<PAGE>
Registration No. 811-2120
Registration No. 2-38414
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Post-Effective Amendment No. 64 [X]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Post-Effective Amendment No. 64 [X]
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(Check appropriate box or boxes)
SECURITY INCOME FUND
(Exact Name of Registrant as Specified in Charter)
700 HARRISON STREET, TOPEKA, KANSAS 66636-0001
(Address of Principal Executive Offices/Zip Code)
Registrant's Telephone Number, including area code:
(785) 431-3127
Copies To:
John D. Cleland, President Amy J. Lee, Secretary
Security Income Fund Security Income Fund
700 Harrison Street 700 Harrison Street
Topeka, KS 66636-0001 Topeka, KS 66636-0001
(Name and address of Agent for Service)
Approximate date of proposed public offering: April 30, 1999
It is proposed that this filing will become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[_] on January 28, 2000, pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[X] on January 28, 2000, pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on January 28, 2000, pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered: Shares of common stock, par value $1.00.
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SECURITY INCOME FUND
FORM N-1A
This Amendment to the Registration Statement of Security Income Fund, which
contains five series, relates only to the Capital Preservation Series. The
prospectus and statement of additional information for the Corporate Bond,
Limited Maturity Bond, U.S. Government and High Yield Series are incorporated
herein by reference to the Registrant's most recent filing under Rule 497 under
the Securities Act of 1933.
PART B. STATEMENT OF ADDITIONAL INFORMATION
ITEM 22. FINANCIAL STATEMENTS
To be filed by amendment.
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SECURITY FUNDS
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PROSPECTUS
FEBRUARY 1, 2000
* Security Capital
Preservation Fund
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The Securities and Exchange
Commission has not approved or
disapproved these securities or
passed upon the adequacy of this
prospectus. Any representation to
the contrary is a criminal offense.
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[LOGO]
SECURITY DISTRIBUTORS, INC.
A Member of The Security Benefit
Group of Companies
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TABLE OF CONTENTS
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OVERVIEW OF THE SECURITY CAPITAL PRESERVATION FUND
GOAL ....................................................................... 2
CORE STRATEGY............................................................... 2
INVESTMENT POLICIES AND STRATEGIES.......................................... 2
PRINCIPAL RISKS OF INVESTING IN THE FUND.................................... 2
WHO SHOULD CONSIDER INVESTING IN THE FUND................................... 2
FEES AND EXPENSES OF THE FUND............................................... 4
A DETAILED LOOK AT THE SECURITY CAPITAL PRESERVATION FUND
OBJECTIVE................................................................... 6
STRATEGY.................................................................... 6
PRINCIPAL INVESTMENTS....................................................... 6
Fixed Income Securities................................................. 6
Wrapper Agreements...................................................... 7
Short-Term Investments.................................................. 8
Derivative Instruments.................................................. 8
Other Investments....................................................... 8
INVESTMENT PROCESS.......................................................... 9
RISKS ...................................................................... 10
Primary Risks........................................................... 10
Secondary Risk.......................................................... 12
MANAGEMENT OF THE FUND...................................................... 13
Board of Directors...................................................... 13
Investment Adviser...................................................... 13
Other Services.......................................................... 14
Organizational Structure................................................ 15
Portfolio Managers...................................................... 15
CALCULATING THE FUND'S SHARE PRICE.......................................... 16
BUYING SHARES............................................................... 16
Class A Shares.......................................................... 16
Class A Distribution Plan............................................... 16
Class B Shares.......................................................... 17
Class B Distribution Plan............................................... 17
Class C Shares.......................................................... 18
Class C Distribution Plan............................................... 18
Waiver of Deferred Sales Charge......................................... 18
Confirmations and Statements............................................ 18
SELLING SHARES.............................................................. 19
Qualified TSA Redemptions............................................... 21
Qualified IRA Redemptions............................................... 22
Qualified Plan Redemptions.............................................. 22
Payment of Redemption Proceeds.......................................... 22
DIVIDENDS AND DISTRIBUTIONS................................................. 23
TAX CONSIDERATIONS.......................................................... 23
SHAREHOLDER SERVICES........................................................ 23
Accumulation Plan....................................................... 23
Systematic Withdrawal Program........................................... 24
Exchange Privilege...................................................... 24
Retirement Plans........................................................ 25
GENERAL INFORMATION......................................................... 25
Shareholder Inquiries................................................... 25
FINANCIAL HIGHLIGHTS........................................................ 26
APPENDIX A - REDUCED SALES CHARGES.......................................... 29
Class A Shares.......................................................... 29
Rights of Accumulation.................................................. 29
Statement of Intention.................................................. 29
Reinstatement Privilege................................................. 29
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OVERVIEW OF THE SECURITY CAPITAL PRESERVATION FUND
GOAL
The Fund seeks a high level of current income while seeking to maintain a stable
value per share.
CORE STRATEGY
The Fund invests primarily in fixed income securities. The Fund also enters into
contracts with financial institutions that are designed to stabilize the Fund's
share value.
INVESTMENT POLICIES AND STRATEGIES
The Fund invests all of its assets in a master portfolio with the same
investment goal as the Fund. The Fund, through the master portfolio, seeks to
achieve its goal by investing in fixed income securities of varying maturities,
money market instruments and futures and options (including futures and options
traded on foreign exchanges, such as bonds and equity indices of foreign
countries). The Fund attempts to maintain a stable share value by entering into
contracts, called Wrapper Agreements, with financial institutions, such as
insurance companies or banks.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Although the Fund seeks to preserve a stable share value, there are risks
associated with fixed income investing. For example, the value of fixed income
securities could fluctuate or fall if:
* There is a sharp rise in interest rates.
* An issuer's creditworthiness declines.
* Changes in interest rates or economic downturns have a negative effect on
issuers in the financial services industry.
The Fund attempts to offset these risks by purchasing Wrapper Agreements.
Wrapper Agreements may have their own risks, including:
* The possibility of default by a financial institution providing a Wrapper
Agreement ("Wrapper Provider").
* The inability of the Fund to obtain Wrapper Agreements covering the Fund's
assets.
The Fund is also subject to the risk that the Investment Adviser incorrectly
judges the potential risks and rewards of derivative investing.
WHO SHOULD CONSIDER INVESTING IN THE FUND
You should consider investing in the Fund if you are looking for an investment
that seeks to earn current income higher than money market mutual funds over
most time periods and to preserve the value of your investment. In addition, the
Fund is offered as an alternative to short-term bond funds and as a comparable
investment to stable value or guaranteed investment contract options offered in
employee benefit plans.
The Fund offers shares only to retirement accounts such as tax-sheltered annuity
custodial accounts (TSAs) individual retirement accounts (IRAs) and to employees
investing through participant-directed employee benefit plans. IRAs include
traditional IRAs, Roth IRAs, education IRAs, simplified employee pension IRAs
(SEP IRAs), savings incentive match plans for employees (SIMPLE IRAs), and Keogh
plans.
You should not consider investing in the Fund if you seek capital growth.
Although it provides a convenient means of diversifying short-term investments,
the Fund by itself does not constitute a balanced investment program.
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An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Although the Fund seeks to preserve a stable share value, it is possible to lose
money by investing in the Fund.
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FEES AND EXPENSES OF THE FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
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SHAREHOLDER FEES (fees paid directly from your investment)
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CLASS A CLASS B CLASS C
SHARES(1) SHARES(2) SHARE(3)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 3.5% None None
Maximum Sales Charge Imposed
on Reinvested Dividends None None None
5% during the
Maximum Deferred Sales charge (as a first year,
percentage of original purchase price or None decreasing to 0% 1%
redemption proceeds, whichever if lower) in the sixth and
following years
Maximum Redemption Fee(4) 3% 3% 3%
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1 Purchases of Class A shares in amounts of $1,000,000 or more are not subject
to an initial sales load; however, a deferred sales charge of 1% is imposed
in the event of redemption within one year of purchase.
2 Class B shares convert tax-free to Class A shares automatically after eight
years.
3 A deferred sales charge of 1% is imposed in the event of redemption within
one year of purchase.
4 The redemption fee payable to the master portfolio is designed primarily to
offset those expenses which may be incurred by the master portfolio in
connection with certain shareholder redemptions. Proceeds from the redemption
fee will be used by the master portfolio to offset the actual portfolio and
administrative costs associated with such redemptions, including custodian,
transfer agent, settlement, and account processing costs, as well as the
adverse impact of such redemptions on the premiums paid for Wrapper
Agreements and the yield on Wrapper Agreements. The redemption fee may also
have the effect of discouraging redemptions by shareholders attempting to
take advantage of short-term interest rate movements. The redemption fee does
not apply to Qualified TSA, Qualified IRA or Qualified Plan Redemptions.
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ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
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MANAGEMENT DISTRIBUTION OTHER TOTAL ANNUAL FUND
FEES(1) (12B-1) FEES EXPENSES(2) OPERATING EXPENSES(3)
Class A 0.00% 0.25% ____% _____%
Class B 0.00% 0.75% ____% _____%
Class C 0.00% 0.50% ____% _____%
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1 The Fund does not directly pay a management fee. However, the underlying
master portfolio in which the Fund invests, the BT PreservationPlus Income
Portfolio (the "Portfolio") does pay a management fee to its investment
adviser, Bankers Trust Company. Bankers Trust Company has contractually
agreed to waive its advisory fee from the Portfolio until July 31, 2000.
2 "Other Expenses" includes the amounts paid by the Portfolio for wrapper
agreements.
3 Information on the annual Fund operating expenses reflects the expenses of
both the Fund and the Portfolio. Security Management Company, LLC ("SMC"),
the Fund's Administrator, has agreed that if the total annual expenses of the
Fund, exclusive of interest, taxes, extraordinary expenses, brokerage fees
and commissions, and Rule 12b-1 fees, but inclusive of its own fee, exceeds
1.50%, SMC will contribute to the Fund an amount and/or waive its fee as may
be necessary to insure that the total annual expenses do not exceed such
amount.
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EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated. The Example also assumes that your investment has a 5% return each
year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
You would pay the following expenses if you redeemed your shares at the end of
each period.
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1 YEAR 3 YEARS
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Class A
Class B
Class C
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You would pay the following expenses if you redeemed your shares at the end of
each period and were assessed the 3% Redemption Fee.
-----------------------------------
1 YEAR 3 YEARS
-----------------------------------
Class A
Class B
Class C
-----------------------------------
You would pay the following expenses if you did not redeem your shares.
-----------------------------------
1 YEAR 3 YEARS
-----------------------------------
Class A
Class B
Class C
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A DETAILED LOOK AT THE SECURITY CAPITAL PRESERVATION FUND
OBJECTIVE
The Security Capital Preservation Fund seeks a high level of current income
while seeking to maintain a stable value per share.
While priority is given to earning income and maintaining the value of the
Fund's principal, all fixed income securities, including U.S. government
obligations, can change in value when, for example, interest rates change or an
issuer's creditworthiness changes. THE FUND'S OBJECTIVE IS NOT A FUNDAMENTAL
POLICY AND MAY BE CHANGED BY THE FUND'S BOARD OF DIRECTORS.
STRATEGY
As noted previously, the Fund seeks its objective by investing its assets in the
BT PreservationPlus Income Portfolio. Accordingly, references to the Fund
investing in particular types of securities or asset classes are actually
references to what is done by the underlying Portfolio.
The Fund seeks current income that is higher than that of money market funds by
investing in fixed income securities with varying maturities and maintaining an
average portfolio DURATION of 2.5 to 4.5 years. In addition, the Fund enters
into Wrapper Agreements designed to stabilize the Fund's share value. Wrapper
Agreements are provided by financial institutions, such as insurance companies
and banks. In an attempt to enhance return, the Fund also employs a global asset
allocation strategy, which evaluates the equity, bond, cash and currency
opportunities across domestic and international markets.
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DURATION measures the sensitivity of bond prices to changes in interest rates.
The longer the duration of a bond, the longer it will take to repay the
principal and interest obligations and the more sensitive it is to changes in
interest rates. Investors in longer-duration bonds face more risk as interest
rates rise--but also are more likely to receive more income from their
investment to compensate for the risk.
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PRINCIPAL INVESTMENTS
FIXED INCOME SECURITIES -- The Fund invests at least 65% of its total assets in
fixed income securities rated, at the time of purchase, within the top four
long-term rating categories by a nationally recognized statistical rating
organization (or, if unrated, are determined to be of similar quality by the
Portfolio's Investment Adviser). However, the Fund may invest up to 10% of its
assets in high yield debt securities (also known as junk bonds) rated in the
fifth and sixth long-term rating categories by a nationally recognized
statistical rating organization (or, if unrated, are determined to be of similar
quality by the Fund's Investment Adviser).
Fixed income securities in which the Fund may invest include the following:
* U.S. government securities that are issued or guaranteed by the U.S.
Treasury, or by agencies or instrumentalities of the U.S. Government.
* U.S. dollar-denominated securities issued by domestic or foreign
corporations, foreign governments or supranational entities.
* U.S. dollar-denominated asset-backed securities issued by domestic or foreign
entities.
* Mortgage pass-through securities issued by governmental and non-governmental
issuers.
* Collateralized mortgage obligations and real estate mortgage investment
conduits.
* Obligations issued or guaranteed, or backed by securities issued or
guaranteed, by the U.S. government, or any of its agencies or
instrumentalities, including CATS, TIGRs, TRs and zero coupon securities,
which are securities consisting of either the principal component or the
interest component of a U.S. Treasury bond.
The following policies are employed to attempt to reduce the risks involved in
investing in fixed income securities:
* Assets are allocated among a diversified group of issuers.
* Investments are primarily made in fixed income securities that are rated, at
the time of purchase, within the top four rating categories as rated by
Moody's Investors Service, Inc., Standard & Poor's Ratings Services or Duff &
Phelps Credit Rating Co., another nationally recognized statistical rating
organization, or, if unrated, determined by us to be of comparable quality.
* Average portfolio duration of 2.5 to 4.5 years is targeted by investing in
fixed income securities with short- to intermediate term MATURITIES.
Generally, rates of short-term investments fluctuate less than longer-term
investments.
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MATURITY measures the time remaining until an issuer must repay a bond's
principal in full.
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WRAPPER AGREEMENTS -- The Fund enters into Wrapper Agreements with insurance
companies, banks and other financial institutions. Unlike traditional fixed
income portfolios, the Fund's purchases of Wrapper Agreements should offset
substantially the price fluctuations typically associated with fixed income
securities. In using Wrapper Agreements, the Fund seeks to eliminate the effect
of any gains or losses on the value per share when the Fund sells securities.
Normally, these agreements require the Wrapper Provider to maintain the BOOK
VALUE of a portion of the Fund's assets (Covered Assets) if certain events
occur. More than one Wrapper Provider provides coverage with respect to the same
securities and, when applicable, pays based on the pro rata portion of the
Fund's assets that it covers.
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BOOK VALUE of the Covered Assets is their purchase price, plus interest on the
Covered Assets at the Crediting Rate, less an adjustment to reflect any
defaulted securities.
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The Crediting Rate:
* Is the actual interest earned on the Covered Assets based on the formula
stated in the Wrapper Agreements and is generally adjusted monthly for price
movements in the Covered Assets and amounts payable to or receivable from the
Wrapper Provider; and
* Is a significant component of the Fund's yield.
In general, if the Fund sells securities to meet shareholder redemptions and the
market value (plus accrued interest) of those securities is less than their book
value, the Wrapper Provider must pay the difference to the Fund. On the other
hand, if the Fund sells securities and the market value (plus accrued interest)
is more than the book value, the Fund must pay the difference to the Wrapper
Provider. The timing of payments between the Fund and the Wrapper Provider vary.
The following policies are employed to attempt to reduce the risks involved in
using Wrapper Agreements:
* Wrapper Agreements are purchased from multiple issuers, each of which has
received a HIGH QUALITY RATING from Moody's or Standard & Poor's.
* The financial well being of the issuers of the securities in which the Fund
invests and the Wrapper Providers providing Wrapper Agreements to the Fund
are monitored on a continuous basis.
Generally, unless the Wrapper Agreement requires the sale of a security that has
been downgraded below a specified rating, the Fund is not required to dispose of
any security or Wrapper Agreement whose issuer's rating has been downgraded.
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A HIGH QUALITY RATING means a security is rated in the top two long-term ratings
categories by a nationally recognized statistical rating organization.
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SHORT-TERM INVESTMENTS -- The Fund will also invest in short-term investments,
including money market mutual funds, to meet shareholder withdrawals and other
liquidity needs. These short-term investments, such as commercial paper and
certificates of deposit, will be rated, at the time of purchase, in one of the
top two short-term rating categories by a nationally recognized statistical
rating organization, or if unrated, are determined to be of similar quality by
the Portfolio's Investment Adviser.
DERIVATIVE INSTRUMENTS -- The Fund may invest in various instruments commonly
known as "derivatives" to increase its exposure to certain groups of securities.
The derivatives that the Fund may use include FUTURES CONTRACTS, OPTIONS ON
FUTURES CONTRACTS AND FORWARD CONTRACTS. The Fund may use derivatives to keep
cash on hand to meet shareholder redemptions, as a hedging strategy to maintain
a specific portfolio duration, or to protect against market risk. When employing
the global asset allocation strategy, the Fund may use derivatives for
leveraging, which is a way to attempt to enhance returns.
OTHER INVESTMENTS -- The Fund may also invest in and utilize the following
investments and investment techniques and practices: Rule 144A securities,
when-issued and delayed delivery securities, repurchase agreements, reverse
repurchase agreements and dollar rolls.
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FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS are commonly used for
traditional hedging purposes to attempt to protect an investor from the risks of
changing interest rates, securities prices or currency exchange rates and for
cash management purposes as a low cost method of gaining exposure to a
particular securities market without investing directly in those securities.
PORTFOLIO TURNOVER rate measures the frequency that the Portfolio sells and
replaces the securities it holds within a given period. Historically, this Fund
has had a high portfolio turnover rate. High turnover can increase the Fund's
transaction costs, thereby lowering its returns.
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INVESTMENT PROCESS
The Fund's investment strategy emphasizes a diversified exposure to higher
yielding mortgage, corporate and asset-backed sectors of the investment grade
fixed income markets. These "spread" sectors have historically offered higher
returns than U.S. government securities. The investment process focuses on a
top-down approach, first focused on the sector allocations, then using relative
value analysis to select the best securities within each sector. To select
securities, we analyze such factors as credit quality, interest rate sensitivity
and spread relationships between individual bonds.
The Fund also purchases Wrapper Agreements, which seek to offset price
fluctuations of the fixed income securities and, as a result, provide a stable
value per share for the Fund. A primary emphasis is placed on assessing the
credit quality of financial institutions that may provide a Wrapper Agreement to
the Fund. The Portfolio's Investment Adviser performs proprietary credit
analysis on a large universe of issuers and actively manages the negotiation and
maintenance of Wrapper Agreements.
The global asset allocation strategy attempts to enhance long-term returns and
manage risk by responding effectively to changes in global markets using
instruments including but not limited to, futures, options and currency
forwards. This strategy employs a multi-factor global asset allocation model
that evaluates equity, bond, cash and currency opportunities across domestic and
international markets.
In implementing the global asset allocation strategy, the Fund invests in
options and futures based on any type of security or index including options and
futures traded on foreign exchanges, such as bonds and equity indices of foreign
countries. Some options and futures strategies, including selling futures,
buying puts and writing calls, hedge the Fund's investments against price
fluctuations. Other strategies, including buying futures, writing puts and
buying calls, tend to increase and will broaden the Fund's market exposure.
Options and futures may be combined with each other, or with forward contracts,
in order to adjust the risk and return characteristics of an overall strategy.
The Fund may also enter into forward currency exchange contracts (agreements to
exchange one currency for another at a future date), may buy and sell options
and futures contracts relating to foreign currencies and may purchase securities
indexed to foreign currencies. Currency management strategies allow shifts of
investment exposure from one currency to another to attempt to profit from
anticipated declines in the value of a foreign currency relative to the U.S.
dollar.
Some of these strategies will require the Fund to segregate liquid assets in a
custodial account to cover its obligations. Successful implementation of the
global asset allocation strategy depends on the Investment Adviser's judgment as
to the potential risks and rewards of implementing the different types of
strategies.
RISKS
Set forth below are some of the prominent risks associated with fixed income
investing, the use of Wrapper Agreements, and the risks of investing in general.
Although an attempt is made to assess the likelihood that these risks may
actually occur and to limit them, there can be no guarantee that it will
succeed.
PRIMARY RISKS
INTEREST RATE RISK. All debt securities face the risk that the securities will
decline in value because of changes in interest rates. Generally, investments
subject to interest rate risk will decrease in value when interest rates rise
and increase when interest rates fall. If interest rates are falling, the Fund's
income may decline because of the investment or reinvestment of assets in fixed
income securities.
CREDIT RISK. An investor purchasing a fixed income security faces the risk that
the value of the security may decline because the creditworthiness of the issuer
may decline or the issuer may fail to make timely payment of interest or
principal.
WRAPPER AGREEMENT RISK. Although the Wrapper Agreements attempt to maintain a
stable value per share, there are risks associated with the Wrapper Agreements,
including:
* A Wrapper Provider could default, which could cause the Fund's share value to
fluctuate or fall and could result in losses for Plan participants who sell
their shares.
* The Wrapper Agreements may require the Fund to maintain a certain percentage
of its assets in short-term investments. This could result in a lower return
than if the Fund invested those assets in longer-term securities. The Fund
may elect not to cover a fixed income security with a remaining maturity of
60 days or less, cash or short-term investments with Wrapper Agreements.
* The Wrapper Agreements generally do not protect the Fund from loss caused by
a fixed income security issuer's default on principal or interest payments.
* The Fund may not be able to obtain Wrapper Agreements to cover all of its
assets.
* If a Wrapper Provider is unable to make timely payments, the Portfolio's
Board may determine the fair value of that Wrapper Agreement to be less than
the difference between the book value and the market value, which could cause
the Fund's net asset value to fluctuate.
* There is no guarantee that a Fund shareholder or Plan participant will
realize the same investment return as they might if they had invested
directly in the Fund's assets (without use of the Wrapper Agreements).
MARKET RISK. Although individual securities may outperform their market, the
entire market may decline as a result of rising interest rates, regulatory
developments or deteriorating economic conditions.
SECURITY SELECTION RISK. While the Fund invests in short- to intermediate-term
securities, which by nature are relatively stable investments, the risk remains
that the securities selected will not perform as expected. This could cause the
Fund's returns to lag behind those of money market funds.
LIQUIDITY RISK. Liquidity risk is the risk that a security cannot be sold
quickly at a price that reflects the estimate of its value. Because there is no
active trading market for Wrapper Agreements, the Fund's investments in the
Wrapper Agreements are considered illiquid. In an effort to minimize this risk,
the Fund limits its investments in illiquid securities, including Wrapper
Agreements, to 15% of net assets.
PRICING RISK. The securities in the Fund are valued at their stated market value
if price quotations are available and, if not, by the method that most
accurately reflects their current worth in the judgment of the Portfolio's Board
of Trustees.
This procedure implies an unavoidable risk, the risk that the prices used are
higher or lower than the prices that the securities might actually command if
they were sold. If the securities are valued too highly, you may end up paying
too much for Fund shares when you buy. If the price of the securities are
undervalued, you may not receive the full market value for your Fund shares when
you sell.
According to the procedures adopted by the Portfolio's Board of Trustees, the
fair value of the Wrapper Agreements generally will equal the difference between
the book value and the market value (plus accrued interest) of the Fund's
assets. In determining fair value, the Board will consider the creditworthiness
and ability of a Wrapper Provider to pay amounts due under the Wrapper
Agreements. If the Board of Trustees determines that a Wrapper Agreement should
not be valued this way, the net asset value of the Fund could fluctuate.
DERIVATIVE RISK. Derivatives are more volatile and less liquid than traditional
fixed income securities. Risks associated with derivatives include:
* the derivative may not fully offset the underlying positions;
* the derivatives used for risk management may not have the intended effects
and may result in losses or missed opportunities; and
* the possibility the Fund cannot sell the derivative because of an illiquid
secondary market.
The use of derivatives for leveraging purposes tends to magnify the effect of an
instrument's price changes as market conditions change.
If the Fund invests in futures contracts and options on futures contracts for
non-hedging purposes, the margin and premiums required to make those investments
will not exceed 5% of the Fund's net asset value after taking into account
unrealized profits and losses on the contracts. Futures contracts and options on
futures contracts used for non-hedging purposes involve greater risks than other
investments.
FOREIGN INVESTING RISK. The Fund faces the risks detailed below in the portion
of its investments it devotes to foreign securities.
* POLITICAL RISK. Profound social changes and business practices that depart
from developed-market norms have hindered the growth of capital markets in
developing nations in the past. High levels of debt have tended to make them
overly reliant on foreign capital investment and vulnerable to capital
flight. Governments have limited foreign investors' access to capital markets
and restricted the flow of profits overseas. They have resorted to high
taxes, expropriation and nationalization. All these threats remain a part of
emerging-market investing in particular today.
* INFORMATION RISK. Foreign accounting, auditing, and financial reporting and
disclosure standards tend to be less stringent than those in the United
States. And the risks of investors acting on incomplete or inaccurate
information are correspondingly greater. Compounding the problem, local
investment research often lacks the sophistication to spot potential
pitfalls.
CURRENCY RISK. The Fund invests in foreign securities denominated in foreign
currencies. This creates the possibility that changes in foreign exchange rates
will affect the value of foreign securities and, thus, the U.S. dollar amount of
income or gain received on these securities. The Portfolio's Investment Adviser
seeks to minimize this risk by actively managing the currency exposure of the
Fund. There is no guarantee that these currency management activities will work
and they could cause losses to the Fund.
SECONDARY RISK
LOWER RATED SECURITIES. The Fund may invest in debt securities rated in the
fifth and sixth long-term ratings categories. The market for lower-rated debt
securities may be thinner and less active than that for higher rated debt
securities, which can adversely affect the prices at which the lower-rated
securities are sold. If market quotations are not available, lower-rated debt
securities will be valued in accordance with procedures established by the
Portfolio's Board of Trustees. Judgment plays a greater role in valuing high
yield corporate debt securities than is the case for securities for which more
external sources for quotations and last sale information is available. Adverse
publicity and changing investor perception may affect the availability of
outside pricing services to value lower-rated debt securities and the Fund's
ability to dispose of these securities. Since the risk of default is higher for
lower-rated securities, the Investment Adviser's research and credit analysis
are an especially important part of managing securities of this type.
In considering investments for the Fund, the Investment Adviser attempts to
identify those issuers of high yielding debt securities whose financial
conditions are adequate to meet future obligations, have improved or are
expected to improve in the future. The Investment Adviser's analysis focuses on
relative values based on such factors as interest on dividend coverage, asset
coverage, earnings prospects and the experience and managerial strength of the
issuer.
TEMPORARY DEFENSIVE POSITION. From time to time a temporary defensive position
may be adopted in response to extraordinary adverse political, economic or
market events. Up to 100% of the Fund's assets could be placed in short-term
obligations within one of the top two investment ratings. These short-term
obligations may not be covered by a Wrapper Agreement. To the extent such a
position is adopted, the Fund may not meet its goal of a high level of current
income or a stable net asset value.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS -- The Fund's shareholders, voting in proportion to the
number of shares each owns, elect a Board of Directors, and the Directors
supervise all of the Fund's activities on their behalf.
INVESTMENT ADVISER -- Under the supervision of the Board of Trustees of the
Portfolio, Bankers Trust Company (Bankers Trust) with headquarters at 130
Liberty Street, New York, New York 10006, acts as the Portfolio's Investment
Adviser. As Investment Adviser, Bankers Trust makes the Portfolio's investment
decisions and assumes responsibility for the securities the Portfolio owns. It
buys and sells securities for the Portfolio and conducts the research that leads
to the purchase and sale decisions. Bankers Trust received a fee of ____% of the
Portfolio's average daily net assets for its services in the last fiscal year.
As of December 31, 1999, Bankers Trust had total assets under management of
approximately $____ billion. Bankers Trust is dedicated to servicing the needs
of corporations, governments, financial institutions, and private clients and
has invested retirement assets on behalf of the nation's largest corporations
and institutions for more than 50 years. The scope of the firm's capability is
broad: it is a leader in both the active and passive quantitative investment
disciplines and maintains a major presence in stock and bond markets worldwide.
As of December 31, 1999, BT managed approximately $_______ in stable value
assets.
At a Special Meeting of Shareholders held on October 8, 1999, shareholders of
the Portfolio approved a new investment advisory agreement with Morgan Grenfell,
Inc. As of October 6, 1999, Morgan Grenfell, Inc. has been renamed Deutsche
Asset Management Inc. ("DAMI"). The new investment advisory agreement with DAMI
may be implemented within two years of the date of the Special Meeting upon
approval of a majority of the members of the Board of Trustees of the Portfolio
who are not "interested persons", generally referred to as Independent Trustees.
Shareholders of the Portfolio also approved a new sub-investment advisory
agreement among the Trust, DAMI and Bankers Trust under which Bankers Trust may
perform certain of DAMI's responsibilities, at DAMI's expense, upon approval of
the Independent Trustees, within two years of the date of the Special Meeting.
Under the new investment advisory agreement and new sub-advisory agreement, the
compensation paid and the services provided would be the same as those under the
existing advisory agreement with Bankers Trust.
DAMI is located at 885 Third Avenue, 32nd Floor, New York, New York 10022. DAMI
provides a full range of investment advisory services to institutional clients.
DAMI serves as investment adviser to ten other investment companies and as
sub-adviser to five other investment companies.
On March 11, 1999, Bankers Trust announced that it had reached an agreement with
the United States Attorney's Office in the Southern District of New York to
resolve an investigation concerning inappropriate transfers of unclaimed funds
and related record-keeping problems that occurred between 1994 and early 1996.
Bankers Trust pleaded guilty to misstating entries in the bank's books and
records and agreed to pay a $63.5 million fine to state and federal authorities.
On July 26, 1999, the federal criminal proceedings were concluded with Bankers
Trust's formal sentencing. The events leading up to the guilty pleas did not
arise out of the investment advisory or mutual fund management activities of
Bankers Trust or its affiliates.
As a result of the plea, absent an order from the SEC, Bankers Trust would not
be able to continue to provide investment advisory services to the Portfolio.
The SEC has granted a temporary order to permit Bankers Trust and its affiliates
to continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order.
OTHER SERVICES -- The Fund's administrator, Security Management Company, LLC
("SMC" or the "Administrator") provides administrative services, fund accounting
and transfer agency services to the Fund. Bankers Trust provides administrative
services--such as portfolio accounting, legal services and other services--for
the Portfolio.
Pursuant to a separate Management Services Agreement, SMC also performs certain
other services on behalf of the Fund. Under this Agreement, SMC provides, among
other things, feeder fund management and administrative services to the Fund
which include:
* monitoring the performance of the Portfolio;
* coordinating the Fund's relationship with the Portfolio;
* communicating with the Fund's Board of Directors and shareholders regarding
the Portfolio's performance and the Fund's two tier structure, and in
general;
* assisting the Board of Directors of the Fund in all aspects of the
administration and operation of the Fund.
For these services, the Fund pays SMC a fee at the annual rate of .20% of its
average daily net assets, calculated daily and payable monthly.
For providing certain shareholder services to the shareholders of the Fund, SMC
receives from Bankers Trust a fee which is equal on an annual basis to .20% of
the aggregate net assets of the Fund invested in the Portfolio. The fee is not
an expense of the Fund or the Portfolio.
ORGANIZATIONAL STRUCTURE -- Although the Fund has not currently retained the
services of an investment adviser or sub-adviser, it may do so in the future.
Accordingly, the Fund, along with the other mutual funds in the Security Funds
complex, have applied to the Securities and Exchange Commission ("SEC") for an
exemptive order from the Investment Company Act of 1940 that will permit the
Fund and Security Management Company, LLC to enter into and materially amend
sub-advisory agreements without the agreements or amendments being approved by
shareholders. However, this order would not apply to sub-advisory agreements
with an affiliate of Security Management Company, LLC. If this order is
obtained, the Fund or Security Management Company, LLC could terminate a
sub-advisory agreement with a sub-adviser and engage a new sub-adviser, or
materially amend a sub-advisory agreement, without shareholder approval of the
new sub-advisory agreement or the amendment.
In order for the Fund to enter into and amend sub-advisory agreements without
shareholder approval, the Fund and Security Management Company, LLC must not
only receive an order from the SEC, but the shareholders of the Fund must also
approve this method of operation. At a meeting of shareholders on October 29,
1999 Fund shareholders approved this method of operation. Therefore the Fund
could be operated under the method of operation described above upon
effectiveness of the exemptive order, although at this time it is not
anticipated that it will do so.
There can be no assurance that the exemptive order will be issued by the SEC. It
is anticipated that if the exemptive order is granted, notice to shareholders
would be required of new sub-advisory agreements.
The Fund is a "feeder fund" that invests all of its assets in a "master
portfolio," the BT PreservationPlus Income Portfolio. The Fund and the master
portfolio have the same investment objective. The master portfolio is advised by
Bankers Trust.
The master portfolio may accept investments from other feeder funds. The feeders
bear the master portfolio's expenses in proportion to their assets. Each feeder
can set its own transaction minimums, fund-specific expenses, and other
conditions. This arrangement allows the Fund's Directors to withdraw the Fund's
assets from the master portfolio if they believe doing so is in the
shareholders' best interests. If the Directors withdraw the Fund's assets, they
would then consider whether the Fund should hire its own investment adviser,
invest in a different master portfolio or take other action.
PORTFOLIO MANAGERS -- ERIC KIRSCH, Managing Director and Chief Investment
Officer of the Structured Fixed Income Group at Bankers Trust, has managed the
Fixed Income Securities of the Portfolio since its inception in May 1999. Mr.
Kirsch joined Bankers Trust in 1980. He is a Chartered Financial Analyst with
ten years of investment experience.
LOUIS R. D'ARIENZO, Vice President and a portfolio manager of the Structured
Fixed Income Group at Bankers Trust, has managed the Fixed Income Securities of
the Portfolio since its inception in May 1999. Mr. D'Arienzo joined Bankers
Trust in 1981 and has 17 years investment experience.
JOHN D. AXTELL, JR., a Principal and a portfolio manager at Bankers Trust, is
responsible for the portfolio management and trading activities relating to
Stable Value Investments for client porfolios. Mr. Axtell joined Bankers Trust
in 1990.
CALCULATING THE FUND'S SHARE PRICE
The Fund's share price is calculated daily (also known as the "net asset value"
or "NAV") in accordance with the standard formula for valuing mutual fund shares
at the close of regular trading on the New York Stock Exchange every day the
Exchange is open for business. The formula calls for deducting all of a Fund's
liabilities from the total value of its assets--the market value of the
securities it holds, plus its cash reserves--and dividing the result by the
number of shares outstanding.
According to the procedures adopted by the Board of Trustees of the Portfolio,
the fair value of the Wrapper Agreements generally will equal the difference
between the book value and the market value (plus accrued interest) of the
Portfolio's assets. In determining fair value, the Board will consider the
creditworthiness and ability of a Wrapper Provider to pay amounts due under the
Wrapper Agreements.
- --------------------------------------------------------------------------------
The Exchange is open every week, Monday through Friday, except when the
following holidays are celebrated: New Year's Day, Martin Luther King, Jr. Day
(the third Monday in January), Presidents' Day (the third Monday in February),
Good Friday, Memorial Day (the last Monday in May), Independence Day, Labor Day
(the first Monday in September), Thanksgiving Day (the fourth Thursday in
November) and Christmas Day.
- --------------------------------------------------------------------------------
BUYING SHARES
Shares of the Fund are available through broker/dealers, banks, and other
financial intermediaries that have an agreement with the Fund's Distributor,
Security Distributors, Inc.
There are three different ways to buy shares of the Fund--Class A shares, Class
B shares or Class C shares. The different classes of a Fund differ primarily
with respect to the sales charges and Rule 12b-1 distribution fees to which they
are subject. The minimum initial investment is $100. Subsequent investments must
be $100 (or $20 under an Accumulation Plan). The Fund reserves the right to
reject any order to purchase shares.
CLASS A SHARES -- Class A shares are subject to a sales charge at the time of
purchase. An order for Class A shares will be priced at the Fund's net asset
value per share (NAV), plus the sales charge, set forth in the following table.
The NAV, plus the sales charge is the "offering price." The Fund's NAV is
generally calculated as of the close of trading on every day the New York Stock
Exchange is open. An order for Class A shares is priced at the NAV next
calculated after the order is accepted by the Fund, plus the sales charge.
- --------------------------------------------------------------------------------
SALES CHARGE
--------------------------------------------
APPLICABLE PERCENTAGE OF PERCENTAGE
AMOUNT OF PURCHASE PERCENTAGE OF NET AMOUNT REALLOWABLE
AT OFFERING PRICE OFFERING PRICE INVESTED TO DEALERS
- --------------------------------------------------------------------------------
Less than $100,000 ................. 3.5% 3.63% 3.0%
$100,000 but less than $500,000..... 2.5% 2.56% 2.0%
$500,000 but less than $1,000,000... 1.5% 1.52% 1.0%
$1,000,000 and over ................ None None (See below)
- --------------------------------------------------------------------------------
Please see Appendix A for options that are available for reducing the sales
charge applicable to purchases of Class A shares.
CLASS A DISTRIBUTION PLAN -- The Fund has adopted a Class A Distribution Plan
that allows the Fund to pay distribution fees to the Fund's Distributor. The
Distributor uses the fees to finance activities related to the sale of Class A
shares and services to shareholders. The distribution fee is equal to 0.25% of
the average daily net assets of the Fund's Class A shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
CLASS B SHARES -- Class B shares are not subject to a sales charge at the time
of purchase. An order for Class B shares will be priced at the Fund's NAV next
calculated after the order is accepted by the Fund. The Fund's NAV is generally
calculated as of the close of trading on every day the New York Stock Exchange
is open.
Class B shares are subject to a deferred sales charge if redeemed within 5 years
from the date of purchase. The deferred sales charge is a percentage of the NAV
of the shares at the time they are redeemed or the original purchase price,
whichever is less. Shares that are not subject to the deferred sales charge are
redeemed first. Then, shares held the longest will be the first to be redeemed.
The amount of the deferred sales charge is based upon the number of years since
the shares were purchased, as follows:
--------------------------------------------------------
NUMBER OF YEARS SINCE PURCHASE DEFERRED SALES CHARGE
--------------------------------------------------------
1 5%
2 4%
3 3%
4 3%
5 2%
6 and more 0%
--------------------------------------------------------
The Distributor will waive the deferred sales charge under certain
circumstances. See "Waiver of the Deferred Sales Charge," page 18.
CLASS B DISTRIBUTION PLAN -- The Fund has adopted a Class B Distribution Plan
that allows the Fund to pay distribution fees to the Distributor. The
Distributor uses the fees to finance activities related to the sale of Class B
shares and services to shareholders. The distribution fee is equal to .75% of
the average daily net assets of the Fund's Class B shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
Class B shares automatically convert to Class A shares on the eighth anniversary
of purchase. This is advantageous to such shareholders because Class A shares
are subject to a lower distribution fee than Class B shares. A pro rata amount
of Class B shares purchased through the reinvestment of dividends or other
distributions is also converted to Class A shares each time that shares
purchased directly are converted.
CLASS C SHARES -- Class C shares are not subject to a sales charge at the time
of purchase. An order for Class C shares will be priced at the Fund's NAV next
calculated after the order is accepted by the Fund. The Fund's NAV is generally
calculated as of the close of trading on every day the New York Stock Exchange
is open.
Class C shares are subject to a deferred sales charge of 1.00% if redeemed
within one year from the date of purchase. The deferred sales charge is a
percentage of the NAV of the shares at the time they are redeemed or the
original purchase price, whichever is less. Shares that are not subject to the
deferred sales charge are redeemed first. Then, shares held the longest will be
the first to be redeemed. The Distributor will waive the deferred sales charge
under certain circumstances. See "Waiver of the Deferred Sales Charge," page 18.
CLASS C DISTRIBUTION PLAN -- The Fund has adopted a Class C Distribution Plan
that allows the Fund to pay distribution fees to the Distributor. The
Distributor uses the fees to finance activities related to the sale of Class C
shares and services to shareholders. The distribution fee is equal to .50% of
the average daily net assets of the Fund's Class C shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
WAIVER OF DEFERRED SALES CHARGE -- The Distributor will waive the deferred sales
charge under the following circumstances:
* Upon the death of the shareholder if shares are redeemed within one year of
the shareholder's death
* Upon the disability of the shareholder prior to age 65 if shares are redeemed
within one year of the shareholder becoming disabled and the shareholder was
not disabled when the shares were purchased
* In connection with required minimum distributions from a retirement plan
qualified under Section 401(a), 401(k), 403(b) or 408 of the Internal Revenue
Code
* In connection with distributions from retirement plans qualified under
Section 401(a) or 401(k) of the Internal Revenue Code for:
* returns of excess contributions to the plan
* retirement of a participant in the plan
* a loan from the plan (loan repayments are treated as new sales for
purposes of the deferred sales charge)
* Upon the financial hardship (as defined in regulations under the Code) of a
participant in a plan
* Upon termination of employment of a participant in a plan
* Upon any other permissible withdrawal under the terms of the plan
CONFIRMATIONS AND STATEMENTS -- The Fund will send you a confirmation statement
after every transaction that affects your account balance or registration.
However, certain automatic transactions may be confirmed on a quarterly basis
including systematic withdrawals, automatic purchases and reinvested dividends.
Each shareholder will receive a quarterly statement setting forth a summary of
the transactions that occurred during the preceding quarter.
SELLING SHARES
Selling your shares of a Fund is called a "redemption," because the Fund buys
back its shares. A shareholder may sell shares at any time. Shares will be
redeemed at the NAV next determined after the order is accepted by the Fund's
transfer agent, less any applicable (i) deferred sales charge and (ii)
redemption fee. A Fund's NAV is generally calculated as of the close of trading
on every day the New York Stock Exchange is open. Any share certificates
representing Fund shares being sold must be returned with a request to sell the
shares. The value of your shares at the time of redemption may be more or less
than their original cost. The Fund reserves the right to honor any request for
redemption by making payment in whole or in part in securities selected in the
sole discretion of the Fund. The redemption-in-kind will not include wrapper
agreements.
When redeeming recently purchased shares, if the Fund has not collected payment
for the shares, it may delay sending the proceeds until it has collected
payment, which may take up to 15 days.
When the interest rate trigger is active, redemptions that are not Qualified TSA
Redemptions, Qualified IRA Redemptions or Qualified Plan Redemptions, as
described in the following sections, will be subject to a 3% redemption fee. It
is therefore important to consult with your professional tax advisor regarding
the terms, conditions and tax consequences of such withdrawals.
To sell your shares, send a letter of instruction that includes:
* The name and signature of the account owner(s)
* The name of the Fund
* The reason you are selling your shares
* The dollar amount or number of shares to sell
* Where to send the proceeds
* A signature guarantee if
- The check will be mailed to a payee or address different than that of the
account owner, or
- The sale of shares is more than $10,000.
- --------------------------------------------------------------------------------
A SIGNATURE GUARANTEE helps protect against fraud. Banks, brokers, credit
unions, national securities exchanges and savings associations provide signature
guarantees. A notary public is not an eligible signature guarantor. For joint
accounts, both signatures must be guaranteed.
- --------------------------------------------------------------------------------
Mail your request to:
Security Management Company, LLC
P.O. Box 750525
Topeka, KS 66675-9135
Signature requirements vary based on the type of account you have:
* INDIVIDUAL OR JOINT TENANTS: Written instructions must be signed by an
individual shareholder, or in the case of joint accounts, all of the
shareholders, exactly as the name(s) appears on the account.
* UGMA OR UTMA: Written instructions must be signed by the custodian as it
appears on the account.
* SOLE PROPRIETOR OR GENERAL PARTNER: Written instructions must be signed by an
authorized individual as it appears on the account.
* CORPORATION OR ASSOCIATION: Written instructions must be signed by the
person(s) authorized to act on the account. A certified resolution dated
within six months of the date of receipt, authorizing the signer to act, must
accompany the request if not on file with the Fund.
* TRUST: Written instructions must be signed by the trustee(s). If the name of
the current trustee(s) does not appear on the account, a certified
certificate of incumbency dated within 60 days must also be submitted.
* RETIREMENT: Written instructions must be signed by the account owner.
Qualified TSA Redemptions, Qualified IRA Redemptions and Qualified Plan
Redemptions are not subject to the redemption fee at any time. All other
redemptions are subject to the redemption fee, in the amount of 3%, on the
proceeds of such redemptions of shares by shareholders on any day that the
"Interest Rate Trigger" (as described below) is "active," and not subject to
those charges on days that the Interest Rate Trigger is "inactive." The Interest
Rate Trigger is active on any day when, as of the preceding day, the "Reference
Index Yield" exceeds the sum of the "Annual Effective Yield" of the Portfolio's
plus 1.35%. The Reference Index Yield on any determination date is the previous
day's closing "Yield to Worst" on the Lehman Brothers Intermediate Treasury Bond
Index(R). The "Annual Effective Yield" generally represents one day's investment
income expressed as an annualized yield and compounded annually. The status of
the Interest Rate Trigger will either be "active" or "inactive" on any day, and
shall be determined on every day that an NAV is calculated for the Fund. Once
the Interest Rate Trigger is active, it remains active every day until the
Reference Index Yield is less than the sum of the Annual Effective Yield of the
Portfolio plus 1.10%, at which time the Interest Rate Trigger becomes inactive
on the following day and remains inactive every day thereafter until it becomes
active again. An example of when and how the redemption fee will apply to the
redemption of shares follows.
- --------------------------------------------------------------------------------
The Annual Effective Yield of the Portfolio is intended to represent one day's
investment income expressed as an annualized yield and compounded annually. The
Annual Effective Yield of the Portfolio shall be expressed as a percentage and
calculated on each business day as follows based on the dividend declared for
the previous day:
[(1 + PREVIOUS DAY'S DIVIDEND FACTOR)^365 - 1
---------------------------------------------
NAV per share
- --------------------------------------------------------------------------------
Shareholder is considering submitting a request for a redemption of Class A
shares other than a Qualified TSA Redemption, Qualified IRA Redemption or
Qualified Plan Redemption to the Fund on March 2 in the amount of $5,000. Assume
that the Reference Index Yield is 8.65% as of the close of business on March 1
and the Annual Effective Yield of the Portfolio is 6.20% as of that date. Since
the Annual Effective Yield of the Portfolio plus 1.35% (7.55%) is less than the
Reference Index Yield (8.65%), the Interest Rate Trigger is active. Thus, the
net redemption proceeds to the Shareholder will be $4,850. The redemption fee
will continue to apply to all redemptions which are not Qualified TSA
Redemptions, Qualified IRA Redemptions or Qualified Plan Redemptions until the
day after the Reference Index Yield is less than the sum of the Annual Effective
Yield of the Portfolio plus 1.10%. (Please note that this example does not take
into consideration an individual Shareholder's tax issues or consequences
including without limitation any withholding taxes that may apply.)
The spread between the Annual Effective Yield of the Portfolio and the Reference
Index Yield that cause the Interest Rate Trigger to be activated (currently a
spread of 1.35%) and de-activated (currently a spread of 1.10%) reflect the fact
that the Portfolio's entire investment advisory fee is currently being waived.
If the investment advisory fee waiver is discontinued, these spreads will
change.
Shareholders can obtain information regarding when the Interest Rate Trigger is
active, as well as the Annual Effective Yield of the Portfolio and the Reference
Index Yield by calling 1-800-888-2461. The amount of, and method of applying,
the redemption fee, including the operation of the Interest Rate Trigger, may be
changed in the future.
QUALIFIED TSA REDEMPTIONS -- A redemption of Fund shares can be made at any time
without the assessment of a redemption fee if the redemption is a "Qualified TSA
Redemption." In general, amounts distributed to a taxpayer from a TSA account
prior to the date on which the taxpayer reaches age 59 1/2 are includible in the
taxpayer's gross income and, unless the distribution meets the requirements of a
specific exception under the tax code, are also subject to an early withdrawal
penalty tax. A "Qualified TSA Redemption" is a redemption made by an owner of a
TSA account that is not subject to the early withdrawal penalty tax, provided
however, that a rollover from a TSA account to an IRA account, or a direct
trustee-to-trustee transfer of a TSA account is not a Qualified TSA Redemption
unless the owner of the TSA account or IRA account continues the investment of
the transferred amount in the Fund.
Owners of TSA accounts requesting a redemption of Fund shares will be required
to provide a written statement as to whether the proceeds of the redemption will
be subject to the early withdrawal penalty tax and to identify the specific
exception upon which he or she intends to rely. This information will form the
basis for determining whether a redemption is a Qualified TSA Redemption. The
Fund or the Fund's Administrator may require additional evidence, such as the
opinion of a certified public accountant or tax attorney, that any particular
redemption will not be subject to early withdrawal penalty tax.
QUALIFIED IRA REDEMPTIONS -- A redemption of Fund shares can be made at any time
without the assessment of a redemption fee if the redemption is a "Qualified IRA
Redemption." In general, amounts distributed to a taxpayer from an IRA account
prior to the date on which the taxpayer reaches age 59 1/2 are includible in the
taxpayer's gross income and, unless the distribution meets the requirements of a
specific exception under the tax code, are also subject to an early withdrawal
penalty tax. A "Qualified IRA Redemption" is a redemption made by an owner of an
IRA account that is not subject to the early withdrawal penalty tax, provided
however, that an IRA rollover, or a direct trustee-to-trustee transfer of an IRA
is not a Qualified IRA Redemption unless the owner of the IRA account continues
the investment of the transferred amount in the Fund.
Owners of IRA accounts requesting a redemption of Fund shares will be required
to provide a written statement as to whether the proceeds of the redemption will
be subject to the early withdrawal penalty tax and to identify the specific
exception upon which he or she intends to rely. This information will form the
basis for determining whether a redemption is a Qualified IRA Redemption. The
Fund or the Fund's Administrator may require additional evidence, such as the
opinion of a certified public accountant or tax attorney, that any particular
redemption will not be subject to early withdrawal penalty tax.
QUALIFIED PLAN REDEMPTIONS -- Your plan administrator should be contacted for
information on how to redeem shares. There will be no reduction of the NAV per
share for Qualified Plan Redemptions (other than the possible assessment of a
contingent deferred sales charge) which are redemptions resulting from a plan
participant's death, disability, retirement, termination of employment or to
make loans to, or "in service" withdrawals by, a plan participant. All other
redemptions of shares, including transfers to other plan investment options,
will be subject to the 3% redemption fee if the Interest Rate Trigger is active.
The Fund reserves the right to require written verification of whether a
redemption request is for a Qualified Plan Redemption in accordance with plan
provisions and to establish the authenticity of this information before
processing a redemption request.
PAYMENT OF REDEMPTION PROCEEDS -- Payments may be made by check.
The Fund may suspend the right of redemption during any period when trading on
the New York Stock Exchange is restricted or such Exchange is closed for other
than weekends or holidays, or any emergency is deemed to exist by the Securities
and Exchange Commission.
BY CHECK. Redemption proceeds will be sent to the shareholder(s) of record at
the address on our records generally within seven days after receipt of a valid
redemption request. For a charge of $15 deducted from redemption proceeds, the
Administrator will provide a certified or cashier's check, or send the
redemption proceeds by express mail, upon the shareholder's request.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends from its net income daily and pays the dividends on
a monthly basis.
The Fund reserves the right to include in the daily dividend any short-term
capital gains on securities that it sells. Also, the Fund will normally declare
and pay annually any long-term capital gains as well as any short-term capital
gains that it did not distribute during the year.
On occasion, the dividends the Fund distributes may differ from the income the
Fund earns. When the Fund's income exceeds the amount distributed to
shareholders, the Fund may make an additional distribution. When an additional
distribution is necessary, the Board of Directors may declare a REVERSE STOCK
SPLIT to occur at the same time the additional distribution is made. Making the
additional distribution simultaneously with the reverse stock split will
minimize fluctuations in the net asset value of the Fund's shares.
All dividends and capital gains, if any, will automatically be reinvested unless
you notify the Fund otherwise.
- --------------------------------------------------------------------------------
A REVERSE STOCK SPLIT reduces the number of total shares the Fund has
outstanding. The market value of the shares will be the same after the stock
split as before the split, but each share will be worth more.
- --------------------------------------------------------------------------------
TAX CONSIDERATIONS
The Fund does not ordinarily pay income taxes. You and other shareholders pay
taxes on the income or capital gains from the Fund's holdings.
For TSA owners, IRA owners and Plan participants utilizing the Fund as an
investment option under their Plan, dividend and capital gain distributions from
the Fund generally will not be subject to current taxation, but will accumulate
on a tax-deferred basis.
Because each participant's tax circumstances are unique and because the tax laws
governing Plans are complex and subject to change, it is recommended that you
consult your Plan administrator, your plan's Summary Plan Description, and/or
your tax advisor about the tax consequences of your participation in your Plan
and of any Plan contributions or withdrawals.
SHAREHOLDER SERVICES
ACCUMULATION PLAN -- An investor may choose to invest in the Fund through a
voluntary Accumulation Plan. This allows for an initial investment of $100
minimum and subsequent investments of $20 minimum at any time. An Accumulation
Plan involves no obligation to make periodic investments, and is terminable at
will.
Payments are made by sending a check to the Distributor who (acting as an agent
for the dealer) will purchase whole and fractional shares of the Fund as of the
close of business on such day as the payment is received. The investor will
receive a confirmation and statement after each investment.
Investors may also choose to use "Secur-O-Matic" (automatic bank draft) to make
Fund purchases. There is no additional charge for choosing to use Secur-O-Matic.
Withdrawals from your bank account may occur up to 3 business days before the
date scheduled to purchase Fund shares. An application for Secur-O-Matic may be
obtained from the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM -- Shareholders who wish to receive regular
monthly, quarterly, semiannual, or annual payments of $25 or more may establish
a Systematic Withdrawal Program. A shareholder may elect a payment that is a
specified percentage of the initial or current account value or a specified
dollar amount. A Systematic Withdrawal Program will be allowed only if shares
with a current aggregate net asset value of $5,000 or more are deposited with
the Administrator, which will act as agent for the shareholder under the
Program. Shares are liquidated at net asset value less any applicable Redemption
Fee. The Program may be terminated on written notice, or it will terminate
automatically if all shares are liquidated or redeemed from the account.
A shareholder may establish a Systematic Withdrawal Program with respect to
Class B and Class C shares without the imposition of any applicable contingent
deferred sales charge, provided that such withdrawals do not in any 12-month
period, beginning on the date the Program is established, exceed 10 percent of
the value of the account on that date ("Free Systematic Withdrawals"). Free
Systematic Withdrawals are not available if a Program established with respect
to Class B or Class C shares provides for withdrawals in excess of 10 percent of
the value of the account in any Program year and, as a result, all withdrawals
under such a Program would be subject to any applicable contingent deferred
sales charge. Free Systematic Withdrawals will be made first by redeeming those
shares that are not subject to the contingent deferred sales charge and then by
redeeming shares held the longest. The contingent deferred sales charge
applicable to a redemption of Class B or Class C shares requested while Free
Systematic Withdrawals are being made will be calculated as described under
"Waiver of Deferred Sales Charge," page 18. A Systematic Withdrawal form may be
obtained from the Fund.
EXCHANGE PRIVILEGE -- Shareholders who own shares of the Fund may exchange those
shares for shares of another of the series of Security Income Fund or for shares
of other mutual funds distributed by the Distributor (the "Security Funds").
Exchanges may be made, only in those states where shares of the fund into which
an exchange is to be made are qualified for sale. No service fee is presently
imposed on such an exchange. Class A, Class B and Class C shares of the Fund may
be exchanged for Class A, Class B and, if applicable, Class C shares,
respectively, of another Security Fund. A Redemption Fee may be assessed on an
exchange from the Security Capital Preservation Fund to another Security Fund if
the Interest Rate Trigger is active. Any applicable contingent deferred sales
charge will be calculated from the date of the initial purchase.
Exchanges of Class A shares from the Fund are made at net asset value without a
front-end sales charge if (1) the shares have been owned for at least 90
consecutive days prior to the exchange, (2) the shares were acquired pursuant to
a prior exchange from a Security Fund which assessed a sales charge on the
original purchase, or (3) the shares were acquired as a result of the
reinvestment of dividends or capital gains distributions. Exchanges of Class A
shares from the Fund, other than those described above, are made at net asset
value plus the sales charge described in the prospectus of the other Security
Fund being acquired, less the sales charge paid on the shares of the Fund at the
time of original purchase.
Shareholders should contact the Fund before requesting an exchange in order to
ascertain whether any sales charges are applicable to the shares to be
exchanged. In effecting the exchanges of Fund shares, the Administrator will
first cause to be exchanged those shares which would not be subject to any sales
charges.
For tax purposes, an exchange is a sale of shares which may result in a taxable
gain or loss. Special rules may apply to determine the amount of gain or loss on
an exchange occurring within ninety days after the exchanged shares were
acquired.
Exchanges are made upon receipt of a properly completed Exchange Authorization
form. This privilege may be changed or discontinued at any time at the
discretion of the management of the Fund upon 60 days' notice to shareholders. A
current prospectus of the Security Fund into which an exchange is made will be
given to each shareholder exercising this privilege.
RETIREMENT PLANS -- The Fund has available tax-qualified retirement plans for
individuals, prototype plans for the self-employed, pension and profit sharing
plans for corporations and custodial accounts for employees of public school
systems and organizations meeting the requirements of Section 501(c)(3) of the
Internal Revenue Code. Further information concerning these plans is contained
in the Fund's Statement of Additional Information.
GENERAL INFORMATION
SHAREHOLDER INQUIRIES -- Shareholders who have questions concerning their
account or wish to obtain additional information, may call the Fund (see back
cover for address and telephone numbers), or contact their securities dealer.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for its Class A shares, Class B shares and Class C Shares
for the period May 3, 1999 to September 30, 1999. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund assuming reinvestment of all dividends and distributions. This
information has been audited by ____________________, whose report, along with
the Fund's financial statements, is included in the annual report which is
available upon request.
- --------------------------------------------------------------------------------
SECURITY CAPITAL PRESERVATION FUND (CLASS A)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999
PER SHARE DATA
Net asset value beginning of period..........................
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................
Net gain (loss) on securities (realized & unrealized)........
Total from investment operations.............................
LESS DISTRIBUTIONS
Dividends (from net investment income).......................
Distributions (from capital gains)...........................
Total distributions..........................................
Net asset value end of period................................
Total return ................................................
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands).........................
Ratio of expenses to average net assets......................
Ratio of net investment income (loss) to average net assets..
Portfolio turnover rate......................................
- --------------------------------------------------------------------------------
SECURITY CAPITAL PRESERVATION FUND (CLASS B)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999
PER SHARE DATA
Net asset value beginning of period..........................
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................
Net gain (loss) on securities (realized & unrealized)........
Total from investment operations.............................
LESS DISTRIBUTIONS
Dividends (from net investment income).......................
Distributions (from capital gains)...........................
Total distributions..........................................
Net asset value end of period................................
Total return ................................................
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands).........................
Ratio of expenses to average net assets .....................
Ratio of net investment income (loss) to average net assets..
Portfolio turnover rate......................................
- --------------------------------------------------------------------------------
SECURITY CAPITAL PRESERVATION FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999
PER SHARE DATA
Net asset value beginning of period..........................
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................................
Net gain (loss) on securities (realized & unrealized)........
Total from investment operations.............................
LESS DISTRIBUTIONS
Dividends (from net investment income).......................
Distributions (from capital gains)...........................
Total distributions..........................................
Net asset value end of period................................
Total return ................................................
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands).........................
Ratio of expenses to average net assets .....................
Ratio of net investment income (loss) to average net assets..
Portfolio turnover rate......................................
<PAGE>
APPENDIX
REDUCED SALES CHARGES
CLASS A SHARES -- Initial sales charges may be reduced or eliminated for persons
or organizations purchasing Class A shares of the Fund alone or in combination
with Class A shares of other Security Funds.
For purposes of qualifying for reduced sales charges on purchases made pursuant
to Rights of Accumulation or a Statement of Intention, the term "Purchaser"
includes the following persons: an individual, his or her spouse and children
under the age of 21; a trustee or other fiduciary of a single trust estate or
single fiduciary account established for their benefit; an organization exempt
from federal income tax under Section 501(c)(3) or (13) of the Internal Revenue
Code; or a pension, profit-sharing or other employee benefit plan whether or not
qualified under Section 401 of the Internal Revenue Code.
RIGHTS OF ACCUMULATION -- To reduce sales charges on purchases of Class A shares
of the Fund, a Purchaser may combine all previous purchases of the Fund with a
contemplated current purchase and receive the reduced applicable front-end sales
charge. The Distributor must be notified when a sale takes place which might
qualify for the reduced charge on the basis of previous purchases.
Rights of accumulation also apply to purchases representing a combination of the
Class A shares of the Fund, and other Security Funds, except Security Cash Fund,
in those states where shares of the fund being purchased are qualified for sale.
STATEMENT OF INTENTION -- A Purchaser may choose to sign a Statement of
Intention within 90 days after the first purchase to be included thereunder,
which will cover future purchases of Class A shares of the Fund, and other
Security Funds, except Security Cash Fund. The amount of these future purchases
shall be specified and must be made within a 13-month period (or 36-month period
for purchases of $1 million or more) to become eligible for the reduced
front-end sales charge applicable to the actual amount purchased under the
Statement. Shares equal to five percent (5%) of the amount specified in the
Statement of Intention will be held in escrow until the statement is completed
or terminated. These shares may be redeemed by the Fund if the Purchaser is
required to pay additional sales charges.
A Statement of Intention may be revised during the 13-month (or, if applicable,
36-month) period. Additional Class A shares received from reinvestment of income
dividends and capital gains distributions are included in the total amount used
to determine reduced sales charges. A Statement of Intention may be obtained
from the Fund.
