AMENDED AND RESTATED
INVESTMENT ADVISORY CONTRACT
THIS AGREEMENT, made this 1st day of November 1999, between SECURITY INCOME
FUND, a Kansas corporation (hereinafter referred to as the "Fund"), and SECURITY
MANAGEMENT COMPANY, LLC, a Kansas limited liability company (hereinafter
referred to as the "Management Company"), is amended and restated effective as
of June 28, 2005.
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management investment
company registered under the Federal Investment Company Act of 1940; and
WHEREAS, the Fund is authorized to issue shares of capital stock in separate
Series, with each such Series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund currently offers shares in four separate series, including the
Diversified Income Series, the High Yield Series, the Income Opportunity Series
and the Capital Preservation Series, such series together with all other series
subsequently established by the Fund with respect to which the Fund desires to
retain the Management Company to render investment advisory services hereunder
and with respect to which the Management Company is willing so to do, being
herein collectively referred to as the "Series"; and
WHEREAS, the Management Company is willing to provide investment research and
advice to the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties hereto agree as follows:
1. EMPLOYMENT OF MANAGEMENT COMPANY. The Fund hereby employs the Management
Company to act as investment adviser to each Series of the Fund with respect
to the investment of its assets, and to supervise and arrange the purchase
of securities for and the sale of securities held in the portfolios of the
Series of the Fund, subject always to the supervision of the Board of
Directors of the Fund, during the period and upon and subject to the terms
and conditions herein set forth. The Management Company hereby accepts such
employment and agrees to perform the services required by this Agreement for
the compensation herein provided.
In the event the Fund establishes additional series with respect to which it
desires to retain the Management Company to render investment advisory
services hereunder, it shall notify the Management Company in writing. If
the Management Company is willing to render such services it shall notify
the Fund in writing, whereupon such series shall become a Series subject to
the terms and conditions hereunder, and to such amended or additional
provisions as shall be specifically agreed to by the Fund and the Management
Company in accordance with applicable law.
2. INVESTMENT ADVISORY DUTIES.
(a) The Management Company shall regularly provide each Series of the Fund
with investment research, advice and supervision, continuously furnish
an investment program and recommend that securities shall be purchased
and sold and what portion of the assets of each Series shall be held
uninvested and shall arrange for the purchase of securities and other
investments for and the sale of securities and other investments held
in the portfolio of each Series. All investment advice furnished by the
Management Company to each Series under this Section 2 shall at all
times conform to any requirements imposed by the provisions of the
Fund's Articles of Incorporation and Bylaws, the Investment Company Act
of 1940 and the rules and regulations promulgated thereunder, any other
applicable provisions of law, and the terms of the registration
statements of the Fund under the Securities Act of 1933 and the
Investment Company Act of 1940, all as from time to time amended. The
Management Company shall advise and assist the officers or other agents
of the Fund in taking such steps as are necessary or appropriate to
carry out the decisions of the Fund's Board of Directors (and any duly
appointed committee thereof) with regard to the foregoing matters and
the general conduct of the Fund's business.
(b) Subject to the provisions of the Investment Company Act of 1940 (the
"1940 Act") and any applicable exemptions thereto, the Management
Company is authorized, but is under no obligation, to enter into
sub-advisory agreements (the "Sub-Advisory Agreements") with one or
more sub-advisers (each a "Sub-adviser") to provide investment advisory
services to any Series of the Fund. Each Sub-adviser shall have
investment discretion with respect to the assets of the Series assigned
to that Sub-adviser by the Management Company. The Management Company
shall not be responsible or liable with respect to any investment
decision made by a Sub-adviser, whether such decision be to purchase,
sell or hold such investment. Consistent with the provisions of the
1940 Act and any applicable exemption thereto, the Investment Manager
may enter into Sub-Advisory Agreements or amend Sub-Advisory Agreements
without the approval of the shareholders of the affected Series.
3. PORTFOLIO TRANSACTIONS AND BROKERAGE.
(a) Transactions in portfolio securities shall be effected by the
Management Company, through brokers or otherwise, in the manner
permitted in this Section 3 and in such manner as the Management
Company shall deem to be in the best interests of the Fund after
consideration is given to all relevant factors.
(b) In reaching a judgment relative to the qualification of a broker to
obtain the best execution of a particular transaction, the Management
Company may take into account all relevant factors and circumstances,
including the size of any contemporaneous market in such securities;
the importance to the Fund of speed and efficiency of execution;
whether the particular transaction is part of a larger intended change
in portfolio position in the same securities; the execution
capabilities required by the circumstances of the particular
transaction; the capital required by the transaction; the overall
capital strength of the broker; the broker's apparent knowledge of or
familiarity with sources from or to whom such securities may be
purchased or sold; as well as the efficiency, reliability and
confidentiality with which the broker has handled the execution of
prior similar transactions.
