITIONAL INFORMATION FEBRUARY 1, 2001 RELATING TO THE PROSPECTUS DATED February 1, 2001, 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 State Street Bank and Trust Company 225 Franklin Boston, Massachusetts 02110 INDEPENDENT AUDITORS 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............................................. 20 Restricted Securities.................................................... 20 Real Estate Securities................................................... 21 Zero Coupon Securities................................................... 21 Foreign Investment Risks................................................. 21 Risks of Conversion to Euro.............................................. 22 Brady Bonds.............................................................. 22 Emerging Countries....................................................... 22 Political and Economic Risks............................................. 22 Religious and Ethnic Instability......................................... 23 Foreign Investment Restrictions.......................................... 23 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..................................................... 24 INVESTMENT POLICY LIMITATIONS............................................... 35 Fundamental Policies..................................................... 36 Operating Policies....................................................... 36 OFFICERS AND DIRECTORS...................................................... 37 REMUNERATION OF DIRECTORS AND OTHERS........................................ 38 PRINCIPAL HOLDERS OF SECURITIES............................................. 39 HOW TO PURCHASE SHARES...................................................... 40 Alternative Purchase Options............................................. 40 Class A Shares........................................................... 41 Security Equity Fund's Class A Distribution Plan......................... 41 Class B Shares........................................................... 42 Class B Distribution Plan................................................ 42 Class C Shares........................................................... 43 Class C Distribution Plan................................................ 43 Class S Shares........................................................... 43 Class S Distribution Plan................................................ 43 Calculation and Waiver of Contingent Deferred Sales Charges.............. 44 Arrangements With Broker-Dealers and Others.............................. 44 Purchases at Net Asset Value............................................. 45 Purchases for Employer-Sponsored Retirement Plans........................ 46 ACCUMULATION PLAN........................................................... 46 SYSTEMATIC WITHDRAWAL PROGRAM............................................... 47 INVESTMENT MANAGEMENT....................................................... 47 Portfolio Management..................................................... 52 Code of Ethics........................................................... 53 DISTRIBUTOR................................................................. 54 ALLOCATION OF PORTFOLIO BROKERAGE........................................... 54 BROKERAGE ENHANCEMENT PLAN.................................................. 56 HOW NET ASSET VALUE IS DETERMINED........................................... 57 HOW TO REDEEM SHARES........................................................ 58 Telephone Redemptions.................................................... 59 HOW TO EXCHANGE SHARES...................................................... 59 Exchange by Telephone.................................................... 60 DIVIDENDS AND TAXES......................................................... 60 Passive Foreign Investment Companies..................................... 62 Options, Futures and Forward Contracts and Swap Agreements............... 63 Market Discount.......................................................... 63 Original Issue Discount.................................................. 63 Constructive Sales....................................................... 64 Foreign Taxation......................................................... 64 Foreign Currency Transactions............................................ 64 Other Taxes.............................................................. 64 ORGANIZATION................................................................ 64 CUSTODIAN, TRANSFER AGENT AND DIVIDEND-PAYING AGENT......................... 65 INDEPENDENT AUDITORS........................................................ 65 PERFORMANCE INFORMATION..................................................... 65 RETIREMENT PLANS............................................................ 67 INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) ...................................... 67 ROTH IRAS................................................................... 68 EDUCATION IRAS.............................................................. 68 SIMPLE IRAS................................................................. 68 PENSION AND PROFIT-SHARING PLANS............................................ 69 403(B) RETIREMENT PLANS..................................................... 69 SIMPLIFIED EMPLOYEE PENSION PLANS (SEPPS) .................................. 69 FINANCIAL STATEMENTS........................................................ 69 APPENDIX A.................................................................. 70 APPENDIX B.................................................................. 71 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 58.) 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 60.) 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, Class C and Class S Shares"). (See "How to Purchase Shares," page 40.) 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, Class C and Class S 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 47. 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, Class C and Class S distribution fees) will not exceed any expense limitation imposed by any state. See "Investment Management," page 47 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 service-related activities. Under Distribution Plans adopted with respect to the Class B shares, Class C shares and Class S 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, Class C shares and Class S shares, respectively, of the Funds to finance various distribution and service-related activities. (See "Class A Distribution Plan," page 41, "Class B Distribution Plan," page 42, "Class C Distribution Plan," page 43 and "Class S Distribution Plan," page 43.) 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"); (vii) zero coupon securities; and (viii) securities of other investment companies. 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 may invest in the high yield, high risk debt securities (commonly referred to as "junk bonds") described above, its share price and yield may 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 repurchase agreements, 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, OppenheimerFunds, 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; (iii) dollar denominated foreign securities; and (iv) securities of other investment companies. 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., and Social Investment Research Service. 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 with total market value of $10 billion or below at the time of purchase and which the Investment Manager believes are undervalued. The Mid Cap Value Fund may also invest in (i) preferred stocks; (ii) warrants; (iii) investment grade debt securities (or unrated securities of comparable quality); and (iv) securities of other investment companies. 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 developing 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 developing 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 total 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 and/or revenue 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); (iv) investment grade debt securities (or unrated securities of comparable quality) and securities of other investment companies. 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 $10 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 repurchase agreements or 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). A repurchase agreement is a contract under which a 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). Each of the Funds may enter into repurchase agreements with respect to any portfolio securities that it may acquire consistent with its investment policies and restrictions. The Funds may enter into repurchase agreements to meet anticipated redemptions or pending investment or reinvestment of Fund assets in portfolio securities. The Board of Directors of each Fund has delegated certain responsibilities in connection with repurchase agreements to the Investment Manager or Sub-Adviser. Those responsibilities include monitoring and evaluating a Fund's use of repurchase agreements, evaluating the creditworthiness of repurchase agreement counterparties and taking steps that are reasonably designed to ensure that a Fund's repurchase agreements are fully collateralized. Repurchase agreements 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. 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. 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 securities in emerging markets. Investing in securities in emerging countries may entail greater risks than investing in 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. For the purpose of Fundamental Policy (4) industries are determined by reference to the classifications of industries set forth in the Funds' semiannual and annual reports. 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* (64) - --------------------- (Birth Date: May 1, 1936) 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.** (54) - --------------------------- (Birth Date: December 14, 1946) 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** (61) - ----------------------- (Birth Date: August 20, 1939) 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.** (66) - -------------------------- (Birth Date: February 3, 1934) 5500 SW 7th Street, Topeka, Kansas 66606 POSITION HELD WITH THE FUND--Director PRINCIPAL OCCUPATIONS--Independent Investor, Morris Co. (personal investments). Former General Partner, Mark Morris Associates (Veterinary Research and Education). MAYNARD F. OLIVERIUS (57) - ------------------------- (Birth Date: December 18, 1943) 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* (47) - ---------------------- (Birth Date: February 21, 1953) 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 (52) - ----------------------- (Birth Date: March 10, 1948) 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 (39) - --------------- (Birth Date: June 5, 1961) 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 (37) - ---------------------- (Birth Date: November 3, 1963) 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 (33) - --------------------- (Birth Date: June 5, 1967) 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 (43) - -------------------- (Birth Date: December 28, 1957) 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 (35) - ---------------------------- (Birth Date: October 9, 1965) 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 47, 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, Class C and Class S 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 47, "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, 2000, and the aggregate compensation paid to each of the directors during calendar year 2000 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.
- -------------------------------------------------------------------------------------- TOTAL COMPENSATION AGGREGATE COMPENSATION ESTIMATED FROM THE ---------------------------------- ANNUAL SECURITY SECURITY SECURITY SECURITY BENEFITS FUND COMPLEX, NAME OF DIRECTOR GROWTH AND EQUITY ULTRA UPON INCLUDING OF THE FUND INCOME FUND FUND FUND RETIREMENT THE FUNDS - -------------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------------- **Mr. Worswick retired as a fund director February 1996. No deferred compensation accrued for Mr. Worswick as of September 30, 2000. Mr. Worswick received deferred compensation in the amount of $8,386 during the fiscal-year ended September 30, 2000. - --------------------------------------------------------------------------------------
The Investment Manager compensates its officers and directors who may also serve as officers or directors of the Funds. On December 18, 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 December 18, 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, Class C and Class S shares of Social Awareness Fund and 0% of the Class B, Class C and Class S 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 December 18, 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, Class C and Class S 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, Class C and Class S 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, Class C and Class S 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, 59.5% of the total outstanding Class C shares and 0% of the total outstanding Class S 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, 57.8% of the total outstanding Class C shares and 0% of the total outstanding Class S 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 December 18, 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 and Class S 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 December 18, 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 - ------------------------------------------------------------------------------ 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. 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 46.) 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 four 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. CLASS S SHARES - FLEXIBLE LOAD OPTION. Class S 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 seven years of the date of purchase. Class S shares do not convert to another class of shares after a specified number of years. 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, Class C or Class S 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 OF PERCENTAGE AMOUNT OF PURCHASE PERCENTAGE OF NET AMOUNT REALLOWABLE AT OFFERING PRICE OFFERING 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 Class B 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 Class C shares other than the distribution fee paid to the Distributor. CLASS S SHARES -- Class S 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 seven 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 6% Second 6% Third 5% Fourth 4% Fifth 3% Sixth 2% Seventh 1% Eighth and Following 0% -------------------------------------------- CLASS S DISTRIBUTION PLAN -- Each Fund bears some of the costs of selling its Class S shares under a Distribution Plan adopted with respect to its Class S shares ("Class S 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 S shares. Amounts paid by the Funds are currently used to pay dealers and other firms that make Class S 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, (2) a service fee for account maintenance and personal service to shareholders payable calendar quarterly beginning in the second year in an amount equal to .25% annually of the average daily net asset value of Class S shares sold by such dealers remaining outstanding on the books of the Funds, and (3) a trail commission payable calendar quarterly beginning in the seventh year, and for each year thereafter, in an amount equal to .75% annually of the average daily net asset value of Class S shares sold by such dealers remaining outstanding on the books of the Funds. Rules of the NASD limit the aggregate amount that a Fund may pay annually in distribution costs for the sale of its Class S shares to 6.25% of gross sales of Class S 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 S 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 S 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 S 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 S shares. In the event the Class S Distribution Plan is terminated by the Class S 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 Class S 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, Class C shares and Class S 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 shares held for more than five years or Class S shares held for more than seven 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, Class C or Class S shares of the Funds pursuant to a systematic withdrawal program. (See "Systematic Withdrawal Program," page 47.) ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS -- The Investment Manager or Distributor, from time to time, will 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. 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, Class C or Class S 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. In addition, the Investment Manager or Distributor may sponsor training or education meetings at various locations. In connection with such meetings it is expected that the Investment Manager or Distributor would pay the travel, lodging and other expenses of representatives of the dealers in attendance. Certain of the foregoing arrangements may be financed by payments to the Distributor under a Rule 12b-1 Distribution Plan. These arrangements 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. 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, Class C and Class S shares during that year. The applicable marketing allowance factors are set forth in the accompanying table. --------------------------------------------------------------- APPLICABLE MARKETING AGGREGATE NEW SALES ALLOWANCE 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 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. - -------------------------------------------------------------------------------- The Distributor may also enter into arrangements with dealers whereby it agrees to "annualize" the first-year commission expected to be paid on the purchase of Fund shares by retirement plans receiving plan recordkeeping services from Security Financial Resources, Inc. Such arrangements will typically provide for an up-front payment by the Distributor to the dealer of a specified percentage of the first-year's expected commissions attributable to a particular retirement plan. In some circumstances, a retirement plan that was not previously receiving plan recordkeeping services from Security Financial Resources, Inc. may transfer its assets in an arrangement where it does receive such services. In such circumstances, the Distributor may pay the dealer a commission on the transferred assets that is different from the commission otherwise set forth in the table above, but typically not in excess of 1.25% of the transferred amount. 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, Class C or Class S 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, Class C or Class S 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, Class C and Class S shares requested while Free Systematic Withdrawals are being made will be calculated as described under "Calculation and Waiver of Contingent Deferred Sales Charges," page 44. 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 September 30, 2000, manages over $47 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 September 30, 2000, 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, 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 $266 billion in assets on behalf of investment companies, employee benefit plans, endowments, foundations and other institutions. 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, Class C and Class S 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, Class C and Class S 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, Class C and Class S 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, 2000, 1999 and 1998 the Funds paid the following amounts to the Investment Manager for its services:
- ----------------------------------------------------------------------------------------------------------------- TRANSFER INVESTMENT INVESTMENT AGENCY ADVISORY ADVISORY ADMINISTRATIVE SERVICE FEES 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 C(4) - ----------------------------------------------------------------------------------------------------------------- Growth and 2000 $ $ $ $ Income Fund 1999 1,101,276 0 0 0 1.22% 2.22% 2.22% 1998 1,168,375 0 0 0 1.21% 2.21% - ----------------------------------------------------------------------------------------------------------------- Equity Fund 2000 1999 11,048,439 0 0 0 1.02% 2.02% 2.02% 1998 9,261,209 0 0 0 1.02% 2.02% - ----------------------------------------------------------------------------------------------------------------- Global Fund 2000 1999 835,806 0 0 0 2.00% 3.00% 3.00% 1998 670,488 0 0 0 2.00% 3.00% - ----------------------------------------------------------------------------------------------------------------- Total 2000 Return 1999(1) 67,956 0 49,157 10,768 2.00% 2.94% 2.93% Fund 1998 72,662 36,703 63,270 12,372 2.00% 2.94% - ----------------------------------------------------------------------------------------------------------------- Social 2000 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% - ----------------------------------------------------------------------------------------------------------------- Mid Cap 2000 Value 1999 258,906 0 23,301 31,436 1.33% 2.37% 2.38% Fund 1998 144,005 35,151 19,523 12,984 1.27% 2.33% - ----------------------------------------------------------------------------------------------------------------- Small Cap 2000 Growth 1999 0 114,419 9,398 9,645 0.49% 1.94% 1.47% Fund 1998(2) 0 33,554 3,020 4,672 1.39% 2.38% - ----------------------------------------------------------------------------------------------------------------- Enhanced 2000 Index Fund 1999(3) 82,418 0 9,890 4,312 1.48% 2.20% 2.05% - ----------------------------------------------------------------------------------------------------------------- International 2000 Fune 1999(3) 44,906 0 21,837 1,425 2.50% 3.19% 2.78% - ----------------------------------------------------------------------------------------------------------------- Select 25 2000 Fund 1999(3) 95,115 0 11,414 16,830 1.48% 2.19% 2.07% - ----------------------------------------------------------------------------------------------------------------- Ultra 2000 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% - ----------------------------------------------------------------------------------------------------------------- 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 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. 3 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. 4 Class C shares were initially offered for sale on January 29, 1999. Percentage amounts for the period have been annualized. - -----------------------------------------------------------------------------------------------------------------
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: - -------------------------------------------------------------------------------- POSITION(S) WITH SECURITY NAME POSITION(S) WITH THE FUNDS MANAGEMENT COMPANY, LLC - -------------------------------------------------------------------------------- James R. President and Director President and Managing Schmank Member Representative - -------------------------------------------------------------------------------- John D. Chairman of the Board Senior Vice President and Cleland and Director Managing Member Representative - -------------------------------------------------------------------------------- Terry A. Vice President (Equity Fund Senior Vice President and Milberger and Growth and Income Fund) Senior Portfolio Manager - -------------------------------------------------------------------------------- Amy J. Lee Secretary Secretary - -------------------------------------------------------------------------------- Brenda M. Treasurer Assistant Vice President Harwood and Treasurer - -------------------------------------------------------------------------------- Cindy L. Vice President Second Vice President Shields (Equity Fund only) and Portfolio Manager - -------------------------------------------------------------------------------- Christopher D. Assistant Secretary Assistant Secretary Swickard - -------------------------------------------------------------------------------- James P. Vice President (Equity Fund Vice President and Schier and Ultra Fund only) Senior Portfolio Manager - -------------------------------------------------------------------------------- Frank Not Applicable Director of Research Whitsell - -------------------------------------------------------------------------------- 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, Director 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. BRANDON NELSON was named co-manager of the Small Cap Growth Fund in early November 2000. Mr. Nelson has over four years of investment experience. He joined Strong in 1996 after working as a summer intern on Mr. Ognar's team in 1995. He received an M.S. degree in finance from the University of Wisconsin-Madison and participated in the Applied Security Analysis Program. Mr. Nelson also earned a B.B.A. degree in finance from the University of Wisconsin-Madison. 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 now part of Firstar. 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 11 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, Portfolio Manager 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, research analysts and traders 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, 1998, 1999 and 2000, 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 and Class C shares in the amounts set forth in the table below.
- -------------------------------------------------------------------------------------------------------------------------- GROSS UNDERWRITING COMMISSIONS NET UNDERWRITING COMMISSIONS COMPENSATION ON REDEMPTIONS ------------------------------- ---------------------------- --------------------------- 1998 1999 2000 1998 1999 2000 1998 1999 2000 - -------------------------------------------------------------------------------------------------------------------------- Growth and Income Fund...... $ 161,083 $ 63,182 $ 11,930 $ 10,480 $ 12,982 $ 20,267 Equity Fund................. 1,586,589 1,361,567 137,516 160,666 123,648 162,305 Ultra Fund.................. 51,626 52,603 3,908 7,112 19,376 4,914 Global Fund................. 16,810 28,694 66 3,301 24,076 17,455 Total Return Fund........... 14,300 6,452 728 1,156 7,197 2,420 Social Awareness Fund....... 73,830 353,066 4,310 193,400 4,833 7,142 Mid Cap Value FundZ......... 176,512 73,459 4,530 8,929 5,438 26,386 Small Cap Growth Fund....... 29,790(1) 10,311 28(1) 266 2,250(1) 1,025 Enhanced Index Fund(2)...... --- 103,177 --- 2,153 --- 3,015 International Fund(2)....... --- 16,430 --- 1,422 --- 50 Select 25 Fund(2)........... --- 346,485 --- 10,249 --- 11,783 Large Cap Growth Fund(3).... --- --- --- --- --- --- Technology Fund(3).......... --- --- --- --- --- --- - -------------------------------------------------------------------------------------------------------------------------- 1 For the period October 15, 1997 (date of inception) to September 30, 1998. 2 For the period January 28, 1999 (date of inception) to September 30, 1999. 3 For the period May 1, 2000 (date of inception) to September 30, 2000. - --------------------------------------------------------------------------------------------------------------------------
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. In some cases, the computer and other equipment furnished by the broker may have additional uses that are not related to the investment services and research information. In such cases, the Investment Manager or Sub-Adviser must allocate the value of the computer and other equipment into research and non-research categories. Since that portion allocable to research can be paid from Fund brokerage commissions rather than being paid by the Investment Manager or Sub-Adviser, the Investment Manager or Sub-Adviser will have a conflict of interest in making the allocation. Finally, the investment services or research information provided to the Investment Manager or Sub-Adviser may be produced by parties other than the broker effecting the portfolio transaction. If a transaction is directed to a broker supplying investment services or research information, 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:
- --------------------------------------------------------------------------------------------------- FUND TRANSACTIONS DIRECTED TO AND COMMISSIONS PAID FUND BROKERAGE TO BROKER-DEALERS WHO FUND TOTAL COMMISSIONS ALSO PERFORMED SERVICES BROKERAGE PAID TO SECURITY -------------------------- COMMISSIONS DISTRIBUTORS, INC., BROKERAGE FUND YEAR PAID THE UNDERWRITER TRANSACTIONS COMMISSIONS - --------------------------------------------------------------------------------------------------- Security Growth 2000 $ $ $ $ and Income Fund 1999 283,962 0 52,804,552 95,172 1998 332,718 0 68,503,622 105,204 - --------------------------------------------------------------------------------------------------- Security Equity Fund - 2000 Equity Fund 1999 1,061,580 0 242,335,957 371,592 1998 1,099,219 0 263,017,019 359,314 - --------------------------------------------------------------------------------------------------- Security Equity Fund - 2000 Global Fund 1999 205,358 0 19,042,698 41,461 1998 218,464 0 21,465,232 59,626 - --------------------------------------------------------------------------------------------------- Security Equity Fund - 2000 Total Return Fund 1999 25,284 0 15,281,864 25,284 1998 9,871 0 3,474,334 7,670 - --------------------------------------------------------------------------------------------------- Security Equity Fund - 2000 Social Awareness Fund 1999 18,988 0 5,210,696 7,612 1998 10,661 0 1,418,953 1,722 - --------------------------------------------------------------------------------------------------- Security Equity Fund - 2000 Mid Cap Value Fund 1999 128,100 0 6,287,986 18,084 1998 64,157 0 8,264,311 14,947 - --------------------------------------------------------------------------------------------------- Security Equity Fund - 2000 Small Cap Growth Fund 1999 74,858 0 0 0 1998(1) 22,215 0 3,087,031 6,947 - --------------------------------------------------------------------------------------------------- Security Equity Fund - 2000 Enhanced Index Fund 1999(2) 15,495 0 0 0 - --------------------------------------------------------------------------------------------------- Security Equity Fund - 2000 International Fund 1999(2) 43,773 0 0 0 - --------------------------------------------------------------------------------------------------- Security Equity Fund - 2000 Select 25 Fund 1999(2) 27,042 0 26,372,448 27,042 - --------------------------------------------------------------------------------------------------- Security Equity Fund - 2000(3) Large Cap Growth Fund - --------------------------------------------------------------------------------------------------- Security Equity Fund - 2000(3) Technology Fund - --------------------------------------------------------------------------------------------------- Security Ultra Fund 2000 1999 150,072 0 14,817,087 41,430 1998 268,722 0 39,308,363 69,536 - --------------------------------------------------------------------------------------------------- 1 Small Cap Growth Fund's figures are based on the period October 15, 1997 (date of inception) to September 30, 1998. 2 Enhanced Index, International and Select 25 Funds' figures are based on the period January 29, 1999 (date of inception) to September 30, 1999. 3 Large Cap Growth and Technology Funds are based on the period May 1, 2000 (date of inception) to September 30, 2000. - ---------------------------------------------------------------------------------------------------
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 or 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. However, to date, none of the Funds have implemented the Plan. 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, Class C and Class S 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, Class C and Class S 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, Class C and Class S 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, C and Class S shares by approximately the amount of the different distribution expenses attributable to Class A, B, C and Class S 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 less any applicable contingent deferred sales charge. 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 67.) 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 58. HOW TO EXCHANGE SHARES Stockholders of the Funds may exchange their shares for shares of another of the Funds or for shares of certain of the other mutual funds distributed by the Distributor . 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. Stockholders who hold their shares in a tax-qualified retirement plan may also exchange shares of the Funds for shares of Security Capital Preservation Fund, but may not exchange into Municipal Bond Fund. Stockholders, except those who have purchased through the following custodial accounts of the Investment Manager, 403(b)(7) accounts, SEPP accounts and SIMPLE plans, may also exchange their shares for shares of Security Cash fund. 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, Class C and Class S shares of the Funds may be exchanged for Class A, Class B, Class C and Class S 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 or Class S shares, except that a stockholder may exchange Class C or Class S 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 58.) 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, Class C and Class S shares of the Funds bear such costs through a higher distribution fee, expenses attributable to Class B, Class C and Class S shares, generally, will be higher and as a result, income distributions paid by the Funds with respect to Class B, Class C and Class S 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 four 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 59, 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 State Street Bank and Trust Company, 225 Franklin, Boston, Massachusetts 02110, currently acts as custodian for the portfolio securities of Large Cap Growth, Technology, Global 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. 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 and Ultra Fund. Security Management Company, LLC acts as the Funds' transfer and dividend-paying agent. 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, 2000 the average annual total return for each Fund was the following:
