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
INVESTORS, LLC, a Kansas limited liability company (hereinafter referred to as
the "Management Company"), is amended and restated effective as of October 13,
2008.
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, including
the Diversified Income Series, the High Yield 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, on August 15, 2008, the Board of Directors of the Fund authorized
changes to the Management Company's compensation in connection with the
Diversified Income Series;
WHEREAS, the parties hereto wish to amend the Agreement to reflect the changes
authorized by the Board of Directors of the Fund;
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
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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
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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
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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; 0.50 percent of the average daily net assets of Diversified
Income Series; and 0.35 of the average daily net assets of the Capital
Preservation Series. 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
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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
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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 continue in
force with respect to a Series for an initial term of up to two years, and
then 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,
or by the vote of the holders of a majority of the outstanding voting
securities of each series of the Fund (as defined in the 1940 Act), and (b)
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. 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:
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Xxxxxxx X. Xxxxxxx, President
ATTEST:
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Xxx X. Xxx, Secretary
SECURITY INVESTORS, LLC
By:
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Xxxxxxx X. Xxxxxxx, President
ATTEST:
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Xxx X. Xxx, Secretary
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