EXHIBIT 99(d)(1)
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.
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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
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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
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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
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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.
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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).
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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: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxxx X. Xxxxx, President
ATTEST:
/s/ Xxx X. Xxx
-------------------------------------
Xxx X. Xxx, Secretary
SECURITY MANAGEMENT COMPANY, LLC
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxxx X. Xxxxx, President
ATTEST:
/s/ Xxx X. Xxx
-------------------------------------
Xxx X. Xxx, Secretary
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