- ---------------------------------------------------------------------------------------------------------------------------- 1 YEAR 5 YEARS 10 YEARS ----------------------------- ----------------------------- ----------------------------- CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS 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)% (5.10)% (1.00)% ---(7) ---(7) ---(7) --- --- --- International Fund........ (8.67)% (8.33)% (4.17)% ---(7) ---(7) ---(7) --- --- --- Select 25 Fund............ (0.75)% 0.20% 4.50% ---(7) ---(7) ---(7) --- --- --- Large Cap Growth Fund..... _____%(8) _____%(8) _____%(8) Technology Fund........... _____%(8) _____%(8) _____%(8) - ---------------------------------------------------------------------------------------------------------------------------- 1 From October 19, 1993 (date of inception) to September 30, 2000 2 From October 1, 1993 (date of inception) to September 30, 2000 3 From June 1, 1995 (date of inception) to September 30, 2000 4 From November 1, 1996 (date of inception) to September 30, 2000 5 From May 1, 1997 (date of inception) to September 30, 2000 6 From October 15, 1997 (date of inception) to September 30, 2000 7 From January 29, 1999 (date of inception) to September 30, 2000, percentage amounts are not annualized 8 From May 1, 2000 (date of inception) to September 30, 2000 - ----------------------------------------------------------------------------------------------------------------------------
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, 2000. - -------------------------------------------------------------------------------- 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) Large Cap Growth Fund ............. _____%(9) _____%(9) _____%(9) Technology Fund ................... _____%(9) _____%(9) _____%(9) - ------------------------------------------------------------------------------- 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) 9 From May 1, 2000 (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, 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 Section 403(b) Retirement Plans are set forth in "403(b) Retirement Plans," page 69. 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 2000 is affected, $32,000, will increase annually to $52,000 in the year 2005. The adjusted gross income level at which the deduction for 2000 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 other funds in the Security Group, which funds include Security Social Awareness, Capital Preservation, Diversified Income and High Yield Funds, under a Section 403(b) Plan. Class S shares are not available to custodial accounts of the Investment Manager and Class A shares may not be available to custodial accounts of the Investment Manager opened on or after June 5, 2000. The minimum initial or subsequent investment in a custodial account under a Section 403(b) Plan is $50. An annual administration fee of $25 is required for each custodial account with a balance less than $25,000 and a $5 withdrawal fee will be charged when any custodial account is closed. Employees may request loans from their custodial accounts. An administration fee of $125 will be charged at the time of application for a loan and a $50 loan maintenance fee will be deducted each year from the account balance. Loan repayments will be treated as purchases for the purpose of determining any applicable deferred sales charge. See "How to Purchase Shares," page 40, for a discussion of the application of deferred sales charges to Class B and Class C shares. Loans may not be available from certain accounts, including those opened prior to June 5, 2000. Please contact Security Management Company, LLC concerning loan availability. Section 403(b) Plans are subject to numerous restrictions on the amount that may be contributed, the persons who are eligible to participate, the time when distributions may commence, and the number and amount of any loans requested. 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. 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. 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. PART C. OTHER INFORMATION ITEM 23. EXHIBITS (a) Articles of Incorporation (b) Bylaws(4) (c) Specimen copy of share certificates for Fund's shares of capital stock(7) (d) (1) Investment Management and Services Agreement(7) (2) Sub-Advisory Contract - Oppenheimer(2) (3) Sub-Advisory Contract - Strong(1) (4) Sub-Advisory Contract - Bankers Trust(4) (5) Sub-Advisory Contract - Wellington(5) (e) (1) Distribution Agreement(7) (2) Class B Distribution Agreement(7) (3) Class C Distribution Agreement(7) (4) Class S Distribution Agreement (5) Underwriter-Dealer Agreement (f) Not applicable (g) (1) Custodian Agreement - UMB Bank (2) Custodian Agreement - Chase Manhattan Bank(7) (3) Custodian Agreement - State Street (h) Not applicable (i) Legal Opinion (j) Not applicable (k) Not applicable (l) Not applicable (m) (1) Class A Distribution Plan(7) (2) Class B Distribution Plan(7) (3) Class C Distribution Plan(7) (4) Class S Distribution Plan (5) Brokerage Enhancement Plan(7) (n) Multiple Class Plan(3) (o) RESERVED (p) Code of Ethics (1) Security Funds, Security Management Company, LLC ("SMC"), and Security Distributors, Inc. (2) Sub-Adviser Code of Ethics - Oppenheimer(6) (3) Sub-Adviser Code of Ethics - Strong (4) Sub-Adviser Code of Ethics - Bankers Trust (5) Sub-Adviser Code of Ethics - Wellington (q) Power of Attorneys (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 to the Exhibits filed with Security Income Fund's Post-Effective Amendment No. 64 to Registration Statement 2-38414 (filed November 29, 1999). (4) 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). (5) 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). (6) Incorporated herein by referenced to the Exhibits filed with the Initial Registration Statement of Oppenheimer Emerging Technologies Fund to Registration Statement Reg. No. 333-32108 (filed March 10, 2000). (7) Incorporated herein by reference from the Exhibits filed with the Registrant's Post-Effective Amendment No. 89 to Registration Statement 2-19458 (filed May 1, 2000). 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 DIRECTOR--Security Distributors, Inc. VICE PRESIDENT AND TREASURER--First Security Benefit Life Insurance and Annuity Company of New York TREASURER--First Advantage Insurance Agency, Inc. 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 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, 1315 SW Arrowhead Road, Topeka, Kansas 66604 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 DONALD J. SCHEPKER - ------------------ SENIOR VICE PRESIDENT--Security Management Company, LLC SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER--Security Benefit Life Insurance Company; Security Benefit Group, Inc. TREASURER--Security Financial Resources, Inc. VICE PRESIDENT--Security Benefit Academy; First Security Benefit Life Insurance and Annuity Company of New York; Security Financial Resources Collective Investments, LLC MARK E. YOUNG - ------------- VICE PRESIDENT--Security Management Company, LLC SECOND VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit Group, Inc. 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 BOARD MEMBER--Topeka Parks and Recreation Foundation, City Hall, 215 East 7th, Room 259, Topeka, Kansas 66603 JANE A. TEDDER - -------------- VICE PRESIDENT AND SENIOR ECONOMIST--Security Management Company, LLC VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit Group, Inc. BOARD MEMBER--Endowment Trust Council Plymouth Congregational Church, 925 Vermont, Lawrence, Kansas 66044 MEMBER--Shawnee County Council of American Red Cross, 1325 SW Arrowhead Road, Topeka, Kansas 66604 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; Security Financial Resources Collective Investments, LLC; First Advantage Insurance Agency, Inc. 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; Security Distributors, Inc. ASSISTANT VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit Group, Inc. TREASURER AND 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 PRESIDENT--St. John's School Endowment Committee, 1229 Kentucky, Lawrence, Kansas 66044 RALPH HEIST - ----------- VICE PRESIDENT--Security Management Company, LLC SECOND VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit Group, Inc. VICE PRESIDENT--Kemper Service Company, 811 Main, Kansas City, Missouri 64105 VICE PRESIDENT--Scudder Kemper Investments, 811 Main, Kansas City, Missouri 64105 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 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 Harrison, Topeka, Kansas 66636-0001 OPPENHEIMERFUNDS, INC. OppenheimerFunds, Inc. is a sub-adviser of the Registrant. CHARLES E. ALBERS - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds (since April 1998); a Chartered Financial Analyst. EDWARD AMBERGER - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None JANETTE APRILANTE - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None VICTOR BABIN - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--None BRUCE BARTLETT - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds GEORGE BATEJAN - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Executive Vice President/Chief Information Officer OTHER AFFILIATIONS--Formerly Senior Vice President (until May 1998) CONNIE BECHTOLT - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None KATHLEEN BEICHERT - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None RAJEEV BHAMAN - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None MARK BINNING - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None ROBERT J. BISHOP - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Vice President of Mutual Fund Accounting (since May 1996); an officer of other Oppenheimer funds JOHN R. BLOMFIELD - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None CHAD BOLL - --------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None SCOTT BROOKS - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None JEFFREY BURNS - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President/Assistant Counsel OTHER AFFILIATIONS--Stradley, Ronen Stevens and Young, LLP (February 1998-September 1999) ADELE CAMPBELL - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President & Assistant Treasurer: Rochester Division OTHER AFFILIATIONS--Formerly, Assistant Vice President of Rochester Fund Services, Inc. MICHAEL A. CARBUTO - ------------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds; Vice President of Centennial Asset Management Corporation JOHN CARDILLO - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None ELISA CHRYSANTHIS - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None H.C. DIGBY CLEMENTS - ------------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President: Rochester Division OTHER AFFILIATIONS--None O. LEONARD DARLING - ------------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice Chairman, Chief Executive Officer and Executive Vice President OTHER AFFILIATIONS--Chairman of the Board and a director (since June 1999) and Senior Managing Director (since December 1998) of HarbourView Asset Management Corporation; a director (since March 2000) of OFI Private Investments, Inc.; Trustee (1993) of Awhtolia College - Greece; formerly Chief Executive Officer of HarbourView Asset Management Corporation (December 1998-June 1999) JOHN DAVIS - ---------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--EAB Financial (April 1998-February 1999) ROBERT A. DENSEN - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--None RUGGERO DE'ROSSI - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Formerly, Chief Strategist at ING Barings (July 1998-March 2000) SHERI DEVEREUX - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None MAX DIETSHE - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Deloitte & Touche LLP (1989-1999) CRAIG P. DINSELL - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Executive Vice President OTHER AFFILIATIONS--None JOHN DONEY - ---------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds DREW DONOHUE - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--Formerly, a trust officer for Trust Company ANDREW J. DONOHUE - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Executive Vice President, General Counsel and Director OTHER AFFILIATIONS--Executive Vice President (since September 1993) and a director (since January 1992) of the Distributor; Executive Vice President, General Counsel (since September 1995) and a director (since August 1994) of HarbourView Asset Management Corporation, Shareholder Services, Inc., Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc., of OFI Private Investments, Inc. (since March 2000), and of PIMCO Trust Company (since May 2000); President and a director of Centennial Asset Management Corporation (since September 1995) and of Oppenheimer Real Asset Management, Inc. (since July 1996); Vice President and a director (since September 1997) of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc; a director (since April 2000) of OppenheimerFunds Legacy Program, a charitable trust program established by the Manager; General Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer Acquisition Corp.; an officer of other Oppenheimer funds BRUCE DUNBAR - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None DANIEL ENGSTROM - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None ARMOND ERPF - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None GEORGE EVANS - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds EDWARD N. EVERETT - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None GEORGE FAHEY - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None LESLIE A. FALCONIO - ------------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds (since June 1999) SCOTT FARRAR - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Assistant Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds KATHERINE P. FELD - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President, Senior Counsel and Secretary OTHER AFFILIATIONS--Vice President and Secretary of the Distributor; Secretary and Director of Centennial Asset Management Corporation; Vice President and Secretary of Oppenheimer Real Asset Management, Inc.; Secretary of HarbourView Asset Management Corporation, Oppenheimer Partnership Holdings, Inc., Shareholder Financial Services, Inc. and Shareholder Services, Inc. RONALD H. FIELDING - ------------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President; Chairman: Rochester Division OTHER AFFILIATIONS--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 DAVID FOXHOVEN - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--Formerly Manager, Banking Operations Department (July 1996-November 1998) CRYSTAL FRENCH - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None DAN GANGEMI - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None SUBRATA GHOSE - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--Formerly, Equity Analyst at Fidelity Investments (1995-March 2000) CHARLES GILBERT - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None ALAN GILSTON - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None JILL GLAZERMAN - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None MIKHAIL GOLDVERG - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None JEREMY GRIFFITHS - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Executive Vice President, Chief Financial Officer and Director OTHER AFFILIATIONS--Chief Financial Officer, Treasurer and director of Oppenheimer Acquisition Corp.; Executive Vice President of HarbourView Asset Management Corporation; President. Chief Executive Officer and director of PIMCO Trust Company; director of OppenheimerFunds, Legacy Program (charitable trust program); Vice President of OFI Private Investments, Inc. and a Member and Fellow of the Institute of Chartered Accountants ROBERT GRILL - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--None ROBERT GUY - ---------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--None ROBERT HALEY - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None THOMAS B. HAYES - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None DOROTHY HIRSHMAN - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None MERRYL HOFFMAN - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President and Senior Counsel OTHER AFFILIATIONS--None MERRELL HORA - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None SCOTT T. HUEBL - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None JAMES HYLAND - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--Formerly Manager of Customer Research for Prudential Investments (February 1998-July 1999) DAVID HYUN - ---------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Formerly portfolio manager, technology analyst and research associate at Fred Alger Management, Inc. (August 1993-June 2000) STEVE ILNITZKI - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--Formerly Vice President of Product Management at Ameritrade (until March 2000) KATHLEEN T. IVES - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None WILLIAM JAUME - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Senior Vice President (since April 2000) of HarbourView Asset Management Corporation FRANK JENNINGS - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds ANDREW JORDAN - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None DEBORAH KABACK - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President and Senior Counsel OTHER AFFILIATIONS--Senior Vice President and Deputy General Counsel of Oppenheimer Capital (April 1989-November 1999) LEWIS KAMMAN - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Senior Consultant for Bell Atlantic Network Integration, Inc. (June 1997-December 1998) JENNIFER KANE - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None LYNN OBERIST KEESHAN - -------------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--Formerly (until March 1999) Vice President, Business Development and Treasury at Liz Claiborne, Inc. THOMAS W. KEFFER - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--None ERICA KLEIN - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None WALTER KONOPS - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None AVRAM KORNBERG - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--None JIMMY KOURKOULAKOS - ------------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None JOHN KOWALIK - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager for certain OppenheimerFunds JOSEPH KRIST - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None CHRISTOPHER LEAVY - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--Vice President and Portfolio Manager at Morgan Stanley Investment Management (1997-September 2000) and an Analyst and Portfolio Manager at Crestar Asset Management (1995-1997) MICHAEL LEVINE - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None SHANQUAN LI - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None MITCHELL J. LINDAUER - -------------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President and Assistant General Counsel OTHER AFFILIATIONS--None MALISSA LISCHIN - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--Formerly Associate Manager, Investment Management Analyst at Prudential (1996-March 2000) DAVID MABRY - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None BRIDGET MACASKILL - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Chairman, Chief Executive Officer and Director OTHER AFFILIATIONS--President, Chief Executive Officer and a director (since March 2000) of OFI Private Investments, Inc., an investment adviser subsidiary of the Manager; Chairman and a director of Shareholder Services, Inc. (since August 1994) and Shareholder Financial Services, Inc. (since September 1995), transfer agent subsidiaries of the Manager; President (since September 1995) and a director (since October 1990) of Oppenheimer Acquisition Corp., the Manager's parent holding company; President (since September 1995) and a director (since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding company subsidiary of the Manager; President and a director (since October 1997) of OppenheimerFunds International Ltd., an offshore fund management subsidiary of the Manager and of Oppenheimer Millennium Funds plc; a director of HarbourView Asset Management Corporation (since July 1991) and of Oppenheimer Real Asset Management, Inc. (since July 1996), investment adviser subsidiaries of the Manager; a director (since April 2000) of OppenheimerFunds Legacy Program, a charitable trust program established by the Manager; a director of Prudential Corporation plc (a U.K. financial service company); President and a trustee of other Oppenheimer funds; formerly President of the Manager (June 1991-August 2000) STEVE MACCHIA - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None PHILIP T. MASTERSON - ------------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None LORETTA MCCARTHY - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Executive Vice President OTHER AFFILIATIONS--None LISA MIGAN - ---------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None ANDREW J. MIKA - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--Formerly a Second Vice President for Guardian Investments (June 1990-October 1999) JOY MILAN - --------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None DENIS R. MOLLEUR - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President and Senior Counsel OTHER AFFILIATIONS--None NIKOLAOS MONOYIOS - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--A Vice President and/or portfolio manager of certain Oppenheimer funds MARGARET MUDD - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--Formerly Vice President - Syndications of Sanwa Bank California (January 1998-September 1999) JOHN MURPHY - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--President and Chief Operating Officer OTHER AFFILIATIONS--President of MassMutual Institutional Funds and the MML Series Funds KENNETH NADLER - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None DAVID NEGRI - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds BARBARA NIEDERBRACH - ------------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None ROBERT A. NOWACZYK - ------------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None RAY OLSON - --------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None GINA M. PALMIERI - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds (since June 1999) FRANK PAVLAK - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Formerly. Branch Chief of Investment Company Examinations at U.S. Securities and Exchange Commission (January 1981-December 1998) JAMES PHILLIPS - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None DAVID PELLEGRINO - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None JANE PUTNAM - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds MICHAEL QUINN - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None JULIE RADTKE - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None RUSSELL READ - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--Senior Vice President (since March 2000) of HarbourView Asset Management Corporation; Vice President of Oppenheimer Real Asset Management, Inc. (since August 1996) THOMAS REEDY - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Vice President (since April 1999) of HarbourView Asset Management Corporation; an officer and/or portfolio manager of certain Oppenheimer funds JOHN REINHARDT - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President: Rochester Division OTHER AFFILIATIONS--None JEFFREY ROSEN - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None MARCI ROSSELL - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President and Corporate Economist OTHER AFFILIATIONS--Economist with Federal Reserve Bank of Dallas (April 1996-March 1999) RICHARD H. RUBINSTEIN - --------------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds LAWRENCE RUDNICK - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None JAMES RUFF - ---------- POSITION WITH OPPENHEIMERFUNDS, INC.--Executive Vice President OTHER AFFILIATIONS--President and director of the Distributor; Vice President (since March 2000) of OFI Private Investments, Inc. ANDREW RUOTOLO - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Executive Vice President OTHER AFFILIATIONS--President and director of Shareholder Services, Inc.; formerly Chief Operations Officer for American International Group (August 1997-September 1999) ROHIT SAH - --------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None VALERIE SANDERS - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None KENNETH SCHLUPP - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--Assistant Vice President (since March 2000) of OFI Private Investments, Inc. JEFF SCHNEIDER - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Formerly (until May 1999) Director, Personal Decisions International ELLEN SCHOENFELD - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None ALLAN SEDMAK - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None JENNIFER SEXTON - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None MARTHA SHAPIRO - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None CONNIE SONG - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None RICHARD SOPER - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None KEITH SPENCER - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None CATHLEEN STAHL - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Assistant Vice President & Manager of Women & Investing Program RICHARD A. STEIN - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President: Rochester Division OTHER AFFILIATIONS--Assistant Vice President (since 1995) of Rochester Capitol Advisors, L.P. ARTHUR STEINMETZ - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds JAYNE STEVLINGSON - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None GREGG STITT - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None JOHN STOMA - ---------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--None KEVIN SURRETT - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--Assistant Vice President of Product Development At Evergreen Investor Services, Inc. (June 1995-May 1999) JAMES C. SWAIN - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice Chairman of the Board OTHER AFFILIATIONS--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 - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None ANTHONY A. TANNER - ----------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President: Rochester Division OTHER AFFILIATIONS--None PAUL TEMPLE - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Formerly (until May 2000) Director of Product Development at Prudential ANGELA UTTARO - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None MARK VANDEHEY - ------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None MAUREEN VANNORSTRAND - -------------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None ANNETTE VON BRANDIS - ------------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None PHILLIP VOTTIERO - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Chief Financial Officer for the Sovlink Group (April 1996-June 1999) TERESA WARD - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None JERRY WEBMAN - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--Senior Investment Officer, Director of Fixed Income BARRY WEISS - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--Fitch IBCA (1996-January 2000) CHRISTINE WELLS - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None JOSEPH WELSH - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None WILLIAM L. WILBY - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--Senior Investment Officer, Director of International Equities; Senior Vice President of HarbourView Asset Management Corporation DONNA WINN - ---------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--Vice President (since March 2000) of OFI Private Investments, Inc. BRIAN W. WIXTED - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President and Treasurer OTHER AFFILIATIONS--Treasurer (since March 1999) of HarbourView Asset Management Corporation, Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc., of OFI Private Investments, Inc. (since March 2000) and of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since May 2000); Treasurer and Chief Financial Officer (since May 2000) of PIMCO Trust Company; Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. and of Centennial Asset Management Corporation; an officer of other Oppenheimer funds; formerly Principal and Chief Operating Officer, Bankers Trust Company - Mutual Fund Services Division (March 1995-March 1999) CAROL WOLF - ---------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds; serves on the Board of Chinese Children Adoption International Parents Council, Supporters of Children, and the Advisory Board of Denver Children's Hospital Oncology Department KURT WOLFGRUBER - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--Senior Investment Officer, Director of Domestic Equities; member of the Investment Product Review Committee and the Executive Committee of HarbourView Asset Management Corporation; formerly (until April 2000) a Managing Director and Portfolio Manager at J.P. Morgan Investment Management, Inc. CALEB WONG - ---------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--An officer and/or portfolio manager of certain Oppenheimer funds (since June 1999) ROBERT G. ZACK - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President and Assistant Secretary, Associate General Counsel OTHER AFFILIATIONS--Assistant Secretary of Shareholder Services, Inc. (since May 1985), Shareholder Financial Services, Inc. (since November 1989), OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds JILL ZACHMAN - ------------ POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President: Rochester Division OTHER AFFILIATIONS--None NEAL ZAMORE - ----------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--Director e-Commerce; formerly (until May 2000) Vice President at GE Capital MARK ZAVANELLI - -------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Assistant Vice President OTHER AFFILIATIONS--None ARTHUR J. ZIMMER - ---------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Senior Vice President OTHER AFFILIATIONS--Senior Vice President (since April 1999) of HarbourView Asset Management Corporation; Vice President of Centennial Asset Management Corporation; an officer and/or portfolio manager of certain Oppenheimer funds SUSAN ZIMMERMAN - --------------- POSITION WITH OPPENHEIMERFUNDS, INC.--Vice President OTHER AFFILIATIONS--None The Oppenheimer Funds include the New York-based Oppenheimer Funds, the Denver-based Oppenheimer Funds and the Oppenheimer Quest/Rochester Funds, as set forth below: NEW YORK-BASED OPPENHEIMER FUNDS Oppenheimer California Municipal Fund Oppenheimer Capital Appreciation Fund Oppenheimer Capital Preservation Fund Oppenheimer Developing Markets Fund Oppenheimer Discovery Fund Oppenheimer Emerging Technologies Fund Oppenheimer Enterprise Fund Oppenheimer Europe Fund Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund Oppenheimer International Growth Fund Oppenheimer International Small Company Fund Oppenheimer Large Cap Growth Fund Oppenheimer Money Market Fund, Inc. Oppenheimer Multi-Sector Income Trust Oppenheimer Multi-State Municipal Trust Oppenheimer Multiple Strategies Fund Oppenheimer Municipal Bond Fund Oppenheimer New York Municipal Fund Oppenheimer Series Fund, Inc. Oppenheimer Trinity Core Fund Oppenheimer Trinity Growth Fund Oppenheimer Trinity Value Fund Oppenheimer U.S. Government Trust Oppenheimer World Bond Fund QUEST/ROCHESTER FUNDS Limited Term New York Municipal Fund Oppenheimer Convertible Securities Fund Oppenheimer MidCap Fund Oppenheimer Quest Capital Value Fund, Inc. Oppenheimer Quest For Value Funds Oppenheimer Quest Global Value Fund, Inc. Oppenheimer Quest Value Fund, Inc. Rochester Fund Municipals DENVER-BASED OPPENHEIMER FUNDS Centennial America Fund, L.P. Centennial California Tax Exempt Trust Centennial Government Trust Centennial Money Market Trust Centennial New York Tax Exempt Trust Centennial Tax Exempt Trust Oppenheimer Cash Reserves Oppenheimer Champion Income Fund Oppenheimer Capital Income Fund Oppenheimer High Yield Fund Oppenheimer Integrity Funds Oppenheimer International Bond Fund Oppenheimer Limited-Term Government Fund Oppenheimer Main Street Opportunity Fund Oppenheimer Main Street Small Cap Fund Oppenheimer Main Street Funds, Inc. Oppenheimer Municipal Fund Oppenheimer Real Asset Fund Oppenheimer Senior Floating Rate Fund Oppenheimer Strategic Income Fund Oppenheimer Total Return Fund, Inc. Oppenheimer Variable Account Funds Panorama Series Fund, Inc. The address of OppenheimerFunds, Inc., OppenheimerFunds Distributor, Inc., HarbourView Asset Management Corp., Oppenheimer Partnership Holdings, Inc., Oppenheimer Acquisition Corp. and OFI Private Investments, Inc. is Two World Trade Center, New York, New York 10048-0203. The address of the New York-based Oppenheimer Funds, the Quest Funds, the Denver-based Oppenheimer Funds, Shareholder Financial Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services, Centennial Asset Management Corporation, Centennial Capital Corp., and Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood, Colorado 80112. The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New York 14625-2807. 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. 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, SECRETARY, GENERAL COUNSEL, AND CHIEF COMPLIANCE OFFICER--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. JOSEPH J. RHIEL - --------------- SENIOR VICE PRESIDENT AND CHIEF INFORMATION OFFICER--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 Technology Series of Equity Fund and Series K, Series M and Series T of SBL Fund. 