REINSTATEMENT PRIVILEGE -- Shareholders who redeem their Class A shares of the
Fund have a one-time privilege (1) to reinstate their accounts by purchasing
Class A shares without a sales charge up to the dollar amount of the redemption
proceeds; or (2) to the extent the redeemed shares would have been eligible for
the exchange privilege, to purchase Class A shares of another of the Security
Funds, without a sales charge up to the dollar amount of the redemption
proceeds. To exercise this privilege, a shareholder must provide written notice
and a check in the amount of the reinvestment within thirty days after the
redemption request; the reinstatement will be made at the net asset value per
share on the date received by the Fund or the Security Funds, as appropriate.
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
BY TELEPHONE -- Call 1-800-888-2461.
BY MAIL -- Write to:
Security Management Company, LLC
700 SW Harrison
Topeka, KS 66636-0001
ON THE INTERNET -- Reports and other information about the Fund can be viewed
online or downloaded from:
SEC: http://www.sec.gov
SMC, LLC: http://www.securitybenefit.com
Additional information about the Fund (including the Statement of Additional
Information) can be reviewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, DC. Information about the
operation of the public reference room may be obtained by calling the Commission
at 1-800-SEC-0330. Copies may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, DC
20549-6009.
- --------------------------------------------------------------------------------
ANNUAL/SEMI-ANNUAL REPORT -- Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION -- The Fund's Statement of Additional
Information and the Fund's annual or semi-annual report are available, without
charge upon request by calling the Funds' toll-free telephone number
1-800-888-2461, extension 3127. Shareholder inquiries should be addressed to
SMC, LLC, 700 SW Harrison Street, Topeka, Kansas 66636-0001, or by calling the
Fund's toll-free telephone number listed above. The Fund's Statement of
Additional Information is incorporated into this prospectus by reference.
The Fund's Investment Company Act file number is listed below:
Security Income Fund............. 811-2120
<PAGE>
- --------------------------------------------------------------------------------
SECURITY INCOME FUND
* CAPITAL PRESERVATION SERIES
Member of The Security Benefit Group of Companies
700 SW Harrison, Topeka, Kansas 66636-0001
(785) 431-3127
(800) 888-2461
This Statement of Additional Information is not a Prospectus. It should be read
in conjunction with the Prospectus dated February 1, 2000, as it may be
supplemented from time to time. A Prospectus may be obtained by writing Security
Distributors, Inc., 700 SW Harrison, Topeka, Kansas 66636-0001, or by calling
(785) 431-3127 or (800) 888-2461, ext. 3127.
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 2000
RELATING TO THE PROSPECTUS DATED February 1, 2000,
as it may be supplemented from time to time
- --------------------------------------------------------------------------------
FUND ADMINISTRATOR
Security Management Company, LLC
700 SW Harrison Street
Topeka, Kansas 66636-0001
DISTRIBUTOR
Security Distributors, Inc.
700 SW Harrison Street
Topeka, Kansas 66636-0001
CUSTODIAN
UMB Bank, N.A.
928 Grand Avenue
Kansas City, Missouri 64106
INDEPENDENT AUDITOR
______________________
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105-2143
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES,
POLICIES AND RESTRICTIONS................................................ 3
Investment Objective..................................................... 3
Investment Policies...................................................... 3
SHORT-TERM INSTRUMENTS................................................. 3
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES....................... 4
COMMERCIAL PAPER....................................................... 4
U.S. DOLLAR-DENOMINATED FIXED INCOME SECURITIES........................ 4
U.S. DOLLAR-DENOMINATED FOREIGN SECURITIES............................. 4
U.S. DOLLAR-DENOMINATED SOVEREIGN AND
SUPRANATIONAL FIXED INCOME SECURITIES................................ 4
MORTGAGE-AND ASSET-BACKED SECURITIES................................... 5
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")........................... 5
ZERO-COUPON SECURITIES................................................. 6
WRAPPER AGREEMENTS..................................................... 6
RISKS OF WRAPPER AGREEMENTS............................................ 8
ILLIQUID SECURITIES.................................................... 9
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES............................ 10
U.S. GOVERNMENT OBLIGATIONS............................................ 10
LOWER-RATED DEBT SECURITIES ("JUNK BONDS")............................. 11
HEDGING STRATEGIES..................................................... 11
FUTURES CONTRACTS AND OPTIONS AND FUTURES CONTRACTS - GENERAL.......... 12
FUTURES CONTRACTS...................................................... 12
OPTIONS ON FUTURES CONTRACTS........................................... 13
OPTIONS ON SECURITIES.................................................. 14
GLOBAL ASSET ALLOCATION STRATEGY ("GAA STRATEGY")...................... 15
REPURCHASE AGREEMENTS.................................................. 17
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS......................... 17
BORROWING.............................................................. 17
ASSET COVERAGE......................................................... 17
Rating Services.......................................................... 17
Investment Restrictions.................................................. 17
FUNDAMENTAL RESTRICTIONS............................................... 18
NON-FUNDAMENTAL RESTRICTIONS........................................... 18
Portfolio Transactions and Brokerage Commissions......................... 19
PERFORMANCE INFORMATION.................................................... 20
Standard Performance Information......................................... 20
YIELD.................................................................. 20
TOTAL RETURN........................................................... 21
PERFORMANCE RESULTS.................................................... 21
Comparison of Fund Performance........................................... 21
Economic and Market Information.......................................... 21
VALUATION OF ASSETS; REDEMPTIONS IN KIND................................... 21
Overview of TSA Accounts................................................. 23
OVERVIEW OF THE TYPES OF
INDIVIDUAL RETIREMENT ACCOUNTS............................................. 23
Types of Individual Retirement Accounts.................................. 23
TRADITIONAL IRAS....................................................... 23
ROTH IRAS.............................................................. 24
SIMPLE IRAS............................................................ 24
KEOGH PLANS............................................................ 25
EDUCATION IRAS......................................................... 25
OWNERSHIP OF SHARES THROUGH PLANS.......................................... 25
QUALIFIED REDEMPTIONS...................................................... 25
Traditional IRAs, SEP-IRAs and SIMPLE IRAs............................... 27
Roth IRAs................................................................ 27
Keogh Plans.............................................................. 27
Education IRAs........................................................... 28
MANAGEMENT OF THE FUND AND TRUST........................................... 28
Directors and Officers of Security Income Fund........................... 28
Trustees of BT Investment Portfolios..................................... 29
Officers of BT Investment Portfolios..................................... 31
Security Income Fund Director Compensation Table......................... 31
BT Investment Portfolio Trustee Compensation Table....................... 32
Investment Adviser....................................................... 32
Administrator............................................................ 33
Custodian and Transfer Agent............................................. 34
Banking Regulatory Matters............................................... 34
Independent Accountants.................................................. 34
ORGANIZATION OF SECURITY INCOME FUND....................................... 34
ORGANIZATION OF THE TRUST.................................................. 35
TAXATION................................................................... 35
Taxation of the Fund..................................................... 35
Taxation of the Portfolio................................................ 36
Other Taxation........................................................... 37
Foreign Withholding Taxes................................................ 37
FINANCIAL STATEMENTS....................................................... 37
APPENDIX................................................................... 38
Description of Moody's Corporate Bond Ratings............................ 38
Description of S&P's Corporate Bond Ratings.............................. 38
Duff & Phelps' Long-Term Debt Ratings.................................... 39
Description of Moody's Short-Term Ratings................................ 39
Description of S&P Short-Term Issuer Credit Ratings...................... 40
Description of Duff & Phelps' Commercial Paper Ratings................... 40
Description of Moody's Insurance Financial Strength Ratings.............. 40
Description of S&P Claims Paying Ability Rating Definitions.............. 41
Duff & Phelps' Claims Paying Ability Ratings............................. 41
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
Security Capital Preservation Fund (the "Fund") is a separate series of Security
Income Fund, an open-end, management investment company (mutual fund) of the
series type, offering shares of the Fund ("Shares") as described herein.
As described in the Fund's Prospectus, the Fund seeks to achieve its investment
objective by investing all its net investable assets (the "Assets") in BT
PreservationPlus Income Portfolio (the "Portfolio"), a diversified open-end
management investment company having the same investment objective as the Fund.
The Portfolio is a separate subtrust of BT Investment Portfolios, a New York
master trust fund (the "Portfolio Trust").
Because the investment characteristics of the Fund correspond directly to those
of the Portfolio (in which the Fund invests all of its assets), the following is
a discussion of the various investments of and techniques employed by the
Portfolio. The Fund has been established to serve as an alternative investment
to short-term bond funds and money market funds. In addition, since to date,
there has been no comparable investment substitute for those individuals who are
"rolling" assets over from the stable value or guaranteed investment contract
("GIC") option of their employee benefit plans (such as 401(k) plans), the Fund
is designed to be that comparable alternative.
Shares of the Fund are sold by Security Distributors, Inc., the Fund's
distributor (the "Distributor"), solely to tax-sheltered annuity custodial
accounts as defined in Section 403(b)(7) of the Internal Revenue Code of 1986,
as amended (the "Code"), individual retirement accounts as defined in Section
408 of the Code including "SIMPLE IRAs" and "SEP IRAs", Roth IRAs as defined in
Section 408A of the Code, education individual retirement accounts as defined in
Section 530 of the Code and "Keogh Plans" (sometimes collectively referred to
herein as "IRAs"), and to employees investing through participant-directed
employee benefit plans (each a "Plan" and together "Plans"). Shares are offered
to Plans either directly, or through vehicles such as bank collective funds or
insurance company separate accounts consisting solely of such Plans. Shares are
also available to employee benefit plans which invest in the Fund through an
omnibus account or similar arrangement.
The Fund's Prospectus (the "Prospectus") is dated February 1, 2000. The
Prospectus provides the basic information investors should know before investing
and may be obtained without charge by calling the Distributor at 1-800-888-2461
extension 3127. This Statement of Additional Information ("SAI"), which is not a
prospectus, is intended to provide additional information regarding the
activities and operations of the Fund and the Portfolio and should be read in
conjunction with the Prospectus. This SAI is not an offer by the Fund to an
investor that has not received a Prospectus. Capitalized terms not otherwise
defined in this SAI have the meanings ascribed to them in the Prospectus.
INVESTMENT OBJECTIVE -- The investment objective of the Fund is a high level of
current income while seeking to maintain a stable net asset value per Share.
There can, of course, be no assurance that the Fund will achieve its investment
objective.
INVESTMENT POLICIES --The Fund seeks to achieve its investment objective by
investing all of its Assets in the Portfolio. The Fund's investment in the
Portfolio may be withdrawn at any time if the Board of Directors of Security
Income Fund determines that it is in the best interests of the Fund to do so.
The Portfolio's investment objective is a high level of current income while
seeking to maintain a stable net asset value per Share. The Portfolio expects to
invest primarily in fixed income securities ("Fixed Income Securities") of
varying maturities rated, at the time of purchase, in one of the top four
long-term rating categories by Standard & Poor's Ratings Services ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), or Duff & Phelps Credit Rating Co.,
or comparably rated by another nationally recognized statistical rating
organization ("NRSRO"), or, if not rated by a NRSRO, of comparable quality as
determined by Bankers Trust in its sole discretion.
In addition, the Portfolio will enter into contracts ("Wrapper Agreements") with
insurance companies, banks or other financial institutions ("Wrapper Providers")
that are rated, at the time of purchase, in one of the top two long-term rating
categories by Moody's or S&P. There is no active trading market for Wrapper
Agreements, and none is expected to develop; therefore, they will be considered
illiquid. At the time of purchase, the value of all of the Wrapper Agreements
and any other illiquid securities will not exceed 15% of the Portfolio's net
assets.
The following is a discussion of the various investments of and techniques
employed by the Portfolio.
SHORT-TERM INSTRUMENTS. The Portfolio's assets may be invested in high quality
short-term investments with remaining maturities of 397 days or less to maintain
the Liquidity Reserve (as defined below), to meet anticipated redemptions and
expenses for day-to-day operating purposes and when, in the opinion of Bankers
Trust Company, the Portfolio's investment adviser (the "Adviser" or "Bankers
Trust"), it is advisable to adopt a temporary defensive position because of
unusual and adverse conditions affecting the respective markets. The Portfolio
may hold short-term investments consisting of foreign and domestic (i)
short-term obligations of sovereign governments, their agencies,
instrumentalities, authorities or political subdivisions; (ii) other short-term
debt securities rated in one of the top two short-term rating categories by an
NRSRO or, if unrated, of comparable quality in the opinion of the Adviser; (iii)
commercial paper; (iv) bank obligations, including negotiable certificates of
deposit, time deposits and bankers' acceptances; and (v) repurchase agreements.
At the time the Portfolio invests in commercial paper, bank obligations or
repurchase agreements, the issuer or the issuer's parent must have an
outstanding long-term debt rating of A or higher by Standard & Poor's Ratings
Group ("S&P") or A-2 or higher by Moody's Investors Service, Inc. ("Moody's") or
outstanding commercial paper or bank obligations rated A-1 by S&P or Prime-1 by
Moody's; or, if no such ratings are available, the instrument must be of
comparable quality in the opinion of the Adviser.
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. Certificates of deposit are
receipts issued by a depository institution in exchange for the deposit of
funds. The issuer agrees to pay the amount deposited plus interest to the bearer
of the receipt on the date specified on the certificate. The certificate usually
can be traded in the secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed to enable
businesses to obtain funds to finance commercial transactions. Generally, an
acceptance is a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise. The draft is
then "accepted" by a bank that, in effect, unconditionally guarantees to pay the
face value of the instrument on its maturity date. The acceptance may then be
held by the accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific maturity. Although
maturities for acceptances can be as long as 270 days, most acceptances have
maturities of six months or less.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from one to
270 days) unsecured promissory notes issued by corporations in order to finance
their current operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.
For a description of commercial paper ratings, see the Appendix.
U.S. DOLLAR-DENOMINATED FIXED INCOME SECURITIES. Bonds and other debt
instruments are used by issuers to borrow money from investors. The issuer pays
the investor a fixed or variable rate of interest and must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not
pay current interest but are purchased at a discount from their face values.
Debt securities, loans and other direct debt have varying degrees of quality and
varying levels of sensitivity to changes in interest rates. Longer-term bonds
are generally more sensitive to interest rate changes than short-term bonds.
U.S. DOLLAR-DENOMINATED FOREIGN SECURITIES. The Portfolio may invest a portion
of its assets in the dollar-denominated debt securities of foreign companies.
Investing in the securities of foreign companies involves more risks than
investing in securities of U.S. companies. Their value is subject to economic
and political developments in the countries where the companies operate and to
changes in foreign currency values. Values may also be affected by foreign tax
laws, changes in foreign economic or monetary policies, exchange control
regulations and regulations involving prohibitions on the repatriation of
foreign currencies.
In general, less information may be available about foreign companies than about
U.S. companies, and foreign companies are generally not subject to the same
accounting, auditing and financial reporting standards as are U.S. companies.
Foreign securities markets may be less liquid and subject to less regulation
than the U.S. securities markets. The costs of investing outside the United
States frequently are higher than those in the United States. These costs
include relatively higher brokerage commissions and foreign custody expenses.
U.S. DOLLAR-DENOMINATED SOVEREIGN AND SUPRANATIONAL FIXED INCOME SECURITIES.
Debt instruments issued or guaranteed by foreign governments, agencies and
supranational organizations ("sovereign debt obligations"), especially sovereign
debt obligations of developing countries, may involve a high degree of risk. The
issuer of the obligation or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal and interest
when due and may require renegotiation or rescheduling of debt payments. In
addition, prospects for repayment of principal and interest may depend on
political as well as economic factors.
MORTGAGE- AND ASSET-BACKED SECURITIES. The Portfolio may purchase
mortgage-backed securities issued by the U.S. government, its agencies or
instrumentalities and non-governmental entities such as banks, mortgage lenders
or other financial institutions. Mortgage-backed securities include mortgage
pass-through securities, mortgage-backed bonds and mortgage pay-through
securities. A mortgage pass-through security is a pro rata interest in a pool of
mortgages where the cash flow generated from the mortgage collateral is passed
through to the security holder. A mortgage-backed bond is a general obligation
of the issuer, payable out of the issuer's general funds and additionally
secured by a first lien on a pool of mortgages. Mortgage pay-through securities
exhibit characteristics of both pass-through and mortgage-backed bonds. The
mortgage pass-through securities issued by non-governmental entities such as
banks, mortgage lenders or other financial institutions in which the Portfolio
may invest include private label mortgage pass-through securities and whole
loans. Mortgage-backed securities also include other debt obligations secured by
mortgages on commercial real estate or residential properties. Other types of
mortgage-backed securities will likely be developed in the future, and the
Portfolio may invest in them if Bankers Trust determines they are consistent
with the Portfolio's investment objective and policies.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are mortgage-backed bonds
that separate mortgage pools into different classes, called tranches. Tranches
pay different rates of interest and can mature in a few months, or in as long as
20 years. Issued by the Federal Home Loan Mortgage Corporation (Freddie Mac) and
private issuers, CMOs are usually backed by government-guaranteed or other top
grade mortgages and have AAA ratings. In return for a lower yield, CMOs provide
investors with increased security throughout the life of their investment
compared to purchasing a whole mortgage-backed security. Even so, if mortgage
rates drop sharply, causing a flood of refinancings, prepayment rates will soar
and CMO tranches will be repaid before their expected maturity.
REMICs are pass-through vehicles created under the tax reform act of 1986 to
issue multiclass mortgage-backed securities. REMICs may be organized as
corporations, partnerships or trusts. Interests in REMICs may be senior or
junior, regular (debt instruments) or residual (equity interests). CMOs normally
have AAA bond ratings, whereas REMICs represent a range of risk levels.
Asset-backed securities have structural characteristics similar to
mortgage-backed securities. However, the underlying assets are not first lien
mortgage loans or interests therein but include assets such as motor vehicle
installment sale contracts, other installment sale contracts, home equity loans,
leases of various types of real and personal property, and receivables from
revolving credit (credit card) agreements. Such assets are securitized through
the use of trusts or special purpose corporations. Payments or distributions of
principal and interest on asset-backed securities may be guaranteed up to
certain amounts and for a certain time period by a letter of credit or a pool
insurance policy issued by a financial institution unaffiliated with the issuer,
or other credit enhancements may be present.
The yield characteristics of the mortgage- and asset-backed securities in which
the Portfolio may invest differ from those of traditional debt securities. Among
the major differences are that interest and principal payments are made more
frequently on mortgage- and asset-backed securities (usually monthly) and that
principal may be prepaid at any time because the underlying mortgage loans or
other assets generally may be prepaid at any time. As a result, if the Portfolio
purchases these securities at a premium, a prepayment rate that is faster than
expected will reduce their yield, while a prepayment rate that is slower than
expected will have the opposite effect of increasing yield. Conversely, if the
Portfolio purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
their yield. Amounts available for reinvestment by the Portfolio are likely to
be greater during a period of declining interest rates and, as a result, are
likely to be reinvested at lower interest rates than during a period of rising
interest rates.
Unlike ordinary Fixed Income Securities, which generally pay a fixed rate of
interest and return principal upon maturity, mortgage-backed securities repay
both interest income and principal as part of their periodic payments. Because
the mortgages underlying mortgage-backed certificates can be prepaid at any time
by homeowners or corporate borrowers, mortgage-backed securities give rise to
certain unique "pre-payment" risks. Prepayment risk or call risk is the
likelihood that, during periods of falling interest rates, securities with high
stated interest rates will be prepaid (or "called") prior to maturity, requiring
the Portfolio to invest the proceeds at generally lower interest rates.
In general, the prepayment rate for mortgage-backed securities decreases as
interest rates rise and increases as interest rates fall. However, rising
interest rates will tend to decrease the value of these securities. In addition,
an increase in interest rates may affect the volatility of these securities by
effectively changing a security that was considered a short-term security at the
time of purchase into a long-term security. Long-term securities generally
fluctuate more widely in response to changes in interest rates than short- or
intermediate-term securities.
The market for privately issued mortgage- and asset-backed securities is smaller
and less liquid than the market for U.S. government mortgage-backed securities.
CMO classes may be specially structured in a manner that provides any of a wide
variety of investment characteristics, such as yield, effective maturity and
interest rate sensitivity. As market conditions change, however, and
particularly during periods of rapid or unanticipated changes in market interest
rates, the attractiveness of the CMO classes and the ability of the structure to
provide the anticipated investment characteristics may be significantly reduced.
These changes can result in volatility in the market value, and in some
instances reduced liquidity, of the CMO class.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the benefit
of the same type of security interest in the related collateral. Credit card
receivables are generally unsecured, and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to avoid payment of certain amounts owed on the
credit cards, thereby reducing the balance due. There is the risk in connection
with automobile receivables that recoveries on repossessed collateral may not,
in some cases, be available to support payments on those securities.
ZERO-COUPON SECURITIES. The Portfolio may invest in certain zero coupon
securities that are "stripped" U.S. Treasury notes and bonds. Zero Coupon
Securities including CATS, TIGRs and TRs, are the separate income or principal
components of a debt instrument. Zero coupon securities usually trade at a
substantial discount from their face or par value. Zero coupon securities are
subject to greater fluctuations of market value in response to changing interest
rates than debt obligations of comparable maturities that make current
distributions of interest in cash. Zero coupon securities involve risks that are
similar to those of other debt securities, although they may be more volatile,
and the value of certain zero coupon securities moves in the same direction as
interest rates. Zero coupon bonds do not make regular interest payments.
WRAPPER AGREEMENTS. Wrapper Agreements are structured with a number of different
features. Wrapper Agreements purchased by the Portfolio are of three basic
types: (1) non-participating, (2) participating and (3) "hybrid." In addition,
the Wrapper Agreements will either be of fixed-maturity or open-end maturity
("evergreen"). The Portfolio enters into particular types of Wrapper Agreements
depending upon their respective cost to the Portfolio and the Wrapper Provider's
creditworthiness, as well as upon other factors. Under most circumstances, it is
anticipated that the Portfolio will enter into participating Wrapper Agreements
of open-end maturity and hybrid Wrapper Agreements.
Under a NON-PARTICIPATING WRAPPER AGREEMENT, the Wrapper Provider becomes
obligated to make a payment to the Portfolio whenever the Portfolio sells
Covered Assets at a price below Book Value to meet withdrawals of a type covered
by the Wrapper Agreement (a "Benefit Event"). Conversely, the Portfolio becomes
obligated to make a payment to the Wrapper Provider whenever the Portfolio sells
Covered Assets at a price above their Book Value in response to a Benefit Event.
In neither case is the Crediting Rate adjusted at the time of the Benefit Event.
Accordingly, under this type of Wrapper Agreement, while the Portfolio is
protected against decreases in the market value of the Covered Assets below Book
Value, it does not realize increases in the market value of the Covered Assets
above Book Value; those increases are realized by the Wrapper Providers.
Under a PARTICIPATING WRAPPER AGREEMENT, the obligation of the Wrapper Provider
or the Portfolio to make payments to each other typically does not arise until
all of the Covered Assets have been liquidated. Instead of payments being made
on the occurrence of each Benefit Event, these obligations are a factor in the
periodic adjustment of the Crediting Rate.
Under a HYBRID WRAPPER AGREEMENT, the obligation of the Wrapper Provider or the
Portfolio to make payments does not arise until withdrawals exceed a specified
percentage of the Covered Assets, after which time payment covering the
difference between market value and Book Value will occur.
A FIXED-MATURITY WRAPPER AGREEMENT terminates at a specified date, at which time
settlement of any difference between Book Value and market value of the Covered
Assets occurs. A fixed-maturity Wrapper Agreement tends to ensure that the
Covered Assets provide a relatively fixed rate of return over a specified period
of time through bond immunization, which targets the duration of the Covered
Assets to the remaining life of the Wrapper Agreement.
An EVERGREEN WRAPPER AGREEMENT has no fixed maturity date on which payment must
be made, and the rate of return on the Covered Assets accordingly tends to vary.
Unlike the rate of return under a fixed-maturity Wrapper Agreement, the rate of
return on assets covered by an evergreen Wrapper Agreement tends to more closely
track prevailing market interest rates and thus tends to rise when interest
rates rise and fall when interest rates fall. An evergreen Wrapper Agreement may
be converted into a fixed-maturity Wrapper Agreement that will mature in the
number of years equal to the duration of the Covered Assets.
Wrapper Providers are banks, insurance companies and other financial
institutions. The number of Wrapper Providers has been increasing in recent
years. As of December 1998, there were approximately _________ Wrapper Providers
rated in one of the top two long-term rating categories by Moody's, S&P or
another NRSRO. The cost of Wrapper Agreements is typically 0.10% to 0.25% per
dollar of Covered Assets per annum.
In the event of the default of a Wrapper Provider, the Portfolio could
potentially lose the Book Value protections provided by the Wrapper Agreements
with that Wrapper Provider. However, the impact of such a default on the
Portfolio as a whole may be minimal or non-existent if the market value of the
Covered Assets thereunder is greater than their Book Value at the time of the
default, because the Wrapper Provider would have no obligation to make payments
to the Portfolio under those circumstances. In addition, the Portfolio may be
able to obtain another Wrapper Agreement from another Wrapper Provider to
provide Book Value protections with respect to those Covered Assets. The cost of
the replacement Wrapper Agreement might be higher than the initial Wrapper
Agreement due to market conditions or if the market value (plus accrued interest
on the underlying securities) of those Covered Assets is less than their Book
Value at the time of entering into the replacement agreement. Such cost would
also be in addition to any premiums previously paid to the defaulting Wrapper
Provider. If the Portfolio were unable to obtain a replacement Wrapper
Agreement, participants redeeming Shares might experience losses if the market
value of the Portfolio's assets no longer covered by the Wrapper Agreement is
below Book Value. The combination of the default of a Wrapper Provider and an
inability to obtain a replacement agreement could render the Portfolio and the
Fund unable to achieve their investment objective of seeking to maintain a
stable value per Share.
With respect to payments made under the Wrapper Agreements between the Portfolio
and the Wrapper Provider, some Wrapper Agreements provide that payments may be
due upon disposition of the Covered Assets, while others provide for payment
only upon the total liquidation of the Covered Assets or upon termination of the
Wrapper Agreement. In none of these cases, however, would the terms of the
Wrapper Agreements specify which Portfolio Securities are to be disposed of or
liquidated. Moreover, because it is anticipated that each Wrapper Agreement will
cover all Covered Assets up to a specified dollar amount, if more than one
Wrapper Provider becomes obligated to pay to the Portfolio the difference
between Book Value and market value (plus accrued interest on the underlying
securities), each Wrapper Provider will pay a pro-rata amount in proportion to
the maximum dollar amount of coverage provided. Thus, the Portfolio will not
have the option of choosing which Wrapper Agreement to draw upon in any such
payment situation. Under the terms of most Wrapper Agreements, the Wrapper
Provider will have the right to terminate the Wrapper Agreement in the event
that material changes are made to the Portfolio's investment objectives or
limitations or to the nature of the Portfolio's operations. In such event, the
Portfolio may be obligated to pay the Wrapper Provider termination fees equal in
amount to the premiums that would have been due had the Wrapper Agreement
continued through the predetermined period. The Portfolio will have the right to
terminate a Wrapper Agreement for any reason. Such right, however, may also be
subject to the payment of termination fees. In the event of termination of a
Wrapper Agreement or conversion of an evergreen Wrapper Agreement to a fixed
maturity, some Wrapper Agreements may require that the duration of some portion
of the Fund's portfolio securities be reduced to correspond to the fixed
maturity or termination date and that such securities maintain a higher credit
rating than is normally required, either of which requirements might adversely
affect the return of the Portfolio and the Fund.
RISKS OF WRAPPER AGREEMENTS. Each Wrapper Agreement obligates the Wrapper
Provider to maintain the "Book Value" of a portion of the Portfolio's assets
("Covered Assets") up to a specified maximum dollar amount, upon the occurrence
of certain specified events. The Book Value of the Covered Assets is their
purchase price (i) plus interest on the Covered Assets at a rate specified in
the Wrapper Agreement ("Crediting Rate"), and (ii) less an adjustment to reflect
any defaulted securities. The Crediting Rate used in computing Book Value is
calculated by a formula specified in the Wrapper Agreement and is adjusted
periodically. In the case of Wrapper Agreements purchased by the Portfolio, the
Crediting Rate is the actual interest earned on the Covered Assets, or an
index-based approximation thereof, plus or minus an adjustment for an amount
receivable from or payable to the Wrapper Provider based on fluctuations in the
market value of the Covered Assets. As a result, while the Crediting Rate will
generally reflect movements in the market rates of interest, it may at any time
be more or less than these rates or the actual interest income earned on the
Covered Assets. The Crediting Rate may also be impacted by defaulted securities
and by increases and decreases of the amount of Covered Assets as a result of
contributions and withdrawals tied to the sale and redemption of Shares.
Furthermore, the premiums due Wrapper Providers in connection with the
Portfolio's investments in Wrapper Agreements are offset against interest earned
and thus reduce the Crediting Rate. These premiums are generally paid quarterly.
In no event will the Crediting Rate fall below zero percent under the Wrapper
Agreements entered into by the Portfolio.
Under the terms of a typical Wrapper Agreement, if the market value (plus
accrued interest on the underlying securities) of the Covered Assets is less
than their Book Value at the time the Covered Assets are liquidated in order to
provide proceeds for withdrawals of Portfolio interests resulting from
redemptions of Shares by Plan participants, the Wrapper Provider becomes
obligated to pay to the Portfolio the difference. Conversely, the Portfolio
becomes obligated to make a payment to the Wrapper Provider if it is necessary
for the Portfolio to liquidate Covered Assets at a price above their Book Value
in order to make withdrawal payments. (Withdrawals generally will arise when the
Fund must pay shareholders who redeem their Shares.) Because it is anticipated
that each Wrapper Agreement will cover all Covered Assets up to a specified
dollar amount, if more than one Wrapper Provider becomes obligated to pay to the
Portfolio the difference between Book Value and market value (plus accrued
interest on the underlying securities), each Wrapper Provider will be obligated
to pay a pro-rata amount in proportion to the maximum dollar amount of coverage
provided. Thus, the Portfolio will not have the option of choosing which Wrapper
Agreement to draw upon in any such payment situation.
The terms of the Wrapper Agreements vary concerning when these payments must
actually be made between the Portfolio and the Wrapper Provider. In some cases,
payments may be due upon disposition of the Covered Assets; other Wrapper
Agreements provide for settlement only upon termination of the Wrapper Agreement
or total liquidation of the Covered Assets.
The Fund expects that the use of Wrapper Agreements by the Portfolio will under
most circumstances permit the Fund to maintain a constant NAV per Share and to
pay dividends that will generally reflect over time both the interest income of,
and market gains and losses on, the Covered Assets held by the Portfolio less
the expenses of the Fund and the Portfolio. However, there can be no guarantee
that the Fund will maintain a constant NAV per Share or that any Fund
shareholder or Plan participant will realize the same investment return as might
be realized by investing directly in the Portfolio assets other than the Wrapper
Agreements. For example, a default by the issuer of a Portfolio Security or a
Wrapper Provider on its obligations might result in a decrease in the value of
the Portfolio assets and, consequently, the Shares. The Wrapper Agreements
generally do not protect the Portfolio from loss if an issuer of Portfolio
Securities defaults on payments of interest or principal. Additionally, a Fund
shareholder may realize more or less than the actual investment return on the
Portfolio Securities depending upon the timing of the shareholder's purchases
and redemption of Shares, as well as those of other shareholders. Furthermore,
there can be no assurance that the Portfolio will be able at all times to obtain
Wrapper Agreements. Although it is the current intention of the Portfolio to
obtain such agreements covering all of its assets (with the exceptions noted),
the Portfolio may elect not to cover some or all of its assets with Wrapper
Agreements should Wrapper Agreements become unavailable or should other
conditions such as cost, in Bankers Trust's sole discretion, render their
purchase inadvisable.
If, in the event of a default of a Wrapper Provider, the Portfolio were unable
to obtain a replacement Wrapper Agreement, participants redeeming Shares might
experience losses if the market value of the Portfolio's assets no longer
covered by the Wrapper Agreement is below Book Value. The combination of the
default of a Wrapper Provider and an inability to obtain a replacement agreement
could render the Portfolio and the Fund unable to achieve their investment
objective of maintaining a stable NAV per Share. If the Board of Trustees of the
Portfolio Trust (the "Portfolio Trust Board") determines that a Wrapper Provider
is unable to make payments when due, that Board may assign a fair value to the
Wrapper Agreement that is less than the difference between the Book Value and
the market value (plus accrued interest on the underlying securities) of the
applicable Covered Assets and the Portfolio might be unable to maintain NAV
stability.
Some Wrapper Agreements require that the Portfolio maintain a specified
percentage of its total assets in short-term investments ("Liquidity Reserve").
These short-term investments must be used for the payment of withdrawals from
the Portfolio and Portfolio expenses. To the extent the Liquidity Reserve falls
below the specified percentage of total assets, the Portfolio is obligated to
direct all net cash flow to the replenishment of the Liquidity Reserve. The
obligation to maintain a Liquidity Reserve may result in a lower return for the
Portfolio and the Fund than if these funds were invested in longer-term Fixed
Income Securities. The Liquidity Reserve required by all Wrapper Agreements is
not expected to exceed 20% of the Portfolio's total assets.
Wrapper Agreements also require that the Covered Assets have a specified
duration or maturity, consist of specified types of securities or be of a
specified investment quality. The Portfolio will purchase Wrapper Agreements
whose criteria in this regard are consistent with the Portfolio's (and the
Fund's) investment objective and policies as described in this Prospectus.
Wrapper Agreements may also require the disposition of securities whose ratings
are downgraded below a certain level. This may limit the Portfolio's ability to
hold such downgraded securities. For a description of Wrapper Provider ratings,
see the Appendix.
ILLIQUID SECURITIES. Mutual funds do not typically hold a significant amount of
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities, and a mutual fund might be unable to
dispose of illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven days. A mutual
fund might also have to register restricted securities in order to dispose of
them, resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including repurchase
agreements, commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Rule 144A Securities are securities that are not
registered for sale under the federal securities laws but can be resold to
institutions pursuant to Rule 144A under the Securities Act of 1933.
Institutional investors depend on an efficient institutional market in which the
unregistered security can be readily resold or on an issuer's ability to honor a
demand for repayment. The fact that there are contractual or legal restrictions
on resale of such investments to the general public or to certain institutions
may not be indicative of their liquidity.
The Securities and Exchange Commission (the "SEC") has adopted Rule 144A under
the 1933 Act, which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public. Rule
144A establishes a "safe harbor" from the registration requirements of the 1933
Act for resales of certain securities to qualified institutional buyers. The
Adviser anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this rule and
the development of automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.
The Adviser will monitor the liquidity of Rule 144A securities held by the
Portfolio under the supervision of the Portfolio Trust Board. In reaching
liquidity decisions, the Adviser will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers and other potential purchasers or sellers of the security;
(3) dealer undertakings to make a market in the security; and (4) the nature of
the security and of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer).
Provided that a dealer or institutional trading market in such securities
exists, these restricted securities are treated as exempt from the Portfolio's
15% limit on illiquid securities. Under the supervision of the Portfolio Trust
Board, Bankers Trust determines the liquidity of restricted securities; and
through reports from Bankers Trust, the Portfolio Trust Board monitors trading
activity in restricted securities. If institutional trading in restricted
securities were to decline, the liquidity of the Portfolio could be adversely
affected.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities can take place a month or more after the date of the
purchase commitment. The purchase price and the interest rate payable, if any,
on the securities are fixed on the purchase commitment date or at the time the
settlement date is fixed. The value of such securities is subject to market
fluctuation, and no interest accrues to the Portfolio until settlement takes
place. At the time the Portfolio makes the commitment to purchase securities on
a when-issued or delayed delivery basis, it will record the transaction, reflect
the value each day of such securities in determining its NAV and, if applicable,
calculate the maturity for the purposes of average maturity from that date. At
the time of settlement, a when-issued security may be valued at less than the
purchase price. To facilitate such acquisitions, the Portfolio will maintain
with its custodian (Bankers Trust) a segregated account with liquid assets,
consisting of cash, U.S. government securities or other appropriate securities,
in an amount at least equal to such commitments. On delivery dates for such
transactions, the Portfolio will meet its obligations from maturities or sales
of the securities held in the segregated account and/or from cash flow. If the
Portfolio chooses to dispose of the right to acquire a when-issued security
prior to its acquisition, it could, as with the disposition of any other
portfolio obligation, realize a gain or loss due to market fluctuation. It is
the current policy of the Portfolio not to enter into when-issued commitments
exceeding in the aggregate 15% of the market value of its total assets, less
liabilities other than the obligations created by when-issued commitments.
U.S. GOVERNMENT OBLIGATIONS. The Portfolio may invest in obligations issued or
guaranteed by U.S. government agencies or instrumentalities. U.S. government
securities are high-quality debt securities issued or guaranteed by the U.S.
Treasury or by an agency or instrumentality of the U.S. government. These
obligations may or may not be backed by the "full faith and credit" of the
United States. In the case of securities not backed by the full faith and credit
of the United States, the Portfolio must look principally to the federal agency
issuing or guaranteeing the obligation for ultimate repayment and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments. Securities in which the
Portfolio may invest that are not backed by the full faith and credit of the
United States include obligations of the Tennessee Valley Authority, the Federal
Home Loan Mortgage Corporation and the U.S. Postal Service, each of which has
the right to borrow from the U.S. Treasury to meet its obligations, and
obligations of the Federal Farm Credit System and the Federal Home Loan Banks,
both of whose obligations may be satisfied only by the individual credit of the
issuing agency. Securities that are backed by the full faith and credit of the
United States include obligations of the Government National Mortgage
Association (the "GNMA"), the Farmers Home Administration and the Export-Import
Bank.
LOWER-RATED DEBT SECURITIES ("JUNK BONDS"). The Portfolio may invest in debt
securities rated in the fifth and sixth long-term rating categories by S&P,
Moody's and Duff & Phelps Credit Rating Company, or comparably rated by another
NRSRO, or if not rated by a NRSRO, of comparable quality as determined by
Bankers Trust in its sole discretion. While the market for high yield corporate
debt securities has been in existence for many years and has weathered previous
economic downturns, the 1980's brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and restructuring.
Past experience may not provide an accurate indication of future performance of
the high yield bond market, especially during periods of economic recession. In
fact, from 1989 to 1991, the percentage of lower-rated debt securities that
defaulted rose significantly above prior levels.
The market for lower-rated debt securities may be thinner and less active than
that for higher rated debt securities, which can adversely affect the prices at
which the former are sold. If market quotations are not available, lower-rated
debt securities will be valued in accordance with procedures established by the
Board of Trustees, including the use of outside pricing services. Judgment plays
a greater role in valuing high yield corporate debt securities than is the case
for securities for which more external sources for quotations and last sale
information is available. Adverse publicity and changing investor perception may
affect the availability of outside pricing services to value lower-rated debt
securities and the Portfolio's ability to dispose of these securities.
Since the risk of default is higher for lower-rated debt securities, Bankers
Trust's research and credit analysis are an especially important part of
managing securities of this type held by the Portfolio. In considering
investments for the Portfolio, Bankers Trust will attempt to identify those
issuers of high yielding debt securities whose financial conditions are adequate
to meet future obligations, have improved or are expected to improve in the
future. Bankers Trust's analysis focuses on relative values based on such
factors as interest on dividend coverage, asset coverage, earnings prospects and
the experience and managerial strength of the issuer.
The Portfolio may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as a security holder to seek
to protect the interest of security holders if it determines this to be in the
interest of the Portfolio.
HEDGING STRATEGIES. The Portfolio may use certain strategies designed to adjust
the overall risk of its investment portfolio. These "hedging" strategies involve
derivative contracts, including U.S. Treasury and Eurodollar futures contracts
and exchange-traded put and call options on such futures contracts. New
financial products and risk management techniques continue to be developed and
may be used if consistent with the Portfolio's investment objective and
policies. Among other purposes, these hedging strategies may be used to
effectively maintain a desired portfolio duration or to protect against market
risk should the Portfolio change its investments among different types of Fixed
Income Securities. In this respect, these hedging strategies are designed for
different purposes than the investments in Wrapper Agreements.
The Portfolio might not use any hedging strategies, and there can be no
assurance that any strategy used will succeed. If the Adviser is incorrect in
its judgment on market values, interest rates or other economic factors in using
a hedging strategy, the Portfolio may have lower net income and a net loss on
the investment. Each of these strategies involves certain risks, which include:
* the fact that the skills needed to use hedging instruments are different from
those needed to select securities for the Portfolio;
* the possibility of imperfect correlation, or even no correlation, between the
price movements of hedging instruments and price movements of the securities
or currencies being hedged;
* possible constraints placed on the Portfolio's ability to purchase or sell
portfolio investments at advantageous times due to the need for the Portfolio
to maintain "cover" or to segregate securities; and
* the possibility that the Portfolio will be unable to close out or liquidate
its hedged position.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS -- GENERAL. The successful
use of these instruments draws upon the Adviser's skill and experience with
respect to such instruments and usually depends on its ability to forecast
interest rate movements correctly. If interest rates move in an unexpected
manner, the Portfolio may not achieve the anticipated benefits of futures
contracts or options thereon or may realize losses and thus will be in a worse
position than if such strategies had not been used. In addition, the correlation
between movements in the price of futures contracts or options thereon and
movements in the price of the securities hedged or used for cover will not be
perfect and could produce unanticipated losses.
FUTURES CONTRACTS. The Portfolio may enter into contracts for the purchase or
sale for future delivery of fixed-income securities or contracts based on
financial indices, including any index of U.S. government securities, foreign
government securities or corporate debt securities. U.S. futures contracts have
been designed by exchanges that have been designated "contracts markets" by the
Commodity Futures Trading Commission ("CFTC") and must be executed through a
futures commission merchant, or brokerage firm, that is a member of the relevant
contract market. Futures contracts trade on a number of exchange markets, and,
through their clearing corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange. The Portfolio may
enter into futures contracts based on debt securities that are backed by the
full faith and credit of the U.S. government, such as long-term U.S. Treasury
bonds, U.S. Treasury notes, GNMA modified pass-through mortgage-backed
securities and three-month U.S. Treasury bills. The Portfolio may also enter
into futures contracts that are based on bonds issued by entities other than the
U.S. government.
At the same time a futures contract is purchased or sold, the Portfolio must
allocate cash or securities as a deposit payment. Daily thereafter, the futures
contract is valued and "variation margin" may be required (that is, the
Portfolio may have to provide or may receive cash that reflects any decline or
increase in the contract's value).
At the time of delivery of securities pursuant to a futures contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.
Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is fulfilled
before the termination date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the contracts are traded,
the Portfolio will incur brokerage fees when it purchases or sells futures
contracts.
The purpose of the Portfolio's acquisition or sale of a futures contract is to
attempt to protect the Portfolio from fluctuations in interest rates without
actually buying or selling fixed-income securities. For example, if interest
rates were expected to increase (which thus would cause the prices of debt
securities to decline), the Portfolio might enter into futures contracts for the
sale of debt securities. Such a sale would have much the same effect as selling
an equivalent value of the debt securities owned by the Portfolio. If interest
rates did increase, the value of the debt securities held by the Portfolio would
decline, but the value of the futures contracts to the Portfolio would increase
at approximately the same rate, thereby keeping the Portfolio's NAV from
declining as much as it otherwise would have. The Portfolio could accomplish
similar results by selling debt securities and investing in bonds with short
maturities when interest rates are expected to increase. However, since the
futures market is more liquid than the cash market, the use of futures contracts
as an investment technique allows the Portfolio to maintain a defensive position
without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may decline (thus increasing
the value of debt securities), futures contracts for the acquisition of debt
securities may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of the underlying debt securities, the
Portfolio could take advantage of the anticipated rise in the value of debt
securities without actually buying them until the market had stabilized. At that
time, the futures contracts could be liquidated and the Portfolio could then buy
debt securities on the cash market. To the extent the Portfolio enters into
futures contracts for this purpose, the assets in the segregated asset account
maintained to cover the Portfolio's obligations with respect to such futures
contracts will consist of cash, cash equivalents or high quality liquid debt
securities from its portfolio in an amount equal to the difference between the
fluctuating market value of such futures contracts and the aggregate value of
the initial and variation margin payments made by the Portfolio with respect to
such futures contracts.
The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial and variation
margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions that could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by Bankers Trust may still not
result in a successful transaction.
In addition, futures contracts entail risks. Although the Adviser believes that
use of such contracts will benefit the Portfolio, if its investment judgment
about the general direction of interest rates is incorrect, the Portfolio's
overall performance would be poorer than if it had not entered into any such
contract. For example, if the Portfolio has hedged against the possibility of an
increase in interest rates that would adversely affect the price of debt
securities held in its portfolio and interest rates decrease instead, the
Portfolio will lose part or all of the benefit of the increased value of its
debt securities that it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Portfolio has
insufficient cash, it may have to sell debt securities from its portfolio to
meet daily variation margin requirements. Such sales of securities may be, but
will not necessarily be, at increased prices that reflect the rising market. The
Portfolio may have to sell securities at a time when it may be disadvantageous
to do so.
OPTIONS ON FUTURES CONTRACTS. The Portfolio may purchase and write (sell)
options on futures contracts for hedging purposes. The purchase of a call option
on a futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities. As with
the purchase of futures contracts, when the Portfolio is not fully invested it
may purchase a call option on a futures contract to hedge against a market
advance due to declining interest rates.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the security that is deliverable upon exercise of
the futures contract. If the futures price at expiration of the option is below
the price specified in the option ("exercise price"), the Portfolio will retain
the full amount of the net premium (the premium received for writing the option
less any commission), which will provide a partial hedge against any decline
that may have occurred in its portfolio holdings. The writing of a put option on
a futures contract constitutes a partial hedge against increasing prices of the
security that is deliverable upon exercise of the futures contract. If the
futures price at expiration of the option is higher than the exercise price, the
Portfolio will retain the full amount of the option net premium, which will
provide a partial hedge against any increase in the price of securities that the
Portfolio intends to purchase. If a put or call option the Portfolio has written
is exercised, the Portfolio may incur a loss that will be reduced by the amount
of the net premium it receives. Depending on the degree of correlation between
changes in the value of its portfolio securities and changes in the value of its
futures positions, such losses from existing options on futures may to some
extent be reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some respects
to the purchase of put options on portfolio securities. For example, the
Portfolio may purchase a put option on a futures contract to hedge its portfolio
against the risk of rising interest rates. The amount of risk the Portfolio
assumes when it purchases an option on a futures contract is the premium paid
for the option plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the risk that
changes in the value of the underlying futures contract will not be fully
reflected in the value of the option purchased.
The Portfolio Trust Board has adopted a restriction that the Portfolio will not
enter into any futures contract or option on a futures contract if immediately
thereafter the amount of margin deposits on all the futures contracts held by
the Portfolio and premiums paid on outstanding options on its futures contracts
(other than those entered into for BONA FIDE hedging purposes) would exceed 5%
of the market value of the Portfolio's total assets.
OPTIONS ON SECURITIES. The Portfolio may write (sell) covered call and put
options on its portfolio securities ("covered options") to a limited extent in
an attempt to increase income. However, the Portfolio may forgo the benefits of
appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options it writes. A call option
written by a Portfolio is "covered" if the Portfolio owns the underlying
security covered by the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Portfolio holds a call option on the same security and in the
same principal amount as the written call option where the exercise price of the
call option so held (a) is equal to or less than the exercise price of the
written call option or (b) is greater than the exercise price of the written
call option if the difference is maintained by the Portfolio in cash, U.S.
government securities and other high quality liquid securities in a segregated
account with its custodian.
When the Portfolio writes a covered call option, it gives the purchaser of the
option the right to buy the underlying security at the exercise price by
exercising the option at any time during the option period. If the option
expires unexercised, the Portfolio will realize income in an amount equal to the
premium received for writing the option. If the option is exercised, a decision
over which the Portfolio has no control, the Portfolio must sell the underlying
security to the option holder at the exercise price. By writing a covered call
option, the Portfolio forgoes, in exchange for the net premium, the opportunity
to profit during the option period from an increase in the market value of the
underlying security above the exercise price.
When the Portfolio writes a covered put option, it gives the purchaser of the
option the right to sell the underlying security to the Portfolio at the
exercise price at any time during the option period. If the option expires
unexercised, the Portfolio will realize income in the amount of the net premium
received for writing the option. If the put option is exercised, a decision over
which the Portfolio has no control, the Portfolio must purchase the underlying
security from the option holder at the exercise price. By writing a covered put
option, the Portfolio, in exchange for the net premium, accepts the risk of a
decline in the market value of the underlying security below the exercise price.
The Portfolio will only write put options involving securities for which a
determination is made at the time the option is written that the Portfolio
wishes to acquire the securities at the exercise price.
The Portfolio may terminate its obligation as the writer of a call or put option
by purchasing an option with the same exercise price and expiration date as the
option previously written. This transaction is called a "closing purchase
transaction." The Portfolio will realize a profit or loss on a closing purchase
transaction if the amount paid to purchase the option is less or more, as the
case may be, than the amount received from the sale thereof. To close out a
position as a purchaser of an option, the Portfolio may enter into a "closing
sale transaction," which involves liquidating the Portfolio's position by
selling the option previously purchased. Where the Portfolio cannot effect a
closing purchase transaction, it may be forced to incur brokerage commissions or
dealer spreads in selling securities it receives or it may be forced to hold
underlying securities until an option is exercised or expires.
When the Portfolio writes an option, an amount equal to the net premium received
is included in the liability section of its Statement of Assets and Liabilities
as a deferred credit. The amount of the deferred credit will be subsequently
marked to market to reflect the current market value of the option. The current
market value of a traded option is the last sale price or, in the absence of a
sale, the mean between the closing bid and asked prices. If an option expires or
if the Portfolio enters into a closing purchase transaction, the Portfolio will
realize a gain (or loss if the cost of the closing purchase transaction exceeds
the net premium received when the option was sold), and the deferred credit
related to such option will be eliminated. If a call option is exercised, the
Portfolio will realize a gain or loss from the sale of the underlying security
and the proceeds of the sale will be increased by the premium originally
received. The writing of covered call options may be deemed to involve the
pledge of the securities against which the option is being written. Securities
against which call options are written will be segregated on the books of the
custodian for the Portfolio.
The Portfolio may purchase call and put options on any securities in which it
may invest. The Portfolio would normally purchase a call option in anticipation
of an increase in the market value of such securities. The purchase of a call
option would entitle the Portfolio, in exchange for the premium paid, to
purchase a security at a specified price during the option period. The Portfolio
would ordinarily have a gain if the value of the securities increased above the
exercise price sufficiently to cover the premium and would have a loss if the
value of the securities remained at or below the exercise price during the
option period.
The Portfolio would normally purchase put options in anticipation of a decline
in the market value of securities in its portfolio ("protective puts") or
securities of the type in which it is permitted to invest. The purchase of a put
option would entitle the Portfolio, in exchange for the premium paid, to sell a
security, which may or may not be held in the Portfolio's holdings, at a
specified price during the option period. The purchase of protective puts is
designed merely to offset or hedge against a decline in the market value of the
Portfolio's holdings. Put options also may be purchased by the Portfolio for the
purpose of benefiting from a decline in the price of securities that the
Portfolio does not own. The Portfolio would ordinarily recognize a gain if the
value of the securities decreased below the exercise price sufficiently to cover
the premium and would recognize a loss if the value of the securities remained
at or above the exercise price. Gains and losses on the purchase of protective
put options would tend to be offset by countervailing changes in the value of
underlying portfolio securities.
The Portfolio has adopted certain non-fundamental policies concerning option
transactions that are discussed below.
The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded if the option markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying securities markets that will not be
reflected in the option markets. It is impossible to predict the volume of
trading that may exist in such options, and there can be no assurance that
viable exchange markets will develop or continue.
The Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Portfolio will purchase such options only from broker-dealers who are primary
U.S. government securities dealers recognized by the Federal Reserve Bank of New
York and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. Bankers Trust will monitor
the creditworthiness of dealers with whom the Portfolio enters into such options
transactions under the general supervision of the Portfolio Board.
GLOBAL ASSET ALLOCATION STRATEGY ("GAA STRATEGY"). In connection with the GAA
Strategy and in addition to the securities described above, the Portfolio may
invest in indexed securities, futures contracts on securities indices,
securities representing securities of foreign issuers (e.g. ADRs, GDRs and
EDRs), options on stocks, options on futures contracts, foreign currency
exchange transactions and options on foreign currencies. These are discussed
below, to the extent not already described above.
INDEXED SECURITIES. The indexed securities in which the Portfolio may invest
include debt securities whose value at maturity is determined by reference to
the relative prices of various currencies or to the price of a stock index. The
value of such securities depends on the price of foreign currencies, securities
indices or other financial values or statistics. These securities may be
positively or negatively indexed; that is, their value may increase or decrease
if the underlying instrument appreciates.
FUTURES CONTRACTS ON SECURITIES INDICES. Futures contracts on securities indices
provide for the making and acceptance of a cash settlement based upon changes in
the value of an index of securities, and will be entered into by the Portfolio
to hedge against anticipated future change in general market prices which
otherwise might either adversely affect the value of securities held by the
Portfolio or adversely affect the prices of securities which are intended to be
purchased at a later date for the Portfolio, or as an efficient means of
managing allocations between asset classes. A futures contract may also be
entered into to close out or offset an existing futures position. The risks
attendant to futures contracts on securities indices are similar to those of
futures contracts, discussed above.
SECURITIES REPRESENTING SECURITIES OF FOREIGN ISSUERS. The Portfolio's
investments in the securities of foreign issuers may be made directly or in the
form of American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRs"), European Depositary Receipts ("EDRs") or other similar securities
representing securities of foreign issuers. These securities may not necessarily
be denominated in the same currency as the securities they represent, and while
designed for use as alternatives to the purchase of the underlying securities in
their national markets and currencies, are subject to the same risks as the
foreign securities to which they relate.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Portfolio from time to time may
enter into foreign currency exchange transactions to convert to and from
different foreign currencies and to convert foreign currencies to and from the
U.S. dollar, either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through forward contracts to purchase
or sell foreign currencies. A forward foreign currency exchange contract
obligates the Portfolio to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the contract.
Forward foreign currency exchange contracts establish an exchange rate at a
future date. These contracts are transferable in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward foreign currency exchange contract generally has no deposit
requirement and is traded at a net price without commission. Neither spot
transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of the Portfolio's securities or in foreign exchange
rates, or prevent loss if the prices of these securities should decline.
The Portfolio may enter into foreign currency hedging transactions in an attempt
to protect against changes in foreign currency exchange rates between the trade
and settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated investment position. Since consideration of the prospect for
currency parities will be incorporated into Bankers Trust's long term investment
decisions, the Portfolio will not routinely enter into foreign currency hedging
transactions with respect to security transactions; however, Bankers Trust
believes that it is important to have the flexibility to enter into foreign
currency hedging transactions when it determines that the transactions would be
in the Portfolio's best interest. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
OPTIONS ON FOREIGN CURRENCIES. The Portfolio may write covered put and call
options and purchase put and call options on foreign currencies for the purpose
of protecting against declines in the dollar value of portfolio securities and
against increases in the dollar cost of securities to be acquired. The Portfolio
may use options on currency to cross hedge, which involves writing or purchasing
options on one currency to hedge against changes in exchange rates for a
different, but related currency. As with other types of options, however, the
writing of an option on foreign currency will constitute only a partial hedge up
to the amount of the premium received, and the Portfolio could be required to
purchase or sell foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on foreign currency may be used to
hedge against fluctuations in exchange rates although, in the event of exchange
rate movements adverse to the Portfolio's position, it may forfeit the entire
amount of the premium plus related transaction costs. In addition, the Portfolio
may purchase call options on currency when the Adviser anticipates that the
currency will appreciate in value.
There is no assurance that a liquid secondary market on an options exchange will
exist for any particular option, or at any particular time. If the Portfolio is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Portfolio will not be able to sell the underlying currency
or dispose of assets held in a segregated account until the options expire or
are exercised. Similarly, if the Portfolio is unable to effect a closing sale
transaction with respect to options it has purchased, it would have to exercise
the options in order to realize any profit and will incur transaction costs upon
the purchase or sale of underlying currency. The Portfolio pays brokerage
commissions or spreads in connection with its options transactions.
As in the case of forward contracts, certain options on foreign currencies are
traded over the counter and involve liquidity and credit risks which may not be
present in the case of exchange traded currency options. The Portfolio's ability
to terminate over-the-counter ("OTC") options will be more limited than with
exchange traded options. It is also possible that broker dealers participating
in OTC options transactions will not fulfill their obligations. Until such time
as the staff of the SEC changes its position, the Portfolio will treat purchased
OTC options and assets used to cover written OTC options as illiquid securities.
With respect to options written with primary dealers in U.S. Government
securities pursuant to an agreement requiring a closing purchase transaction at
a formula price, the amount of illiquid securities may be calculated with
reference to the repurchase formula.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Portfolio buys a security
at one price and simultaneously agrees to sell it back to the seller on a
specific date and at a higher price reflecting a market rate of interest
unrelated to the coupon rate or maturity of the underlying security. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. In a reverse repurchase
agreement, the Portfolio temporarily transfers possession of a portfolio
instrument to another party in return for cash. This could increase the risk of
fluctuation in the Fund's yield or in the market value of its interest in the
Portfolio. In a dollar roll, the Portfolio sells mortgage-backed or other
securities for delivery in the current month and simultaneously contracts to
purchase substantially similar securities on a specified future date. Reverse
repurchase agreements and dollar rolls are forms of borrowing and will be
counted towards the Portfolio's borrowing restrictions. Wrapper Agreements would
cover the cash proceeds of such transactions but not the portfolio instruments
transferred to another party until possession of such instruments is returned to
the Portfolio.
BORROWING. The Portfolio will not borrow money (including through reverse
repurchase agreements or dollar roll transactions) for any purpose in excess of
5% of its total assets, except that it may borrow for temporary or emergency
purposes up to 1/3 of its total assets. Under the 1940 Act, the Portfolio is
required to maintain continuous asset coverage of 300% with respect to such
borrowings and to sell (within three days) sufficient portfolio holdings to
restore such coverage if it should decline to less than 300% due to market
fluctuations or otherwise, even if such liquidation of the Portfolio's holdings
may be disadvantageous from an investment standpoint.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of the Portfolio's securities and the Fund's NAV per
Share, and money borrowed by the Portfolio will be subject to interest and other
costs (which may include commitment fees and/or the cost of maintaining minimum
average balances) that may exceed the income received from the securities
purchased with the borrowed funds. It is not the intention of Bankers Trust to
use leverage as a normal practice in the investment of the Portfolio's assets.
There can be no assurance that the use of these portfolio strategies will be
successful.
ASSET COVERAGE. To assure that the Portfolio's use of futures contracts and
related options, as well as when-issued and delayed-delivery securities, are not
used to achieve investment leverage, the Portfolio will cover such transactions,
as required under applicable interpretations of the SEC, either by owning the
underlying securities or by segregating or earmarking liquid securities with the
Portfolio's custodian (Bankers Trust) in an amount at all times equal to or
exceeding the Portfolio's commitment with respect to these instruments or
contracts. The Portfolio will also cover its use of Wrapper Agreements to the
extent required to avoid the creation of a "senior security" (as defined in the
1940 Act) in connection with its use of such agreements.
RATING SERVICES -- The ratings of rating services represent their opinions as to
the quality of the securities that they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective and are not
absolute standards of quality. Although these ratings are an initial criterion
for selection of portfolio investments, the Adviser also makes its own
evaluation of these securities, subject to review by the Portfolio Trust Board.
After purchase by the Portfolio, an obligation may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Portfolio.
Neither event would require the Portfolio to eliminate the obligation from its
portfolio, but the Adviser will consider such an event in its determination of
whether the Portfolio should continue to hold the obligation. A description of
the ratings referred to herein and in the Prospectus is set forth in the
Appendix.
INVESTMENT RESTRICTIONS -- The following investment restrictions are
"fundamental policies" of the Fund and the Portfolio and may not be changed
without the approval of a "majority of the outstanding voting securities" of the
Fund or the Portfolio, as the case may be. The phrase "Majority of the
outstanding voting securities" under the 1940 Act, and as used in this SAI and
the Prospectus, means, with respect to the Fund (or the Portfolio), the lesser
of (1) 67% or more of the outstanding voting securities of the Fund (or of the
total beneficial interests of the Portfolio) present at a meeting, if the
holders of more than 50% of the outstanding voting securities of the Fund (or of
the total beneficial interests of the Portfolio) are present or represented by
proxy or (2) more than 50% of the outstanding voting securities of the Fund (or
of the total beneficial interests of the Portfolio). Whenever the Fund is
requested to vote on a fundamental policy of the Portfolio, the Fund will hold a
meeting of its shareholders and will cast its vote as instructed by them. Fund
shareholders who do not vote will not affect the Fund's votes at the Portfolio
meeting. The Fund's votes representing Fund shareholders not voting will be
voted by the Directors of Security Income Fund in the same proportion as the
Fund shareholders who do, in fact, vote.
None of the fundamental and non-fundamental policies described below shall
prevent the Fund from investing all of its assets in an open-end investment
company with substantially the same investment objective. Because the Fund and
the Portfolio have the same fundamental policies and the Fund invests all of its
Assets in the Portfolio, the following discussion (though speaking only of the
Portfolio) applies to the Fund as well.
