EX-99.CODE ETH
Item 11 (a)(1)
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL OFFICERS OF THE SECURITY FUNDS
I. COVERED OFFICERS/PURPOSE OF THE CODE
The Security Funds' code of ethics (this "Code") for the investment companies
within the complex (collectively, "Funds" and each, "Company") applies to the
Company's President (Principal Executive Officer) and Treasurer (Principal
Financial Officer) (the "Covered Officers" each of whom are set forth in Exhibit
A) for the purpose of promoting:
- honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
- full, fair, accurate, timely and understandable disclosure in reports
and documents that a registrant files with, or submits to, the
Securities and Exchange Commission ("SEC") and in other public
communications made by the Company;
- compliance with applicable laws and governmental rules and
regulations;
- the prompt internal reporting of violations of the Code to an
appropriate person or persons identified in the Code; and
- accountability for adherence to the Code.
Each Covered Officer should adhere to a high standard of business ethics and
should be sensitive to situations that may give rise to actual as well as
apparent conflicts of interest.
II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF
INTEREST
OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private
interest interferes with the interests of, or his or her service to, the
Company. For example, a conflict of interest would arise if a Covered Officer,
or a member of his or her family, receives improper personal benefits as a
result of his or her position with the Company.
Certain conflicts of interest arise out of the relationships between
Covered Officers and the Company and already are subject to conflict of interest
provisions in the Investment Company Act of 1940 ("Investment Company Act") and
the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example,
Covered Officers may not individually engage in certain transactions (such as
the purchase or sale of securities or other property) with the Company because
of their status as "affiliated persons" of the Company. The Company's and the
investment adviser's compliance programs and procedures are designed to prevent,
or identify and correct, violations of these provisions. This Code does not, and
is not intended to, repeat or replace these programs and procedures, and such
conflicts fall outside of the parameters of this Code.
Although typically not presenting an opportunity for improper personal
benefit, conflicts arise from, or result from, the contractual relationship
between the Company and the investment adviser of which the Covered Officers are
also officers or employees. As a result, this Code recognizes that the Covered
Officers will, in the normal course of their duties (whether formally for the
Company or for the adviser, or for both), be involved in establishing policies
and implementing decisions that will have different effects on the adviser and
the Company. The participation of the Covered Officers in such activities is
inherent in the contractual relationship between the Company and the adviser and
is consistent with the performance by the Covered Officers of their duties as
officers of the Company. Thus, if performed in conformity with the provisions of
the Investment Company Act and the Investment Advisers Act, such activities will
be deemed to have been handled ethically. In addition, it is recognized by the
Funds' Boards of Directors ("Boards") that the Covered Officers may also be
officers or employees of one or more other investment companies covered by this
code.
Other conflicts of interest are covered by the Code, even if such conflicts
of interest are not subject to provisions in the Investment Company Act and the
Investment Advisers Act. The following list provides examples of conflicts of
interest under the Code, but Covered Officers should keep in mind that these
examples are not exhaustive. THE OVERARCHING PRINCIPLE IS THAT THE PERSONAL
INTEREST OF A COVERED OFFICER SHOULD NOT BE PLACED IMPROPERLY BEFORE THE
INTEREST OF THE COMPANY.
* * *
Each Covered Officer must:
- not use his or her personal influence or personal relationships
improperly to influence investment decisions or financial reporting by
the Company whereby the Covered Officer would benefit personally to
the detriment of the Company;
- not cause the Company to take action, or fail to take action, for the
individual personal benefit of the Covered Officer rather than the
benefit the Company;
- report at least annually his or her affiliations or other
relationships which may give rise to conflicts of interest with the
Funds (provided that annual completion of the Funds' Directors and
Officers Questionnaire shall satisfy the requirements of this bullet
point).
There are some conflict of interest situations that should always be discussed
with the Secretary of the Funds (the "Secretary"), or other senior legal
officer, if material. Examples of these include:(1)
- service as a director on the board of any public company;
- the receipt of any gifts in excess of $___;
- ----------
(1) Any activity or relationship that would present a conflict for a Covered
Officer would likely also present a conflict for the Covered Officer if a
member of the Covered Officer's family engages in such an activity or has
such a relationship.
2
- the receipt of any entertainment from any company with which the
Company has current or prospective business dealings unless such
entertainment is business-related, reasonable in cost, appropriate as
to time and place, and not so frequent as to raise any question of
impropriety;
- any ownership interest in, or any consulting or employment
relationship with, any of the Company's service providers, other than
its investment adviser, principal underwriter, administrator or any
affiliated person thereof;
- a direct or indirect financial interest in commissions, transaction
charges or spreads paid by the Company for effecting portfolio
transactions or for selling or redeeming shares other than an interest
arising from the Covered Officer's employment, such as compensation or
equity ownership.