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 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 SENIOR 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 AND CFO--Wellington Management International PRESIDENT AND TREASURER--Wellington Sales Corporation VICE PRESIDENT AND TREASURER/CASHIER--Wellington Trust Company, NA 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 VICE PRESIDENT--Wellington Trust Company, NA ROBERT LLOYD EVANS - ------------------ GENERAL PARTNER--Wellington Management Company, LLP LISA DE LA FUENTE FINKEL - ------------------------ GENERAL PARTNER--Wellington Management Company, LLP SENIOR VICE PRESIDENT AND DIRECTOR--Wellington Global Administrator, Ltd. DIRECTOR--Wellington Global Holdings, Ltd. SENIOR VICE PRESIDENT--Wellington Hedge Management, Inc. SUPERVISORY BOARD--Wellington Luxembourg SCA DIRECTOR--Wellington Management Global Holdings, Ltd. SENIOR VICE PRESIDENT AND DIRECTOR--Wellington Sales Corporation CHARLES TOWNSEND FREEMAN - ------------------------ GENERAL PARTNER--Wellington Management Company, LLP LAURIE ALLEN GABRIEL - -------------------- MANAGING PARTNER--Wellington Management Company, LLP SENIOR VICE PRESIDENT--Wellington Global Administrator, Ltd. SENIOR VICE PRESIDENT AND 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 AND VICE PRESIDENT--Wellington Trust Company, NA PRESIDENT--Wellington Hedge Management, Inc. DIRECTOR AND 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. SENIOR VICE PRESIDENT--Wellington Global Holdings, Ltd. and Wellington Global Administrator, Ltd. PAUL J. HAMEL - ------------- GENERAL PARTNER--Wellington Management Company, LLP VICE PRESIDENT AND BANK INFORMATION SYSTEMS OFFICER--Wellington Trust Company, NA LUCIUS TUTTLE HILL, III - ----------------------- GENERAL PARTNER--Wellington Management Company, LLP VICE PRESIDENT--Wellington Trust Company, NA 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 SENIOR VICE PRESIDENT--Wellington Hedge Management, Inc. and Wellington Global Administrator, Ltd. NANCY THERESE LUKITSH - --------------------- GENERAL PARTNER--Wellington Management Company, LLP DIRECTOR AND VICE PRESIDENT--Wellington Trust Company, NA SENIOR VICE PRESIDENT--Wellington Hedge Management, Inc. and Wellington Global Administrator, Ltd. MARK THOMAS LYNCH - ----------------- GENERAL PARTNER--Wellington Management Company, LLP CHRISTINE SMITH MANFREDI - ------------------------ GENERAL PARTNER--Wellington Management Company, LLP VICE PRESIDENT--Wellington Trust Company, NA SENIOR 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 AND CHAIRMAN OF THE BOARD--Wellington Trust Company, NA. DIRECTOR--Wellington International Management Company Pte Ltd. CHAIRMAN AND DIRECTOR--Wellington Global Holdings, Ltd., Wellington Global Administrator, Ltd., Wellington Management Global Holdings, Ltd., and Wellington Hedge Management, Inc. 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 SENIOR 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 SAUL JOSEPH PANNELL - ------------------- GENERAL PARTNER--Wellington Management Company, LLP THOMAS LOUIS PAPPAS - ------------------- GENERAL PARTNER--Wellington Management Company, LLP JONATHAN MARTIN PAYSON - ---------------------- GENERAL PARTNER--Wellington Management Company, LLP DIRECTOR AND PRESIDENT--Wellington Trust Company, NA SENIOR VICE PRESIDENT--Wellington Sales Corporation DIRECTOR--Wellington Global Holdings, Ltd., Wellington Global Administrator, Ltd., and Wellington Management Global Holdings, Ltd. PHILIP H. PERELMUTER - -------------------- GENERAL PARTNER--Wellington Management Company, LLP ROBERT DOUGLAS RANDS - -------------------- GENERAL PARTNER--Wellington Management Company, LLP 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 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 STEPHEN ALBERT SODERBERG - ------------------------ GENERAL PARTNER--Wellington Management Company, LLP ERIC STROMQUIST - --------------- GENERAL PARTNER--Wellington Management Company, LLP BRENDAN JAMES SWORDS - -------------------- GENERAL PARTNER--Wellington Management Company, LLP SENIOR VICE PRESIDENT--Wellington Hedge Management, Inc. and Wellington Global Administrator, Ltd. 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 AND COMPLIANCE OFFICER--Wellington Management International SENIOR VICE PRESIDENT, CLERK AND DIRECTOR--Wellington Sales Corporation VICE PRESIDENT AND TRUST OFFICER--Wellington Trust Company, NA SUPERVISORY BOARD--Wellington Luxembourg SCA CLARE VILLARI - ------------- GENERAL PARTNER--Wellington Management Company, LLP ERNST HANS VON METZSCH - ---------------------- GENERAL PARTNER--Wellington Management Company, LLP SENIOR 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 AND TRUST COUNSEL--Wellington Trust Company, NA DIRECTOR--Wellington International Management Company Pte Ltd. SENIOR VICE PRESIDENT, ASSISTANT CLERK AND DIRECTOR--Wellington Sales Corporation DIRECTOR AND DEPUTY CHAIRMAN--Wellington Global Holdings, Ltd. and Wellington Global Administrator, Ltd. DIRECTOR, SENIOR VICE PRESIDENT AND 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, Suite 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 ACKERMANN - ------------------- 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. CHAIRMAN, SUPERVISORY BOARD--Deutsche Bank Luxembourg, S.A. MEMBER, SUPERVISORY BOARD--EUREX Frankfurt AG; EUREX Zurich AG; Linde AG; Stora Enso Oyj; Mannesmann AG ROBERT B. ALLARDICE III - ----------------------- Bankers Trust Company, 130 Liberty Street, New York, New York 10006. DIRECTOR--Bankers Trust Company; Bankers Trust Corporation ADVISORY DIRECTOR--Deutsche Bank, Americas Holding Corp. MEMBER--Board of Directors, Deutsche Bank Canada HANS ANGERMUELLER - ----------------- Bankers Trust Company, 130 Liberty Street, New York, New York 10006. DIRECTOR--Bankers Trust Company; Bankers Trust Corporation; Wharton Financial Institutions Center OF COUNSEL--Shearman & Sterling GEORGE BEITZEL - -------------- Bankers Trust Company, 130 Liberty Street, New York, New York 10006. DIRECTOR--Bankers Trust Company; Bankers Trust Corporation; ACTUATE; Computer Task Group, Inc.; Bitstream, Inc.; Staff Leasing, Inc. PRIVATE INVESTOR YVES DE BALMANN - --------------- 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. VICE CHAIRMAN--Bankers Trust Corporation DIRECTOR--Bankers Trust International, plc; Aerospatiale Matra JESSICA P. EINHORM - ------------------ DIRECTOR--Bankers Trust Company; Bankers Trust Corporation; Council on Foreign Relations; Institute for International Economics, Pitney Bowes TRUSTEE--German Marshall Fund and Rockefeller Brothers Fund MEMBER--Executive Committee Trilateral Commission WILLIAM HOWELL - -------------- Bankers Trust Company, 130 Liberty Street, New York, New York 10006. DIRECTOR--Bankers Trust Company; Bankers Trust Corporation; American Electric Power; Exxon Mobil Corporation; Halliburton Company; Williams, Inc.; Pfizer, Inc. 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); The Clearinghouse Interbank Payments Co. L.L.C. 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 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, DIRECTOR AND CHIEF EXECUTIVE OFFICER--Taunus Corporation and DB U.S. Financial Markets Holding Corporation PRESIDENT AND CHIEF EXECUTIVE OFFICER--Deutsche Bank Americas Holding Corp. BOARD MEMBER--Local Initiatives Support Corp. DIRECTOR--Deutsche Bank Securities, Inc.; DB Alex. Brown LLC 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 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 SBL Variable Annuity Account XIV (b) (1) (2) (3) NAME AND PRINCIPAL POSITION AND OFFICES POSITION AND OFFICES BUSINESS ADDRESS* WITH UNDERWRITER WITH REGISTRANT Gregory J. Garvin President and Director None John D. Cleland Vice President and Director Chairman of the Board and Director James R. Schmank Director 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; Chase Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, New York 11245 and State Street Bank and Trust Company, 801 Pennsylvania, Kansas City, Missouri 64105. ITEM 29. MANAGEMENT SERVICES Not applicable. ITEM 30. UNDERTAKINGS Not applicable. SIGNATURES Pursuant to the requirements of the Investment Company Act of 1940, the Registrant 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 14th day of November, 2000. John D. Cleland SECURITY EQUITY FUND Chairman of the Board (The Fund) and Director James R. Schmank By: President and Director ------------------------------------- James R. Schmank, President and as Donald A. Chubb, Jr. Attorney-In-Fact for the Officers and Director Directors Whose Names Appear Opposite Penny A. Lumpkin Director ------------------------------------- Brenda M. Harwood, Treasurer Mark L. Morris, Jr. (Principal Financial Officer) Director Maynard Oliverius Director EX-99.A 2 0002.txt ARTICLES OF INCORPORATION 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. 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 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] 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 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 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 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 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 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 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 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 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 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. 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. 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. 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. 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 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 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 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 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 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. 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. 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 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 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. 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. 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 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. 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] 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 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 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 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 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 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 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 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 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 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 21st day of July, 2000, adopted resolutions establishing eleven new series of common stock in addition to those 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 eleven new series of common stock of Security Equity Fund in addition to the separate series of common stock presently issued by the corporation; WHEREAS, Security Equity Fund presently issues its shares in the following Series: Equity Series A, B, C and S ("Equity Fund"), Global Series A, B, C and S ("Global Fund"), Total Return Series A, B, C and S ("Total Return Fund"), Social Awareness Series A, B, C and S ("Social Awareness Fund"), Mid Cap Value Series A, B, C and S ("Mid Cap Value Fund"), Small Cap Growth Series A, B, C and S ("Small Cap Growth Fund"), Enhanced Index Series A, B, C and S ("Enhanced Index Fund"), International Series A, B, C and S ("International Fund"), Select 25 Series A, B, C and S ("Select 25 Fund"), Large Cap Growth Series A, B, C and S ("Large Cap Growth Fund"), and Technology Series A, B, C and S ("Technology Fund") (each referred to herein as a "Fund" and collectively the "Funds"); and WHEREAS, the Board of Directors desires to authorize the issuance of an indefinite number of shares of capital stock of each of the new 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 eleven new series of the Security Equity Fund designated as Equity Series S, Global Series S, Total Return Series S, Social Awareness Series S, Mid Cap Value Series S, Small Cap Growth Series S, Enhanced Index Series S, International Series S, Select 25 Series S, Large Cap Growth Series S, and Technology Series S. 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 new series of the corporation. 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 NASD Conduct Rules, 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 each Fund 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 that series. (b) All cash and other property received by the corporation from the sale of shares of a Fund, 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 Fund, to which they relate and held for the benefit of the stockholders owning shares of such Fund. (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 a Fund represent a stockholder interest in a particular fund of assets held by the corporation and, accordingly, dividends shall be calculated and declared for each series of that Fund 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 series. Stockholders of each Fund shall share in dividends declared and paid with respect to such Fund pro rata based on their ownership of shares of such Fund. 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 Total Return Series B, the Social Awareness Series B, the Mid Cap Value Series B, the Small Cap Growth Series B, the Enhanced Index Series B, the International Series B, the Select 25 Series B, the Large Cap Growth Series B and the Technology 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, Total Return Series A, Social Awareness Series A, Mid Cap Value Series A, Small Cap Growth Series A, Enhanced Index Series A, International Series A, Select 25 Series A, Large Cap Growth Series A or Technology 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 14th day of August, 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, 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 14th day of August, 2000. MARCIA J. JOHNSON -------------------------------- Notary Public My commission expires: March 23, 2001 EX-99.E(4) 3 0003.txt CLASS S DISTRIBUTION AGREEMENT SECURITY EQUITY FUND CLASS S DISTRIBUTION AGREEMENT THIS AGREEMENT, made this 21st day of July, 2000, 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 S 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 S 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 S 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 S 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. BROKERAGE ENHANCEMENT PLAN. (a) The Fund may direct SDI to take appropriate actions to effect the purposes of the Brokerage Enhancement Plan (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. 8. 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. 9. 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. 10. 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 S 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. 11. 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. 12. 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. 13. 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 66636-0001 Security Distributors, Inc. Security Benefit Group Building 700 Harrison Topeka, Kansas 66636-0001 14. 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 S 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, President ATTEST: AMY J. LEE - --------------------------------- Amy J. Lee, Secretary SECURITY DISTRIBUTORS, INC. BY: GREGORY J. GARVIN ----------------------------- Gregory J. Garvin, President ATTEST: AMY J. LEE - --------------------------------- Amy J. Lee, Secretary EX-99.E(5) 4 0004.txt UNDERWRITER DEALER AGREEMENT [SBG LOGO] THE SECURITY BENEFIT GROUP OF COMPANIES - -------------------------------------------------------------------------------- SECURITY BENEFIT LIFE INSURANCE COMPANY 700 SW HARRISON ST. SECURITY BENEFIT GROUP, INC. TOPEKA, KANSAS 66636-0001 SECURITY DISTRIBUTORS, INC. (785) 431-3000 SECURITY MANAGEMENT COMPANY, LLC UNDERWRITER DEALER AGREEMENT Dealer Name: Security Distributors, Inc. ("we" or "us") invites you to participate in the distribution of shares of the Security Mutual Funds (the "Funds") for which we now or in the future serve as principal underwriter, subject to the terms of this Agreement. We will notify you from time to time of the Funds which are eligible for distribution and the terms of compensation under this Agreement. This Agreement supersedes any prior underwriter dealer agreements between us, as stated in paragraph 16 below. 1. LICENSING. (a) You represent that you are a member in good standing of the National Association of Securities Dealers, Inc. ("NASD") and are presently licensed to the extent necessary by the appropriate regulatory agency of each state in which you will offer and sell shares of the Funds. You agree that termination or suspension of such membership with the NASD, or of your license to do business by any state or federal regulatory agency, at any time shall terminate or suspend this Agreement forthwith and shall require you to notify us in writing of such action. This Agreement is in all respects subject to the Conduct Rules of the NASD which shall control any provision to the contrary in this Agreement. (b) You agree to notify us immediately in writing if at any time you are not a member in good standing of the Securities Investor Protection Corporation ("SIPC"). 2. SALES OF FUND SHARES. You may offer and sell shares of each Fund and class only at the public offering price which shall be applicable to, and in effect at the time of, each transaction. The procedures relating to all orders and the handling of them shall be subject to the terms of the then current prospectus and statement of additional information (hereafter, the "prospectus") and new account application, including amendments, for each such Fund, and our written instructions from time to time. This Agreement is not exclusive, and either party may enter into similar agreements with third parties. 3. DUTIES OF DEALER: IN GENERAL. You agree: (a) To act as principal, or as agent on behalf of your customers, in all transactions in shares of the Funds. You shall not have any authority to act as agent for the issuer (the Funds), for us, or for any other dealer in any respect, nor will you represent to any third party that you have such authority or are acting in such capacity. (b) To purchase shares only from us or from your customers. (c) To enter orders for the purchase of shares of the Funds only from us and only for the purpose of covering purchase orders you have already received from your customers or for your own bona fide investment. (d) To maintain records of all sales and redemptions of shares made through you and to furnish us with copies of such records on request. (e) To distribute prospectuses and reports to your customers in compliance with applicable legal requirements, except to the extent that we expressly undertake to do so on your behalf. (f) That you will not withhold placing customers' orders for shares so as to profit yourself as a result of such withholding or place orders for shares in amounts just below the point at which sales charges are reduced so as to benefit from a higher sales charge applicable to an amount below the breakpoint. (g) That if any shares confirmed to you hereunder are repurchased or redeemed by any of the Funds within seven business days after such confirmation of your original order, you shall forthwith refund to us the full concession allowed to you on such orders. We shall forthwith pay to the appropriate Fund our share, if any, of the "charge" on the original sale and shall also pay to such Fund the refund from you as herein provided. We shall notify you of such repurchase or redemption within a reasonable time after settlement. Termination or cancellation of this Agreement shall not relieve you or us from the requirements of this subparagraph. (h) That if payment for the shares purchased is not received within the time customary or the time required by law for such payment, the sale may be canceled forthwith without any responsibility or liability on our part or on the part of the Funds, or at our option, we may sell the shares which you ordered back to the Funds, in which latter case we may hold you responsible for any loss to the Funds or loss of profit suffered by us resulting from your failure to make payment as aforesaid. We shall have no liability for any check or other item returned unpaid to you after you have paid us on behalf of a purchaser. We may refuse to liquidate the investment unless we receive the purchaser's signed authorization for the liquidation. (i) That you shall assume responsibility for any loss to the Funds caused by a correction made subsequent to trade date, provided such correction was not based on any error, omission or negligence on our part, and that you will immediately pay such loss to the Funds upon notification. (j) That if on a redemption which you have ordered, instructions in proper form, including outstanding certificates, are not received within the time customary or the time required by law, the redemption may be canceled forthwith without any responsibility or liability on our part or on the part of any Fund, or at our option, we may buy the shares redeemed on behalf to the Fund, in which latter case we may hold you responsible for any loss to the Fund or loss of profit suffered by us resulting from your failure to settle the redemption. 4. CONDITIONAL ORDERS; CERTIFICATES. We will not accept from you any conditional orders for shares of any of the Funds. Delivery of certificates for shares purchased shall be made by the Funds only against constructive receipt of the purchase price, subject to deduction for your concession and our portion of the sales charges, if any, on such sale. No certificates will be issued unless specifically requested. 5. DEALER COMPENSATION. On each purchase of shares by you from us, the total sales charges and your dealer concessions shall be as stated in each Fund's then current prospectus or SAI, subject to NASD rules and applicable state and federal laws. Such sales charges and dealer concessions are subject to reductions under a variety of circumstances as described in the Funds' prospectuses. For an investor to obtain these reductions, we must be notified at the time of the sale that the sale qualifies for the reduced charges. If you fail to notify us of the applicability of a reduction in the sales charge at the time the trade is placed, neither we nor any of the Funds will be liable for amounts necessary to reimburse any investor for the reduction which should have been effected. 6. REDEMPTIONS. Redemptions or repurchases of shares will be made at the net asset value of such shares, less any applicable deferred sales or redemption charges, in accordance with the applicable prospectuses. Except as permitted by applicable law, you agree not to purchase any shares from your customers at a price lower than the redemption or repurchase prices then computed by the Funds. You shall, however, be permitted to sell shares for the account of the record owner to the Funds at the repurchase price then currently in effect for such shares and may charge the owner a fair commission for handling the transaction. 7. EXCHANGES. Telephone exchange orders will be effective only for uncertificated shares and may be subject to any fees or other restrictions set forth in the applicable prospectuses. You may charge the shareholder a fair commission for handling an exchange transaction. Exchanges from a Fund sold with no sales charge to a Fund which carries a sales charge, and exchanges from a Fund sold with a sales charge to a Fund which carries a higher sales charge may be subject to a sales charge in accordance with the terms of each Fund's prospectus. You will be obligated to comply with any additional exchange policies described in each Fund's prospectus. 8. TRANSACTION PROCESSING. All orders are subject to acceptance by us and by the Fund or its transfer agent, and become effective only upon confirmation by us. If required by law, each transaction shall be confirmed in writing on a fully disclosed basis and if confirmed by us, a copy of each confirmation shall be sent simultaneously to you if you so request. All sales are made subject to receipt of shares by us from the Funds. We reserve the right in our discretion, without notice, to suspend the sale of shares or withdraw the offering of shares entirely. Telephone orders will be effected at the price(s) next computed on the day they are received from you if, as set forth in each Fund's current prospectus, they are received prior to the time the price of its shares is calculated. Orders received after that time will be effected at the price(s) computed on the next business day. All orders must be accompanied by payment in U.S. dollars. Orders payable by check must be drawn payable in the U.S. dollars on a U.S. bank, for the full amount of the investment. 9. MULTIPLE CLASSES. We may from time to time provide to you written compliance guidelines or standards relating to the sale or distribution of Funds offering multiple classes of shares with different sales charges and distribution-related operating expenses. In addition, you will be bound by an applicable rules or regulations of government agencies or self-regulatory organizations generally affecting the sale or distribution of mutual funds offering multiple classes of shares. 10. RULES 12B-1 PLANS. You are also invited to participate in all Plans adopted by the Funds (the "Plan Funds") pursuant to Rule 12b-1 under the 1940 Act. To the extent you provide administrative and other services, including, but not limited to, furnishing personal and other services and assistance to your customers who own shares of a Plan Fund, answering routine inquiries regarding a Fund, assisting in changing account designations and addresses, maintaining such accounts or such other services as a Fund may require, to the extent permitted by applicable statutes, rules or regulations, we shall pay you a Rule 12b-1 servicing fee. To the extent that you participate in the distribution of Fund shares which are eligible for a Rule 12b-1 distribution fee, we shall also pay you a Rule 12b-1 distribution fee. All Rule 12b-1 servicing and distribution fees shall be based on the value of shares attributable to customers of your firm and eligible for such payment, and shall be calculated on the basis and at the rates set forth in the Fund's then current prospectus or SAI. Without prior approval by a majority of the outstanding shares of a Fund, the aggregate annual fees paid to you pursuant to each Plan shall not exceed the amounts stated as the "annual maximums" in each Fund's prospectus, which amount shall be a specified percent of the value of the Fund's net assets held in your customers' accounts which are eligible for payment pursuant to this Agreement (determined in the same manner as each Fund uses to compute its net assets as set forth in its effective Prospectus). We shall furnish to the Boards of Directors of the Plan Funds, for their review on a quarterly basis, a written report of the amounts expended under the Plans and the purposes for which such expenditures were made. The Plans and provisions of any agreement relating to such Plans must be approved annually by a vote of the Plan Funds' Directors, including such persons who are not interested persons of the Plan Funds and who have no financial interest in the Plans or any related agreement ("Rule 12b-1 Directors"). The Plans or the provisions of this Agreement relating to such Plans may be terminated at any time by the vote of a majority of the Plan Funds' Boards of Directors, including Rule 12b-1 Directors, or by a vote of a majority of the outstanding shares of the Plan Funds, on sixty (60) days' written notice, without payment of any penalty. The Plans or the provisions of this Agreement may also be terminated by any act that terminates the Distribution Agreement between us and the Plan Funds. In the event of the termination of the Plans for any reason, the provisions of this Agreement relating to the Plans will also terminate. Continuation of the Plans and provisions of this Agreement relating to such Plans are conditioned on Rule 12b-1 Directors being ultimately responsible for selecting and nominating any new Rule 12b-1 Directors. Under Rule 12b-1, Directors of any of the Plan Funds have a duty to request and evaluate, and persons who are party to any agreement related to a Plan have a duty to furnish, such information as may reasonably be necessary to an informed determination of whether the Plan or any agreement should be implemented or continued. Under Rule 12b-1, Plan Funds are permitted to implement or continue Plans or the provisions of this Agreement relating to such Plans from year-to-year only if, based on certain legal considerations, the Boards of Directors are able to conclude that the Plans will benefit the Plan Funds. Absent such yearly determination the Plans and the provisions of this Agreement relating to the Plans must be terminated as set forth above. In addition, any obligation assumed by a Fund pursuant to this Agreement shall be limited in all cases to the assets of such Fund and no person shall seek satisfaction thereof from shareholders of a Fund. You agree to waive payment of any amounts payable to you by us under a Fund's Plan of Distribution pursuant to Rule 12b-1 until such time as we are in receipt of such fee from the Fund. The provisions of the Rule 12b-1 Plans between the Plan Funds and us, insofar as they relate to Plans, shall control over the provisions of this Agreement in the event of any inconsistency. 11. REGISTRATION OF SHARES. Upon request, we shall notify you of the states or other jurisdictions in which each Fund's shares are currently registered or qualified for sale to the public. We shall have no obligation to register or qualify, or to maintain registration or qualification of, Fund shares in any state or other jurisdiction. We shall have no responsibility, under the laws regulating the sale of securities in any U.S. or foreign jurisdiction, for the qualification or status of persons selling Fund shares or for the manner of sale of Fund shares. Except as stated in this paragraph, we shall not, in any event, be liable or responsible for the issue, form, validity, enforceability and value of such shares or for any matter in connection therewith, and no obligation not expressly assumed by us in this Agreement shall be implied. Nothing in this Agreement, however, shall be deemed to be a condition, stipulation or provision binding any person acquiring any security to waive compliance with any provision of the Securities Act of 1933, or of the rules and regulations of the Securities and Exchange Commission, or to relieve the parties hereto from any liability arising under the Securities Act of 1933. 12. FUND INFORMATION. No person is authorized to give any information or make any representations concerning shares of any Fund except those contained in the Fund's current prospectus or in materials issued by us as information supplemental to such prospectus. We will supply prospectuses, reasonable quantities of supplemental sale literature, sales bulletins, and additional information as issued. You agree not to use other advertising or sales material relating to the Funds except that which (a) conforms to the requirements of any applicable laws or regulations of any government or authorized agency in the U.S. or any other country, having jurisdiction over the offering or sale of shares of the Funds, and (b) is approved in writing by us in advance of such use. Such approval may be withdrawn by us in whole or in part upon notice to you, and you shall, upon receipt of such notice, immediately discontinue the use of such sales literature, sales material and advertising. You are not authorized to modify or translate any such materials without our prior written consent. 13. INDEMNIFICATION. You further agree to indemnify, defend and hold harmless us, the Funds, their officers, directors and employees from any and all losses, claims, liabilities and expenses arising out of (1) any alleged violation of any statute or regulations (including without limitation the securities laws and regulations of the United States or any state or foreign country) or any alleged tort or breach of contract, in or related to the offer and sale by you of shares of the Funds pursuant to this Agreement (except to the extent that our negligence or failure to follow correct instructions received from you is the cause of such loss, claim, liability or expense), (2) any redemption or exchange pursuant to telephone instructions received from you or your agents or employees, or (3) the breach by you of any of the terms and conditions of this Agreement. 14. TERMINATION; SUCCESSION; AMENDMENT. Each party to this Agreement may cancel its participation in this Agreement by giving written notice to the other party. Such notice shall be deemed to have been given and to be effective on the date on which it was either delivered personally to the other party or any officer or member thereof, or was mailed postpaid or delivered to a telegraph office for transmission to the other party's Chief Legal Officers at the addresses shown herein or in the most recent NASD Manual. This Agreement shall terminate immediately upon the appointment of a Trustee under the Securities Investor Protection Act or any other act of insolvency by you. The termination of this Agreement by any of the foregoing means shall have no effect upon transactions entered into prior to the effective date of termination. A trade placed by you subsequent to your voluntary termination of this Agreement will not serve to reinstate the Agreement. Reinstatement, except in the case of a temporary suspension of a dealer, will only be effective upon written notification by us. Unless terminated, this Agreement shall be binding upon each party's successors or assigns. This Agreement may be amended by us at any time by written notice to you and your placing of an order or acceptance of payments of any kind after the effective date and receipt of notice of any such Amendment shall constitute your acceptance of such Amendment. 