FUNDAMENTAL RESTRICTIONS. As a matter of fundamental policy, the Portfolio may
not:
1. Borrow money (including through reverse repurchase or dollar roll
transactions) in excess of 5% of the Portfolio's total assets (taken at
cost), except that the Portfolio may borrow for temporary or emergency
purposes up to 1/3 of its net assets. The Portfolio may pledge, mortgage or
hypothecate not more than 1/3 of such assets to secure such borrowings
provided that collateral arrangements with respect to options and futures,
including deposits of initial and variation margin, are not considered a
pledge of assets for purposes of this restriction and except that assets may
be pledged to secure letters of credit solely for the purpose of
participating in a captive insurance company sponsored by the Investment
Company Institute;
2. Underwrite securities issued by other persons except insofar as the
Portfolio may be deemed an underwriter under the 1933 Act in selling a
portfolio security;
3. Make loans to other persons except (a) through the lending of the
Portfolio's portfolio securities and provided that any such loans not exceed
30% of its total assets (taken at market value); (b) through the use of
repurchase agreements or the purchase of short-term obligations; or (c) by
purchasing a portion of an issue of debt securities of types distributed
publicly or privately;
4. Purchase or sell real estate (including limited partnership interests but
excluding securities secured by real estate or interests therein), interests
in oil, gas or mineral leases, commodities or commodity contracts (except
futures and option contracts) in the ordinary course of business (except
that the Portfolio may hold and sell, for its portfolio, real estate
acquired as a result of the Portfolio's ownership of securities);
5. Concentrate its investments in any particular industry (excluding U.S.
government securities), but if it is deemed appropriate for the achievement
of the Portfolio's investment objective, up to 25% of its total assets may
be invested in any one industry;
6. Issue any senior security (as that term is defined in the 1940 Act) if such
issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements
with respect to options and futures contracts, including deposits of initial
and variation margin, are not considered to be the issuance of a senior
security for purposes of this restriction;
7. Purchase, with respect to 75% of the Portfolio's total assets, securities of
any issuer if such purchase at the time thereof would cause the Portfolio to
hold more than 10% of any class of securities of such issuer, for which
purposes all indebtedness of an issuer shall be deemed a single class and
all preferred stock of an issuer shall be deemed a single class, except that
options or futures contracts shall not be subject to this restriction; and
8. Invest, with respect to 75% of the Portfolio's total assets, more than 5% of
its total assets in the securities (excluding U.S. government securities) of
any one issuer.
NON-FUNDAMENTAL RESTRICTIONS. In order to comply with certain statutes and
policies and for other reasons, the Portfolio will not, as a matter of operating
policy (these restrictions may be changed without shareholder approval):
(i) purchase any security or evidence of interest therein on margin, except
that short-term credit necessary for the clearance of purchases and sales
of securities may be obtained and deposits of initial and variation
margin may be made in connection with the purchase, ownership, holding or
sale of futures contracts;
(ii) sell securities it does not own (short sales). (This restriction does not
preclude short sales "against the box" (that is, sales of securities (a)
the Portfolio contemporaneously owns or (b) where the Portfolio has the
right to obtain securities equivalent in kind and amount to those sold).
The Portfolio has no current intention to engage in short selling);
(iii) purchase securities issued by any investment company except to the extent
permitted by the 1940 Act (including any exemptions or exclusions
therefrom), except that this limitation does not apply to securities
received or acquired as dividends, through offers of exchange, or as a
result of reorganization, consolidation or merger; and
(iv) invest more than 15% of the Portfolio's net assets (taken at the greater
of cost or market value) in securities that are illiquid or not readily
marketable (excluding Rule 144A securities deemed by the Portfolio Board
to be liquid).
An investment restriction will not be considered violated if that restriction is
complied with at the time the relevant action is taken, notwithstanding a later
change in the market value of an investment, in net or total assets or in the
change of securities rating of the investment or any other later change.
The Portfolio will comply with the permitted investments and investment
limitations in the securities laws and regulations of all states in which the
Fund, or any other registered investment company investing in the Portfolio, is
registered.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS -- The Adviser is responsible
for decisions to buy and sell securities, futures contracts and options thereon
for the Portfolio, the selection of brokers, dealers and futures commission
merchants to effect transactions and the negotiation of brokerage commissions,
if any. Broker-dealers may receive brokerage commissions on portfolio
transactions, including options, futures contracts and options on futures
transactions and the purchase and sale of underlying securities upon the
exercise of options. Orders may be directed to any broker-dealer or futures
commission merchant, including, to the extent and in the manner permitted by
applicable law, the Adviser or its subsidiaries or affiliates. Purchases and
sales of certain portfolio securities on behalf of the Portfolio are frequently
placed by the Adviser with the issuer or a primary or secondary market-maker for
these securities on a net basis, without any brokerage commission being paid by
the Portfolio. Trading does, however, involve transaction costs. Transactions
with dealers serving as market-makers reflect the spread between the bid and
asked prices. Transaction costs may also include fees paid to third parties for
information as to potential purchasers or sellers of securities. Purchases of
underwritten issues may be made that will include an underwriting fee paid to
the underwriter.
The Adviser seeks to evaluate the overall reasonableness of the brokerage
commissions paid (to the extent applicable) in placing orders for the purchase
and sale of securities for the Portfolio taking into account such factors as
price, commission (negotiable in the case of national securities exchange
transactions), if any, size of order, difficulty of execution and skill required
of the executing broker-dealer through familiarity with commissions charged on
comparable transactions, as well as by comparing commissions paid by the
Portfolio to reported commissions paid by others. The Adviser reviews on a
routine basis commission rates, execution and settlement services performed,
making internal and external comparisons.
The Adviser is authorized, consistent with Section 28(e) of the Securities
Exchange Act of 1934, as amended, when placing portfolio transactions for the
Portfolio with a broker to pay a brokerage commission (to the extent applicable)
in excess of that which another broker might have charged for effecting the same
transaction on account of the receipt of research, market or statistical
information. The term "research, market or statistical information" includes (a)
advice as to (i) the value of securities, (ii) the advisability of investing in,
purchasing or selling securities, and (iii) the availability of securities or
purchasers or sellers of securities and (b) furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. Higher commissions may be
paid to firms that provide research services to the extent permitted by law. The
Adviser may use this research information in managing the Portfolio's assets, as
well as the assets of other clients.
Consistent with the policy stated above, the Conduct Rules of the National
Association of Securities Dealers, Inc. and such other policies as the Portfolio
Trust Board may determine, the Adviser may consider sales of shares of the Fund
and of other investment company clients of the Adviser as a factor in the
selection of broker-dealers to execute portfolio transactions. The Adviser will
make such allocations if commissions are comparable to those charged by
nonaffiliated, qualified broker-dealers for similar services.
Except for implementing the policies stated above, there is no intention to
place portfolio transactions with particular brokers or dealers or groups
thereof. In effecting transactions in over-the-counter securities, orders are
placed with the principal market-makers for the security being traded unless,
after exercising care, it appears that more favorable results are available
otherwise.
Although certain research, market or statistical information from brokers and
dealers can be useful to the Portfolio and to the Adviser, it is the opinion of
the Portfolio's management that such information is only supplementary to the
Adviser's own research effort, since the information must still be analyzed,
weighed and reviewed by the Adviser's staff. Such information may be useful to
the Adviser in providing services to clients other than the Portfolio, and not
all such information is used by the Adviser in connection with the Portfolio.
Conversely, such information provided to the Adviser by brokers and dealers
through whom other clients of the Adviser effect securities transactions may be
useful to the Adviser in providing services to the Portfolio.
In certain instances there may be securities that are suitable for the
Portfolio, as well as for one or more of the Adviser's other clients. Investment
decisions for the Portfolio and for the Adviser's other clients are made with a
view to achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated between
(among) clients in a manner believed to be equitable to each. It is recognized
that in some cases this system could have a detrimental effect on the price or
volume of the security as far as the Portfolio is concerned. However, it is
believed that the ability of the Portfolio to participate in volume transactions
will produce better executions for the Portfolio.
PERFORMANCE INFORMATION
STANDARD PERFORMANCE INFORMATION -- From time to time, quotations of the Fund's
performance may be included in advertisements, sales literature or shareholder
reports. These performance figures are calculated in the following manner:
YIELD. Yield refers to the income generated by an investment over a given period
of time, expressed as an annual percentage rate. Yields are calculated according
to a standard that is required for all stock and bond mutual funds. Because this
differs from other accounting methods, the quoted yield may not equal the income
actually paid to shareholders.
Per SEC regulations, the yield of the Fund (the "SEC yield") shall be calculated
on any determination date as follows:
2[((a - b)/c * d) + 1)^6 - 1] where
a = current income measured over a 30-day period.
b = Expenses accrued during the same 30-day period.
c = Average daily number of shares outstanding during the same 30-day period.
d = Maximum offering price per share on the last day of the period.
The "annual effective yield" of the fund is intended to represent one day's
investment income expressed as an annualized yield and compounded annually. It
shall be expressed as a percentage and calculated on each business day as
follows based on the dividend declared for the previous day.
[(1 + previous day's dividend factor)^365 - 1]
----------------------------------------------
NAV per share
Example: If on March 1, the Fund's dividend factor is 0.00174163 and the Fund's
NAV per share is $10, then the Fund's annual effective yield for March 2 equals
6.56%.
The annual effective yield of the Portfolio is used in determining when the
interest rate trigger is active.
Performance information or advertisements may include comparisons of the Fund's
investment results to various unmanaged indices or results of other mutual funds
or investment or savings vehicles. From time to time, the Fund's ranking may be
quoted from various sources, such as Lipper Analytical Services, Inc., Value
Line, Inc. and Morningstar, Inc.
Unlike some bank deposits or other investments that pay a fixed yield for a
stated period of time, the total return of the Shares will vary depending upon
interest rates, the current market value of the securities held by the Portfolio
and the Wrapper Agreements and changes in the expenses of the Shares and the
Portfolio. In addition, during certain periods for which total return may be
provided, the Fund's administrator, Security Management Company, LLC may have
voluntarily agreed to waive portions of its fees, or to reimburse certain
operating expenses of the Fund , on a month-to-month basis. Bankers Trust may
have agreed to do the same thing with respect to the Portfolio. Such waivers
will have the effect of increasing the Fund's net income (and therefore its
yield and total return) during the period such waivers are in effect.
TOTAL RETURN. Total return is the change in value of an investment in the shares
over a given period, assuming reinvestment of any dividends and capital gain
distributions. A cumulative total return reflects actual performance over a
stated period of time. An average annual total return is a hypothetical rate of
return that, if achieved annually, would have produced the same cumulative total
return if performance had been constant over the entire period. Average annual
total return calculations smooth out variations in performance; they are not the
same as actual year-by-year results. Average annual total returns covering
periods of less than one year assume that performance will remain constant for
the rest of the year.
The Fund's average annual total return is calculated for certain periods by
determining the average annual compounded rates of return over those periods
that would cause an investment of $1,000 (made at the maximum public offering
price with all distributions reinvested) to reach the value of that investment
at the end of the periods. The Fund may also calculate total return figures that
represent aggregate performance over a period or year-by-year performance.
PERFORMANCE RESULTS. Any performance information provided for the Fund should
not be considered as representative of its performance in the future, because
the NAV and public offering price of Shares will vary based not only on the
type, quality and maturities of the securities held by the Portfolio but also on
changes in the current value of such securities and on changes in the expenses
of the Fund and the Portfolio. Total return reflects the performance of both
principal and income.
Unless noted otherwise, the Fund's total return and average annual total return
will reflect deduction of the maximum initial sales load in the case of Class A
shares or the applicable deferred sales charge in the case of Class B and Class
C shares. From time to time the Fund may include performance information in
advertisements and sales literature without deduction of the sales charge,
which, if deducted, would reduce the performance data quoted.
COMPARISON OF FUND PERFORMANCE -- Comparison of the quoted non-standardized
performance of various investments is valid only if performance is calculated in
the same manner. Since there are different methods of calculating performance,
investors should consider the effect of the methods used to calculate
performance when comparing performance of the Fund with performance quoted with
respect to other investment companies or types of investments.
In connection with communicating its performance to current or prospective
shareholders, the Fund also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to unmanaged
indices that may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs. Evaluations of the Fund's
performance made by independent sources may also be used in advertisements
concerning the Fund. Sources for the Fund's performance information could
include the following: ASIAN WALL STREET JOURNAL, BARRON'S, BUSINESS WEEK,
CHANGING Times, THE KIPLINGER MAGAZINE, CONSUMER DIGEST, FINANCIAL TIMES,
FINANCIAL WORLD, FORBES, FORTUNE, GLOBAL INVESTOR, INVESTOR'S DAILY, LIPPER
ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE ANALYSIS, MONEY, MORNINGSTAR
INC., NEW YORK TIMES, PERSONAL INVESTING NEWS, PERSONAL INVESTOR, SUCCESS, U.S.
NEWS AND WORLD REPORT, VALUELINE, WALL STREET JOURNAL, WEISENBERGER INVESTMENT
COMPANIES SERVICES, WORKING WOMEN and WORTH.
ECONOMIC AND MARKET INFORMATION -- Advertising and sales literature of the Fund
may include discussions of economic, financial and political developments and
their effect on the securities market. Such discussions may take the form of
commentary on these developments by Fund portfolio managers and their views and
analysis on how such developments could affect the Fund. In addition,
advertising and sales literature may quote statistics and give general
information about the mutual fund industry, including the growth of the
industry, from sources such as the Investment Company Institute ("ICI"). For
example, according to the ICI, thirty-seven percent of American households are
pursuing their financial goals through mutual funds. These investors, as well as
businesses and institutions, have entrusted over $3.5 trillion to the more than
6,000 funds available.
VALUATION OF ASSETS; REDEMPTIONS IN KIND
Debt securities (other than short-term debt obligations maturing in 60 days or
less), including listed securities and securities for which price quotations are
available, will normally be valued on the basis of market valuations furnished
by a pricing service. Such market valuations may represent the last quoted price
on the securities' major trading exchange or quotes received from dealers or
market makers in the relevant securities or may be determined through the use of
matrix pricing. In matrix pricing, pricing services may use various pricing
models, involving comparable securities, historic relative price movements,
economic factors and dealer quotations. Over-the-counter securities will
normally be valued at the bid price. Short-term debt obligations and money
market securities maturing in 60 days or less are valued at amortized cost.
Securities for which market quotations are not readily available are valued by
Bankers Trust pursuant to procedures adopted by the Portfolio's Trust Board.
The NAV per Share is calculated once on each Valuation Day as of the Valuation
Time, which is currently 3:00 p.m., Central time, or if the NYSE closes early,
at the time of such early closing. The NAV per Share is computed by dividing the
value of the Fund's assets (I.E., the value of its investment in the Portfolio
and other assets, if any), less all liabilities, by the total number of its
Shares outstanding. The Portfolio's securities and other assets are valued
primarily on the basis of market quotations or, if quotations are not readily
available, by a method that the Portfolio Trust Board believes accurately
reflects fair value.
Pursuant to procedures adopted by the Portfolio Trust Board, the Wrapper Value
generally will be equal to the difference between the Book Value and the market
value (plus accrued interest on the underlying securities) of the applicable
Covered Assets. If the market value (plus accrued interest on the underlying
securities) of the Covered Assets is greater than their Book Value, the Wrapper
Value will be reflected as a liability of the Portfolio in the amount of the
difference, I.E., a negative value, reflecting the potential liability of the
Portfolio to the Wrapper Provider. If the market value (plus accrued interest on
the underlying securities) of the Covered Assets is less than their Book Value,
the Wrapper Value will be reflected as an asset of the Portfolio in the amount
of the difference, I.E., a positive value, reflecting the potential liability of
the Wrapper Provider to the Portfolio. In performing its fair value
determination, the Portfolio Trust Board expects to consider the
creditworthiness and ability of a Wrapper Provider to pay amounts due under the
Wrapper Agreement. If the Portfolio Trust Board determine that a Wrapper
Provider is unable to make such payments, that Board may assign a fair value to
the Wrapper Agreement that is less than the difference between the Book Value
and the market value (plus accrued interest on the underlying securities) of the
applicable Covered Assets and the Portfolio might be unable to maintain NAV
stability.
The problems inherent in making a good faith determination of value are
recognized in the codification effected by SEC Financial Reporting Release No. 1
(formerly Accounting Series Release No. 113) ("FRR 1"), which concludes that
there is "no automatic formula" for calculating the value of restricted
securities. It recommends that the best method simply is to consider all
relevant factors before making any calculation. According to FRR 1, such factors
would include consideration of the--
type of security involved, financial statements, cost at date of
purchase, size of holding, discount from market value of unrestricted
securities of the same class at the time of purchase, special reports
prepared by analysts, information as to any transactions or offers
with respect to the security, existence of merger proposals or tender
offers affecting the security, price and extent of public trading in
similar securities of the issuer or comparable companies, and other
relevant matters.
The Adviser will value securities purchased by the Portfolio that are restricted
as to resale or for which current market quotations are not readily available,
including Wrapper Agreements, based upon all relevant factors as outlined in FRR
1.
The Fund and the Portfolio each reserves the right, if conditions exist that
make cash payments undesirable, or for other reasons, to honor any request for
redemption or withdrawal, respectively, by making payment wholly or partly in
Portfolio Securities, as the same may be chosen by the Adviser in its sole
discretion (a "redemption in kind"). Such securities shall not include Wrapper
Agreements, and shall be valued as they are for purposes of computing the Fund's
or the Portfolio's NAV, as the case may be. If payment is made to a Fund
shareholder in securities, the shareholder may incur transaction expenses in
converting those securities into cash.
The Portfolio has agreed to make a redemption in kind to the Fund whenever the
Fund wishes to make a redemption in kind to a shareholder thereof, and therefore
Fund shareholders that receive redemptions in kind will receive Portfolio
Securities of the Portfolio and in no case will they receive a security issued
by the Portfolio. The Portfolio has advised Security Income Fund that the
Portfolio will not redeem in kind except in circumstances in which the Fund is
permitted to redeem in kind or unless requested by the Fund.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each business day the Portfolio determines its
NAV. At the close of business on each such day, the value of each investor's
beneficial interest in the Portfolio will be determined by multiplying the NAV
of the Portfolio by the percentage effective for that day that represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals that are to be effected as of the close of business on
that day will then be effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio will then be recomputed as the percentage
equal to a fraction (a) the numerator of which is the value of the investor's
investment in the Portfolio as of the close of business on that day plus or
minus, as the case may be, the amount of net additions to or withdrawals from
the investor's investment in the Portfolio effected as of the close of business
on that day, and (b) the denominator of which is the aggregate NAV of the
Portfolio as of the close of business on that day plus or minus, as the case may
be, the amount of net additions to or withdrawals from the aggregate investments
in the Portfolio by all investors therein. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as the close of business on the following business day.
The Fund and the Portfolio each reserves the right to redeem all of its shares,
if their respective Boards vote to liquidate the Fund and/or Portfolio as
applicable.
OVERVIEW OF TSA ACCOUNTS -- In general, Section 403(b)(7) of the Internal
Revenue Code of 1986, as amended (the "Code") permits public school employees
and employees of certain types of charitable, educational and scientific
organizations specified in Section 501(c)(3) of the Code to purchase shares of a
mutual fund through a custodial account, and, subject to certain limitations, to
exclude the amount of purchase payments from gross income for tax purposes.
Shares of the Fund may be purchased in connection with a TSA custodial account.
TSA Accounts may provide significant tax savings to individuals, but are
governed by a complex set of tax rules under the Code and the regulations
promulgated by the Department of the Treasury thereunder. If you already have a
Security Funds TSA custodial account, you may be able to invest in the Fund. If
you do not presently have a Security Funds TSA custodial account and you meet
the requirements of the applicable tax rules, you may be able to create a
Security Funds TSA custodial account (or a TSA custodial account from another
provider that makes shares of the Fund available to its customers) and invest in
shares of the Fund through that TSA. Included in Appendix B is a general
discussion of some TSA features. HOWEVER, TSA OWNERS AND OTHER PROSPECTIVE
INVESTORS SHOULD CONSULT WITH THEIR PROFESSIONAL TAX AND FINANCIAL ADVISERS
BEFORE ESTABLISHING A TSA OR OTHERWISE INVESTING IN SHARES.
OVERVIEW OF THE TYPES OF INDIVIDUAL RETIREMENT ACCOUNTS
In general, an IRA is a trust or custodial account established in the United
States for the exclusive benefit of an individual or his or her
beneficiaries.(Keogh plans are established by self-employed persons, including
partnerships, and also cover eligible non-owner employees.) Most IRAs are
designed principally as retirement savings vehicles. Education IRAs are designed
to provide a tax-favored means of saving for a child's educational expenses.
IRAs may provide significant tax savings to individuals, but are governed by a
complex set of tax rules set out under the Internal Revenue Code of 1986, as
amended (the "Code"),and the regulations promulgated by the Department of the
Treasury thereunder. If you already have an IRA, your IRA may be able to invest
in the Fund. If you do not presently have an IRA and you meet the requirements
of the applicable tax rules, you may be able to create an IRA and invest in
Shares of the Fund through that IRA. Included below is a general discussion of
some IRA features. However, IRA Owners and other prospective investors should
consult with their professional tax and financial advisers before establishing
an IRA or investing in Shares.
TYPES OF INDIVIDUAL RETIREMENT ACCOUNTS --
TRADITIONAL IRAS. If you are under age 70 1/2, and you (or if you file a joint
return, your spouse) have taxable compensation, you may set up a Traditional IRA
and make annual IRA contributions of up to $2,000, or 100% of your taxable
compensation, whichever is less. Taxable income includes wages, salaries, and
other amounts reported in box 1 of Form W-2, as well as earnings from
self-employment. If you file a joint return and your taxable compensation is
less than that of your spouse, you may make annual contributions to a
Traditional IRA equal to the lesser of $2,000, or the sum of (i) your taxable
compensation and (ii) the taxable compensation of your spouse, reduced by the
amount of his or her IRA deduction for the year. Amounts contributed to a
Traditional IRA generally are deductible for federal income tax purposes.
However, if you were covered by an employer retirement plan, the amount of your
contribution to a Traditional IRA that you may deduct will be reduced or
eliminated if your modified adjusted gross income exceeds certain amounts
(currently $50,000 for a married couple filing a joint return and $30,000 for a
single taxpayer). If your spouse is covered by an employer retirement plan but
you are not, you may be able to deduct your contributions to a Traditional IRA;
however, the deduction will be reduced or eliminated if your adjusted gross
income on a joint return exceeds $150,000. Even if your ability to deduct
contributions to a Traditional IRA is limited, you may still make contributions
up to the limits described above. In general, you may also make a contribution
to a Traditional IRA by "rolling over" all or a portion of a distribution you
receive from a qualified retirement plan (such as a pension or profit-sharing
plan or a 401(k) plan) or another Traditional IRA. Amounts distributed from a
Traditional IRA and eligible rollover distributions from qualified retirement
plans will not be includible in income if they are contributed to a Traditional
IRA in a rollover transaction which meets certain conditions; however, a federal
withholding tax may be imposed on such distributions. Consult your professional
tax adviser for complete details on Traditional IRAs.
ROTH IRAS. Regardless of your age, you may be able to establish a Roth IRA.
Contributions to Roth IRAs are not deductible for federal income tax purposes.
However, if all of the applicable requirements are met, earnings in the account
accumulate tax free, and all withdrawals are also tax free. Generally, you may
contribute up to $2,000 annually to a Roth IRA; however, your ability to
contribute to a Roth IRA will be reduced or eliminated if your adjusted gross
income exceeds certain amounts (currently $150,000 for a married couple filing a
joint return and$95,000 for a single taxpayer). In addition, if you make
contributions to both a Traditional IRA and a Roth IRA, your contribution limit
for the Roth IRA will be reduced by the amount of the contribution you make to
the Traditional IRA. If certain requirements are met, and (i) your modified
adjusted gross income is not more than $100,00, and (ii) you are not married and
filing a separate tax return, you can roll over amounts from a Traditional IRA
to a Roth IRA. The amount rolled over generally will be included in your taxable
income; however, if you roll over from a Traditional IRA to a Roth IRA before
1999, you may elect to have the taxable amount included in your income ratably
over a four-year period. You may also roll over amounts from one Roth IRA to
another Roth IRA. Consult your professional tax adviser for complete details on
Roth IRAs. SEP-IRAs are IRAs that are created in connection with a simplified
employee pension ("SEP") established and maintained by a self-employed
individual, a partnership or a corporation. SEP-IRAs must be created for each
qualifying employee of the employer that establishes a SEP. In general, a
qualifying employee is an employee who has: (i) reached the age of 21; and (ii)
worked for the employer at least three out of the past five years. Each SEP-IRA
is owned by the employee for whom it is created; assets of a SEP are not pooled
together. SEPs must provide for discretionary employer contributions. In other
words, employers are not required to make contributions to SEP-IRAs each year,
but if they do make contributions for any year, the contributions must be based
on a specific allocation formula set forth in the SEP, and must not discriminate
in favor of highly compensated employees. Contributions to SEP-IRAs generally
are deductible by the employer, subject to certain limitations. Contributions to
SEP-IRAs of self-employed individuals are subject to certain additional
limitations. SEP-IRAs generally are subject to the same distribution and
rollover rules that apply to Traditional IRAs.
SIMPLE IRAS. In general, a SIMPLE plan may be established by any employer,
including a sole proprietorship, partnership or corporation, with 100 or fewer
employees, and must be the only retirement plan maintained by the employer.
Under a SIMPLE plan using SIMPLE IRAs, a SIMPLE IRA is created for each eligible
employee which, in general, includes all employees who received at least $5,000
in compensation during any two years preceding the year for which eligibility is
being determined (i.e., the current year) and is reasonably expected to earn at
least $5,000 during the current year. As with SEP-IRAs, SIMPLE IRAs are
individual accounts owned by each eligible employee. Under a SIMPLE IRA plan,
eligible employees can elect to contribute a portion of their salary to their
SIMPLE IRA. (These contributions are referred to as "elective deferrals.")
Elective deferrals are based on a stated percentage of the employee's
compensation, and are limited to $6,000 per year (indexed for inflation).
Elective deferrals are included in employees' gross income only for Social
Security and Medicare tax purposes (i.e., they are not included in wages for
federal income tax purposes).In addition to elective deferrals by employees,
under a SIMPLE IRA plan, employers must make either: (i) matching contributions
equal to each employee' selective deferral, up to a maximum of 3% of the
employee's compensation, or (ii) nonelective contributions of 2% of compensation
for each eligible employee(subject to certain limits). Employer contributions to
SIMPLE IRAs are excluded from employees' gross income and are deductible by the
employer. SIMPLE IRAs generally are subject to the same distribution and
rollover rules that apply to Traditional IRAs. However, a rollover from a SIMPLE
IRA to a Traditional IRA can be made tax free only after the employee has
participated in the SIMPLE IRA plan for at least two years.
KEOGH PLANS. Keogh plans are qualified retirement plans established by sole
proprietors or partnerships. As with other qualified retirement plans, in
general, contributions to Keogh plans are deductible, and neither such
contributions nor the investment earnings thereon are subject to tax until they
are distributed by the plan. A number of different types of plans may qualify as
Keogh plans. In certain circumstances, Keogh plans may provide greater tax
advantages than other types of retirement plans. However, Keogh plans must
satisfy a number of complex rules, including minimum participation requirements,
under which certain employees must be covered by the plan, and in some cases,
minimum funding requirements. Professional assistance generally is required to
establish and maintain a Keogh plan.
EDUCATION IRAS. An education IRA is a trust or custodial account created for the
purpose of paying the qualified higher education expenses of a designated
beneficiary, i.e., a child under the age of 18 at the time of the contributions.
In general, qualified higher education expenses include expenses for tuition,
fees, books, supplies and equipment required for the designated beneficiary of
the Education IRA to attend an eligible educational institution, which includes
essentially all accredited post-secondary educational institutions. Any
individual may make contributions to an education IRA so long as his or her
modified adjusted gross income is less than $110,000 ($160,000 for married
taxpayers filing jointly).The maximum total contributions that may be made to
education IRAs for each child is $500 per year. Generally, amounts may be rolled
over from an Education IRA to another education IRA established for the same
beneficiary or for certain members of the beneficiary's family. Beneficiaries
may make tax free withdrawals from education IRAs to pay qualified higher
education expenses. Other withdrawals generally will be subject to tax. Consult
your professional tax adviser for complete details on Education IRAs.
OWNERSHIP OF SHARES THROUGH PLANS
Fund Shares owned by Plan Participants through Plans are held either directly by
the respective Plan, or beneficially through vehicles such as bank collective
funds or insurance company separate accounts consisting solely of such Plans
(collectively, "Plan Pools"), which will in turn offer the Fund as an investment
option to their participants. Investments in the Fund may by themselves
represent an investment option for a Plan or may be combined with other
investments as part of a pooled investment option for the Plan. In the latter
case, the Fund may require Plans to provide information regarding the withdrawal
order and other characteristics of any pooled investment option in which the
Shares are included prior to a Plan's initial investment in the Fund.
Thereafter, the Fund will require the Plan to provide information regarding any
changes to the withdrawal order and other characteristics of the pooled
investment option before such changes are implemented. The Fund in its sole
discretion may decline to sell Shares to Plans if the governing withdrawal order
or other characteristics of any pooled investment option in which the Shares are
included is determined at any time to be disadvantageous to the Fund. Plan
Participants should contact their Plan administrator or the organization that
provides recordkeeping services if they have questions concerning their account.
Plan administrators and fiduciaries should call 1-800-888-2461 for information
regarding a Plan's account with the Fund.
QUALIFIED REDEMPTIONS
At any time, a redemption of Fund Shares can be effected without assessment of
the Redemption Fee as described in the Prospectus, if such redemption is a
"Qualified Plan Redemption," a "Qualified TSA Redemption" or a "Qualified IRA
Redemption." "Qualified Plan Redemptions" are redemptions resulting from a Plan
Participant's death, disability, retirement or termination of employment or to
make loans to, or "in service" withdrawals by, a Plan Participant.
A "Qualified TSA Redemption" is a redemption made by an owner of a TSA account
to effect a distribution from his or her account that is not subject to the 10%
penalty tax imposed by section 72(t), other than a rollover from a TSA account
to an IRA or other TSA account and, direct trustee-to-trustee transfers, unless
the owner continues the investment of the transferred amount in the Fund. In
general, section 72(t) of the Code imposes a 10% penalty tax on any distribution
received by a taxpayer who owns a TSA account prior to the date on which the
taxpayer reaches age 59 1/2, unless the distribution meets the requirements of a
specific exception to the penalty tax. In general, rollovers from a TSA account
to an IRA, from one TSA account to another and direct trustee-to-trustee
transfers from one TSA account to another TSA account are not subject to tax.
TSA account owners requesting a redemption of Fund Shares will be required to
provide a written statement as to whether the proceeds of the redemption will be
subject to a penalty tax and, if not, to identify the specific exception upon
which the owner intends to rely. The information provided by the owner will be
reflected on the Form 1099-R issued to the owner and filed with the Internal
Revenue Service in connection with the redemption as well as forming the basis
for redemption as a Qualified TSA Redemption. The Fund may require additional
evidence, such as the opinion of a certified public accountant or tax attorney,
that any particular redemption will not be subject to any penalty tax. TSA
ACCOUNT OWNERS SHOULD CONSULT THEIR TAX ADVISERS REGARDING THE TAX CONSEQUENCES
OF ANY REDEMPTION.
Some of the exceptions to the 10% penalty taxes are described below. This
description is intended to provide only a brief summary of the principal
exceptions to the additional tax imposed on early withdrawals under the current
provisions of the Code, which may change from time to time. The Fund intends to
conform the definition of Qualified TSA Redemptions to changes in applicable tax
laws; however, the Fund reserves the right to continue to define Qualified TSA
Redemptions by reference to Code provisions now in effect or otherwise to define
such phrase independently of future Code provisions.
In general, the early withdrawal penalty tax imposed by the Code will not apply
to the following types of distributions from a TSA account:
1. Distributions made on or after the date on which the TSA account owner
attains age 59 1/2;
2. Distributions made to a beneficiary (or to the estate of the TSA account
owner) on or after the death of the TSA account owner;
3. Distributions attributable to the TSA account owner being disabled;
4. Distributions made to the TSA account owner after separation from service
after age 55;
5. Distributions to an alternate payee (e.g. a former spouse) pursuant to a
qualified domestic relations order;
6. Distributions that are part of a series of substantially equal periodic
payments made at least annually for the life (or life expectancy) of the TSA
account owner, or the joint lives (or life expectancies) of the TSA account
owner and his or her designated beneficiary, after the TSA account owner
separates from service;
7. Distributions made to a TSA account owner for medical care, but not in
excess of the amount allowable as a medical expense deduction by the TSA
account owner on his or her tax return for the year;
8. Distributions timely made to correct an excess contribution; and
9. Distributions timely made to reduce an excess elective deferral.
A "Qualified IRA Redemption" is a redemption made by an IRA Owner to effect a
distribution from his or her IRA account that is not subject to the 10% penalty
tax imposed by section 72(t) or 530(d), as applicable, other than IRA rollovers,
direct trustee-to-trustee transfers and conversions of Traditional IRAs to Roth
IRAs, unless the IRA Owner continues the investment of the transferred amount in
the Fund. In general, section 72(t) of the Code imposes a 10% penalty tax on any
distribution received by a taxpayer from a Traditional IRA, SEP-IRA or SIMPLE
IRA prior to the date on which the taxpayer reaches age 59 1/2, unless the
distribution meets the requirements of a specific exception to the penalty tax.
Similar penalties apply to early withdrawals from Roth IRAs and Keogh Plans.
Section 530(d) as currently written, imposes a separate 10% penalty tax on
distributions from an education IRA not used to pay qualified higher education
expenses. In general, rollovers from one IRA to another and direct
trustee-to-trustee transfers from an IRA to another IRA (or in some cases to
other types of qualified plans) are not subject to tax. In addition, conversions
of Traditional IRAs to Roth IRAs are subject to income tax but are not subject
to the early withdrawal penalty tax. IRA Owners requesting a redemption of Fund
Shares will be required to provide a written statement as to whether the
proceeds of the redemption will be subject to a penalty tax and, if not, to
identify the specific exception upon which the IRA Owner intends to rely. The
information provided by the IRA Owner will be reflected on the Form 1099-R
issued to the IRA Owner and filed with the Internal Revenue Service in
connection with the redemption as well as forming the basis for redemption as a
Qualified IRA Redemption. The Fund may require additional evidence, such as the
opinion of a certified public accountant or tax attorney, that any particular
redemption will not be subject to any penalty tax. IRA OWNERS SHOULD CONSULT
THEIR TAX ADVISERS REGARDING THE TAX CONSEQUENCES OF ANY REDEMPTION.
Some of the exceptions to the 10% penalty taxes are described below. This
description is intended to provide only a brief summary of the principal
exceptions to the additional tax imposed on early withdrawals under the current
provisions of the Code, which may change from time to time. The Fund intends to
conform the definition of Qualified IRA Redemptions to changes in applicable tax
laws; however, the Fund reserves the right to continue to define Qualified IRA
Redemptions by reference to Code provisions now in effect or otherwise to define
such phrase independently of future Code provisions.
TRADITIONAL IRAS, SEP-IRAS AND SIMPLE IRAS -- In general, the 10% penalty tax
imposed by section 72(t) of the Code will not apply to the following types of
distributions from a Traditional IRA, SEP-IRA or SIMPLE IRA:
1. Distributions made on or after the date on which the IRA Owner attains age
59 1/2;
2. Distributions made to a beneficiary (or to the estate of the IRA Owner) on
or after the death of the IRA Owner;
3. Distributions attributable to the IRA Owner's being disabled within the
meaning of section 72(m)(7) of the Code;
4. Distributions made to the IRA Owner to the extent such distributions do not
exceed the amount of unreimbursed medical expenses allowed as a deduction
under section 213 of the Code;
5. Distributions to unemployed individuals to the extent such distributions do
not exceed the amount paid for medical insurance as described in section
213(d)(1)(D) of the Code for the IRA Owner, and his or her spouse and
dependents;
6. Distributions to an IRA Owner to the extent such distributions do not exceed
the qualified higher education expenses, as defined in section 72(t)(7), for
the IRA Owner;
7. Distributions to an IRA Owner that are used to acquire a first home, and
that meet the definition of "qualified first-time homebuyer distributions"
under section 72(t)(8) of the Code; and
8. Distributions that are part of a series of substantially equal periodic
payments made at least annually for the life (or life expectancy) of the IRA
Owner, or the joint lives (or life expectancies) of the IRA Owner and his or
her designated beneficiary.
ROTH IRAS -- With respect to a Roth IRA, all "qualified distributions" are
excluded from gross income and, therefore, from the 10% penalty tax imposed by
section 72(t). In general, qualified distributions from a Roth IRA include:
1. Distributions made on or after the date on which the IRA Owner attains age
59 1/2;
2. Distributions made to a beneficiary (or to the estate of the IRA Owner) on
or after the death of the IRA Owner;
3. Distributions attributable to the IRA Owner's being disabled within the
meaning of section 72(m)(7) of the Code; and
4. Distributions to an IRA Owner that are used to acquire a first home, and
that meet the definition of "qualified first-time homebuyer distributions"
under section 72(t)(8) of the Code.
However, a distribution will not be a qualified distribution, even if it
otherwise meets the definition, if it is made within the 5-year period beginning
with the first taxable year for which the IRA Owner made a contribution to the
Roth IRA (or such person's spouse made a contribution to a Roth IRA established
for the IRA Owner). Special rules apply with respect to certain types of
rollovers.
To the extent a distribution from a Roth IRA is not a qualified distribution,
either because it does not meet the definition of a qualified distribution in
the first instance, or because it is made within the five-year period described
in section 408A(d)(2)(B), the portion of the distribution that represents
earnings will be subject to tax in accordance with section 72 of the Code,
including the 10% penalty tax imposed under section 72(t). The same exceptions
to the penalty tax that apply to Traditional IRAs will apply to nonqualified
distributions from Roth IRAs.
In the event of a nonqualified distribution from a Roth IRA, only the earnings
in the account are subject to tax; contributions may be recovered tax-free
(since no deduction is permitted for such contributions). Section 408A(d)
provides that distributions from Roth IRAs are considered to come first from
contributions, to the extent that distributions do not exceed the total amount
of contributions.
KEOGH PLANS -- In general, the 10% penalty tax imposed by section 72(t) of the
Code will not apply to the following types of distributions from a Traditional
IRA:
1. Distributions made on or after the date on which the IRA Owner attains age
59 1/2;
2. Distributions made to a beneficiary (or to the estate of the IRA Owner) on
or after the death of the IRA Owner;
3. Distributions attributable to the IRA Owner's being disabled within the
meaning of section 72(m)(7) of the Code;
4. Distributions made to the IRA Owner after separation from service after age
55;
5. Distributions to unemployed individuals to the extent such distributions do
not exceed the amount of unreimbursed medical expenses allowed as a
deduction under section 213 of the Code;
6. Distributions to an alternate payee (e.g., a former spouse) pursuant to a
qualified domestic relations order; and
7. Distributions that are part of a series of substantially equal periodic
payments made at least annually for the life (or life expectancy) of the IRA
Owner, or the joint lives (or life expectancies) of the IRA Owner and his or
her designated beneficiary.
EDUCATION IRAS -- Distributions from an education IRA are included in income
unless the qualified higher education expenses of the designated beneficiary are
equal to or greater than the amount of such distributions. In addition, certain
special rules are provided that permit certain rollovers or changes in
beneficiaries. Any distribution that is subject to tax under section 530 is also
subject to the 10% penalty tax imposed by section 530(d)(4). Thus, in general,
any distribution from an education IRA that exceeds the amount of qualified
higher education expenses of the designated beneficiary will be subject to the
10% penalty tax.
MANAGEMENT OF THE FUND AND TRUST
The Board of Directors of Security Income Fund and the Board of Trustees of the
Portfolio Trust (collectively, the Directors) are each composed of persons
experienced in financial matters who meet throughout the year to oversee the
activities of the Fund or the Portfolio, respectively. In addition, the
Directors review contractual arrangements with companies that provide services
to the Fund/Portfolio and review the Fund's performance.
The Directors and officers of the Security Income Fund and the Portfolio Trust,
their birth dates, and their principal occupations during the past five years
are set forth below. Their titles may have varied during that period. Unless
otherwise indicated, the address of each officer and director of Security Income
Fund is 700 Harrison Street, Topeka, Kansas 66636-0001 and the address of each
officer of the Portfolio Trust is One South Street, Baltimore, Maryland 21202.
DIRECTORS AND OFFICERS OF SECURITY INCOME FUND --
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, ADDRESS, AND AGE POSITION(S) HELD WITH FUND PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John D. Cleland* President and Director Senior Vice President and Managing Member Representative,
(Birth date: May 1, 1936) Security Management Company, LLC; Senior Vice President,
Security Benefit Group, Inc. and Security Benefit Life Insurance
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Donald A. Chubb, Jr.** Director Business broker, Griffith & Blair Realtors. Prior to 1997,
(Birth date: December 14, 1946) President, Neon Tube Light Company, Inc.
2222 SW 29th Street
Topeka, Kansas 66611
- ------------------------------------------------------------------------------------------------------------------------------------
Penny A. Lumpkin** Director President, Vivian's (Corporate Sales); Vice President, Palmer
(Birth date: August 20, 1939) News Companies, Inc. (Wholesalers, Retailers and Developers) and
3616 Canterbury Town Road Bellaire Shopping Center (Leasing and Shopping Center
Topeka, Kansas 66610 Management); Secretary Treasurer, Palmer New, Inc. (Wholesale
Distributors)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark L. Morris, Jr.** Director Retired; Former General Partner, Mark Morris Associates
(Birth date: February 3, 1934) (Veterinary Research and Education)
5500 SW 7th Street
Topeka, Kansas 66606
- ------------------------------------------------------------------------------------------------------------------------------------
Maynard Oliverius Director President and Chief Executive Officer, Stormont-Vail HealthCare
(Birth date: December 18, 1943)
1500 SW 10th Avenue
Topeka, Kansas 66604
- ------------------------------------------------------------------------------------------------------------------------------------
James R. Schmank* Director and Vice President President and Managing Member Representative, Security
(Birth date: February 21, 1953) Management Company, LLC; Senior Vice President, Security Benefit
Group, Inc. and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Amy J. Lee Secretary Secretary, Security Management Company, LLC; Vice President,
(Birth date: June 5, 1961) Associate General Counsel and Assistant Secretary, Security
Benefit Group, Inc. and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Brenda M. Harwood Treasurer Assistant Vice President and Treasurer, Security Management
(Birth date: November 3, 1963) Company, LLC; Assistant Vice President, Security Benefit Group,
Inc. and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Steven M. Bowser Vice President Vice President and Portfolio Manager, Security Management
(Birth date: February 11, 1960) Company, LLC; Vice President, Security Benefit Group, Inc. and
Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas A. Swank Vice President Senior Vice President and Portfolio Manager, Security Management
(Birth date: January 10, 1960) Company, LLC; Senior Vice President and Chief Investment
Officer, Security Benefit Group, Inc. and Security Benefit Life
Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
David Eshnaur Vice President Assistant Vice President and Portfolio Manager, Security
(Birth date: October 8, 1960) Management Company, LLC. Prior to July 1997, Assistant Vice
President and Assistant Portfolio Manager, Waddell & Reed.
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher D. Swickard Assistant Secretary Assistant Secretary, Security Management Company, LLC; Assistant
(Birth date: October 9, 1965) Vice President and Assistant Counsel, Security Benefit Group,
Inc. and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
*These directors are deemed to be "interested persons" of the Fund.
**These directors serve on the Fund's audit committee, the purpose of which (among other things) is to meet with independent
auditors, to review the work of the auditors, and to oversee the handling by Security Management Company, LLC of the accounting
function for the Fund.
</FN>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The officers of Security Income Fund hold identical offices with each of the
other mutual funds in the Security Funds Family, except Messrs. Eshnaur, Bowser
and Swank who hold the same office only with respect to SBL Fund. The directors
of Security Income Fund also serve as directors of each of the other Security
Funds. Ms. Lee is also Secretary of the Distributor, Messrs. Cleland and Schmank
are directors and Vice Presidents of the Distributor and Ms. Harwood is a
director and Treasurer of the Distributor.
TRUSTEES OF BT INVESTMENT PORTFOLIOS --
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
POSITION(S) HELD WITH
NAME, ADDRESS, AND AGE THE TRUSTS AND PORTFOLIO PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Charles P. Biggar Trustee Trustee of each of the other investment companies in the BT Fund
(Birth date: October 13, 1930) Complex(1); Retired; former Vice President, International
12 Hitching Post Lane Business Machines ("IBM") and President, National Services and
Chappaqua, New York 10514 the Field Engineering Divisions of IBM
- ------------------------------------------------------------------------------------------------------------------------------------
S. Leland Dill Trustee Trustee of each of the other investment companies in the BT Fund
(Birth date: March 28, 1930) Complex; Retired; Director, Coutts (U.S.A.) International;
5070 North Ocean Drive Trustee, Phoenix-Zweig Trust(2) and Phoenix-Euclid Market
Singer Island, Florida 33404 Neutral Fund(2); former Partner, KPMG Peat Marwick; Director,
Vintners International Company Inc.; Director, Coutts Trust
Holdings Ltd., Director, Coutts Group; General Partner, Pemco(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Martin J. Gruber Trustee Trustee of each of the other investment companies in the BT Fund
(Birth date: July 15, 1937) Complex; Nomura Professor of Finance, Leonard N. Stern School of
229 South Irving Street Business, New York University (since 1964); Trustee, TIAA(2);
Ridgewood, New Jersey 07450 Trustee, Japan Equity Fund(2); Trustee, Taiwan Equity Fund(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Hale* Trustee Trustee of each of the other investment companies in the BT Fund
(Birth date: July 17, 1945) Complex; Managing Director, Deutsche Asset Management; Director,
205 Woodbrook Lane Flag Investors Funds(2); Managing Director, Deutsche Banc Alex.
Baltimore, Maryland 21212 Brown Incorporated; Director and President, Investment Company
Capital Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Herring Trustee Trustee of each of the other investment companies in the BT Fund
(Birth date: February 18, 1946) Complex; Jacob Safra Professor of International Banking,
325 South Roberts Road Professor of Finance and Vice Dean, The Wharton School,
Bryn Mawr, Pennsylvania 19010 University of Pennsylvania (since 1972)
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce E. Langton Trustee Trustee of each of the other investment companies in the BT Fund
(Birth date: May 10, 1931) Complex; Retired; Trustee, Allmerica Financial Mutual Funds
99 Jordan Lane (1992-present); Member, Pension and Thrift Plans and Investment
Stamford, Connecticut 06903 Committee, Unilever U.S. Corporation (1989 to present)(3);
Director, TWA Pilots Directed Account Plan and 401(k) Plan (1988
to present)(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Philip Saunders, Jr. Trustee Trustee of each of the other investment companies in the BT Fund
(Birth date: October 11, 1935) Complex; Principal, Philip Saunders Associates (Economic and
445 Glen Road Financial Analysis); former Director, Financial Industry
Weston, Massachusetts 02193 Consulting, Wolf & President, John Hancock Home Mortgage
Corporation; Senior Vice President of Treasury and Financial
Services, John Hancock Mutual Life Insurance Company, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Harry Van Benschoten Trustee Trustee of each of the other investment companies in the BT Fund
(Birth date: February 18, 1928) Complex; Retired; Director, Canada Life Insurance Corporation of
6581 Ridgewood Drive New York
Naples, Florida 34108
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
* "Interested Person" within the meaning of Section 2(a)(19) of the Act. Mr. Hale is a Managing Director of Deutsche Asset
Management, the U.S. asset management unit of Deutsche Bank and its affiliates.
1. The "BT Fund Complex" consists of BT Investment Funds, BT Institutional Funds, BT Pyramid Mutual Funds, BT Advisor Funds, Cash
Management Portfolio, Intermediate Tax Free Portfolio, Tax Free Money Portfolio, NY Tax Free Money Portfolio, Treasury Money
Portfolio, International Equity Portfolio, Equity 500 Index Portfolio, Capital Appreciation Portfolio, Asset Management
Portfolio and BT Investment Portfolios.
2. An investment company registered under the Investment Company Act of 1940, as amended (the "Act").
3. A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.
</FN>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Board has an Audit Committee that meets with the Trusts' and Portfolio's
independent accountants to review the financial statements of the Trust, the
adequacy of internal controls and the accounting procedures and policies of the
Trust. Each member of the Board except Mr. Hale also is a member of the Audit
Committee.
OFFICERS OF BT INVESTMENT PORTFOLIOS --
Unless otherwise specified, each officer listed below holds the same position
with the Trust and BT Investment Portfolios.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
POSITION(S) HELD WITH
NAME, ADDRESS, AND AGE THE TRUSTS AND PORTFOLIO PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Daniel O. Hirsch Secretary Director, Deutsche Banc Alex. Brown Incorporated and Investment
(Birth date: March 27, 1954) Company Capital Corp. since July 1998; Assistant General Counsel,
One South Street Office of the General Counsel, United States Securities and
Baltimore, Maryland 21202 Exchange Commission from 1993 to 1998
- ------------------------------------------------------------------------------------------------------------------------------------
John Y. Keffer President and Chief President, Forum Financial Group L.L.C. and its affiliates;
(Birth date: July 14, 1942) Executive Officer President, ICC Distributors, Inc.(1)
ICC Distributors, Inc.
Two Portland Square
Portland, Maine 04101
- ------------------------------------------------------------------------------------------------------------------------------------
Charles A. Rizzo Treasurer Vice President and Department Head, Deutsche Asset Management since
(Birth date: August 5, 1958) 1998; Senior Manager, PricewaterhouseCoopers LLP from 1993 to 1998
One South Street
Baltimore, Maryland 21202
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1. Underwriter/distributor for the Trust. Mr. Keffer owns 100% of the shares of ICC Distributors, Inc.
</FN>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Messrs. Hirsch, Keffer and Rizzo also hold similar positions for other
investment companies for which ICC Distributors, or an affiliate serves as the
principal underwriter.
No person who is an officer or director of Bankers Trust is an officer or
Trustee of the Trust. No director, officer or employee of ICC Distributors, Inc.
or any of its affiliates will receive any compensation from the Trust for
serving as an officer or Trustee of the Trust.
SECURITY INCOME FUND DIRECTOR COMPENSATION TABLE --
- --------------------------------------------------------------------------------
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
NAME FROM SECURITY INCOME FUND SECURITY FUND COMPLEX
- --------------------------------------------------------------------------------
Donald A. Chubb, Jr. ..... $13,000 $26,000
John D. Cleland .......... N/A N/A
Penny A. Lumpkin ......... 13,000 26,000
Mark L. Morris, Jr. ...... 13,212 26,294
Maynard Oliverius ........ 9,000 18,000
James R. Schmank ......... N/A N/A
- --------------------------------------------------------------------------------
As of November 1, 1999 the officers and directors of Security Income Fund as a
group beneficially owned none of the total outstanding voting shares of the
Fund.
BT INVESTMENT PORTFOLIO TRUSTEE COMPENSATION TABLE --
- --------------------------------------------------------------------------------
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM FUND COMPLEX
NAME OF PERSON, POSITION FROM TRUST*+ FROM PORTFOLIO+ PAID TO TRUSTEES**
- --------------------------------------------------------------------------------
Charles P. Biggar,
Trustee of Portfolios $ N/A $
Kelvin J. Lancaster $ N/A $
S. Leland Dill,
Trustee of Trust
and Portfolios N/A $ $
Philip Saunders, Jr.,
Trustee of Trust and
Portfolios N/A $ $
- --------------------------------------------------------------------------------
*The aggregate compensation is provided for the BT Investment Funds which is
comprised of 16 funds.
+Information is provided for the Trust's fiscal year ended September 30, 1999.
**Aggregated information is furnished for the BT Family of Funds which consists
of the following: BT Investment Funds, BT Institutional Funds, BT Pyramid
Mutual Funds, BT Advisor Funds, BT Investment Portfolios, Cash Management
Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio, NY Tax Free
Money Portfolio, International Equity Portfolio, Short Intermediate U.S.
Government Securities Portfolio, Intermediate Tax Free Portfolio, Asset
Management Portfolio, Equity 500 Index Portfolio, and Capital Appreciation
Portfolio. The compensation is provided for the fiscal year ended September
30, 1999.
- --------------------------------------------------------------------------------
As of _____________, 1999, the Trustees and Officers of the Trust owned in the
aggregate less than 1% of the shares of the Trust (all series taken together).
As of __________, 1999, the following shareholders of record owned 5% or more of
the Fund:
INVESTMENT ADVISER -- Bankers Trust is the Portfolio's investment adviser.
Bankers Trust is a wholly owned subsidiary of Deutsche Bank. Deutsche Bank is a
banking company with limited liability organized under the laws of the Federal
Republic of Germany. Deutsche Bank is the parent company of a group consisting
of banks, capital markets companies, fund management companies, mortgage banks,
a property finance company, installment financing and leasing companies,
insurance companies, research and consultancy companies and other domestic and
foreign companies.
Bankers Trust may have deposit, loan and other commercial banking relationships
with the issuers of obligations which may be purchased on behalf of the
Portfolio, including outstanding loans to such issuers which could be repaid in
whole or in part with the proceeds of securities so purchased. Such affiliates
deal, trade and invest for their own accounts in such obligations and are among
the leading dealers of various types of such obligations. Bankers Trust has
informed the Portfolio that, in making its investment decisions, it does not
obtain or use material inside information in its possession or in the possession
of any of its affiliates. In making investment recommendations for the
Portfolio, Bankers Trust will not inquire or take into consideration whether an
issuer of securities proposed for purchase or sale by the Portfolio is a
customer of Bankers Trust, its parent or its subsidiaries or affiliates and, in
dealing with its customers, Bankers Trust, its parent, subsidiaries and
affiliates will not inquire or take into consideration whether securities of
such customers are held by any fund managed by Bankers Trust or any such
affiliate.
For the fiscal year ended September 30, 1999, Bankers Trust earned $__________
for compensation of investment advisory services provided to the Portfolio. For
the same period, Bankers Trust reimbursed $__________ to the Portfolio to cover
expenses.
At a Special Meeting held on October 8, 1999, shareholders of the Portfolio also
approved a new investment advisory agreement with Morgan Grenfell, Inc. As of
October 5, 1999, Morgan Grenfell, Inc. has been renamed Deutsche Asset
Management Inc. ("DAMI"). The new investment advisory agreement with DAMI may be
implemented within two years of the date of the Special Meeting upon approval of
a majority of the members of the Board of Trustees of the Portfolio who are not
"interested persons" ("Independent Trustees"). Shareholders of the Portfolio
also approved a new sub-investment advisory agreement among the Portfolio, DAMI
and Bankers Trust under which Bankers Trust may perform certain of DAMI's
responsibilities, at DAMI's expense, upon approval of the Independent Trustees,
within two years of the date of the Special Meeting. DAMI is a subsidiary of
Deutsche Asset Management Ltd., a wholly owned subsidiary of Deutsche Morgan
Grenfell Group PLC, an investment holding company which is, in turn, a wholly
owned subsidiary of Deutsche Bank.
ADMINISTRATOR -- Pursuant to an Administrative Services and Transfer Agency
Agreement with Security Income Fund, dated April 1, 1987 as amended April 30,
1999, Security Management Company, LLC ("SMC") acts as the administrative agent
for the Fund and as such performs administrative functions and the bookkeeping,
accounting and pricing function for the Fund. For these services SMC receives,
on an annual basis .09% of the average net assets of the fund, calculated daily
and payable monthly. Under this Agreement SMC also performs the transfer agency
function for the Fund. As such, SMC performs all shareholder servicing
functions, mailing shareholder communications and acting as dividend disbursing
agent. For the transfer agency services, SMC receives an annual maintenance fee
of $8 per account, a fee of $1 per shareholder transaction, and a fee of $1 per
dividend transaction. Under a sub-administration agreement between SMC and
Bankers Trust, Bankers Trust has agreed to provide certain fund accounting
services to the fund, including calculation of the Fund's daily NAV. For these
services, SMC pays Bankers Trust a fee of $14,000 per year.
Under an administration and services agreements, Bankers Trust is obligated on a
continuous basis to provide such administrative services as the Board of
Trustees of the Trust and the Portfolio reasonably deem necessary for the proper
administration of the Trust and the Portfolio. Bankers Trust will generally
assist in all aspects of the Fund's and Portfolio's operations; supply and
maintain office facilities (which may be in Bankers Trust's own offices),
statistical and research data, data processing services, clerical, accounting,
bookkeeping and record keeping services (including without limitation the
maintenance of such books and records as are required under the 1940 Act and the
rules thereunder, except as maintained by other agents), executive and
administrative services, and stationary and office supplies; prepare reports to
shareholders or investors; prepare and file tax returns; supply financial
information and supporting data for reports to and filings with the SEC and
various state Blue Sky authorities; supply supporting documentation for meetings
of the Board of Trustees; provide monitoring reports and assistance regarding
compliance with Declarations of Trust, by-laws, investment objectives and
policies and with Federal and state securities laws; arrange for appropriate
insurance coverage; calculate net asset values, net income and realized capital
gains or losses; and negotiate arrangements with, and supervise and coordinate
the activities of, agents and others to supply services.
For the fiscal year ended September 30, 1999, Bankers Trust earned $__________
as compensation for administrative and other services provided to the Fund.
During the same period, Bankers Trust reimbursed $__________to the Fund to cover
expenses.
Pursuant to a separate Management Services Agreement, SMC also performs certain
other services on behalf of the Fund. Under this Agreement, SMC provides feeder
fund management and administrative services to the Fund which include monitoring
the performance of the Portfolio, coordinating the Fund's relationship with the
Portfolio, communicating with the Fund's Board of Directors and shareholders
regarding the Portfolio's performance and the Fund's two tier structure, and in
general, assisting the Board of Directors of the Fund in all aspects of the
administration and operation of the Fund. For these services, the Fund pays SMC
a fee at the annual rate of .20% of its average daily net assets, calculated
daily and payable monthly.
During the fiscal year ended September 30, 1999, the Fund paid the following
amounts to the Administrator for its services.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ADMINISTRATIVE TRANSFER AGENCY REIMBURSEMENT EXPENSE RATIO
SERVICE FEES PAID SERVICE FEES PAID OF EXPENSES BY -------------------------------
FUND YEAR TO ADMINISTRATOR TO ADMINISTRATOR ADMINISTRATOR CLASS A CLASS B CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Fund 1998 $81,783 $191,501 --- --- --- ---
1997 80,734 141,412 --- --- --- ---
1996 95,487 128,776 --- --- --- ---
Capital Preservation Fund 1999(1)
- ------------------------------------------------------------------------------------------------------------------------------------
1. Capital Preservations Fund's figures are based on the period May 3, 1999 (date of inception) to September 30, 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For the fiscal year ended September 30, 1999, the Fund paid the Administrator
$_____________ for its services under the Management Services Agreement.
CUSTODIAN AND TRANSFER AGENT -- Bankers Trust, 130 Liberty Street (One Bankers
Trust Plaza), New York, New York 10006, serves as Custodian for the Portfolio
pursuant to the administration and services agreements. As Custodian, it holds
the Portfolio's assets. Bankers Trust also serves as transfer agent of the
Portfolio pursuant to the administration and services agreement. Bankers Trust
may be reimbursed by the Portfolio for its out-of-pocket expenses. Bankers Trust
will comply with the self-custodian provisions of Rule 17f-2 under the 1940 Act.
UMB Bank, N.A. 928 Grand Avenue, Kansas City, Missouri 64106 serves as Custodian
for the Fund and as such, holds all the Fund's assets.
BANKING REGULATORY MATTERS -- Bankers Trust has been advised by its counsel that
in its opinion Bankers Trust may perform the services for the Portfolio
contemplated by the Advisory Agreement and other activities for the Portfolio
described in the Prospectus and this SAI without violation of the Glass-Steagall
Act or other applicable banking laws or regulations. However, counsel has
pointed out that future changes in either Federal or state statutes and
regulations concerning the permissible activities of banks or trust companies,
as well as future judicial or administrative decisions or interpretations of
present and future statutes and regulations, might prevent Bankers Trust from
continuing to perform those services for the Portfolio. State laws on this issue
may differ from the interpretations of relevant Federal law and banks and
financial institutions may be required to register as dealers pursuant to state
securities law. If the circumstances described above should change, the Boards
of Directors would review the relationships with Bankers Trust and consider
taking all actions necessary in the circumstances.
INDEPENDENT ACCOUNTANTS -- _________________, One Kansas City Place, 1200 Main
Street, Kansas City, Missouri 64105, acts as independent accountants of Security
Income Fund. _______________, 787 Seventh Avenue, New York, New York 10019, acts
as independent accountants of the Portfolio.
ORGANIZATION OF SECURITY INCOME FUND
Security Income Fund was organized as a Kansas corporation on April 20, 1965 and
is registered with the Securities and Exchange Commission as an investment
company. Such registration does not involve supervision by the Securities and
Exchange Commission of the management or policies of the Fund.
The Articles of Incorporation of Security Income Fund provides for the issuance
of shares of common stock in one or more classes or series.
Security Income Fund has authorized the issuance of an indefinite number of
shares of capital stock of $1.00 part value and currently issues its shares in
five series, Corporate Bond Fund, Limited Maturity Bond Fund, U.S. Government
Fund, High Yield Fund and Capital Preservation Fund. The shares of each Series
of Security Income Fund represent a pro rata beneficial interest in that Series'
net assets and in the earnings and profits or losses derived from the investment
of such assets.
Each Series of Security Income Fund currently issues two classes of shares
except Capital Preservation Fund which issues three classes of shares. Each
class of shares participates proportionately based on their relative net asset
values in dividends and distributions and have equal voting, liquidation and
other rights except that (i) expenses related to the distribution of each class
of shares or other expenses that the Board of Directors may designate as class
expenses from time to time, are borne solely by each class; (ii) each class of
shares has exclusive voting rights with respect to any Distribution Plan adopted
for that class; (iii) each class has different exchange privileges; and (iv)
each class has a different designation. When issued and paid for, the shares of
each Series of Security income Fund will be fully paid and nonassessable. Shares
may be exchanged as described under "Exchange Privilege," in the prospecting but
will have no other preference, conversion, exchange or preemptive rights. Shares
are transferable, redeemable and assignable and have cumulative voting
privileges for the election of directors.
On certain matters, such as the election of directors, all shares of the Series
of Security Income Fund vote together with each share having one vote. Under
certain circumstances, the shareholders of one series of Security Income Fund
could control the outcome of these votes. On other matters affecting a
particular Series, such as the investment advisory contract or the fundamental
policies, only shares of that Series are entitled to vote, and a majority vote
of the shares of that Series is required for approval of the proposal.
Security Income Fund does not generally hold annual meetings of shareholders and
will do so only when required by law. Shareholders may remove directors from
office by vote cast in person or by proxy at a meeting of shareholders. Such a
meeting will be called at the written request of 10% of Security Income Fund's
outstanding shares.
ORGANIZATION OF THE TRUST
BT Investment Funds was organized on July 21, 1986, under the name BT Tax-Free
Investment Trust, and assumed its current name on May 16, 1988. The shares of
each series participate equally in the earnings, dividends and assets of the
particular series. The Trusts may create and issue additional series of shares.
