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EXHIBIT (5)(A)
INVESTMENT ADVISORY CONTRACT
INVESTMENT ADVISORY CONTRACT
THIS AGREEMENT, made this 27th day of March, 1987, between SECURITY INCOME
FUND, a Kansas corporation (hereinafter referred to as the "Fund"), and
SECURITY MANAGEMENT COMPANY, a Kansas corporation (hereinafter referred to as
the "Management Company"),
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 three separate series designated
the Corporate Bond Series, the U.S. Government Series, and the High Yield
Series (the "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.
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2. INVESTMENT ADVISORY DUTIES. 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.
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
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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;
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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 rendered by the Management
Company as provided herein, for each of the Fund's fiscal years
this Agreement is in effect, the Fund shall pay the Management
Company an annual fee equal to .5 percent of the average daily
closing value of the net assets of each Series 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 in which
a fee is owed for any Series, 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 the
Series shall be computed in the same manner as the value of such
net assets is computed in connection with the determination of the
net asset value of the shares of the Fund as described in the
Fund's Prospectus and Statement of Additional Information. The net
asset value of each Series shall be included in and comprise a
part of the net assets of the Fund for purposes of determining
said fee under this Section.
(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 and extraordinary expenses (such as litigation), 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
to 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.
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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 that corporation 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 March 27, 1987, provided that on that date it is 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
April 1, 1988, 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
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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.
ATTEST: SECURITY INCOME FUND
Xxx X. Xxx By: Xxxxxxx X. Xxxxxxxx
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Title: Secretary President
ATTEST: SECURITY MANAGEMENT COMPANY
Xxx X. Xxx By: Xxxxxxx X. Xxxxxxxx
------------------------ ----------------------
Title: Secretary President
Please note that this Agreement was re-executed October 21, 1991, to correct a
typographical error.
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AMENDMENT TO INVESTMENT ADVISORY CONTRACT
WHEREAS, Security Income Fund (the "Fund") and Security Management Company (the
"Management Company") are parties to an Investment Advisory Contract dated
March 27, 1987 (the "Agreement"), under which the Management Company agrees to
provide investment research and advice to the Fund in return for the
compensation specified in the Agreement;
WHEREAS, Security Income Fund currently offers its shares in two series, the
Corporate Bond Series and the U.S. Government Series (hereinafter collectively
referred to as the "Series");
WHEREAS, effective October 19, 1993, the Fund will offer its shares in two
Classes, Class A shares, which are currently being offered, and a new class,
Class B shares;
WHEREAS, the Fund has adopted a Distribution Plan with respect to its Class B
shares and, as a result, such shares are subject to distribution fees to which
Class A shares are not subject;
WHEREAS, the distribution fees associated with Class B shares require the
amendment of the Agreement relative to that class of shares;
WHEREAS, on October 1, 1993, the initial Class B shareholder of each Series of
the Fund approved such amendment to this Agreement;
WHEREAS, the changes to the Agreement which are contemplated by this Amendment
do not affect the interests of Class A shareholders of the Fund;
NOW, THEREFORE, the Fund and the Management Company hereby amend the Investment
Advisory Contract, dated March 27, 1987, effective October 1, 1993, as follows:
A. The Management Company agrees to provide investment research and advice,
to the Fund pursuant to the terms and conditions set forth in the
Agreement, as amended in section B below.
B. Section 5(b) of the Agreement shall be amended by deleting it in its
entirety and replacing it with the following:
(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 Distribution Plan,
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
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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).
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Investment Advisory Contract this 1st day of October 1993.