15. SETOFF; DISPUTE RESOLUTION. Should any of your concession accounts with us have debit balance, we may offset and recover the amount owed from any other account you have with us, without notice or demand to you. In the event of a dispute concerning any provision of this Agreement, either party may require the dispute to be submitted to binding arbitration under the commercial arbitration rules of the NASD or the American Arbitration Association. Judgment upon any arbitration award may be entered by any state or federal court having jurisdiction. This Agreement shall be construed in accordance with the laws of the State of Kansas, not including any provision which would require the general application of the law of another jurisdiction. 16. ACCEPTANCE; CUMULATIVE EFFECTIVE. This Agreement is cumulative and supersedes any agreement previously in effect. It shall be binding upon the parties hereto when signed by us and accepted by you. If you have a current dealer agreement with us, your first trade or acceptance of payments from us after receipt of this Agreement, as it may be amended pursuant to paragraph 14, above, shall constitute your acceptance of its terms. Otherwise, your signature below shall constitute your acceptance of its terms. SECURITY DISTRIBUTORS, INC. By: _______________________________________ Gregory J. Garvin, President 700 Harrison, Topeka, Kansas 66636-0001 Attention: Chief Legal Officer (for legal notices only) (785) 431-3000 Dealer: Please complete and sign this section and return the original to us. Dealer:______________________________ NASD CRD #____________________________ By: ______________________________ ______________________________________ Street Name: ______________________________ ______________________________________ Title: ______________________________ City State Zip Date: ______________________________ Telephone_____________________________ SMC 52B (R8-00) EX-99.G(1) 5 0005.txt CUSTODY AGREEMENT - UMB CUSTODY AGREEMENT Dated January 1, 1995 As amended September 24, 1998 Between UMB BANK, N.A. and THE SECURITY FUNDS 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 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 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 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 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 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 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 AMENDMENT TO CUSTODY AGREEMENT DATED NOVEMBER 3, 2000 The following open-end management investment companies ("Funds") are currently parties to the Custody Agreement dated January 1, 1995, as amended September 24, 1998, with UMB Bank, n.a. ("Custodian"). This amendment is entered into to reflect: (i) certain name changes which have occurred within the Funds; (ii) to add Total Return Series of Security Equity Fund to the agreement which the Custodian has acted as custodian of the assets since July 1999; and (iii) remove Advisor's Fund which has been dissolved. The parties agree to be bound by all the terms and conditions contained in said Agreement. LIST OF FUNDS: DATE ENTERED -------------- ------------ Security Equity Fund: Equity Series January 1, 1995 Social Awareness Series September 24, 1998 Mid Cap Value Series (formerly Value Series) September 24, 1998 Small Cap Growth Series (formerly Small Company Series) September 24, 1998 Enhanced Index Series January 27, 1999 Select 25 Series January 27, 1999 Total Return Series July 1999 Security Growth and Income Fund January 1, 1995 Security Ultra Fund January 1, 1995 SBL Fund Series A January 1, 1995 Series B January 1, 1995 Series C January 1, 1995 Series E January 1, 1995 Series H April 26, 1999 Series J January 1, 1995 Series P September 24, 1998 Series S January 1, 1995 Series V September 24, 1998 Series X September 24, 1998 Series Y April 26, 1999 Security Income Fund Diversified Income Series (formerly U.S. Government January 1, 1995 Series; Corporate Bond Series and Limited Maturity Bond Series merged into Diversified Income Series) High Yield Series September 24, 1998 Capital Preservation Series April 26, 1999 Security Municipal Bond Fund January 1, 1995 Security Cash Fund January 1, 1995 SECURITY EQUITY FUND Equity Series Social Awareness Series Mid Cap Value Series (formerly Value Series) Small Cap Growth Series (formerly Small Company Series) Enhanced Index Series Select 25 Series ATTEST: Total Return Series AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President ATTEST: SECURITY GROWTH AND INCOME FUND AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President ATTEST: SECURITY ULTRA FUND AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President SBL FUND Series A, B, C, E, H, J, P, S, V, ATTEST: X and Y AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President SECURITY INCOME FUND Diversified Income Series High Yield Series ATTEST: Capital Preservation Series AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President ATTEST: SECURITY MUNICIPAL BOND FUND AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President ATTEST: SECURITY CASH FUND AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President ATTEST: UMB BANK, N.A. By: - ------------------------------------- ------------------------------ Name: ------------------------------ Title: ------------------------------ 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 Equity Series Social Awareness Series Mid Cap Value Series (formerly Value Series) Small Cap Growth Series (formerly Small Company Series) Enhanced Index Series Select 25 Series ATTEST: Total Return Series AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President Date: November 3, 2000 ATTEST: SECURITY GROWTH AND INCOME FUND AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President Date: November 3, 2000 ATTEST: SECURITY ULTRA FUND AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President Date: November 3, 2000 SBL FUND Series A, B, C, E, H, J, P, S, V, ATTEST: X and Y AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President Date: November 3, 2000 SECURITY INCOME FUND Diversified Income Series High Yield Series ATTEST: Capital Preservation Series AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President Date: November 3, 2000 ATTEST: SECURITY MUNICIPAL BOND FUND AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President Date: November 3, 2000 ATTEST: SECURITY CASH FUND AMY J. LEE By: JAMES R. SCHMANK - ------------------------------------- ------------------------------ Amy J. Lee Title: President Date: November 3, 2000 ATTEST: UMB BANK, N.A. By: - ------------------------------------- ------------------------------ Name: ------------------------------ Title: ------------------------------ Date: ------------------------------ EX-99.G(2) 6 0006.txt CUSTODY AGREEMENT - STATE STREET CUSTODIAN AGREEMENT This Agreement between the registered investment companies having executed this Agreement, 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 Funds 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]. SBL FUND FUND SIGNATURE ATTESTED TO BY: By: JAMES R. SCHMANK By: CHRIS SWICKARD ------------------------------- ------------------------------ Name: James R. Schmank Name: Chris Swickard ------------------------------- ------------------------------ Title: President Title: Assistant Secretary ------------------------------- ------------------------------ SECURITY EQUITY FUND FUND SIGNATURE ATTESTED TO BY: By: JAMES R. SCHMANK By: CHRIS SWICKARD ------------------------------- ------------------------------ Name: James R. Schmank Name: Chris Swickard ------------------------------- ------------------------------ Title: President Title: Assistant Secretary ------------------------------- ------------------------------ STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY: By: ROBERT G. NOVELLANO By: MARVIN RAU ------------------------------ ------------------------------ Name: Robert G. Novellano Name: Marvin Rau ------------------------------ ------------------------------ Title: Vice President Title: Vice President ------------------------------ ------------------------------ SCHEDULE I SBL FUND * Series G (Large Cap Growth Series) * Series L (Capital Growth Series) * Series Q (Small Cap Value Series) * Series T (Technology Series) * Series W (Main Street Growth and Income Series) SECURITY EQUITY FUND * Large Cap Growth Series * Technology Series STATE STREET SCHEDULE A GLOBAL CUSTODY NETWORK SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES NON-MANDATORY COUNTRY SUBCUSTODIAN DEPOSITORIES 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 -- Republic Corporation Limited, Shanghai and of China Shenzhen branches 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 The Hongkong and Shanghai Banking -- of 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, (Cedel Bank, societe anonyme)/State S.A. Street London Limited INTERSETTLE (for EASDAQ Securities) STATE STREET SCHEDULE B GLOBAL CUSTODY NETWORK MANDATORY DEPOSITORIES COUNTRY MANDATORY DEPOSITORIES 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 -Shanghai Securities Central Clearing and Registration Republic 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 --Stredisko cennych papiru; Republic -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 Securities Depository Corporation Korea 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 *Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice 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 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 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. 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. AMENDMENT NUMBER 1 TO SCHEDULE I WHEREAS, Security Equity Fund and SBL Fund (the "Funds") are parties to a Custody Agreement (the "Agreement") dated April 28, 2000 with State Street Bank and Trust Company on behalf of certain of their respective series; and WHEREAS, the Board of Directors of the Funds at a meeting duly called and held on May 5, 2000 voted to extend the Agreement to certain other series as specified in Amendment Number 1 to Schedule I hereto; and WHEREAS, Section 18 of the Agreement provides that it may be extended to other series of the Funds by the written agreement of the parties; NOW THEREFORE, the parties agree that the Agreement shall be extended to the Series listed on Amendment Number 1 to Schedule I. IN WITNESS WHEREOF, each of the parties have caused this instrument to be executed in its name and behalf by its duly authorized representative as of May 5, 2000. SBL FUND FUND SIGNATURE ATTESTED TO BY: By: JAMES R. SCHMANK By: AMY J. LEE ------------------------------- ------------------------------ Name: James R. Schmank Name: Amy J. Lee ------------------------------- ------------------------------ Title: President Title: Secretary ------------------------------- ------------------------------ SECURITY EQUITY FUND FUND SIGNATURE ATTESTED TO BY: By: JAMES R. SCHMANK By: AMY J. LEE ------------------------------- ------------------------------ Name: James R. Schmank Name: Amy J. Lee ------------------------------- ------------------------------ Title: President Title: Secretary ------------------------------- ------------------------------ STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY: By: ROBERT G. NOVELLANO By: MARVIN RAU ------------------------------ ------------------------------ Name: Robert G. Novellano Name: Marvin Rau ------------------------------ ------------------------------ Title: Vice President Title: Vice President ------------------------------ ------------------------------ SERIES WHICH ADOPTED THE AGREEMENT ON APRIL 28, 2000 SBL FUND * Series G (Large Cap Growth Series) * Series L (Capital Growth Series) * Series Q (Small Cap Value Series) * Series T (Technology Series) * Series W (Main Street Growth and Income Series) SECURITY EQUITY FUND * Large Cap Growth Series * Technology Series SERIES ADOPTING THE AGREEMENT ON MAY 5, 2000 SBL FUND * Series D (Global Series) * Series I (International Series) * Series K (Global Strategic Income Series) * Series M (Global Total Return Series) * Series N (Managed Asset Allocation Series) * Series O (Equity Income Series) SECURITY EQUITY FUND * Global Series * International Series EX-99.I 7 0007.txt LEGAL OPINION [SBG LOGO] - -------------------------------------------------------------------------------- Security Benefit Life Insurance Company 700 SW Harrison St. Security Benefit Group, Inc. Topeka, Kansas 66636-0001 Security Distributors, Inc. (785) 431-3000 Security Management Company, LLC November 17, 2000 Security Equity Fund 700 Harrison Street Topeka, KS 66636-0001 Dear Sir/Madam: In connection with the registration under the Securities Act of 1933 of an indefinite number of shares of common stock of Security Equity Fund (the "Company"), I have examined such matters as I have deemed necessary to give this opinion. On the basis of the foregoing, it is my opinion that the shares have been duly authorized and, when paid for as contemplated by the Company's Registration Statement, will be validly issued, fully paid, and non-assessable. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement. Sincerely, CHRIS SWICKARD Christopher D. Swickard, Esq. Assistant Secretary Security Equity Fund EX-99.M(4) 8 0008.txt CLASS S DISTRIBUTION PLAN SECURITY EQUITY FUND CLASS S 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 S 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 S 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 beginning in the second year and for each year thereafter, quarterly, in arrears in an amount equal to a 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 account maintenance and shareholder 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 with respect to any Series 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; and (b) 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 S 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 S 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: July 21, 2000 By: AMY J. LEE ------------------------------- ---------------------------------- 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: July 21, 2000 ------------------------- EX-99.P(1) 9 0009.txt CODE OF ETHICS - SECURITY FUNDS SECURITY FUNDS CODE OF ETHICS SECTION 1 - LEGAL REQUIREMENTS Rule 17j-1 of the Investment Company Act of 1940, as amended (the "Act") provides that every registered investment company and the investment adviser and principal underwriter of such investment company shall adopt a written code of ethics containing provisions reasonably necessary to prevent its access persons from engaging, in connection with the purchase or sale of a security held or to be acquired by the registered investment company, in any of the following prohibited practices: (1) employing any device, scheme or artifice to defraud such registered investment company; (2) making to such registered investment company any untrue statement of a material fact or omitting to state to such registered investment company a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; (3) engaging in any act, practice or course of business which operates or would operate as a fraud or deceit upon a registered investment company; or (4) engaging in any manipulative practice with respect to such registered investment company. The Security Funds, Security Management Company, LLC ("SMC"), and Security Distributors, Inc. ("SDI") have adopted this Code of Ethics to satisfy the requirements of Rule 17j-1 of the Act. In addition, SMC adopts these procedures with respect to its private investment advisory clients ("Private Accounts") as a measure reasonably designed to prevent its access persons, with respect to personal trading, from violating the antifraud provisions of the Investment Advisers Act of 1940. Investment Advisers serving as Sub-Advisers to certain of the Security Funds have their own code of ethics. Access persons of such Sub-Advisers, including access persons that are also access persons of the Funds, are subject to their employer's code of ethic and reporting requirements in lieu of this Code. Certain terms used in this Code are defined in Appendix A attached hereto. SECTION 2 - FIDUCIARY PRINCIPLES This Code of Ethics is based upon the principle that the access persons of the Security Funds and of the Private Accounts have a fiduciary duty to the Funds, Fund shareholders and to the Private Accounts to conduct their personal securities transactions in a manner that does not interfere with Fund portfolio or Private Account transactions or otherwise take unfair advantage of their relationship with the Funds or the Private Accounts. Accordingly, access persons shall: (1) at all times place the interests of Fund shareholders and Private Account clients first; (2) conduct all personal securities transactions consistent with this Code of Ethics and in such a manner as to avoid any actual or potential conflict of interest or any abuse of their position of trust and responsibility; and (3) at all times avoid taking inappropriate advantage of their positions. SECTION 3 - PROHIBITIONS No access person shall purchase or sell, directly or indirectly, any securities in which he or she has, or by reason of such transaction acquires, any direct or indirect beneficial ownership and which he or she knows or should have known at the time of such purchase or sale: (1) is being considered for purchase or sale by one or more of the Funds or Private Accounts; (2) is being purchased or sold by one or more of the Funds or Private Accounts; or (3) is being offered in an initial public offering ("IPO"). The foregoing prohibitions do not apply to independent directors of the Funds, unless such director knew or, in the ordinary course of fulfilling his or her official duties as a director, should have known that the security was being considered for purchase or sale by one or more of the Funds or was being purchased or sold by one or more of the Funds. With respect to purchases or sales of securities made or considered on behalf of a Fund by a Sub-Adviser (other than SMC), the foregoing prohibitions shall not apply, unless the access person knew, or should have known, that the security was being considered for purchase or sale, or was being purchased or sold, by one or more of the Funds. Access persons shall not make more than 20 securities trades, including DE MINIMIS transactions as defined below, in any calendar month. Access persons may not PROFIT from the purchase and sale or sale and purchase of the same (or equivalent) securities within 30 calendar days; provided that this provision does not apply to transactions in options and futures. Any profits made in connection with a transaction that violates this provision shall be disgorged. An access person may apply to the President of SMC for an exemption from this prohibition based upon hardship and may trade within the 30 calendar day-period with the President's written approval. This prohibition is not applicable to DE MINIMIS transactions. Portfolio managers shall not receive any gift or other thing of more than DE MINIMIS value from any person or entity that does business with or on behalf of one or more of the Funds or the Private Accounts. Portfolio managers, research analysts and traders of SMC shall not purchase or sell a security during the period beginning seven (7) days before and ending seven (7) days after a Fund or Private Account trades in that security. For the traders and portfolio managers and research analysts for the equity Funds, the seven-day blackout period applies to transactions of the Funds and Private Accounts investing primarily in equity securities. For portfolio managers and research analysts for the fixed income Funds, the seven-day blackout period applies to transactions of the Funds and Private Accounts investing primarily in fixed income securities. Any profits made by a portfolio manager, research analyst or trader in connection with a transaction that violates this provision shall be disgorged and paid to the Fund or Private Account as appropriate. Portfolio managers shall not serve on the boards of directors of publicly traded companies, absent prior authorization from the President and Secretary of SMC and the Funds' board of directors. SECTION 4 - EXEMPTED TRANSACTIONS The prohibitions of Section 3 of this Code shall not apply to: (1) purchases or sales effected in any account over which the access person has no direct or indirect influence or control; (2) purchases or sales of securities which are not eligible for purchase or sale by the Funds or Private Accounts; (3) purchases or sales which are non-volitional on the part of either the access person, the Funds or the Private Accounts, for example, gifts, splits, tender offers, mergers, and stock dividends; (4) purchases or sales which are made pursuant to a systematic investment program; (5) DE MINIMIS purchases or sales of securities (not including IPOs or trades within the 7-day blackout period) in the following amounts per calendar month: ----------------------------------------------------- MARKET TOTAL TRANSACTIONS* CAPITALIZATION OF SECURITY PER SECURITY PER MONTH ----------------------------------------------------- Less than $1 billion Up to $10,000 $1 - $5 billion Up to $25,000 More than $5 billion Up to $50,000 ----------------------------------------------------- *Total transactions include all purchases and sales of that security in a calendar month. Purchases and sales are not netted. For example, a purchase of $5,000 and a sale of $10,000 equal total transactions of $15,000. ----------------------------------------------------- (6) the purchase of securities in an initial public offering when the access person is purchasing such securities pursuant to non-transferable subscription rights; and (7) the purchase or sale of exchange-traded funds that track an index, including open-end investment companies and unit investment trusts, and options and futures on broad based indices. SECTION 5 - REPORTING PROCEDURES Every access person shall report, not later than ten days after the end of the calendar quarter in which the transaction was effected, the following information with respect to transactions in any security in which such access person has or by reason of such transaction acquires, any direct or indirect beneficial ownership in the security: (1) the date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares, and the principal amount of each security involved; (2) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); (3) the price at which the transaction was effected; (4) the name of the broker, dealer or bank with or through whom the transaction was effected; and (5) the date the report is submitted by the Access Person. Any report required under Section 5 may contain a statement that the report shall not be construed as an admission by the person making such report that he or she has any direct or indirect beneficial ownership in the security to which the report relates. Such report is to be provided on the Quarterly Personal Security Transaction Report, attached as Appendix B. In addition, upon commencement of employment, and not later than ten days after employment, with SMC, SDI or the Funds, every access person shall disclose all personal securities holdings by filing an Initial Holdings Report with the Secretary of SMC. The personal securities holdings shall be provided on the Initial Holdings Report form attached as Appendix C. Each access person shall provide annually to the Secretary of SMC an Annual Holdings Report disclosing all securities in which he or she had any direct or indirect beneficial ownership. Such disclosure is to be provided on the Annual Holdings Report attached as Appendix D. The Annual Holdings Report shall be provided on or before January 30th of each year, and the information in the report must be current as of thirty days or less before submission to the Secretary of SMC. In addition to the foregoing reporting requirements, access persons shall direct their broker to supply to the Secretary of SMC, on a timely basis, duplicate copies of confirmations of all personal securities transactions. These reporting requirements shall not apply to independent directors of the Funds, except that such directors shall report any purchase or sale of a security that he or she knew or, in the ordinary course of fulfilling his or her official duties as a director, should have known was being considered for purchase or sale by one or more of the Funds or was being purchased or sold by one or more of the Funds. Further, these reporting requirements SHALL apply to the exempted transactions set forth in Section 4 above except those transactions effected for any account over which such person does not have any direct or indirect influence or control. SECTION 6 - PRECLEARANCE OF TRANSACTIONS All access persons shall, prior to executing personal securities transactions, preclear such transactions on the "Pre-approval of Personal Securities Transactions" form (attached as Appendix E hereto) with the Compliance Administrator of SMC, or in his or her absence, the President or Secretary of SMC. (Portfolio Managers are also required to complete the Portfolio Manager Certification (see Appendix F) as part of obtaining pre-clearance of any transaction.) The Compliance Administrator, President or Secretary shall review the proposed transaction to ensure that it complies with the requirements set forth in this Code of Ethics. If approved, he or she shall state on the pre-approval form the rationale for approving any transaction in a private placement security. Preclearance, once obtained, shall remain valid for three business days following the date of the approval. The form evidencing such approval shall be filed with the Secretary of SMC. The requirement to preclear transactions shall not apply to independent directors of the Funds, except that such a director shall preclear any transactions in securities that he or she knows or, in the ordinary course of fulfilling his or her official duties as a director, should know are being considered for purchase or sale by one or more of the Funds or are being purchased or sold by one or more of the Funds. The requirement to pre-clear transactions shall not apply to the exempted transactions set forth in Section 4. SECTION 7 - SANCTIONS The Secretary of SMC shall review the above-referenced quarterly "Personal Securities Transaction Reports" submitted by access persons to determine whether any violations of the policy have occurred. If a violation is found to have occurred, whether intentionally or unintentionally, the violator will be placed on probation for a period of twelve (12) months. Repeated violations of the policy will constitute grounds for further disciplinary action or, possibly, termination of employment. SECTION 8 - ANNUAL REPORT TO FUNDS' BOARD OF DIRECTORS The Secretary of SMC shall on an annual basis provide a written report to the Funds' board of directors concerning the operation of this Code of Ethics. Such report shall: (1) certify to the Board that SMC and SDI have adopted procedures pursuant to Rule 17j-1 reasonably necessary to prevent access persons from violating this Code of Ethics; (2) summarize existing procedures concerning personal investing and any changes made during the preceding year; (3) describe any issues arising under the Code of Ethics, including information about material violations and sanctions imposed during the past year; and (4) identify any recommended changes in existing restrictions or procedures based upon the Funds' experience under their Code of Ethics, evolving industry practices and developments in applicable laws or regulations. SECTION 9 - APPROVAL BY THE BOARD OF DIRECTORS The foregoing Code of Ethics has been reviewed and approved by the Security Funds Board of Directors and is approved pursuant to Rule 17j-1 under the Investment Company Act of 1940. SECTION 10 - ANNUAL CERTIFICATION SMC, SDI and the Funds consider compliance with this Code of Ethics an important part of the fiduciary duty of the Funds' and the Private Account's access persons. Accordingly, access persons will be required to certify annually that they have read and understand the Code of Ethics; recognize that they are subject thereto; have complied with the requirements of the Code of Ethics; and have disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of the code. I have read and understand the foregoing Security Funds Code of Ethics and have complied, and will comply in the future, in all respects with the requirements of the Code. Signed: ______________________________ Name: ______________________________ Dated: ______________________________ APPENDIX A DEFINITIONS Important terms used in this Code of Ethics are defined below: The term "access person" means any employee of: (1) Security Management Company, LLC ("SMC") or the Security Funds ("the Funds") who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a security, or whose functions relate to the making of any recommendations with respect to such purchases or sales; (2) all officers and directors of SMC and the Funds; (3) any director or officer of Security Distributors, Inc. ("SDI") who in the ordinary course of his or her business makes, participates in, or obtains information regarding the purchase or sale of securities for the Funds or whose functions or duties relate to the making of any recommendations to such investment company with respect to such purchases or sales; and (4) any natural person who both (i) controls, as that term is defined in Section 2(a)(9) of the Act, SMC or the Funds and (ii) obtains information concerning recommendations made to the Funds with regard to the purchase or sale of a security. The term "beneficial ownership" means securities held by: (a) your spouse, minor children or relatives who share the same house with you; (b) an estate for your benefit; (c) a trust, of which (i) you are a trustee or you or members of your immediate family have a vested interest in the income or corpus of the trust, (ii) you own a vested beneficial interest, or (iii) you are the settlor and you have the power to revoke the trust without the consent of all the beneficiaries; (d) a partnership in which you are a partner; (e) a corporation (other than with respect to treasury shares of the corporation) of which you are an officer, director or 10 percent stockholder; (f) any other person if, by reason of contract, understanding, relationship, agreement or other arrangement, you obtain therefrom benefits substantially equivalent to those of ownership; or (g) your spouse or minor children or any other person, if, even though you do not obtain therefrom the above-mentioned benefits of ownership, you can vest or revest title in yourself at once or at some future time. A beneficial owner of a security also includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power and/or investment power with respect to such security. Voting power includes the power to vote, or to direct the voting of such security, and investment power includes the power to dispose, or to direct the disposition of such security. A person is the beneficial owner of a security if she or he has the right to acquire beneficial ownership of such security at any time within sixty (60) days. The term "security" means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest, option or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for security, fractional undivided interest in oil, gas, or other mineral rights, any put, call, straddle, option or privilege entered into on a national securities exchange relating to foreign currency or, in general, any interest or instrument commonly known as a security, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing, provided, however, that security shall not mean securities issued by the Government of the United States, bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements, shares of registered open-end investment companies ("mutual funds"), variable annuity contracts and variable life insurance policies. An "independent director" is a director who is not an "interested person" of the Funds as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940. A security "is being considered for purchase or sale" when a recommendation to purchase or sell a security has been made and communicated and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation. Security Funds include the following funds and their series: SBL Fund, Security Cash Fund, Security Equity Fund, Security Income Fund, Security Growth and Income Fund, Security Municipal Bond Fund, and Security Ultra Fund. The term "systematic investment program" means any program to purchase or sell securities in predetermined amounts (calculated on the basis of shares or dollars) at specified time intervals, for example contributions to a 401(k) or profit sharing plan. APPENDIX B QUARTERLY PERSONAL SECURITY TRANSACTION REPORT CALENDAR QUARTER ENDED _________________ REPORT DATE:_______________ - -------------------------------------------------------------------------------- INTEREST TITLE AND RATE AND NAME OF BROKER, NUMBER OF DATE AND PRICE MATURITY DEALER, OR SHARES OF NATURE OF AT WHICH TOTAL DATE (IF BANK HANDLING SECURITY TRANSACTION EFFECTED PRICE APPLICABLE) TRANSACTION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This report is filed pursuant to and in accordance with Rule 204-2 under the Investment Advisor's Act of 1940. To the best of my knowledge and belief the foregoing schedule accurately and completely lists all of the security transactions which took place during the quarter indicated in which I had direct or indirect beneficial ownership. BY MY TYPED SIGNATURE AND SBG EMPLOYEE NUMBER SHOWN BELOW, I CERTIFY THAT I AM THE PERSON STATED AND THE PERSONAL SECURITIES TRANSACTION INFORMATION REPORTED IS TRUE AND CORRECT FOR THE CALENDAR QUARTER STATED. - -------------------------------------------------------------------------------- Employed By Typed Signature Associate Number APPENDIX C INITIAL HOLDINGS REPORT REPORT DATE:_________________ - -------------------------------------------------------------------------------- NAME OF ANY BROKER(S), DEALER(S), TITLE OF NUMBER PRINCIPAL OR BANK(S) WITH WHOM MY SECURITIES SECURITY OF SHARES AMOUNT ARE MAINTAINED AS OF THE DATE BELOW - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This report is filed pursuant to and in accordance with Rule 204-2 under the Investment Advisor's Act of 1940. To the best of my knowledge and belief the foregoing schedule accurately and completely lists all of the security holdings indicated in which I had direct or indirect beneficial ownership as of _____________, the date I became an Access Person as defined under the Code of Ethics. BY MY TYPED SIGNATURE AND SBG EMPLOYEE NUMBER SHOWN BELOW, I CERTIFY THAT I AM THE PERSON STATED AND THE INITIAL HOLDINGS INFORMATION REPORTED IS TRUE AND CORRECT. - -------------------------------------------------------------------------------- Employed By Typed Signature Associate Number APPENDIX D ANNUAL PERSONAL HOLDINGS REPORT - -------------------------------------------------------------------------------- TITLE OF NUMBER NAME OF ANY BROKER, DEALER, OR BANK SECURITY OF SHARES TOTAL PRICE WITH WHOM MY SECURITIES ARE MAINTAINED - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This report is filed pursuant to and in accordance with Rule 204-2 under the Investment Advisor's Act of 1940. To the best of my knowledge and belief the foregoing schedule accurately and completely lists all of the security holdings indicated in which I had direct or indirect beneficial ownership as of ______________. BY MY TYPED SIGNATURE AND SBG EMPLOYEE NUMBER SHOWN BELOW, I CERTIFY THAT THE INFORMATION REPORTED ON THIS FORM IS TRUE AND CORRECT. - -------------------------------------------------------------------------------- Date Employed By Typed Signature Associate Number [DATE] [DEALER ADDRESS] Subj: Account Number _________ Dear Sir or Madam: I am an access person of Security Management Company ("SMC"), an investment adviser registered with the Securities and Exchange Commission. SMC has adopted a Code of Ethics as required by Rule 17j-1 under the Investment Company Act of 1940. As an access person, I am subject to SMC's Code of Ethics, which requires that I arrange to have my broker send duplicate confirmations of my personal securities transactions to SMC. Accordingly, please provide duplicate confirmations of any securities transactions for the above-referenced account to: Amy J. Lee, Secretary Security Management Company, LLC 700 S.W. Harrison Street Topeka, Kansas 66636-0001 If you have any questions concerning this matter, please contact me at (785) _____-______. Sincerely, EX-99.P(3) 10 0010.txt CODE OF ETHICS - STRONG CODE OF ETHICS FOR ACCESS PERSONS OF THE STRONG FAMILY OF MUTUAL FUNDS, STRONG CAPITAL MANAGEMENT, INC., STRONG INVESTMENTS, INC., AND FLINT PRAIRIE, L. L. C. [STRONG LOGO] STRONG CAPITAL MANAGEMENT, INC. October 22, 1999 CODE OF ETHICS For Access Persons of The Strong Family of Mutual Funds, Strong Capital Management, Inc., Strong Investments, Inc., and Flint Prairie, L. L. C. Dated October 22, 1999 TABLE OF CONTENTS I. INTRODUCTION.......................................................... 