Each Trust's Declaration of Trust permits the Trustees to divide or combine the
shares into a greater or lesser number of shares without thereby changing the
proportionate beneficial interest in series. Each share represents an equal
proportionate interest in a series with each other share. Shares when issued are
fully paid and non-assessable, except as set forth below. Shareholders are
entitled to one vote for each share held.
Shares of the Trust do not have cumulative voting rights, which means that
holders of more than 50% of the shares voting for the election of Trustees can
elect all Trustees. Shares are transferable but have no preemptive, conversion
or subscription rights. Shareholders generally vote by Fund, except with respect
to the election of Trustees.
Massachusetts law provides that shareholders could under certain circumstances
be held personally liable for the obligations of the Trust. However, the Trust's
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee. The Declaration of Trust provides for indemnification from the Trust's
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations, a possibility
that the Trust believes is remote. Upon payment of any liability incurred by the
Trust, the shareholder paying the liability will be entitled to reimbursement
from the general assets of the Trust. The Trustees intend to conduct the
operations of the Trust in a manner so as to avoid, as far as possible, ultimate
liability of the shareholders for liabilities of the Trust.
Whenever a Trust is requested to vote on matters pertaining to a Portfolio, the
Trust will vote its shares without a meeting of shareholders of the respective
Fund if the proposal is one, which if made with respect to the Fund, would not
require the vote of shareholders of the Fund as long as such action is
permissible under applicable statutory and regulatory requirements. For all
other matters requiring a vote, a Trust will hold a meeting of shareholders of
its respective Fund and, at the meeting of the investors in the Portfolio, the
Trust will cast all of its votes in the same proportion as votes in all its
shares at the Portfolio meeting, other investors with a greater pro rata
ownership of the Portfolio could have effective voting control of the operations
of the Portfolio.
TAXATION
TAXATION OF THE FUND -- The Fund intends to qualify annually to be treated as a
regulated investment company under the Code. To qualify for that treatment, the
Fund must, among other things, (a) derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, futures or forward
contracts) derived with respect to its business of investing in securities or
those currencies (the "Income Requirement"), (b) diversify its holdings so that,
at the end of each quarter of its taxable year, (i) at least 50% of the value of
its assets is represented by cash and cash items (including receivables), U.S.
government securities, securities of other regulated investment companies and
other securities, with such other securities of any one issuer limited to an
amount not greater than 5% of the value of the Fund's total assets and not
greater than 10% of the issuer's outstanding voting securities and (ii) not more
than 25% of the value of its total assets is invested in the securities of any
one issuer (other than U.S. government securities or the securities of other
regulated investment companies), and (c) distribute for each taxable year at
least 90% of its investment company taxable income (generally consisting of
interest, dividends and the excess of net short-term capital gain over net
long-term capital loss).
The Fund will be subject to a nondeductible 4% federal excise tax to the extent
it fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus any undistributed amount from the
prior year.
The Fund, as an investor in the Portfolio, will be deemed to own a proportionate
share of the Portfolio's assets, and to earn a proportionate share of the
Portfolio's income, for purposes of determining whether the Fund satisfies all
the requirements described above to qualify as a regulated investment company.
See the next section for a discussion of the tax consequences to the Fund of
hedging transactions engaged in by the Portfolio.
TAXATION OF THE PORTFOLIO -- The Portfolio will be treated as a separate
partnership for federal income tax purposes and will not be a "publicly traded
partnership." As a result, the Portfolio will not be subject to federal income
tax. Instead, the Fund and other investors in the Portfolio will be required to
take into account, in computing their federal income tax liability, their
respective shares of the Portfolio's income, gains, losses, deductions and
credits, without regard to whether they have received any cash distributions
from the Portfolio. The Portfolio also will not be subject to state income or
franchise tax.
Because, as noted above, the Fund will be deemed to own a proportionate share of
the Portfolio's assets, and to earn a proportionate share of the Portfolio's
income, for purposes of determining whether the Fund satisfies the requirements
to qualify as a regulated investment company, the Portfolio intends to conduct
its operations so that the Fund will be able to satisfy all those requirements.
Distributions received by the Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) generally will not result in the
Fund's recognizing any gain or loss for federal income tax purposes, except that
(a) gain will be recognized to the extent any cash that is distributed exceeds
the Fund's basis for its interest in the Portfolio prior to the distribution,
(b) income or gain will be realized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (c) gain or loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The Fund's basis for its interest in the Portfolio
generally will equal the amount of cash and the basis of any property the Fund
invests in the Portfolio, increased by the Fund's share of the Portfolio's net
income and gains and decreased by (i) the amount of any cash and the basis of
any property distributed from the Portfolio to the Fund and (ii) the Fund's
share of the Portfolio's losses, if any.
The Portfolio's use of hedging strategies, such as writing (selling) and
purchasing options and futures contracts, involves complex rules that will
determine for income tax purposes the amount, character and timing of
recognition of the gains and losses it realizes in connection therewith. Gains
from options and futures contracts derived by the Portfolio with respect to its
business of investing in securities will qualify as permissible income for the
Fund under the Income Requirement.
Certain futures and foreign currency contracts in which the Portfolio may invest
may be subject to section 1256 of the Code ("section 1256 contracts"). Any
section 1256 contracts held by the Portfolio at the end of each taxable year,
other than contracts subject to a "mixed straddle" election made by the
Portfolio, must be "marked-to-market" (that is, treated as having been sold at
that time for their fair market value) for federal income tax purposes, with the
result that unrealized gains or losses will be treated as though they were
realized. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net realized gain or loss from any actual sales of section
1256 contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 1256
contracts also may be marked-to-market for purposes of the 4% excise tax
mentioned previously.
Code section 1092 (dealing with straddles) also may affect the taxation of
options and futures contracts in which the Portfolio may invest. Section 1092
defines a "straddle" as offsetting positions with respect to personal property;
for these purposes, options and futures contracts are personal property. Under
that section, any loss from the disposition of a position in a straddle
generally may be deducted only to the extent the loss exceeds the unrealized
gain on the offsetting position(s) of the straddle; in addition, these rules may
apply to postpone the recognition of loss that otherwise would be recognized
under the mark-to-market rules discussed above. The regulations under section
1092 also provide certain "wash sale" rules, which apply to transactions where a
position is sold at a loss and a new offsetting position is acquired within a
prescribed period, and "short sale" rules applicable to straddles. If the
Portfolio makes certain elections, the amount, character and timing of
recognition of gains and losses from the affected straddle positions would be
determined under rules that vary according to the elections made. Because only a
few of the regulations implementing the straddle rules have been promulgated,
the tax consequences to the Portfolio of straddle transactions are not entirely
clear.
If the Portfolio has an "appreciated financial position"--generally, an interest
(including an interest through an option, futures or forward contract, or short
sale) with respect to any debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted
basis--and enters into a "constructive sale" of the same or substantially
similar property, the Portfolio will be treated as having made an actual sale
thereof, with the result that gain will be recognized at that time. A
constructive sale generally consists of a short sale, an offsetting notional
principal contract, or a futures or forward contract entered into by the
Portfolio or a related person with respect to the same or substantially similar
property. In addition, if the appreciated financial position is itself a short
sale or such a contract, acquisition of the underlying property or substantially
similar property will be deemed a constructive sale. The foregoing will not
apply, however, to any transaction during any taxable year that otherwise would
be treated as a constructive sale if the transaction is closed within 30 days
after the end of that year and the Portfolio holds the appreciated financial
position unhedged for 60 days after that closing (I.E., at no time during that
60-day period is the Portfolio's risk of loss regarding that position reduced by
reason of certain specified transactions with respect to substantially similar
or related property, such as having an option to sell, being contractually
obligated to sell, making a short sale or granting an option to buy
substantially identical stock or securities).
OTHER TAXATION --The investment by the Fund in the Portfolio should not cause
the Fund to be liable for any income or franchise tax in the State of New York.
The Portfolio is organized as a New York trust. The Portfolio is not subject to
any income or franchise tax in the State of New York or the State of Kansas.
If the Fund fails to qualify as a RIC for any taxable year, all of its taxable
income will be subject to tax at regular corporate income tax rates without any
deduction for distributions to shareholders and such distributions generally
will be taxable to shareholders as ordinary dividends to the extent of the
Fund's current and accumulated earnings and profits. In this event,
distributions generally will be eligible for the dividends-received deduction
for corporate shareholders.
FOREIGN WITHHOLDING TAXES -- Income received and gains realized by the Portfolio
from sources within foreign countries may be subject to withholding and other
taxes imposed by those countries that would reduce the yield and/or total return
on its securities. Tax conventions between certain countries and the United
States may reduce or eliminate these foreign taxes, however, and many foreign
countries do not impose taxes on capital gains in respect of investments by
foreign investors.
FINANCIAL STATEMENTS
The financial statements for the Fund and the Portfolio for the fiscal year
ended September 30, 1999, are incorporated herein by reference to the Annual
Report to shareholders for the Fund and Portfolio dated September 30, 1999.
Copies of the Fund's and the Portfolio's Annual Report are provided to every
person requesting the Statement of Additional Information.
<PAGE>
APPENDIX
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DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS
Aaa -- Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds rated Baa are considered as medium-grade obligations, i.e. they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such, bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba -- Bonds rated Ba are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both (good and bad times over the future). Uncertainty of position characterizes
bonds in this class.
B -- Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa -- Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca -- Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.
C -- Bonds rated C are the lowest-rated class of bonds and issued so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS
AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.
BB -- Debt rate BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B -- Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.
CCC -- Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC -- Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C -- The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.
CI -- The rating CI is reserved for income bonds on which no interest is being
paid.
D -- Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
DUFF & PHELPS' LONG-TERM DEBT RATINGS
AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- -- High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
A+, A, A- -- Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
BBB+, BBB, BBB- -- Below-average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB, BB- -- Below investment grade but deemed likely to meet obligation when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B+, B, B- -- Below investment grade and possessing risk that obligations will
not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or into
a higher or lower rating grade.
CCC -- Well below investment-grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD -- Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP -- Preferred stock with dividend arrearages.
DESCRIPTION OF MOODY'S SHORT-TERM DEBT RATINGS
Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leasing
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated PRIME-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
DESCRIPTION OF S&P SHORT-TERM ISSUER CREDIT RATINGS
A-1 -- An obligor rated `A-1' has STRONG capacity to meet its financial
commitments. It is rated in the highest category by Standard & Poor's. Within
this category, certain obligors are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial commitments is
EXTREMELY STRONG.
A-2 -- An obligor rated `A-2' has SATISFACTORY capacity to meet its financial
commitments. However, it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligors in the highest
rating category.
A-3 -- An obligor rated `A-3' has ADEQUATE capacity to meet its financial
obligations. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitments.
DESCRIPTION OF DUFF & PHELPS' COMMERCIAL PAPER RATINGS
D-1+ -- Highest certainty of timely payment. Short term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk free U.S. Treasury short term
obligations.
D-1 -- Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
D-1- -- High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D-2 -- Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
D-3 -- Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
DESCRIPTION OF MOODY'S INSURANCE FINANCIAL STRENGTH RATINGS
Aaa -- Insurance companies rated Aaa offer exceptional financial security. While
the financial strength of these companies is likely to change, such changes as
can be visualized are most unlikely to impair their fundamentally strong
position.
Aa -- Insurance companies rated Aa offer excellent financial security. Together
with the Aaa group they constitute what are generally known as high grade
companies. They are rated lower than Aaa companies because long-term risks
appear somewhat larger.
A -- Insurance companies rated A offer good financial security. However,
elements may be present which suggest a susceptibility to impairment sometime in
the future.
Baa -- Insurance companies rated Baa offer adequate financial security. However,
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time.
Ba -- Insurance companies rated Ba offer questionable financial security. Often
the ability of these companies to meet policyholder obligations maybe very
moderate and thereby not well safeguarded in the future.
B -- Insurance companies rated B offer poor financial security. Assurance of
punctual payment of policyholder obligations over any long period of time is
small.
Caa -- Insurance companies rated Caa offer very poor financial security. They
may be in default on their policyholder obligations or there may be present
elements of danger with respect to punctual payment of policyholder obligations
and claims.
Ca -- Insurance companies rated Ca offer extremely poor financial security. Such
companies are often in default on their policyholder obligations or have other
marked shortcomings.
C -- Insurance companies rated C are the lowest rated class of insurance company
and can be regarded as having extremely poor prospects of ever offering
financial security.
Numeric modifiers: Numeric modifiers are used to refer to the ranking within the
group -- one being the highest and three being the lowest. However, the
financial strength of companies within a generic rating symbol (Aa, for example)
is broadly the same.
DESCRIPTION OF S&P CLAIMS PAYING ABILITY RATING DEFINITIONS
SECURE RANGE -- AAA to BBB
"AAA" -- Superior financial security on an absolute and relative basis. Capacity
to meet policyholder obligations is overwhelming under a variety of economic and
underwriting conditions.
"AA" -- Excellent financial security. Capacity to meet policyholder obligations
is strong under a variety of economic and underwriting conditions.
"A" -- Good financial security, but capacity to meet policyholder obligations is
somewhat susceptible to adverse economic and underwriting conditions.
"BBB" -- Adequate financial security, but capacity to meet policyholder
obligations is susceptible to adverse economic and underwriting conditions.
VULNERABLE RANGE -- BB to CCC
"BB" -- Financial security may be adequate, but capacity to meet policyholder
obligations, particularly with respect to long-term or "long-tail" policies, is
vulnerable to adverse economic and underwriting conditions.
"B" -- Vulnerable financial security. Currently able to meet policyholder
obligations, but capacity to meet policyholder obligations is particularly
vulnerable to adverse economic and underwriting conditions.
"CCC" -- Extremely vulnerable financial security. Continued capacity to meet
policyholder obligations is highly questionable unless favorable economic and
underwriting conditions prevail.
"R" -- Regulatory action. As of the date indicated, the insurer is under
supervision of insurance regulators following rehabilitation, receivership,
liquidation, or any other action that reflects regulatory concern about the
insurer's financial condition. Information on this status is provided by the
National Association of Insurance Commissioners and other regulatory bodies.
Although believed to be accurate, this information is not guaranteed. The "R"
rating does not apply to insurers subject only to nonfinancial actions such as
market conduct violations.
Plus (+) or minus (-) Ratings from "AA" to "B" may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
DUFF & PHELPS' CLAIMS PAYING ABILITY RATINGS
AAA -- Highest claims paying ability. Risk factors are negligible.
AA+, AA, AA- -- Very high claims paying ability. Protection factors are strong.
Risk is modest, but may vary slightly over time due to economic and/or
underwriting conditions.
A+, A, A- -- High claims paying ability. Protection factors are average and
there is an expectation of variability in risk over time due to economic and/or
underwriting conditions.
BBB+, BBB, BBB- -- Adequate claims paying ability. Protection factors are
adequate. There is considerable variability in risk over time due to economic
and/or underwriting conditions.
BB+, BB, BB- -- Uncertain claims paying ability and less than investment grade
quality. However, the company is deemed likely to meet these obligations when
due. Protection factors will vary widely with changes in economic and/or
underwriting conditions.
B+, B, B- -- Possessing risk that policyholder and contractholder obligations
will not be paid when due. Protection factors will vary widely with changes in
economic and underwriting conditions or company fortunes.
CCC -- There is substantial risk that policyholder and contractholder
obligations will not be paid when due. Company has been or is likely to be
placed under state insurance department supervision.
DD -- Company is under an order of liquidation.
<PAGE>
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Articles of Incorporation
(b) By-laws
(c) Specimen copy of share certificate for Registrant's shares of capital
stock(1)
(d) Investment Advisory Contract
(e) (1) Distribution Agreement
(2) Class B Distribution Agreement
(3) Class C Distribution Agreement
(4) Underwriter-Dealer Agreement(2)
(f) Form of Non-Qualified Deferred Compensation Plan(3)
(g) Custodian Agreement(4)
(h) (1) Third Party Feeder Fund Agreement
(2) Recordkeeping and Investment Accounting Agreement
(3) Management Services Agreement
(4) Administrative Services and Transfer Agency Agreement
(i) Legal Opinion(1)
(j) Not applicable
(k) Not applicable
(l) Not applicable
(m) (1) Distribution Plan (see exhibit 23(e)(1))
(2) Class B Distribution Plan
(3) Class C Distribution Plan
(n) Multiple Class Plan
(o) Powers of Attorney - Bankers Trust
(p) Code of Ethics(5)
(1) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 61 to Registration Statement No.
2-38414 (May 3, 1999).
(2) Incorporated herein by reference to the Exhibits filed with Security Equity
Fund's Post-Effective Amendment No. 84 to Registration Statement No.
2-19458 (January 28, 1999).
(3) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 58 to Registration Statement No.
2-38414 (April 30, 1997).
(4) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 62 to Registration Statement No.
2-38414 (April 30, 1999).
(5) Incorporated herein by reference from the Exhibits filed with Security
Equity Fund's Post-Effective Amendment No. 86 to Registration Statement
2-19458 (January 28, 2000).
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
ITEM 25. INDEMNIFICATION.
A policy of insurance covering Security Management Company, LLC, its affiliate
Security Distributors, Inc., and all of the registered investment companies
advised by Security Management Company, LLC insures the Registrant's directors
and officers against liability arising by reason of an alleged breach of duty
caused by any negligent act, error or accidental omission in the scope of their
duties.
Paragraph 30 of the Registrant's Bylaws, as amended February 3, 1995, provides
in relevant part as follows:
30. INDEMNIFICATION AND LIABILITY OF DIRECTORS AND OFFICERS. Each person who is
or was a Director or officer of the Corporation or is or was serving at the
request of the Corporation as a Director or officer of another corporation
(including the heirs, executors, administrators and estate of such person)
shall be indemnified by the Corporation as of right to the full extent
permitted or authorized by the laws of the State of Kansas, as now in
effect and is hereafter amended, against any liability, judgment, fine,
amount paid in settlement, cost and expense (including attorney's fees)
asserted or threatened against and incurred by such person in his/her
capacity as or arising out of his/her status as a Director or officer of
the Corporation or, if serving at the request of the Corporation, as a
Director or officer of another corporation. The indemnification provided by
this bylaw provision shall not be exclusive of any other rights to which
those indemnified may be entitled under the Articles of Incorporation,
under any other bylaw or under any agreement, vote of stockholders or
disinterested directors or otherwise, and shall not limit in any way any
right which the Corporation may have to make different or further
indemnification with respect to the same or different persons or classes of
persons.
No person shall be liable to the Corporation for any loss, damage,
liability or expense suffered by it on account of any action taken or
omitted to be taken by him/her as a Director or officer of the Corporation
or of any other corporation which he/she serves as a Director or officer at
the request of the Corporation, if such person (a) exercised the same
degree of care and skill as a prudent man would have exercised under the
circumstances in the conduct of his/her own affairs, or (b) took or omitted
to take such action in reliance upon advice of counsel for the Corporation,
or for such other corporation, or upon statement made or information
furnished by Directors, officers, employees or agents of the Corporation,
or of such other corporation, which he/she had no reasonable grounds to
disbelieve.
In the event any provision of this section 30 shall be in violation of the
Investment Company Act of 1940, as amended, or of the rules and regulations
promulgated thereunder, such provisions shall be void to the extent of such
violations.
On March 25, 1988, the shareholders approved the Board of Directors'
recommendation that the Articles of Incorporation be amended by adopting the
following Article Fifteenth:
"A director shall not be personally liable to the corporation or to its
stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this sentence shall not eliminate nor limit the
liability of a director:
A. for any breach of his or her duty of loyalty to the corporation or to
its stockholders;
B. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
C. for any unlawful dividend, stock purchase or redemption under the
provisions of Kansas Statutes Annotated (K.S.A.) 17-6424 and
amendments thereto; or
D. for any transaction from which the director derived an improper
personal benefit."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 26. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER
Not applicable.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Security Equity Fund
Security Ultra Fund
Security Growth and Income Fund
Security Municipal Bond Fund
Variflex Variable Annuity Account (Variflex)
Variflex Variable Annuity Account (Variflex ES)
Varilife Variable Separate Account
Parkstone Variable Annuity Account
Security Varilife Separate Account
Variable Annuity Account VIII (Variflex LS)
Variable Annuity Account VIII (Variflex Signature)
SBL Variable Annuity Account X
SBL Variable Annuity Account XI
(b) (1) (2) (3)
NAME AND PRINCIPAL POSITION AND OFFICES POSITION AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER WITH REGISTRANT
------------------ -------------------- --------------------
Richard K Ryan President & Director None
John D. Cleland Vice President & Director President & Director
James R. Schmank Vice President & Director Vice President & Director
Mark E. Young Vice President & Director None
Amy J. Lee Secretary Secretary
Brenda M. Harwood Treasurer and Director Treasurer
*700 Harrison, Topeka, Kansas 66636-0001
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Certain accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the rules promulgated thereunder are maintained by
Security Management Company, LLC, 700 Harrison, Topeka, Kansas 66636-0001; and
Bankers Trust Company, 130 Liberty Street, New York, New York 10006. Records
relating to the duties of the Registrant's custodian are maintained by UMB Bank,
n.a., 928 Grand Avenue, Kansas City, Missouri 64106.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Topeka, and State of Kansas on the 24th day of November, 1999.
SECURITY INCOME FUND
(The Fund)
By: JOHN D. CLELAND
----------------------------------------
John D. Cleland, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated:
Date: November 24, 1999
----------------------------------------
DONALD A. CHUBB, JR. Director
- -------------------------------------
Donald A. Chubb, Jr.
JOHN D. CLELAND President and Director
- -------------------------------------
John D. Cleland
PENNY A. LUMPKIN Director
- -------------------------------------
Penny A. Lumpkin
MARK L. MORRIS, JR. Director
- -------------------------------------
Mark L. Morris, Jr.
MAYNARD OLIVERIUS Director
- -------------------------------------
Maynard Oliverius
JAMES R. SCHMANK Director
- -------------------------------------
James R. Schmank
BRENDA M. HARWOOD Treasurer (Principal Financial Officer)
- -------------------------------------
Brenda M. Harwood
<PAGE>
This Post Effective Amendment No. 64 to the Registration Statement of Security
Income Fund has been signed below by the following persons in the capacities
indicated.
NAME TITLE DATE
By: /s/ DANIEL O. HIRSCH Secretary (Attorney in Fact November 24, 1999
Daniel O. Hirsch for the persons listed below)
/s/ JOHN Y. KEFFER* President and Chief
John Y. Keffer Executive Officer
/s/ CHARLES A. RIZZO* Treasurer
Charles A. Rizzo
/s/ CHARLES P. BIGGAR* Trustee
Charles P. Biggar
/s/ S. LELAND DILL* Trustee
S. Leland Dill
/s/ PHILIP SAUNDERS, JR.* Trustee
Philip Saunders, Jr.
/s/ MARTIN J. GRUBER* Trustee
Martin J. Gruber
/s/ RICHARD HALE* Trustee
Richard Hale
/s/ RICHARD J. HERRING* Trustee
Richard J. Herring
/s/ BRUCE E. LANGTON* Trustee
Bruce E. Langton
/s/ HARRY VAN BENSCHOTEN* Trustee
Harry Van Benschoten
<PAGE>
ARTICLES OF INCORPORATION
OF
SECURITY BOND FUND, INC.
We, the undersigned incorporators, hereby associate ourselves together
to form and establish a corporation for profit under the laws of the State of
Kansas.
FIRST: The name of the corporation is:
SECURITY BOND FUND, INC.
SECOND: The location of its registered office in Kansas is Security
Benefit Life Building, 700 Harrison Street, Topeka, Kansas 66603.
THIRD: The name and address of its registered agent in Kansas is Will
J. Miller, Jr., Security Benefit Life Building, 700 Harrison Street, Topeka,
Kansas 66603.
FOURTH: This corporation is organized for profit and the nature of its
business, objects and purposes to be transacted, promoted and carried on, is:
(1) To engage in the business of an investment company and mutual fund
and to hold, invest and reinvest its funds, and in connection therewith to
hold part or all of its funds in cash, and to purchase or otherwise
acquire, hold for investment or otherwise, trade, purchase on margin, sell,
sell short, assign, pledge, hypothecate, negotiate, transfer, exchange or
otherwise dispose of or turn to account or realize upon, securities (which
term "securities" shall for the purposes of this Article, without
limitation of the generality thereof, be deemed to include any stocks,
bonds, shares, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets) created or issued by any persons, firms, associations,
corporations, syndicates, combinations, organizations, governments or
subdivisions thereof; and to exercise, as owner or holder of any
securities, all rights, powers and privileges in respect thereof; and to do
any and all acts and things for the preservation, protection, improvement
and enhancement in value of any and all such securities.
(2) To issue and sell shares of its own capital stock in such amounts
and on such terms and conditions, for such purposes and for such amount or
kind of consideration (including, without limitation thereof, securities)
now or hereafter permitted by the laws of Kansas, by these Articles of
Incorporation and the Bylaws of the corporation, as its Board of Directors
may determine.
(3) To purchase or otherwise acquire, redeem, hold, dispose of,
resell, transfer, or reissue (all without any vote or consent of
stockholders of the corporation) shares of its capital stock, in any manner
and to the extent now or hereafter permitted by the laws of the State of
Kansas, by these Articles of Incorporation and by the Bylaws of the
corporation, provided that shares of its own capital stock belonging to it
shall not be voted directly or indirectly.
(4) To conduct its business in all its branches at one or more offices
in Kansas and elsewhere in any part of the world, without restriction or
limit as to extent.
(5) To carry out all or any of the foregoing purposes as principal or
agent, and alone or with associates or, to the extent now or hereafter
permitted by the laws of Kansas, as a member of, or as the owner or holder
of any stock of, or shares of interest in, any firm, association,
corporation, trust or syndicate; and in connection therewith to make or
enter into such deeds or contracts with any persons, firms, associations,
corporations, syndicates, governments or sub-divisions thereof, and to do
such acts and things and to exercise such powers as a natural person could
lawfully make, enter into, do or exercise.
(6) To do any and all such further acts and things and to exercise any
and all such further powers as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes.
It is the intention that each of the purposes, specified in each of
the paragraphs of this Article FOURTH, shall be in no wise limited or restricted
by reference to or inference from the terms of any other paragraph, but that the
purposes specified in each of the paragraphs of this Article FOURTH shall be
regarded as independent objects, purposes and powers. The enumeration of the
specific purposes of this Article FOURTH shall not be construed to restrict in
any manner the general objects, purposes and powers of this corporation, nor
shall the expression of one thing be deemed to exclude another, although it be
of like nature. The enumeration of purposes herein shall not be deemed to
exclude or in any way limit by inference any objects, purposes or powers which
this corporation has power to exercise, whether expressly or by force of the
laws of the State of Kansas, now or hereafter in effect, or impliedly by any
reasonable construction of such laws.
FIFTH: The total number of shares which the corporation shall have
authority to issue shall be 3,000,000 shares of capital stock, each of the par
value of $1.00. The Board of Directors shall have the power to fix the
consideration to be received by the corporation for any and all shares of stock
issued by the corporation, but at not less than the par value thereof.
The following provisions are hereby adopted for the purpose of setting
forth the powers, rights, qualifications, limitations or restrictions of the
capital stock of the corporation:
(1) At all meetings of stockholders each stockholder of the
corporation shall be entitled to one vote in person or by proxy on each
matter submitted to a vote at such meeting for each share of capital stock
standing in this name on the books of the corporation on the date, fixed in
accordance with the Bylaws, for determination of stockholders entitled to
vote at such meeting. At all elections of directors each stockholder shall
be entitled to as many votes as shall equal the number of shares of stock
multiplied by the number of directors to be elected, and he may cast all of
such votes for a single director or may distribute them among the number to
be voted for, on any two or more of them as he may see fit.
(2) No holder of any shares of stock of the corporation shall be
entitled as such, as a matter of right, to purchase or subscribe for any
shares of stock of the corporation of any class, whether now or hereafter
authorized or whether issued for cash, property or services or as a
dividend or otherwise, or to purchase or subscribe for any obligations,
bonds, notes, debentures, other securities or stock convertible into shares
of stock of the corporation or carrying or evidencing any right to purchase
shares of stock of any class.
(3) All persons who shall acquire stock in the corporation shall
acquire the same subject to the provisions of these Articles of
Incorporation.
SIXTH: The minimum amount of capital with which the corporation will
commence business is One Thousand Dollars.
SEVENTH: The name and places of residence for each of the
incorporators are as follows:
NAMES PLACES OF RESIDENCE
Dean L. Smith 1800 W. 26th
Topeka, Kansas 66611
Will J. Miller, Jr. 2824 Plass Street
Topeka, Kansas 66611
Everett S. Gille 2832 Plass Street
Topeka, Kansas 66611
EIGHTH: The duration of the corporate existence of the corporation is
one hundred years.
NINTH: The number of directors to constitute the Board of Directors of
the corporation, which shall be a minimum of three and a maximum of nine, may be
varied from time to time by the Board of Directors or stockholders of the
corporation between said minimum and maximum. Unless otherwise provided by the
Bylaws of the corporation, the directors of the corporation need not be
stockholders therein.
TENTH:
(1) Except as may be otherwise specifically provided by (i) statute,
(ii) the Articles of Incorporation of the corporation as from time to time
amended or (iii) bylaw provisions adopted from time to time by the
stockholders or directors of the corporation, all powers of management,
direction and control of the corporation shall be, and hereby are, vested
in the Board of Directors.
(2) If the Bylaws so provide, the Board of Directors, by resolution
adopted by a majority of the whole board, may designate two or more
directors to constitute an executive committee, which committee, to the
extent provided in said resolution or in the Bylaws of the corporation,
shall have and exercise all of the authority of the Board of Directors in
the management of the corporation.
(3) Shares of stock in other corporations shall be voted by the
President or a Vice President, or such officer or officers of the
corporation as the Board of Directors shall from time to time designate for
the purpose, or by a proxy or proxies thereunto duly authorized by the
Board of Directors, except as otherwise ordered by vote of the holders of a
majority of the shares of the capital stock of the corporation outstanding
and entitled to vote in respect thereto.
(4) Subject only to the provisions of the federal Investment Company
Act of 1940 and the rules and regulations promulgated thereunder, any
director, officer or employee individually, or any partnership of which any
director, officer or employee may be a member, or any corporation or
association of which any director, officer or employee may be an officer,
director, trustee, employee or stockholder, may be a party to, or may be
pecuniarily or otherwise interested in, any contract or transaction of the
corporation, and in the absence of fraud no contract or other transaction
shall be thereby affected or invalidated; provided that in case a director,
or a partnership, corporation or association of which a director is a
member, officer, director, trustee, employee or stockholder is so
interested, such fact shall be disclosed or shall have been known to the
Board of Directors or a majority thereof; and any director of the
corporation who is so interested, or who is also a director, officer,
trustee, employee or stockholder of such other corporation or association
or a member of such partnership which is so interested, may be counted in
determining the existence of a quorum at any meeting of the Board of
Directors of the corporation which shall authorize any such contract or
transaction, and may vote thereat to authorize any such contract or
transaction, with like force and effect as if he were not such director,
officer, trustee, employee or stockholder of such other corporation or
association or not so interested or a member of a partnership so
interested.
(5) The Board of Directors is hereby empowered to authorize the
issuance and sale, from time to time, of shares of the capital stock of the
corporation, whether for cash at not less than the par value thereof or for
such other consideration including securities as the Board of Directors may
deem advisable in the manner and to the extent now or hereafter permitted
by the Bylaws of the corporation and by the laws of Kansas.
ELEVENTH: The private property of the stockholders shall not be a
subject to the payment of the debts of the corporation.
TWELFTH: Insofar as permitted under the laws of Kansas, the
stockholders and directors shall have power to hold their meetings, if the
Bylaws so provide, and to keep the books and records of the corporation outside
of the State of Kansas, and to have one or more offices, within or without the
State of Kansas, at such places as may be from time to time designated in the
Bylaws or by resolution of the stockholders or directors.
THIRTEENTH: Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them, secured or unsecured,
or between this corporation and its stockholders, or any class of them, any
court, state or federal, of competent jurisdiction within the State of Kansas
may on the application in a summary way of this corporation, or of any creditor,
secured or unsecured, or stockholders thereof, or on the application of trustees
in dissolution, or on the application of any receiver or receivers appointed for
this corporation by any court, state or federal, of competent jurisdiction,
order a meeting of the creditors of class of creditors secured or unsecured or
of the stockholders or class of stockholders of the corporation, as the case may
be, to be summoned in such manner as said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors, or
of the stockholders, or class of stockholders of this corporation, as the case
may be, agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
FOURTEENTH: The corporation reserves the right to alter, amend or
repeal any provision contained in its Articles of Incorporation in the manner
now or hereafter prescribed by the statutes of Kansas, and all rights and powers
conferred herein are granted subject to this reservation; and, in particular,
the corporation reserves the right and privilege to amend its Articles of
Incorporation from time to time so as to authorize other or additional classes
of shares (including preferential shares), to increase or decrease the number of
shares of any class now or hereafter authorized, to establish, limit or deny to
stockholders of any class the right to purchase or subscribe for any shares of
stock of the corporation of any class, whether now or hereafter authorized or
whether issued for cash, property or services or as a dividend or otherwise, or
to purchase or subscribe for any obligations, bonds, notes, debentures, or
securities or stock convertible into shares of stock of the corporation or
carrying or evidencing any right to purchase shares of stock of any class, and
to vary the preferences, designations, priorities, special powers,
qualifications, limitations, restrictions and the special, participating,
optional or relative rights or other characteristics in respect of the shares of
each class, and to accept and avail itself of, or subject itself to, the
provisions of any statutes of Kansas hereafter enacted pertaining to private
corporations, to exercise all the rights, powers and privileges conferred upon
corporations organized thereunder or accepting the provisions thereof and to
assume the obligations and duties imposed therein, upon the affirmative vote of
the holders of a majority of the shares of stock entitled to vote thereon, or,
in the event the statutes of Kansas then in effect require a separate vote by
classes of shares, upon the affirmative vote of the holders of a majority of the
shares of each class whose separate vote is required thereon, or, in the event
the statutes of Kansas then in effect require a larger vote, upon such larger
vote of the stockholders entitled to vote thereon as may then be required by
such statutes.
IN WITNESS WHEREOF, we have hereunto subscribed our names this 9th day
of September, 1970.
DEAN L. SMITH
-----------------------------------
Dean L. Smith
WILL J. MILLER
-----------------------------------
Will J. Miller, Jr.
EVERETT S. GILLE
-----------------------------------
Everett S. Gille
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Personally appeared before me, a notary public in and for Shawnee County,
Kansas, the above named DEAN L. SMITH, WILL J. MILLER and EVERETT S. GILLE, who
are personally known to me to be the same persons who executed the foregoing
instrument of writing, and such persons duly acknowledged the execution of the
same.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my official
seal this 9th day of September, 1970.
LOIS J. HEDRICK
-----------------------------------
Notary Public
My commission expires January 8, 1972
<PAGE>
Topeka, Kansas September 9, 1970
-----------------
Date
OFFICE OF SECRETARY OF STATE
RECEIVED OF SECURITY BOND FUND, INC.
and deposited in the State Treasury, fees on these Articles of Incorporation as
follows:
Application Fee $25.00
Filing and Recording Fee $2.50
Capitalization Fee $1,550.00
ELWILL M. SHANAHAN
-----------------------------------
Secretary of State
<PAGE>
CHANGE OF LOCATION OF REGISTERED OFFICE
AND/OR
CHANGE OF RESIDENT AGENT
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, Everett S. Gille, Vice President and Larry D. Armel, Secretary of
Security Bond Fund, Inc. a corporation organized and existing under and by
virtue of the laws of the State of Kansas, do hereby certify that a regular
meeting of the Board of Directors of said corporation held on the 11th day of
July, 1975, the following resolution was duly adopted.
Be it further resolved that the RESIDENT AGENT of said corporation in
the State of Kansas be changed from Will J. Miller, Jr., 700 Harrison Street,
Topeka, Shawnee, Kansas the same being of record in the office of Secretary of
State of Kansas to Security Management Company, Inc. 700 Harrison Street,
Topeka, Shawnee, Kansas 66636.
The President and Secretary are hereby authorized to file and record
the same in the manner as required by law:
EVERETT S. GILLE
-----------------------------------
Everett S. Gille, Vice-President
LARRY D. ARMEL
-----------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered that before me Lois J. Hedrick a Notary Public in and for the
County and State aforesaid, came Everett S. Gille, Vice-President and Larry D.
Armel, Secretary, of Security Bond Fund, Inc. a corporation personally known to
me to be the persons who executed the foregoing instrument of writing as vice
president and secretary respectively, and duly acknowledged the execution of the
same this 11th day of July, 1975.
LOIS J. HEDRICK
-----------------------------------
Notary Public
My commission expires January 8, 1976
NOTE: This form must be filed in duplicate.
Address of Resident Agent and Registered Office, as set forth above,
must be the same.
The statutory fee for filing is $20.00 and must accompany this form.
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
SECURITY BOND FUND, INC.
- --------------------------------------------------------------------------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, Everett S. Gille, President, and Lois J. Hedrick, Assistant Secretary
of Security Bond Fund, Inc., a corporation organized and existing under the laws
of the State of Kansas, and whose registered office is Security Benefit Life
Building, 700 Harrison Street, Topeka, Shawnee, Kansas, do hereby certify that
at the regular meeting of the Board of Directors of said corporation held on the
7th day of January, 1977 said board adopted a resolution setting forth the
following amendment to the Articles of Incorporation and declared its
advisability, to wit:
RESOLVED, that whereas the board of directors deems it advisable and
in the best interests of the corporation to increase the authorized
capitalization of the corporation, that the articles of incorporation
of the Fund be amended by deleting the first paragraph of Article
FIFTH in its entirety, and by inserting, in lieu thereof, the
following new first paragraph of Article FIFTH:
FIFTH: The total number of shares which the corporation
shall have authority to issue shall be 6,000,000 shares of
capital stock, each of the par valueof $1.00. The board of
directors shall have the power to fix the consideration to be
received by the corporation for any and all shares of stock
issued by the corporation, but at not less than the par value
thereof.
FURTHER RESOLVED, that the foregoing proposed amendment to the
Articles of Incorporation of the Fund be presented to the stockholders
of the Fund for consideration at the annual meeting of stockholders to
be held on March 25, 1977.
That thereafter, pursuant to said resolution and in accordance with the
by-laws and the laws of the State of Kansas, said directors called a
meeting of stockholders for the consideration of said amendment, and
thereafter, pursuant to said notice and in accordance with the statutes of
the State of Kansas, on the 25th day of March, 1977, said stockholders met
and convened and considered said proposed amendment.
That at said meeting the stockholders entitled to vote did vote upon said
amendment, and the majority of voting stockholders of the corporation had
voted for the proposed amendment certifying that the votes were 534,468
(common) shares in favor of the proposed amendment and 9,925 (common)
against the amendment.
That said amendment was duly adopted in accordance with the provisions of
K.S.A. 17-6602.
That the capital of said corporation will not be reduced under or by reason
of said amendment.
IN WITNESS WHEREOF we have hereunto set out hands and affixed the seal of
said corporation this 30th day of March, 1977.
EVERETT S. GILLE
------------------------------------
Everett S. Gille, Vice-President
LOIS J. HEDRICK
------------------------------------
Lois J. Hedrick, Assistant Secretary
STATE OF KANSAS )
) ss
COUNTY OF SHAWNEE)
Be it remembered, that before me, Janet M. Ladd a Notary Public in and for
the County and State aforesaid, came Everett S. Gille, President and Lois J.
Hedrick, Assistant Secretary of Security Bond Fund, Inc. a corporation,
personally known to me to be the persons who executed the foregoing instrument
of writing as president and assistant secretary respectively, and duly
acknowledged the execution of the same this 30th day of March, 1977.
JANET M. LADD
------------------------------------
Notary Public
My commission expires September 3, 1980.
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
SECURITY BOND FUND, INC.
- --------------------------------------------------------------------------------
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, Everett S. Gille, President, and Larry D. Armel, Secretary of Security
Bond Fund, Inc. a corporation organized and existing under the laws of the State
of Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee, Kansas, do hereby certify that at the regular
meeting of the Board of Directors of said corporation held on the 5th day of
January, 1979, said board adopted a resolution setting forth the following
amendment to the Articles of Incorporation and declared its advisability, to
wit:
RESOLVED, that whereas the board of directors deems it advisable and
in the best interests of the corporation to increase the authorized
capitalization of the corporation, that the articles of incorporation
of the Fund be amended by deleting the first paragraph of Article
FIFTH in its entirety, and by inserting, in lieu thereof, the
following new first paragraph of Article FIFTH:
FIFTH: The total number of shares which the corporation shall
have authority to issue shall be 10,000,000 shares of capital stock,
each of the par value of $1.00. The board of directors shall have the
power to fix the consideration to be received by the corporation for
any and all shares of stock issued by the corporation, but at not less
than the par value thereof.
FURTHER RESOLVED, that the foregoing proposed amendment to the
Articles of Incorporation of the Fund be presented to the stockholders
of the Fund for consideration at the annual meeting of stockholders to
be held on March 23, 1979.
That thereafter, pursuant to said resolution and in accordance with the
by-laws and the laws of the State of Kansas, said directors called a meeting of
stockholders for the consideration of said amendment, and thereafter, pursuant
to said notice and in accordance with the statutes of the State of Kansas, on
the 23rd day of March, 1979, said stockholders met and convened and considered
said proposed amendment.
That at said meeting the stockholders entitled to vote did vote upon said
amendment, and the majority of voting stockholders of the corporation had voted
for the proposed amendment certifying that the votes were 1,987,933 (common)
shares in favor of the proposed amendment and 95,636 (common) shares against the
amendment.
That said amendment was duly adopted in accordance with the provisions of
K.S.A. 17-6602.
That the capital of said corporation will not be reduced under or by reason
of said amendment.
IN WITNESS WHEREOF we have hereunto set out hands and affixed the seal of
said corporation this 23rd day of March, 1979.
EVERETT S. GILLE
-----------------------------------
Everett S. Gille, President
LARRY D. ARMEL
-----------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Lois J. Hedrick a Notary Public in
and for the County and State aforesaid, came Everett S. Gille, President and
Larry D. Armel, Secretary of Security Bond Fund, Inc. a corporation, personally
known to me to be the persons who executed the foregoing instrument of writing
as president and assistant secretary respectively, and duly acknowledged the
execution of the same this 23rd day of March, 1979.
LOIS J. HEDRICK
-----------------------------------
Notary Public
My commission expires January 8, 1980.
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
SECURITY BOND FUND, INC.
We, Everett S. Gille, President, and Larry D. Armel, Secretary of
Security Bond Fund, Inc., a corporation organized and existing under the laws of
the State of Kansas, and whose registered office is Security Benefit Life
Building, 700 Harrison Street, Topeka, Kansas, 66636, do hereby certify that at
the regular meeting of the board of directors of said corporation held on the
9th day of January, 1981, said board adopted resolutions setting forth the
following amendments to the articles of incorporation and declared their
advisability:
"RESOLVED, that the articles of incorporation of Security Bond Fund,
Inc. as heretofore amended, be further amended by deleting Article
FIRST in its entirety and by inserting, in lieu thereof, the following
new Article FIRST:
`FIRST: The name of the corporation is:
SECURITY BOND FUND.'"
"RESOLVED, that the articles of incorporation of Security Bond Fund,
Inc., as heretofore amended, be further amended by deleting the first
paragraph of Article FIFTH and by inserting, in lieu thereof, the
following:
`FIFTH: The total number of shares which the corporation shall
have authority to issue is 100,000,000 shares of capital stock,
each of the par value of $1.00 per share. The board of directors
shall have the power to fix the consideration to be received by
the corporation for any and all shares of stock issued by the
corporation, but at not less than the par value thereof'.
FURTHER RESOLVED, that the board of directors of this corporation
hereby declares the advisability of the foregoing amendments to
the articles of incorporation of this corporation and hereby
recommends that the stockholders of this corporation adopt said
amendments.
FURTHER RESOLVED, that at the annual meeting of the stockholders
of this corporation to be held at the offices of the corporation
in Topeka, Kansas, on March 27, 1981, beginning at 10:00 a.m. on
that day, the matter of the aforesaid proposed amendments to the
articles of incorporation of this corporation shall be submitted
to the stockholders entitled to vote thereon.
FURTHER RESOLVED, that in the event the stockholders of this
corporation shall approve and adopt the proposed amendments to
the articles of incorporation of this corporation as heretofore
adopted and recommended by this board of directors, the
appropriate officers of this corporation be, and they hereby are
authorized and directed, for and in behalf of this corporation,
to make, execute, verify, acknowledge and file or record in any
and all appropriate governmental offices any and all certificates
and other instruments, and to take any and all other action as
may be necessary to effectuate the said proposed amendments to
the articles of incorporation of this corporation."
That thereafter, pursuant to said resolutions and in accordance with
the bylaws and the laws of the State of Kansas, said directors called
a meeting of stockholders for the consideration of said amendments and
thereafter, pursuant to said notice and in accordance with the
statutes of the State of Kansas, on the 27th day of March, 1981, said
stockholders met and convened and considered said proposed amendments.
That at said meeting the stockholders entitled to vote did vote upon
the amendment to Article FIRST, and the majority of voting
stockholders of the corporation had voted for the proposed amendment
certifying that the votes were (Common Stock) 2,559,350 shares in
favor of the proposed amendment, (Common Stock) 223,217 shares against
the amendment, and (Common Stock) 477 shares abstained; and
That at said meeting the stockholders entitled to vote did vote upon
the amendment to Article FIFTH, and the majority of voting stockholders of the
corporation had voted for the proposed amendment certifying that the votes were
(Common Stock) 2,546,301 shares in favor of the proposed amendment, (Common
Stock) 236,266 shares against the amendment, and (Common Stock) 477 shares
abstained.
That said amendments were duly adopted in accordance with the
provisions of K.S.A. 16-6602, as amended.
That the capital of said corporation will not be reduced under or by
reason of said amendments.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the
seal of said corporation, this 30th day of March, 1981.
[Seal]
EVERETT S. GILLE
-----------------------------------
Everett S. Gille, President
LARRY D. ARMEL
-----------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Lois J. Hedrick, a Notary Public in
and for the County and State aforesaid, came Everett S. Gille, President, and
Larry D. Armel, Secretary, of Security Bond Fund, Inc., a corporation,
personally known to me to be the persons who executed the foregoing instrument
of writing as president and secretary, respectively, and duly acknowledged the
execution of the same this 30th day of March, 1981.
LOIS J. HEDRICK
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: January 8, 1984.
Submit in duplicate
A fee of $20.00 must accompany this form.
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
SECURITY BOND FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, Everett S. Gille, President, and Larry D. Armel, Secretary of
Security Bond Fund, Inc., a corporation organized and existing under the laws of
the State of Kansas, and whose registered office is Security Benefit Life
Building, 700 Harrison Street, Topeka, Shawnee, Kansas, do hereby certify that
at the regular meeting of the Board of Directors of said Corporation held on the
7th day of January, 1983, said board adopted resolutions setting forth the
following amendments to the Articles of Incorporation and declared their
advisability, to wit:
"RESOLVED, that the articles of incorporation of Security Bond Fund,
as heretofore amended, be further amended by deleting Article FIFTH in
its entirety and by inserting, in lieu thereof, the following new
Article FIFTH:
`FIFTH: The total number of shares of stock which the Corporation
shall have authority to issue is Five Hundred Million (500,000,000) shares
of common stock, of the par value of One Dollar ($1.00) per share. The
board of directors of the corporation is expressly authorized to cause
shares of common stock of the corporation authorized herein to be issued in
one or more series and to increase or decrease the number of shares so
authorized to be issued in any such series.
The following provisions are hereby adopted for the purpose of setting
forth the powers, rights, qualifications, limitations or restrictions of the
capital stock of the corporation:
(1) At all meetings of stockholders each stockholder of the corporation of
any class or series shall be entitled to one vote in person or by proxy on
each matter submitted to a vote at such meeting for each share of capital
stock of any class or series standing in his name on the books of the
corporation on the date, fixed in accordance with the Bylaws, for
determination of stockholders entitled to vote at such meeting. At all
elections of directors each stockholder of any class or series shall be
entitled to as many votes as shall equal the number of shares of stock of
any class or series multiplied by the number of directors to be elected,
and he may cast all of such votes for a single director or may distribute
them among the number to be voted for, or any two or more of them as he may
see fit.
(2) All shares of stock of the corporation of any class or series shall be
nonassessable.
(3) No holder of any shares of stock of the corporation of any class or
series shall be entitled as such, as a matter of right, to subscribe for or
purchase any shares of stock of the corporation of any class or series,
whether now or hereafter authorized or whether issued for cash, property or
services or as a dividend or otherwise, or to subscribe for or purchase any
obligations, bonds, notes, debentures, other securities or stock
convertible into shares of stock of the corporation of any class or series
or carrying or evidencing any right to purchase shares of stock of any
class or series.
(4) All persons who shall acquire stock in the corporation shall acquire
the same subject to the provisions of these articles of incorporation".
FURTHER RESOLVED, that the board of directors of this corporation
hereby declares the advisability of the foregoing amendment to the
articles of incorporation of this corporation and hereby recommends
that the stockholders of this corporation adopt said amendment.
FURTHER RESOLVED, that at the annual meeting of the stockholders of
this corporation to be held at the offices of the corporation in
Topeka, Kansas, on March 25, 1983, beginning at 10:00 a.m. on that
day, the matter of the aforesaid proposed amendment to the articles of
incorporation of this corporation shall be submitted to the
stockholders entitled to vote thereon.
FURTHER RESOLVED, that in the event the stockholders of this
corporation shall approve and adopt the proposed amendment to the
articles of incorporation of this corporation as heretofore adopted
and recommended by this board of directors, the appropriate officers
of this corporation be, and they hereby are authorized and directed,
for and in behalf of this corporation, to make, execute, verify,
acknowledge and file or record in any and all appropriate governmental
offices any and all certificates and other instruments, and to take
any and all other action as may be necessary to effectuate the
proposed amendment to the articles of incorporation of this
corporation.
That thereafter, pursuant to said resolution and in accordance with
the by-laws and the laws of the State of Kansas, said directors called a meeting
of stockholders for the consideration of said amendment, and thereafter,
pursuant to said notice and in accordance with the statutes of the State of
Kansas, on the 25th day of March, 1983, said stockholders met and convened and
considered said proposed amendment.
That at said meeting the stockholders entitled to vote did vote upon
said amendment, and the majority of voting stockholders of the corporation had
voted for the proposed amendment certifying that the votes were
3,242,059 Common Stock shares in favor of the proposed amendment,
170,544 Common Stock shares against the amendment, and
3,642 Common Stock shares abstained from voting on the amendment.
That said amendment was duly adopted in accordance with the provisions
of K.S.A. 17-6602, as amended.
That the capital of said corporation will not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the
seal of said Corporation, this 30th day of March, 1983.
[Seal]
EVERETT S. GILLE
-----------------------------------
Everett S. Gille, President
LARRY D. ARMEL
-----------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Lois J. Hedrick, a Notary Public in
and for the County and State aforesaid, came Everett S. Gille, President, and
Larry D. Armel, Secretary, of Security Bond Fund, a corporation, personally
known to me to be the persons who executed the foregoing instrument of writing
as President and Secretary, respectively, and duly acknowledged the execution of
the same this 30th day of March, 1983.
LOIS J. HEDRICK
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: January 8, 1984.
Submit to this office in duplicate.
A fee of $20.00 must accompany this form.
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
SECURITY BOND FUND
We, Everett S. Gille, President, and Barbara W. Rankin, Secretary, of
Security Bond Fund, a corporation organized and existing under the laws of the
State of Kansas, and whose registered office is at 700 Harrison Street, in the
city of Topeka, county of Shawnee, 66636, Kansas, do hereby certify that at the
special meeting of the Board of Directors of said corporation held on the 3rd
day of May, 1985, said board adopted a resolution setting forth the following
amendments to the Articles of Incorporation and declared its advisability:
"RESOLVED, that the articles of incorporation of Security Bond
Fund, as heretofore amended, be further amended by deleting
Article FIRST in its entirety and by inserting, in lieu thereof,
the following new Article FIRST:
"FIRST: The name of the corporation (hereinafter called the
Corporation) is SECURITY INCOME FUND."
FURTHER RESOLVED, that the board of directors of this corporation
hereby declares the advisability of the foregoing amendment to
the articles of incorporation of this corporation and hereby
recommends that the stockholders of this corporation adopt said
amendment.
FURTHER RESOLVED, that in the event the stockholders of this
corporation shall approve and adopt the proposed amendment to the
articles of incorporation of this corporation as heretofore
adopted and recommended by this board of directors, the
appropriate officers of this corporation be, and they hereby are
authorized and directed, for and in behalf of this corporation,
to make, execute, verify, acknowledge and file or record in any
and all appropriate governmental offices any and all certificates
and other instruments, and to take any and all other action as
may be necessary to effectuate the proposed amendment to the
articles of incorporation of this corporation."
We further certify that thereafter, pursuant to said resolution, and
in accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, on the 12th day of July,
1985, said stockholders convened and considered the proposed amendment.
We further certify that at said meeting a majority of the stockholders
entitled to vote voted in favor of the proposed amendment, and that the votes
were 2,996,852 common shares in favor of the proposed amendment and 406,842
common shares against the amendment.
We further certify that the amendment was duly adopted in accordance
with the provisions of K.S.A. 17-6602, as amended.
We further certify that the capital of said corporation will not be
reduced under or by reason of said amendment.
IN WITNESS WHEREOF we have hereunto set our hands and affixed the seal
of said corporation this 23rd day of July, 1985.
[Seal]
EVERETT S. GILLE
-----------------------------------
Everett S. Gille, President
BARBARA W. RANKIN
-----------------------------------
Barbara W. Rankin, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, a Notary Public in and for the
aforesaid county and state, personally appeared Everett S. Gille, President, and
Barbara W. Rankin, Secretary, of Security Bond Fund, a corporation, who are
known to me to be the same persons who executed the foregoing Certificate of
Amendment to Articles of Incorporation, and duly acknowledged the execution of
the same this 23rd day of July, 1985.
LOIS J. HEDRICK
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: June 1, 1988
THIS FORM MUST BE SUBMITTED TO THIS OFFICE IN DUPLICATE.
THE FILING FEE OF $20 MUST ACCOMPANY THIS DOCUMENT.
MAIL THIS DOCUMENT, WITH FEE, TO:
Secretary of State
Capitol, 2nd Floor
Topeka, KS 66612
<PAGE>
CERTIFICATE OF
DESIGNATION OF SERIES
OF COMMON STOCK
OF
SECURITY INCOME FUND
STATE OF KANSAS )
)ss.:
COUNTY OF SHAWNEE)
We, Everett S. Gille, President, and Barbara W. Rankin, Secretary, of
Security Income Fund, a corporation organized and existing under the laws of the
State of Kansas, and whose registered office is the Security Benefit Life
Building, 700 Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify
that pursuant to the authority expressly vested in the board of directors by the
provisions of the corporation's articles of incorporation, the board of
directors of said corporation at its regular meeting duly convened and held on
the 3rd day of May, 1985, adopted resolutions establishing two separate series
of common stock of the corporation and setting forth the preferences, rights,
privileges and restrictions of such series, which resolutions provided in their
entirety as follows:
RESOLVED, that, pursuant to Article FIFTH of the Fund's articles of
incorporation, the Fund shall be authorized to issue 200,000 shares of
common stock of the Fund, each of the par value of One Dollar ($1.00)
per share, in the Corporate Bond Series, the investment objective of
which shall be identical to that of current investment objective of
the Fund, to wit: to conserve principal while generating interest
income by investing in upper medium to high-grade debt securities,
primarily those issued by U.S. and Canadian corporations and
securities which are obligations of or guaranteed by the U.S.
Government or any of its agencies. The Fund shall also be authorized
to issue 200,000 shares of common stock of the Fund, each of the par
value of One Dollar ($1.00) per share, in the U.S. Government Series,
the investment objective of which is to provide a high level of
interest income with security of principal by investing in securities
which are guaranteed or issued by the U.S. Government, its agencies or
instrumentalities.
FURTHER RESOLVED, that the powers, rights, qualifications, limitations
and restrictions of the shares of the Fund's series of common stock,
as set forth in the minutes of the January 7, 1983 meeting of this
board of directors, are hereby reaffirmed and incorporated by
reference in the minutes of this meeting.
FURTHER RESOLVED, that the issuance of shares in the above described
series shall take place upon the effectiveness of the Fund's
post-effective amendment, filed with the Securities and Exchange
Commission, updating the material contained in the Fund's registration
statement and reflecting the conversion of the Fund into an investment
company of the Series type, as further authorized below.
FURTHER RESOLVED, that, the appropriate officers of the corporation
be, and they hereby are authorized and directed, for and in behalf of
this corporation, to make, execute, verify, acknowledge and file or
record in any and all appropriate governmental offices any and all
other action as may be necessary to effectuate the proposed
conversion.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the
seal of the corporation this 26th day of July, 1985.
EVERETT S. GILLE
-----------------------------------
EVERETT S. GILLE, President
BARBARA W. RANKIN
-----------------------------------
BARBARA W. RANKIN, Secretary
STATE OF KANSAS )
) ss.:
COUNTY OF SHAWNEE)
Be it remembered, that before me, Lois J. Hedrick, a Notary Public in
and for the County and State aforesaid, came EVERETT S. GILLE, President, and
BARBARA W. RANKIN, Secretary, of Security Income Fund, a Kansas corporation,
personally known to me to be the persons who executed the foregoing instrument
of writing as president and secretary, respectively, and duly acknowledged the
execution of the same this 26th day of July, 1985.
LOIS J. HEDRICK
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: June 1, 1988.
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES OF COMMON STOCK
OF
SECURITY INCOME FUND
STATE OF KANSAS )
) ss.:
COUNTY OF SHAWNEE)
We, Everett S. Gille, President, and Barbara W. Rankin, Secretary of
Security Income Fund, a corporation organized and existing under the laws of the
State of Kansas, and whose registered office is the Security Benefit Life
Building, 700 Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify
that pursuant to the authority expressly vested in the board of directors by the
provisions of the corporation's articles of incorporation, the board of
directors of said corporation at its regular meeting duly convened and held on
the 10th day of January, 1986, adopted resolutions establishing a third separate
series of common stock of the corporation and setting forth the preferences,
rights, privileges and restrictions of such series, which resolutions provided
in their entirety as follows:
RESOLVED, that, pursuant to the Article FIFTH of the Fund's articles
of incorporation, the Fund shall be authorized to issue 100,000,000
shares of common stock of the Fund, each of the par value of One
Dollar ($1.00) per share, in the High-Yield Series, the investment
objective of which is to seek high current income by investing in
higher yielding, long-term securities.
FURTHER RESOLVED, that, the powers, rights, qualifications,
limitations and restrictions of the shares of the Fund's series of
common stock, as set forth in the minutes of the January 7, 1983
meeting of this board of directors, are hereby reaffirmed and
incorporated by reference into the minutes of this meeting.
FURTHER RESOLVED, that, the issuance of shares in the above described
series shall take place upon the effectiveness of the Fund's
post-effective amendment, filed with the Securities and Exchange
Commission, updating the material contained in the Fund's registration
statement and reflecting the conversion of the Fund into an investment
company of the Series type, as further authorized below.
FURTHER RESOLVED, that the appropriate officers of the corporation be,
and they hereby are authorized and directed, for and in behalf of this
corporation, to make, execute, verify, acknowledge and file or record
in any and all appropriate governmental offices any and all
appropriate governmental offices any and all other action as may be
necessary to effectuate the proposed conversion.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the
seal of the corporation this 6th day of February, 1986.
EVERETT S. GILLE
-----------------------------------
EVERETT S. GILLE, President
BARBARA W. RANKIN
-----------------------------------
BARBARA W. RANKIN, Secretary
STATE OF KANSAS )
) ss.:
COUNTY OF SHAWNEE)
Be it remembered, that before me, Glenda J. Overstreet, a Notary Public in
and for the County and State aforesaid, came EVERETT S. GILLE, President, and
BARBARA W. RANKIN,Secretary, of Security Income Fund, a Kansas corporation,
personally known to me to be the persons who executed the foregoing instrument
of writing as president and secretary, respectively, and duly acknowledged the
execution of the same this 6th day of February, 1986.
GLENDA J. OVERSTREET
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: February 1, 1990
<PAGE>
AMENDED
CERTIFICATE OF DESIGNATION
OF SERIES OF COMMON STOCK
OF
SECURITY INCOME FUND
STATE OF KANSAS )
) ss.:
COUNTY OF SHAWNEE)
We, Everett S. Gille, President, and Barbara W. Rankin, Secretary, of
Security Income Fund, a corporation organized and existing under the laws of the
State of Kansas, and whose registered office is the Security Benefit Life
Building, 700 Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify
that pursuant to the authority expressly vested in the board of directors by the
provisions of the corporation's articles of incorporation, the board of
directors of said corporation at its regular meeting duly convened and held on
the 10th day of January, 1986, adopted resolutions establishing two separate
series of common stock of the corporation and setting forth the preferences,
rights, privileges and restrictions of such series, which resolutions provided
in their entirety as follows:
RESOLVED, that, pursuant to the Article FIFTH of the Fund's articles
of incorporation, the Fund shall be authorized to issue 200,000,000
shares of common stock of the Fund, each of the par value of One
Dollar ($1.00) per share, in the Corporate Bond Series, the investment
objective of which shall be identical to that of current investment
objective of the Fund, to wit: to conserve principal while generating
interest income by investing in upper medium to high-grade debt
securities primarily those issued by U.S. and Canadian corporations
and securities which are obligations of or guaranteed by the U.S.
Government or any of its agencies. The Fund shall also be authorized
to issue 200,000,000 shares of common stock of the Fund, each of the
par value of One Dollar ($1.00) per share, in the U.S. Government
Series, the investment objective of which is to provide a high level
of interest income with security of principal by investing in
securities which are guaranteed or issued by the U.S. Government, its
agencies or instrumentalities.
FURTHER RESOLVED, that, the powers, rights, qualifications,
limitations and restrictions of the shares of the Fund's series of
common stock, as set forth in the minutes of the January 7, 1983
meeting of this board of directors, are hereby reaffirmed and
incorporated by reference into the minutes of this meeting.