(c) Subject to any statements concerning the allocation of brokerage
contained in the Fund's prospectus or statement of additional
information, the Management Company is authorized to direct the
execution of portfolio transactions for the Fund to brokers who furnish
investment information or research service to the Management Company.
Such allocation shall be in such amounts and proportions as the
Management Company may determine. If the transaction is directed to a
broker providing brokerage and research services to the Management
Company, the commission paid for such transaction may be in excess of
the commission another broker would have charged for effecting that
transaction, if the Management Company shall have determined in good
faith that the commission is reasonable in relation to the value of the
brokerage and research services provided, viewed in terms of either
that particular transaction or the overall responsibilities of the
Management Company with respect to all accounts as to which it now or
hereafter exercises investment discretion. For purposes of the
immediately preceding sentence, "providing brokerage and research
services" shall have the meaning generally given such terms or similar
terms under Section 28(e)(3) of the Securities Exchange Act of 1934, as
amended.
(d) In the selection of a broker for the execution of any transaction not
subject to fixed commission rates, the Management Company shall have no
duty or obligation to seek advance competitive bidding for the most
favorable negotiated commission rate to be applicable to such
transaction, or to select any broker solely on the basis of its
purported or "posted" commission rates.
(e) In connection with transactions on markets other than national or
regional securities exchanges, the Fund will deal directly with the
selling principal or market maker without incurring charges for the
services of a broker on its behalf unless, in the best judgment of the
Management Company, better price or execution can be obtained in
utilizing the services of a broker.
4. ALLOCATION OF EXPENSES AND CHARGES. The Management Company shall provide
investment advisory, statistical and research facilities and all clerical
services relating to research, statistical and investment work, and shall
provide for the compilation and maintenance of such records relating to
these functions as shall be required under applicable law and the rules and
regulations of the Securities and Exchange Commission. The Management
Company will also provide the Fund with a president, a chief financial
officer, and a secretary, subject to the approval of the Board of Directors,
and will pay the salaries and expenses of such officers of the Fund who are
also directors, officer or employees of the Management Company.
Other than as specifically indicated in the preceding sentences, the
Management Company shall not be required to pay any expenses of the Fund,
and in particular, but without limiting the generality of the foregoing, the
Management Company shall not be required to pay office rental or general
administrative expenses; Board of Directors' fees; legal, auditing and
accounting expenses; insurance premiums; broker's commissions; taxes and
governmental fees and any membership dues; fees of custodian, transfer
agent, registrar and dividend disbursing agent (if any); expenses of
obtaining quotations on the Fund's portfolio securities and pricing of the
Fund's shares; cost of stock certificates and any other expenses (including
clerical expenses) of issue, sale, repurchase or redemption of shares of the
Fund's capital stock; costs and expenses in connection with the registration
of the Fund's capital stock under the Securities Act of 1933 and
qualification of the Fund's capital stock under the Blue Sky laws of the
states where such stock is offered; costs and expenses in connection with
the registration of the Fund under the Investment Company Act of 1940 and
all periodic and other reports required thereunder; expenses of preparing,
printing and distributing reports, proxy statements, prospectuses,
statements or additional information, notices and distributions to
stockholders; costs of stationery; costs of stockholder and other meetings;
expenses of maintaining the Fund's corporate existence; and such
nonrecurring expenses as may arise including litigation affecting the Fund
and the legal obligations the Fund may have to indemnify its officers and
directors.
5. COMPENSATION OF MANAGEMENT COMPANY.
(a) As compensation for the services to be rendered by the Management
Company as provided for herein, for each of the years this Agreement is
in effect, the Fund shall pay the Management Company an annual fee
equal to 0.60 percent of the average daily net assets of High Yield
Series; 0.35 percent of the average daily net assets of Diversified
Income Series and the Capital Preservation Series; and 0.80 percent of
the average daily net assets of Income Opportunity Series of $200
million or less, plus 0.70 percent of the average daily net assets of
Income Opportunity Series of more than $200 million, computed on a
daily basis. Such fee shall be adjusted and payable monthly. If this
Agreement shall be effective for only a portion of a year, then the
Management Company's compensation for said year shall be prorated for
such portion. For purposes of this Section 5, the value of the net
assets of each such Series shall be computed in the same manner at the
end of the business day as the value of such net assets is computed in
connection with the determination of the net asset value of the Fund's
shares as described in the Fund's prospectus.
(b) For each of the Fund's full fiscal years this Agreement remains in
force, the Management Company agrees that if the total annual expenses
of each Series of the Fund, exclusive of interest and taxes,
extraordinary expenses (such as litigation), and distribution fees paid
under the Fund's Class B and Class C Distribution Plans, but inclusive
of the Management Company's compensation, exceed any expense limitation
imposed by state securities law or regulation in any state in which
shares of the Fund are then qualified for sale, as such regulations may
be amended from time to time, the Management Company will contribute to
such Series such funds or waive such portion of its fee, adjusted
monthly as may be requisite to insure that such annual expenses will
not exceed any such limitation. If this Contract shall be effective for
only a portion of one of the Series' fiscal years, then the maximum
annual expenses shall be prorated for such portion. Brokerage fees and
commissions incurred in connection with the purchase or sale of any
securities by a Series shall not be deemed to be expenses with the
meaning of this paragraph (b).