1 A. Fiduciary Duty.................................................... 1 1. Place the interests of Advisory Clients first................ 1 2. Avoid taking inappropriate advantage of their position....... 1 3. Conduct all Personal Securities Transactions in full compliance with this Code including both the preclearance and reporting requirements................................... 1 B. Appendices to the Code............................................ 1 1. Definitions.................................................. 2 2. Contact Persons.............................................. 2 3. Disclosure of Personal Holdings in Securities................ 2 4. Acknowledgment of Receipt of Code of Ethics and Limited Power of Attorney............................................ 2 5. Preclearance Request for Access Persons...................... 2 6. Annual Code of Ethics Questionnaire.......................... 2 7. List of Broad-Based Indices.................................. 2 8. Gift Policy.................................................. 2 9. Insider Trading Policy....................................... 2 10. Electronic Trading Authorization Form........................ 2 11. Social Security Number/Tax Identification Form............... 2 C. Application of the Code to Independent Fund Directors............. 2 D. Application of the Code to Funds Subadvised by SCM................ 2 II. PERSONAL SECURITIES TRANSACTIONS...................................... 2 A. Annual Disclosure of Personal Holdings by Access Persons.......... 2 B. Preclearance Requirements for Access Persons...................... 3 1. General Requirement.......................................... 3 2. Transactions Exempt from Preclearance Requirements........... 3 a. Mutual Funds............................................. 3 b. No Knowledge............................................. 3 c. Certain Corporate Actions................................ 3 d. Rights................................................... 3 e. Application to Commodities, Futures, Options on Futures and Options on Broad-Based Indices....................... 3 f. Miscellaneous............................................ 4 TABLE OF CONTENTS (CONTINUED) C. Preclearance Requests............................................. 4 1. Trade Authorization Request Forms............................ 4 2. Review of Form............................................... 4 3. Access Person Designees...................................... 4 D. Prohibited Transactions........................................... 5 1. Prohibited Securities Transactions........................... 5 a. Initial Public Offerings................................. 5 b. Pending Buy or Sell Orders............................... 5 c. Seven Day Blackout....................................... 5 d. Intention to Buy or Sell for Advisory Client............. 6 e. 60-Day Blackout.......................................... 6 2. Always Prohibited Securities Transactions.................... 6 a. Inside Information....................................... 6 b. Market Manipulation...................................... 6 c. Large Positions in Registered Investment Companies....... 6 d. Others................................................... 6 3. Private Placements........................................... 6 4. No Explanation Required for Refusals......................... 7 E. Execution of Personal Securities Transactions..................... 7 F. Length of Trade Authorization Approval............................ 7 G. Trade Reporting Requirements...................................... 7 1. Reporting Requirement........................................ 7 2. Disclaimers.................................................. 8 3. Quarterly Review............................................. 8 4. Availability of Reports...................................... 8 III. FIDUCIARY DUTIES...................................................... 9 A. Confidentiality................................................... 9 B. Gifts............................................................. 9 1. Accepting Gifts.............................................. 9 2. Solicitation of Gifts........................................ 9 3. Giving Gifts................................................. 9 C. Payments to Advisory Clients...................................... 9 D. Corporate Opportunities........................................... 9 E. Undue Influence................................................... 10 F. Service as a Director............................................. 10 G. Involvement in Criminal Matters or Investment-Related Civil Proceedings....................................................... 10 TABLE OF CONTENTS (CONTINUED) IV. COMPLIANCE WITH THIS CODE OF ETHICS................................... 10 A. Code of Ethics Review Committee................................... 10 1. Membership, Voting, and Quorum............................... 10 2. Investigating Violations of the Code......................... 10 3. Annual Reports............................................... 11 B. Remedies.......................................................... 11 1. Sanctions.................................................... 11 2. Sole Authority............................................... 11 3. Review....................................................... 11 C. Exceptions to the Code............................................ 12 D. Compliance Certification.......................................... 12 E. Record Retention.................................................. 12 1. Code of Ethics............................................... 12 2. Violations................................................... 12 3. Required Reports............................................. 12 4. Access Person List........................................... 12 F. Inquiries Regarding the Code...................................... 12 CODE OF ETHICS For Access Persons of The Strong Family of Mutual Funds, Strong Capital Management, Inc., Strong Investments, Inc., and Flint Prairie, L. L. C. Dated October 22, 1999 TABLE OF APPENDICES Appendix 1 (Definitions)............................................... 13 Appendix 2 (Contact Persons)........................................... 16 Appendix 3 (Disclosure of Personal Holdings in Securities)............. 17 Appendix 4 (Acknowledgment of Receipt of Code of Ethics and Limited Power of Attorney).......................................... 18 Appendix 5 (Preclearance Request for Access Persons)................... 19 Appendix 6 (Annual Code of Ethics Questionnaire)....................... 20 Appendix 7 (List of Broad-Based Indices)............................... 23 Appendix 8 (Gift Policy)............................................... 24 Appendix 9 (Insider Trading Policy).................................... 26 Appendix 10 (Electronic Trading Authorization Form) .................... 30 Appendix 11 (Social Security Number/Tax Identification Form) ........... 31 CODE OF ETHICS For Access Persons of The Strong Family of Mutual Funds, Strong Capital Management, Inc., Strong Investments, Inc., and Flint Prairie, L. L. C. Dated October 22, 1999 I. INTRODUCTION(1) A. FIDUCIARY DUTY. This Code of Ethics is based upon the principle that directors, officers and associates of Strong Capital Management, Inc. ("SCM"), Strong Investments, Inc. ("the Distributor"), the Strong Family of Mutual Funds ("the Strong Funds") and Flint Prairie, L. L. C. ("Flint Prairie") have a fiduciary duty to place the interests of clients ahead of their own. The Code applies to all Access Persons and focuses principally on preclearance and reporting of personal transactions in securities. Access Persons must avoid activities, interests and relationships that might interfere with making decisions in the best interests of the Advisory Clients of SCM. As fiduciaries, Access Persons must at all times: 1. PLACE THE INTERESTS OF ADVISORY CLIENTS FIRST. Access Persons must scrupulously avoid serving their own personal interests ahead of the interests of the Advisory Clients of SCM. AN ACCESS PERSON MAY NOT INDUCE OR CAUSE AN ADVISORY CLIENT TO TAKE ACTION, OR NOT TO TAKE ACTION, FOR PERSONAL BENEFIT RATHER THAN FOR THE BENEFIT OF THE ADVISORY CLIENT. For example, an Access Person would violate this Code by causing an Advisory Client to purchase a Security he or she owned for the purpose of increasing the price of that Security. 2. AVOID TAKING INAPPROPRIATE ADVANTAGE OF THEIR POSITION. The receipt of investment opportunities, perquisites or gifts from persons seeking business with the Strong Funds, SCM, the Distributor, Flint Prairie or their clients could call into question the exercise of an Access Person's independent judgment. Access persons may not, for example, use their knowledge of portfolio transactions to profit by the market effect of such transactions. 3. CONDUCT ALL PERSONAL SECURITIES TRANSACTIONS IN FULL COMPLIANCE WITH THIS CODE INCLUDING BOTH THE PRECLEARANCE AND REPORTING REQUIREMENTS. Doubtful situations should be resolved in favor of Advisory Clients. Technical compliance with the Code's procedures will not automatically insulate from scrutiny any trades that may indicate an abuse of fiduciary duties. - -------------------- 1 Capitalized words are defined in Appendix 1. B. APPENDICES TO THE CODE. The appendices to this Code are attached hereto, are a part of the Code and include the following: 1. DEFINITIONS--capitalized words as defined in the Code (Appendix 1), 2. CONTACT PERSONS, including the Preclearance Officer designees and the Code of Ethics Review Committee (Appendix 2), 3. DISCLOSURE OF PERSONAL HOLDINGS IN SECURITIES (Appendix 3), 4. ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS AND LIMITED POWER OF ATTORNEY (Appendix 4), 5. PRECLEARANCE REQUEST FOR ACCESS PERSONS (Appendix 5), 6. ANNUAL CODE OF ETHICS QUESTIONNAIRE (Appendix 6), 7. LIST OF BROAD-BASED INDICES (Appendix 7), 8. GIFT POLICY (Appendix 8), 9. INSIDER TRADING POLICY (Appendix 9) 10. Electronic Trading Authorization Form (Appendix 10), and 11. Social Security Number/Tax Identification Form (Appendix 11). C. APPLICATION OF THE CODE TO INDEPENDENT FUND DIRECTORS. This Code applies to Independent Fund Directors and requires Independent Fund Directors and their Immediate Families to report Securities Transactions to the Compliance Department in accordance with the trade reporting requirements (Section II.G.). However, provisions of the Code relating to the disclosure of personal holdings (Section II.A.), preclearance of trades (Section II.B.), prohibited transactions (II.D.1.), large positions in registered investment companies (Section II.D.2.c.), private placements (Section II.D.3.), restrictions on serving as a director of a publicly-traded company (Section III.F.) and receipt of gifts (Section III.B.) do not apply to Independent Fund Directors. D. APPLICATION OF THE CODE TO FUNDS SUBADVISED BY SCM. This Code does not apply to the directors, officers and general partners of Funds for which SCM serves as a subadviser. II. PERSONAL SECURITIES TRANSACTIONS A. ANNUAL DISCLOSURE OF PERSONAL HOLDINGS BY ACCESS PERSONS. Upon designation as an Access Person, and thereafter on an annual basis, all Access Persons must report on the Disclosure of Personal Holdings In Securities Form (Appendix 3) (or a substantially similar form) all Securities, including securities held in certificate form, in which they have a Beneficial Interest and all Securities in non-client accounts for which they make investment decisions (previously reported holdings, as well as those specifically excluded from the definition of Security, need not be reported). This provision does not apply to Independent Fund Directors. B. PRECLEARANCE REQUIREMENTS FOR ACCESS PERSONS. 1. GENERAL REQUIREMENT. Except for the transactions set forth in Section II.B.2., ALL SECURITIES TRANSACTIONS in which an Access Person or a member of his or her Immediate Family has a Beneficial Interest MUST BE PRECLEARED with the Preclearance Officer or his designee. This provision does not apply to transactions of Independent Fund Directors and their Immediate Families. 2. TRANSACTIONS EXEMPT FROM PRECLEARANCE REQUIREMENTS. The following Securities Transactions are exempt from the preclearance requirements set forth in Section II.B.1. of this Code: a. MUTUAL FUNDS. Securities issued by any registered open-end investment companies (including but not limited to the Strong Funds); b. NO KNOWLEDGE. Securities Transactions where neither SCM, the Access Person nor an Immediate Family member knows of the transaction before it is completed (for example, Securities Transactions effected for an Access Person by a trustee of a blind trust or discretionary trades involving an investment partnership or investment club in which the Access Person is neither consulted nor advised of the trade before it is executed); c. CERTAIN CORPORATE ACTIONS. Any acquisition or disposition of Securities through stock dividends, dividend reinvestments, stock splits, reverse stock splits, mergers, consolidations, spin-offs or other similar corporate reorganizations or distributions generally applicable to all holders of the same class of Securities. Odd-lot tender offers are also exempt from the preclearance requirements; however, all other tender offers must be precleared; d. RIGHTS. Any acquisition or disposition of Securities through the exercise of rights, options, convertible bonds or other instruments acquired in compliance with this Code; e. APPLICATION TO COMMODITIES, FUTURES, OPTIONS ON FUTURES AND OPTIONS ON BROAD-BASED INDICES. Commodities, futures (including currency futures and futures on securities comprising part of a broad-based, publicly traded market based index of stocks), options on futures, options on currencies and options on certain indices designated by the Compliance Department as broad-based are not subject to preclearance or the seven day black out, 60-day profit disgorgement and other prohibited transaction provisions of Section II.D.1. of the Code but are subject to transaction reporting requirements (Section II.G.). The options on indices designated by the Compliance Department as broad-based may be changed from time to time and are listed in Appendix 7. THE OPTIONS ON INDICES THAT ARE NOT DESIGNATED AS BROAD-BASED ARE SUBJECT TO THE PRECLEARANCE, SEVEN-DAY BLACKOUT, 60-DAY PROFIT DISGORGEMENT, PROHIBITED TRANSACTION AND REPORTING PROVISIONS OF THE CODE. f. MISCELLANEOUS. Any transaction in the following: (1) bankers acceptances; (2) bank certificates of deposit ("CDs"); (3) commercial paper; (4) repurchase agreements (when backed by exempt securities); (5) U.S. Government Securities; (6) the acquisition of equity securities in dividend reinvestment plans ("DRIPs"), when the acquisition is directly through the issuer or its non-broker agent; (7) Securities of the employer of a member of the Access Person's Immediate Family if such securities are beneficially owned through participation by the Immediate Family member in a Profit Sharing plan, 401(k) plan, ESOP or other similar plan; and (8) other Securities as may from time to time be designated in writing by the Code of Ethics Review Committee on the grounds that the risk of abuse is minimal or non-existent. C. PRECLEARANCE REQUESTS. 1. TRADE AUTHORIZATION REQUEST FORMS. Prior to entering an order for a Securities Transaction that requires preclearance, the Access Person must complete, IN WRITING, a Preclearance Request For Access Persons Form (Appendix 5) and submit the completed form to the Preclearance Officer (or his or her designee). The Preclearance Request For Access Persons Form requires Access Persons to provide certain information and to make certain representations. Proposed Securities Transactions of the Preclearance Officer that require preclearance must be submitted to his designee. 2. REVIEW OF FORM. After receiving the completed Preclearance Request For Access Persons Form, the Preclearance Officer (or his or her designee) will (a) review the information set forth in the form, (b) independently confirm whether the Securities are held by any Funds or other accounts managed by SCM and whether there are any unexecuted orders to purchase or sell the Securities by any Fund or accounts managed by SCM and (c) as soon as reasonably practicable, determine whether to clear the proposed Securities Transaction. The authorization, date, and time of the authorization must be reflected on the Preclearance Request For Access Persons Form. The Preclearance Officer (or his or her designee) will keep one copy of the completed form for the Compliance Department, send one copy to the Access Person seeking authorization and send the third copy to the Trading Department, which will cause the transaction to be executed. If the brokerage account is an Electronic Trading Account and the Access Person has completed the Electronic Trading Authorization Form (Appendix 10), the Access Person will execute the transaction on his or her own behalf and will provide Compliance with a copy of the electronic confirmation by the end of the next business day. No order for a securities transaction for which preclearance authorization is sought may be placed prior to the receipt of WRITTEN authorization of the transaction by the preclearance officer (or his or her designee). Verbal approvals are not permitted. 3. ACCESS PERSON DESIGNEES. If an Access Person is unable to personally effect a personal Securities Transaction, such Access Person may designate an individual at SCM to complete and submit for preclearance on his or her behalf a Preclearance Request For Access Persons Form provided the following requirements are satisfied: a. The Access Person communicates the details of the trade and affirms the accuracy of the representations and warranties contained on the Form directly to such designated person; and b. The designated person completes the Preclearance Request For Access Persons Form on behalf of the Access Person in accordance with the requirements of the Code and then executes the Access Person Designee Certification contained in the Form. The Access Person does not need to sign the Form so long as the foregoing certification is provided. D. PROHIBITED TRANSACTIONS. 1. PROHIBITED SECURITIES TRANSACTIONS. The following Securities Transactions for accounts in which an Access Person or a member of his or her Immediate Family have a Beneficial Interest, to the extent they require preclearance under Section II.B. above, are prohibited and will not be authorized by the Preclearance Officer (or his or her designee) absent exceptional circumstances: a. INITIAL PUBLIC OFFERINGS. Any purchase of Securities in an initial public offering (other than a new offering of a registered open-end investment company); b. PENDING BUY OR SELL ORDERS. Any purchase or sale of Securities on any day during which any Advisory Client has a pending "buy" or "sell" order in the same Security (or Equivalent Security) until that order is executed or withdrawn, unless the purchase or sale is a Program Trade; c. SEVEN DAY BLACKOUT. Purchases or sales of Securities by a Portfolio Manager within seven calendar days of a purchase or sale of the same Securities (or Equivalent Securities) by an Advisory Client managed by that Portfolio Manager, unless the purchase or sale is a Program Trade. For example, if a Fund trades in a Security on day one, day eight is the first day the Portfolio Manager may trade that Security for an account in which he or she has a beneficial interest; d. INTENTION TO BUY OR SELL FOR ADVISORY CLIENT. Purchases or sales of Securities at a time when that Access Person intends, or knows of another's intention, to purchase or sell that Security (or an Equivalent Security) on behalf of an Advisory Client. This prohibition applies whether the Securities Transaction is in the same (E.G., two purchases) or the opposite (a purchase and sale) direction of the transaction of the Advisory Client, unless the purchase or sale is a Program Trade; and e. 60-DAY BLACKOUT. (1) Sales of a Security within 60 days of the purchase of the Security (or an Equivalent Security) in which the Access Person has a Beneficial Interest and (2) purchases of a Security within 60 days of the sale of the Security (or an Equivalent Security) in which the Access Person had a Beneficial Interest, unless in each case, the Access Person agrees to give up all profits on the transaction to a charitable organization as specified by remedies involving sanctions (Section IV.B.1.). 2. ALWAYS PROHIBITED SECURITIES TRANSACTIONS. The following Securities Transactions are prohibited and will not be authorized under any circumstances: a. INSIDE INFORMATION. Any transaction in a Security while in possession of material nonpublic information regarding the Security or the issuer of the Security (see Insider Trading Policy, Appendix 9); b. MARKET MANIPULATION. Transactions intended to raise, lower, or maintain the price of any Security or to create a false appearance of active trading; c. LARGE POSITIONS IN REGISTERED INVESTMENT COMPANIES. Transactions in a registered investment company, including Strong Funds, which result in the Access Person owning five percent or more of any class of securities in such investment company (this prohibition does not apply to Independent Fund Directors); and d. OTHERS. Any other transactions deemed by the Preclearance Officer (or his designee) to involve a conflict of interest, possible diversion of corporate opportunity or an appearance of impropriety. 3. PRIVATE PLACEMENTS. Acquisitions of Beneficial Interests in Securities in a private placement by an Access Person is strongly discouraged. The Preclearance Officer (or his or her designee) will give permission only after considering, among other facts, whether the investment opportunity should be reserved for Advisory Clients and whether the opportunity is being offered to an Access Person by virtue of his or her position as an Access Person. Access Persons who have been authorized to acquire and have acquired securities in a private placement are required to disclose that investment to the Compliance Department when they play a part in any subsequent consideration of an investment in the issuer by an Advisory Client. In such circumstances, the decision to purchase securities of the issuer by an Advisory Client must be independently authorized by a Portfolio Manager with no personal interest in the issuer. This provision does not apply to Independent Fund Directors. 4. NO EXPLANATION REQUIRED FOR REFUSALS. In some cases, the Preclearance Officer (or his or her designee) may refuse to authorize a Securities Transaction for a reason that is confidential. The Preclearance Officer is not required to give an explanation for refusing to authorize any Securities Transaction. E. EXECUTION OF PERSONAL SECURITIES TRANSACTIONS. Unless an exception is provided in writing by the Compliance Department, all transactions in Securities subject to the preclearance requirements for which an Access Person or a member of his or her Immediate Family has a Beneficial Interest shall be executed by the Trading Department. However, if the Access Person's brokerage account is an Electronic Trading Account, the transaction may be placed by the Access Person. IN ALL INSTANCES, THE TRADING DEPARTMENT MUST GIVE PRIORITY TO CLIENT TRADES OVER ACCESS PERSON TRADES. F. LENGTH OF TRADE AUTHORIZATION APPROVAL. The authorization provided by the Preclearance Officer (or his or her designee) is effective until the earlier of (1) its revocation; (2) the close of business on the second trading day after the authorization is granted for transactions placed by the Trading Department (for example, if authorization is provided on a Monday, it is effective until the close of business on Wednesday); (3) the close of business of the SAME TRADING DAY that the authorization is granted for transactions placed through an Electronic Trading Account; or (4) the Access Person learns that the information in the Trade Authorization Request Form is not accurate. If the order for the Securities Transaction is not placed within that period, a new advance authorization must be obtained before the Securities Transaction is placed. For Securities Transactions placed by the Trading Deparment that have not been executed within two trading days after the day the authorization is granted (for example, in the case of a limit order or a Not Held Order), no new authorization is necessary unless the person placing the original order for the Securities Transaction amends it in any way. G. TRADE REPORTING REQUIREMENTS. 1. REPORTING REQUIREMENT. EVERY ACCESS PERSON AND MEMBERS OF HIS OR HER IMMEDIATE FAMILY (INCLUDING INDEPENDENT FUND DIRECTORS AND THEIR IMMEDIATE FAMILIES) MUST ARRANGE FOR THE COMPLIANCE DEPARTMENT TO RECEIVE DIRECTLY FROM ANY BROKER, DEALER OR BANK THAT EFFECTS ANY SECURITIES TRANSACTION, DUPLICATE COPIES OF EACH CONFIRMATION FOR EACH SUCH TRANSACTION AND PERIODIC STATEMENTS FOR EACH BROKERAGE ACCOUNT IN WHICH SUCH ACCESS PERSON HAS A BENEFICIAL INTEREST. Additionally, securities held in certificate form that are not included in the periodic statements, must also be reported. To assist in making these arrangements, the Compliance Department will send a letter to each brokerage firm based on the information provided by the Access Person in Appendix 3. THE FOREGOING DOES NOT APPLY TO TRANSACTIONS AND HOLDINGS IN (1) OPEN-END INVESTMENT COMPANIES INCLUDING BUT NOT LIMITED TO THE STRONG FUNDS, (2) BANKERS ACCEPTANCES, (3) BANK CERTIFICATES OF DEPOSIT ("CDS"), (4) COMMERCIAL PAPER, (5) REPURCHASE AGREEMENTS WHEN BACKED BY EXEMPT SECURITIES, (6) U. S. GOVERNMENT SECURITIES, (7) THE ACQUISITION OF EQUITY SECURITIES IN DIVIDEND REINVESTMENT PLANS ("DRIPS"), WHEN THE ACQUISITION IS DIRECTLY THROUGH THE ISSUER OR ITS NON-BROKER AGENT; OR (8) SECURITIES OF THE EMPLOYER OF A MEMBER OF THE ACCESS PERSON'S IMMEDIATE FAMILY IF SUCH SECURITIES ARE BENEFICIALLY OWNED THROUGH PARTICIPATION BY THE IMMEDIATE FAMILY MEMBER IN A PROFIT SHARING PLAN, 401(K) PLAN, ESOP OR OTHER SIMILAR PLAN. 2. DISCLAIMERS. Any report of a Securities Transaction for the benefit of a person other than the individual in whose account the transaction is placed may contain a statement that the report should not be construed as an admission by the person making the report that he or she has any direct or indirect beneficial ownership in the Security to which the report relates. 3. QUARTERLY REVIEW. At least quarterly, for Securities Transactions requiring preclearance under this Code, the Preclearance Officer (or his or her designee) shall compare the confirmations and periodic statements provided pursuant to the trade reporting requirements (Section II.G.1.) to the approved Trade Authorization Request Forms. Such review shall include: a. Whether the Securities Transaction complied with this Code; b. Whether the Securities Transaction was authorized in advance of its placement; c. Whether the Securities Transaction was executed within two full trading days of when it was authorized; d. Whether any Fund or accounts managed by SCM owned the Securities at the time of the Securities Transaction, and; e. Whether any Fund or separate accounts managed by SCM purchased or sold the Securities in the Securities Transaction within at least 10 days of the Securities Transaction. 4. AVAILABILITY OF REPORTS. All information supplied pursuant to this Code will be available for inspection by the Boards of Directors of SCM and SFDI; the Board of Directors of each Strong Fund; the Code of Ethics Review Committee; the Compliance Department; the Access Person's department manager (or designee); any party to which any investigation is referred by any of the foregoing, the SEC, any self-regulatory organization of which the Strong Funds, SCM, the Distributor or Flint Prairie is a member, and any state securities commission; as well as any attorney or agent of the foregoing, the Strong Funds, SCM, the Distributor or Flint Prairie. III. FIDUCIARY DUTIES A. CONFIDENTIALITY. Access Persons are prohibited from revealing information relating to the investment intentions, activities or portfolios of Advisory Clients except to persons whose responsibilities require knowledge of the information. B. GIFTS. The following provisions on gifts apply only to associates of SCM, the Distributor and Flint Prairie. 1. ACCEPTING GIFTS. On occasion, because of their position with SCM, the Distributor, the Strong Funds or Flint Prairie, associates may be offered, or may receive without notice, gifts from clients, brokers, vendors or other persons not affiliated with such entities. Acceptance of extraordinary or extravagant gifts is not permissible. Any such gifts must be declined or returned in order to protect the reputation and integrity of SCM, the Distributor, the Strong Funds and Flint Prairie. Gifts of a nominal value (i.e., gifts whose reasonable value is no more than $100 a year), customary business meals, entertainment (E.G., sporting events) and promotional items (E.G., pens, mugs, T-shirts) may be accepted. Please see the Gift Policy (Appendix 8) for additional information. If an associate receives any gift that might be prohibited under this Code, the associate must inform the Compliance Department. 2. SOLICITATION OF GIFTS. Associates of SCM, the Distributor or Flint Prairie may not solicit gifts or gratuities. 3. GIVING GIFTS. Associates of SCM, the Distributor or Flint Prairie may not give any gift with a value in excess of $100 per year to persons associated with securities or financial organizations, including exchanges, other member organizations, commodity firms, news media or clients of the firm. Please see the Gift Policy (Appendix 9) for additional information. C. PAYMENTS TO ADVISORY CLIENTS. Access Persons may not make any payments to Advisory Clients in order to resolve any type of Advisory Client complaint. All such matters must be handled by the Legal Department. D. CORPORATE OPPORTUNITIES. Access Persons may not take personal advantage of any opportunity properly belonging to any Advisory Client, SCM, the Distributor or Flint Prairie. This includes, but is not limited to, acquiring Securities for one's own account that would otherwise be acquired for an Advisory Client. E. UNDUE INFLUENCE. Access Persons may not cause or attempt to cause any Advisory Client to purchase, sell or hold any Security in a manner calculated to create any personal benefit to the Access Person. If an Access Person or Immediate Family Member stands to materially benefit from an investment decision for an Advisory Client that the Access Person is recommending or participating in, the Access Person must disclose to those persons with authority to make investment decisions for the Advisory Client, any Beneficial Interest that the Access Person (or Immediate Family) has in that Security or an Equivalent Security, or in the issuer thereof, where the decision could create a material benefit to the Access Person (or Immediate Family) or the appearance of impropriety. If the Access Person in question is a person with authority to make investment decisions for the Advisory Client, disclosure must also be made to the Compliance Department. The person to whom the Access Person reports the interest, in consultation with the Compliance Department, must determine whether the Access Person will be restricted in making investment decisions. F. SERVICE AS A DIRECTOR. No Access Person, other than an Independent Fund Director, may serve on the board of directors of a publicly-held company not affiliated with SCM, the Distributor, the Strong Funds or Flint Prairie absent prior written authorization by the Code of Ethics Review Committee. This authorization will rarely, if ever, be granted and, if granted, will normally require that the affected Access Person be isolated through "Chinese Wall" or other procedures from those making investment decisions related to the issuer on whose board the Access Person sits. G. INVOLVEMENT IN CRIMINAL MATTERS OR INVESTMENT-RELATED CIVIL PROCEEDINGS. Each Access Person must notify the Compliance Department, as soon as reasonably practical, if arrested, arraigned, indicted or pleads no contest to any criminal offense (other than minor traffic violations) or if named as a defendant in any Investment-Related civil proceedings or any administrative or disciplinary action. IV. COMPLIANCE WITH THIS CODE OF ETHICS A. CODE OF ETHICS REVIEW COMMITTEE. 