FURTHER RESOLVED, that, the issuance of shares in the above described
series shall take place upon the effectiveness of the Fund's
post-effective amendment, filed with the Securities and Exchange
Commission, updating the material contained in the Fund's registration
statement and reflecting the conversion of the Fund into an investment
company of the Series type, as further authorized below.
FURTHER RESOLVED, that the appropriate officers of the corporation be,
and they hereby are authorized and directed, for and in behalf of this
corporation, to make, execute, verify, acknowledge and file or record
in any and all appropriate governmental offices any and all
appropriate governmental offices any and all other action as may be
necessary to effectuate the proposed conversion.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the
seal of the corporation this 6th day of February, 1986.
EVERETT S. GILLE
-----------------------------------
EVERETT S. GILLE, President
BARBARA W. RANKIN
-----------------------------------
BARBARA W. RANKIN, Secretary
STATE OF KANSAS )
) ss.:
COUNTY OF SHAWNEE)
Be it remembered, that before me, Glenda J. Overstreet, a Notary
Public in and for the County and State aforesaid, came EVERETT S. GILLE,
President, and BARBARA W. RANKIN, Secretary, of Security Income Fund, a Kansas
corporation, personally known to me to be the persons who executed the foregoing
instrument of writing as president and secretary, respectively, and duly
acknowledged the execution of the same this 6th day of February, 1986.
GLENDA J. OVERSTREET
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: February 1, 1990
<PAGE>
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
SECURITY INCOME FUND
We, Michael J Provines, President , and Amy J. Lee, Secretary of the
above named corporation, a corporation organized and existing under the laws of
the State of Kansas, do hereby certify that at a meeting of the Board of
Directors of said corporation, the board adopted a resolution setting forth the
following amendment to the Articles of Incorporation and declaring its
advisability;
"A director shall not be personally liable to the corporation or to
its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this sentence shall not eliminate nor limit the
liability of a director:
A. for any breach of his or her duty of loyalty to the corporation or
to itstockholders:
B. for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
C. for an unlawful dividend, stock purchase or redemption under the
provisions of Kansas Statutes Annotated (K.S.A.) 17-6424 and
amendments thereto; or
D. for any transaction from which the director derived an improper
personal benefit."
We further certify that thereafter, pursuant to said resolution, and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at the meeting a majority of the stockholders entitled
to vote voted in favor of the proposed amendment.
We further certify that the amendment was duly adopted in accordance with the
provisions of K.S.A. 17-6602, as amended.
We further certify that the capital of said corporation will not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, we have hereunto set out hands and affixed the seal of said
corporation this 19th day of April, 1988.
MICHAEL J. PROVINES
-----------------------------------
Michael J. Provines, President
AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, a Notary Public in and for the
aforesaid county and state, personally appeared Michael J. Provines, President,
and Amy J. Lee, Secretary, of the corporation named in this document, who are
known to me to be the same persons who executed the foregoing certificate, and
duly acknowledged the execution of the same this 19th day of April, 1988.
CONNIE BRUNGARDT
-----------------------------------
Notary Public
My Commission Expires: November 30, 1991.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE,
WITH $20.00 FILING FEE, TO:
Secretary of State
Capitol. 2nd Floor
Topeka, KS 66612
(913) 296-2236
<PAGE>
CERTIFICATE OF DISSOLUTION
OF SERIES OF COMMON STOCK
OF
SECURITY INCOME FUND
PURSUANT TO K.S.A. SECTION 17-6401(g)
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, Michael J. Provines, President, and Amy J. Lee, Secretary, of Security
Income Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is the Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to the authority expressly vested in the Board of Directors by the provisions of
the corporation's Articles of Incorporation, the Board of Directors of said
corporation by unanimous written consent dated December 9, 1991, adopted a
resolution dissolving the High Yield Series of common stock of the corporation,
which resolution provided in its entirety as follows:
RESOLVED, that as of December 9, 1991, there are no authorized shares
of the High Yield Series of Security Income Fund outstanding and none
will be issued in the future.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 9th day of December, 1991.
MICHAEL J. PROVINES
-----------------------------------
Michael J. Provines, President
AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
Be it remembered, that on this 9th day of December, 1991, before me, the
undersigned a notary public in and for the county and state aforesaid, came
Michael J. Provines, President, and Amy J. Lee, Secretary of Security Income
Fund, a Kansas corporation, personally known to me to be the persons who
executed the foregoing instrument of writing as President and Secretary,
respectively, and duly acknowledged the execution of the same to be the act and
deed of said corporation.
In testimony whereof, I have hereunto set my hand and affixed my notarial seal
the day and year last above written.
LINDA K. GIFFORD
-----------------------------------
Notary Public
My Commission Expires: November 1, 1993.
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
SECURITY INCOME FUND
We, Michael J Provines, President , and Amy J. Lee, Secretary of the above named
corporation, a corporation organized and existing under the laws of the State of
Kansas, do hereby certify that at a meeting of the Board of Directors of said
corporation, the board adopted a resolution setting forth the following
amendment to the Articles of Incorporation and declaring its advisability:
See attached amendment
We further certify that thereafter, pursuant to said resolution, and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at a meeting a majority of the stockholders entitled to
vote voted in favor of the proposed amendment.
We further certify that the amendment was duly adopted in accordance with the
provisions of K.S.A. 17-6602, as amended.
IN WITNESS WHEREOF, we have hereunto set out hands and affixed the seal of said
corporation this 27th day of July, 1993.
MICHAEL J. PROVINES
-----------------------------------
Michael J. Provines, President
AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered that before me, a Notary Public in and for the aforesaid county
and state, personally appeared Michael J. Provines, President, and Amy J. Lee,
Secretary, the corporation named in this document, who are known to me to be the
same persons who executed the foregoing certificate, and duly acknowledged the
execution of the same this 27th day of July, 1993.
PEGGY S. AVEY
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: November 21, 1996.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE,
WITH $20 FILING FEE, TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-4564
<PAGE>
SECURITY INCOME FUND
The Board of Directors of Security Income Fund recommends that the Articles of
Incorporation be amended by deleting Article Fifth in its entirety and by
inserting, in lieu therefor, the following new Article:
FIFTH: The total number of shares of stock which the corporation shall have
authority to issue shall be Four Hundred Million (400,000,000) shares of common
stock, each of the par value of One Dollar ($1.00) per share. The board of
directors of the corporation is expressly authorized to cause shares of common
stock of the corporation authorized herein to be issued in one or more classes
or series as may be established from time to time by setting or changing in one
or more respects the voting powers, rights, qualifications, limitations or
restrictions of such shares of stock and to increase or decrease the number of
shares so authorized to be issued in any such class or series.
The following provisions are hereby adopted for the purpose of setting forth the
powers, rights, qualifications, limitations or restrictions of the capital stock
of the corporation (unless provided otherwise by the board of directors with
respect to any such additional class or series at the time of establishing and
designating such additional class or series):
(1) At all meetings of stockholders each stockholder of the corporation of any
class or series shall be entitled to one vote in person or by proxy on each
matter submitted to a vote at such meeting for each share of capital stock
of any class or series standing in the stockholder's name on the books of
the corporation on the date, fixed in accordance with the Bylaws, for
determination of stockholders entitled to vote at such meeting. At all
elections of directors each stockholder of any class or series shall be
entitled to as many votes as shall equal the number of shares of stock of
any class or series multiplied by the number of directors to be elected,
and stockholders may cast all of such votes for a single director or may
distribute them among the number to be voted for, or any two or more of
them as they may see fit.
(2) All shares of stock of the corporation of any class or series shall be
nonassessable.
(3) No holder of any shares of stock of the corporation of any class or series
shall be entitled as such, as a matter of right, to subscribe for or
purchase any shares of stock of the corporation of any class or series,
whether now or hereafter authorized or whether issued for cash, property or
services or as a dividend or otherwise, or to subscribe for or purchase any
obligations, bonds, notes, debentures, other securities or stock
convertible into shares of stock of the corporation of any class or series
or carrying or evidencing any right to purchase shares of stock of any
class or series.
(4) All persons who shall acquire stock in the corporation shall acquire the
same subject to the provisions of these articles of incorporation.
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY INCOME FUND
STATE OF KANSAS )
)ss.
COUNTY OF SHAWNEE)
We, Michael J. Provines, President, and Brenda M. Luthi, Assistant Secretary, of
Security Income Fund, a corporation organized and existing under the laws of the
State of Kansas, and whose registered office is the Security Benefit Life
Building, 700 Harrison Street, Topeka, Shawnee, Kansas, do hereby certify that
pursuant to the authority expressly vested in the Board of Directors by the
provisions of the corporation's Articles of Incorporation, the Board of
Directors of said corporation at a meeting duly convened and held on the 23rd
day of July, 1993, adopted resolutions establishing two new series of common
stock in addition to those series of common stock currently being issued by the
corporation. Resolutions were also adopted which set forth the preferences,
rights, privileges and restrictions of the separate series of stock of Security
Income Fund, which resolutions are provided in their entirety as follows:
RESOLVED that, pursuant to the authority vested in the Board of Directors of
Security Income Fund by its Articles of Incorporation, the officers of the Fund
are hereby directed and authorized to establish two new series of the Fund and
to redesignate the existing series. The existing series shall be known as
Corporate Bond Series A and U.S. Government Series A. The new series hereby
established shall be known as Corporate Bond Series B and U.S. Government Series
B. The officers of the Fund are hereby directed and authorized to allocate
100,000,000 $1.00 par value shares of the Fund's authorized capital stock of
400,000,000 shares to each series.
FURTHER RESOLVED, that the preferences, rights, privileges and restrictions of
the shares of each series of Security Income Fund shall be as follows:
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless of
series, shall be equal.
2. At all meetings of stockholders each stockholder of the corporation shall be
entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled to
as many votes as shall equal the number of shares of stock multiplied by the
number of directors to be elected, and he or she may cast all of such votes
for a single director or may distribute them among the number to be voted
for, or any two or more of them as he or she may see fit. Notwithstanding
the foregoing, (i) if any matter is submitted to the stockholders which does
not affect the interest of all series, then only stockholders of the
affected series shall be entitled to vote and (ii) in the event the
Investment Company Act of 1940, as amended, or the rules and regulations
promulgated thereunder shall require a greater or different vote than would
otherwise be required herein or by the Articles of Incorporation of the
corporation, such greater or different voting requirement shall also be
satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset value
thereof, such redemption and the valuation and payment in connection
therewith to be made in compliance with the provisions of the
Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the Corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available thereof.
4. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
5. (a) Outstanding shares of Corporate Bond Series A and B shall represent
a stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
Outstanding shares of U.S. Government Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
(b) All cash and other property received by the corporation from the sale
of shares of Corporate Bond Series A and B and the U.S. Government
Series A and B, respectively, all securities and other property held as
a result of the investment and reinvestment of such cash and other
property, all revenues and income received or receivable with respect
to such cash, other property, investments and reinvestments, and all
proceeds derived from the sale, exchange, liquidation or other
disposition of any of the foregoing, shall be allocated to the
Corporate Bond Series A and B or U.S. Government Series A and B to
which they relate and held for the benefit of the stockholders owning
shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and charged
to the series to which such loss, liability or expense relates. Where
any loss, liability or expense relates to more than one series, the
Board of Directors shall allocate the same between or among such series
pro rata based on the respective net asset values of such series or on
such other basis as the Board of Directors deems appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
6. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
7. Dividends may be paid when, as and if declared by the Board of Directors out
of funds legally available therefor. Shares of Corporate Bond Series A and B
represent a stockholder interest in a particular fund of assets and,
accordingly, dividends shall be calculated and declared for these series in
the same manner, at the same time, on the same day, and will be paid at the
same dividend rate except that expenses attributable to Corporate Bond
Series A or B and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Corporate Bond
Series. Stockholders of the Corporate Bond Series shall share in dividends
declared and paid with respect to such series pro rata based on their
ownership of shares of such series. Shares of U.S. Government Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected U.S.
Government Series. Stockholders of the U.S. Government Series shall share in
dividends declared and paid with respect to such series pro rata based on
their ownership of shares of such series. Whenever dividends are declared
and paid with respect to the Corporate Bond Series A and B or the U.S.
Government Series A and B, the holders of shares of the other series shall
have no rights in or to such dividends.
8. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
9. On the eighth anniversary of the purchase of shares of the Corporate Bond
Series B or the U.S. Government Series B (except those purchased through the
reinvestment of dividends and other distributions) will automatically
convert to Corporate Bond Series A or U.S. Government Series A,
respectively, at the relative net asset values of each of the series without
the imposition of any sales load, fee or other charge. All shares in a
stockholder's account that were purchased through the reinvestment of
dividends and other distributions will be considered to be held in a
separate sub-account. Each time Series B shares are converted to Series A
shares, a pro rata portion of the Series B shares held in the sub-account
will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
Corporation this 19th day of October, 1993.
MICHAEL J. PROVINES
------------------------------------
Michael J. Provines, President
BRENDA M. LUTHI
------------------------------------
Brenda M. Luthi, Assistant Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Peggy S. Avey, a Notary Public in and for the
County and State aforesaid, came Michael J. Provines, President, and Brenda M.
Luthi, Assistant Secretary, of Security Income Fund, a Kansas Corporation,
personally known to me to be the persons who executed the foregoing instrument
of writing as President and Secretary, respectively, and duly acknowledged the
execution of the same this 19th day of October, 1993.
PEGGY S. AVEY
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: November 21, 1996
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
SECURITY INCOME FUND
We, John D. Cleland, President , and Amy J. Lee, Secretary of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, do hereby certify that at a meeting of the Board of Directors of said
corporation, the board adopted a resolution setting forth the following
amendment to the Articles of Incorporation and declaring its advisability:
See attached amendment
We further certify that thereafter, pursuant to said resolution, and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at a meeting a majority of the stockholders entitled to
vote, voted in favor of the proposed amendment.
We further certify that the amendment was duly adopted in accordance with the
provisions of K.S.A. 17-6602, as amended.
IN WITNESS WHEREOF, we have hereunto set out hands and affixed the seal of the
corporation this 21st day of December, 1994.
JOHN D. CLELAND
-----------------------------------
John D. Cleland, President
AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, a Notary Public in and for the aforesaid
county and state, personally appeared John D. Cleland, President, and Amy J.
Lee, Secretary, of Security Income Fund, who are known to me to be the same
persons who executed the foregoing certificate and duly acknowledged the
execution, of the same this 21st day of December, 1994
JUDITH M. RALSTON
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: January 1, 1995.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE,
WITH $20 FILING FEE, TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-4564
<PAGE>
SECURITY INCOME FUND
The Board of Directors of Security Income Fund recommends that the Articles of
Incorporation be amended by deleting the first paragraph of Article Fifth and by
inserting, in lieu therefor, the following new Article:
FIFTH: The total number of shares of stock which the corporation shall have
authority to issue shall be one billion (1,000,000,000) shares of common
stock, each of the par value of one dollar ($1.00) per share. The board of
directors of the corporation is expressly authorized to cause shares of
common stock of the corporation authorized herein to be issued in one or
more classes or series as may be established from time to time by setting
or changing in one or more respects the voting powers, rights,
qualifications, limitations or restrictions of such shares of stock and to
increase or decrease the number of shares so authorized to be issued in any
such class or series.
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY INCOME FUND
STATE OF KANSAS )
)ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 21st day of October,
1994, adopted resolutions (i) establishing two new series of common stock in
addition to those four series of common stock currently being issued by the
corporation, and (ii) allocating the corporation's authorized capital stock
among the six separate series of common stock of the corporation. Resolutions
were also adopted which for the two new series set forth and for the existing
four series reaffirmed, the preferences, rights, privileges and restrictions of
separate series of stock of Security Income Fund, which resolutions are provided
in their entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of two new series
of common stock of Security Income Fund in addition to the four separate series
of common stock presently issued by the fund designated as U.S. Government
Series A, U.S. Government Series B, Corporate Bond Series A and Corporate Bond
Series B.
WHEREAS, the corporation's shareholders will consider an amendment to the
corporation's articles of incorporation to increase the authorized capital stock
of the corporation from 400,000,000 to 1,000,000,000 shares, at a meeting of
shareholders to be held December 21, 1994; and
WHEREAS, upon approval by shareholders of the proposed amendment to the
corporation's articles of incorporation, the Board of Directors wishes to
reallocate the 1,000,000,000 shares of authorized capital stock among the
series.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation are hereby
directed and authorized to establish two new series of the Security Income Fund
designated as Limited Maturity Bond Series A and Limited Maturity Bond Series B.
FURTHER RESOLVED, that, upon approval by shareholders of an amendment increasing
the corporation's authorized capital stock from 400,000,000 to 1,000,000,000
shares, the officers of the corporation are hereby directed and authorized to
allocate the corporation's authorized capital stock of 1,000,000,000 shares as
follows: 200,000,000 $1.00 par value shares to each of Corporate Bond Series A
and B; 100,000,000 $1.00 par value shares to each of U.S. Government
Series A and B; 100,000,000 $1.00 par value shares to each of Limited Maturity
Bond Series A and B; and 200,000,000 $1.00 par value shares shall remain
unallocated.
FURTHER RESOLVED, that the preferences, rights, privileges and restrictions of
the shares of each series of Security Income Fund shall be as follows:
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless of
series, shall be equal.
2. At all meetings of stockholders each stockholder of the corporation shall be
entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled to
as many votes as shall equal the number of shares of stock multiplied by the
number of directors to be elected, and he or she may cast all of such votes
for a single director or may distribute them among the number to be voted
for, or any two or more of them as he or she may see fit. Notwithstanding
the foregoing, (i) if any matter is submitted to the stockholders which does
not affect the interests of all series, then only stockholders of the
affected series shall be entitled to vote and (ii) in the event the
Investment Company Act of 1940, as amended, or the rules and regulations
promulgated thereunder shall require a greater or different vote than would
otherwise be required herein or by the Articles of Incorporation of the
corporation, such greater or different voting requirement shall also be
satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset value
thereof, such redemption and the valuation and payment in connection
therewith to be made in compliance with the provisions of the
Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the Corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
5. (a) Outstanding shares of Corporate Bond Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
Outstanding shares of U.S. Government Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
Outstanding shares of Limited Maturity Bond Series A and B shall
represent a stockholder interest in a particular fund of assets held by
the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors.
(b) All cash and other property received by the corporation from the sale
of shares of Corporate Bond Series A and B, the U.S. Government Series
A and B, and Limited Maturity Bond Series A and B, respectively, all
securities and other property held as a result of the investment and
reinvestment of such cash and other property, all revenues and income
received or receivable with respect to such cash, other property,
investments and reinvestments, and all proceeds derived from the sale,
exchange, liquidation or other disposition of any of the foregoing,
shall be allocated to the Corporate Bond Series A and B, U.S.
Government Series A and B, or Limited Maturity Bond Series A and B, to
which they relate and held for the benefit of the stockholders owning
shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and charged
to the series to which such loss, liability or expense relates. Where
any loss, liability or expense relates to more than one series, the
Board of Directors shall allocate the same between or among such series
pro rata based on the respective net asset values of such series or on
such other basis as the Board of Directors deems appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
6. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
7. Dividends may be paid when, as and if declared by the Board of Directors out
of funds legally available therefor. Shares of Corporate Bond Series A and B
represent a stockholder interest in a particular fund of assets and,
accordingly, dividends shall be calculated and declared for these series in
the same manner, at the same time, on the same day, and will be paid at the
same dividend rate except that expenses attributable to Corporate Bond
Series A or B and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Corporate Bond
Series. Stockholders of the Corporate Bond Series shall share in dividends
declared and paid with respect to such series pro rata based on their
ownership of shares of such series. Shares of U.S. Government Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected U.S.
Government Series. Stockholders of the U.S. Government Series shall share in
dividends declared and paid with respect to such series pro rata based on
their ownership of shares of such series. Shares of Limited Maturity Bond
Series A and B represent a stockholder interest in a particular fund of
assets and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and will
be paid at the same dividend rate except that expenses attributable to
Limited Maturity Bond Series A or B and payments made pursuant to a 12b-1
Plan or Shareholder Services Plan shall be borne exclusively by the affected
Limited Maturity Bond Series. Stockholders of the Limited Maturity Bond
Series shall share in dividends declared and paid with respect to such
series pro rata based on their ownership of shares of such series. Whenever
dividends are declared and paid with respect to the Corporate Bond Series A
and B, U.S. Government Series A and B, or Limited Maturity Bond Series A and
B, the holders of shares of the other series shall have no rights in or to
such dividends.
8. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
9. On the eighth anniversary of the purchase of shares of the Corporate Bond
Series B, U.S. Government Series B, or Limited Maturity Bond Series B,
(except those purchased through the reinvestment of dividends and other
distributions), such shares will automatically convert to shares of
Corporate Bond Series A, U.S. Government Series A, Limited Maturity Bond
Series A, respectively, at the relative net asset values of each of the
series without the imposition of any sales load, fee or other charge. All
shares in a stockholder's account that were purchased through the
reinvestment of dividends and other distributions paid with respect to
Series B shares will be considered to be held in a separate sub-account.
Each time Series B shares are converted to Series A shares, a pro rata
portion of the Series B shares held in the sub-account will also convert to
Series A shares.
We hereby certify that pursuant to said resolution, and in accordance with the
by-laws of the corporation and the laws of the State of Kansas, the Board of
Directors called a meeting of stockholders for consideration of the proposed
amendment to the articles of incorporation, and thereafter, pursuant to notice
and in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment. We further certify that at the
meeting a majority of the stockholders entitled to vote voted in favor of the
proposed amendment which was duly adopted in accordance with the provisions of
K.S.A. 17-6602, as amended.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 21st day of December, 1994.
JOHN D. CLELAND
-----------------------------------
John D. Cleland, President
AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
JUDITH M. RALSTON
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: January 1, 1995.
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY INCOME FUND
STATE OF KANSAS )
)ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 3rd day of February,
1995, adopted resolutions (i) establishing two new series of common stock in
addition to those six series of common stock currently being issued by the
corporation, and (ii) allocating the corporation's authorized capital stock
among the eight separate series of common stock of the corporation. Resolutions
were also adopted which for the two new series set forth and for the existing
six reaffirmed the preferences, rights, privileges and restrictions of separate
series of stock of Security Income Fund, which resolutions are provided in their
entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of two new series
of common stock of Security Income Fund in addition to the six separate series
of common stock presently issued by the fund designated as U.S. Government
Series A, U.S. Government Series B, Corporate Bond Series A, Corporate Bond
Series B, Limited Maturity Bond Series A and Limited Maturity Bond Series B.
WHEREAS, the Board of Directors wishes to reallocate the 1,000,000,000 shares of
authorized capital stock among the series.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation are hereby
directed and authorized to establish two new series of the Security Income Fund
designated as Global Aggressive Bond Series A and Global Aggressive Bond Series
B.
FURTHER RESOLVED, that, the officers of the corporation are hereby directed and
authorized to allocate the corporation's authorized capital stock of
1,000,000,000 shares as follows: 200,000,000 $1.00 par value shares to each of
Corporate Bond Series A and B; 100,000,000 $1.00 par value shares to each of
U.S. Government Series A and B; 100,000,000 $1.00 par value shares to each of
Limited Maturity Bond Series A and B; and 100,000,000 $1.00 par value shares to
each of Global Aggressive Bond Series A and B.
FURTHER RESOLVED, that the preferences, rights, privileges and restrictions of
the shares of each series of Security Income Fund shall be as follows:
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless of
series, shall be equal.
2. At all meetings of stockholders each stockholder of the corporation shall be
entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled to
as many votes as shall equal the number of shares of stock multiplied by the
number of directors to be elected, and he or she may cast all of such votes
for a single director or may distribute them among the number to be voted
for, or any two or more of them as he or she may see fit. Notwithstanding
the foregoing, (i) if any matter is submitted to the stockholders which does
not affect the interests of all series, then only stockholders of the
affected series shall be entitled to vote and (ii) in the event the
Investment Company Act of 1940, as amended, or the rules and regulations
promulgated thereunder shall require a greater or different vote than would
otherwise be required herein or by the Articles of Incorporation of the
corporation, such greater or different voting requirement shall also be
satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset value
thereof, such redemption and the valuation and payment in connection
therewith to be made in compliance with the provisions of the
Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the Corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
5. (a) Outstanding shares of Corporate Bond Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
Outstanding shares of U.S. Government Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
Outstanding shares of Limited Maturity Bond Series A and B shall
represent a stockholder interest in a particular fund of assets held by
the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors. Outstanding shares of Global Aggressive Bond Series A and B
shall represent a stockholder interest in a particular fund of assets
held by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors.
(b) All cash and other property received by the corporation from the sale
of shares of Corporate Bond Series A and B, the U.S. Government Series
A and B, Limited Maturity Bond Series A and B, and Global Aggressive
Bond Series A and B respectively, all securities and other property
held as a result of the investment and reinvestment of such cash and
other property, all revenues and income received or receivable with
respect to such cash, other property, investments and reinvestments,
and all proceeds derived from the sale, exchange, liquidation or other
disposition of any of the foregoing, shall be allocated to the
Corporate Bond Series A and B, U.S. Government Series A and B, or
Limited Maturity Bond Series A and B, or Global Aggressive Bond Series
A and B, to which they relate and held for the benefit of the
stockholders owning shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and charged
to the series to which such loss, liability or expense relates. Where
any loss, liability or expense relates to more than one series, the
Board of Directors shall allocate the same between or among such series
pro rata based on the respective net asset values of such series or on
such other basis as the Board of Directors deems appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
6. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
7. Dividends may be paid when, as and if declared by the Board of Directors out
of funds legally available therefor. Shares of Corporate Bond Series A and B
represent a stockholder interest in a particular fund of assets and,
accordingly, dividends shall be calculated and declared for these series in
the same manner, at the same time, on the same day, and will be paid at the
same dividend rate except that expenses attributable to Corporate Bond
Series A or B and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Corporate Bond
Series. Stockholders of the Corporate Bond Series shall share in dividends
declared and paid with respect to such series pro rata based on their
ownership of shares of such series. Shares of U.S. Government Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected U.S.
Government Series. Stockholders of the U.S. Government Series shall share in
dividends declared and paid with respect to such series pro rata based on
their ownership of shares of such series. Shares of Limited Maturity Bond
Series A and B represent a stockholder interest in a particular fund of
assets and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and will
be paid at the same dividend rate except that expenses attributable to
Limited Maturity Bond Series A or B and payments made pursuant to a 12b-1
Plan or Shareholder Services Plan shall be borne exclusively by the affected
Limited Maturity Bond Series. Stockholders of the Limited Maturity Bond
Series shall share in dividends declared and paid with respect to such
series pro rata based on their ownership of shares of such series. Shares of
Global Aggressive Bond Series A and B represent a stockholder interest in a
particular fund of assets and accordingly, dividends shall be calculated and
declared for these series in the same manner, at the same time, on the same
day, and will be paid at the same dividend rate except that expenses
attributable to Global Aggressive Bond Series A or B and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be born
exclusively by the affected Global Aggressive Bond Series. Stockholders of
the Global Aggressive Bond Series A and B shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Whenever dividends are declared and paid with respect
to the Corporate Bond Series A and B, U.S. Government Series A and B,
Limited Maturity Bond Series A and B, or Global Aggressive Bond Series A and
B, the holders of shares of the other series shall have no rights in or to
such dividends.
8. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
9. On the eighth anniversary of the purchase of shares of the Corporate Bond
Series B, U.S. Government Series B, Limited Maturity Bond Series B, or
Global Aggressive Bond Series B, (except those purchased through the
reinvestment of dividends and other distributions), such shares will
automatically convert to shares of Corporate Bond Series A, U.S. Government
Series A, Limited Maturity Bond Series A, or Global Aggressive Bond Series A
respectively, at the relative net asset values of each of the series without
the imposition of any sales load, fee or other charge. All shares in a
stockholder's account that were purchased through the reinvestment of
dividends and other distributions paid with respect to Series B shares will
be considered to be held in a separate sub-account. Each time Series B
shares are converted to Series A shares, a pro rata portion of the Series B
shares held in the sub-account will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 3rd day of February, 1995.
JOHN D. CLELAND
-----------------------------------
John D. Cleland, President
AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Connie Brungardt a Notary Public in and for
the County and State aforesaid, came JOHN D. CLELAND, President, and AMY J. LEE,
Secretary, of Security Income Fund, a Kansas corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as President
and Secretary, respectively, and duly acknowledged the execution, of the same
this 3rd day of February, 1995.
CONNIE BRUNGARDT
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: November 30, 1998
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF COMMON STOCK
OF
SECURITY INCOME FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 2nd day of February,
1996, adopted resolutions authorizing the corporation to issue an indefinite
number of shares of capital stock of each of the eight series of common stock of
the corporation. Resolutions were also adopted which reaffirmed the preferences,
rights, privileges and restrictions of separate series of stock of Security
Income Fund, which resolutions are provided in their entirety as follows:
WHEREAS, K.S.A. 17-6602 has been amended to allow the board of directors of a
corporation that is registered as an open-end investment company under the
Investment Company Act of 1940 (the "1940 Act") to approve, by resolution, an
amendment of the corporation's Articles of Incorporation, to allow the issuance
of an indefinite number of shares of the capital stock of the corporation;
WHEREAS, the corporation is registered as an open-end investment company under
the 1940 Act; and
WHEREAS, the Board of Directors desire to authorize the issuance of an
indefinite number of shares of capital stock of each of the eight series of
common stock of the corporation;
NOW THEREFORE BE IT RESOLVED, that, the officers of the corporation are hereby
directed and authorized to issue an indefinite number of $1.00 par value shares
of capital stock of each series of the corporation, which consist of U.S.
Government Series A, U.S. Government Series B, Corporate Bond Series A,
Corporate Bond Series B, Limited Maturity Bond Series A, Limited Maturity Bond
Series B, Global Aggressive Bond Series A, and Global Aggressive Bond Series B;
FURTHER RESOLVED, that, the preferences, rights, privileges and restrictions of
the shares of each of the corporation's series of common stock, as set forth in
the minutes of the February 3, 1995, meeting of this Board of Directors, are
hereby reaffirmed and incorporated by reference into the minutes of this
meeting; and
FURTHER RESOLVED, that, the appropriate officers of the corporation be, and they
hereby are, authorized and directed to take such action as may be necessary
under the laws of the State of Kansas or as they deem appropriate to cause the
foregoing resolutions to become effective.
The undersigned do hereby certify that the foregoing amendment to the
corporation's Articles of Incorporation has been duly adopted in accordance with
the provisions of K.S.A. 17-6602.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 2nd day of February, 1996.
JOHN D. CLELAND
-----------------------------------
John D. Cleland, President
AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, L. Charmaine Lucas, a Notary Public in and for
the aforesaid County and State, came John D. Cleland, President, and Amy J. Lee,
Secretary, of Security Income Fund, a Kansas corporation, personally known to me
to be the same persons who executed the foregoing instrument of writing and duly
acknowledged the execution of the same this 2nd day of February, 1996.
L. CHARMAINE LUCAS
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: April 1, 1998
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
SECURITY INCOME FUND
We, John D. Cleland, President , and Amy J. Lee, Secretary of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, do hereby certify that at a regular meeting of the Board of Directors of
said corporation, held on the 2nd day of February, 1996, the board adopted a
resolution setting forth the following amendment to the Articles of
Incorporation and declaring its advisability:
RESOLVED
The Board of Directors of Security Income Fund recommends that the Articles of
Incorporation be amended by deleting Article Fifth in its entirety and by
inserting, in lieu thereof, the following new Article:
FIFTH: The corporation shall have authority to issue an indefinite number of
shares of common stock, of the par value of one dollar ($1.00) per share. The
board of directors of the Corporation is expressly authorized to cause shares of
common stock of the Corporation authorized herein to be issued in one or more
series as may be established from time to time by setting or changing in one or
more respects the voting powers, rights, qualifications, limitations or
restrictions of such shares of stock and to increase or decrease the number of
shares so authorized to be issued in any such series.
We further certify that the amendment was duly adopted in accordance with the
provisions of K.S.A. 17-6602, as amended.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of said
corporation this 2nd day of February, 1996.
JOHN D. CLELAND
-----------------------------------
John D. Cleland, President
AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that before me, L. Charmaine Lucas, a Notary Public in and for
the aforesaid county and state, personally appeared John D. Cleland, President,
and Amy J. Lee, Secretary, of Security Income Fund, who are known to me to be
the same persons who executed the foregoing certificate and duly acknowledged
the execution of the same this 2nd day of February, 1996.
L. CHARMAINE LUCAS
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: April 1, 1998
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE,
WITH $20 FILING FEE, TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY INCOME FUND
STATE OF KANSAS )
)ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 3rd day of May, 1996,
adopted resolutions (i) establishing two new series of common stock in addition
to those eight series of common stock currently being issued by the corporation,
and (ii) allocating the corporation's authorized capital stock among the ten
separate series of common stock of the corporation. Resolutions were also
adopted which for the two new series set forth and for the existing eight
reaffirmed the preferences, rights, privileges and restrictions of separate
series of stock of Security Income Fund, which resolutions are provided in their
entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of two new series
of common stock of Security Income Fund in addition to the eight separate series
of common stock presently issued by the fund designated as Corporate Bond Series
A, Corporate Bond Series B, U.S. Government Series A, U.S. Government Series B,
Limited Maturity Bond Series A, Limited Maturity Bond Series B, Global
Aggressive Bond Series A and Global Aggressive Bond Series B; and
WHEREAS, the Board of Directors desires to authorize the issuance of an
indefinite number of shares of capital stock of each of the ten series of common
stock of the corporation.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation are hereby
directed and authorized to establish two new series of the Security Income Fund
designated as High Yield Series A and High Yield Series B.
FURTHER RESOLVED, that, the officers of the corporation are hereby directed and
authorized to issue an indefinite number of $1.00 par value shares of capital
stock of each series of the corporation, which consist of Corporate Bond Series
A, Corporate Bond Series B, U.S. Government Series A, U.S. Government Series B,
Limited Maturity Bond Series A, Limited Maturity Bond Series B, Global
Aggressive Bond Series A, Global Aggressive Bond Series B, High Yield Series A
and High Yield Series B.
FURTHER RESOLVED, that the preferences, rights, privileges and restrictions of
the shares of each series of Security Income Fund shall be as follows:
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless of
series, shall be equal.
2. At all meetings of stockholders each stockholder of the corporation shall be
entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled to
as many votes as shall equal the number of shares of stock multiplied by the
number of directors to be elected, and he or she may cast all of such votes
for a single director or may distribute them among the number to be voted
for, or any two or more of them as he or she may see fit. Notwithstanding
the foregoing, (i) if any matter is submitted to the stockholders which does
not affect the interests of all series, then only stockholders of the
affected series shall be entitled to vote and (ii) in the event the
Investment Company Act of 1940, as amended, or the rules and regulations
promulgated thereunder shall require a greater or different vote than would
otherwise be required herein or by the Articles of Incorporation of the
corporation, such greater or different voting requirement shall also be
satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset value
thereof, such redemption and the valuation and payment in connection
therewith to be made in compliance with the provisions of the
Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the Corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
5. (a) Outstanding shares of Corporate Bond Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
Outstanding shares of U.S. Government Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
Outstanding shares of Limited Maturity Bond Series A and B shall
represent a stockholder interest in a particular fund of assets held by
the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors. Outstanding shares of Global Aggressive Bond Series A and B
shall represent a stockholder interest in a particular fund of assets
held by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors. Outstanding shares of High Yield Series A and B shall
represent a stockholder interest in a particular fund of assets held by
the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors.
(b) All cash and other property received by the corporation from the sale
of shares of Corporate Bond Series A and B, the U.S. Government Series
A and B, Limited Maturity Bond Series A and B, Global Aggressive Bond
Series A and B, and High Yield Series A and B, respectively, all
securities and other property held as a result of the investment and
reinvestment of such cash and other property, all revenues and income
received or receivable with respect to such cash, other property,
investments and reinvestments, and all proceeds derived from the sale,
exchange, liquidation or other disposition of any of the foregoing,
shall be allocated to the Corporate Bond Series A and B, U.S.
Government Series A and B, or Limited Maturity Bond Series A and B,
Global Aggressive Bond Series A and B, or High Yield Series A and B, to
which they relate and held for the benefit of the stockholders owning
shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and charged
to the series to which such loss, liability or expense relates. Where
any loss, liability or expense relates to more than one series, the
Board of Directors shall allocate the same between or among such series
pro rata based on the respective net asset values of such series or on
such other basis as the Board of Directors deems appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
6. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
7. Dividends may be paid when, as and if declared by the Board of Directors out
of funds legally available therefor. Shares of Corporate Bond Series A and B
represent a stockholder interest in a particular fund of assets and,
accordingly, dividends shall be calculated and declared for these series in
the same manner, at the same time, on the same day, and will be paid at the
same dividend rate except that expenses attributable to Corporate Bond
Series A or B and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Corporate Bond
Series. Stockholders of the Corporate Bond Series shall share in dividends
declared and paid with respect to such series pro rata based on their
ownership of shares of such series. Shares of U.S. Government Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected U.S.
Government Series. Stockholders of the U.S. Government Series shall share in
dividends declared and paid with respect to such series pro rata based on
their ownership of shares of such series. Shares of Limited Maturity Bond
Series A and B represent a stockholder interest in a particular fund of
assets and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and will
be paid at the same dividend rate except that expenses attributable to
Limited Maturity Bond Series A or B and payments made pursuant to a 12b-1
Plan or Shareholder Services Plan shall be borne exclusively by the affected
Limited Maturity Bond Series. Stockholders of the Limited Maturity Bond
Series shall share in dividends declared and paid with respect to such
series pro rata based on their ownership of shares of such series. Shares of
Global Aggressive Bond Series A and B represent a stockholder interest in a
particular fund of assets and accordingly, dividends shall be calculated and
declared for these series in the same manner, at the same time, on the same
day, and will be paid at the same dividend rate except that expenses
attributable to Global Aggressive Bond Series A or B and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be born
exclusively by the affected Global Aggressive Bond Series. Stockholders of
the Global Aggressive Bond Series A and B shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of High Yield Series A and B represent a
stockholder interest in a particular fund of assets and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and will be paid at the same
dividend rate except that expenses attributable to High Yield Series A or B
and payments made pursuant to a 12b-1 Plan or Shareholder Services Plan
shall be borne exclusively by the affected High Yield Series. Stockholders
of the High Yield Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Whenever dividends are declared and paid with respect to the
Corporate Bond Series A and B, U.S. Government Series A and B, Limited
Maturity Bond Series A and B, Global Aggressive Bond Series A and B, or High
Yield Series A and B, the holders of shares of the other series shall have
no rights in or to such dividends.
8. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
9. On the eighth anniversary of the purchase of shares of the Corporate Bond
Series B, U.S. Government Series B, Limited Maturity Bond Series B, Global
Aggressive Bond Series B, or High Yield Series B, (except those purchased
through the reinvestment of dividends and other distributions), such shares
will automatically convert to shares of Corporate Bond Series A, U.S.
Government Series A, Limited Maturity Bond Series A, Global Aggressive Bond
Series A, or High Yield Series A, respectively, at the relative net asset
values of each of the series without the imposition of any sales load, fee
or other charge. All shares in a stockholder's account that were purchased
through the reinvestment of dividends and other distributions paid with
respect to Series B shares will be considered to be held in a separate
sub-account. Each time Series B shares are converted to Series A shares, a
pro rata portion of the Series B shares held in the sub-account will also
convert to Series A shares.
FURTHER RESOLVED, that, the appropriate officers of the corporation be, and they
hereby are, authorized and directed to take such action as may be necessary
under the laws of the State of Kansas or as they deem appropriate to cause the
foregoing resolutions to become effective.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 13th day of May, 1996.
JOHN D. CLELAND
-----------------------------------
John D. Cleland, President
AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Jana R. Selley a Notary Public in and for the
County and State aforesaid, came JOHN D. CLELAND, President, and AMY J. LEE,
Secretary, of Security Income Fund, a Kansas corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as President
and Secretary, respectively, and duly acknowledged the execution of the same
this 13th day of May, 1996.
JANA R. SELLEY
-----------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: June 14, 1996
<PAGE>
CERTIFICATE CHANGING NAME OF
SERIES OF STOCK
OF
SECURITY INCOME FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 7th day of February,
1997, adopted resolutions changing the name of Global Aggressive Bond Series A
and Global Aggressive Bond Series B, existing series of common stock of Security
Income Fund, which resolutions are provided in their entirety as follows:
WHEREAS, the Board of Directors has approved the change in name of an existing
series of common stock, from Global Aggressive Bond Series A and B to Global
High Yield Series A and B to more accurately reflect the investment objectives
of the series.
WHEREAS, there are no changes in the voting powers, designations, preferences
and relative, participating, optional or other rights, if any, or the
qualifications, limitations or restrictions of the series requiring stockholder
approval;
NOW, THEREFORE, BE IT RESOLVED, that, the name of Global Aggressive Bond Series
A and Global Aggressive Bond Series B of Security Income Fund is hereby changed
to Global High Yield Series A and Global High Yield Series B, respectively;
FURTHER RESOLVED, that, the appropriate officers of the corporation be, and they
hereby are, authorized and directed to take such action as may be necessary
under the laws of the State of Kansas or as they deem appropriate to cause the
foregoing resolutions to become effective.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 12th day of March, 1997.
JOHN D. CLELAND
------------------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, L. Charmaine Lucas, a Notary Public in and for
the County and State aforesaid, came JOHN D. CLELAND, President, and AMY J. LEE,
Secretary, of the Security Income Fund, a Kansas corporation, personally known
to me to be the persons who executed the foregoing instrument of writing as
President and Secretary, respectively, and duly acknowledged the execution of
the same this 12th day of March, 1997.
L. CHARMAINE LUCAS
------------------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires April 1, 1998
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES OF COMMON STOCK
OF
SECURITY INCOME FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 7th day of February,
1997, adopted resolutions (i) establishing four new series of common stock in
addition to those ten series of common stock currently being issued by the
corporation, and (ii) allocating the corporation's authorized capital stock
among the fourteen separate series of common stock of the corporation.
Resolutions were also adopted, which for the four new series set forth and for
the existing ten reaffirmed the preferences, rights, privileges and restrictions
of separate series of stock of Security Income Fund, which resolutions are
provided in their entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of four new
series of common stock of Security Income Fund in addition to the ten separate
series of common stock presently issued by the fund designated as Corporate Bond
Series A, Corporate Bond Series B, U.S. Government Series A, U.S. Government
Series B, Limited Maturity Bond Series A, Limited Maturity Bond Series B, Global
Aggressive Bond Series A, Global Aggressive Bond Series B, High Yield Series A
and High Yield Series B; and
WHEREAS, the Board of Directors desires to authorize the issuance of an
indefinite number of shares of capital stock of each of the fourteen series of
common stock of the corporation.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation are hereby
directed and authorized to establish four new series of Security Income Fund
designated as Emerging Markets Total Return Series A, Emerging Markets Total
Return Series B, Global Asset Allocation Series A and Global Asset Allocation
Series B.
FURTHER RESOLVED, that, the officers of the corporation are hereby directed and
authorized to issue an indefinite number of $1.00 par value shares of capital
stock of each series of the corporation, which consist of Corporate Bond Series
A, Corporate Bond Series B, U.S. Government Series A, U.S. Government Series B,
Limited Maturity Bond Series A, Limited Maturity Bond Series B, Global
Aggressive Bond Series A, Global Aggressive Bond Series B, High Yield Series A,
High Yield Series B, Emerging Markets Total Return Series A, Emerging Markets
Total Return Series B, Global Asset Allocation Series A and Global Asset
Allocation Series B.
FURTHER RESOLVED, that the preferences, rights, privileges and restrictions of
the shares of each series of Security Income Fund shall be as follows:
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset
value thereof, such redemption and the valuation and payment in
connection therewith to be made in compliance with the provisions of
the Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the Corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
5. (a) Outstanding shares of Corporate Bond Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
Outstanding shares of U.S. Government Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
Outstanding shares of Limited Maturity Bond Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors. Outstanding shares of Global Aggressive Bond Series A and B
shall represent a stockholder interest in a particular fund of assets
held by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors. Outstanding shares of High Yield Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors. Outstanding shares of Emerging Markets Total Return Series
A and B shall represent a stockholder interest in a particular fund of
assets held by the corporation which fund shall be invested and
reinvested in accordance with policies and objectives established by
the Board of Directors. Outstanding shares of Global Asset Allocation
Series A and B shall represent a stockholder interest in a particular
fund of assets held by the corporation which fund shall be invested
and reinvested in accordance with policies and objectives established
by the Board of Directors.
(b) All cash and other property received by the corporation from the sale
of shares of Corporate Bond Series A and B, U.S. Government Series A
and B, Limited Maturity Bond Series A and B, Global Aggressive Bond
Series A and B, High Yield Series A and B, Emerging Markets Total
Return Series A and B, and Global Asset Allocation Series A and B,
respectively, all securities and other property held as a result of
the investment and reinvestment of such cash and other property, all
revenues and income received or receivable with respect to such cash,
other property, investments and reinvestments, and all proceeds
derived from the sale, exchange, liquidation or other disposition of
any of the foregoing, shall be allocated to the Corporate Bond Series
A and B, U.S. Government Series A and B, Limited Maturity Bond Series
A and B, Global Aggressive Bond Series A and B, High Yield Series A
and B, Emerging Markets Total Return Series A and B, or Global Asset
Allocation Series A and B, to which they relate and held for the
benefit of the stockholders owning shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and
charged to the series to which such loss, liability or expense
relates. Where any loss, liability or expense relates to more than one
series, the Board of Directors shall allocate the same between or
among such series pro rata based on the respective net asset values of
such series or on such other basis as the Board of Directors deems
appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
6. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
7. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Corporate Bond Series A
and B represent a stockholder interest in a particular fund of assets and,
accordingly, dividends shall be calculated and declared for these series in
the same manner, at the same time, on the same day, and will be paid at the
same dividend rate except that expenses attributable to Corporate Bond
Series A or B and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Corporate Bond
Series. Stockholders of the Corporate Bond Series shall share in dividends
declared and paid with respect to such series pro rata based on their
ownership of shares of such series. Shares of U.S. Government Series A and
B represent a stockholder interest in a particular fund of assets held by
the corporation and, accordingly, dividends shall be calculated and
declared for these series in the same manner, at the same time, on the same
day, and shall be paid at the same dividend rate, except that expenses
attributable to a particular series and payments made pursuant to a 12b-1
Plan or Shareholder Services Plan shall be borne exclusively by the
affected U.S. Government Series. Stockholders of the U.S. Government Series
shall share in dividends declared and paid with respect to such series pro
rata based on their ownership of shares of such series. Shares of Limited
Maturity Bond Series A and B represent a stockholder interest in a
particular fund of assets and, accordingly, dividends shall be calculated
and declared for these series in the same manner, at the same time, on the
same day, and will be paid at the same dividend rate except that expenses
attributable to Limited Maturity Bond Series A or B and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be borne
exclusively by the affected Limited Maturity Bond Series. Stockholders of
the Limited Maturity Bond Series shall share in dividends declared and paid
with respect to such series pro rata based on their ownership of shares of
such series. Shares of Global Aggressive Bond Series A and B represent a
stockholder interest in a particular fund of assets and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and will be paid at the same
dividend rate except that expenses attributable to Global Aggressive Bond
Series A or B and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Aggressive
Bond Series. Stockholders of the Global Aggressive Bond Series A and B
shall share in dividends declared and paid with respect to such series pro
rata based on their ownership of shares of such series. Shares of High
Yield Series A and B represent a stockholder interest in a particular fund
of assets and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and
will be paid at the same dividend rate except that expenses attributable to
High Yield Series A or B and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected High
Yield Series. Stockholders of the High Yield Series shall share in
dividends declared and paid with respect to such series pro rata based on
their ownership of shares of such series. Shares of Emerging Markets Total
Return Series A and B represent a stockholder interest in a particular fund
of assets and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and
will be paid at the same dividend rate except that expenses attributable to
Emerging Markets Total Return Series A or B and payments made pursuant to a
12b-1 Plan or Shareholder Services Plan shall be borne exclusively by the
affected Emerging Markets Total Return Series. Stockholders of the Emerging
Markets Total Return Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Shares of Global Asset Allocation Series A and B represent a
stockholder interest in a particular fund of assets and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and will be paid at the same
dividend rate except that expenses attributable to Global Asset Allocation
Series A or B and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Asset
Allocation Series. Stockholders of the Global Asset Allocation Series shall
share in dividends declared and paid with respect to such series pro rata
based on their ownership of shares of such series. Whenever dividends are
declared and paid with respect to the Corporate Bond Series A and B, U.S.
Government Series A and B, Limited Maturity Bond Series A and B, Global
Aggressive Bond Series A and B, High Yield Series A and B, Emerging Markets
Total Return Series A and B, or Global Asset Allocation Series A and B, the
holders of shares of the other series shall have no rights in or to such
dividends.
8. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
9. On the eighth anniversary of the purchase of shares of the Corporate Bond
Series B, U.S. Government Series B, Limited Maturity Bond Series B, Global
Aggressive Bond Series B, High Yield Series B, Emerging Markets Total
Return Series B, or Global Asset Allocation Series B, (except those
purchased through the reinvestment of dividends and other distributions),
such shares will automatically convert to shares of Corporate Bond Series
A, U.S. Government Series A, Limited Maturity Bond Series A, Global
Aggressive Bond Series A, High Yield Series A, Emerging Markets Total
Return Series A, or Global Asset Allocation Series A, respectively, at the
relative net asset values of each of the series without the imposition of
any sales load, fee or other charge. All shares in a stockholder's account
that were purchased through the reinvestment of dividends and other
distributions paid with respect to Series B shares will be considered to be
held in a separate sub-account. Each time Series B shares are converted to
Series A shares, a pro rata portion of the Series B shares held in the
sub-account will also convert to Series A shares.
FURTHER RESOLVED, that, the appropriate officers of the corporation be, and they
hereby are, authorized and directed to take such action as may be necessary
under the laws of the State of Kansas or as they deem appropriate to cause the
foregoing resolutions to become effective.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 12th day of March, 1997.
JOHN D. CLELAND
------------------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, L. Charmaine Lucas, a Notary Public in and for
the County and State aforesaid, came JOHN D. CLELAND, President, and AMY J. LEE,
Secretary, of the Security Income Fund, a Kansas corporation, personally known
to me to be the persons who executed the foregoing instrument of writing as
President and Secretary, respectively, and duly acknowledged the execution of
the same this 12th day of March, 1997.
L. CHARMAINE LUCAS
------------------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires April 1, 1998
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY INCOME FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 10th day of February,
1999, adopted resolutions (i) establishing three new series of common stock in
addition to those fourteen series of common stock currently being issued by the
corporation, and (ii) allocating the corporation's authorized capital stock
among the seventeen separate series of common stock of the corporation.
Resolutions were also adopted, which for the three new series set forth and for
the existing fourteen reaffirmed the preferences, rights, privileges and
restrictions of separate series of stock of Security Income Fund, which
resolutions are provided in their entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of three new
series of common stock of Security Income Fund in addition to the fourteen
separate series of common stock presently issued by the fund designated as
Corporate Bond Series A, Corporate Bond Series B, U.S. Government Series A, U.S.
Government Series B, Limited Maturity Bond Series A, Limited Maturity Bond
Series B, Global High Yield Series A, Global High Yield Series B, High Yield
Series A, High Yield Series B, Emerging Markets Total Return Series A, Emerging
Markets Total Return Series B, Global Asset Allocation Series A and Global Asset
Allocation Series B; and
WHEREAS, the Board of Directors desires to authorize the issuance of an
indefinite number of shares of capital stock of each of the seventeen series of
common stock of the corporation.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation are hereby
directed and authorized to establish three new series of Security Income Fund
designated as Capital Preservation Series A, Capital Preservation Series B and
Capital Preservation Series C.
FURTHER RESOLVED, that, the officers of the corporation are hereby directed and
authorized to issue an indefinite number of $1.00 par value shares of capital
stock of each series of the corporation, which consist of Corporate Bond Series
A, Corporate Bond Series B, Corporate Bond Series C, U.S. Government Series A,
U.S. Government Series B, Limited Maturity Bond Series A, Limited Maturity Bond
Series B, Global High Yield Series A, Global High Yield Series B, High Yield
Series A, High Yield Series B, Emerging Markets Total Return Series A, Emerging
Markets Total Return Series B, Global Asset Allocation Series A, Global Asset
Allocation Series B, Capital Preservation Series A, Capital Preservation Series
B and Capital Preservation Series C.
FURTHER RESOLVED, that the preferences, rights, privileges and restrictions of
the shares of each series of Security Income Fund shall be as follows:
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless of
series, shall be equal.
2. At all meetings of stockholders each stockholder of the corporation shall be
entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled to
as many votes as shall equal the number of shares of stock multiplied by the
number of directors to be elected, and he or she may cast all of such votes
for a single director or may distribute them among the number to be voted
for, or any two or more of them as he or she may see fit. Notwithstanding
the foregoing, (i) if any matter is submitted to the stockholders which does
not affect the interests of all series, then only stockholders of the
affected series shall be entitled to vote and (ii) in the event the
Investment Company Act of 1940, as amended, or the rules and regulations
promulgated thereunder shall require a greater or different vote than would
otherwise be required herein or by the Articles of Incorporation of the
corporation, such greater or different voting requirement shall also be
satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset value
thereof, such redemption and the valuation and payment in connection
therewith to be made in compliance with the provisions of the
Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Conduct Rules of the National
Association of Securities Dealers, Inc., as from time to time amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the Corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
5. (a) Outstanding shares of Corporate Bond Series A, and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
Outstanding shares of U.S. Government Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors.
Outstanding shares of Limited Maturity Bond Series A and B shall
represent a stockholder interest in a particular fund of assets held by
the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors. Outstanding shares of Global High Yield Series A and B shall
represent a stockholder interest in a particular fund of assets held by
the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors. Outstanding shares of High Yield Series A and B shall
represent a stockholder interest in a particular fund of assets held by
the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors. Outstanding shares of Emerging Markets Total Return Series A
and B shall represent a stockholder interest in a particular fund of
assets held by the corporation which fund shall be invested and
reinvested in accordance with policies and objectives established by
the Board of Directors. Outstanding shares of Global Asset Allocation
Series A and B shall represent a stockholder interest in a particular
fund of assets held by the corporation which fund shall be invested and
reinvested in accordance with policies and objectives established by
the Board of Directors. Outstanding shares of Capital Preservation
Series A, B and C shall represent a stockholder interest in a
particular fund of assets held by the corporation which fund shall be
invested and reinvested in accordance with policies and objectives
established by the Board of Directors.
(b) All cash and other property received by the corporation from the sale
of shares of Corporate Bond Series A and B, U.S. Government Series A
and B, Limited Maturity Bond Series A and B, Global High Yield Series A
and B, High Yield Series A and B, Emerging Markets Total Return Series
A and B, Global Asset Allocation Series A and B and Capital
Preservation Series A, B and C respectively, all securities and other
property held as a result of the investment and reinvestment of such
cash and other property, all revenues and income received or receivable
with respect to such cash, other property, investments and
reinvestments, and all proceeds derived from the sale, exchange,
liquidation or other disposition of any of the foregoing, shall be
allocated to the Corporate Bond Series A and B, U.S. Government Series
A and B, Limited Maturity Bond Series A and B, Global High Yield Series
A and B, High Yield Series A and B, Emerging Markets Total Return
Series A and B, Global Asset Allocation Series A and B, or Capital
Preservation Series A, B and C to which they relate and held for the
benefit of the stockholders owning shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and charged
to the series to which such loss, liability or expense relates. Where
any loss, liability or expense relates to more than one series, the
Board of Directors shall allocate the same between or among such series
pro rata based on the respective net asset values of such series or on
such other basis as the Board of Directors deems appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
6. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
7. Dividends may be paid when, as and if declared by the Board of Directors out
of funds legally available therefor. Shares of Corporate Bond Series A and B
represent a stockholder interest in a particular fund of assets and,
accordingly, dividends shall be calculated and declared for these series in
the same manner, at the same time, on the same day, and will be paid at the
same dividend rate except that expenses attributable to Corporate Bond
Series A or B and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Corporate Bond
Series. Stockholders of the Corporate Bond Series shall share in dividends
declared and paid with respect to such series pro rata based on their
ownership of shares of such series. Shares of U.S. Government Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected U.S.
Government Series. Stockholders of the U.S. Government Series shall share in
dividends declared and paid with respect to such series pro rata based on
their ownership of shares of such series. Shares of Limited Maturity Bond
Series A and B represent a stockholder interest in a particular fund of
assets and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and will
be paid at the same dividend rate except that expenses attributable to
Limited Maturity Bond Series A or B and payments made pursuant to a 12b-1
Plan or Shareholder Services Plan shall be borne exclusively by the affected
Limited Maturity Bond Series. Stockholders of the Limited Maturity Bond
Series shall share in dividends declared and paid with respect to such
series pro rata based on their ownership of shares of such series. Shares of
Global High Yield Series A and B represent a stockholder interest in a
particular fund of assets and, accordingly, dividends shall be calculated
and declared for these series in the same manner, at the same time, on the
same day, and will be paid at the same dividend rate except that expenses
attributable to Global High Yield Series A or B and payments made pursuant
to a 12b-1 Plan or Shareholder Services Plan shall be borne exclusively by
the affected Global High Yield Series. Stockholders of the Global High Yield
Series A and B shall share in dividends declared and paid with respect to
such series pro rata based on their ownership of shares of such series.
Shares of High Yield Series A and B represent a stockholder interest in a
particular fund of assets and, accordingly, dividends shall be calculated
and declared for these series in the same manner, at the same time, on the
same day, and will be paid at the same dividend rate except that expenses
attributable to High Yield Series A or B and payments made pursuant to a
12b-1 Plan or Shareholder Services Plan shall be borne exclusively by the
affected High Yield Series. Stockholders of the High Yield Series shall
share in dividends declared and paid with respect to such series pro rata
based on their ownership of shares of such series. Shares of Emerging
Markets Total Return Series A and B represent a stockholder interest in a
particular fund of assets and, accordingly, dividends shall be calculated
and declared for these series in the same manner, at the same time, on the
same day, and will be paid at the same dividend rate except that expenses
attributable to Emerging Markets Total Return Series A or B and payments
made pursuant to a 12b-1 Plan or Shareholder Services Plan shall be borne
exclusively by the affected Emerging Markets Total Return Series.
Stockholders of the Emerging Markets Total Return Series shall share in
dividends declared and paid with respect to such series pro rata based on
their ownership of shares of such series. Shares of Global Asset Allocation
Series A and B represent a stockholder interest in a particular fund of
assets and, accordingly, dividends shall be calculated and declared for
these series in the same manner, at the same time, on the same day, and will
be paid at the same dividend rate except that expenses attributable to
Global Asset Allocation Series A or B and payments made pursuant to a 12b-1
Plan or Shareholder Services Plan shall be borne exclusively by the affected
Global Asset Allocation Series. Stockholders of the Global Asset Allocation
Series shall share in dividends declared and paid with respect to such
series pro rata based on their ownership of shares of such series. Shares of
Capital Preservation Series A, B and C represent a stockholder interest in a
particular fund of assets and, accordingly, dividends shall be calculated
and declared for these series in the same manner, at the same time, on the
same day, and will be paid at the same dividend rate except that expenses
attributable to Capital Preservation Series A, B or C and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be borne
exclusively by the affected Capital Preservation Series. Stockholders of the
Capital Preservation Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Whenever dividends are declared and paid with respect to the
Corporate Bond Series A and B, U.S. Government Series A and B, Limited
Maturity Bond Series A and B, Global High Yield Series A and B, High Yield
Series A and B, Emerging Markets Total Return Series A and B, Global Asset
Allocation Series A and B, or Capital Preservation Series A, B and C the
holders of shares of the other series shall have no rights in or to such
dividends.
8. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
9. On the eighth anniversary of the purchase of shares of the Corporate Bond
Series B, U.S. Government Series B, Limited Maturity Bond Series B, Global
High Yield Series B, High Yield Series B, Emerging Markets Total Return
Series B, Global Asset Allocation Series B, or Capital Preservation Series B
(except those purchased through the reinvestment of dividends and other
distributions), such shares will automatically convert to shares of
Corporate Bond Series A, U.S. Government Series A, Limited Maturity Bond
Series A, Global High Yield Series A, High Yield Series A, Emerging Markets
Total Return Series A, Global Asset Allocation Series A, or Capital
Preservation Series A, respectively, at the relative net asset values of
each of the series without the imposition of any sales load, fee or other
charge. All shares in a stockholder's account that were purchased through
the reinvestment of dividends and other distributions paid with respect to
Series B shares will be considered to be held in a separate sub-account.
Each time Series B shares are converted to Series A shares, a pro rata
portion of the Series B shares held in the sub-account will also convert to
Series A shares.
FURTHER RESOLVED, that, the appropriate officers of the corporation be, and they
hereby are, authorized and directed to take such action as may be necessary
under the laws of the State of Kansas or as they deem appropriate to cause the
foregoing resolutions to become effective.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 22nd day of April, 1999.
JOHN D. CLELAND
------------------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Annette E. Cripps, a Notary Public in and
for the County and State aforesaid, came JOHN D. CLELAND, President, and AMY J.
LEE, Secretary, of the Security Income Fund, a Kansas corporation, personally
known to me to be the persons who executed the foregoing instrument of writing
as President and Secretary, respectively, and duly acknowledged the execution of
the same this 22nd day of April, 1999.
ANNETTE E. CRIPPS
------------------------------------------
Notary Public
My commission expires 7-8-2001.
<PAGE>
AMENDED CERTIFICATE OF DESIGNATION
OF GLOBAL HIGH YIELD SERIES
OF
SECURITY INCOME FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, file this Amended Certificate
of Designation in accordance with Section 17-6401 of the Kansas Statutes
Annotated and do hereby declare the following:
WHEREAS, the Board of Directors of Security Income Fund approved the liquidation
and dissolution of the Global High Yield Series A and B of the Fund pursuant to
the Plan of Liquidation and Dissolution for the Series; and
WHEREAS, the Plan of Liquidation and Dissolution was approved by the vote of the
holders of a majority of outstanding voting securities of Global High Yield
Series A and B of Security Income Fund at the Fund's special meeting of
stockholders held on April 26, 1999; and
WHEREAS, the assets of the Global High Yield Series A and Global High Yield
Series B of the Security Income Fund were liquidated on May 6, 1999; and
WHEREAS, a pro rata share of the liquidation proceeds was sent to each
shareholder of record of the Series as of the date of liquidation;
NOW, THEREFORE, BE IT RESOLVED, that, there are no shares outstanding of Global
High Yield Series A or Global High Yield Series B and no shares of the Series
will be issued.