III. DISCLOSURE AND COMPLIANCE
- Each Covered Officer should familiarize himself or herself with the
disclosure requirements generally applicable to the Company;
- each Covered Officer should not knowingly misrepresent, or cause
others to misrepresent, facts about the Company to others, whether
within or outside the Company, including to the Company's directors
and auditors, and to governmental regulators and self-regulatory
organizations;
- each Covered Officer should, to the extent appropriate within his or
her area of responsibility, consult with other officers and employees
of the Funds and the adviser with the goal of promoting full, fair,
accurate, timely and understandable disclosure in the reports and
documents the Funds file with, or submit to, the SEC and in other
public communications made by the Funds; and
- it is the responsibility of each Covered Officer to promote compliance
with the standards and restrictions imposed by applicable laws, rules
and regulations.
IV. REPORTING AND ACCOUNTABILITY
Each Covered Officer must:
- upon adoption of the Code (or thereafter as applicable, upon becoming
a Covered Officer), affirm in writing to the Board that he or she has
received, read, and understands the Code;
- annually thereafter affirm to the Board that he or she has complied
with the requirements of the Code;
3
- not retaliate against any other Covered Officer or any employee of the
Funds or their affiliated persons for reports of potential violations
that are made in good faith; and
- notify the Secretary promptly if he or she knows of any violation of
this Code. Failure to do so is itself a violation of this Code.
The Secretary, or other designated senior legal officer of the Funds' investment
adviser, is responsible for applying this Code to specific situations in which
questions are presented under it and has the authority to interpret this Code in
any particular situation.(2) However, any approvals or waivers(3) sought by the
President will be considered by the Audit Committee of the Funds (the
"Committee").
The Funds will follow these procedures in investigating and enforcing this Code:
- the Secretary or other designated senior legal officer will take all
appropriate action to investigate any potential violations reported to
him or her;
- if, after such investigation, the Secretary believes that no violation
has occurred, the Secretary is not required to take any further
action;
- any matter that the Secretary believes is a violation will be reported
to the Committee;
- if the Committee concurs that a violation has occurred, it will inform
and make a recommendation to the Board, which will consider
appropriate action, which may include review of, and appropriate
modifications to, applicable policies and procedures; notification to
appropriate personnel of the investment adviser or its board; or a
recommendation to dismiss the Covered Officer as an officer of the
Funds;
- the Board will be responsible for granting waivers, as appropriate;
and
- any changes to or waivers of this Code will, to the extent required,
be disclosed as provided by SEC rules.
V. OTHER POLICIES AND PROCEDURES
This Code shall be the sole code of ethics adopted by the Funds for purposes of
Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to
registered investment companies thereunder. Insofar as other policies or
procedures of the Funds, the Funds' adviser, principal underwriter, or other
service providers govern or purport to govern the behavior or activities of the
Covered Officers who are subject to this Code, they are superseded by this Code
to the extent
- ----------
(2) The Secretary or other designated senior legal officer is authorized to
consult, as appropriate, with counsel to the Company and counsel to the
Independent Directors, and is encouraged to do so.
(3) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of
a material departure from a provision of the code of ethics" and "implicit
waiver," which must also be disclosed, as "the registrant's failure to take
action within a reasonable period of time regarding a material departure
from a provision of the code of ethics that has been made known to an
executive officer" of the registrant.
4
that they overlap or conflict with the provisions of this Code. The Funds' and
their investment adviser's and principal underwriter's codes of ethics under
Rule 17j-1 under the Investment Company Act are separate requirements applying
to the Covered Officers and others, and are not part of this Code.
VI. AMENDMENTS
Any amendments to this Code, other than amendments to Exhibit A, must be
approved or ratified by a majority vote of the Board, including a majority of
independent directors.
VII. CONFIDENTIALITY
All reports and records prepared or maintained pursuant to this Code will be
considered confidential and shall be maintained and protected accordingly.
Except as otherwise required by law or this Code, such matters shall not be
disclosed to anyone other than the Board and its counsel and the appropriate
Company and its adviser.
VIII. INTERNAL USE
The Code is intended solely for the internal use by the Funds and does not
constitute an admission, by or on behalf of any Company, as to any fact,
circumstance, or legal conclusion.
Date: May 7, 2004
5
EXHIBIT A - COVERED OFFICERS
Michael G. Odlum - President
Brenda M. Harwood - Treasurer
Date: May 7, 2004
6