1. MEMBERSHIP, VOTING, AND QUORUM. The Code of Ethics Review Committee shall consist of Senior Officers of SCM. The Committee shall vote by majority vote with two members serving as a quorum. Vacancies may be filled; and in the case of extended absences or periods of unavailability, alternates may be selected by the majority vote of the remaining members of the Committee. However, in the event that the General Counsel or Deputy General Counsel is unavailable, at least one member of the Committee shall also be a member of the Compliance Department. 2. INVESTIGATING VIOLATIONS OF THE CODE. The General Counsel, or his or her designee, is responsible for investigating any suspected violation of the Code and shall report the results of each investigation to the Code of Ethics Review Committee. The Code of Ethics Review Committee is responsible for reviewing the results of any investigation of any reported or suspected violation of the Code. Any material violation of the Code by an associate of SCM, the Distributor or Flint Prairie for which significant remedial action was taken will be reported to the Boards of Directors of the Strong Funds at the next regularly scheduled quarterly Board meeting. 3. ANNUAL REPORTS. The Code of Ethics Review Committee will review the Code at least once a year, in light of legal and business developments and experience in implementing the Code and will prepare an annual report to the Boards of Directors of SCM, the Distributor and each Strong Fund that: a. Summarizes existing procedures concerning personal investing and any changes in the procedures made during the past year; b. Identifies any violation requiring significant remedial action during the past year; and c. Identifies any recommended changes in existing restrictions or procedures based on its experience under the Code, evolving industry practices or developments in applicable laws or regulations. B. REMEDIES. 1. SANCTIONS. If the Code of Ethics Review Committee determines that an Access Person has committed a violation of the Code, the Committee may impose sanctions and take other actions as it deems appropriate, including a letter of caution or warning, suspension of personal trading rights, suspension of employment (with or without compensation), fine, civil referral to the SEC, criminal referral and termination of employment for cause. The Code of Ethics Review Committee may also require the Access Person to reverse the trade(s) in question and forfeit any profit or absorb any loss derived therefrom. The amount of profit shall be calculated by the Code of Ethics Review Committee and shall be forwarded to a charitable organization. No member of the Code of Ethics Review Committee may review his or her own transaction. 2. SOLE AUTHORITY. The Code of Ethics Review Committee has sole authority, subject to the review set forth in Section IV.B.3. below, to determine the remedy for any violation of the Code, including appropriate disposition of any moneys forfeited pursuant to this provision. Failure to promptly abide by a directive to reverse a trade or forfeit profits may result in the imposition of additional sanctions. 3. REVIEW. Whenever the Code of Ethics Review Committee determines that an Access Person has committed a violation of this Code that merits significant remedial action, it will report promptly to the Boards of Directors of SCM and/or the Distributor (as appropriate), and no less frequently than the quarterly meeting to the Boards of Directors of the applicable Strong Funds, information relating to the investigation of the violation, including any sanctions imposed. The Boards of Directors of SCM, the Distributor and the Strong Funds may modify such sanctions as they deem appropriate. Such Boards may have access to all information considered by the Code of Ethics Review Committee in relation to the case. The Code of Ethics Review Committee may determine whether to delay the imposition of any sanctions pending review by the applicable Boards of Directors. C. EXCEPTIONS TO THE CODE. Although exceptions to the Code will rarely, if ever, be granted, the General Counsel of SCM may grant exceptions to the requirements of the Code on a case-by-case basis if he finds that the proposed conduct involves negligible opportunity for abuse. All Material exceptions must be in writing and must be reported as soon as practicable to the Code of Ethics Review Committee and to the Boards of Directors of the SCM Funds at their next regularly scheduled meeting after the exception is granted. Refer to Appendix 1 for the definition of "Material." D. COMPLIANCE CERTIFICATION. At least annually, all Access Persons will be required to certify on the Annual Code of Ethics Questionnaire set forth in Appendix 6, or on a document substantially in the form of Appendix 6, that they have complied with the Code in all respects. E. RECORD RETENTION. SCM will, at its principal place of business, maintain the following records in an easily accessible place, for at least six years and will make records available to the SEC or any representative thereof at any time: 1. CODE OF ETHICS. A copy of the Code of Ethics which is, or at any time has been, in effect. 2. VIOLATIONS. A record of any violation of such Code of Ethics and any action taken as a result of such violation. 3. REQUIRED REPORTS. A copy of each report made by an Access Person pursuant to the Code of Ethics shall include records of the procedures followed in connection with the preclearance and reporting requirements of this Code and information relied on by the Preclearance Officer in authorizing the Securities Transaction and in making the post-Securities Transaction determination. 4. ACCESS PERSON LIST. A list of all persons who are, or have been, required to make reports pursuant to the Code of Ethics. F. INQUIRIES REGARDING THE CODE. The Compliance Department will answer any questions about this Code or any other compliance-related matters. Appendix 1 DEFINITIONS "ACCESS PERSON" means (1) every director, officer, and general partner of SCM, the Distributor, the Strong Funds and Flint Prairie; (2) every associate of SCM, the Distributor and Flint Prairie who, in connection with his or her regular functions, makes, participates in, or obtains information regarding the purchase or sale of a security by an Advisory Client's account; (3) every associate of SCM, the Distributor and Flint Prairie who is involved in making purchase or sale recommendations for an Advisory Client's account; (4) every associate of SCM, the Distributor and Flint Prairie who obtains information concerning such recommendations prior to their dissemination; and (5) such agents of SCM, the Distributor, the Funds or Flint Prairie as the Compliance Department shall designate who may be deemed an Access Person if they were an associate of the foregoing. Any uncertainty as to whether an individual is an Access Person should be brought to the attention of the Compliance Department. Such questions will be resolved in accordance with, and this definition shall be subject to, the definition of "Access Person" found in Rule 17j-1(e)(1) promulgated under the Investment Company Act of 1940. "ADVISORY CLIENT" means any client (including both investment companies and managed accounts) for which SCM serves as an investment adviser or subadviser, renders investment advice, makes investment decisions or places orders through its Trading Department. "BENEFICIAL INTEREST" means the opportunity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, to profit or share in any profit derived from a transaction in the subject Securities. An Access Person is deemed to have a Beneficial Interest in Securities owned by members of his or her Immediate Family. Common examples of Beneficial Interest include joint accounts, spousal accounts, UTMA accounts, partnerships, trusts and controlling interests in corporations. Any uncertainty as to whether an Access Person has a Beneficial Interest in a Security should be brought to the attention of the Compliance Department. Such questions will be resolved by reference to the principles set forth in the definition of "beneficial owner" found in Rules 16a-1(a)(2) and (5) promulgated under the Securities Exchange Act of 1934. "CODE" means this Code of Ethics. "COMPLIANCE DEPARTMENT" means the designated persons listed on Appendix 2, as such Appendix shall be amended from time to time. "THE DISTRIBUTOR" means Strong Investments, Inc. "ELECTRONIC TRADING ACCOUNT" means a brokerage account held by an Access Person where Securities Transactions are placed either electronically via the Internet or the telephone. All such Securities Transactions must be precleared by the Compliance Department. "EQUIVALENT SECURITY" means any Security issued by the same entity as the issuer of a subject Security that is convertible into the equity Security of the issuer. Examples include options but are not limited to rights, stock appreciation rights, warrants and convertible bonds. "FUND" means an investment company registered under the Investment Company Act of 1940 (or a portfolio or series thereof) for which SCM serves as an adviser or subadviser. "IMMEDIATE FAMILY" of an Access Person means any of the following persons who reside in the same household as the Access Person: child grandparent son-in-law stepchild spouse daughter-in-law grandchild sibling brother-in-law parent mother-in-law sister-in-law stepparent father-in-law Immediate Family includes adoptive relationships and any other relationship (whether or not recognized by law) which the General Counsel determines could lead to the possible conflicts of interest, diversions of corporate opportunity, or appearances of impropriety which this Code is intended to prevent. "INDEPENDENT FUND DIRECTOR" means an independent director of an investment company for which SCM serves as the advisor. "LEGAL DEPARTMENT" means the SCM Legal/Compliance Department. "MATERIAL" for purposes of this reporting requirement, shall mean the following: 1. NUMBER OF SHARES - Any transaction for more than 1,000 shares shall be deemed material and subject to reporting. Whether a transaction of 1,000 shares or less is material shall be determined on a case-by-case basis; in particular, the less liquid a security is, the lower the threshold that should be used for the materiality determination. 2. DOLLAR VALUE OF TRANSACTION - Any transaction with a dollar value in excess of $25,000 shall be deemed material and subject to reporting. Whether a transaction of $25,000 or less is material shall be determined on a case-by-case basis. 3. NUMBER OF TRANSACTIONS IN A YEAR - The General Counsel may grant no more than two exceptions per associate per year that are not subject to reporting. For example, if the General Counsel has granted two exceptions to an associate, ANY exception granted thereafter shall be deemed material and subject to reporting (irrespective of the number of shares or other circumstances of the transaction). 4. CONSULTATION WITH INDEPENDENT COUNSEL - In any case where the General Counsel believes there is an issue of whether a proposed exception is material and subject to reporting, he shall consult with counsel to the independent directors for the Strong Funds. "NOT HELD ORDER" means an order placed with a broker and ultimately executed at the discretion of the broker. "PORTFOLIO MANAGER" means a person who has or shares principal day-to-day responsibility for managing the portfolio of an Advisory Client. "PRECLEARANCE OFFICER" means the person designated as the Preclearance Officer in Appendix 2 hereof. "PROGRAM TRADE" is where a Portfolio Manager directs a trader to do trades in either an index-type account or portion of account or, at a minimum, 25-30% of the Securities in a non-index account. Program Trades for non-index type accounts generally arise in any of three situations: (1) cash or other assets are being added to an account and the Portfolio Manager instructs the trader that new securities are to be bought in a manner that maintains the account's existing allocations; (2) cash is being withdrawn from an account and the Portfolio Manager instructs the trader that securities are to be sold in a manner that maintains the account's current securities allocations; and (3) a new account is established and the Portfolio Manager instructs the trader to buy specific securities in the same allocation percentages as are held by other client accounts. "SEC" means the Securities and Exchange Commission. "SECURITY" includes stock; notes, bonds, debentures and other evidences of indebtedness (including loan participations and assignments); limited partnership interests; investment contracts; all derivative instruments of the foregoing, such as options and warrants; and other items mentioned in Section 2(a)(36) of the 1940 Act, not specifically exempted by Rule 17j-1. Items excluded from the definition of "Security" by Rule 17j-1 are U. S. Government Securities, bankers acceptances, bank certificates of deposit, commercial paper and shares of open-end investment companies. In addition, security does not include futures, commodities, currencies or options on the aforementioned, but the purchase and sale of such instruments are nevertheless subject to the reporting requirements of the Code. "SECURITIES TRANSACTION" means a purchase or sale of Securities in which an Access Person or a members of his or her Immediate Family has or acquires a Beneficial Interest. "SCM" means Strong Capital Management, Inc. "STRONG FUNDS" means the investment companies comprising the Strong Family of Mutual Funds. "U. S. GOVERNMENT SECURITY" means any security issued or guaranteed as to principal or interest by the United States or by a person controlled or supervised by and acting as an instrumentality of the Government of the United States pursuant to authority granted by the Congress of the United States or any certificate of deposit for any of the foregoing. Appendix 2 CONTACT PERSONS PRECLEARANCE OFFICER 1. Stephen J. Shenkenberg, Deputy General Counsel and Chief Compliance Officer of SCM DESIGNEES OF PRECLEARANCE OFFICER 1. Thomas A. Hooker 2. Linda E. Meints 3. John S. Weitzer 4. Kelly M. Zeroth COMPLIANCE DEPARTMENT 1. Stephen J. Shenkenberg 2. Thomas A. Hooker 3. Kathleen A. Flanagan 4. Linda E. Meints 5. Kelly M. Zeroth CODE OF ETHICS REVIEW COMMITTEE 1. Stephen J. Shenkenberg, Deputy General Counsel and Chief Compliance Officer of SCM 2. Thomas A. Hooker, Director of Compliance Appendix 3 PERSONAL HOLDINGS IN SECURITIES In accordance with Section II.A. of the Code of Ethics, please provide a list of all Securities (other than those specifically excluded from the definition of Security), including physical certificates held, in which each Access Person has a Beneficial Interest, including those in accounts of the Immediate Family of the Access Person and all Securities in non-client accounts for which the Access Person makes investment decisions. (1) Name of Access Person: _____________________________ (2) If different than (1), name of the person in whose name the account is held: _____________________________ (3) Relationship of (2) to (1): _____________________________ (4) Broker at which Account is maintained: _____________________________ (5) Account Number: _____________________________ (6) Contact person at Broker and phone number _____________________________ (7) For each account, attach the most recent account statement listing Securities in that account. If the Access Person owns Beneficial Interests in Securities that are not listed in an attached account statement, or holds the physical certificate, list them below: NAME OF SECURITY QUANTITY VALUE CUSTODIAN 1. ____________________________________________________________________________ 2. ____________________________________________________________________________ 3. ____________________________________________________________________________ 4. ____________________________________________________________________________ 5. ____________________________________________________________________________ 6. ____________________________________________________________________________ (ATTACH SEPARATE SHEET IF NECESSARY.) I certify that this form and the attached statements (if any) constitute all of the Securities in which I have a Beneficial Interest, including those for which I hold physical certificates, as well as those held in accounts of my Immediate Family. __________________________________________ Access Person Signature Dated: ____________________ __________________________________________ Print Name Appendix 4 ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS AND LIMITED POWER OF ATTORNEY I acknowledge that I have received the Code of Ethics dated October 22, 1999, and represent that: 1. In accordance with Section II.A. of the Code of Ethics, I will fully disclose the Securities holdings in which I have, or a member of my Immediate Family has, a Beneficial Interest.* 2. In accordance with Section II.B.1. of the Code of Ethics, I will obtain prior authorization for all Securities Transactions in which I have, or a member of my Immediate Family has, a Beneficial Interest except for transactions exempt from preclearance under Section II.B. 2. of the Code of Ethics.* 3. In accordance with Section II.G.1. of the Code of Ethics, I will report all Securities Transactions in which I have, or a member of my Immediate Family has, a Beneficial Interest, except for transactions exempt from reporting under Section II.G.1. of the Code of Ethics. 4. I will comply with the Code of Ethics in all other respects. 5. I agree to disgorge and forfeit any profits on prohibited transactions in accordance with the requirements of the Code.* I hereby appoint Strong Capital Management, Inc. as my attorney-in-fact for the purpose of placing orders for and on my behalf to buy, sell, tender, exchange, convert, and otherwise effectuate transactions in any and all stocks, bonds, options, and other securities. I agree that Strong Capital Management, Inc. shall not be liable for the consequences of any errors made by the executing brokers in connection with such transactions.* __________________________________________ Access Person Signature __________________________________________ Print Name Dated: ____________________ * Representations (1), (2) and (5) and the Limited Power of Attorney do not apply to Independent Fund Directors. Appendix 5 Ctrl. No:____________________ Associate ID #____________________ STRONG CAPITAL MANAGEMENT, INC. PRECLEARANCE REQUEST FOR ACCESS PERSONS 1. Name of Access Person (and trading entity, if different): ________________ 2. Name and symbol of Security: ________________ 3. Maximum quantity to be purchased or sold: ________________ 4. Name, account # & phone # of broker to effect transaction: ________________ 5. Check if applicable: Purchase ___ Market Order ___ (Limit Order Price: Sale ___ Limit Order ___ _________________) Not Held Order ___ 6. In connection with the foregoing transaction, I hereby make the following representations and warranties: (a) I do not possess any material nonpublic information regarding the Security or the issuer of the Security. (b) To my knowledge: (1) The Securities or "equivalent" securities (I.E., securities issued by the same issuer) [ ARE / ARE NOT ] (CIRCLE ONE) held by any investment companies or other accounts managed by SCM; (2) There are no outstanding purchase or sell orders for this Security (or any equivalent security) by any investment companies or other accounts managed by SCM; and (3) None of the Securities (or equivalent securities) are actively being considered for purchase or sale by any investment companies or other accounts managed by SCM. (c) The Securities are not being acquired in an initial public offering. (d) The Securities are not being acquired in a private placement or, if they are, I have reviewed Section II.D.3. of the Code and have attached hereto a written explanation of such transaction. (e) If I am a Portfolio Manager, none of the accounts I manage purchased or sold these Securities (or equivalent securities) within the past seven calendar days and I do not expect any such client accounts to purchase or sell these Securities (or equivalent securities) within seven calendar days of my purchase or sale. (f) If I am purchasing these Securities, I have not directly or indirectly (through any member of my Immediate Family, any account in which I have a Beneficial Interest or otherwise) sold these Securities (or equivalent securities) in the prior 60 days. (g) If I am selling these Securities, I have not directly or indirectly (through any member of my Immediate Family, any account in which I have a Beneficial Interest or otherwise) purchased these Securities (or equivalent securities) in the prior 60 days. (h) I have read the SCM Code of Ethics within the prior 12 months and believe that the proposed trade fully complies with the requirements of the Code. _____________________________________ _____________________________________ Access Person Print Name CERTIFICATION OF ACCESS PERSON DESIGNEE The undersigned hereby certifies that the above Access Person (a) directly instructed me to complete this form on his or her behalf, (b) to the best of my knowledge, was out of the office at the time of such instruction and has not returned, and (c) confirmed to me that the representations and warranties contained in this form are accurate. _____________________________________ _____________________________________ Access Person Designee Print Name AUTHORIZATION Authorized By:_______________________ Date:_____________ Time:_____________ PLACEMENT Trader:__________ Date:__________ Time:__________ Qty:__________ EXECUTION Trader:__________ Date:__________ Time:__________ Qty:__________ Price:_________ (Original copy to Compliance Department, Yellow copy to Trading Department, Pink copy to Access Person) revised 7/98 CONFIDENTIAL Appendix 6 ANNUAL CODE OF ETHICS QUESTIONNAIRE(1) For ACCESS PERSONS of The Strong Family of Mutual Funds, Strong Capital Management, Inc., Strong Investments, Inc. and Flint Prairie, L. L. C. September 14, 1999 Associate: ____________________________(please print name) I. Introduction Access Persons(2) are required to answer the following questions FOR THE YEAR SEPTEMBER 1, 1998, THROUGH AUGUST 31, 1999. ANSWERS OF "NO" TO ANY OF THE QUESTIONS IN SECTIONS II AND III MUST BE EXPLAINED ON THE "ATTACHMENT" ON PAGE 3. Upon completion, please sign and return the questionnaire by Monday, September 20th, to Kelly Zeroth in the Compliance Department. All information provided is kept confidential to the maximum extent possible. If you have any questions, please contact Kelly at extension 3549. II. Annual certification of compliance with the Code of Ethics A. Have you OBTAINED PRECLEARANCE for all Securities(3) Transactions in which you have, or a member of your Immediate Family has, a Beneficial Interest, except for transactions exempt from preclearance under the Code of Ethics? (Circle "Yes" if there have been no Securities Transactions.) YES NO (CIRCLE ONE) B. Have you REPORTED all Securities Transactions in which you have, or a member of your Immediate Family has, a Beneficial Interest, except for transactions exempt from reporting under the Code of Ethics? (Reporting requirements include arranging for the Compliance Department to receive, directly from your broker, duplicate transaction confirmations and duplicate periodic statements for each brokerage account in which you have, or a member of your Immediate Family has, a Beneficial Interest, as well as reporting securities held in certificate form(4). Circle "Yes" if there are no reportable transactions.) YES NO (CIRCLE ONE) C. Do you understand that you are PROHIBITED from owning five percent or more of any class of security of a registered investment company, and have you so complied? YES NO (CIRCLE ONE) - -------------------- 1 All definitions used in this questionnaire have the same meaning as those in the Code of Ethics. 2 Non-Access Persons and Independent Fund Directors of the Strong Funds must complete a separate questionnaire. 3 Security, as defined, does NOT include open-end investment companies, including the Strong Funds. 4 Please contact Kelly Zeroth if you are uncertain as to what confirmations and statements you have arranged for the Compliance Department to receive. D. Have you notified the Compliance Department if you have been arrested, arraigned, indicted, or have plead no contest to any criminal offense, or been named as a defendant in any Investment-Related civil proceedings, or administrative or disciplinary action? (Circle "Yes" if you have not been arrested, arraigned, etc.) YES NO (CIRCLE ONE) E. Have you complied with the Code of Ethics in all other respects, including the gift policy? YES NO (CIRCLE ONE) LIST ON THE ATTACHMENT ALL REPORTABLE GIFTS(5) GIVEN OR RECEIVED FOR THE YEAR SEPTEMBER 1, 1998, THROUGH AUGUST 31, 1999, NOTING THE MONTH, "COUNTERPARTY," GIFT DESCRIPTION, AND ESTIMATED VALUE. III. Have you complied in all respects with the Insider Trading Policy dated January 1, 1999? YES NO (CIRCLE ONE) ANSWERS OF "NO" TO ANY OF THE QUESTIONS IN SECTIONS II AND III MUST BE EXPLAINED ON THE "ATTACHMENT" ON PAGE 3. IV. Disclosure of directorships statement A. Are you, or is any member of your Immediate Family, a director of any for-profit, privately held companies(6)? (If "Yes," please list on the Attachment each company for which you are, or a member of your Immediate Family is, a director.) YES NO (CIRCLE ONE) B. If the response to IV.A. is "Yes," do you have knowledge that any of the companies for which you are, or a member of your Immediate Family is, a director will go public or be acquired within the next 12 months? (If the answer is "YES," please be prepared to discuss this matter with a member of the Compliance Department in the near future.) YES NO (CIRCLE ONE) I hereby represent that, to the best of my knowledge, the foregoing responses are true and complete. I understand that any untrue or incomplete response may be subject to disciplinary action by the firm. ________________________________________ Access Person Signature ________________________________________ ___________________________________ Print Name Date - -------------------- 5 Associates are NOT required to report the following: (i) usual and customary promotional items given to or received from vendors, (ii) items donated to charity (through Legal), or (iii) food items consumed on the premises. Entertainment--i.e., a meal or activity with the vendor present--does not have to be reported. 6 Per Section III.F. of the Code of Ethics, no Access Person, other than an Independent Fund Director, may serve on the board of directors of a PUBLICLY HELD company. ATTACHMENT TO ANNUAL CODE OF ETHICS QUESTIONNAIRE PLEASE EXPLAIN ALL "NO" RESPONSES TO QUESTIONS IN SECTIONS II AND III: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ PLEASE LIST EACH COMPANY FOR WHICH YOU ARE, OR A MEMBER OR YOUR IMMEDIATE FAMILY IS, A DIRECTOR (SECTION IV): ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ GIFTS FOR THE YEAR SEPTEMBER 1, 1998, THROUGH AUGUST 31, 1999: MONTH GIFT GIVER/RECEIVER GIFT DESCRIPTION ESTIMATED VALUE 1. ___________________________________________________________________________ 2. ___________________________________________________________________________ 3. ___________________________________________________________________________ 4. ___________________________________________________________________________ 5. ___________________________________________________________________________ 6. ___________________________________________________________________________ 7. ___________________________________________________________________________ 8. ___________________________________________________________________________ 9. ___________________________________________________________________________ 10. ___________________________________________________________________________ (CONTINUE ON AN ADDITIONAL SHEET IF NECESSARY.) Appendix 7 LIST OF BROAD-BASED INDICES Listed below are the broad-based indices as designated by the Compliance Department. See Section II.B.2.e. for additional information. ------------------------------------------------------ DESCRIPTION OF OPTION SYMBOL EXCHANGE ------------------------------------------------------ Computer Technology XCI AMEX Eurotop 100 ERT AMEX Biotechnology Index BTK AMEX Gold/Silver Index* AUX PHLX Hong Kong Option Index HKO AMEX Inter@ctive Wk. Internet Index INX CBOE Japan Index JPN AMEX Major Market Index* XMI AMEX Morgan Stanley High Tech Index MSH AMEX NASDAQ-100 NDX CBOE Oil Service Sector Index OSX PHLX Pacific High Tech Index XPI PSE Russell 2000* RUT CBOE Semiconductor Sector SOX PHLX S&P 100* OEX CBOE S&P 400 Midcap Index* MID CBOE S&P 500* SPX CBOE Technology Index TXX CBOE Value Line Index* VLE PHLX Wilshire Small Cap Index WSX PSE ------------------------------------------------------ * Includes LEAPs ------------------------------------------------------ Appendix 8 GIFT POLICY The gift policy of Strong Capital Management, Inc., Strong Investments, Inc. and Flint Prairie, L. L. C. covers both GIVING GIFTS TO and ACCEPTING GIFTS FROM clients, brokers, persons with whom we do business or others (collectively, "vendors"). It is based on the applicable requirements of the Rules of Fair Practice of the National Association of Securities Dealers, Inc. ("NASD") and is included as part of the firm's Codes of Ethics. Under our policy, associates may not give gifts to or accept gifts from vendors with a value in excess of $100 PER PERSON PER YEAR and must report to the firm annually if they accept certain types of gifts. The NASD defines a "gift" to include any kind of gratuity. Since giving or receiving any gifts in a business setting may give rise to an appearance of impropriety or may raise a potential conflict of interest, we are relying on your professional attitude and good judgment to ensure that our policy is observed to the fullest extent possible. The discussion below is designed to assist you in this regard. Questions regarding the appropriateness of any gift should be directed to the Legal/Compliance Department. 1. GIFTS GIVEN BY ASSOCIATES Under applicable NASD rules, an associate may not give any gift with a value in excess of $100 per year to any person associated with a securities or financial organization, including exchanges, broker-dealers, commodity firms, the news media, or clients of the firm. Please note, however, that the firm may not take a tax deduction for any gift with a value exceeding $25. This memorandum is not intended to authorize any associate to give a gift to a vendor--appropriate supervisory approval must be obtained before giving any gifts. 2. GIFTS ACCEPTED BY ASSOCIATES On occasion, because of their position within the firm, associates may be offered, or may receive without notice, gifts from vendors. Associates may not accept any gift or form of entertainment from vendors (E.G., tickets to the theater or a sporting event where the vendor does not accompany the associate) other than gifts of NOMINAL VALUE, which the NASD defines as under $100 in total from any vendor in any year (managers may, if they deem it appropriate for their department, adopt a lower dollar ceiling). Any gift accepted by an associate must be reported to the firm, subject to certain exceptions (see heading 4 below). In addition, note that our gift policy does not apply to normal and customary business entertainment or to personal gifts (see heading 3 below). Associates may not accept a gift of cash or a cash equivalent (E.G., gift certificates) in ANY amount, and under no circumstances may an associate solicit a gift from a vendor. Associates may wish to have gifts from vendors donated to charity, particularly where it might be awkward or impolite for an associate to decline a gift not permitted by our policy. In such case, the gift should be forwarded to Legal, who will arrange for it to be donated to charity. Similarly, associates may wish to suggest to vendors that, in lieu of an annual gift, the vendors make a donation to charity. In either situation discussed in this paragraph, an associate would not need to report the gift to the firm (see heading 4 below). 3. EXCLUSION FOR BUSINESS ENTERTAINMENT/PERSONAL GIFTS Our gift policy does not apply to normal and customary business meals and entertainment with vendors. For example, if an associate has a business meal and attends a sporting event or show with a vendor, that activity would not be subject to our gift policy, provided the vendor is present. If, on the other hand, a vendor gives an associate tickets to a sporting event and the associate attends the event without the vendor also being present, the tickets would be subject to the dollar limitation and reporting requirements of our gift policy. Under no circumstances may associates accept business entertainment that is extraordinary or extravagant in nature. In addition, our gift policy does not apply to usual and customary gifts given to or received from vendors based on a personal relationship (E.G., gifts between an associate and a vendor where the vendor is a family member or personal friend). 