FURTHER RESOLVED, that the officers of the Fund are hereby authorized to file an
Amended Certificate of Designation pursuant to K.S.A. 17-6401 in order to
eliminate Global High Yield Series A and Global High Yield Series B from
Security Income Fund's Articles of Incorporation.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 6th day of May, 1999.
JOHN D. CLELAND
------------------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Annette E. Cripps, a Notary Public in and
for the County and State aforesaid, came JOHN D. CLELAND, President, and AMY J.
LEE, Secretary, of the Security Income Fund, a Kansas corporation, personally
known to me to be the persons who executed the foregoing instrument of writing
as President and Secretary, respectively, and duly acknowledged the execution of
the same this 6th day of May, 1999.
ANNETTE E. CRIPPS
------------------------------------------
Notary Public
My commission expires 7-8-2001.
<PAGE>
AMENDED CERTIFICATE OF DESIGNATION
OF EMERGING MARKETS TOTAL RETURN SERIES
OF
SECURITY INCOME FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, file this Amended Certificate
of Designation in accordance with Section 17-6401 of the Kansas Statutes
Annotated and do hereby declare the following:
WHEREAS, the Board of Directors of Security Income Fund approved the liquidation
and dissolution of the Emerging Markets Total Return Series A and B of the Fund
pursuant to the Plan of Liquidation and Dissolution for the Series; and
WHEREAS, the Plan of Liquidation and Dissolution was approved by the vote of the
holders of a majority of outstanding voting securities of Emerging Markets Total
Return Series A and B of Security Income Fund at the Fund's special meeting of
stockholders held on April 26, 1999; and
WHEREAS, substantially all of the assets of the Emerging Markets Total Return
Series A and Series B of the Security Income Fund were distributed ratably to
shareholders of record as of May 6, 1999; and
WHEREAS, all remaining assets of the Emerging Markets Total Return Series A and
Series B of the Security Income Fund were distributed ratably to each
shareholder of record of the Series as of the date of liquidation, September 2,
1999;
NOW, THEREFORE, BE IT RESOLVED, that, there are no shares outstanding of
Emerging Markets Total Return Series A or Emerging Markets Total Return Series B
and no shares of the Series will be issued.
FURTHER RESOLVED, that the officers of the Fund are hereby authorized to file an
Amended Certificate of Designation pursuant to K.S.A. 17-6401 in order to
eliminate Emerging Markets Total Return Series A and Emerging Markets Total
Return Series B from Security Income Fund's Articles of Incorporation.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 13th day of September, 1999.
JOHN D. CLELAND
------------------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Annette E. Cripps, a Notary Public in and
for the County and State aforesaid, came JOHN D. CLELAND, President, and AMY J.
LEE, Secretary, of the Security Income Fund, a Kansas corporation, personally
known to me to be the persons who executed the foregoing instrument of writing
as President and Secretary, respectively, and duly acknowledged the execution of
the same this 13th day of September, 1999.
ANNETTE E. CRIPPS
------------------------------------------
Notary Public
My commission expires 7-8-2001.
<PAGE>
AMENDED CERTIFICATE OF DESIGNATION
OF GLOBAL ASSET ALLOCATION SERIES
OF
SECURITY INCOME FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security Income
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, file this Amended Certificate
of Designation in accordance with Section 17-6401 of the Kansas Statutes
Annotated and do hereby declare the following:
WHEREAS, the Board of Directors of Security Income Fund approved the liquidation
and dissolution of the Global Asset Allocation Series A and B of the Fund
pursuant to the Plan of Liquidation and Dissolution for the Series; and
WHEREAS, the Plan of Liquidation and Dissolution was approved by the vote of the
holders of a majority of outstanding voting securities of Global Asset
Allocation Series A and B of Security Income Fund at the Fund's special meeting
of stockholders held on April 26, 1999; and
WHEREAS, substantially all of the assets of the Global Asset Allocation Series A
and Series B of the Security Income Fund were distributed ratably to
shareholders of record as of May 6, 1999; and
WHEREAS, all remaining assets of the Global Asset Allocation Series A and Series
B were distributed ratably to each shareholder of record of the Series as of the
date of liquidation, September 2, 1999;
NOW, THEREFORE, BE IT RESOLVED, that, there are no shares outstanding of Global
Asset Allocation Series A or Global Asset Allocation Series B and no shares of
the Series will be issued.
FURTHER RESOLVED, that the officers of the Fund are hereby authorized to file an
Amended Certificate of Designation pursuant to K.S.A. 17-6401 in order to
eliminate Global Asset Allocation Series A and Global Asset Allocation Series B
from Security Income Fund's Articles of Incorporation.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 13th day of September, 1999.
JOHN D. CLELAND
------------------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Annette E. Cripps, a Notary Public in and
for the County and State aforesaid, came JOHN D. CLELAND, President, and AMY J.
LEE, Secretary, of the Security Income Fund, a Kansas corporation, personally
known to me to be the persons who executed the foregoing instrument of writing
as President and Secretary, respectively, and duly acknowledged the execution of
the same this 13th day of September, 1999.
ANNETTE E. CRIPPS
------------------------------------------
Notary Public
My commission expires 7-8-2001.
<PAGE>
BYLAWS
OF
SECURITY INCOME FUND
OFFICES
1. REGISTERED OFFICE AND REGISTERED AGENT. The location of the registered
office and the name of the registered agent of the Corporation in the State
of Kansas shall be as stated in the Articles of Incorporation or as shall
be determined from time the time by the Board of Directors and on file in
the appropriate public offices of the State of Kansas pursuant to
applicable provisions of law.
2. CORPORATE OFFICES. The Corporation may have such other corporate offices
and places of business anywhere within or without the State of Kansas as
the Board of Directors may from time to time designate or the business of
the Corporation may require.
3. CORPORATE RECORDS. The books and records of the Corporation may be kept at
any one or more offices of the Corporation within or without the State of
Kansas, except that the original or duplicate stock ledger containing the
names and addresses of the stockholders, and the number of shares held by
them, respectively, shall be kept at the registered office of the
Corporation in the State of Kansas.
4. STOCKHOLDERS' RIGHT OF INSPECTION. A stockholder of record, upon written
demand to inspect the records of the Corporation pursuant to any statutory
or other legal right, shall be privileged to inspect such records only
during the usual and customary hours of business and in such manner will
not unduly interfere with the regular conduct of the business of the
Corporation. A stockholder may delegate his/her right of inspection to a
certified or public accountant on the condition, to be enforced at the
option of the Corporation, that the stockholder and accountant agree with
the Corporation to furnish to the Corporation promptly a true and correct
copy of each report with respect to such inspection made by such
accountant. No stockholder shall use, permit to be used or acquiesce in the
use by others of any information so obtained to the detriment competitively
of the Corporation, nor shall he/she furnish or permit to be furnished any
information so obtained to any competitor or prospective competitor of the
Corporation. The Corporation as a condition precedent to any stockholder's
inspection of the records of the Corporation may require the stockholder to
indemnify the Corporation, in such manner and for such amount as may be
determined by the Board of Directors, against any loss or damage which may
be suffered by it arising out of or resulting from any unauthorized
disclosure made or permitted to be made by such stockholder of information
obtained in the course of such inspection.
SEAL
5. SEAL. The Corporation shall have a corporate seal inscribed with the name
of the Corporation and the words "Corporate Seal - Kansas". The form of the
seal may be altered at pleasure and shall be used by causing it or a
facsimile thereof to be impressed, affixed, reproduced or otherwise used.
STOCKHOLDERS' MEETINGS
6. PLACE OF MEETINGS. Meetings of the stockholders may be held at any place
within or without the State of Kansas, as shall be determined from time to
time by the Board of Directors. All meetings of the stockholders for the
election of Directors shall be held at the principal office of the
Corporation in Kansas. Meetings of the stockholders for any purpose other
than the election of Directors may be held at such place as shall be
specified in the notice thereof.
7. ANNUAL MEETING. No annual meeting of stockholders is required to be held
for the purpose of electing directors or any other reason, except when
specifically and expressly required under state or federal law. When an
annual meeting is held for the purpose of electing directors, such
directors shall hold office until the next annual meeting at which
directors are to be elected and until their successors are elected and
qualified, or until their earlier resignation or removal herein.
8. SPECIAL MEETINGS. Special meetings of the stockholders for any purpose or
purposes, unless otherwise prescribed by statute, may be called by the
President, or a Vice President, by the Board of Directors or by the holders
of not less than 10% of all outstanding shares of stock entitled to vote at
any annual meeting; and shall be called by any officer directed to do so by
the Board of Directors.
The "call" and the "notice" of any such meeting shall be deemed to be
synonymous.
9. NOTICE OF MEETINGS. Written or printed notice of each meeting of the
stockholders, whether annual or special, stating the place, date and time
thereof and in case of a special meeting, the purpose or purposes thereof
shall be delivered or mailed to each stockholder entitled to vote thereat,
not less than ten (10) days nor more than fifty (50) days prior to the
meeting. unless as to a particular matter, other or further notice is
required by law, in which case such other or further notice shall be given.
The Board of Directors may fix in advance a date, which shall not be more
than sixty (60) days nor less than ten (10) days preceding the date of any
meeting of the stockholders, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting and
any adjournment thereof; provided, however, that the Board of Directors may
fix a new record date for any adjourned meeting. Any notice of a
stockholders' meeting sent by mail shall be deemed to be delivered when
deposited in the United States mail with postage prepaid thereon, addressed
to the stockholder at his/her address as it appears on the books of the
Corporation.
10. REGISTERED STOCKHOLDERS - EXCEPTIONS - STOCK OWNERSHIP PRESUMED. The
Corporation shall be entitled to treat the holders of the shares of stock
of the Corporation, as recorded on the stock record or transfer books of
the Corporation, as the holders of record and as the holders and owners in
fact thereof and, accordingly, the Corporation shall not be required to
recognize any equitable or other claim to or interest in any such shares on
the part of any other person or other claim to or interest in any such
shares on the part of any other person, firm, partnership, corporation or
association, whether or not the Corporation shall have express or other
notice thereof, except as is otherwise expressly required by law, and the
term "stockholder" as used in these Bylaws means one who is a holder of
record of shares of the Corporation; provided, however, that if permitted
by law,
(a) shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the Bylaws of
such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine;
(b) shares held by a person in a fiduciary capacity may be voted by such
person; and,
(c) a stockholder whose shares are pledged shall be entitled to vote such
shares, unless in the transfer of the shares by the pledgor on the
books of the Corporation, he/she shall have expressly empowered the
pledgee to vote thereon, in which case only the pledgee or his/her
proxy may represent said stock and vote thereon.
11. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. To the extent, if any, and in
the manner permitted by statute and unless otherwise provided in the
Articles of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be
taken by written consent without a meeting.
12. WAIVER OF NOTICE. Whenever any notice is required to be given under the
provisions of these Bylaws, the Articles of Incorporation of the
Corporation, or of any law, a waiver thereof, if not expressly prohibited
by law, in writing signed by the person or persons entitled to notice
shall, whether before or after the time stated therein, be deemed the
equivalent to the giving of such notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when a
person attends a meeting for the express purpose of objecting at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
13. QUORUM. Except as otherwise may be provided by law, by the Articles of
Incorporation of the Corporation or by these Bylaws, the holders of a
majority of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall be required for and shall
constitute a quorum at all meetings of the stockholders for the transaction
of any business. Every decision of a majority in amount of shares of such
quorum shall be valid as a corporate act, except in those specific
instances in which a larger vote is required by law or by the Articles of
Incorporation or by these Bylaws.
If a quorum be not present at any meeting, the stockholders entitled to
vote thereat, present in person or by proxy, shall have power to adjourn
the meeting from time to time without notice other than announcement at the
meeting, until the requisite amount of voting stock shall be present. If
the adjournment is for more than thirty (30) days, or if after adjournment
a new record date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting. At any subsequent session of the meeting at which a
quorum is present in person or by proxy any business may be transacted
which could have been transacted at the initial session of the meeting if a
quorum had been present.
14. PROXIES. At any meeting of the stockholders, every stockholder having the
right to vote shall be entitled to vote in person or by proxy executed by
an instrument in writing subscribed by such a stockholder and bearing a
date not more than three (3) years prior to said meeting unless said
instrument provides that it shall be valid for a longer period.
15. VOTING. Each stockholder shall have one vote for each share of stock having
voting power registered in his/her name on the books of the Corporation and
except where the transfer books of the Corporation shall have been closed
or a date shall have been fixed as a record date for the determination of
its stockholders entitled to vote, no share of stock shall be voted at any
election for directors which shall have been transferred on the books of
the Corporation within twenty (20) days next preceding such election of
Directors. At all elections of Directors, cumulative voting shall prevail,
so that each stockholder shall be entitled to as many votes as shall equal
the number of his/her shares of stock multiplied by the number of Directors
to be elected, and he/she may cast all of such votes for a single Director
or may distribute them among the number to be voted for, or any two or more
as he/she sees fit. Voting shall be ballot for the election of Directors
and on such matters as may be required by law, provided that voting by
ballot on any matter may be waived by the unanimous consent of those
stockholders entitled to vote present at the meeting. A stockholder holding
stock in a fiduciary capacity shall be entitled to vote the shares so held,
and a stockholder whose stock is pledged shall be entitled to vote unless,
in the transfer by the pledgor on the books of the Corporation, (s)he shall
have expressly empowered the pledgee to vote thereon, in which case only
the pledgee or his/her proxy may represent said stock and vote thereon.
16. STOCKHOLDERS' LISTS. A complete list of the stockholders entitled to vote
at every election of Directors, arranged in alphabetical order, with the
address of and the number of voting shares held by each stockholder, shall
be prepared by the officer having charge of the stock books of the
Corporation and for at least ten (10) days prior to the date of the
election shall be open at the place where the election is to be held,
during the usual hours for business, to the examination of any stockholder
and shall be produced and kept open at the place of the election during the
whole time thereof for the inspection of any stockholder present. The
original or duplicate stock ledger shall be the only evidence as to who are
stockholders entitled to examine such lists, or the books of the
Corporation, or to vote in person or by proxy, at such election. Failure to
comply with the foregoing shall not affect the validity or any action taken
at any such meeting.
17. PRESIDING OFFICIALS. Every meeting of the stockholders, for whatever
object, shall be convened by the President, or by the officer or person who
called the meeting by notice as above provided, but it shall be presided
over by the officers specified in paragraphs 37 and 38 of these Bylaws;
provided, however, that the stockholders at any meeting, by a majority vote
in amount of shares represented thereat, and notwithstanding anything to
the contrary contained elsewhere in these Bylaws, may select any persons of
their choosing to act as Chairman and Secretary of such meeting or any
session thereof.
BOARD OF DIRECTORS
18. OFFICES. The Directors may have one or more offices, and keep the books of
the Corporation (except the original or duplicated stock ledgers, and such
other books and records as may by law be required to be kept at a
particular place) at such place or places within or without the State of
Kansas as the Board of Directors may from time to time determine.
19. MANAGEMENT. The management of all affairs, property and business of the
corporation shall be vested in a Board of Directors, consisting of a
minimum of six (6) and a maximum of nine (9) directors. Unless required by
the Articles of Incorporation, Directors need not be stockholders. Each
person who shall serve on the Board of Directors and who shall be
recommended and nominated for election or reelection as a director shall be
a person who is in good standing in his/her community and who shall not, at
the time of election or reelection, have attained his/her 70th birthday. In
addition to the power and authorities by these Bylaws and the Articles of
Incorporation expressly conferred upon it, the Board of Directors may
exercise all such powers of the Corporation, and do all such lawful acts
and things as are not by statute or by the Articles of Incorporation or by
these Bylaws directed or required to be exercised or done by the
stockholders.
20. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies and newly created
directorships resulting from any increase in the authorized number of
Directors may be filled by a majority of the Directors then in office,
though less than a quorum, or by a sole remaining Director, unless it is
otherwise provided in the Articles of Incorporation or these Bylaws, and
the Directors so chosen shall hold office until the next annual election
and until their successors are duly elected and qualified, or until their
earlier resignation or removal. If there are no Directors in office, then
an election of Directors may be held in the manner provided by statute.
21. MEETINGS OF THE NEWLY ELECTED BOARD -- NOTICE. The first meeting of the
members of each newly elected Board of Directors shall be held (a) at such
time and place either within or without the State of Kansas as shall be
suggested or provided by resolution of the stockholders at the meeting at
which such newly elected Board was elected, and no notice of such meeting
shall be necessary to the newly elected Directors in order legally to
constitute the meeting, provided a quorum shall be present, or (b) if not
so suggested or provided for by resolution of the stockholders or if a
quorum shall not be present, at such time and place as shall be consented
to in writing by a majority of the newly elected Directors, provided that
written or printed notice of such meeting shall be given to each of the
other Directors in the same manner as provided in section 23 of these
Bylaws with respect to the giving of notice for special meetings of the
Board except that it shall not be necessary to state the purpose of the
meeting in such notice, or (c) regardless of whether or not the time and
place of such meeting shall be suggested or provided for by resolution of
the stockholders, at such time and place as shall be consented to in
writing by all of the newly elected Directors.
Every Director of the Corporation, upon his/her election, shall qualify by
accepting the office of the Director, and his/her attendance at, or his/her
written approval of the minutes of, any meeting of the Board subsequent to
his/her election shall constitute his/her acceptance of such office; or
he/she may execute such acceptance by a separate writing, which shall be
placed in the minute book.
22. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held
without notice at such times and places either within or without the State
of Kansas as shall from time to time be fixed by resolution adopted by the
full Board of Directors. Any business may be transacted at a regular
meeting.
23. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called
at any time by the Chairman of the Board, the President, and Vice President
or the Secretary, or by any two (2) or more of the Directors. The place may
be within or without the State of Kansas as designated in the notice.
24. NOTICE OF SPECIAL MEETINGS. Written or printed notice of each special
meeting of the Board, stating the place, day and hour of the meeting and
the purpose or purposes thereof, shall be mailed to each Director addressed
to him/her at his/her residence or usual place of business at least three
(3) days before the day on which the meeting is to be held, or shall be
sent to him/her by telegram, or delivered to him/her personally, at least
two (2) days before the day on which the meeting is to be held. If mailed,
such notice shall be deemed to be delivered when it is deposited in the
United States mail with postage thereon addressed to the Director at
his/her residence or usual place of business. If given by telegraph, such
notice shall be deemed to be delivered when it is delivered to the
telegraph company. The notice may be given by any officer having authority
to call the meeting. "Notice" and "call" with respect to such meetings
shall be deemed to be synonymous. Any meeting of the Board of Directors
shall be a legal meeting without any notice thereof having been given if
all Directors shall be present.
25. MEETINGS BY CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT.
Unless otherwise restricted by law, the Articles of Incorporation or these
Bylaws, members of the Board of Directors of the Corporation, or any
committee designated by the board, may participate in a meeting of the
board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant hereto
shall constitute presence in person at such meeting.
26. QUORUM. Unless otherwise required by law, the Articles of Incorporation or
these Bylaws, a majority of the total number of Directors shall be
necessary at all meetings to constitute a quorum for the transaction of
business, and except as may be otherwise provided by law, the Articles of
Incorporation or these Bylaws, the act of a majority of the Directors
present at any meeting at which there is a quorum shall be the act of the
Board of Directors.
If at least two (2) Directors or one-third (1/3) of the whole Board of
Directors, whichever is greater, is present at any meeting at which a
quorum is not present, a majority of the Directors present at such meeting
shall have power successively to adjourn the meeting from time to time to a
subsequent date, without notice to any Directors other than announcement at
the meeting. At such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the original
meeting with was adjourned.
27. STANDING OR TEMPORARY COMMITTEES. The Board of Directors may, by resolution
or resolutions passed by a majority of the whole Board, designate one (1)
or more committees, each committee to consist of one (1) or more Directors
of the Corporation. The Board may designate one (1) or more Directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not
he/she or they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided
in the resolution of the Board of Directors or in these Bylaws, shall have
and may exercise all of the powers and authority of the Board of Directors
in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power of authority of the
Board of Directors with respect to amending the Articles of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or
amending the Bylaws of the Corporation; and, unless the resolution, these
Bylaws or the Articles of Incorporation expressly so provide, no such
committee shall have power or authority to declare a dividend or to
authorize the issuance of stock.
Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of
Directors. All committees so appointed shall, unless otherwise provided by
the Board of Directors, keep regular minutes of the transactions at their
meetings and shall cause them to be recorded in books kept for that purpose
in the office of the Corporation and shall report the same to the Board of
Directors at its next meeting. The Secretary or an Assistant Secretary of
the Corporation may act as Secretary of the committee if the committee so
requests.
28. COMPENSATION. Unless otherwise restricted by the Articles of Incorporation,
the Board of Directors may, by resolution, fix the compensation to be paid
Directors for serving as Directors of the Corporation and may, by
resolution, fix a sum which shall be allowed and paid for attendance at
each meeting of the Board of Directors and may provide for reimbursement of
expenses incurred by Directors in attending each meeting; provided that
nothing herein contained shall be construed to preclude any Director from
serving the Corporation in any other capacity and receiving his/her regular
compensation therefor. Members of special or standing committees may be
allowed similar compensation for attending committee meetings. Nothing
herein contained shall be construed to preclude any Director or committee
member from serving the Corporation in any other capacity and receiving
compensation therefor.
29. RESIGNATIONS. Any Director may resign at any time upon written notice to
the Corporation. Such resignation shall take effect at the time specified
therein or shall take effect upon receipt thereof by the Corporation if no
time is specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
30. INDEMNIFICATION AND LIABILITY OF DIRECTORS AND OFFICERS. Each person who is
or was a Director or officer of the Corporation or is or was serving at the
request of the Corporation as a Director or officer of another corporation
(including the heirs, executors, administrators and estate of such person)
shall be indemnified by the Corporation as of right to the full extent
permitted or authorized by the laws of the State of Kansas, as now in
effect and is hereafter amended, against any liability, judgment, fine,
amount paid in settlement, cost and expense (including attorneys' fees)
asserted or threatened against and incurred by such person in his/her
capacity as or arising out of his/her status as a Director or officer of
the Corporation or, if serving at the request of the Corporation, as a
Director or officer of another corporation. The indemnification provided by
this bylaw provision shall not be exclusive of any other rights to which
those indemnified may be entitled under the Articles of Incorporation,
under any other bylaw or under any agreement, vote of stockholders or
disinterested directors or otherwise, and shall not limit in any way any
right which the Corporation may have to make different or further
indemnification with respect to the same or different persons or classes of
persons.
No person shall be liable to the Corporation for any loss, damage,
liability or expense suffered by it on account of any action taken or
omitted to be taken by him/her as a Director or officer of the Corporation
or of any other corporation which he/she serves as a Director or officer at
the request of the Corporation, if such person (a) exercised the same
degree of care and skill as a prudent man would have exercised under the
circumstances in the conduct of his/her own affairs, or (b) took or omitted
to take such action in reliance upon advice of counsel for the Corporation,
or for such other corporation, or upon statement made or information
furnished by Directors, officers, employees or agents of the Corporation,
or of such other corporation, which he/she had no reasonable grounds to
disbelieve.
In the event any provision of this section 30 shall be in violation of the
Investment Company Act of 1940, as amended, or of the rules and regulations
promulgated thereunder, such provisions shall be void to the extent of such
violations.
31. ACTION WITHOUT A MEETING. Unless otherwise restricted by the Articles of
Incorporation or these Bylaws, any action required or permitted to be taken
at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting if written consent thereto is signed by all members
of the Board of Directors or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board
or committee.
32. NUMBERS AND POWERS OF THE BOARD. The property and business of this
Corporation shall be managed by a Board of Directors, and the number of
Directors to constitute the Board shall be not less than six (6) nor more
than nine (9). Directors need not be stockholders. In addition to the
powers and authorities by these Bylaws expressly conferred upon the Board
of Directors, the Board may exercise all such powers of the corporation and
do or cause to be done all such lawful acts and things as are not by
statute or by the Articles of Incorporation or by these Bylaws prohibited,
or required to be exercised or done by the stockholders only.
33. TERM OF OFFICE. The first Board of Directors shall be elected at the first
duly held meeting of the incorporators and thereafter they shall be elected
at the annual meetings of the stockholders. Except as may otherwise be
provided by law, the Articles of Incorporation or these Bylaws, each
Director shall hold office until the next annual election and until a
successor shall be duly elected and qualified, or until his/her written
resignation shall have been filed with the Secretary of the Corporation.
Each Director, upon his/her election, shall qualify by accepting the office
of Director by executing and filing with the Corporation a written
acceptance of his/her election which shall be placed in the minute book.
34. WAIVER. Any notice provided or required to be given to the Directors may be
waived in writing by any of them. Attendance of a Director at any meeting
shall constitute a waiver of notice of such meeting except where he/she
attends for the express purpose of objecting to the transaction of any
business thereat because the meeting is not lawfully called or convened.
OFFICERS
35. (a) OFFICERS - WHO SHALL CONSTITUTE. The officers of the Corporation shall
be a Chairman of the Board, a President, one or more Vice Presidents,
a Secretary, a Treasurer, one or more Assistant Secretaries and one or
more Assistant Treasurers. The Board shall elect a President, a
Secretary and a Treasurer at its first meeting after each annual
meeting of the stockholders. The Board then, or from time to time, may
elect one or more of the other prescribed officers as it may deem
advisable, but need not elect any officers other than a President, a
Secretary and a Treasurer. The Board may, if it desires, elect or
appoint additional officers and may further identify or describe any
one or more of the officers of the Corporation. In the discretion of
the Board of Directors, the office of Chairman of the Board of
Directors may remain unfilled. The Chairman of the Board of Directors,
if any, shall at all times be, and other officers may be, members of
the Board of Directors.
Officers of the Corporation need not be members of the Board of
Directors. Any two (2) or more offices may be held by the same person.
An officer shall be deemed qualified when he/she enters upon the
duties of the office to which he/she has been elected or appointed and
furnishes any bond required by the Board; but the Board may also
require his/her written acceptance and promise faithfully to discharge
the duties of such office.
(b) TERM OF OFFICE. Each officer of the Corporation shall hold his/her
office at the pleasure of the Board of Directors or for such other
period as the Board may specify at the time of his/her election or
appointment, or until his/her death, resignation or removal by the
Board, whichever first occurs. In any event, each officer of the
Corporation who is not reelected or reappointed at the annual election
of officers by the Board next succeeding his/her election or
appointment shall be deemed to have been removed by the Board, unless
the Board provides otherwise at the time of his/her election or
appointment.
(c) OTHER AGENTS. The Board from time to time may also appoint such other
agents for the Corporation as it shall deem necessary or advisable,
each of whom shall serve at the pleasure of the Board or for such
period as the Board may specify, and shall exercise such powers, have
such titles and perform such duties as shall be determined from time
to time by the Board or by an officer empowered by the Board to make
such determinations.
36. CHAIRMAN OF THE BOARD. If a Chairman of the Board be elected, he/she shall
preside at all meetings of the stockholders and Directors at which he/she
may be present and shall have such other duties, powers and authority as
any be prescribed elsewhere in these Bylaws. The Board of Directors may
delegate such other authority and assign such additional duties to the
Chairman of the Board, other than those conferred by law exclusively upon
the President, as it may from time to time determine, and, to the extent
permissible by law, the Board may designate the Chairman of the Board as
the Chief Executive Officer of the Corporation with all of the powers
otherwise conferred upon the President of the Corporation under paragraph
37 of these Bylaws, or it may, from time to time, divide the
responsibilities, duties and authority for the general control and
management of the Corporation's business and affairs between the Chairman
of the Board and the President.
37. THE PRESIDENT. Unless the Board otherwise provides, the President shall be
the Chief Executive Officer of the Corporation with such general executive
powers and duties of supervision and management as are usually vested in
the office of the Chief Executive Officer of a corporation, and he/she
shall carry into effect all directions and resolutions of the Board. The
President, in the absence of the Chairman of the Board or if there be no
Chairman of the Board, shall preside at all meetings of the stockholders
and Directors.
The President may execute all bonds, notes, debentures, mortgages and other
instruments for and in the name of the Corporation, may cause the corporate
seal to be affixed thereto, and may execute all other instruments for and
in the name of the Corporation.
Unless the Board otherwise provides, the President, or any person
designated in writing by him/her, shall have full power and authority on
behalf of this Corporation (a) to attend and vote or take action at any
meeting of the holders of securities of corporations in which this
Corporation may hold securities, and at such meetings shall possess and may
exercise any and all rights and powers incident to being a holder of such
securities, and (b) to execute and deliver waivers of notice and proxies
for and in the name of the Corporation with respect to any securities held
by this Corporation.
He/she shall, unless the Board otherwise provides, be ex officio a member
of all standing committees.
He/she shall have such other or further duties and authority as may be
prescribed elsewhere in these Bylaws or from time to time by the Board of
Directors.
If a Chairman of the Board be elected or appointed and designated as the
Chief Executive Officer of the Corporation, as provided in paragraph 36 of
these Bylaws, the President shall perform such duties as may be
specifically delegated to him/her by the Board of Directors or are
conferred by law exclusively upon him/her, and in the absence, disability,
or inability or refusal to act of the Chairman of the Board, the President
shall perform the duties and exercise the powers of the Chairman of the
Board.
38. VICE PRESIDENT. In the absence of the President or in the event of his/her
disability or inability or refusal to act, any Vice President may perform
the duties and exercise the powers of the President until the Board
otherwise provides. Vice Presidents shall perform such other duties as the
Board may from time to time prescribe.
39. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall attend all
sessions of the Board and all meetings of the stockholders, shall prepare
minutes of all proceedings at such meetings and shall preserve them in a
minute book of the Corporation. He/she shall perform similar duties for the
executive and other standing committees when requested by the Board or any
such committee.
It shall be the principal responsibility of the Secretary to give, or cause
to be given, notice of all meetings of the stockholders and of the Board of
Directors, but this shall not lessen the authority of others to give such
notice as is authorized elsewhere in these Bylaws.
The Secretary shall see that all books, records, lists and information, or
duplicates, required to be maintained in Kansas, or elsewhere, are so
maintained.
The Secretary shall keep in safe custody the seal of the Corporation, and
shall have authority to affix the seal to any instrument requiring a
corporate seal and, when so affixed, he/she shall attest the seal by
his/her signature. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest the
affixing by his/her signature.
The Secretary shall have the general duties, responsibilities and
authorities of a Secretary of a Corporation and shall perform such other
duties and have such other responsibility and authority as may be
prescribed elsewhere in these Bylaws or from time to time by the Board of
Directors or the Chief Executive Officer of the Corporation, under whose
direct supervision (s)he shall be.
In the absence of the Secretary or in the event of his/her disability, or
inability or refusal to act, any Assistant Secretary may perform the duties
and exercise the powers of the Secretary until the Board otherwise
provides. Assistant Secretaries shall perform such other duties as the
Board of Directors may from time to time prescribe.
40. TREASURER AND ASSISTANT TREASURERS. The Treasurer shall have responsibility
for the safekeeping of the funds and securities of the Corporation, shall
keep or cause to be kept full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall keep, or
cause to be kept, all other books of account and accounting records of the
Corporation. He/she shall deposit or cause to be deposited all moneys and
other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors or by any
officer of the Corporation to whom such authority has been granted by the
Board.
He/she shall disburse, or permit to be disbursed, the funds of the
Corporation as may be ordered, or authorized generally, by the Board, and
shall render to the Chief Executive Officer of the Corporation and the
Directors whenever they may require it, an account of all his/her
transactions as Treasurer and of those under his/her jurisdiction, and of
the financial condition of the Corporation.
He/she shall perform such other duties and shall have such other
responsibility and authority as may be prescribed elsewhere in these Bylaws
or from time to time by the Board of Directors.
He/she shall have the general duties, powers and responsibility of a
Treasurer of a corporation and shall, unless otherwise provided by the
Board, be the Chief Financial and Accounting Officer of the Corporation.
If required by the Board, he/she shall give the Corporation a bond in a sum
and with one or more sureties satisfactory to the Board, for the faithful
performance of the duties of his/her office and for the restoration to the
Corporation, in the case of his/her death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his/her possession or under his/her control
which belong to the Corporation.
In the absence of the Treasurer or in the event of his/her disability, or
inability or refusal to act, any Assistant Treasurer may perform the duties
and exercise the powers of the Treasurer until the Board otherwise
provides. Assistant Treasurers shall perform such other duties and have
such other authority as the Board of Directors may from time to time
prescribe.
41. DUTIES OF OFFICERS MAY BE DELEGATED. If any officer of the Corporation be
absent or unable to act, or for any other reason that the Board may deem
sufficient, the Board may delegate, for the time being, some or all of the
functions, duties, powers and responsibilities of any officer to any other
officer, or to any other agent or employee of the Corporation or other
responsible person, provided a majority of the whole Board concurs.
42. REMOVAL. Any officer or agent elected or appointed by the Board of
Directors, and any employee, may be removed or discharged by the Board
whenever in its judgment the best interests of the Corporation would be
served thereby, but such removal or discharge shall be without prejudice to
the contract rights, if any, of the person so removed or discharged.
43. SALARIES AND COMPENSATION. Salaries and compensation of all elected
officers of the Corporation shall be fixed, increased or decreased by the
Board of Directors, but this power, except as to the salary or compensation
of the Chairman of the Board and the President, may, unless prohibited by
law, be delegated by the Board to the Chairman of the Board or the
President, or may be delegated to a committee. Salaries and compensation of
all appointed officer, agents, and employees of the Corporation may be
fixed, increased or decreased by the Board of Directors, but until action
is taken with respect thereto by the Board of Directors the same fixed,
increased or decreased by the Chairman of the Board, the President or such
other officer or officers as may be empowered by the Board of Directors to
do so.
44. DELEGATION OF AUTHORITY TO HIRE, DISCHARGE AND DESIGNATE DUTIES. The Board
from time to time may delegate to the Chairman of the Board, the President
or other officer or executive employee of the Corporation, authority to
hire, discharge and fix and modify the duties, salary or other compensation
of employees of the Corporation under their jurisdiction, and the Board may
delegate to such officer or executive employee similar authority with
respect to obtaining and retaining for the Corporation the services of
attorneys, accountants and other experts.
STOCK
45. CERTIFICATES FOR SHARES OF STOCK. Certificates for shares of stock shall be
issued in numerical order, and each stockholder shall be entitled to a
certificate signed by, or in the name of the Corporation by, the Chairman
of the Board or the President or a Vice President, and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary,
certifying the number of shares owned by him/her. To the extent permitted
by statute, any of or all of the signatures on such certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, such certificate may nevertheless be issued by the
Corporation with the same effect as if such officer, transfer agent or
registrar who signed such certificate, or whose facsimile signature shall
have been used thereon, had not ceased to be such officer, transfer agent
or registrar of the Corporation.
46. TRANSFERS OF STOCK. Transfers of stock shall be made only upon the transfer
books of the Corporation, kept at the office of the Corporation or of the
transfer agent designated to transfer the class of stock, and before a new
certificate is issued the old certificate shall be surrendered for
cancellation. Until and unless the Board appoints some other person, firm
or corporation as its transfer agent (and upon the revocation of any such
appointment, thereafter, until a new appointment is similarly made) the
Secretary of the Corporation shall be the transfer agent of the Corporation
without the necessity of any formal action of the Board, and the Secretary,
or any person designated by him/her, shall perform all of the duties
thereof.
47. REGISTERED STOCKHOLDERS. Only registered stockholders shall be entitled to
be treated by the Corporation as the holders and owner in fact of the
shares standing in their respective names, and the Corporation shall not be
bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as expressly provided by the laws
of Kansas.
48. LOST CERTIFICATES. The Board of Directors may authorize the Secretary to
direct that a new certificate or certificates be issued in place of any
certificate or certificates theretofore issued by the Corporation, alleged
to have been lost, stolen or destroyed, upon the making of an affidavit of
the fact by the person claiming the certificate or certificates to be lost,
stolen or destroyed. When authorizing such issue of a replacement
certificate or certificates, the Secretary may, as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his/her legal representative, to give the
Corporation and its transfer agents and registrars, if any, a bond in such
sum as it may direct to indemnify it against any claim that may be made
against it with respect to the certificate or certificates alleged to have
been lost, stolen or destroyed, or with respect to the issuance of such new
certificate or certificates.
49. REGULATIONS. The Board of Directors shall have power and authority to make
all such rules and regulations as it may deem expedient concerning the
issue, transfer, conversion and registration of certificates for shares of
stock of the Corporation, not inconsistent with the laws of the State of
Kansas, the Articles of Incorporation of the Corporation and these Bylaws.
50. FIXING RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise in respect of any change, conversion or exchange of stock or for
the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty (60) days not
less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders
shall apply to any adjournment of the meeting; provided, however, that the
Board of Directors may fix a new record date for the adjourned meeting.
DIVIDENDS AND FINANCE
51. DIVIDENDS. Dividends upon the outstanding shares of stock of the
Corporation, subject to the provisions of the Articles of Incorporation and
of any applicable law and of these Bylaws, may be declared by the Board of
Directors at any meeting. Subject to such provisions, dividends may be paid
in cash, in property, or in shares of stock of the Corporation.
52. CREATION OF RESERVES. The Directors may set apart out of any of the funds
of the Corporation available for dividends a reserve or reserves for any
proper purpose or may abolish any such reserve in the manner in which it
was created.
53. DEPOSITORIES. The moneys of the Corporation shall be deposited in the name
of the Corporation in such bank or banks or other depositories as the Board
of Directors shall designate, and shall be drawn out only by check signed
by persons designated by resolution adopted by the Board of Directors,
except that the Board of Directors may delegate said powers in the manner
hereinafter provided in this bylaw 53. The Board of Directors may by
resolution authorize an officer or officers of the Corporation to designate
any bank or banks or other depositories in which moneys of the Corporation
may be deposited, and to designate the persons who may sign checks drawn on
any particular account or accounts of the Corporation, whether created by
direct designation of the Board of Directors or by authorized officer or
officers as aforesaid.
54. FISCAL YEAR. The Board of Directors shall have power to fix and from time
to time change the fiscal year of the Corporation. In the absence of action
by the Board of Directors, the fiscal year of the Corporation shall end
each year on the date which the Corporation treated as the close of its
first fiscal year, until such time, if any, as the fiscal year shall be
changed by the Board of Directors.
55. DIRECTORS' STATEMENT. The Board of Directors may present at each annual
meeting of the stockholders, and when called for by vote of the
stockholders shall present to any annual or special meeting of the
stockholders, a full and clear statement of the business and condition of
the Corporation.
56. FIXING OF CAPITAL, TRANSFERS OF SURPLUS. Except as may be specifically
otherwise provided in the Articles of Incorporation, the Board of Directors
is expressly empowered to exercise all authority conferred upon it or the
Corporation by any law or statute, and in conformity therewith, relative
to:
(a) the determination of what part of the consideration received for
shares of the Corporation shall be capital;
(b) increasing or reducing capital;
(c) transferring surplus to capital or capital to surplus;
(d) all similar or related matters;
provided that any concurrent action or consent by or of the Corporation and
its stockholders required to be taken or given pursuant to law shall be
duly taken or given in connection therewith.
57. LOANS TO OFFICERS AND DIRECTORS PROHIBITED. The Corporation shall not loan
money to any officer or director of the Corporation.
58. BOOKS, ACCOUNTS AND RECORDS. The books, accounts and records of the
Corporation, except as may be otherwise required by the laws of the State
of Kansas, may be kept outside the State of Kansas, at such place or places
as the Board of Directors may from time to time determine. The Board of
Directors shall determine whether, to what extent and the conditions upon
which the book, accounts and records of the Corporation, or any of them,
shall be open to the inspection of the stockholders, and no stockholder
shall have any right to inspect any book, account or record of the
Corporation, except as conferred by law or by resolution of the
stockholders or Directors.
INVESTMENT AND MANAGEMENT POLICIES
59. CUSTODY OF SECURITIES. Without limitation as to any restriction imposed by
the Articles of Incorporation of the Corporation or by operation of law on
the conduct of the Corporation's investment company business, the custody
of the Corporation's securities shall be subject to the following
requirements:
(a) The securities of the Corporation shall be placed in the custody and
care of a custodian which shall be a bank or trust company having not
less than $2,000,000 aggregate capital, surplus and undivided profits.
(b) Upon the resignation or inability to serve of the custodian, the
officers and directors shall be required to use their best efforts to
locate a successor, to whom all cash and securities must be delivered
directly, and in the event that no successor can be found, to submit
to stockholders the question of whether the corporation should be
liquidated or shall function without a custodian.
(c) Any agreement with the custodian shall require it to deliver
securities owned by the Corporation only (1) upon sale of such
securities for the account of the Corporation and receipt of payment;
(2) to the broker or dealer selling the securities in accordance with
"street delivery" custom; (3) on redemption, retirement of maturity;
(4) on conversion or exchange into other securities pursuant to a
conversion or exchange privilege, or plan of merger, consolidation,
reorganization, recapitalization, readjustment, share split-up, change
of par value, deposit in or withdrawal from a voting trust, or similar
transaction or event affecting the issuer; or (5) pursuant to the
redemption in kind of any securities of the Corporation.
(d) Any agreement with the custodian shall require it to deliver funds of
the Corporation only (1) upon the purchase of securities for the
portfolio of the Corporation and delivery of such securities to the
custodian, or (2) for the redemption of shares by the Corporation, the
payment of interest, dividend disbursements, taxes, management fees,
the making of payments in connection with the conversion, exchange or
surrender of securities owned by the Corporation and the payment of
operating expenses of the Corporation.
60. RESTRICTIONS ON THE INVESTMENT OF FUNDS. Without limitation as to any
restrictions imposed by the Articles of Incorporation of the Corporation or
by operation of law on the conduct of the Corporation's investment company
business, the officers and Directors of the Corporation shall not permit
the Corporation to take any action not permitted by its fundamental
investment policies, as amended, set forth in the Corporation's
registration statement.
61. DISTRIBUTION OF EARNINGS.
A. The Directors by appropriate resolution shall from time to time
distribute the net earnings of the Corporation to its shareholders
pro-rata by mailing checks to the shareholders at the address shown on
the books of the Company.
B. In addition to paying all current expenses, it shall be the duty of the
officers and Directors to set up adequate reserves to cover taxes,
auditors' fees, and any and all necessary expenses that can be
anticipated but are not currently payable, and same shall be deducted
from gross earnings before net earnings may be distributed.
C. If any of the net earnings of this Corporation is profit from sale of
its securities or from any source that would be considered as capital
gains, this information shall be clearly revealed to the stockholders
and the basis of calculation of such gains set forth.
D. The officers and Directors shall distribute not less than that amount
of net earnings of this Corporation to its shareholders as may be
required or advisable under applicable law and special distribution of
net earnings may be made at the discretion of the Directors at any time
to meet this requirement or for any other reason.
62. UNDERWRITING OR PRINCIPAL BROKER AGREEMENT.
A. The officers and Directors of this Corporation shall not enter into an
agreement or contract with any person or corporation to act as
underwriter or principal broker for the sale and/or distribution of its
shares, unless said person or corporation is fully qualified as a
broker and has net all the requirements of the Kansas Corporation
Commission and United States Securities and Exchange Commission and is
currently in good standing with said Commissions.
B. No commission, sales load or discount from the offering price of said
shares shall be greater than that which is permitted under the
Investment Company Act of 1940 and the rules, regulations and orders
promulgated thereunder.
C. Any such contract so made shall not endure for a period of more than on
year, unless such extension has been duly ratified and approved by a
majority vote of the Directors of the Corporation, and such contract
shall contain a provision that it may be terminated for cause upon
sixty days written notice by either party.
MISCELLANEOUS
63. WAIVER OF NOTICE. Whenever any notice is required to be given under the
provisions of the statutes of Kansas, or of the Articles of Incorporation
or of these Bylaws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, Directors or members of a committee of directors need be
specified in any written waiver of notice unless so required by the
Articles of Incorporation of these Bylaws.
64. CONTRACTS. The Board of Directors may authorize any officer or officers, or
agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
65. AMENDMENTS. These Bylaws may be altered, amended or repealed, or new Bylaws
may be adopted, in any of the following ways: (i) by the holders of a
majority of the outstanding shares of stock of the Corporation entitled to
vote, or (ii) by a majority of the full Board of Directors and any change
so made by the stockholders may thereafter be further changed by a majority
of the directors; provided, however, that the power of the Board of
Directors to alter, amend or repeal the Bylaws, or to adopt new Bylaws, may
be denied as to any Bylaws or portion thereof as the stockholders shall so
expressly provide.
CERTIFICATE
The undersigned Secretary of Security Income Fund, a Kansas Corporation, hereby
certifies that the foregoing Bylaws are the amended/restated Bylaws of said
Corporation adopted by the Directors of the Corporation.
Dated: February 3, 1995
AMY J. LEE
------------------------------
Amy J. Lee
Secretary
<PAGE>
AMENDMENT TO THE
BYLAWS
OF
SECURITY INCOME FUND
The following amendment was made to the Bylaws of Security Income Fund, dated
February 3, 1995, at the regular meeting of the Board of Directors held on July
23, 1999, deleting paragraph 14 in its entirety and inserting in lieu thereof:
14. PROXIES. At any meeting of the stockholders, every stockholder having the
right to vote shall be entitled to vote in person or by proxy executed by
an instrument in writing subscribed by such a stockholder and bearing a
date not more than three (3) years prior to said meeting unless said
instrument provides that it shall be valid for a longer period. A
stockholder voting by proxy may do so via electronic, including via the
Internet, or telephonic transmission provided that any such electronic
transmission must either contain or be accompanied by information from
which it can be determined that the stockholder authorized the
transmission. A copy, facsimile or other reliable reproduction of the
instrument may be substituted for the original instrument for any purpose
for which the original instrument could be used.
Dated: July 23, 1999
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
<PAGE>
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of June 4, 1999 by and between BT INVESTMENT PORTFOLIOS, a
New York trust (herein called the "Trust") and BANKERS TRUST COMPANY (herein
called the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end management investment company
under the Investment Company Act of 1940;
WHEREAS, the Trust desires to retain the Investment Adviser to render
investment advisory and other services to the Trust with respect to certain of
its series of shares of beneficial interests as may currently exist or be
created in the future (each, a "Fund") as listed on Exhibit A hereto, and the
Investment Adviser is willing to so render such services on the terms
hereinafter set forth;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the promises and mutual covenants herein contained, it is
agreed between the parties hereto as follows:
1. APPOINTMENT. The Trust hereby appoints the Investment Adviser to act as
investment adviser to each Fund for the period and on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
render the services herein set forth for the compensation herein provided.
2. MANAGEMENT. Subject to the supervision of the Board of Trustees of the
Trust, the Investment Adviser will provide a continuous investment program for
the Fund, including investment research and management with respect to all
securities, investments, cash and cash equivalents in the Fund. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by each Fund. The Investment Adviser will
provide the services rendered by it hereunder in accordance with the investment
objective(s) and policies of each Fund as stated in the Fund's then-current
prospectus and statement of additional information (or the Fund's then current
registration statement on Form N-1A as filed with the Securities and Exchange
Commission (the "SEC") and the then-current offering memorandum if the Fund is
not registered under the Securities Act of 1933, as amended ("1933 Act"). The
Investment Adviser further agrees that it:
(a) will conform with all applicable rules and regulations of the SEC
(herein called the "Rules") and with all applicable provisions of the 1933 Act;
as amended, the Securities Exchange Act of 1934, as amended (the "1934 Act"),
the Investment Company Act of 1940, as amended (the "1940 Act"); and the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and will, in
addition, conduct its activities under this Agreement in accordance with
regulations of the Board of Governors of the Federal Reserve System pertaining
to the investment advisory activities of bank holding companies and their
subsidiaries;
(b) will place orders pursuant to its investment determinations for each
Fund either directly with the issuer or with any broker or dealer selected by
it. In placing orders with brokers and dealers, the Investment Adviser will use
its reasonable best efforts to obtain the best net price and the most favorable
execution of its orders, after taking into account all factors it deems
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. Consistent with this obligation, the
Investment Adviser may, to the extent permitted by law, purchase and sell
portfolio securities to and from brokers and dealers who provide brokerage and
research services (within the meaning of Section 28(e) of the 1934 Act) to or
for the benefit of any fund and/or other accounts over which the Investment
Adviser or any of its affiliates exercises investment discretion. Subject to the
review of the Trust's Board of Trustees from time to time with respect to the
extent and continuation of the policy, the Investment Adviser is authorized to
pay to a broker or dealer who provides such brokerage and research services a
commission for effecting a securities transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Investment Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Investment Adviser
with respect to the accounts as to which it exercises investment discretion; and
(c) will maintain books and records with respect to the securities
transactions of each Fund and will render to the Trust's Board of Trustees such
periodic and special reports as the Board may request.
3. SERVICES NOT EXCLUSIVE. The investment advisory services rendered by the
Investment Adviser hereunder are not to be deemed exclusive, and the Investment
Adviser shall be free to render similar services to others so long as its
services under this Agreement are not impaired thereby.
4. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 of
the Rules under the 1940 Act, the Investment Adviser hereby agrees that all
records which it maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records upon
request of the Trust. The Investment Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act and to comply in full with the
requirements of Rule 204-2 under the Advisers Act pertaining to the maintenance
of books and records.
5. EXPENSES. During the term of this Agreement, the Investment Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of purchasing securities (including brokerage
commissions, if any) for the Fund.
6. COMPENSATION. For the services provided and the expenses assumed pursuant
to this Agreement, the Trust will pay the Investment Adviser, and the Investment
Adviser will accept as full compensation therefor, fees, computed daily and
payable monthly, on an annual basis equal to the percentage set forth on Exhibit
A hereto of that Fund's average daily net assets.
7. LIMITATION OF LIABILITY OF THE INVESTMENT ADVISER: INDEMNIFICATION.
(a) The Investment Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by a Fund in connection with the
matters to which this Agreement relates, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement;
(b) Subject to the exceptions and limitations contained in Section 7(c)
below:
(i) the Investment Adviser (hereinafter referred to as a "Covered
Person") shall be indemnified by the respective Fund to the fullest extent
permitted by law, against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit or proceeding in which
he becomes involved, as a party or otherwise, by virtue of his being or having
been the Investment Adviser of the Fund, and against amounts paid or incurred by
him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(c) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which
the proceeding was brought (A) to be liable to the Trust or to one or more
Funds' investors by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office, or
(B) not to have acted in good faith in the reasonable belief that his action was
in the best interest of a Fund; or
(ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office;
(A) by the court or other body approving the settlement; or
(B) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any investor in a Fund may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by independent
counsel.
(d) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be exclusive
of or affect any other rights to which any Covered Person may now or hereafter
be entitled, shall continue as to a person who has ceased to be a Covered Person
and shall inure to the benefit of the successors and assigns of such person.
Nothing contained herein shall affect any rights to indemnification to which
Trust personnel and any other persons, other than a Covered Person, may be
entitled by contract or otherwise under law.
(e) Expenses in connection with the preparation and presentation of a
defense to any claim, suit or proceeding of the character described in
subsection (b) of this Section 7 may be paid by the Trust on behalf of the
respective Fund from time to time prior to final disposition thereto upon
receipt of an undertaking by or on behalf of such Covered Person that such
amount will be paid over by him to the Trust on behalf of the respective Fund if
it is ultimately determined that he is not entitled to indemnification under
this Section 7; provided, however, that either (i) such Covered Person shall
have provided appropriate security for such undertaking or (ii) the Trust shall
be insured against losses arising out of any such advance payments, or (iii)
either a majority of the Trustees who are neither Interested Persons of the
Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
as opposed to a trial-type inquiry or full investigation, that there is reason
to believe that such Covered Person will be entitled to indemnification under
this Section 7.
8. DURATION AND TERMINATION. This Agreement shall be effective as to a Fund
as of the date the Fund commences investment operations after this Agreement
shall have been approved by the Board of Trustees of the Trust with respect to
that Fund and the Investor(s) in the Fund in the manner contemplated by Section
15 of the 1940 Act and, unless sooner terminated as provided herein, shall
continue until the second anniversary of such date. Thereafter, if not
terminated, this Agreement shall continue in effect as to such Fund for
successive periods of 12 months each, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of the
Board of Trustees of the Trust who are not parties to this Agreement or
Interested Persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval, or (b) by Vote of a Majority of the
Outstanding Voting Securities of the Trust; provided, however, that this
Agreement may be terminated by the Trust at any time, without the payment of any
penalty, by the Board of Trustees of the Trust, by Vote of a Majority of the
Outstanding Voting Securities of the Trust on 60 days' written notice to the
Investment Adviser, or by the Investment Adviser as to the Trust at any time,
without payment of any penalty, on 90 days' written notice to the Trust. This
Agreement will immediately terminate in the event of its assignment (as used in
this Agreement, the terms "Vote of a Majority of the Outstanding Voting
Securities," "Interested Person" and "Assignment' shall have the same meanings
as such terms have in the 1940 Act and the rules and regulatory constructions
thereunder.)
9. AMENDMENT OF THIS AGREEMENT. No material term of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of a material term of this
Agreement shall be effective with respect to a Fund, until approved by Vote of a
Majority of the Outstanding Voting Securities of that Fund.
10. REPRESENTATIONS AND WARRANTIES. The Investment Adviser hereby represents
and warrants as follows:
(a) The Investment Adviser is exempt from registration under the 1940 Act:
(b) The Investment Adviser has all requisite authority to enter into,
execute, deliver and perform its obligations under this Agreement;
(c) This Agreement is legal, valid and binding, and enforceable in
accordance with its terms; and
(d) The performance by the Investment Adviser of its obligations under
this Agreement does not conflict with any law to which it is subject.
11. COVENANTS. The Investment Adviser hereby covenants and agrees that, so
long as this Agreement shall remain in effect:
(a) The Investment Adviser shall remain either exempt from, or registered
under, the registration provisions of the Advisers Act; and
(b) The performance by the Investment Adviser of its obligations under
this Agreement shall not conflict with any law to which it is then subject.
12. NOTICES. Any notice required to be given pursuant to this Agreement shall
be deemed duly given if delivered or mailed by registered mail, postage prepaid,
(a) to the Investment Adviser, Mutual Funds Services, 130 Liberty Street (One
Bankers Trust Plaza), New York, New York 10006 or (b) to the Trust, c/o BT Alex.
Brown, Inc., One South Street, Baltimore, Maryland 21202.
13. WAIVER. With full knowledge of the circumstances and the effect of its
action, the Investment Adviser hereby waives any and all rights which it may
acquire in the future against the property of any investor in a Fund, other than
shares in that Fund, which arise out of any action or inaction of the Trust
under this Agreement.
14. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by the laws
of the State of New York, without reference to principles of conflicts of law.
The Trust is organized under the laws of the State of New York pursuant to a
Declaration of Trust dated March 27, 1993. No Trustee, officer or employee of
the Trust shall be personally bound by or liable hereunder, nor shall resort be
had to their private property for the satisfaction of any obligation or claim
hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
BT INVESTMENT PORTFOLIOS
By: DANIEL O. HIRSCH
---------------------------
Name: Daniel O. Hirsch
Title: Secretary
BANKERS TRUST COMPANY
By: ROSS YOUNGMAN
---------------------------
Name: Ross Youngman
Title: Managing Director
<PAGE>
EXHIBIT A
---------
TO
INVESTMENT ADVISORY AGREEMENT
MADE AS OF JUNE 4, 1999
BETWEEN
BT INVESTMENT PORTFOLIOS AND BANKERS TRUST COMPANY
FUND INVESTMENT ADVISORY FEE
---- -----------------------
Latin American Equity Portfolio 1.00%
Small Cap Portfolio 0.65%
Pacific Basin Equity Portfolio 0.75%
Asset Management Portfolio II 0.65%
Asset Management Portfolio III 0.65%
Liquid Assets Portfolio 0.15%
BT PreservationPlus Portfolio 0.35%
BT PreservationPlus Income Portfolio 0.70%
US Bond Index Portfolio 0.15%
EAFE Equity Index Portfolio 0.25%
Small Cap Index Portfolio 0.15%
European Equity Portfolio 0.65%
Global Equity Portfolio 0.75%
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT, made this 14th day of September, 1970, between SECURITY BOND
FUND, INC., a Kansas corporation (hereinafter referred to as the "Company"), and
SECURITY DISTRIBUTORS, INC., a Kansas corporation (hereinafter referred to as
the "Distributor").
WITNESSETH:
WHEREAS, the Company is engaged in business as an open-end, management
investment company registered under the federal Investment Company Act of 1940;
and
WHEREAS, the Distributor is willing to act as principal underwriter for the
Company to offer for sale, sell and deliver after sale shares of the Company's
$1 par value common stock (hereinafter referred to as the "Shares") on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
set forth, the parties hereto agree as follows:
1. EMPLOYMENT OF DISTRIBUTOR. The Company hereby employs the Distributor to
act as principal underwriter for the Company and hereby agrees that during
the term of this Agreement, and any renewal or extension thereof, or until
any prior termination thereof, the Distributor shall have the exclusive
right to offer for sale and to distribute any and all Shares issued or to
be issued by the Company. The Distributor hereby accepts such employment
and agrees to act as the distributor of the Shares issued or to be issues
by the Company during the period this Agreement is in effect and agrees
during such period to offer for sale such Shares as long as such Shares
remain available for sale, unless the Distributor is unable legally to make
such offer for sale as the result of any law or governmental regulation.
2. OFFERING PRICE AND COMMISSIONS. Prior to the issuance of any Shares by the
Company pursuant to any subscription tendered by or through the Distributor
and confirmed for sale to or through the Distributor, the Distributor shall
pay or cause to be paid to the Custodian of the Company in cash, an amount
equal to the net asset value of such Shares at the time of acceptance of
each such subscription and confirmation by the Company of the sale of such
Shares. The Distributor shall be entitled to charge a commission on each
such sale of Shares in the amount set forth in the Company's Prospectus,
such commission to be an amount equal to the difference between the net
asset value and the offering price of the Shares, as such offering price
may from time to time be determined by the board of directors of the
Company. All Shares shall be sold to the public only at their public
offering price at the time of such sale, and the Company shall receive not
less than the full net asset value thereof.
3. ALLOCATION OF EXPENSES AND CHARGES. During the period this Agreement is in
effect, the Company shall pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933, including all
expenses in connection with the preparation and printing of any
registration statements and prospectuses necessary for registration
thereunder but excluding any additional costs and expenses incurred in
furnishing the Distributor with prospectuses.
During the period this Agreement is in effect the Distributor will pay or
reimburse the Company for:
(a) All costs, expenses and fees incurred in connection with the
qualification of the Shares under the applicable Blue Sky laws of the
states in which the Shares are offered;
(b) All costs and expenses of printing and mailing prospectuses (other
than to existing shareholders) and confirmations, and all costs and
expenses of preparing, printing and mailing advertising material sales
literature, circulars, applications, and other materials used or to be
used in connection with the offering for sale and the sale of Shares;
and
(c) All clerical and administrative costs in processing the applications
for and in connection with the sale of Shares.
The Distributor agrees to submit to the Company for its prior approval
all advertising material, sales literature, circulars and any other
material which the Distributor proposes to use in connection with the
offering for sale of Shares.
4. DISTRIBUTOR MAY ACT AS BROKER AND RECEIVE COMMISSIONS. Notwithstanding any
other provisions of this Agreement, it is understood and agreed that the
Distributor may act as a broker, on behalf of the Company, in the purchase
and sale of securities not effected on a securities exchange, provided that
any such transactions and any commission paid in connection therewith shall
comply in every respect with the requirements of the Federal Investment
Company Act of 1940 and in particular with Section 17(c) of said statute
and the Rules and Regulations of the Securities and Exchange Commission
promulgated thereunder.
5. AGREEMENT SUBJECT TO APPLICABLE LAW AND REGULATIONS. The parties hereto
agree that all provisions of this Agreement will be performed in strict
accordance with the requirements of the Investment Company Act of 1940, the
Securities Act of 1933, the Securities Exchange Act of 1934, and the rules
and regulations of the Securities and exchange Commission under said
statutes, in strict accordance with all applicable state "Blue Sky" laws
and the rules and regulations thereunder, and in strict accordance with the
provisions of the Articles of Incorporation and Bylaws of the Company.
6. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective at the date and time that the Company's prospectus, reflecting
the underwriting arrangements provided by this Agreement, shall become
effective under the Securities Act of 1933, and shall continue in force
until December 31, 1971, and from year to year thereafter, but only if such
continuance is specifically approved at least annually by the board of
directors of the Company and the majority of the board of directors who are
not parties to this Agreement or affiliated persons of any such party, or
by the vote of a majority of the outstanding voting securities of the
Company. Written notice of any such approval by the board of directors or
by the holders of a majority of the outstanding voting securities of the
Company shall be given promptly to the Distributor.
This Agreement may be terminated by the Company at any time by giving the
Distributor at least sixty (60) days previous written notice of such
intention to terminate. This Agreement may be terminated by the Distributor
at any time by giving the Company at least sixty (60) days previous written
notice of such intention to terminate.
This Agreement shall terminate automatically in the event of its assignment
by the Distributor. As used in the preceding sentence, the word
"assignment" shall have the meaning set forth in Section 2(a)(4) of the
Investment Company Act of 1940.
7. CONSTRUCTION OF AGREEMENT. No provision of this Agreement is intended to or
shall be construed as protecting the Distributor against any liability to
the Company or to the Company's security holders to which the Distributor
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of the
Distributor's reckless disregard of its obligations and duties under this
Agreement.
Terms or words used in this Agreement, which also occur in the Articles of
Incorporation or Bylaws of the Company, shall have the same meaning herein
as given to such terms or words in Articles of Incorporation or Bylaws of
the Company.
8. DISTRIBUTOR AN INDEPENDENT CONTRIBUTOR. The Distributor shall be deemed to
be an independent contractor and, except as expressly provided or
authorized by the Company, shall have no authority to act for or represent
the Company.
