INVESTMENT ADVISORY CONTRACT
THIS AGREEMENT, made this ______ day of _________________________, 1997, between
SECURITY INCOME FUND, a Kansas corporation (the "Fund"), and MFR Advisors, Inc.,
a New York corporation (the "Adviser"),
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 in separate Series, with each
such Series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund desires to retain the Adviser to render certain investment
advisory services hereunder and with respect to Emerging Markets Total Return
Series, Global Asset Allocation Series, and Global High Yield Series (formerly
Global Aggressive Bond Series) of the Fund (the "Series") 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 ADVISER. The Fund hereby employs the Adviser to act as
investment adviser to the 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 Adviser 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 Adviser to render investment advisory services
hereunder, it shall notify the Adviser in writing. If the Adviser 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 Adviser in accordance with applicable law.
2. INVESTMENT ADVISORY DUTIES. The Adviser shall regularly provide each Series
of the Fund with investment research, advice and supervision, continuously
furnish an investment program and recommend what 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 Adviser 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
Adviser 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 Adviser,
through brokers or otherwise, in the manner permitted in this Section 3
and in such manner as the Adviser 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 Adviser 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 Adviser is authorized to direct the execution of
portfolio transactions for the Fund to brokers who furnish investment
information or research service to the Adviser. Such allocation shall
be in such amounts and proportions as the Adviser may determine. If the
transaction is directed to a broker providing brokerage and research
services to the Adviser, the commission paid for such transaction may
be in excess of the commission another broker would have charged for
effecting that transaction, if the Adviser 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 Adviser 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 Adviser shall have no duty or
obligation to seek advance competitive bidding for the most favorable
negotiated commission rate to the 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
Adviser, better price or execution can be obtained in utilizing the
services of a broker.
4. ALLOCATION OF EXPENSES AND CHARGES. The Adviser 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.
Other than as specifically indicated in the preceding sentences, the Adviser
shall not be required to pay any expenses of the Fund, and in particular,
but without limiting the generality of the foregoing, the Adviser 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 of 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 ADVISER.
(a) As compensation for the services rendered by the Adviser as provided
herein, for each of the Fund's fiscal years this Agreement is in
effect, the Fund shall pay the Adviser an annual fee equal to 1.00
percent of the average daily closing value of the net assets for each
of Emerging Markets Total Return Series and Global Asset Allocation
Series, and .75 percent of the average daily closing value of the net
assets of Global High Yield 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 Adviser'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.
(b) For each of the Fund's full fiscal years this Agreement remains in
force, the Adviser 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 Adviser'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 Adviser 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. ADVISER NOT TO RECEIVE COMMISSIONS. In connection with the purchase or sale
of portfolio securities for the account of the Fund, neither the Adviser nor
any officer or director of the Adviser shall act as principal or receive any
compensation from the Fund other than its compensation as provided for in
Section 5 above. If the Adviser, 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 Adviser 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 Adviser.
7. LIMITATION OF LIABILITY OF ADVISER. So long as the Adviser shall give the
Fund the benefit of its best judgment and effort in rendering services
hereunder, the Adviser 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 Adviser 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, "Adviser" shall include directors, officers and
employees of the Adviser, as well as that corporation itself.
8. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent the
Adviser 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 Adviser 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 Adviser 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
Adviser acts as investment adviser to other investment companies, and it
expressly consents to the Adviser acting as such; provided, however, that if
in the opinion of the Adviser, 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 May 1, 1997, 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 May 1, 1998, 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 a majority of the
outstanding shares of any other series. Upon this Agreement becoming
effective, any previous agreement between the Fund and the Adviser 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 Adviser, 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:
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President
ATTEST:
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Secretary
MFR ADVISORS, INC.
By:
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President
ATTEST:
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Secretary