4. REPORTING The NASD requires gifts to be reported to the firm. Except as noted below, associates must report annually all gifts given to or accepted from vendors (Legal will distribute the appropriate reporting form to associates). Associates are NOT required to report the following: (i) usual and customary promotional items given to or received from vendors (E.G., hats, pens, T-shirts, and similar items marked with a firm's logo), (ii) items donated to charity through Legal, or (iii) food items consumed on the firm's premises (E.G., candy, popcorn, etc.). January 1, 1999 Appendix 9 INSIDER TRADING POLICY AND PROCEDURES DESIGNED TO DETECT AND PREVENT INSIDER TRADING A. POLICY STATEMENT. 1. INTRODUCTION. Strong Capital Management, Inc., Strong Investments, Inc., Heritage Reserve Development Corporation, Flint Prairie, L. L. C. and such other companies which adopt these Policies and Procedures (all of the foregoing entities are collectively referred to herein as "Strong") seek to foster a reputation for integrity and professionalism. That reputation is a vital business asset. The confidence and trust placed in Strong by clients is something we should value and endeavor to protect. To further that goal, the Policy Statement implements procedures to deter the misuse of material, nonpublic information in securities transactions. 2. PROHIBITIONS. Accordingly, associates are prohibited from trading, either personally or on behalf of others (including advisory clients), on material, nonpublic information or communicating material, nonpublic information to others in violation of the law. This conduct is frequently referred to as "insider trading." This policy applies to every associate and extends to activities within and outside their duties at Strong. Any questions regarding this policy should be referred to the Compliance Department. 3. GENERAL SANCTIONS. Trading securities while in possession of material, nonpublic information or improperly communicating that information to others may expose you to stringent penalties. Criminal sanctions may include a fine of up to $1,000,000 and/or ten years imprisonment. The SEC can recover the profits gained or losses avoided through the violative trading, a penalty of up to three times the illicit windfall and an order permanently barring you from the securities industry. Finally, you may be sued by investors seeking to recover damages for insider trading violations. 4. INSIDER TRADING DEFINED. The term "insider trading" is not defined in the federal securities laws, but generally is used to refer to the use of material, nonpublic information to trade in securities (whether or not one is an "insider") or to communications of material, nonpublic information to others. While the law concerning insider trading is not static, it is currently understood that the law generally prohibits: a. trading by an insider, while in possession of material, nonpublic information; b. trading by a non-insider, while in possession of material, nonpublic information, where the information either was disclosed to the non-insider in violation of an insider's duty to keep it confidential or was misappropriated; c. recommending the purchase or sale of securities on the basis of material, nonpublic information; d. communicating material, nonpublic information to others; or e. providing substantial assistance to someone who is engaged in any of the above activities. The elements of insider trading and the penalties for such unlawful conduct are described below. Any associate who, after reviewing these Policies and Procedures has any question regarding insider trading should consult with the Compliance Department. Often, a single question can forestall disciplinary action or complex legal problems. 5. TENDER OFFERS. Tender offers represent a particular concern in the law of insider trading for two reasons. First, tender offer activity often produces extraordinary gyrations in the price of the target company's securities. Trading during this time period is more likely to attract regulatory attention (and produces a disproportionate percentage of insider trading cases). Second, the SEC has adopted a rule which expressly forbids trading and "tipping" while in possession of material, nonpublic information regarding a tender offer received from the tender offeror, the target company or anyone acting on behalf of either. Associates should exercise particular caution any time they become aware of nonpublic information relating to a tender offer. 6. CONTACT THE COMPLIANCE DEPARTMENT. To protect yourself, our clients, and Strong, you should contact the Compliance Department immediately if you believe that you may have received material, nonpublic information. B. PROCEDURES DESIGNED TO DETECT AND PREVENT INSIDER TRADING. The following procedures have been established to aid Strong and all associates in avoiding insider trading, and to aid Strong in preventing, detecting, and imposing sanctions against insider trading. Every associate must follow these procedures or risk serious sanctions, including dismissal, substantial personal liability and criminal penalties. Any questions about these procedures should be directed to the Compliance Department. 1. INITIAL QUESTIONS. Before trading in the Securities of a company about which an associate may have potential inside information, an associate, whether trading for himself or herself or others, should ask himself or herself the following questions: a. IS THE INFORMATION MATERIAL? Is this information that an investor would consider important in making his or her investment decisions? Is this information that would substantially affect the market price of the securities if generally disclosed? b. IS THE INFORMATION NONPUBLIC? To whom has this information been provided? Has the information been effectively communicated to the market place by being published in Reuters, THE WALL STREET JOURNAL or other publications of general circulation? 2. MATERIAL AND NONPUBLIC INFORMATION. If, after consideration of the above, any associate believes that the information is material and nonpublic, or if an associate has questions as to whether the information is material and nonpublic, he or she should take the following steps: a. Report the matter immediately to the Compliance Department. b. Do not purchase or sell the Securities either on the associate's own behalf or on the behalf of others. c. Do not communicate the information to anyone, other than to the Compliance Department. d. After the Compliance Department has reviewed the issue, the associate will be instructed to continue the prohibitions against trading and communication, or he or she will be allowed to trade and communicate the information. 3. CONFIDENTIALITY. Information in an associate's possession that is identified as material and nonpublic may not be communicated to anyone, include persons within Strong, except as otherwise provided herein. In addition, care should be taken so that such information is secure. For example, files containing material, nonpublic information should be sealed, access to computer files containing material, nonpublic information should be restricted and conversations containing such information, if appropriate at all, should be conducted in private (for example, not by cellular telephone to avoid potential interception). 4. ASSISTANCE OF THE COMPLIANCE DEPARTMENT. If, after consideration of the items set forth in Section B.2., doubt remains as to whether information is material or nonpublic, or if there is any unresolved question as to the applicability or interpretation of the foregoing procedures, or as to the propriety of any action, it must be discussed with the Compliance Department before trading or communicating the information to anyone. 5. REPORTING REQUIREMENT. In accordance with Strong's Code of Ethics, every associate must arrange for the Compliance Department to receive directly from the broker, dealer, or bank in question, duplicate copies of each confirmation for each Securities Transaction and periodic statement for each brokerage account in which such associate has a beneficial interest. C. INSIDER TRADING EXPLANATIONS. 1. WHO IS AN INSIDER? The concept of "insider" is broad. It includes officers, directors and associates of a company. In addition, a person can be a "temporary insider" if he or she enters into a special confidential relationship in the conduct of a company's affairs and as a result is given access to information solely for the company's purposes. A temporary insider can include, among others, a company's attorneys, accountants, consultants, bank lending officers and the associates of such organizations. In addition, Strong may become a temporary insider. According to the United States Supreme Court, the company must expect the outsider to keep the disclosed nonpublic information confidential, and the relationship must at least imply such a duty before the outsider will be considered an insider. 2. WHAT IS MATERIAL INFORMATION? Trading on inside information is not a basis for liability unless the information is material. "Material information" generally is defined as information for which there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions, or information that is reasonably certain to have a substantial effect on the price of a company's securities. It need not be important that it would have changed the investor's decision to buy or sell. No simple "bright line" test exists to determine when information is material; assessments of materiality involve a highly fact-specific inquiry. For this reason, you should direct any question about whether information is material to the Compliance Department. Material information often relates to a company's results and operations including, for example, dividend changes, earnings results, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems and extraordinary management developments. Material information also may relate to the market for a company's securities. Information about a significant order to purchase or sell securities may, in some contexts, be deemed material. Material information does not have to relate to a company's business. For example, in CARPENTER V. U.S., 108 U.S. 316 (1987), the United States Supreme Court considered as material certain information about the contents of a forthcoming newspaper column that was expected to affect the market price of a security. In that case, a Wall Street Journal reporter was found criminally liable for disclosing to others the dates that reports on various companies would appear in THE WALL STREET JOURNAL and whether those reports would be favorable or unfavorable. 3. WHAT IS NONPUBLIC INFORMATION? Information is nonpublic until it has been effectively disseminated broadly to investors in the market place. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the SEC, or appearing in Dow Jones, Reuters Economic Services, THE WALL STREET JOURNAL, or other publications of general circulation would be considered public. 4. WHAT ARE THE PENALTIES FOR INSIDER TRADING? Penalties for trading on or communicating material, nonpublic information are severe, both for individuals involved in such unlawful conduct and their employers. A person can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation. Penalties include: (a) civil injunctions; (b) treble damages; (c) disgorgement of profits; (d) jail sentences; (e) fines for the person who committed the violation of up to three times the profit gained or loss avoided, whether or not the person actually benefited; and (f) fines for the employer or other controlling person of up to the greater of $1,000,000 or three times the amount of the profit gained or loss avoided. In addition to the foregoing, any violation of this Policy with Respect to Insider Trading can be expected to result in serious sanctions, including dismissal of the person or persons involved. January 1, 1999 Appendix 10 ELECTRONIC TRADING AUTHORIZATION FORM Authorization has been granted to ____________________________ ("Access Person") to open an Electronic Trading Account(1) at ________________ ("Brokerage Firm"). As a condition of approval, the Access Person agrees to the following requirements, relating to all Securities Transactions: 1. All Securities Transactions as defined in the Code of Ethics, except those specifically exempt, must be precleared by the Compliance Department; 2. All Securities Transactions will be placed and executed by the close of the SAME trading day that the authorization is granted, otherwise the authorization will expire. This includes Limit Orders. There will be no open "until filled" orders; 3. The Access Person will provide the Compliance Department with documentation from the Internet Site that shows when the order was placed and executed. 4. The Access Person will arrange for the Compliance Department to receive directly from the Electronic Trading Firm, duplicate copies of each confirmation for each Securities Transaction and periodic statements for each brokerage account in which the Access Person has a Beneficial Interest. THE ACCESS PERSON MAY NOT PLACE TRADES ON HIS OR HER OWN BEHALF UNTIL THESE ARRANGEMENTS HAVE BEEN MADE. 5. The Access Person will comply with the Code of Ethics in all other respects. I hereby agree to the terms and conditions stated above. Any abuse of this privilege may result in disciplinary action by the firm. _____________________________________________ ______________________________ Access Person Date - -------------------------------------------------------------------------------- AUTHORIZATION _____________________________________________ ______________________________ Director of Compliance (or designee) Date - -------------------------------------------------------------------------------- - -------------------- 1 Electronic Trading Account includes brokerage accounts where Securities Transactions are placed electronically via the Internet or the telephone. Appendix 11 TO: ALL ACCESS PERSONS FROM: Director of Compliance Subject: Social Security Number/Tax ID Information Strong's Code of Ethics requires the Compliance Department to monitor the personal investing activity of Access Persons, including investments in mutual funds. To assist in this, we ask that you please provide your Social Security Number, as well as the SSN of each member of your "IMMEDIATE FAMILY". In addition, please list all accounts in which you may have a "BENEFICIAL INTEREST". (Please refer to your copy of the Code of Ethics for a definition of the underlined words.) Please complete this form return it to the Director of Compliance at your earliest convenience. Thank you for your cooperation. ________________________________________________________________________________ (Print Name) (SSN/TIN) ________________________________________________________________________________ (Print Name) (SSN/TIN) ________________________________________________________________________________ (Print Name) (SSN/TIN) ________________________________________________________________________________ (Print Name) (SSN/TIN) ________________________________________________________________________________ (Print Name) (SSN/TIN) ________________________________________________________________________________ (Print Name) (SSN/TIN) EX-99.P(4) 11 0011.txt CODE OF ETHICS - BANKERS TRUST DEUTSCHE ASSET MANAGEMENT CODE OF ETHICS MAY, 2000 A Member of the DEUTSCHE BANK GROUP |/| DEUTSCHE ASSET MANAGEMENT CODE OF ETHICS I. OVERVIEW.............................................................. 1 II. GENERAL RULE.......................................................... 1 III. DEFINITIONS........................................................... 2 IV. RESTRICTIONS.......................................................... 3 Blackout Period Restrictions.......................................... 3 New Issues (IPOs)..................................................... 3 Short-Term Trading.................................................... 4 Restricted List....................................................... 4 Private Placements.................................................... 4 V. COMPLIANCE PROCEDURES................................................. 4 Designated Brokerage Accounts......................................... 4 Pre-Clearance......................................................... 4 Reporting Requirements................................................ 5 Confirmation of Compliance with Policies.............................. 5 VI. OTHER PROCEDURES/RESTRICTIONS......................................... 5 Service on Boards of Directors........................................ 5 Gifts................................................................. 5 Rules for Dealing with Governmental Officials and Political Candidates 7 Confidentiality....................................................... 8 VII. SANCTIONS ............................................................ 8 VIII. INTERPRETATIONS AND EXCEPTIONS........................................ 8 APPENDIX: |_| Acknowledgement Form............................................. 9 |_| Initial (and Annual) Holdings Report............................. 10 DEUTSCHE ASSET MANAGEMENT - U.S. CODE OF ETHICS - -------------------------------------------------------------------------------- I. OVERVIEW This Code of Ethics ("Code") sets forth the specialized rules for business conduct and guidelines for the personal investing activities that generally are required of employees involved in the United States investment management areas of the Deutsche Bank Group and its affiliates (collectively "Deutsche Asset Management" or "DeAM").(1) The provisions of this Code are effective May 26, 2000, and shall apply to all employees deemed to be "Access Persons" (SEE DEFINITION ON NEXT PAGE) and such other employees as the Compliance Department ("Compliance") may determine from time to time. This Code supplements the Deutsche Bank CODE OF PROFESSIONAL CONDUCT, and GLOBAL MASTER COMPLIANCE MANUAL (available at http://compliance.cc.db.com) on the intranet. Each Access Person must observe those policies, as well as abide by the additional principles and rules set forth in this Code. II. GENERAL RULE DeAM employees will, in varying degrees, participate in or be aware of fiduciary and investment services provided to registered investment companies, institutional investment clients, employee benefit trusts and other types of investment advisory accounts. The fiduciary relationship mandates adherence to the highest standards of conduct and integrity. Accordingly, personnel acting in a fiduciary capacity must carry out their duties for the EXCLUSIVE BENEFIT of the client accounts. Consistent with this fiduciary duty, the interests of DeAM clients take priority over the investment desires of DeAM and DeAM personnel. All DeAM personnel must conduct themselves in a manner consistent with the requirements and procedures set forth in this Code. DeAM employees may also be required to comply with other policies imposing separate requirements. Specifically, they may be subject to laws or regulations that impose restrictions with respect to personal securities transactions, including, but not limited to, Section 17(j) and Rule 17j-1 under the Investment Company Act of 1940 (the "Act"). The purpose of this Code of Ethics is to ensure that, in connection with his or her personal trading, no Access Person shall conduct any of the following acts upon a client account: * To employ any device, scheme or artifice to defraud; * To make any untrue statement of a material fact, or omit to state a material fact necessary in order to make the statement not misleading; * To engage in any act, practice or course of business that operates or would operate as a fraud or deceit; or * To engage in any manipulative practice. - ------------ 1 Deutsche Asset Management is the marketing name for the asset management activities of Deutsche Bank AG, Deutsche Funds Management, Bankers Trust Company, DB Alex.Brown LLC, Deutsche Asset Management Inc. (formerly Morgan Grenfell Inc.), and Deutsche Asset Management Investment Services Limited. III. DEFINITIONS A. "ACCESS PERSON" SHALL MEAN: (i) All employees of DeAM, including investment personnel, traders and portfolio managers who, in connection with their regular functions or duties, participate in making decisions or obtain information regarding the purchase or sale of a security by any client accounts, or whose functions relate to the making of any recommendations with respect to such purchases or sales; (ii) All natural persons in a control relationship to DeAM who obtain information concerning investment recommendations made to any client account. The term "control" shall have the same meaning as that set forth in Section 2(a)(9) of the Act; and (iii) Any other personnel with asset management responsibilities or frequent interaction with Access Persons as determined by Compliance (e.g., Legal, Compliance, Risk, Operations, Sales & Marketing, as well as long-term temporary employees and consultants). B. "ACCOUNTS" SHALL MEAN all securities accounts, whether brokerage or otherwise, and securities held directly outside of accounts, but shall not include open-end mutual fund accounts in which securities transactions cannot be effected. C. "EMPLOYEE RELATED ACCOUNT" OF ANY PERSON SUBJECT TO THIS CODE SHALL MEAN: (i) The employee's own Accounts; (ii) The employee's spouse's Accounts and the Accounts of minor children and other members of the household (whether by marriage or similarly committed status) living in the employee's home; (iii) Accounts in which the employee, his/her spouse/domestic partner, minor children or other persons living in their home have a beneficial interest (i.e., share in the profits even if there is no influence on voting or disposition of the shares); and (iv) Accounts (including corporate Accounts and trust Accounts) over which the employee or his/her spouse/domestic partner exercises investment discretion or control. NOTE: ANY PERSON SUBJECT TO THIS CODE IS RESPONSIBLE FOR COMPLIANCE WITH THESE RULES WITH RESPECT TO ANY EMPLOYEE RELATED ACCOUNT, AS APPLICABLE. D. "SECURITIES" SHALL INCLUDE equity or debt securities, derivatives of securities (such as options, warrants, and ADRs), closed-end mutual funds, futures, commodities and similar instruments, but DO NOT INCLUDE: (i) Shares of open-end mutual funds (unless otherwise directed by Compliance); (ii) Direct obligations of the United States government; or (iii) Bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements. IV. RESTRICTIONS A. BLACKOUT PERIOD RESTRICTIONS (i) Access Persons shall not knowingly effect the purchase or sale of a Security for an Employee Related Account on a day during which any client account has a "buy" or "sell" order for the same Security, until that order is executed or withdrawn; (ii) Access Persons shall not effect the purchase or sale of a Security for an Employee Related Account within SEVEN CALENDAR DAYS BEFORE OR SEVEN CALENDAR DAYS AFTER the same Security is traded (or contemplated to be traded) by a client account with which the Access Person is associated. (iii) RUSSELL RECONSTITUTION OF THE INDEX: Effective every June 30th, the Frank Russell Company reconstitutes the various Russell Indices. Several weeks prior to that date, Frank Russell announces the changes to the indices (the "Announcement"). A significant portion of the portfolios which DeAM advise utilize strategies involving securities included in the various Russell indices, and thus DeAM trades heavily in these securities. Therefore, for the period commencing on the day of the Announcement, and continuing until seven business days after June 30th, all Access Persons are prohibited from transacting in any Security that is added to or deleted from the Russell 3000 Index. (iv) DEUTSCHE BANK SECURITIES: During certain times of the year, all Deutsche Bank employees are prohibited from conducting transactions in the equity and debt securities of Deutsche Bank, which affect their beneficial interest in the firm. Compliance generally imposes these "blackout" periods around the fiscal reporting of corporate earnings. Blackouts typically begin two days prior to the expected quarterly or annual earnings announcement, and end two days after earnings are released publicly. Additional restricted periods may be required for certain individuals and events, and Compliance will announce when such additional restricted periods are in effect. (v) EXCEPTIONS TO BLACKOUT PERIODS (ABOVE ITEMS I, II, AND III ONLY) The following are exempt from the specified blackout periods: * Securities that are within the S&P 100 Index; * Futures and options transactions on indexes; * ETF's (Exchange Traded Funds - e.g., SPDRs or "Spiders" (S&P 500 Index), DIAs or "Diamonds" (Dow Jones Industrial Average), etc.); * Shares purchased under an issuer sponsored Dividend Reinvestment Plan ("DRIPs"), other than optional purchases; * To the extent acquired from the issuer, purchases effected upon the exercise of rights issued pro rata to holders of a class of securities; and * Securities purchased under an employer sponsored stock purchase plan or upon the exercise of employee stock options. B. NEW ISSUES (IPOS) Access Persons are prohibited from purchasing or subscribing for Securities pursuant to an initial public offering. This prohibition applies even if Deutsche Bank (or any affiliate of Deutsche Bank) has no underwriting role and/or is not involved with the distribution. C. SHORT -TERM TRADING Access Persons are prohibited from transacting in the purchase and sale, or sale and purchase, of the same (or equivalent) Securities within 30 calendar days. The following are exempted from this restriction: * Futures and options transactions on indexes; * ETF's (Exchange Traded Funds - e.g., SPDRs or "Spiders" (S&P 500 Index), DIAs or "Diamonds" (Dow Jones Industrial Average), etc.); * Shares purchased under an issuer sponsored Dividend Reinvestment Plan ("DRIPs"), other than optional purchases; * To the extent acquired from the issuer, purchases effected upon the exercise of rights issued pro rata to holders of a class of securities; and * Securities purchased under an employer sponsored stock purchase plan. D. RESTRICTED LIST All Deutsche Bank employees, including all Access Persons, are prohibited from buying or selling any securities that are included on the Corporate Restricted List (available on the intranet) and/or other applicable departmental restricted lists. E. PRIVATE PLACEMENTS Prior to effecting a transaction in private securities (i.e., Securities not requiring registration with the Securities and Exchange Commission, and sold directly to the investor), all Access Persons must first obtain the approval of his/her supervisor and then pre-clear the transaction with the Compliance Department, including completing a questionnaire. Any person who has previously purchased privately-placed Securities must disclose such purchases to the Compliance Department before he or she participates in a Fund's or an advisory client's subsequent consideration of an investment in the Securities of the same or a related issuer. NOTE: Transactions in Securities in derivative instruments, including warrants, convertible Securities, futures and options, etc. shall be restricted in the same manner as the underlying Security. V. COMPLIANCE PROCEDURES A. DESIGNATED BROKERAGE ACCOUNTS All Access Persons are required to open and maintain their Employee Related Accounts in accordance with the Deutsche Bank EMPLOYEE TRADING AND PRE-CLEARANCE POLICY, as well as additional division-specific requirements, if any. B. PRE-CLEARANCE Proposed Securities transactions must be pre-cleared with the Compliance Department in accordance with the Deutsche Bank EMPLOYEE TRADING AND PRE-CLEARANCE POLICY. The following are exempted from this restriction: * Futures and options transactions on indexes; * ETF's (Exchange Traded Funds - e.g., SPDRs or "Spiders" (S&P 500 Index), DIAs or "Diamonds" (Dow Jones Industrial Average), etc.); * Shares purchased under an issuer sponsored Dividend Reinvestment Plan ("DRIPs"), other than optional purchases; * To the extent acquired from the issuer, purchases effected upon the exercise of rights issued pro rata to holders of a class of securities; and * Securities purchased under an employer sponsored stock purchase plan. C. REPORTING REQUIREMENTS (i) DISCLOSURE OF EMPLOYEE RELATED ACCOUNTS/PROVISION OF STATEMENTS Upon joining Deutsche Bank, new employees are required to disclose all of their Employee Related Accounts to Compliance, and must carry out the instructions provided to conform such accounts, if necessary, to Deutsche Bank policies. In addition, pursuant to Rule 17j-1 of the Act, no later than ten days after an individual becomes an Access Person, he or she must complete and return an "Initial Holdings Report" (see Appendix). (ii) QUARTERLY PERSONAL SECURITIES TRADING REPORTS ("PSTS") Pursuant to Rule 17j-1 of the Act, within ten (10) days of the end of each calendar quarter, all Access Persons must sign and return to Compliance a PST report, unless exempted by a division-specific requirement, if any. All PSTs that have reportable personal Securities transactions for the quarter will be reviewed by the appropriate supervisory and/or compliance person. (iii) ANNUAL HOLDINGS REPORT Once each year, at a date to be specified by Compliance, each Access Person must provide to Compliance an Annual Holdings Report (see Appendix) current as of a date not more than 30 days prior to the date of the report. D. CONFIRMATION OF COMPLIANCE WITH POLICIES Annually, each Access Person is required to sign a statement acknowledging that he or she has received this Code, as amended or updated, and confirm his or her adherence to it. VI. OTHER PROCEDURES/RESTRICTIONS A. SERVICE ON BOARDS OF DIRECTORS Employees may not maintain outside business affiliations (e.g., officer or director, governor, trustee, part-time employment, etc.) without the prior written approval of the appropriate senior officer of their respective business units. Service on Boards of publicly traded companies should be limited to a small number of instances. However, such service may be undertaken based upon a determination that these activities are consistent with the interests of DeAM and its clients. Employees serving as directors will not be permitted to participate in the process of making investment decisions on behalf of clients which involve the subject company. B. GIFTS (i) ACCEPTING GIFTS Employees are prohibited from soliciting or accepting any personal payment or gift to influence, support or reward any service, transaction or business involving Deutsche Bank, or that appears to be made or offered in anticipation of any future service, transaction or business opportunity. A payment or gift includes any fee, compensation, remuneration or thing of value.