ATTEST: SECURITY INCOME FUND
Xxx X. Xxx By: Xxxxxxx X. Xxxxxxxx
------------------------ ---------------------------
Xxx X. Xxx, Secretary President
ATTEST: SECURITY MANAGEMENT COMPANY
Xxx X. Xxx By: Xxxxxxx X. Xxxxxxxx
------------------------ ---------------------------
Xxx X. Xxx, Secretary President
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AMENDMENT TO INVESTMENT ADVISORY CONTRACT
WHEREAS, Security Income Fund (the "Fund") and Security Management Company (the
"Management Company") are parties to an Investment Advisory Contract dated
March 27, 1987, as amended (the "Advisory Contract"), under which the
Management Company agrees to provide investment research, advice and
supervision and business management services to the Fund in return for the
compensation specified in the Advisory Contract:
WHEREAS, on October 21, 1994, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Limited
Maturity Bond Series, in addition to its presently offered series of common
stock of Corporate Bond Series and U.S. Government Series;
WHEREAS, on October 21, 1994, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Limited Maturity Bond Series in two
classes, designated Class A shares and Class B shares;
WHEREAS, on October 21, 1994, the Board of Directors of the Fund approved the
amendment of the Advisory Contract to provide that the Management Company would
provide investment advisory and business management services to each class of
common stock of the Limited Maturity Bond Series of the Fund under the terms
and conditions of the Advisory Contract; and
WHEREAS, on December 30, 1994, the initial shareholder of the Limited Maturity
Bond Series approved such amendment to the Advisory Contract;
NOW, THEREFORE BE IT RESOLVED, that the Fund and the Management Company hereby
amend the Advisory Contract, to provide that the Management Company shall
provide all investment advisory services, and each of the Management Company
and the Fund shall fulfill all of their respective obligations under the
Advisory Contract, as to each Series of the Fund, including the Limited
Maturity Bond Series.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Investment Advisory Contract this 30th day of December 1994.
ATTEST: SECURITY INCOME FUND
Xxx X. Xxx By: Xxxx X. Xxxxxxx
--------------------- ------------------------------
Xxx X. Xxx, Secretary Xxxx X. Xxxxxxx, President
ATTEST: SECURITY MANAGEMENT COMPANY
Xxx X. Xxx By: Xxxxxxx X. Xxxxxxxx
--------------------- ------------------------------
Xxx X. Xxx, Secretary Xxxxxxx X. Xxxxxxxx, President
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AMENDMENT TO INVESTMENT ADVISORY CONTRACT
WHEREAS, Security Income Fund (the "Fund") and Security Management Company (the
"Management Company") are parties to an Investment Advisory Contract dated
March 27, 1987, as amended (the "Advisory Contract"), under which the
Management Company agrees to provide investment research, advice and
supervision and business management services to the Fund in return for the
compensation specified in the Advisory Contract;
WHEREAS, on February 3, 1995, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Global
Aggressive Bond Series, in addition to its presently offered series of common
stock of Corporate Bond Series, Limited Maturity Bond Series and
U.S. Government Series;
WHEREAS, on February 3, 1995, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Global Aggressive Bond Series in two
classes, designated Class A shares and Class B shares;
WHEREAS, on February 3, 1995, the Board of Directors of the Fund approved the
amendment of the Advisory Contract to provide that the Management Company would
provide investment advisory and business management services to each class of
common stock of the Global Aggressive Bond Series of the Fund under the terms
and conditions of the Advisory Contract; and
WHEREAS, on April 18, 1995, the initial shareholder of the Global Aggressive
Bond Series approved such amendment to the Advisory Contract;
NOW, THEREFORE BE IT RESOLVED, that the Fund and the Management Company hereby
amend the Advisory Contract, dated March 27, 1987, as follows, effective May 1,
1995:
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Paragraph 5(a) shall be amended as follows (new language underlined):
5. Compensation of Management Company
a) As compensation for the services to be rendered by the Management Compa
ny 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
.75 percent of the average daily closing value of the net assets of
Global Aggressive Bond Series of the Fund, and .50 percent of the
average daily closing value of the net assets of Corporate Bond Series,
Limited Maturity Bond Series, and U.S. Government Series of the Fund,
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.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Investment Advisory Contract this 28 day of April, 1995.
ATTEST: SECURITY INCOME FUND
Xxx X. Xxx By: Xxxx X. Xxxxxxx
--------------------- ------------------------------
Xxx X. Xxx, Secretary Xxxx X. Xxxxxxx, President
ATTEST: SECURITY MANAGEMENT COMPANY
Xxx X. Xxx By: Xxxxxxx X. Xxxxxxxx
--------------------- ------------------------------
Xxx X. Xxx, Secretary Xxxxxxx X. Xxxxxxxx, President