6. MANAGEMENT COMPANY NOT TO RECEIVE COMMISSIONS. In connection with the
purchase or sale of portfolio securities for the account of the Fund,
neither the Management Company nor any officer or director of the Management
Company shall act as principal or receive any compensation from the Fund
other than its compensation as provided for in Section 5 above. If the
Management Company, or any "affiliated person" (as defined in the Investment
Company Act of 1940) receives any cash, credits, commissions or tender fees
from any person in connection with transactions in the Fund's portfolio
securities (including but not limited to the tender or delivery of any
securities held in the Fund's portfolio), the Management company shall
immediately pay such amount to the Fund in cash or as a credit against any
then earned but unpaid management fees due by the Fund to the Management
Company.
7. LIMITATION OF LIABILITY OF MANAGEMENT COMPANY. So long as the Management
Company shall give the Fund the benefit of its best judgment and effort in
rendering services hereunder, the Management Company shall not be liable for
any errors of judgment or mistake of law, or for any loss sustained by
reason of the adoption of any investment policy or the purchase, sale or
retention of any security on its recommendation, whether or not such
recommendation shall have been based upon its own investigation and research
or upon investigation and research made by any other individual, firm or
corporation, if such recommendation shall have been made and such other
individual, firm or corporation shall have been selected with due care and
in good faith. Nothing herein contained shall, however, be construed to
protect the Management Company against any liability to the Fund or its
security holders by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement. As used in
this Section 7, "Management Company" shall include directors, officers and
employees of the Management Company, as well as the Management Company
itself.
8. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent the
Management Company or any officer thereof from acting as investment adviser
for any other person, firm, or corporation, nor shall it in any way limit or
restrict the Management Company or any of its directors, officers,
stockholders or employees from buying, selling, or trading any securities
for its own accounts or for the accounts of others for whom it may be
acting; provided, however, that the Management Company expressly represents
that it will undertake no activities which, in its judgment, will conflict
with the performance of its obligations to the Fund under this Agreement.
The Fund acknowledges that the Management Company acts as investment adviser
to other investment companies, and it expressly consents to the Management
Company acting as such; provided, however, that if in the opinion of the
Management Company, particular securities are consistent with the investment
objectives of, and are desirable purchases or sales for the portfolios of
one or more Series and one or more of such other investment companies or
series of such companies at approximately the same time, such purchases or
sales will be made on a proportionate basis if feasible, and if not
feasible, then on a rotating or other equitable basis.
9. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become effective
on November 1, 1999, provided that on or before that date it has been
approved by the holders of a majority of the outstanding voting securities
of each Series of the Fund. This Agreement shall continue in force until
November 1, 2001, and for successive 12-month periods thereafter, unless
terminated, provided each such continuance is specifically approved at least
annually by (a) the vote of a majority of the entire Board of Directors of
the Fund, and the vote of a majority of the directors of the Fund who are
not parties to this Agreement or interested persons (as such terms are
defined in the Investment Company Act of 1940) of any such party cast in
person at a meeting of such directors called for the purpose of voting upon
such approval, or (b) by the vote of the holders of a majority of the
outstanding voting securities of each series of the Fund (as defined in the
Investment Company Act of 1940). In the event a majority of the outstanding
shares of one series vote for continuance of the Advisory Contract, it will
be continued for that series even though the Advisory Contract is not
approved by either a majority of the outstanding shares of any other series
or by a majority of outstanding shares of the Fund. Upon this Agreement
becoming effective, any previous agreement between the Fund and the
Management Company providing for investment advisory and management services
shall concurrently terminate, except that such termination shall not affect
fees accrued and guarantees of expenses with respect to any period prior to
termination.
This Agreement may be terminated at any time as to any series of the Fund,
without payment of any penalty, by vote of the Board of Directors of the
Fund or by vote of the holders of a majority of the outstanding voting
securities of that series of the Fund, or by the Management Company, upon 60
days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
"assignment" (as defined in the Investment Company Act of 1940).
IN WITNESS WHEREOF, the parties hereto 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 INCOME FUND
By: XXXXXXX X. XXXXX
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Xxxxxxx X. Xxxxx, President
ATTEST:
XXX X. XXX
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Xxx X. Xxx, Secretary
SECURITY MANAGEMENT COMPANY, LLC
By: XXXXXXX X. XXXXX
--------------------------------
Xxxxxxx X. Xxxxx, President
ATTEST:
XXX X. XXX
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Xxx X. Xxx, Secretary