9. NOTICE. Any notice required or permitted to be given hereunder to either of
the parties hereto shall be deemed to have been given if mailed by
certified mail in a postage prepaid envelope addressed to the respective
party as follows, unless any such party has notified the other party hereto
that notices thereafter intended for such party shall be mailed to some
other address, in which event notices thereafter shall be addressed to such
party at the address designated in such request:
Security Bond Fund, Inc.
Security Benefit Life Building
700 Harrison Street
Topeka, Kansas
Security Distributors, Inc.
Security Benefit Life Building
700 Harrison Street
Topeka, Kansas
10. AMENDMENT OF AGREEMENT. No amendment to this Agreement shall be effective
until approved by (a) a majority of the board of directors of the Company
and a majority of the board of directors of the Company who are not parties
to this Agreement or affiliated persons of any such party, or (b) a vote of
the holders of a majority of the outstanding voting securities of the
Company.
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 BOND FUND, INC.
By DEAN L. SMITH
------------------------------
President
ATTEST:
WILL J. MILLER, JR.
- ------------------------------
Secretary
(SEAL)
SECURITY DISTRIBUTORS, INC.
By DAVE E. DAVIDSON
------------------------------
President
ATTEST:
WILL J. MILLER, JR.
- ------------------------------
Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Bond Fund, Inc. (the "Company") and Security Distributors,
Inc. (the "Distributor") are parties to a Distribution Agreement dated as of
September 14, 1970, (the "Distribution Agreement ) under which the Distributor
agrees to act as principal underwriter in connection with sales of the shares of
the Company's capital stock; and,
WHEREAS, certain provisions of the Federal Investment Company Act of 1940 have
been amended, and those amendments have an effect upon the relationship between
the Company and the Distributor, and the Distribution Agreement; and,
WHEREAS, The Company and the Distributor wish to amend the Distribution
Agreement to conform to the requirements of the Federal Investment Company Act
of 1940, as amended:
NOW, THEREFORE, The Company and Distributor hereby amend the Distribution
Agreement, effective immediately, as follows:
1. Section 6 of the Distribution Agreement is amended to provide as follows:
"6. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective at the date and time that the Company's prospectus,
reflecting the underwriting arrangements provided by this Agreement,
shall become effective under the Securities Act of 1933, and shall
continue in force until December 31, 1971, and from year to year
thereafter, provided that such continuance for each successive year
after April 30, 1972, is specifically approved in advance at least
annually by the vote of the board of directors (including approval by
the vote of a majority of the directors of the Company who are not
parties to the Agreement or interested persons of any such party) cast
in person at a meeting called for the purpose of voting upon such
approval, or by the vote of a majority (as defined in the Investment
Company Act of 1940) of the outstanding voting securities of the
Company and by such a vote of the board of directors. As used in the
preceding sentence, the words "interested persons" shall have the
meaning set forth in Section 2(a)(19) of the Investment Company Act of
1940. Written notice of any such approval by the board of directors or
by the holders of a majority of the outstanding voting securities of
the Company shall be given promptly to the Distributor.
This Agreement may be terminated by the Company at any time by giving the
Distributor at least sixty (60) days previous written notice of such intention
to terminate. This Agreement may be terminated by the Distributor at any time by
giving the Company at least sixty (60) days previous written notice of such
intention to terminate.
This Agreement shall terminate automatically in the event of its assignment. As
used in the preceding sentence, the word "assignment" shall have the meaning set
forth in Section 2(a)(4) of the Investment Company Act of 1940."
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Distribution Agreement this 14th day of January 1972.
SECURITY BOND FUND, INC.
By DEAN L. SMITH
------------------------------
President
(Corporate Seal)
ATTEST:
WILL J. MILLER, JR.
- ------------------------------
Secretary
SECURITY DISTRIBUTORS, INC.
By DAVE E. DAVIDSON
------------------------------
President
(Corporate Seal)
ATTEST:
WILL J. MILLER, JR.
- ------------------------------
Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Company"), formerly Security Bond Fund, and
Security Distributors, Inc. (the "Distributor") are parties to a Distribution
Agreement dated as of September 14, 1970, (the "Distribution Agreement") under
which the Distributor agrees to act as principal underwriter in connection with
the sales of shares of the Company's capital stock; and
WHEREAS, a Distribution Plan (the "Plan") has been adopted by the directors and
shareholders of Security Income Fund pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "Act"), the provisions of which have an effect upon the
relationship between the Company and the Distributor, and the Distribution
Agreement; and
WHEREAS, the Company and Distributor wish to amend the Distribution Agreement to
conform to the requirements of Rule 12b-1 under the Act and to incorporate the
necessary provisions into the Agreement.
NOW THEREFORE, the Company and Distributor hereby amend the Distribution
Agreement, effective immediately, as follows:
1. New Section 4A is added to the Agreement, which provides as follows:
4A. DISTRIBUTION PLAN.
(a) Pursuant to a Distribution Plan adopted by the Fund, the Fund agrees to
make monthly payments to the Distributor in an amount computed at an
annual rate of .25 of 1% of the Fund's average daily net assets, to
finance activities undertaken by the Distributor for the purpose of
distributing the Fund's shares to investors. The Distributor is
obligated to and hereby agrees to use the entire amount of said fee to
finance the following distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus and
Statement of Additional Information and any supplement thereto
used in connection with the offering of shares to the public;
(ii) Printing of additional copies for use by the Distributor as
sales literature, of reports and other communications which were
prepared by the Fund for distribution to existing shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of shares to the
public;
(iv) Expenses incurred in advertising, promoting and selling shares
of the Fund to the public; and
(v) Any fees paid by the Distributor to securities dealers as
distribution or service fees who have executed a Dealer's
Distribution Agreement with the Distributor.
(b) All payments to the Distributor pursuant to this paragraph are subject
to the following conditions being met by the Distributor:
(i) For the fiscal year of the Fund during which this Plan becomes
effective and for each subsequent fiscal year of the Fund during
which this Plan remains in effect, the Distributor shall submit
to the Fund a budget setting forth in reasonable detail the
distribution-related activities to which the Distributor
proposes to apply payments made by the Fund hereunder;
(ii) Before any payment is made to the Distributor in respect of any
fiscal year, the budget relating thereto shall be approved by
vote of the Fund's Directors, including the affirmative vote of
a majority of the Independent Directors.
(iii) The Distributor shall furnish the Fund with quarterly reports of
its expenditures pursuant to each budget so approved, together
with receipts or other appropriate written evidence of the
amounts expended, and such other information relating to such
budget or expenditures or to the other distribution-related
activities undertaken or proposed to be undertaken by the
Distributor during such fiscal year under its Distribution
Agreement with the Fund as the Fund may reasonably request;
(c) The Dealer's Distribution Agreement (the "Agreement") contemplated by
paragraph 2(v) above shall permit payments to securities dealers by the
Distributor only in accordance with the provisions of this paragraph
and shall have the approval of the majority of the Board of Directors
of the Fund including a majority of the directors who are not
interested persons of the Fund as required by the Rule. The Distributor
may pay to the other party to any Agreement a quarterly fee for
distribution and marketing services provided by such other party. Such
quarterly fee shall be payable in arrears in an amount equal to such
percentage (not in excess of .000685% per day) of the aggregate net
asset value of the shares held by such other party's customers or
clients at the close of business each day as determined from time to
time by the Distributor. The distribution and marketing services
contemplated hereby shall include, but are not limited to, answering
inquiries regarding the Fund, account designations and addresses,
maintaining the investment of such other party's customers or clients
in the Fund and similar services. In determining the extent of such
other party's assistance in maintaining such investment by its
customers or clients, the Distributor may take into account the
possibility that the shares held by such customer or client would be
redeemed in the absence of such quarterly fee.
(d) The provisions of the Distribution Plan approved by the Shareholders of
the Fund on July 12, 1985, and by the Board of Directors of the Fund on
May 3, 1985, are fully incorporated herein by reference. In the event
the Distribution Plan is terminated by the Board of Directors or
Shareholders of the Fund as provided therein, this paragraph shall no
longer be effective.
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Distribution Agreement this 15th day of August 1985.
SECURITY INCOME FUND
By EVERETT S. GILLE
------------------------------
President
ATTEST:
BARBARA W. RANKIN
- ------------------------------
Secretary
SECURITY DISTRIBUTORS, INC.
By EVERETT S. GILLE
------------------------------
President
ATTEST:
BARBARA W. RANKIN
- ------------------------------
Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Fund"), formerly Security Bond Fund, and
Security Distributors, Inc. (the "Distributor") are parties to a Distribution
Agreement dated September 14, 1970, as amended January 14, 1972, and August 15,
1985, (the "Distribution Agreement") under which the Distributor agrees to act
as principal underwriter in connection with the sales of shares of the Fund's
capital stock;
WHEREAS, a Distribution Plan (the "Plan") has been adopted by the directors and
shareholders of the Fund pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "Act"), certain provisions of which have been incorporated into the
Distribution Agreement;
WHEREAS, the Board of Directors of the Fund (including all directors who are not
interested persons of the Fund as defined in the Act) have approved an amendment
to the Plan to provide for expenditures under the Plan to promote sales of
shares of the Fund by securities dealers; and
WHEREAS, the Fund and Distributor wish to amend the Distribution Agreement to
incorporate the Plan amendments into the Agreement.
NOW, THEREFORE, the Fund and Distributor hereby amend the Distribution
Agreement, effective November 26, 1990, as follows:
Section 4A., Distribution Plan, is amended by adding the following Section
4A.(a)(vi):
(vi) Expenses incurred in promoting sales of shares of the Fund by
securities dealers, including the costs of preparation of materials
for presentations, travel expenses, costs of entertainment, and other
expenses incurred in connection with promoting sales of Fund shares
by dealers.
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Distribution Agreement this 26th day of November 1990.
SECURITY INCOME FUND
By MICHAEL J. PROVINES
------------------------------
President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
SECURITY DISTRIBUTORS, INC.
By HOWARD R. FRICKE
------------------------------
President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Company") and Security Distributors, Inc.
(the "Distributor") are parties to a Distribution Agreement dated September 14,
1970, as amended (the "Distribution Agreement"), under which the Distributor
agreed to act as principal underwriter in connection with sales of the shares of
the Company's capital stock; and
WHEREAS, the Company expects to receive an exemptive order from the Securities
and Exchange Commission allowing the Company to issue and offer for sale two or
more classes of the Company's capital stock; and
WHEREAS, the Company and the Distributor wish to amend the Distribution
Agreement to clarify that the Distribution Agreement applies only to the sale of
Class A shares of the capital stock of the Corporate Bond Series and U.S.
Government Series of the Company and the Class A shares of all other Series
subsequently established by the Company:
NOW THEREFORE, the Company and Distributor hereby amend the Distribution
Agreement, effective immediately, as follows:
1. The term "Shares" as referred to in the Distribution Agreement shall refer
to the Class A Shares of the Company's $1.00 par value stock.
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Distribution Agreement this 1st day of October 1993.
SECURITY INCOME FUND
By: MICHAEL J. PROVINES
------------------------------
President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
(SEAL)
SECURITY DISTRIBUTORS, INC.
By: HOWARD R. FRICKE
------------------------------
President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
(SEAL)
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated September 14, 1970,
as amended (the "Distribution Agreement"), under which the Distributor has
agreed to act as principal underwriter in connection with sales of the shares of
the Fund's Class A common stock;
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; and
WHEREAS, on October 21, 1994, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Limited Maturity Bond Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Distribution Agreement to include the sale of Class A shares of the Limited
Maturity Bond Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 30th day of December 1994.
SECURITY INCOME FUND
By: JOHN D. CLELAND
------------------------------
President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
SECURITY DISTRIBUTORS, INC.
By: RICHARD K RYAN
------------------------------
President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated September 14, 1970,
as amended (the "Distribution Agreement"), under which the Distributor has
agreed to act as principal underwriter in connection with sales of the shares of
the Fund's Class A common stock;
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; and
WHEREAS, on February 3, 1995, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Global Aggressive Bond Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Distribution Agreement to include the sale of Class A shares of the Global
Aggressive Bond Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 18th day of April, 1995.
ATTEST: SECURITY INCOME FUND
AMY J. LEE By: JOHN D. CLELAND
- ----------------------------------- -----------------------------------
Amy J. Lee, Secretary John D. Cleland, President
ATTEST: SECURITY DISTRIBUTORS, INC.
AMY J. LEE By: RICHARD K RYAN
- ----------------------------------- -----------------------------------
Amy J. Lee, Secretary Richard K Ryan, President
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated September 14, 1970,
as amended (the "Distribution Agreement"), under which the Distributor has
agreed to act as principal underwriter in connection with sales of the shares of
the Fund's Class A common stock;
WHEREAS, on May 3, 1996, the Board of Directors of the Fund authorized the Fund
to offer its common stock in a new series designated as the High Yield Series,
in addition to its presently offered series of common stock of Corporate Bond
Series, Limited Maturity Bond Series, U.S. Government Series and Global
Aggressive Bond Series;
WHEREAS, on May 3, 1996, the Board of Directors of the Fund further authorized
the Fund to offer shares of the High Yield Series in two classes, designated
Class A shares and Class B shares; and
WHEREAS, on May 3, 1996, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the High Yield Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Distribution Agreement to include the sale of Class A shares of the High Yield
Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 13th day of May, 1996.
ATTEST: SECURITY INCOME FUND
AMY J. LEE By: JOHN D. CLELAND
- ----------------------------------- -----------------------------------
Amy J. Lee, Secretary John D. Cleland, President
ATTEST: SECURITY DISTRIBUTORS, INC.
AMY J. LEE By: RICHARD K RYAN
- ----------------------------------- -----------------------------------
Amy J. Lee, Secretary Richard K Ryan, President
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated September 14, 1970,
as amended (the "Distribution Agreement"), under which the Distributor has
agreed to act as principal underwriter in connection with sales of the shares of
the Fund's Class A common stock;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in two new series designated as the Emerging
Markets Total Return Series and Global Asset Allocation Series, in addition to
its presently offered series of common stock of Corporate Bond Series, Limited
Maturity Bond Series, U.S. Government Series, Global Aggressive Bond Series and
High Yield Series;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund further
authorized the Fund to offer shares for each of the Emerging Markets Total
Return Series and Global Asset Allocation Series in two classes, designated
Class A shares and Class B shares; and
WHEREAS, on February 7, 1997, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares for each of the Emerging Markets Total Return
Series and Global Asset Allocation Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Distribution Agreement to include the sale of Class A shares for each of the
Emerging Markets Total Return Series and Global Asset Allocation Series of the
Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 12th day of March, 1997.
ATTEST: SECURITY INCOME FUND
By: AMY J. LEE By: JOHN D. CLELAND
-------------------------------- --------------------------------
Amy J. Lee, Secretary John D. Cleland, President
ATTEST: SECURITY DISTRIBUTORS, INC.
By: AMY J. LEE By: RICHARD K RYAN
-------------------------------- --------------------------------
Amy J. Lee, Secretary Richard K Ryan, President
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated September 14, 1970,
as amended (the "Distribution Agreement"), under which the Distributor has
agreed to act as principal underwriter in connection with sales of the shares of
the Fund's Class A common stock;
WHEREAS, on February 10, 1999, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Capital
Preservation Series, in addition to its presently offered series of common stock
of Corporate Bond Series, Limited Maturity Bond Series, U.S. Government Series,
Global High Yield Series, High Yield Series, Emerging Markets Total Return
Series and Global Asset Allocation Series;
WHEREAS, on February 10, 1999, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Capital Preservation Series in three
classes, designated Class A shares, Class B shares and Class C shares; and
WHEREAS, on February 10, 1999, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Capital Preservation Series.
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Distribution Agreement to include the sale of Class A shares for the Capital
Preservation Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 30th day of April, 1999.
ATTEST: SECURITY INCOME FUND
By: AMY J. LEE By: JAMES R. SCHMANK
-------------------------------- --------------------------------
Amy J. Lee, Secretary James R. Schmank, Vice President
ATTEST: SECURITY DISTRIBUTORS, INC.
By: AMY J. LEE By: RICHARD K RYAN
-------------------------------- --------------------------------
Amy J. Lee, Secretary Richard K Ryan, President
<PAGE>
CLASS B
DISTRIBUTION AGREEMENT
THIS AGREEMENT, made this 1st day of October 1993, between Security Income Fund,
a Kansas corporation (hereinafter referred to as the "Company"), and Security
Distributors, Inc., a Kansas corporation (hereinafter referred to as the
"Distributor").
WITNESSETH:
WHEREAS, the Company is engaged in business as an open-end, management
investment company registered under the federal Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, the Distributor is willing to act as principal underwriter for the
Company to offer for sale, sell and deliver after sale, the Class B Shares of
the Company's $1.00 par value common stock (hereinafter referred to as the
"Shares") on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
set forth, the parties hereto agree as follows:
1. EMPLOYMENT OF DISTRIBUTOR. The Company hereby employs the Distributor to
act as principal underwriter for the Company with respect to its Class B
Shares and hereby agrees that during the term of this Agreement, and any
renewal or extension thereof, or until any prior termination thereof, the
Distributor shall have the exclusive right to offer for sale and to
distribute any and all of its Class B Shares issued or to be issued by the
Company. The Distributor hereby accepts such employment and agrees to act
as the distributor of the Class B Shares issued or to be issued by the
Company during the period this Agreement is in effect and agrees during
such period to offer for sale such Shares as long as such Shares remain
available for sale, unless the Distributor is unable legally to make such
offer for sale as the result of any law or governmental regulation.
2. OFFERING PRICE AND COMMISSIONS. Prior to the issuance of any Shares by the
Company pursuant to any subscription tendered by or through the Distributor
and confirmed for sale to or through the Distributor, the Distributor shall
pay or cause to be paid to the custodian of the Company in cash, an amount
equal to the net asset value of such Shares at the time of acceptance of
each such subscription and confirmation by the Company of the sale of such
Shares. All Shares shall be sold to the public only at their public
offering price at the time of such sale, and the Company shall receive not
less than the full net asset value thereof.
3. ALLOCATION OF EXPENSES AND CHARGES. During the period this Agreement is in
effect, the Company shall pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933 (the "1933 Act"),
including all expenses in connection with the preparation and printing of
any registration statements and prospectuses necessary for registration
thereunder but excluding any additional costs and expenses incurred in
furnishing the Distributor with prospectuses.
The Company will also pay all costs, expenses and fees incurred in connection
with the qualification of the Shares under the applicable Blue Sky laws of the
states in which the Shares are offered.
During the period this Agreement is in effect, the Distributor will pay or
reimburse the Company for:
(a) All costs and expenses of printing and mailing prospectuses (other
than to existing shareholders) and confirmations, and all costs and
expenses of preparing, printing and mailing advertising material,
sales literature, circulars, applications, and other materials used or
to be used in connection with the offering for sale and the sale of
Shares; and
(b) All clerical and administrative costs in processing the applications
for and in connection with the sale of Shares.
The Distributor agrees to submit to the Company for its prior approval all
advertising material, sales literature, circulars and any other material which
the Distributor proposes to use in connection with the offering for sale of
Shares.
4. REDEMPTION OF SHARES. The Distributor, as agent of and for the account of
the Fund, may redeem Shares of the Fund offered for resale to it at the net
asset value of such Shares (determined as provided in the Articles of
Incorporation or Bylaws) and not in excess of such maximum amounts as may
be fixed from time to time by an officer of the Fund. Whenever the officers
of the Fund deem it advisable for the protection of the shareholders of the
Fund, they may suspend or cancel such authority.
5. SALES CHARGES. A contingent deferred sales charge shall be retained by the
Distributor from the net asset value of Shares of the Fund that it has
redeemed, it being understood that such amounts will not be in excess of
that set forth in the then-current registration statement of the Fund.
Furthermore, the Distributor may retain any amounts authorized for payment
to it under the Fund's Distribution Plan.
6. DISTRIBUTOR MAY ACT AS BROKER AND RECEIVE COMMISSIONS. Notwithstanding any
other provisions of this Agreement, it is understood and agreed that the
Distributor may act as a broker, on behalf of the Company, in the purchase
and sale of securities not effected on a securities exchange, provided that
any such transactions and any commission paid in connection therewith shall
comply in every respect with the requirements of the 1940 Act and in
particular with Section 17(e) of that Act and the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
7. AGREEMENTS SUBJECT TO APPLICABLE LAW AND REGULATIONS. The parties hereto
agree that all provisions of this Agreement will be performed in strict
accordance with the requirements of: the 1940 Act, the 1933 Act, the
Securities Exchange Act of 1934, the rules and regulations of the
Securities and Exchange Commission under said statutes, all applicable
state Blue Sky laws and the rules and regulations thereunder, the rules of
the National Association of Securities Dealers, Inc., and, in strict
accordance with, the provisions of the Articles of Incorporation and Bylaws
of the Company.
8. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective at the date and time that the Company's prospectus, reflecting
the underwriting arrangements provided by this Agreement, shall become
effective under the 1933 Act, and shall, unless terminated as provided
herein, continue in force for two years from that date, and from year to
year thereafter, provided that such continuance for each successive year is
specifically approved in advance at least annually by either the Board of
Directors or by the vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Company and, in either event, by the
vote of a majority of the directors of the Company who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting upon such approval. As used in the
preceding sentence, the words "interested persons" shall have the meaning
set forth in Section 2(a)(19) of the 1940 Act. Written notice of any such
approval by the Board of Directors or by the holders of a majority of the
outstanding voting securities of the Company and by the directors who are
not such interested persons shall be given promptly to the Distributor.
This Agreement may be terminated at any time without the payment of any penalty
by the Company by giving the Distributor at least sixty (60) days' previous
written notice of such intention to terminate. This Agreement may be terminated
by the Distributor at any time by giving the Company at least sixty (60) days'
previous written notice of such intention to terminate.
This Agreement shall terminate automatically in the event of its assignment. As
used in the preceding sentence, the word "assignment" shall have the meaning set
forth in Section 2(a)(4) of the 1940 Act.
9. CONSTRUCTION OF AGREEMENT. No provision of this Agreement is intended to or
shall be construed as protecting the Distributor against any liability to
the Company or to the Company's security holders to which the Distributor
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties under this Agreement.
Terms or words used in the Agreement, which also occur in the Articles of
Incorporation or Bylaws of the Company, shall have the same meaning herein as
given to such terms or words in the Articles of Incorporation or Bylaws of the
Company.
10. DISTRIBUTOR AN INDEPENDENT CONTRACTOR. The Distributor shall be deemed to
be an independent contractor and, except as expressly provided or
authorized by the Company, shall have no authority to act for or represent
the Company.
11. NOTICE. Any notice required or permitted to be given hereunder to either of
the parties hereto shall be deemed to have been given if mailed by
certified mail in a postage-prepaid envelope addressed to the respective
party as follows, unless any such party has notified the other party hereto
that notices thereafter intended for such party shall be mailed to some
other address, in which event notices thereafter shall be addressed to such
party at the address designated in such request:
Security Income Fund
Security Benefit Group Building
700 Harrison
Topeka, Kansas
Security Distributors, Inc.
Security Benefit Group Building
700 Harrison
Topeka, Kansas
12. AMENDMENT OF AGREEMENT. No amendment to this Agreement shall be effective
until approved by (a) a majority of the Board of Directors of the Company
and a majority of the directors of the Company who are not parties to this
Agreement or affiliated persons of any such party, or (b) a vote of the
holders of a majority of the outstanding voting securities of the Company.
IN WITNESS WHEREOF, the parties 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: MICHAEL J. PROVINES
------------------------------
President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
(SEAL)
SECURITY DISTRIBUTORS, INC.
BY: HOWARD R. FRICKE
------------------------------
President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
(SEAL)
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1994 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
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; and
WHEREAS, on October 21, 1994, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the Limited Maturity Bond
Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
Limited Maturity Bond Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 30th day of December 1994.
SECURITY INCOME FUND
By: JOHN D. CLELAND
------------------------------
President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
SECURITY DISTRIBUTORS, INC.
By: RICHARD K RYAN
------------------------------
President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
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; and
WHEREAS, on February 3, 1995, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the Global Aggressive Bond
Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
Global Aggressive Bond Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 18th day of April, 1995.
ATTEST: SECURITY INCOME FUND
AMY J. LEE By: JOHN D. CLELAND
- ----------------------------------- -----------------------------------
Amy J. Lee, Secretary John D. Cleland, President
ATTEST: SECURITY DISTRIBUTORS, INC.
AMY J. LEE By: RICHARD K RYAN
- ----------------------------------- -----------------------------------
Amy J. Lee, Secretary Richard K Ryan, President
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993, as amended (the "Distribution Agreement"), under which the Distributor has
agreed to act as principal underwriter in connection with sales of the shares of
the Fund's Class B common stock;
WHEREAS, on May 3, 1996, the Board of Directors of the Fund authorized the Fund
to offer its common stock in a new series designated as the High Yield Series,
in addition to its presently offered series of common stock of Corporate Bond
Series, U.S. Government Series, Limited Maturity Bond Series, and Global
Aggressive Bond Series;
WHEREAS, on May 3, 1996, the Board of Directors of the Fund further authorized
the Fund to offer shares of the High Yield Series in two classes, designated
Class A shares and Class B shares; and
WHEREAS, on May 3, 1996, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the High Yield Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the High
Yield Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 13th day of May 1996.
ATTEST: SECURITY INCOME FUND
AMY J. LEE By: JOHN D. CLELAND
- ----------------------------------- -----------------------------------
Amy J. Lee, Secretary John D. Cleland, President
ATTEST: SECURITY DISTRIBUTORS, INC.
AMY J. LEE By: RICHARD K RYAN
- ----------------------------------- -----------------------------------
Amy J. Lee, Secretary Richard K Ryan, President
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993, as amended (the "Distribution Agreement"), under which the Distributor has
agreed to act as principal underwriter in connection with sales of the shares of
the Fund's Class B common stock;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in two new series designated as the Emerging
Markets Total Return Series and the Global Asset Allocation Series, in addition
to its presently offered series of common stock of Corporate Bond Series, U.S.
Government Series, Limited Maturity Bond Series, Global Aggressive Bond Series,
and High Yield Series;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund further
authorized the Fund to offer shares for each of the Emerging Markets Total
Return Series and the Global Asset Allocation Series in two classes, designated
Class A shares and Class B shares; and
WHEREAS, on February 7, 1997, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares for each of the Emerging
Markets Total Return Series and the Global Asset Allocation Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares for each of
the Emerging Markets Total Return Series and the Global Asset Allocation Series
of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 12th day of March, 1997.
ATTEST: SECURITY INCOME FUND
By: AMY J. LEE By: JOHN D. CLELAND
-------------------------------- --------------------------------
Amy J. Lee, Secretary John D. Cleland, President
ATTEST: SECURITY DISTRIBUTORS, INC.
By: AMY J. LEE By: RICHARD K RYAN
-------------------------------- --------------------------------
Amy J. Lee, Secretary Richard K Ryan, President
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993, as amended (the "Distribution Agreement"), under which the Distributor has
agreed to act as principal underwriter in connection with sales of the shares of
the Fund's Class B common stock;
WHEREAS, on February 10, 1999, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Capital
Preservation Series, in addition to its presently offered series of common stock
of Corporate Bond Series, U.S. Government Series, Limited Maturity Bond Series,
Global High Yield Series, High Yield Series, Emerging Markets Total Return
Series and Global Asset Allocation Series;
WHEREAS, on February 10, 1999, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Capital Preservation Series in three
classes, designated Class A shares, Class B shares and Class C shares; and
WHEREAS, on February 10, 1999, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares for the Capital Preservation
Series.
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares for the
Capital Preservation Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 30th day of April, 1999.
ATTEST: SECURITY INCOME FUND
By: AMY J. LEE By: JAMES R. SCHMANK
-------------------------------- --------------------------------
Amy J. Lee, Secretary James R. Schmank, Vice President
ATTEST: SECURITY DISTRIBUTORS, INC.
By: AMY J. LEE By: RICHARD K RYAN
-------------------------------- --------------------------------
Amy J. Lee, Secretary Richard K Ryan, President
<PAGE>
CLASS C
DISTRIBUTION AGREEMENT
THIS AGREEMENT, made this 30th day of April, 1999, between Security Income Fund,
a Kansas corporation (hereinafter referred to as the "Company"), and Security
Distributors, Inc., a Kansas corporation (hereinafter referred to as the
"Distributor").
WITNESSETH:
WHEREAS, the Company is engaged in business as an open-end, management
investment company registered under the federal Investment Company Act of 1940
(the "1940 Act");
WHEREAS, the Company issues its stock in several series; and
WHEREAS, the Distributor is willing to act as principal underwriter for the
Company to offer for sale, sell and deliver after sale, the Class C Shares of
the Company's Capital Preservation Series of common stock (hereinafter referred
to as the "Shares") on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
set forth, the parties hereto agree as follows:
1. Employment of Distributor. The Company hereby employs the Distributor to
act as principal underwriter for the Company with respect to its Class C
Shares and hereby agrees that during the term of this Agreement, and any
renewal or extension thereof, or until any prior termination thereof,
the Distributor shall have the exclusive right to offer for sale and to
distribute any and all of the Class C Shares issued or to be issued by
the Company. The Distributor hereby accepts such employment and agrees
to act as the distributor of the Class C Shares issued or to be issued
by the Company during the period this Agreement is in effect and agrees
during such period to offer for sale such Shares as long as such Shares
remain available for sale, unless the Distributor is unable legally to
make such offer for sale as the result of any law or governmental
regulation.
2. Offering Price and Commissions. Prior to the issuance of any Shares by
the Company pursuant to any subscription tendered by or through the
Distributor and confirmed for sale to or through the Distributor, the
Distributor shall pay or cause to be paid to the custodian of the
Company in cash, an amount equal to the net asset value of such Shares
at the time of acceptance of each such subscription and confirmation by
the Company of the sale of such Shares. All Shares shall be sold to the
public only at their public offering price at the time of such sale, and
the Company shall receive not less than the full net asset value
thereof.
3. Allocation of Expenses and Charges. During the period this Agreement is
in effect, the Company shall pay all costs and expenses in connection
with the registration of Shares under the Securities Act of 1933 (the
"1933 Act"), including all expenses in connection with the preparation
and printing of any registration statements and prospectuses necessary
for registration thereunder but excluding any additional costs and
expenses incurred in furnishing the Distributor with prospectuses.
The Company also will pay all costs, expenses and fees incurred in
connection with the qualification of the Shares under the applicable
Blue Sky laws of the states in which the Shares are offered.
During the period this Agreement is in effect, the Distributor will pay
or reimburse the Company for:
(a) All costs and expenses of printing and mailing prospectuses (other
than to existing shareholders) and confirmations, and all costs and
expenses of preparing, printing and mailing advertising material,
sales literature, circulars, applications, and other materials used
or to be used in connection with the offering for sale and the sale
of Shares; and
(b) All clerical and administrative costs in processing the
applications for and in connection with the sale of Shares.
The Distributor agrees to submit to the Company for its prior approval
all advertising material, sales literature, circulars and any other
material which the Distributor proposes to use in connection with the
offering for sale of Shares.
4. Redemption of Shares. The Distributor, as agent of and for the account
of the Fund, may redeem Shares of the Fund offered for resale to it at
the net asset value of such Shares (determined as provided in the
then-current registration statement of the Fund) and not in excess of
such maximum amounts as may be fixed from time to time by an officer of
the Fund. Whenever the officers of the Fund deem it advisable for the
protection of the shareholders of the Fund, they may suspend or cancel
such authority.
5. Sales Charges. A contingent deferred sales charge shall be retained by
the Distributor from the net asset value of Shares of the Fund that it
has redeemed, it being understood that such amounts will not be in
excess of that set forth in the then-current registration statement of
the Fund. Furthermore, the Distributor may retain any amounts authorized
for payment to it under the Fund's Distribution Plan.
6. Distributor May Act as Broker and Receive Commissions. Notwithstanding
any other provisions of this Agreement, it is understood and agreed that
the Distributor may act as a broker, on behalf of the Company, in the
purchase and sale of securities not effected on a securities exchange,
provided that any such transactions and any commission paid in
connection therewith shall comply in every respect with the requirements
of the 1940 Act and in particular with Section 17(e) of that Act and the
rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
7. Agreements Subject to Applicable Law and Regulations. The parties hereto
agree that all provisions of this Agreement will be performed in strict
accordance with the requirements of: the 1940 Act, the 1933 Act, the
Securities Exchange Act of 1934, the rules and regulations of the
Securities and Exchange Commission under said statutes, all applicable
state Blue Sky laws and the rules and regulations thereunder, the rules
of the National Association of Securities Dealers, Inc., and, in strict
accordance with, the provisions of the Articles of Incorporation and
Bylaws of the Company.
8. Duration and Termination of Agreement. This Agreement shall become
effective at the date and time that the Company's prospectus, reflecting
the underwriting arrangements provided by this Agreement, shall become
effective under the 1933 Act, and shall, unless terminated as provided
herein, continue in force for two years from that date, and from year to
year thereafter, provided that such continuance for each successive year
is specifically approved in advance at least annually by either the
Board of Directors or by the vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of the Class C shares of the
Series and, in either event, by the vote of a majority of the directors
of the Company who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the
purpose of voting upon such approval. As used in the preceding sentence,
the words "interested persons" shall have the meaning set forth in
Section 2(a)(19) of the 1940 Act.
This Agreement may be terminated at any time without the payment of any
penalty by the Company by giving the Distributor at least sixty (60)
days' previous written notice of such intention to terminate. This
Agreement may be terminated by the Distributor at any time by giving the
Company at least sixty (60) days' previous written notice of such
intention to terminate.
This Agreement shall terminate automatically in the event of its
assignment. As used in the preceding sentence, the word "assignment"
shall have the meaning set forth in Section 2(a)(4) of the 1940 Act.
9. Construction of Agreement. No provision of this Agreement is intended to
or shall be construed as protecting the Distributor against any
liability to the Company or to the Company's security holders to which
the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its
duties under this Agreement.
Terms or words used in the Agreement, which also occur in the Articles
of Incorporation or Bylaws of the Company, shall have the same meaning
herein as given to such terms or words in the Articles of Incorporation
or Bylaws of the Company.
10. Distributor an Independent Contractor. The Distributor shall be deemed
to be an independent contractor and, except as expressly provided or
authorized by the Company, shall have no authority to act for or
represent the Company.
11. Notice. Any notice required or permitted to be given hereunder to either
of the parties hereto shall be deemed to have been given if mailed by
certified mail in a postage-prepaid envelope addressed to the respective
party as follows, unless any such party has notified the other party
hereto that notices thereafter intended for such party shall be mailed
to some other address, in which event notices thereafter shall be
addressed to such party at the address designated in such request:
Security Income Fund
Security Benefit Group Building
700 Harrison
Topeka, Kansas
Security Distributors, Inc.
Security Benefit Group Building
700 Harrison
Topeka, Kansas
12. Amendment of Agreement. No amendment to this Agreement shall be
effective until approved by (a) a majority of the Board of Directors of
the Company and a majority of the directors of the Company who are not
parties to this Agreement or affiliated persons of any such party, or
(b) a vote of the holders of a majority of the outstanding voting
securities of the Class C shares of the Series.
IN WITNESS WHEREOF, the parties 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: JAMES R. SCHMANK
--------------------------------
James R. Schmank, Vice President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
SECURITY DISTRIBUTORS, INC.
BY: RICHARD K RYAN
--------------------------------
Richard K Ryan, President
ATTEST:
AMY J. LEE
- ------------------------------
Secretary
<PAGE>
THIRD PARTY FEEDER FUND AGREEMENT
AMONG
SECURITY MANAGEMENT COMPANY, LLC,
SECURITY DISTRIBUTORS, INC.,
SECURITY INCOME FUND,
CAPITAL PRESERVATION SERIES,
BT PRESERVATIONPLUS INCOME PORTFOLIO
AND
BANKERS TRUST COMPANY
DATED AS OF MAY 4, 1999
<PAGE>
THIRD PARTY FEEDER FUND AGREEMENT
The parties to this Agreement are Security Management Company, LLC
("Security Management"), Security Income Fund, (the "Company"), a Kansas
corporation, in respect of the Capital Preservation Series, a series thereof
(the "Fund"), BT PreservationPlus Income Portfolio, a New York business trust
(the "Portfolio"), Security Distributors, Inc., a corporation organized under
the laws of the State of Kansas ("Security Distributors"), and Bankers Trust
Company, a New York banking corporation ("Bankers"), with respect to the
proposed investment by the Fund in the Portfolio. THIS AGREEMENT is made and
entered into as of May 4, 1999, with respect to the proposed investment by the
Fund in the Portfolio.
PREAMBLE
WHEREAS, the Company and the Portfolio are each open-end management
investment companies and the Fund and the Portfolio have the same investment
objectives;
WHEREAS, Bankers currently serves as the investment adviser of the
Portfolio;
WHEREAS, Security Distributors currently serves as the principal
underwriter of the Company and Fund;
WHEREAS, Security Management serves as promoter of the Fund;
WHEREAS, the Company desires to invest all of the Fund's investable assets
in the Portfolio in exchange for a beneficial interest in the Portfolio (the
"Investment") on the terms and conditions set forth in this Agreement; and
WHEREAS, the Portfolio believes that accepting the Investment is in the
best interests of the Portfolio and that the interests of existing investors in
the Portfolio will not be diluted as a result of its accepting the Investment;
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
herein made and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE ONE
THE INVESTMENT
1.1 AGREEMENT TO EFFECT THE INVESTMENT. The Company agrees to assign, transfer
and deliver all of the Fund's investable assets (the "Assets") to the
Portfolio at each Closing (as hereinafter defined). The Portfolio agrees in
exchange therefore to issue to the Fund a beneficial interest (the
"Interest") in the Portfolio equal in value to the net asset value of the
Assets of the Fund conveyed to the Portfolio on that date of Closing.
ARTICLE TWO
CLOSING AND CLOSING DATE
2.1 TIME OF CLOSING. The conveyance of the Assets in exchange for the Interest,
as described in Article One, together with related acts necessary to
consummate such transactions, shall occur initially on the date the Company
commences its offering of shares of the Fund to the public and at each
subsequent date as the Company desires to make a further Investment in the
Portfolio (each, a "Closing"). All acts occurring at any Closing shall be
deemed to occur simultaneously as of the last daily determination of the
Portfolio's net asset value on the date of Closing.
2.2 RELATED CLOSING MATTERS. On each date of Closing, the Company, on behalf of
the Fund, shall authorize the Fund's custodian to deliver all of the Assets
held by such custodian to the Portfolio's custodian. The Fund's and the
Portfolio's custodians shall each acknowledge, in a form acceptable to the
other party, their respective delivery and acceptance of the Assets. The
Portfolio shall deliver to the Company acceptable evidence of the Fund's
ownership of the Interest. In addition, each party shall deliver to each
other party such bills of sale, checks, assignments, securities
instruments, receipts or other documents as such other party or its counsel
may reasonably request. Each of the representations and warranties set
forth in Article Three shall be deemed to have been made anew on each date
of Closing.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
3.1 THE COMPANY AND SECURITY MANAGEMENT
The Company and Security Management each represents and warrants to the
Portfolio and Bankers that:
(a) ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Kansas.
The Fund is a duly and validly designated series of the Company. The
Company and the Fund have the requisite power and authority to own
their property and conduct their business as now being conducted and
as proposed to be conducted pursuant to this Agreement.
(b) AUTHORIZATION OF AGREEMENT. The execution and delivery of this
Agreement by the Company and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action
on the part of the Company. No other action or proceeding is necessary
for the execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder and the
consummation by the Company of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company in
respect of the Fund, enforceable against them in accordance with its
terms.
(c) AUTHORIZATION OF INVESTMENT. The Investment has been duly authorized
by all necessary action on the part of the Board of Directors of the
Company.
(d) NO BANKRUPTCY PROCEEDINGS. Neither the Company nor the Fund is under
the jurisdiction of a court in a proceeding under Title 11 of the
United States Code (the "Bankruptcy Code") or similar case within the
meaning of Section 368(a)(3)(A) of the Bankruptcy Code.
(e) FUND ASSETS. The Fund's Assets will, at the initial Closing, consist
solely of cash.
(f) FISCAL YEAR. The fiscal year end for the Fund is September 30.
(g) AUDITORS. The Company has appointed Ernst & Young, LLP as the Fund's
independent public accountants to certify the Fund's financial
statements in accordance with Section 32 of the Investment Company Act
of 1940, as amended ("1940 Act").
(h) REGISTRATION STATEMENT. The Company has reviewed the Portfolio's
registration statement on Form N-1A, as filed with the Securities and
Exchange Commission ("SEC"), and understands and agrees to the
Portfolio's policies and methods of operation as described therein.
(i) ERRORS AND OMISSIONS INSURANCE POLICY. The Company has in force an
errors and omissions liability insurance policy insuring the Fund
against loss up to $8 million for negligence or wrongful acts.
(j) SEC FILINGS. To the best of its knowledge, the Company has duly filed
all forms, reports, proxy statements and other documents
(collectively, the "SEC Filings") required to be filed under the
Securities Act of 1933, as amended (the "1933 Act"), the Securities
Exchange Act of 1934 (the "1934 Act") and the 1940 Act (collectively,
the "Securities Laws") in connection with the registration of its
shares, any meetings of its shareholders and its registration as an
investment company. The SEC Filings were prepared in accordance with
the requirements of the Securities Laws, as applicable, and the rules
and regulations of the SEC thereunder and do not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(k) 1940 ACT REGISTRATION. The Company is duly registered as an open-end
management investment company under the 1940 Act and the Fund and its
shares are registered or qualified in any states where such
registration or qualification is necessary and such registrations or
qualifications are in full force and effect.
(l) All purchases and redemptions of Fund shares contemplated by this
Agreement shall be effected in accordance with the Fund's then-current
prospectus.
3.2 THE PORTFOLIO AND BANKERS
The Portfolio and Bankers each represents and warrants to the Company and
Security Management that:
(a) ORGANIZATION. The Portfolio is a business trust duly organized and
validly existing under the common law of the State of New York and has
the requisite power and authority to own its property and conduct its
business as now being conducted and as proposed to be conducted
pursuant to this Agreement.
(b) AUTHORIZATION OF AGREEMENT. The execution and delivery of this
Agreement by the Portfolio and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action
on the part of the Portfolio by its Board of Trustees and no other
action or proceeding is necessary for the execution and delivery of
this Agreement by the Portfolio, the performance by the Portfolio of
its obligations hereunder and the consummation by the Portfolio of the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Portfolio and constitutes a legal, valid
and binding obligation of the Portfolio, enforceable against it in
accordance with its terms.
(c) AUTHORIZATION OF ISSUANCE OF INTEREST. The issuance by the Portfolio
of the Interest in exchange for the Investment by the Fund of its
Assets has been duly authorized by all necessary action on the part of
the Board of Trustees of the Portfolio. When issued in accordance with
the terms of this Agreement, the Interest will be validly issued,
fully paid and non-assessable by the Portfolio.
(d) NO BANKRUPTCY PROCEEDINGS. The Portfolio is not under the jurisdiction
of a court in a proceeding under Title 11 of the Bankruptcy Code or
similar case within the meaning of Section 368(a)(3)(A) of the
Bankruptcy Code.
(e) FISCAL YEAR. The fiscal year end of the Portfolio is September 30.
(f) AUDITORS. The Portfolio has appointed Ernst & Young LLP as the
Portfolio's independent public accountants to certify the Portfolio's
financial statements in accordance with Section 32 of the 1940 Act.
(g) REGISTRATION STATEMENT. The Portfolio has reviewed the Company's
registration statement on Form N-1A, as filed with the SEC, and
understands and agrees to the Fund's policies and methods of operation
as described therein.
(h) ERRORS AND OMISSIONS INSURANCE POLICY. The Portfolio has in force an
errors and omissions liability insurance policy insuring the Portfolio
against loss up to $10 million for negligence or wrongful acts.
(i) SEC FILINGS; STATE FILINGS. To the best of its knowledge, the
Portfolio has duly filed all SEC Filings required to be filed with the
SEC pursuant to the 1934 Act and the 1940 Act in connection with any
meetings of its investors and its registration as an investment
company. Beneficial interests in the Portfolio are not required to be
registered under the 1933 Act because such interests are offered
solely in private placement transactions that do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act,
and such beneficial interests are not required to be registered or
qualified in any state. The SEC Filings were prepared in accordance
with the requirements of the Securities Laws, as applicable, and the
rules and regulations of the SEC thereunder, and do not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(j) 1940 ACT REGISTRATION. The Portfolio is duly registered as an open-end
management investment company under the 1940 Act and such registration
is in full force and effect.
(k) TAX STATUS. The Portfolio is taxable as a partnership under the
Internal Revenue Code of 1986, as amended (the "Code").
(l) YEAR 2000 PREPAREDNESS. The Portfolio has taken steps reasonably
designed to assure that the software and operating systems it uses
(and those of its vendors) to perform its obligations hereunder are
able properly to distinguish dates before January 1, 2000 from dates
on or after January 1, 2000.
3.3 BANKERS
Bankers represents and warrants to the Company and Security Management
that:
(a) ORGANIZATION. Bankers is a New York banking corporation duly
organized, validly existing and in good standing under the laws of the
State of New York and has the requisite power and authority to conduct
its business as now being conducted.
(b) AUTHORIZATION OF AGREEMENT. The execution and delivery of this
Agreement by Bankers has been duly authorized by all necessary action
on the part of Bankers and no other action or proceeding is necessary
for the execution and delivery of this Agreement by Bankers. This
Agreement has been duly executed and delivered by Bankers and
constitutes a legal, valid and binding obligation of Bankers.
(c) ADVISERS ACT. Bankers is exempt from the definition of an investment
adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and is not required to register under that Act.
(d) CHANGE OF CONTROL. Bankers is a wholly owned subsidiary of Bankers
Trust Corporation. On November 30, 1998, Bankers Trust Corporation
entered into an Agreement and Plan of Merger with Deutsche Bank, AG
under which Bankers Trust Corporation would merge with and into a
subsidiary of Deutsche Bank AG. If the proposed transaction is
approved and completed, Deutsche Bank, AG, as the investment adviser's
new parent company, will control the operations of Bankers.
(e) YEAR 2000. Bankers has taken steps reasonably designed to insure
assure that the software and operating systems it uses (and those of
its vendors) to perform its obligations hereunder are able properly to
distinguish dates before January 1, 2000 from dates on or after
January 1, 2000.
3.4 SECURITY MANAGEMENT AND SECURITY DISTRIBUTORS
(a) Security Management represents and warrants to the Portfolio and
Bankers that:
(i) ORGANIZATION. Security Management is a limited liability
company duly organized, validly existing and in good standing
under the laws of the State of Kansas and has the requisite
power and authority to conduct its business as now being
conducted.
(ii) AUTHORIZATION OF AGREEMENT. The execution and delivery of this
Agreement by Security Management have been duly authorized by
all necessary action on the part of Security Management and no
other action or proceeding is necessary for the execution and
delivery of this Agreement by Security Management. This
Agreement has been duly executed and delivered by Security
Management and constitutes a legal, valid and binding
obligation of Security Management.
(iii) PROMOTER AND ADMINISTRATOR. Security Management is the Fund's
promoter and administrator and is registered as an investment
adviser under the Advisers Act.
(b) Security Distributors represents and warrants to the Portfolio and
Bankers that:
(i) AUTHORIZATION OF AGREEMENT. The execution and delivery of this
Agreement by Security Distributors has been duly authorized by
all necessary action on the part of Security Distributors and
no other action or proceeding is necessary for the execution
and delivery of this Agreement by Security Distributors. This
Agreement has been duly executed and delivered by Security
Distributors and constitutes a legal, valid and binding
obligation of Security Distributors.
(ii) Security Distributors serves as the Company's and the Fund's
principal underwriter and is duly registered as a
broker-dealer under the 1934 Act. Security Distributors is
duly organized, validly existing and in good standing under
the laws of the state of Kansas, and has requisite authority
to conduct its business as now being conducted.
ARTICLE FOUR
COVENANTS
4.1 THE COMPANY
The Company covenants that:
(a) ADVANCE REVIEW OF CERTAIN DOCUMENTS. The Company will furnish the
Portfolio and Bankers, at least 10 business days prior to filing or
first use, as the case may be, with drafts of its registration
statement on Form N-lA (including amendments) and prospectus
supplements or amendments relating to the Fund. The Company will
furnish the Portfolio and Bankers with any proposed advertising or
sales literature relating to the Fund at least 10 business days prior
to filing or first use. These advance review periods may be waived
with the consent of the Portfolio and Bankers. The Company agrees that
it will include in all such Fund documents any disclosures that may be
required by law, particularly those relating to Bankers' status as a
bank, and it will include in all such Fund documents any material
comments reasonably made by Bankers or the Portfolio. The Portfolio
and Bankers will, however, in no way be liable for any errors or
omissions in such documents, whether or not they make any objection
thereto, except to the extent such errors or omissions result from
information provided by Bankers or the Portfolio. The Company will not
make any other written or oral representation about the Portfolio or
Bankers without their prior written consent.
(b) TAX STATUS. The Fund will qualify for treatment as a regulated
investment company under Subchapter M of the Code for all periods
during which this Agreement is in effect, except to the extent a
failure to so qualify may result from any action or omission of the
Portfolio.
(c) INVESTMENT SECURITIES. The Fund will own no investment security other
than its Interest in the Portfolio.
(d) PROXY VOTING. If requested to vote as a shareholder on matters
pertaining to the Portfolio (other than a vote by the Company to
continue the operation of the Portfolio upon the withdrawal of another
investor in the Portfolio), the Company will, to the extent required
by applicable law, (i) call a meeting of shareholders of the Fund for
the purpose of seeking instructions from shareholders regarding such
matters, (ii) vote the Fund's Interest proportionally as instructed by
Fund shareholders, and (iii) vote the Fund's Interest with respect to
the shares held by Fund shareholders who do not give voting
instructions in the same proportion as the shares of Fund shareholders
who do give voting instructions. The Company will hold each such
meeting of Fund shareholders in accordance with a timetable reasonably
established by the Portfolio. With respect to proposals solely
attributable to and for the benefit of Bankers, Bankers shall bear the
costs and expenses in calling and holding such meetings, including,
but not limited to the cost of printing and mailing proxy statements
and expenses associated with the solicitation of Fund shareholders.
(e) Insurance. The Company shall at all times maintain errors and
omissions liability insurance with respect to the Fund covering losses
for negligence and wrongful acts in an amount not less than $5
million. At least once each calendar year, the Company shall review
its insurance coverage, and shall increase its coverage as it deems
appropriate.
(f) Auditors. In the event the Fund's independent public accountants
differ from those of the Portfolio, the Fund shall be responsible for
any costs and expenses associated with the need for the Portfolio's
independent public accountants to provide information to the Fund's
independent public accountants.
4.2 INDEMNIFICATION BY SECURITY MANAGEMENT
(a) With respect to those matters listed in subparagraphs (i) through (vi)
below, Security Management will indemnify and hold harmless the
Portfolio, Bankers and their respective trustees, directors, officers
and employees and each other person who controls the Portfolio or
Bankers, as the case may be, within the meaning of Section 15 of the
1933 Act (each, a "Covered Person" and collectively, "Covered
Persons"), against any and all losses, claims, demands, damages,
liabilities and expenses, joint or several, (each, a "Liability" and
collectively, the "Liabilities"). Unless Security Management elects to
assume the defense pursuant to paragraph (b) Security Management will
bear the reasonable cost of investigating and defending against any
claims therefor and any reasonable counsel fees incurred in connection
therewith. This Section 4.2 applies to any Liability which arises out
of, is based upon or results from:
(i) any violation or alleged violation of the Securities Laws, any
other statute or common law or are incurred in connection with
or as a result of any formal or informal administrative
proceeding or investigation by a regulatory agency, insofar as
such Liabilities arise out of or are based upon the ground or
alleged ground that any direct or indirect omission or
commission by the Company or the Fund (either during the
course of its daily activities or in connection with the
accuracy of its representations or its warranties in this
Agreement) caused or continues to cause the Portfolio to
violate any federal or state securities laws or regulations or
any other applicable domestic or foreign law or regulations or
common law duties or obligations, but only to the extent that
such Liabilities do not arise out of and are not based upon an
omission or commission of the Portfolio or Bankers;
(ii) the Fund having caused the Portfolio to be an association
taxable as a corporation rather than a partnership; or
(iii) any misstatement of a material fact or an omission of a
material fact in the Company's registration statement
(including amendments thereto) or included in Fund advertising
or sales literature, other than information provided by or on
behalf of the Portfolio or Bankers or included in Fund
advertising or sales literature at the request of the
Portfolio or Bankers or the agent of either;
(iv) the failure of any representation or warranty made by the
Company or Security Management to be materially accurate when
made or the failure of the Company or Security Management to
perform any covenant contained herein or to otherwise comply
with the terms of this Agreement;
(v) any unlawful or negligent act of the Company, Security
Management or any director, officer, employee or agent of the
Company or Security Management, whether such act was committed
against the Company, the Portfolio, Bankers Trust or any third
party;
(vi) any Liability of the Fund for which the Portfolio is also
liable and for which the Company or Security Management is
responsible; provided, however, that in no case shall Security
Management be liable with respect to any claim made against
any Covered Person under this Section 4.2 unless the Covered
Person shall have notified Security Management in writing of
the nature of the claim within a reasonable time after the
summons, other first legal process or formal or informal
initiation of a regulatory investigation or proceeding shall
have been served upon or provided to a Covered Person, or any
federal, state or local tax deficiency has come to the
attention of Bankers, the Portfolio or a Covered Person.
Failure to notify Security Management of such claim shall
relieve it from Liability only to the extent that it is
actually harmed or disadvantaged by the failure to provide
timely notice and shall not relieve Security Management from
any Liability that it may have to any Covered Person otherwise
than on account of the indemnification contained in this
Section.
(b) Security Management will be entitled to participate at its own expense
in the defense or, if it so elects, to assume the defense of any suit
brought to enforce any such Liability. If Security Management elects
to assume the defense, such defense shall be conducted by counsel
chosen by Security Management. In the event Security Management elects
to assume the defense of any such suit and retain such counsel, each
Covered Person and any other defendant or defendants may retain
additional counsel, but shall bear the fees and expenses of such
counsel unless (A) Security Management shall have specifically
authorized the retaining of such counsel or (B) the parties to such
suit include any Covered Person and Security Management, and any such
Covered Person has been advised by counsel in writing that one or more
legal defenses may be available to it that may not be available to
Security Management, in which case Security Management shall not be
entitled to assume the defense of such suit notwithstanding its
obligation to bear the reasonable fees and expenses of such counsel.
Security Management shall not be liable to indemnify any Covered
Person for any settlement of any claim effected without Security
Management's written consent, which consent shall not be unreasonably
withheld or delayed. The indemnities set forth in paragraph (a) will
be in addition to any liability that the Company in respect of the
Fund might otherwise have to a Covered Person.
4.3 INDEMNIFICATION BY SECURITY DISTRIBUTORS
(a) With respect to those matters listed in subparagraph (i) through (iv)
below, Security Distributors will indemnify and hold harmless the
Portfolio, Bankers and their respective trustees, directors, officers
and employees and each other person who controls the Portfolio or
Bankers, as the case may be, within the meaning of Section 15 of the
1933 Act (each a "Covered Person" and collectively, "Covered
Persons"), against any and all losses, claims, demands, damages,
liabilities and expenses, joint or several, (each, a "Liability" and
collectively, the "Liabilities"). Unless Security Distributors elects
to assume the defense pursuant to paragraph (c), Security Distributors
will bear the reasonable cost of investigating and defending against
any claims therefor and any reasonable counsel fees incurred in
connection therewith. This Section 4.3 applies to any Liability which
arises out of, is based upon or results from:
(i) any misstatement of a material fact or an omission of a
material fact included in Fund advertising or sales
literature, other than information provided by or on behalf of
the Portfolio or Bankers or included in Fund advertising or
sales literature at the request of the Portfolio or Bankers or
the agent of either;
(ii) the failure of any representation or warranty made by Security
Distributors to be materially accurate when made or the
failure of Security Distributors to perform any covenant
contained herein or to otherwise comply with the terms of this
Agreement;
(iii) any unlawful or negligent act of Security Distributors or any
director, officer, employee or agent of Security Distributors,
whether such act was committed against the Company, the
Portfolio, Bankers Trust or any third party; or
(iv) any material breach of Security Distributors' representations,
warranties and covenants included herein, including the
representations that the Fund will permit investments only by
IRAs and Plans as defined in the prospectus for the BT
PreservationPlus Income Fund.
(b) In no case shall Security Distributors be liable with respect to any
claim made against any Covered Person under this Section 4.3 unless
the Covered Person shall have notified Security Distributors in
writing of the nature of the claim within a reasonable time after the
summons, other first legal process or formal or informal initiation of
a regulatory investigation or proceeding shall have been served upon
or provided to a Covered Person, or any federal, state or local tax
deficiency has come to the attention of Bankers, the Portfolio or a
Covered Person. Failure to notify Security Distributors of such claim
shall relieve it from Liability only to the extent that it is actually
harmed or disadvantaged by the failure to provide timely notice and
shall not relieve Security Distributors from any Liability that it may
have to any Covered Person otherwise than on account of the
indemnification contained in this Section.
(c) Security Distributors will be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such Liability. If Security
Distributors elects to assume the defense, such defense shall be
conducted by counsel chosen by Security Distributors. In the event
Security Distributors elects to assume the defense of any such suit
and retain such counsel, each Covered Person and any other defendant
or defendants may retain additional counsel, but shall bear the fees
and expenses of such counsel unless (i) Security Distributors shall
have specifically authorized the retaining of such counsel or (ii) the
parties to such suit include any Covered Person and Security
Distributors, and any such Covered Person has been advised by counsel
in writing that one or more legal defenses may be available to it that
may not be available to Security Distributors, in which case Security
Distributors shall not be entitled to assume the defense of such suit
notwithstanding its obligation to bear the reasonable fees and
expenses of such counsel. Security Distributors shall not be liable to
indemnify any Covered Person for any settlement of any claim effected
without Security Distributors' written consent. Such consent shall not
be unreasonably withheld or delayed. The indemnities set forth in
paragraph (a) will be in addition to any liability that Security
Distributors might otherwise have to a Covered Person.
(d) Any material breach of the representations, warranties and covenants
included herein (including the representations that the Fund will
permit investments only by IRAs and Plans (as defined in the
prospectus for the BT PreservationPlus Income Fund) and, other than
with the consent of the Portfolio, that the redemption rights of
shareholders of the Fund will be the same as those described in the
prospectus for the BT PreservationPlus Income Fund.
4.4 THE PORTFOLIO
The Portfolio covenants that:
(a) ADVANCE REVIEW OF CERTAIN DOCUMENTS. The Portfolio will furnish the
Company and Security Management, at least 10 business days prior to
filing or first use, as the case may be, with drafts of its
registration statement on Form N-1A (including amendments) and
prospectus supplements or amendments. This advance review period may
be waived with the consent of the Company and Security Management. The
Portfolio will not make any written or oral representation about the
Company, Security Distributors or Security Management without their
prior written consent.
(b) TAX STATUS. The Portfolio will qualify to be taxable as a partnership
under the Code for all periods during which this Agreement is in
effect, except to the extent that the failure to so qualify results
from any action or omission of the Fund.
(c) INSURANCE. The Portfolio shall at all times maintain errors and
omissions liability insurance covering losses for negligence and
wrongful acts in an amount not less than $10 million. At least once
each calendar year, the Portfolio shall review its insurance coverage,
and shall increase its coverage, as it deems appropriate.
(d) AVAILABILITY OF INTERESTS. Conditional upon the Company complying with
the terms of this Agreement, the Portfolio shall permit the Fund to
make additional Investments in the Portfolio on each business day on
which shares of the Fund are sold to the public; provided, however,
that the Portfolio may refuse to permit the Fund to make additional
Investments in the Portfolio on any day on which:
(i) the Portfolio has refused to permit all other investors in the
Portfolio to make additional investments in the Portfolio, or
(ii) the Trustees of the Portfolio have reasonably determined that
permitting additional investments by the Fund in the Portfolio
would constitute a breach of their fiduciary duties to the
Portfolio.
4.5 INDEMNIFICATION BY BANKERS
(a) With respect to those matters listed in subparagraphs (i) through
(viii) below, Bankers will indemnify and hold harmless the Company,
Security Management, Security Distributors, their respective
directors, officers and employees and each other person who controls
the Company, the Fund, Security Management or Security Distributors,
as the case may be, within the meaning of Section 15 of the 1933 Act
(each, a "Covered Person" and collectively, "Covered Persons"),
against any and all losses, claims, demands, damages, liabilities and
expenses, joint or several, (each, a "Liability" and collectively, the
"Liabilities"). Unless Bankers elects to assume the defense pursuant
to paragraph (b), Bankers will bear the reasonable costs of
investigating and defending against any claims therefore and any
reasonable counsel fees incurred in connection therewith), whether
incurred directly by the Company, Security Management or Security
Distributors or indirectly by the Company, Security Management, or
Security Distributors through the Company's Investment in the
Portfolio. This Section 4.5 applies to any Liability which arises out
of, is based upon or results from:
(i) any violation or alleged violation of the Securities Laws, any
other statute or common law or are incurred in connection with
or as a result of any formal or informal administrative
proceeding or investigation by a regulatory agency, insofar as
such Liabilities arise out of or are based upon the ground or
alleged ground that any direct or indirect omission or
commission by the Portfolio (either during the course of its
daily activities or in connection with the accuracy of its
representations or its warranties in this Agreement) caused or
continues to cause the Company to violate any federal or state
securities laws or regulations or any other applicable
domestic or foreign law or regulations or common law duties or
obligations, but only to the extent that such Liabilities do
not arise out of and are not based upon an omission or
commission of the Company, Security Management or Security
Distributors;
(ii) an inaccurate calculation of the Portfolio's net asset value
(whether by the Portfolio, Bankers or any party retained for
that purpose);
(iii) (A) any misstatement of a material fact or an omission of a
material fact in the Portfolio's registration statement
(including amendments thereto) or included in advertising or
sales literature used by the Fund, other than information
provided by or on behalf of the Company, Security Management
or Security Distributors or included at their, or their
agent's request, or (B) any misstatement of a material fact or
an omission of a material fact in the registration statement
or advertising or sales literature of any investor in the
Portfolio, other than the Company;
(iv) the Portfolio's having caused the Fund to fail to qualify as a
regulated investment company under the Code;
(v) failure of any representation or warranty made by the
Portfolio or Bankers to be materially accurate when made, any
material breach of any representation or warranty made by the
Portfolio or Bankers, or the failure of the Portfolio or
Bankers to perform any covenant contained herein or to
otherwise comply with the terms of this Agreement;
(vi) any unlawful or negligent act by the Portfolio, Bankers or any
director, trustee, officer, employee or agent of the Portfolio
or adviser, whether such act was committed against the
Portfolio, the Company, Security Management, Security
Distributors or any third party;
(vii) any claim that the systems, methodologies, or technology used
in connection with operating the Portfolio, including the
technologies associated with maintaining the master-feeder
structure of the Portfolio, violate any license or infringe
upon any patent or trademark;
(viii) any liability of the Portfolio for which the Fund is also
liable and for which the Portfolio or Bankers is responsible,
and any Liability of the Portfolio to any investor in the
Portfolio (or shareholder thereof), other than the Fund (and
its shareholders); provided, however, that in no case shall
Bankers be liable with respect to any claim made against any
such Covered Person under this Section 4.5 unless such Covered
Person shall have notified Bankers in writing of the nature of
the claim within a reasonable time after the summons, other
first legal process or formal or informal initiation of a
regulatory investigation or proceeding shall have been served
upon or provided to a Covered Person or any federal, state or
local tax deficiency has come to the attention of the Company,
Security Management, Security Distributors or a Covered
Person. Failure to notify Bankers of such claim shall relieve
it from Liability only to the extent that it is actually
harmed or disadvantaged by the failure to provide timely
notice and shall not relieve Bankers from any Liability that
it may have to any Covered Person otherwise than on account of
the indemnification contained in this paragraph.