(2) However, subject to the prerequisites of honesty, absolute fulfillment of fiduciary duty to Deutsche Bank, relevant laws and regulations, and reasonable conduct on the part of the employee, the acceptance of some types of reasonable business gifts received by employees may be permissible, and the rules are as follows: - ------------ 2 UNDER THE BANK BRIBERY ACT AND OTHER APPLICABLE LAWS AND REGULATIONS, SEVERE PENALTIES MAY BE IMPOSED ON ANYONE WHO OFFERS OR ACCEPTS SUCH IMPROPER PAYMENTS OR GIFTS. IF YOU RECEIVE OR ARE OFFERED AN IMPROPER PAYMENT OR GIFT, OR IF YOU HAVE ANY QUESTIONS AS TO THE APPLICATION OR INTERPRETATION OF DEUTSCHE BANK'S RULES REGARDING THE ACCEPTANCE OF GIFTS, YOU MUST BRING THE MATTER TO THE ATTENTION OF THE COMPLIANCE DEPARTMENT. * Cash gifts of any amount are prohibited. This includes cash equivalents such as gift certificates, bonds, securities or other items that may be readily converted to cash. * Acceptance of non-cash gifts, souvenirs, tickets for sporting or entertainment events, and other items with a value less than U.S. $100 or its equivalent is generally permitted, when it is clear that they are unsolicited, unrelated to a transaction and the donor is not attempting to influence the employee. * Acceptance of gifts, other than cash, given in connection with special occasions (e.g., promotions, retirements, weddings, holidays), that are of reasonable value in the circumstances are permissible. * Employees may accept reasonable and conventional business courtesies, such as joining a customer or vendor in attending sporting events, golf outings or concerts, provided that such activities involve no more than the customary amenities. * The cost of working session meals or reasonable related expenses involving the discussion or review of business matters related to Deutsche Bank may be paid by the customer, vendor or others, provided that such costs would have otherwise been reimbursable to the employee by Deutsche Bank in accordance with its travel and entertainment and expense reimbursement policies. (ii) GIFT GIVING (TO PERSONS OTHER THAN GOVERNMENT OFFICIALS) In appropriate circumstances, it may be acceptable and customary for DeAM to extend gifts to customers or others who do business with Deutsche Bank. Employees should be certain that the gift will not give rise to a conflict of interest, or appearance of conflict, and that there is no reason to believe that the gift will violate applicable codes of conduct of the recipient. Employees with appropriate authority to do so may make business gifts at DeAM's expense, provided that the following requirements are met: * Gifts in the form of cash or cash equivalents may not be given regardless of amount. * The gift must be of reasonable value in the circumstances, and should not exceed a value of U.S. $100 unless the specific prior approval of the appropriate Managing Officer(3) is obtained. * The gift must be lawful and in accordance with generally accepted business practices of the governing jurisdictions. * The gift must not be given with the intent to influence or reward any person regarding any business or transaction involving DeAM. - ------------ 3 FOR PURPOSES OF THIS POLICY, "MANAGING OFFICER" IS DEFINED AS AN OFFICER OF AT LEAST THE MANAGING DIRECTOR LEVEL TO WHOM THE EMPLOYEE DIRECTLY OR INDIRECTLY REPORTS, WHO IS IN CHARGE OF THE EMPLOYEE'S UNIT (E.G., A DEPARTMENT HEAD, DIVISION HEAD, FUNCTION HEAD, GROUP HEAD, GENERAL MANAGER, ETC). (iii) GIFTS TO GOVERNMENT OFFICIALS The Compliance Department must be contacted prior to making any gift to a governmental employee or official. Various governmental agencies, legislative bodies and jurisdictions may have rules and regulations regarding the receipt of gifts by their employees or officials. In some cases, government employees or officials may be prohibited from accepting any gifts. (SEE NEXT SECTION FOR ADDITIONAL RULES REGARDING POLITICAL CONTRIBUTIONS.) C. RULES FOR DEALING WITH GOVERNMENTAL OFFICIALS AND POLITICAL CANDIDATES (i) CORPORATE PAYMENTS OR POLITICAL CONTRIBUTIONS No corporate payments or gifts of value may be made to any outside party, including any government official or political candidate or official, for the purpose of securing or retaining business for Deutsche Bank, or influencing any decision on its behalf. * The Federal Election Campaign Act prohibits corporations and labor organizations from using their general treasury funds to make contributions or expenditures in connection with federal elections, and therefore DEUTSCHE BANK DEPARTMENTS MAY NOT MAKE CONTRIBUTIONS TO U.S. FEDERAL POLITICAL PARTIES OR CANDIDATES. * Corporate contributions to political parties or candidates in jurisdictions not involving U.S. Federal elections are permitted only when such contributions are made in accordance with applicable local laws and regulations, and the prior approval of a member of the DeAM Executive Committee has been obtained, and the Deutsche Bank Americas Regional Cost Committee has been notified. UNDER THE FOREIGN CORRUPT PRACTICES ACT, BANK BRIBERY LAW, ELECTIONS LAW AND OTHER APPLICABLE REGULATIONS, SEVERE PENALTIES MAY BE IMPOSED ON DEUTSCHE BANK AND ON INDIVIDUALS WHO VIOLATE THESE LAWS AND REGULATIONS. SIMILAR LAWS AND REGULATIONS MAY ALSO APPLY IN VARIOUS COUNTRIES AND LEGAL JURISDICTIONS WHERE DEUTSCHE BANK DOES BUSINESS. (ii) PERSONAL POLITICAL CONTRIBUTIONS No personal payments or gifts of value may be made to any outside party, including any government official or political candidate or official, for the purpose of securing business for Deutsche Bank or influencing any decision on its behalf. Employees should always exercise care and good judgment to avoid making any political contribution that may give rise to a conflict of interest, or the appearance of conflict. For example, if a DeAM business unit engages in business with a particular governmental entity or official, DeAM employees should avoid making personal political contributions to officials or candidates who may appear to be in a position to influence the award of business to Deutsche Bank. (iii) ENTERTAINMENT OF GOVERNMENT OFFICIALS Entertainment and other acts of hospitality toward government or political officials should never compromise or appear to compromise the integrity or reputation of the official or Deutsche Bank. When hospitality is extended, it should be with the expectation that it will become a matter of public knowledge. D. CONFIDENTIALITY Access Persons must not divulge contemplated or completed securities transactions or trading strategies of DeAM clients to any person, except as required by the performance of such person's duties, and only on a need-to-know basis. In addition, the Deutsche Bank policies on confidential information, which are contained within the CODE OF PROFESSIONAL CONDUCT must be observed. VII. SANCTIONS Any Access Person who violates this Code may be subject to disciplinary actions, including possible dismissal. In addition, any Securities transactions executed in violation of this Code, such as short-term trading or trading during blackout periods, may subject the employee to a financial penalty, including but not limited to, unwinding the trade and/or disgorging of the profits. Finally, violations and suspected violations of criminal laws will be reported to the appropriate authorities as required by applicable laws and regulations. VIII. INTERPRETATIONS AND EXCEPTIONS Compliance shall have the right to make final and binding interpretations of this Code, and may grant an exception to certain of the above restrictions, as long as no abuse or potential abuse is involved. Each Access Person must obtain approval from the Compliance Department before taking action regarding such an exception. Any questions regarding the applicability, meaning or administration of this Code shall be referred in advance of any contemplated transaction, to Compliance. DEUTSCHE ASSET MANAGEMENT ACKNOWLEDGEMENT In connection with my employment with one or more of the legal entities which make up Deutsche Asset Management, I acknowledge that I have received, read and understand the Deutsche Asset Management CODE OF ETHICS issued May, 2000, and agree to adhere to and abide by its provisions. I understand that any violation(s) of this Code of Ethics is grounds for immediate disciplinary action up to, and including, dismissal. Signature _______________________________ Print Name _______________________________ Legal Entity _______________________________ Date _______________________________ PLEASE RETURN THIS FORM TO DEAM COMPLIANCE AT 130 LIBERTY STREET, 17TH FLOOR (MAIL STOP 2172). A Member of the DEUTSCHE BANK GROUP |/| DEUTSCHE ASSET MANAGEMENT TO: "Access Person" FROM: DeAM Compliance RE: Initial/Annual Holdings Report - Personal Securities Accounts - -------------------------------------------------------------------------------- In conformance with Securities and Exchange Commission Rule 17j-1 pursuant to the Investment Company Act of 1940 you are required to provide Compliance with this "Initial Holdings Report" within 10 days of joining Deutsche Asset Management ("DeAM"), and annually thereafter. Accordingly, please fill in the following requested information (or attach a copy of your most recent statement) for all securities(4) either held directly or held in your Employee-Related Accounts(5). BROKER/ACCT.# NAME OF ISSUER NO. OF SHARES PRINCIPAL AMOUNT - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- - ----------------- ----------------- ----------------- ----------------- Signature: _______________________________ Date: _________________________ Print Name: _______________________________ Expense Code: _________________ - ------------ 4 "Securities" includes equity or debt securities (both privately and publicly offered), derivatives of securities (such as options, warrants, indexes and ADRs), futures, commodities and similar instruments, BUT DOES NOT INCLUDE: (i) shares of open-end mutual funds (unless otherwise directed by compliance) or (ii) direct obligations of the United States government. 5 "Employee Related Accounts" include (i) employee's own accounts; (ii) the employee's spouse's accounts and the accounts of minor children and other members of the household (whether by marriage or similarly committed status) living in the employee's home; (iii) accounts in which the employee, his/her spouse/domestic partner, minor children or other persons living in their home have a beneficial interest (i.e., share in the profits even if there is no influence on voting or disposition of shares); and (iv) accounts (including corporate accounts and trust accounts) over which the employee or his/her spouse/domestic partner exercises investment discretion or control. **PLEASE COMPLETE AND RETURN TO COMPLIANCE AT MAIL STOP 2172** EX-99.P(5) 12 0012.txt CODE OF ETHICS - WELLINGTON Wellington Management Company, llp Wellington Trust Company, na Wellington Management International Wellington International Management Company Pte Ltd. Code of Ethics - -------------------- -------------------------------------------------------- SUMMARY Wellington Management Company, llp and its affiliates have a fiduciary duty to investment company and investment counseling clients which requires each employee to act solely for the benefit of clients. Also, each employee has a duty to act in the best interest of the firm. In addition to the various laws and regulations covering the firm's activities, it is clearly in the firm's best interest as a professional investment advisory organization to avoid potential conflicts of interest or even the appearance of such conflicts with respect to the conduct of the firm's employees. Wellington Management's personal trading and conduct must recognize that the firm's clients always come first, that the firm must avoid any actual or potential abuse of our positions of trust and responsibility, and that the firm must never take inappropriate advantage of its positions. While it is not possible to anticipate all instances of potential conflict, the standard is clear. In light of the firm's professional and legal responsibilities, we believe it is appropriate to restate and periodically distribute the firm's Code of Ethics to all employees. It is Wellington Management's aim to be as flexible as possible in its internal procedures, while simultaneously protecting the organization and its clients from the damage that could arise from a situation involving a real or apparent conflict of interest. While it is not possible to specifically define and prescribe rules regarding all possible cases in which conflicts might arise, this Code of Ethics is designed to set forth the policy regarding employee conduct in those situations in which conflicts are most likely to develop. If an employee has any doubt as to the propriety of any activity, he or she should consult the President or Regulatory Affairs Department. The Code reflects the requirements of United States law, Rule 17j-1 of the Investment Company Act of 1940, as amended on October 29, 1999, as well as the recommendations issued by an industry study group in 1994, which were strongly supported by the SEC. The term "Employee" includes all employees and Partners. - -------------------- -------------------------------------------------------- POLICY ON PERSONAL Essentially, this policy requires that all personal SECURITIES securities transactions (including acquisitions or TRANSACTIONS dispositions other than through a purchase or sale) by all Employees must be cleared prior to execution. The only exceptions to this policy of prior clearance are noted below. DEFINITION OF "PERSONAL SECURITIES TRANSACTIONS" The following transactions by Employees are considered "personal" under applicable SEC rules and therefore subject to this statement of policy: 1 Transactions for an Employee's own account, including IRA's. 2 Transactions for an account in which an Employee has indirect beneficial ownership, unless the Employee has no direct or indirect influence or control over the account. Accounts involving family (including husband, wife, minor children or other dependent relatives), or accounts in which an Employee has a beneficial interest (such as a trust of which the Employee is an income or principal beneficiary) are included within the meaning of "indirect beneficial interest". If an Employee has a substantial measure of influence or control over an account, but neither the Employee nor the Employee's family has any direct or indirect beneficial interest (e.g., a trust for which the Employee is a trustee but not a direct or indirect beneficiary), the rules relating to personal securities transactions are not considered to be directly applicable. Therefore, prior clearance and subsequent reporting of such transactions are not required. In all transactions involving such an account an Employee should, however, conform to the spirit of these rules and avoid any activity which might appear to conflict with the investment company or counseling clients or with respect to the Employee's position within Wellington Management. In this regard, please note "Other Conflicts of Interest", found later in this Code of Ethics, which does apply to such situations. - -------------------- -------------------------------------------------------- PRECLEARANCE EXCEPT AS SPECIFICALLY EXEMPTED IN THIS SECTION, ALL REQUIRED EMPLOYEES MUST CLEAR PERSONAL SECURITIES TRANSACTIONS PRIOR TO EXECUTION. This includes bonds, stocks (including closed end funds), convertibles, preferreds, options on securities, warrants, rights, etc., for domestic and foreign securities, whether publicly traded or privately placed. The only exceptions to this requirement are automatic dividend reinvestment and stock purchase plan acquisitions, broad-based stock index and US government securities futures and options on such futures, transactions in open-end mutual funds, US Government securities, commercial paper, or non-volitional transactions. Non-volitional transactions include gifts to an Employee over which the Employee has no control of the timing or transactions which result from corporate action applicable to all similar security holders (such as splits, tender offers, mergers, stock dividends, etc.). Please note, however, that most of these transactions must be reported even though they do not have to be precleared. See the following section on reporting obligations. Clearance for transactions must be obtained by contacting the Director of Global Equity Trading or those personnel designated by him for this purpose. Requests for clearance and approval for transactions may be communicated orally or via email. The Trading Department will maintain a log of all requests for approval as coded confidential records of the firm. Private placements (including both securities and partnership interests) are subject to special clearance by the Director of Regulatory Affairs, Director of Enterprise Risk Management or the General Counsel, and the clearance will remain in effect for a reasonable period thereafter, not to exceed 90 days. CLEARANCE FOR PERSONAL SECURITIES TRANSACTIONS FOR PUBLICLY TRADED SECURITIES WILL BE IN EFFECT FOR ONE TRADING DAY ONLY. THIS "ONE TRADING DAY" POLICY IS INTERPRETED AS FOLLOWS: * IF CLEARANCE IS GRANTED AT A TIME WHEN THE PRINCIPAL MARKET IN WHICH THE SECURITY TRADES IS OPEN, CLEARANCE IS EFFECTIVE FOR THE REMAINDER OF THAT TRADING DAY UNTIL THE OPENING OF THAT MARKET ON THE FOLLOWING DAY. * IF CLEARANCE IS GRANTED AT A TIME WHEN THE PRINCIPAL MARKET IN WHICH THE SECURITY TRADES IS CLOSED, CLEARANCE IS EFFECTIVE FOR THE NEXT TRADING DAY UNTIL THE OPENING OF THAT MARKET ON THE FOLLOWING DAY. - -------------------- -------------------------------------------------------- FILING OF REPORTS Records of personal securities transactions by Employees will be maintained. All Employees are subject to the following reporting requirements: 1 Duplicate Brokerage Confirmations All Employees must require their securities brokers to send duplicate confirmations of their securities transactions to the Regulatory Affairs Department. Brokerage firms are accustomed to providing this service. Please contact Regulatory Affairs to obtain a form letter to request this service. Each employee must return to the Regulatory Affairs Department a completed form for each brokerage account that is used for personal securities transactions of the Employee. Employees should NOT send the completed forms to their brokers directly. The form must be completed and returned to the Regulatory Affairs Department prior to any transactions being placed with the broker. The Regulatory Affairs Department will process the request in order to assure delivery of the confirms directly to the Department and to preserve the confidentiality of this information. When possible, the transaction confirmation filing requirement will be satisfied by electronic filings from securities depositories. 2 Filing of Quarterly Report of all "Personal Securities Transactions" SEC rules require that a quarterly record of all personal securities transactions be submitted by each person subject to the Code's requirements and that this record be available for inspection. To comply with these rules, every Employee must file a quarterly personal securities transaction report within 10 calendar days after the end of each calendar quarter. Reports are filed electronically utilizing the firm's proprietary Personal Securities Transaction Reporting System (PSTRS) accessible to all Employees via the Wellington Management Intranet. At the end of each calendar quarter, Employees will be notified of the filing requirement. Employees are responsible for submitting the quarterly report within the deadline established in the notice. Transactions during the quarter indicated on brokerage confirmations or electronic filings are displayed on the Employee's reporting screen and must be affirmed if they are accurate. Holdings not acquired through a broker submitting confirmations must be entered manually. All Employees are required to submit a quarterly report, even if there were no reportable transactions during the quarter. Employees must also provide information on any new brokerage account established during the quarter including the name of the broker, dealer or bank and the date the account was established. IMPORTANT NOTE: The quarterly report must include the required information for all "personal securities transactions" as defined above, except transactions in open-end mutual funds, money market securities, US Government securities, and futures and options on futures on US government securities. Non-volitional transactions and those resulting from corporate actions must also be reported even though preclearance is not required and the nature of the transaction must be clearly specified in the report. 3 Certification of Compliance As part of the quarterly reporting process on PSTRS, Employees are required to confirm their compliance with the provisions of this Code of Ethics. 4 Filing of Personal Holding Report Annually, all Employees must file a schedule indicating their personal securities holdings as of December 31 of each year by the following January 30. SEC Rules require that this report include the title, number of shares and principal amount of each security held in an Employee's personal account, and the name of any broker, dealer or bank with whom the Employee maintains an account. "Securities" for purposes of this report are those which must be reported as indicated in the prior paragraph. Newly hired Employees are required to file a holding report within ten (10) days of joining the firm. Employees may indicate securities held in a brokerage account by attaching an account statement, but are not required to do so, since these statements contain additional information not required by the holding report. 5 Review of Reports All reports filed in accordance with this section will be maintained and kept confidential by the Regulatory Affairs Department. Reports will be reviewed by the Director of Regulatory Affairs or personnel designated by her for this purpose. - -------------------- -------------------------------------------------------- RESTRICTIONS ON While all personal securities transactions must be "PERSONAL SECURITIES cleared prior to execution, the following guidelines TRANSACTIONS" indicate which transactions will be prohibited, discouraged, or subject to nearly automatic clearance. The clearance of personal securities transactions may also depend upon other circumstances, including the timing of the proposed transaction relative to transactions by our investment counseling or investment company clients; the nature of the securities and the parties involved in the transaction; and the percentage of securities involved in the transaction relative to ownership by clients. The word "clients" refers collectively to investment company clients and counseling clients. Employees are expected to be particularly sensitive to meeting the spirit as well as the letter of these restrictions. Please note that these restrictions apply in the case of debt securities to the specific issue and in the case of common stock, not only to the common stock, but to any equity-related security of the same issuer including preferred stock, options, warrants, and convertible bonds. Also, a gift or transfer from you (an Employee) to a third party shall be subject to these restrictions, unless the donee or transferee represents that he or she has no present intention of selling the donated security. 1 No Employee may engage in personal transactions involving any securities which are: * being bought or sold on behalf of clients until one trading day after such buying or selling is completed or canceled. In addition, no Portfolio Manager may engage in a personal transaction involving any security for 7 days prior to, and 7 days following, a transaction in the same security for a client account managed by that Portfolio Manager without a special exemption. See "Exemptive Procedures" below. Portfolio Managers include all designated portfolio managers and others who have direct authority to make investment decisions to buy or sell securities, such as investment team members and analysts involved in Research Equity portfolios. All Employees who are considered Portfolio Managers will be so notified by the Regulatory Affairs Department. * the subject of a new or changed action recommendation from a research analyst until 10 business days following the issuance of such recommendation; * the subject of a reiterated but unchanged recommendation from a research analyst until 2 business days following reissuance of the recommendation * actively contemplated for transactions on behalf of clients, even though no buy or sell orders have been placed. This restriction applies from the moment that an Employee has been informed in any fashion that any Portfolio Manager intends to purchase or sell a specific security. This is a particularly sensitive area and one in which each Employee must exercise caution to avoid actions which, to his or her knowledge, are in conflict or in competition with the interests of clients. 2 The Code of Ethics strongly discourages short term trading by Employees. In addition, no Employee may take a "short term trading" profit in a security, which means the sale of a security at a gain (or closing of a short position at a gain) within 60 days of its purchase, without a special exemption. See "Exemptive Procedures". The 60 day prohibition does not apply to transactions resulting in a loss, nor to futures or options on futures on broad-based securities indexes or US government securities. 3 No Employee engaged in equity or bond trading may engage in personal transactions involving any equity securities of any company whose primary business is that of a broker/dealer. 4 Subject to preclearance, Employees may engage in short sales, options, and margin transactions, but such transactions are strongly discouraged, particularly due to the 60 day short term profit-taking prohibition. Any Employee engaging in such transactions should also recognize the danger of being "frozen" or subject to a forced close out because of the general restrictions which apply to personal transactions as noted above. In specific case of hardship an exception may be granted by the Director of Regulatory Affairs or her designee upon approval of the Ethics Committee with respect to an otherwise "frozen" transaction. 5 No Employee may engage in personal transactions involving the purchase of any security on an initial public offering. This restriction also includes new issues resulting from spin-offs, municipal securities and thrift conversions, although in limited cases the purchase of such securities in an offering may be approved by the Director of Regulatory Affairs or her designee upon determining that approval would not violate any policy reflected in this Code. This restriction does not apply to open-end mutual funds, U. S. government issues or money market investments. 6 EMPLOYEES MAY NOT PURCHASE SECURITIES IN PRIVATE PLACEMENTS UNLESS APPROVAL OF THE DIRECTOR OF REGULATORY AFFAIRS, DIRECTOR OF ENTERPRISE RISK MANAGEMENT OR THE GENERAL COUNSEL HAS BEEN OBTAINED. This approval will be based upon a determination that the investment opportunity need not be reserved for clients, that the Employee is not being offered the investment opportunity due to his or her employment with Wellington Management and other relevant factors on a case-by-case basis. If the Employee has portfolio management or securities analysis responsibilities and is granted approval to purchase a private placement, he or she must disclose the privately placed holding later if asked to evaluate the issuer of the security. An independent review of the Employee's analytical work or decision to purchase the security for a client account will then be performed by another investment professional with no personal interest in the transaction. - -------------------- -------------------------------------------------------- GIFTS AND OTHER Employees should not seek, accept or offer any gifts or SENSITIVE PAYMENTS favors of more than minimal value or any preferential treatment in dealings with any client, broker/dealer, portfolio company, financial institution or any other organization with whom the firm transactS business. Occasional participation in lunches, dinners, cocktail parties, sporting activities or similar gatherings conducted for business purposes are not prohibited. However, for both the Employee's protection and that of the firm it is extremely important that even the appearance of a possible conflict of interest be avoided. Extreme caution is to be exercised in any instance in which business related travel and lodgings are paid for other than by Wellington Management, and prior approval must be obtained from the Regulatory Affairs Department. Any question as to the propriety of such situations should be discussed with the Regulatory Affairs Department and any incident in which an Employee is encouraged to violate these provisions should be reported immediately. An explanation of all extraordinary travel, lodging and related meals and entertainment is to be reported in a brief memorandum to the Director of Regulatory Affairs. Employees must not participate individually or on behalf of the firm, a subsidiary, or any client, directly or indirectly, in any of the following transactions: 1 Use of the firm's funds for political purposes. 2 Payment or receipt of bribes, kickbacks, or payment or receipt of any other amount with an understanding that part or all of such amount will be refunded or delivered to a third party in violation of any law applicable to the transaction. 3 Payments to government officials or employees (other than disbursements in the ordinary course of business for such legal purposes as payment of taxes). 4 Payment of compensation or fees in a manner the purpose of which is to assist the recipient to evade taxes, federal or state law, or other valid charges or restrictions applicable to such payment. 5 Use of the funds or assets of the firm or any subsidiary for any other unlawful or improper purpose. - -------------------- -------------------------------------------------------- OTHER CONFLICTS Employees should also be aware that areas other than OF INTEREST personal securities transactions or gifts and sensitive payments may involve conflicts of interest. The following should be regarded as examples of situations involving real or potential conflicts rather than a complete list of situations to avoid. "INSIDE INFORMATION" Specific reference is made to the firm's policy on the use of "inside information" which applies to personal securities transactions as well as to client transactions. USE OF INFORMATION Information acquired in connection with employment by the organization may not be used in any way which might be contrary to or in competition with the interests of clients. Employees are reminded that certain clients have specifically required their relationship with us to be treated confidentially. DISCLOSURE OF INFORMATION Information regarding actual or contemplated investment decisions, research priorities or client interests should not be disclosed to persons outside our organization and in no way can be used for personal gain. OUTSIDE ACTIVITIES All outside relationships such as directorships or trusteeships of any kind or membership in investment organizations (e.g., an investment club) must be cleared by the Director of Regulatory Affairs prior to the acceptance of such a position. As a general matter, directorships in unaffiliated public companies or companies which may reasonably be expected to become public companies will not be authorized because of the potential for conflicts which may impede our freedom to act in the best interests of clients. Service with charitable organizations generally will be authorized, subject to considerations related to time required during working hours and use of proprietary information. EXEMPTIVE PROCEDURE The Director of Regulatory Affairs, the Director of Enterprise Risk Management, the General Counsel or the Ethics Committee can grant exemptions from the personal trading restrictions in this Code upon determining that the transaction for which an exemption is requested would not result in a conflict of interest or violate any other policy embodied in this Code. Factors to be considered may include: the size and holding period of the Employee's position in the security, the market capitalization of the issuer, the liquidity of the security, the reason for the Employee's requested transaction, the amount and timing of client trading in the same or a related security, and other relevant factors. Any Employee wishing an exemption should submit a written request to the Director of Regulatory Affairs setting forth the pertinent facts and reasons why the employee believes that the exemption should be granted. Employees are cautioned that exemptions are intended to be exceptions, and repetitive exemptive applications by an Employee will not be well received. Records of the approval of exemptions and the reasons for granting exemptions will be maintained by the Regulatory Affairs Department. - -------------------- -------------------------------------------------------- COMPLIANCE WITH THE Adherence to the Code of Ethics is considered a basic CODE OF ETHICS condition of employment with our organization. The Ethics Committee monitors compliance with the Code and reviews violations of the Code to determine what action or sanctions are appropriate. Violations of the provisions regarding personal trading will presumptively be subject to being reversed in the case of a violative purchase, and to disgorgement of any profit realized from the position (net of transaction costs and capital gains taxes payable with respect to the transaction) by payment of the profit to any client disadvantaged by the transaction, or to a charitable organization, as determined by the Ethics Committee, unless the Employee establishes to the satisfaction of the Ethics Committee that under the particular circumstances disgorgement would be an unreasonable remedy for the violation. Violations of the Code of Ethics may also adversely affect an Employee's career with Wellington Management with respect to such matters as compensation and advancement. Employees must recognize that a serious violation of the Code of Ethics or related policies may result, at a minimum, in immediate dismissal. Since many provisions of the Code of Ethics also reflect provisions of the US securities laws, Employees should be aware that violations could also lead to regulatory enforcement action resulting in suspension or expulsion from the securities business, fines and penalties, and imprisonment. Again, Wellington Management would like to emphasize the importance of obtaining prior clearance of all personal securities transactions, avoiding prohibited transactions, filing all required reports promptly and avoiding other situations which might involve even an apparent conflict of interest. Questions regarding interpretation of this policy or questions related to specific situations should be directed to the Regulatory Affairs Department or Ethics Committee. Revised: March 1, 2000 - -------------------------------------------------------------------------------- Wellington Management Company, llp EX-99.Q 13 0013.txt POWERS OF ATTORNEY POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints John D. Cleland, James R. Schmank and Brenda M. Harwood, and each of them his true and lawful attorney-in-fact as agent with full power of substitution and resubstitution of him in his name, place, and stead, to sign any and all registration statements on Form N-1A applicable to the Security Funds, on behalf of the SBL Fund, Security Equity Fund, Security Ultra Fund, Security Growth and Income Fund, Security Cash Fund, Security Income Fund, Security Municipal Bond Fund and Advisor's Fund, and any amendment or supplement thereto, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 5th day of May, 2000. PENNY A. LUMPKIN - ------------------------------ Penny A. Lumpkin MARK L. MORRIS, JR. - ------------------------------ Mark L. Morris, Jr. DONALD A. CHUBB, JR. - ------------------------------ Donald A. Chubb, Jr. MAYNARD F. OLIVERIUS - ------------------------------ Maynard F. Oliverius* *Director of each Fund, except Advisor's Fund. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints John D. Cleland and Brenda M. Harwood, and each of them his true and lawful attorney-in-fact as agent with full power of substitution and resubstitution of him in his name, place, and stead, to sign any and all registration statements on Form N-1A applicable to the Security Funds, on behalf of the SBL Fund, Security Equity Fund, Security Ultra Fund, Security Growth and Income Fund, Security Cash Fund, Security Income Fund, Security Municipal Bond Fund and Advisor's Fund, and any amendment or supplement thereto, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 5th day of May, 2000. JAMES R. SCHMANK - ------------------------------ James R. Schmank POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints James R. Schmank and Brenda M. Harwood, and each of them his true and lawful attorney-in-fact as agent with full power of substitution and resubstitution of him in his name, place, and stead, to sign any and all registration statements on Form N-1A applicable to the Security Funds, on behalf of the SBL Fund, Security Equity Fund, Security Ultra Fund, Security Growth and Income Fund, Security Cash Fund, Security Income Fund, Security Municipal Bond Fund and Advisor's Fund, and any amendment or supplement thereto, and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be done by virtue thereof. IN WITNESS WHEREOF, I have hereunto set my hand this 5th day of May, 2000. JOHN D. CLELAND - ------------------------------ John D. Cleland -----END PRIVACY-ENHANCED MESSAGE-----