(b) Bankers will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought
to enforce any such Liability. If Bankers elects to assume the
defense, such defense shall be conducted by counsel chosen by Bankers.
In the event Bankers elects to assume the defense of any such suit and
retain such counsel, each Covered Person and any other defendant or
defendants in the suit may retain additional counsel but shall bear
the reasonable fees and expenses of such counsel unless (i) Bankers
shall have specifically authorized the retaining of such counsel or
(ii) the parties to such suit include any Covered Person and Bankers,
and any such Covered Person has been advised by counsel, in writing,
that one or more legal defenses may be available to it that may not be
available to Bankers, in which case Bankers shall not be entitled to
assume the defense of such suit notwithstanding the obligation to bear
the fees and expenses of such counsel. Bankers shall not be liable to
indemnify any Covered Person for any settlement of any such claim
effected without Bankers' written consent. Such consent shall not be
unreasonably withheld or delayed. The indemnities set forth in
paragraph (a) will be in addition to any liability that the Portfolio
might otherwise have to a Covered Person.
4.6 SCOPE OF AGREEMENT
Nothing contained herein shall be construed to protect any person against
any liability to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, or negligence, in the performance of such
person's duties, or by reason of such person's reckless disregard of such
person's obligations under such contract or agreement.
4.7 IN-KIND REDEMPTION
In the event the Company desires to withdraw or redeem all or a portion of
the Fund's Investment in the Portfolio, unless otherwise agreed to by the
parties, the Portfolio will effect such redemption (a) in cash, (b) "in kind"
(as described below) or (c) in some combination of the foregoing determined
solely in the discretion of Bankers. Further, if the Interest Rate Trigger as
described in the prospectus for the Portfolio is active, a redemption fee
(currently 3% of the proceeds of such redemption) will be applied. In connection
with a partial or complete redemption "in kind," the Portfolio will distribute
to the Company securities and Wrapper Agreements as described in the prospectus
for the BT PreservationPlus Income Fund. The Portfolio will assign to the
Company one or more Wrapper Agreements issued by the Wrapper providers covering
the securities distributed in kind. The terms and conditions of the Wrapper
Agreements distributed to the Company will be substantially similar to the terms
and conditions of the Wrapper Agreements held by the Portfolio. In order to
obtain the benefits provided thereunder, the Company's management of the
securities must be consistent with the Wrapper Agreement requirements and the
Company must complete the assignment by executing the Wrapper Agreements. No
other withdrawal or redemption of any Interest in the Portfolio will be
satisfied by means of an "in kind" redemption except in compliance with Rule
18f-1 under the 1940 Act, provided, however, that for purposes of determining
compliance with Rule 18f-1, each shareholder of the Fund redeeming shares of the
Fund on a particular day will be treated as a direct holder of an Interest in
the Portfolio being redeemed that day.
4.8 REASONABLE ACTIONS
Each party covenants that it will, subject to the provisions of this
Agreement, from time to time, as and when requested by another party or in its
own discretion, as the case may be, execute and deliver or cause to be executed
and delivered all such assignments and other instruments, take or cause to be
taken such actions, and do or cause to be done all things reasonably necessary,
proper or advisable in order to consummate the transactions contemplated by this
Agreement and to carry out its intent and purpose.
ARTICLE FIVE
CONDITIONS PRECEDENT
5.0 GENERAL
The obligations of each party to consummate the transactions provided for
herein shall be subject to:
(a) performance by the other parties of all the obligations to be
performed by the other parties hereunder on or before each Closing,
(b) all representations and warranties of the other parties contained in
this Agreement being true and correct in all material respects as of
the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of each date of
Closing, with the same force and effect as if made on and as of the
time of such Closing, and
(c) the following further conditions that shall be fulfilled on or before
each Closing.
5.1 REGULATORY STATUS
All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby.
5.2 APPROVAL OF AUDITORS
Unless precluded by applicable fiduciary duties or the failure of the
Fund's shareholders to provide necessary ratification, the directors of the
Company that are not "interested persons" of the Company, as defined in the 1940
Act, shall have selected as the independent certified public accountants for the
Fund the independent certified public accountants selected and ratified for the
Portfolio.
5.3 INVESTMENT OBJECTIVE/RESTRICTIONS
The Fund shall have the same investment objective and substantively the
same investment restrictions as the Portfolio.
ARTICLE SIX
ADDITIONAL AGREEMENTS
6.1 NOTIFICATION OF CERTAIN MATTERS
Each party will give prompt notice to the other parties of:
(a) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause either:
(i) any representation or warranty contained in this Agreement to
be materially untrue or inaccurate, or
(ii) any condition precedent set forth in Article Five hereof to be
unsatisfied in any material respect at the time of any
Closing, and
(b) any material failure of a party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by
such person hereunder; provided, however, that the delivery of any
notice pursuant to this Section 6.1 shall not limit or otherwise
affect the remedies available, hereunder or otherwise, to the party
receiving such notice.
6.2 ACCESS TO INFORMATION
The Portfolio and the Company shall afford each other reasonable access at
all reasonable times to such party's officers, employees, agents and offices and
to all its relevant books and records and shall furnish each other party with
all relevant financial and other data and information as requested; provided,
however, that nothing contained herein shall obligate the Company to provide the
Portfolio with access to the books and records of the Company relating to any
series of the Company other than the Fund, nor shall anything contained herein
obligate the Company to furnish the Portfolio with the Fund's shareholder list,
except as may be required to comply with applicable law or any provision of this
Agreement.
6.3 CONFIDENTIALITY
Each party agrees that it shall hold in strict confidence all data and
information obtained from another party (unless such information is or becomes
readily ascertainable from public or published information or trade sources) and
shall ensure that its officers, employees and authorized representatives do not
disclose such information to others without the prior written consent of the
party from whom it was obtained, except if disclosure is required by the SEC,
any other regulatory body or the Fund's or Portfolio's respective auditors, or
in the opinion of counsel such disclosure is required by law, and then only with
as much prior written notice to the other party as is practical under the
circumstances.
6.4 PUBLIC ANNOUNCEMENTS
No party shall issue any press release or otherwise make any public
statements with respect to the matters covered by this Agreement without the
prior consent of the other parties hereto, which consent shall not be
unreasonably withheld; provided, however, that consent shall not be required if,
in the opinion of counsel, such disclosure is required by law, provided further,
however, that the party making such disclosure shall provide the other parties
hereto with as much prior written notice of such disclosure as is practical
under the circumstances. Advance review of sales literature and advertising
material shall be subject to the provisions of Section 4.1 of this Agreement.
ARTICLE SEVEN
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION
(a) This Agreement may be terminated by the mutual agreement of all
parties.
(b) This Agreement may be terminated at any time by the Company by
withdrawing all of the Fund's Interest in the Portfolio.
(c) This Agreement may be terminated on not less than 120 days' prior
written notice by the Portfolio to the Company, Security Management
and Security Distributors, or by Security Management or Security
Distributors on not less than 120 days' prior written notice to the
Portfolio and Bankers.
(d) This Agreement shall terminate automatically with respect to Security
Management and Security Distributors upon the effective date of
termination by the Company and this Agreement shall terminate
automatically with respect to Bankers upon the effective date of
termination by the Portfolio.
(e) This Agreement may be terminated at any time immediately upon written
notice to the other parties in the event that formal proceedings are
instituted against another party to this Agreement by the SEC or any
other regulatory body, provided that the terminating party has a
reasonable belief that the institution of the proceeding is not
without foundation and will have a material adverse impact on the
terminating party.
(f) This Agreement shall terminate automatically with respect to Security
Distributors upon the effective date of the termination of its duties
as principal underwriter by the Company. At such time Bankers shall
have the right to immediately terminate this Agreement. Security
Management and the Company acknowledge that at such time in the event
this Agreement is not terminated, the Agreement will require amendment
to reflect the Company's appointment of a new distributor.
(g) The indemnification obligations of the parties set forth in Article
Four shall survive the termination of this Agreement with respect to
any Liability relating to actions or omissions prior to the
termination.
7.2 AMENDMENT
This Agreement may be amended, modified or supplemented at any time in such
manner as may be mutually agreed upon in writing by the parties.
7.3 WAIVER
At any time prior to any Closing, any party may:
(a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and
(c) waive compliance with any of the agreements or conditions contained
herein.
ARTICLE EIGHT
DAMAGES
8.1 APPROPRIATE RELIEF
The parties agree that, in the event of a breach of this Agreement, the
remedy of money damages would not be adequate and agree that injunctive relief
would be the appropriate relief.
ARTICLE NINE
GENERAL PROVISIONS
9.1 NOTICES
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly given or made on the earlier of
(a) when actually received in person or by fax, or (b) three days after being
sent by certified or registered United States mail, return receipt requested,
postage prepaid, addressed as follows:
If to Security Management, Security Distributors or the Company:
Security Management Company, LLC
700 SW Harrison Street
Topeka, Kansas 66636-0001
Attention: General Counsel
If to the Portfolio or Bankers:
Mutual Fund Services
BT Alex.Brown Incorporated
One South Street
Baltimore, MD 21202
Attention: Richard T. Hale
Any party to this Agreement may change the identity or address of the
person to receive notice by providing written notice thereof to all other
parties to the Agreement.
9.2 EXPENSES
All costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses, unless otherwise provided herein.
9.3 HEADINGS
The headings and captions contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
9.4 SEVERABILITY
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
9.5 ENTIRE AGREEMENT
This Agreement and the agreements and other documents delivered pursuant
hereto set forth the entire understanding between the parties concerning the
subject matter of this Agreement and incorporate or supersede all prior
negotiations and understandings. There are no covenants, promises, agreements,
conditions or understandings, either oral or written, between them relating to
the subject matter of this Agreement other than those set forth herein. No
representation or warranty has been made by or on behalf of any party to this
Agreement (or any officer, director, trustee, employee or agent thereof) to
induce any other party to enter into this Agreement or to abide by or consummate
any transactions contemplated by any terms of this Agreement, except
representations and warranties expressly set forth herein.
9.6 SUCCESSORS AND ASSIGNMENTS
Each and all of the provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and, except as otherwise specifically
provided in this Agreement, their respective successors and assigns.
Notwithstanding the foregoing, no party shall make any assignment of this
Agreement or any rights or obligations hereunder without the written consent of
all other parties. As used herein, the term "assignment" shall have the meaning
ascribed thereto in the 1940 Act. The parties hereby consent to the acquisition
of Bankers by Deutsche Bank, AG.
9.7 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to the choice of law or
conflicts of law provisions thereof.
9.8 COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
shall constitute one and the same instrument, and any party hereto may execute
this Agreement by signing one or more counterparts.
9.9 THIRD PARTIES
Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason of this
Agreement.
9.10 INTERPRETATION
Any uncertainty or ambiguity existing herein shall not presumptively be
interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for arm's-length agreements.
9.11 LIMITATION OF LIABILITY
The parties hereby acknowledge that the Company has entered into this
Agreement solely on behalf of the Fund and that no other series of the Company
shall have any obligation hereunder with respect to any liability of the Company
arising hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers, thereunto duly authorized, as of the date first
written above.
SECURITY MANAGEMENT COMPANY, LLC
By: JAMES R. SCHMANK
---------------------------------
Name: James R. Schmank
---------------------------------
Title: President
---------------------------------
SECURITY DISTRIBUTORS, INC.
By: RICHARD K RYAN
---------------------------------
Name: Richard K Ryan
---------------------------------
Title: President
---------------------------------
SECURITY INCOME FUND on behalf of itself and the Capital Preservation Series, a
series thereof
By: JAMES R. SCHMANK
---------------------------------
Name: James R. Schmank
---------------------------------
Title: Vice President
---------------------------------
BT PRESERVATIONPLUS INCOME PORTFOLIO
By: DANIEL O. HIRSCH
---------------------------------
Name: Daniel O. Hirsch
---------------------------------
Title: Secretary
---------------------------------
BANKERS TRUST COMPANY
By: ERIC KIRSCH
---------------------------------
Name: Eric Kirsch
---------------------------------
Title: Managing Director
---------------------------------
<PAGE>
RECORDKEEPING AND INVESTMENT
ACCOUNTING AGREEMENT
The parties to this Agreement are Security Management Company, LLC,
("Security Management"), a Kansas limited liability company, having its
principal place of business at 700 SW Harrison Street, Topeka, Kansas 66636, and
Bankers Trust Company ("Bankers"), a New York banking corporation, having its
principal place of business at 130 Liberty Street, New York, New York 10006.
This Agreement is made effective as of May 4, 1999.
WITNESS
WHEREAS, Security Management provides general administrative, fund
accounting, dividend disbursing and transfer agency services to the Capital
Preservation Series (the "Fund") of Security Income Fund (the "Company")
pursuant to an Administrative Services and Transfer Agency Agreement dated April
1, 1987, as amended April 30, 1999; and
WHEREAS, under the terms of said agreement, Security Management is
authorized to delegate, assign or subcontract any of its duties under the
agreement to a third party provided that such arrangement is approved by the
board of directors of the Company; and
WHEREAS, the board of directors of the Company approved the form of this
Recordkeeping and Investment Accounting Agreement at a meeting held February 10,
1999; and
WHEREAS, the Company is registered as an "investment company" under the
Investment Company Act of 1940 (the "1940 Act") and the Fund is a duly
authorized series of the Company; and
WHEREAS, Bankers performs certain investment accounting and recordkeeping
services on a computerized accounting system (the "Portfolio Accounting System")
in connection with maintaining certain accounting records of the Fund;
WHEREAS, Security Management desires to appoint Bankers as recordkeeping
and investment accounting sub-agent for the Fund, and Bankers is willing to
accept such appointment;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF INVESTMENT ACCOUNTING AND RECORDKEEPING SUB-AGENT. Security
Management hereby constitutes and appoints Bankers as investment accounting
and recordkeeping sub-agent for the Fund to perform accounting and
recordkeeping functions related to portfolio transactions required of the
Fund under Rule 31a-1 under the 1940 Act and to calculate the net asset
value of the Fund.
2. REPRESENTATIONS AND WARRANTIES OF SECURITY MANAGEMENT. Security Management
hereby represents, warrants and acknowledges to Bankers:
(a) That it is a limited liability company duly organized and existing and
in good standing under the laws of Kansas;
(b) That it has the requisite power and authority under applicable law,
its charter and its bylaws to enter into this Agreement; that it has
taken all requisite action necessary to appoint Bankers as investment
accounting and recordkeeping sub-agent for Fund; that this Agreement
has been duly executed and delivered by Security Management; and that
this Agreement constitutes a legal, valid and binding obligation of
Security Management, enforceable in accordance with its terms; and
(c) That it has determined to its satisfaction that the Portfolio
Accounting System is appropriate and suitable for its needs.
3. REPRESENTATIONS AND WARRANTIES OF BANKERS. Bankers hereby represents,
warrants and acknowledges to Security Management:
(a) That it is a New York banking corporation duly organized and existing
and in good standing under the laws of the State of New York;
(b) That it has the requisite power and authority under applicable law,
its charter and its bylaws to enter into and perform this Agreement;
that this Agreement has been duly executed and delivered by Bankers;
and that this Agreement constitutes a legal, valid and binding
obligation of Bankers, enforceable in accordance with its terms; and
(c) That the accounts and records maintained and preserved by Bankers
shall be the property of the Fund and that it will not use any
information made available to it under the terms hereof for any
purpose other than complying with its duties and responsibilities
hereunder or as specifically authorized by Security Management in
writing.
(d) YEAR 2000 PREPAREDNESS. Bankers has taken steps reasonably designed to
assure that the software and operating systems it uses (and those of
its vendors) to perform its obligations hereunder are able properly to
distinguish dates before January 1, 2000 from dates on or after
January 1, 2000.
4. Duties and Responsibilities of Security Management.
(a) Security Management shall turn over to Bankers all of Fund's accounts
and records previously maintained, if any.
(b) Security Management shall provide to Bankers the information
reasonably necessary to perform Bankers` duties and responsibilities
hereunder prior to the close of the New York Stock Exchange on each
day on which Bankers prices the Funds' securities. Security Management
will provide information requested as necessary in a written or
printed instrument, or in an electronic format mutually agreed upon
with Bankers, prior to the close of the New York Stock Exchange on
each day on which Bankers prices the Funds' securities.
(c) Security Management shall pay to Bankers such compensation at such
time as may from time to time be agreed upon in writing by Bankers and
Security Management. The initial compensation schedule is attached as
Exhibit A.
(d) Security Management shall provide to Bankers, as conclusive proof of
any fact or matter required to be ascertained from Security Management
as reasonably determined by Bankers, a certificate signed by Security
Management's president or other officer of Security Management, or
other authorized individual, as reasonably requested by Bankers.
Security Management shall also provide to Bankers instructions with
respect to any matter concerning this Agreement requested by Bankers.
Bankers may rely upon any instruction or information furnished by any
person reasonably believed by it to be an officer or agent of Security
Management, and shall not be held to have notice of any change of
authority of any such person until receipt of written notice thereof
from Security Management.
(e) Security Management shall preserve the confidentiality of the
Portfolio Accounting System and the tapes, books, reference manuals,
instructions, records, programs, documentation and information of, and
other materials relevant to, the Portfolio Accounting System and the
business of Bankers (collectively, "Confidential Information").
Security Management shall not voluntarily disclose such Confidential
Information to any other person other than its own employees or agents
who reasonably have a need to know such information pursuant to this
Agreement, or as may be required by applicable law. Security
Management shall return all such Confidential Information to Bankers
upon termination or expiration of this Agreement.
(f) If Bankers shall provide Security Management direct access to the
computerized recordkeeping and reporting system used hereunder or if
Bankers and Security Management shall agree to utilize any electronic
system of communication, Security Management shall be fully
responsible for any and all consequences of the use or misuse of the
terminal device, passwords, access instructions and other means of
access to such system(s) which are utilized by, assigned to or
otherwise made available to Security Management. Security Management
agrees to implement and enforce appropriate security policies and
procedures to prevent unauthorized or improper access to or use of
such system(s). Bankers shall be fully protected in acting hereunder
upon any instructions, communications, data or other information
received by Bankers by such means as fully and to the same effect as
if delivered to Bankers by written instrument signed by the requisite
authorized representative(s) of Security Management.
5. Duties and Responsibilities of Bankers.
(a) Bankers shall calculate Fund's net asset value in accordance with
Fund's registration statement and applicable regulations.
(b) Bankers shall prepare and maintain, in complete, accurate, and current
form, all accounts and records necessary as a basis for calculation of
Fund's net asset value, and shall preserve such records in the manner
and for the periods required by law or for such longer period as the
parties may agree upon in writing.
(c) Bankers shall make available to Security Management and Fund for
inspection or reproduction within a reasonable time, upon demand, all
accounts and records of Fund maintained and preserved by Bankers.
(d) Bankers shall be entitled to rely conclusively on the completeness and
correctness of any and all accounts and records turned over to it by
Security Management.
(e) Bankers shall assist Fund's independent accountants, or upon approval
of Security Management or Fund or upon demand, any regulatory body, in
any requested review of Fund's accounts and records maintained by
Bankers but shall be reimbursed by Security Management for all
expenses and employee time invested in any such review outside of
routine and normal periodic reviews. Inspections conducted by the
Securities and Exchange Commission shall be considered routine.
(f) Bankers shall respond to reasonable requests for information from Fund
or Security Management for books and records maintained by Bankers.
Reasonable requests include information necessary for Security
Management or Fund to prepare tax returns, questionnaires, periodic
reports to shareholders and other such other reports as Security
Management and Bankers shall agree upon from time to time.
(g) Bankers shall not have any responsibility hereunder to Fund, Fund's
shareowners or any other person or entity for moneys or securities of
Fund, whether held by Fund or Fund's custodians.
6. INDEMNIFICATION.
(a) Security Management shall indemnify and hold Bankers harmless from and
against any and all costs, expenses, losses, damages (including
consequential, special and punitive damages), charges, reasonable
counsel fees, payments and liabilities (including amounts paid in
settlement, provided that Security Management shall have approved such
settlement) which may be asserted against or incurred by Bankers, or
for which it may be liable, arising out of or attributable to:
1. Security Management's refusal or failure to substantially comply
with the terms of this Agreement.
2. Security Management's negligent or willful misconduct in
connection with the performance of its duties under this
Agreement, or the failure of any representation or warranty of
Security Management hereunder to be and remain materially true
and correct at all times.
3. The failure of Security Management to comply with applicable law
in connection with the performance of its duties under this
Agreement.
4. Any error, omission, inaccuracy or other deficiency in Fund's
accounts and records or other information provided by or on
behalf of Security Management to Bankers, or the failure of
Security Management to provide, or provide in a timely manner,
the information needed by Bankers to perform its functions.
5. Payment of money by Bankers at the request of Security
Management, or the taking of any action by Bankers at the request
of Security Management which might make Bankers liable for
payment of money; provided, however, that notwithstanding this
indemnification, Bankers shall not be obligated to expend its own
moneys or to take any action to pay money except in Bankers' sole
discretion.
6. The legality of the issue, sale or purchase of any shares of the
Fund, the sufficiency of the purchase or sale price, or the
declaration of any dividend by the Fund, whether paid in cash or
stock.
7. The misuse, whether authorized or unauthorized, of the Portfolio
Accounting System or other computerized recordkeeping and
reporting system to which Bankers provides Security Management
direct access hereunder or by any person who acquires access to
such system(s) through the terminal device, passwords, access
instruction or other means of access to such system(s) which are
utilized by, assigned to or otherwise made available to Security
Management, except to the extent attributable to any negligence
or willful misconduct by Bankers.
8. Bankers' action or omission to act under this Agreement upon any
instructions, advice, notice, request, consent, certificate or
other instrument or paper which it reasonably believes to have
originated from Security Management, the Fund, the Fund's
custodian, or the Fund's independent public accountant and which
it reasonably believes to be genuine and to have been properly
executed.
9. Bankers' action or omission to act under this Agreement in good
faith reliance on the advice or opinion of counsel acceptable to
both Security Management and Bankers concerning the subject
matter of this Agreement.
10. Banker's action or omission to act under this Agreement in good
faith reliance on statements of counsel to the Fund, the Fund's
independent accountants, and the Fund's officers or other
authorized individuals provided by Fund resolution concerning the
subject matter of this Agreement.
(b) Bankers shall indemnify and hold Security Management and Fund harmless
from and against any and all costs, expenses, losses, damages
(including consequential, special and punitive damages), charges,
reasonable counsel fees, payments and liabilities (including amounts
paid in settlement, provided that Bankers shall have approved such
settlement) which may be asserted against or incurred by Security
Management or Fund, or for which it may be liable, arising out of or
attributable to:
1. Bankers' refusal or failure to substantially comply with the
terms of this Agreement.
2. Bankers' negligent or willful misconduct in connection with the
performance of its duties under this Agreement or the failure of
any representation or warranty of Bankers hereunder to be and
remain materially true and correct at all times.
3. The failure of Bankers to comply with applicable law in
connection with the performance of its duties under this
Agreement.
4. Any error, omission, inaccuracy or other deficiency in Fund's
accounts and records or other information provided by or on
behalf of Bankers to Security Management, or the failure of
Bankers to provide, or provide in a timely manner, the
information needed by Security Management to perform its
functions.
5. Security Management's action or omission to act under this
Agreement upon any instructions, advice, notice, request,
consent, certificate or other instrument or paper which it
reasonably believes to have originated from Bankers or Bankers'
independent public accountant and which it reasonably believes to
be genuine and to have been properly executed.
6. Security Management's action or omission to act under this
Agreement in good faith reliance on the advice or opinion of
counsel acceptable to both Security Management and Bankers
concerning the subject matter of this Agreement.
7. Security Management's action or omission to act under this
Agreement in good faith reliance on statements of counsel to
Bankers, Bankers' independent accountants, and Bankers' officers
or Bankers' authorized employees.
(c) A party shall not be liable under this Section 6 with respect to any
claim made against an otherwise indemnified party unless the party
seeking indemnification shall have notified the indemnifying party in
writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have
been served upon the party seeking indemnification. Failure to provide
notice as provided above shall relieve a party from liability only to
the extent that the party is actually harmed or disadvantaged by the
failure to provide timely notice, and shall not relieve a party from
any liability that it may otherwise have without regard to Section 6.
An indemnifying party shall be entitled to:
1. participate, at its own expense, in the defense of an action for
which indemnity may be had against that party hereunder, and
2. to assume control of the defense of an action for which the
indemnifying party may be liable hereunder if the indemnifying
party engages counsel agreeable to the indemnified party to
prosecute the defense; agreement to the selection of counsel not
to be unreasonably withheld.
(d) In the event of losses occasioned by the negligent error of Bankers in
calculating the Fund's net asset value, Security Management shall
accept Bankers' offer to minimize or eliminate any resulting monetary
damages by employing such alternatives as reprocessing fund shareowner
transactions. Bankers shall bear the reasonable costs of reprocessing
such transactions.
7. FORCE MAJEURE. Bankers shall not be responsible or liable for its failure
or delay in performance of its obligations under this Agreement arising out
of or caused, directly or indirectly, by circumstances beyond its
reasonable control or ability to minimize or redress, including, without
limitation: any interruption, loss or malfunction of any utility,
transportation, computer (hardware or software) or communication service;
inability to obtain labor, material, equipment or transportation, or a
delay in mails; governmental or exchange action, statute, ordinance,
rulings, regulations or direction; war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, labor disputes, freezes,
floods, fires, tornadoes, acts of God or public enemy, revolutions, or
insurrection.
8. PROCEDURES. Bankers and Security Management may from time to time adopt
procedures as they agree upon, and Bankers may conclusively assume that any
procedure approved or directed by Security Management does not conflict
with or violate any requirements of Fund's prospectus, charter or
declaration of trust, bylaws, any applicable law, rule or regulation, or
any order, decree or agreement by which the Fund may be bound.
9. TERM AND TERMINATION. This Agreement may be terminated by either party by
notice in writing received by the other party not less than one hundred
twenty (120) days prior to the date upon which such termination shall take
effect. This Agreement shall terminate automatically in the event of the
termination of the (i) Administrative Services and Transfer Agency
Agreement between Security Management and Company, or (ii) Third Party
Feeder Fund Agreement dated May 4, 1999 between Security Management and
Bankers. Upon termination of this Agreement:
(a) Security Management shall pay to Bankers its fees and compensation due
hereunder.
(b) Security Management shall designate a successor (which may be Security
Management) by notice in writing to Bankers on or before the
termination date.
(c) Bankers shall deliver to the successor, or if none has been
designated, to Security Management, at Bankers' office, all records,
funds and other properties of Fund deposited with or held by Bankers
hereunder. In the event that neither a successor nor Security
Management takes delivery of all records, funds and other properties
of Fund by the termination date, Bankers' sole obligation with respect
thereto from the termination date until delivery to a successor or
Security Management shall be to exercise reasonable care to hold the
same in custody in its form and condition as of the termination date,
and Bankers shall be entitled to reasonable compensation therefor,
including but not limited to all of its out-of-pocket costs and
expenses incurred in connection therewith.
10. NOTICES. All notices, requests, instructions and other writings shall be
deemed to have been properly given hereunder if addressed as follows:
If to Security Management:
Security Management Company, LLC
700 SW Harrison Street
Topeka, Kansas 66636-0001
Attention: General Counsel
If to Bankers Trust Company:
Mutual Fund Services
BT Alex.Brown Incorporated
One South Street
Baltimore, MD 21202
Attention: Richard T. Hale
or to such other address as a party may designate, in writing, to each
other party.
11. MISCELLANEOUS.
(a) This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of New York, without reference to the choice of laws
principles thereof.
(b) All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
(c) The representations and warranties and the indemnification extended
hereunder, are intended to and shall continue after and survive the
expiration, termination or cancellation of this Agreement.
(d) The confidentiality provisions of Sections 4.E. and 4.F. shall
continue after and survive the expiration, termination or cancellation
of this Agreement.
(e) No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by each party hereto.
(f) The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed as
a continuing or permanent waiver of any such terms, conditions, rights
or privileges, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred.
(g) The captions in this Agreement are included for convenience of
reference only, and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
(h) This Agreement may be executed in two or more separate counterparts,
each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
(i) If any provision of this Agreement shall be determined to be invalid
or unenforceable, the remaining provisions of this Agreement shall not
be affected thereby, and every provision of this Agreement shall
remain in full force and effect and shall remain enforceable to the
fullest extent permitted by applicable law.
(j) This Agreement may not be assigned by either party hereto without the
prior written consent of the other. The parties hereby consent to the
acquisition of Bankers by Deutsche Bank AG or an affiliate of Deutsche
Bank AG.
(k) Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
Security Management and Bankers.
(l) Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by any party hereunder shall not
affect any rights or obligations of any other party hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective and duly authorized officers, to be effective as of the day
and year first above written.
BANKERS TRUST COMPANY
By: ERIC KIRSCH
--------------------------------
Name: Eric Kirsch
Title: Managing Director
SECURITY MANAGEMENT COMPANY, LLC
By: JAMES R. SCHMANK
--------------------------------
Name: James R. Schmank
Title: President
<PAGE>
EXHIBIT A
FEES
For one fund and one class of that fund $10,000.00
For each additional class $ 2,000.00
<PAGE>
MANAGEMENT SERVICES AGREEMENT
AGREEMENT, made this 30th day of April, 1999, between Security Income Fund, a
Kansas corporation (the "Fund"), and Security Management Company, LLC, a Kansas
corporation ("Manager").
WHEREAS, the Fund is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized to issue its shares in multiple series with
each such series representing a separate portfolio of securities and other
assets; and
WHEREAS, one of the series of the Fund is the Capital Preservation Series
(referred to hereinafter as the "Series"); and
WHEREAS, the Fund desires to engage the Manager to provide certain services
to the Series; and
WHEREAS, the Manager is willing, in accordance with the terms and conditions
hereof, to provide such services to the Series; and
NOW THEREFORE, in consideration of the mutual agreements set forth herein and
intending to be legally bound hereby, the parties agree as follows:
1. APPOINTMENT AND DUTIES OF MANAGER
(a) The Fund, on behalf of the Series, hereby employs the Manager to
perform the services set forth in this Agreement, subject to the
supervision of the Board of Directors of the Fund, for the period and
on the terms set forth in this Agreement. The Manager hereby accepts
such employment and undertakes to pay the salaries and expense of all
personnel of the Manager who perform services relating to the services
it performs hereunder. The Manager shall for all purposes herein be
deemed to be an independent contractor and shall, except as otherwise
expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the
Fund.
(b) Notwithstanding the foregoing, the Manager shall not be deemed to have
assumed any duties hereunder with respect to, and shall not, by the
execution of this Agreement be responsible for, the management of the
Funds' assets or the rendering of investment advice and supervision
with respect thereto, or the distribution of shares of the Funds, nor
shall the Manager be deemed to have assumed any responsibility
hereunder with respect to functions specifically assumed by any
administrator, transfer agent, custodian or shareholder servicing agent
of the Fund or the Series.
(c) Without limiting the generality of the foregoing, the Manager shall
provide the following services to the Series (as well as the services
set forth in Section1(d) below):
i. Provide information to and coordinate the Series' relationship
with registered investment advisors and other securities
professionals who have discretionary authority over Series
shareholder accounts, assist in facilitating instructions
received by such persons relating to Fund business and furnish
facilities and personnel necessary to perform such activities.
ii. Assist as appropriate and coordinate with the Fund's service
providers in administering the affairs of the Series and perform
services on the Series' behalf.
iii. Pay the salaries and expenses of all officers and Directors of
the Fund who are employees of the Manager.
(d) It is intended that the assets of the Series will be invested in a
portfolio (the Portfolio") having substantially the same investment
objective, policies and restrictions as the Series. In addition to its
duties hereunder, set forth in paragraph 1(c), above, with respect to
the Series, the Manager shall perform the following:
i. Monitor the performance of the Portfolio;
ii. Coordinate the relationship of the Series with the Portfolio;
iii. Communicate with the Board of Directors of the Fund regarding the
performance of the Portfolio and the Series;
iv. Furnish reports regarding the Portfolio as reasonably requested
from time-to-time by the Fund's Board of Directors.
v. Perform such other necessary and desirable services regarding the
"Master Feeder" structure of the Series as the Directors may
reasonably request from time to time, including providing certain
indemnification to the Portfolio and the investment advisor on
behalf of the Series.
(e) In carrying out its responsibilities under this Agreement, the Manager
shall at all times act in accordance with applicable provisions of the
1940 Act and the rules and regulations promulgated thereunder and other
applicable federal securities laws.
(f) The Manager shall render regular reports as requested by the Board of
Directors, and will, at the reasonable request of the Board, attend
meetings of the board or its validly constituted committees, and will
make its officers and employees available to meet with the Board to
discuss its duties hereunder.
2. EXPENSES AND COMPENSATION
(a) Allocation of Expenses. The Manager shall, at its expense, employ or
associate with itself such persons as it believes appropriate to assist
in performing its obligations under this Agreement and provide all
services, equipment, facilities and personnel necessary to perform it
obligations under this Agreement. The Fund shall be responsible for all
its expenses and liabilities not otherwise specifically assumed by the
Manager hereunder.
(b) Compensation. For its services under this Agreement, Manager shall be
entitled to receive a fee at the annual rate of 20% of the average
daily net asset value of the Series payable monthly. For the purpose of
accruing compensation, the net asset value of the Series will be
determined in the manner provided in the then-current Prospectus of the
Fund.
3. LIABILITY OF MANAGER. Neither the Manager nor its officers, directors,
employees, agents or controlling person ("Associated Person") of the Manager
shall be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund or Series in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of Manager or such Associated Persons
in the performance of their duties or from reckless disregard by them of
their duties under this Agreement.
4. DURATION AND TERMINATION OF THIS AGREEMENT
(a) DURATION. This Agreement shall become effective on the date hereof.
Unless terminated as herein provided, this Agreement shall remain in
full force and effect for two years from the date hereof. Subsequent to
such initial period of effectiveness, this Agreement shall continue in
full force and effect for successive periods of one year thereafter so
long as such continuance is approved at least annually by the Directors
of the Fund, including the vote of a majority of the Directors of the
Fund who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party.
(b) AMENDMENT. Any amendment to this Agreement shall become effective only
upon the written approval of the Manager and the Fund.
(c) TERMINATION. This Agreement may be terminated at any time, without
payment of any penalty, by vote of the Directors or by vote of a
majority of the outstanding voting securities (as defined in the 1940
Act) of the Series, or by the Manager, in each case upon sixty (60)
days' prior written notice to the other party. Any termination of this
Agreement will be without prejudice to the completion of transactions
already initiated by the Manager on behalf of the Series at the time of
such termination. The Manager shall take all steps reasonably necessary
after such termination to complete any such transactions and is hereby
authorized to take such steps.
(d) AUTOMATIC TERMINATION. This Agreement shall automatically and
immediately terminate in the event of its assignment (as defined in the
1940 Act).
5. SERVICES NOT EXCLUSIVE. The services of the Manager to the Series of the
Fund hereunder are not to be deemed exclusive, and the Manager shall be free
to render similar services to others so long as its services hereunder are
not impaired thereby.
6. MISCELLANEOUS
(a) NOTICE. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for the receipt of
such notices.
(b) SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
shall not be thereby affected.
(c) APPLICABLE LAW. This Agreement shall be construed in accordance with
and governed by the laws of Kansas.
Security Management Company, LLC Security Income Fund
JAMES R. SCHMANK JOHN D. CLELAND
- ---------------------------------- -------------------------------
By: James R. Schmank By: John D. Cleland
Title: President Title: President
Attest: AMY J. LEE Attest: AMY J. LEE
--------------------------- -------------------------
Amy J. Lee, Secretary Amy J. Lee, Secretary
<PAGE>
ADMINISTRATIVE SERVICES AND
TRANSFER AGENCY AGREEMENT
This Agreement, made and entered into this 1st day of April, 1987, by and
between Security Income Fund, a Kansas corporation ("Fund"), and Security
Management Company, a Kansas corporation, ("SMC").
WHEREAS, the Fund is engaged in business as an open-end management investment
company registered under the Investment Company Act of 1940; and
WHEREAS, Security Management Company is willing to provide general
administrative, fund accounting, transfer agency, and dividend disbursing
services to the Fund under the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties agree as follows:
1. EMPLOYMENT OF SECURITY MANAGEMENT COMPANY
SMC will provide the Fund with general administrative, fund accounting,
transfer agency, and dividend disbursing services described and set forth
in Schedule A attached hereto and made a part of this agreement by
reference. SMC agrees to maintain sufficient trained personnel and
equipment and supplies to perform such services in conformity with the
current prospectus of the Fund and such other reasonable standards of
performance as the Fund may from time to time specify, and otherwise in an
accurate, timely, and efficient manner.
2. COMPENSATION
As consideration for the services described in Section I, the Fund agrees
to pay SMC a fee as described and set forth in Schedule B attached hereto
and made a part of this agreement by reference, as it may be amended from
time to time, such fee to be calculated and accrued daily and payable
monthly.
3. EXPENSES
A. EXPENSES OF SMC. SMC shall pay all of the expenses incurred in
providing Fund the services and facilities described in this agreement,
whether or not such expenses are billed to SMC or the fund, except as
otherwise provided herein.
B. DIRECT EXPENSES. Anything in this agreement to the contrary
notwithstanding, the Fund shall pay, or reimburse SMC for the payment
of, the following described expenses of the Fund (hereinafter called
"direct expenses") whether or not billed to the Fund, SMC or any
related entity:
1. Fees and expenses of its independent directors and the meetings
thereof;
2. Fees and costs of investment advisory services;
3. Fees and costs of independent auditors and income tax
preparation;
4. Fees and costs of outside legal counsel and any legal counsel
directly employed by the Fund or its Board of Directors;
5. Custodian and banking services, fees and costs;
6. Costs of printing and mailing prospectuses to existing
shareholders, proxy statements and other reports to shareholders,
where such costs are incurred through the use of unaffiliated
vendors or mail services.
7. Fees and costs for the registration of its securities with the
Securities and Exchange Commission and the jurisdictions in which
it qualifies its share for sale, including the fees and costs of
registering and bonding brokers, dealers and salesmen as
required;
8. Dues and expenses associated with membership in the Investment
Company Institute;
9. Expenses of fidelity and liability insurance and bonding covering
Fund;
10. Organizational costs.
4. INSURANCE
The Fund and SMC agree to procure and maintain, separately or as joint
insureds with themselves, their directors, employees, agents and others,
and other investment companies for which SMC acts as investment advisor and
transfer agent, a policy or policies of insurance against loss arising from
breaches of trust, errors and omissions, and a fidelity bond meeting the
requirements of the Investment Company Act of 1940, in the amounts and with
such deductibles as may be agreed upon from time to time, and to pay such
portions of the premiums therefor as amount of the coverage attributable to
each party is to the aggregate amount of the coverage for all parties.
5. REGISTRATION AND COMPLIANCE
A. SMC represents that as of the date of this agreement it is registered
as a transfer agent with the Securities and Exchange Commission ("SEC")
pursuant to Subsection 17A of the Securities and Exchange Act of 1934
and the rules and regulations thereunder, and agrees to maintain said
registration and comply with all of the requirements of said Act, rules
and regulations so long as this agreement remains in force.
B. The Fund represents that it is a diversified management investment
company registered with the SEC in accordance with the Investment
Company Act of 1940 and the rules and regulations thereunder, and
authorized to sell its shares pursuant to said Act, the Securities Act
of 1933 and the rules and regulations thereunder.
6. LIABILITIES AND INDEMNIFICATION
SMC shall be liable for any actual losses, claims, damages or expenses
(including any reasonable counsel fees and expenses) resulting from SMC's
bad faith, willful misfeasance, reckless disregard of its obligations and
duties, negligence or failure to properly perform any of its
responsibilities or duties under this agreement. SMC shall not be liable
and shall be indemnified and held harmless by the Fund, for any claim,
demand or action brought against it arising out of, or in connection with:
A. Bad faith, willful misfeasance, reckless disregard of its duties or
negligence of the Board of Directors of the Fund, or SMC's acting upon
any instructions properly executed and authorized by the Board of
Directors of the Fund;
B. SMC acting in reliance upon advice given by independent counsel
retained by the Board of Directors of the Fund.
In the event that SMC requests the Fund to indemnify or hold it harmless
hereunder, SMC shall use its best efforts to inform the Fund of the
relevant facts concerning the matter in question. SMC shall use reasonable
care to identify and promptly notify the Fund concerning any matter which
presents, or appears likely to present, a claim for indemnification against
the Fund.
The Fund shall have the election of defending SMC against any claim which
may be the subject of indemnification hereunder. In the event the Fund so
elects, it will so notify SMC and thereupon the Fund shall take over
defenses of the claim, and (if so requested by the Fund, SMC shall incur no
further legal or other claims related thereto for which it would be
entitled to indemnity hereunder provided, however, that nothing herein
contained shall prevent SMC from retaining, at its own expense, counsel to
defend any claim. Except with the Fund's prior consent, SMC shall in no
event confess any claim or make any compromise in any matter in which the
Fund will be asked to indemnify or hold SMC harmless hereunder.
PUNITIVE DAMAGES. SMC shall not be liable to the Fund, or any third
party, for punitive, exemplary, indirect, special or consequential
damages (even if SMC has been advised of the possibility of such
damages) arising from its obligations and the services provided under
this agreement, including but not limited to loss of profits, loss of
use of the shareholder accounting system, cost of capital and expenses
of substitute facilities, programs or services.
FORCE MAJEURE. Anything in this agreement to the contrary
notwithstanding, SMC shall not be liable for delays or errors occurring
by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies,
work stoppages, fire, flood, catastrophe, earthquake, acts of God,
insurrection, war, riot, failure of communication or interruption.
7. DELEGATION OF DUTIES
SMC may, at its discretion, delegate, assign or subcontract any of the
duties, responsibilities and services governed by this agreement, to its
parent company, Security Benefit Group, Inc., whether or not by formal
written agreement. SMC shall, however, retain ultimate responsibility to
the Fund, and shall implement such reasonable procedures as may be
necessary, for assuring that any duties, responsibilities or services so
assigned, subcontracted or delegated are performed in conformity with the
terms and conditions of this agreement.
8. AMENDMENT
This agreement and the schedules forming a part hereof may be amended at
any time, without shareholder approval, by a writing signed by each of the
parties hereto. Any change in the Fund's registration statements or other
documents of compliance or in the forms relating to any plan, program or
service offered by its current prospectus which would require a change in
SMC's obligations hereunder shall be subject to SMC's approval, which shall
not be unreasonably withheld.
9. TERMINATION
This agreement may be terminated by either party without cause upon 120
days' written notice to the other, and at any time for cause in the event
that such cause remains unremedied for more than 30 days after receipt by
the other party of written specification of such cause.
In the event Fund designates a successor to any of SMC's obligations
hereunder, SMC shall, at the expense and pursuant to the direction of the
Fund, transfer to such successor all relevant books, records and other data
of Fund in the possession or under the control of SMC.
10. SEVERABILITY
If any clause or provision of this agreement is determined to be illegal,
invalid or unenforceable under present or future laws effective during the
term hereof, then such clause or provision shall be considered severed
herefrom and the remainder of this agreement shall continue in full force
and effect.
11. TERM
This agreement initially shall become effective upon its approval by a
majority vote of the Board of Directors of the Fund, including a majority
vote of the Directors who are not "interested persons" of Fund or SMC, as
defined in the Investment Company Act of 1940, and shall continue until
terminated pursuant to its provisions.
12. APPLICABLE LAW
This agreement shall be subject to and construed in accordance with the
laws of the State of Kansas.
SECURITY MANAGEMENT COMPANY
BY: Everett S. Gille, President
------------------------------
ATTEST:
Barbara W. Rankin, Secretary
SECURITY INCOME FUND
BY: Everett S. Gille, President
------------------------------
ATTEST:
Barbara W. Rankin, Secretary
<PAGE>
SCHEDULE A
ADMINISTRATIVE SERVICES AND
TRANSFER AGENCY AGREEMENT
Schedule of Administrative and Fund Accounting
Facilities and Services
Security Management Company agrees to provide the Fund the following
Administrative facilities and services:
1. FUND AND PORTFOLIO ACCOUNTING
A. Maintenance of Fund General Ledger and Journal.
B. Preparing and recording disbursements for direct fund expenses.
C. Preparing daily money transfers.
D. Reconciliation of all Fund bank and custodian accounts.
E. Assisting Fund independent auditors as appropriate.
F. Prepare daily projection of available cash balances.
G. Record trading activity for purposes of determining net asset values and
daily dividend.
H. Prepare daily portfolio evaluation report to value portfolio securities
and determine daily accrued income.
I. Determine the daily net asset value per share.
J. Determine the daily, monthly, quarterly, semiannual or annual dividend
per share.
K. Prepare monthly, quarterly, semiannual and annual financial statements.
L. Provide financial information for reports to the securities and exchange
commission in compliance with the provisions of the Investment Company
Act of 1940 and the Securities Act of 1933, the Internal Revenue Service
and other regulatory agencies as required.
M. Provide financial, yield, net asset value, etc. information to NASD and
other survey and statistical agencies as instructed by the Fund.
N. Report to the Audit Committee of the Board of Directors, if applicable.
2. LEGAL
A. Provide registration and other administrative services necessary to
qualify the shares of the Fund for sale in those jurisdictions
determined from time to time by the Fund's Board of Directors (commonly
known as "Blue Sky Registration").
B. Provide registration with and reports to the Securities and Exchange
Commission in compliance with the provisions of the Investment Company
Act of 1940 and the Securities Act of 1933.
C. Prepare and review Fund prospectus and Statement of Additional
Information.
D. Prepare proxy statements and oversee proxy tabulation for annual
meetings.
E. Prepare Board materials and maintain minutes of Board meetings.
F. Draft, review and maintain contractual agreements between Fund and
Investment Advisor, Custodian, Distributor and Transfer Agent.
G. Oversee printing of proxy statements, financial reports to shareholders,
prospectuses and Statements of Additional Information.
H. Provide legal advice and oversight regarding shareholder transactions,
administrative services, compliance with contractual agreements and the
provisions of the 1940 and 1933 Acts.
(Notwithstanding the above, outside counsel for the Funds may provide the
services listed above as a direct Fund expense or at the option of the
Funds, the Funds may employ their own counsel to perform any of these
services.)
<PAGE>
SCHEDULE OF SHARE TRANSFER AND DIVIDEND DISBURSING SERVICES
Security Management Company agrees to provide the Fund the following transfer
agency and dividend disbursing services:
1. Maintenance of shareholder accounts, including processing of new accounts.
2. Posting address changes and other file maintenance for shareholder
accounts.
3. Posting all transactions to the shareholder file, including:
A. Direct purchases
B. Wire order purchases
C. Direct redemptions
D. Wire order redemptions
E. Draft redemptions
F. Direct exchanges
G. Transfers
H. Certificate issuances
I. Certificate deposits
4. Monitor fiduciary processing, insuring accuracy and deduction of fees.
5. Prepare daily reconciliations of shareholder processing to money movement
instructions.
6. Handle bounced check collections. Immediately liquidate shares purchased
and return to the shareholder the check and confirmation of the
transaction.
7. Issuing all checks and stopping and replacing lost checks.
8. Draft clearing services.
A. Maintenance of signature cards and appropriate corporate resolutions.
B. Comparison of the signature on the check to the signatures on the
signature card for the purpose of paying the face amount of the check
only.
C. Receiving checks presented for payment and liquidating shares after
verifying account balance.
D. Ordering checks in quantity specified by the Fund for the shareholder.
9. Mailing confirmations, checks and/or certificates resulting from
transaction requests to shareholders.
10. Performing all of the Fund's other mailings, including:
A. Dividend and capital gain distributions.
B. Semiannual and annual reports.
C. 1099/year-end shareholder reporting.
D. Systematic withdrawal plan payments.
E. Daily confirmations.
11. Answering all service related telephone inquiries from shareholders and
others, including:
A. General and policy inquiries (research and resolve problems).
B. Fund yield inquiries.
C. Taking shareholder processing requests and account maintenance changes
by telephone as described above.
D. Submit pending requests to correspondence.
E. Monitor online statistical performance of unit.
F. Develop reports on telephone activity.
12. Respond to written inquiries (research and resolve problems), including:
A. Initiate shareholder account reconciliation proceeding when
appropriate.
B. Notify shareholder of bounced investment checks.
C. Respond to financial institutions regarding verification of deposit.
D. Initiate proceedings regarding lost certificates.
E. Respond to complaints and log activities.
F. Correspondence control.
13. Maintaining and retrieving all required past history for shareholders and
provide research capabilities as follows:
A. Daily monitoring of all processing activity to verify back-up
documentation.
B. Provide exception reports.
C. Microfilming.
D. Storage, retrieval and archive.
14. Prepare materials for annual meetings.
A. Address and mail annual proxy and related material.
B. Prepare and submit to Fund and affidavit of mailing.
C. Furnish certified list of shareholders (hard copy or microfilm) and
inspectors of election.
15. Report and remit as necessary for state escheat requirements.
Approved: Fund _________________________________________SMC Everette S. Gille
<PAGE>
---------------------------------------------------------------
MODEL: MONTHLY FUNDS
-------------
MAINTENANCE FEE.................................. $8.00
TRANSACTIONS..................................... $1.00
DIVIDENDS........................................ $0.50
ADMINISTRATION FEE............................... 0.00045
(BASED ON DAILY NET ASSET VALUE)
----------------------------------------------------------------
MASTER WORKSHEET BOND GOV HIGH YIELD
-----------------------------------------------
1986:
TRANSACTIONS - 6,897 603 260
DIVIDENDS - 23,264 2,195 314
SHAREHOLDER ACCTS - 3,574 226 258
AVERAGE NET ASSETS - 45,164,242.34 2,260,755.40 2,948,233.60
INCOME - 4,804,113.27 207,258.25 223,104.47
EXPENSES - 449,036.13 21,101.91 17,675.96
SERVICE FEES - 50,806.27 962.23 1,118.94
1986 1986
SERVICE TRANSFER & EXPENSE EXPENSE
FEES ADMINISTRATION PERCENT RATIO RATIO
ACTUAL MODEL INCREASE ACTUAL MODEL
-----------------------------------------------------------------
BOND 50,806.27 67,444.91 32.75% 0.994% 1.031%
GOVERNMENT 962.23 4,525.84 370.35% 0.933% 1.091%
HIGH YIELD 1,118.94 2,603.71 132.69% 0.600% 0.862%
<PAGE>
SCHEDULE B
AMENDMENT TO SECURITY INCOME FUND
ADMINISTRATIVE SERVICES AND
TRANSFER AGENCY AGREEMENT
Schedule of Fees
Annual Maintenance Fee........................$8.00 per account
Transactions..................................$1.00 per transaction
Administration Fee............................0.09% of the average net assets of
the Fund (calculated daily and payable monthly).
This amendment shall take effect as of April 28, 1989.
In witness thereof, the parties hereto have caused this amendment to be
executed on the date indicated.
Security Income Fund
By: MICHAEL J. PROVINES
Date: January 27, 1989 ------------------------------
Michael J. Provines, President
Attest:
AMY J. LEE
- ------------------------------
Amy J. Lee, Secretary
Security Management Company
By: MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
Date: January 27, 1989
Attest:
AMY J. LEE
- ------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO ADMINISTRATIVE SERVICES
AND TRANSFER AGENCY AGREEMENT
WHEREAS, Security Income Fund (hereinafter referred to as the "Fund") and
Security Management Company (hereinafter referred to as "SMC") are parties to an
Administrative Services and Transfer Agency Agreement dated April 1, 1987, (the
"Administrative Services Agreement") under which SMC agrees to provide general
administrative, fund accounting, transfer agency, and dividend disbursing
services to the Fund in return for the compensation specified in the
Administrative Services Agreement; and
WHEREAS, on July 7, 1989, the Board of Directors of the Fund voted to amend the
Administrative Services Agreement to provide for payment by the Fund of the fees
of all directors;
NOW THEREFORE, the Fund and the Management Company hereby amend the
Administrative Services Agreement, dated April 1, 1987, effective July 7, 1989,
as follows:
Paragraph 3.B.1. shall be deleted in its entirety and the following
paragraph inserted in lieu thereof:
3. EXPENSES
B. DIRECT EXPENSES
1. Fees and expenses of its directors (including the fees of those
directors who are deemed to be "interested persons" of the Fund
as that term is defined in the Investment Company Act of 1940)
and the meetings thereof;
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Administrative Services Agreement this 7th day of July, 1989.
SECURITY INCOME FUND
By: MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
Attest:
AMY J. LEE
- ------------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY
By: MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
Attest:
AMY J. LEE
- ------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO ADMINISTRATIVE SERVICES
AND TRANSFER AGENCY AGREEMENT
WHEREAS, Security Income Fund (hereinafter referred to as the "Fund") and
Security Management Company (hereinafter referred to as "SMC") are parties to an
Administrative Services and Transfer Agency Agreement dated April 1, 1987, as
amended January 27, 1989, and July 7, 1989, (the "Administrative Services
Agreement") under which SMC agrees to provide general administrative, fund
accounting, transfer agency, and dividend disbursing services to the Fund in
return for the compensation specified in the Administrative Services Agreement;
and
WHEREAS, on July 27, 1990, the Board of Directors of the Fund voted to amend the
Administrative Services Agreement to provide for payment by the Fund of the fees
of only those directors who are not "interested persons" of the Fund;
NOW THEREFORE, the Fund and SMC hereby amend the Administrative Services
Agreement, dated April 1, 1987, effective July 27, 1990, as follows:
Paragraph 3.B.1. shall be deleted in its entirety and the following
paragraph inserted in lieu thereof:
3. EXPENSES
B. DIRECT EXPENSES
1. Fees and expenses of its directors (including the fees of those
directors who are deemed to be "interested persons" of the Fund
as that term is defined in the Investment Company Act of 1940)
and the meetings thereof;
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Administrative Services Agreement this 27th day of July, 1990.
SECURITY INCOME FUND
By: MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
Attest:
AMY J. LEE
- ------------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY
By: MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
Attest:
AMY J. LEE
- ------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO ADMINISTRATIVE
SERVICES AND TRANSFER AGENCY AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Management Company (the
"Management Company") are parties to an Administrative Services and Transfer
Agency Agreement dated April 1, 1987, as amended (the "Administrative
Agreement"), under which the Management Company provides general administrative,
fund accounting, transfer agency and dividend disbursing services to the Fund in
return for the compensation specified in the Administrative Agreement;
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; and
WHEREAS, on October 21, 1994, the Board of Directors approved the amendment of
the Administrative Agreement to provide that the Management Company would
provide general administrative, fund accounting, transfer agency, and dividend
disbursing services to each class of the Limited Maturity Bond Series under the
terms and conditions of the Administrative Agreement;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Management Company hereby amend
the Administrative Agreement, to provide that the Management Company shall
provide those administrative and other services described in the Administrative
Contract, and each of the Management Company and the Fund shall fulfill all of
their respective obligations under the Administrative Contract, as to each of
the Series of the Fund, including the Limited Maturity Bond Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Administrative Agreement this 30th day of December 1994.
SECURITY INCOME FUND
By: John D. Cleland
-----------------------------------
John D. Cleland, President
ATTEST:
Amy J. Lee
- -----------------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY
By: Jeffrey B. Pantages
-----------------------------------
Jeffrey B. Pantages, President
ATTEST:
Amy J. Lee
- -----------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO
ADMINISTRATIVE SERVICES AND TRANSFER AGENCY AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Management Company (the
"Management Company") are parties to an Administrative Services and Transfer
Agency Agreement dated April 1, 1987, as amended (the "Administrative
Agreement"), under which the Management Company provides general administrative,
fund accounting, transfer agency and dividend disbursing services to the Fund in
return for the compensation specified in the Administrative Agreement;
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; and
WHEREAS, on February 3, 1995, the Board of Directors approved the amendment of
the Administrative Agreement to provide that the Management Company would
provide general administrative, fund accounting, transfer agency, and dividend
disbursing services to each class of the Global Aggressive Bond Series under the
terms and conditions of the Administrative Agreement;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Management Company hereby amend
the Administrative Agreement, dated April 1, 1987, as follows, effective May 1,
1995,
1. Schedule B shall be deleted in its entirety and the attached Schedule B
inserted in lieu thereof.
2. The Administrative Agreement is hereby amended to cover the Global
Aggressive Bond Series of the Fund.
3. Paragraph 7 shall be deleted in its entirety and the following paragraph
inserted in lieu thereof:
DELEGATION OF DUTIES
The Management Company may, at its discretion, delegate, assign or
subcontract any of the duties, responsibilities and services governed by
this agreement, to its parent company, Security Benefit Group, Inc., whether
or not by formal written agreement, or to any third party, provided that
such arrangement with a third party has been approved by the Board of
Directors of the Fund. The Management Company shall, however, retain
ultimate responsibility to the Fund and shall implement such reasonable
procedures as may be necessary for assuring that any duties,
responsibilities or services so assigned, subcontracted or delegated are
performed in conformity with the terms and conditions of this agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Administrative Agreement this 28th day of April, 1995.
SECURITY INCOME FUND
By: John D. Cleland
-----------------------------------
John D. Cleland, President
ATTEST:
Amy J. Lee
- -----------------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY
By: Jeffrey B. Pantages
-----------------------------------
Jeffrey B. Pantages, President
ATTEST:
Amy J. Lee
- -----------------------------------
Amy J. Lee, Secretary
<PAGE>
SECURITY INCOME FUND ADMINISTRATIVE SERVICES
AND TRANSFER AGENCY AGREEMENT
SCHEDULE B
The following charges apply to all Series of Security Income Fund:
Maintenance Fee: $8.00 per account
Transaction Fee: $1.00
Dividend Fee: $1.00
Annual Administration Fee: 0.45% (based on daily net asset value)
The following charges apply only to Global Aggressive Bond Series of the
Security Income Fund:
Global Administration Fee: In addition to the above fees, Global Aggressive Bond
Series shall pay an annual fee equal to the greater of .10 percent of its
average net assets or (i) $30,000 in the year ending April 29, 1996; (ii)
$45,000 in the year ending April 29, 1997; and (iii) $60,000 thereafter. If this
Agreement shall terminate before the last day of a month, compensation for that
part of the month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees set forth above.
<PAGE>
AMENDMENT TO ADMINISTRATIVE SERVICES
AND TRANSFER AGENCY AGREEMENT
WHEREAS, Security Income Fund (hereinafter referred to as the "Fund") and
Security Management Company (hereinafter referred to as "SMC") are parties to an
Administrative Services and Transfer Agency Agreement dated April 1, 1987, as
amended, (the "Administrative Agreement"), under which SMC provides general
administrative, fund accounting, transfer agency and dividend disbursing
services to the Fund in return for the compensation specified in the
Administrative Agreement;
WHEREAS, on February 2, 1996, the Board of Directors of the Fund voted to amend
the Administrative Agreement to provide for payment by the Fund for costs
associated with preparing and transmitting electronic filings to the Securities
and Exchange Commission or any other regulating authority;
NOW THEREFORE, the Fund and SMC hereby amend paragraph 3B of the Administrative
Agreement, effective February 2, 1996, by adding the following language at the
end of paragraph 3B:
11. Costs associated with the preparation and transmission of any
electronic filings to the Securities and Exchange Commission or any
other regulating authority.
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Administrative Agreement this 2nd day of February, 1996.
SECURITY INCOME FUND
By: John D. Cleland
-----------------------------------
John D. Cleland, President
ATTEST:
Amy J. Lee
- -----------------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY
By: Jeffrey B. Pantages
-----------------------------------
Jeffrey B. Pantages, President
ATTEST:
Amy J. Lee
- -----------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO
ADMINISTRATIVE SERVICES AND TRANSFER AGENCY AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Management Company (the
"Management Company") are parties to an Administrative Services and Transfer
Agency Agreement dated April 1, 1987, as amended (the "Administrative
Agreement"), under which the Management Company provides general administrative,
fund accounting, transfer agency and dividend disbursing services to the Fund in
return for the compensation specified in the Administrative Agreement;
WHEREAS, on May 3, 1996, the Board of Directors of the Fund authorized the Fund
to offer its common stock in a new series designated as the High Yield Series,
in addition to its presently offered series of common stock of Corporate Bond
Series, Limited Maturity Bond Series, U.S. Government Series, and Global
Aggressive Bond Series;
WHEREAS, on May 3, 1996, the Board of Directors of the Fund further authorized
the Fund to offer shares of the High Yield Series in two classes, designated
Class A shares and Class B shares; and
WHEREAS, on May 3, 1996, the Board of Directors approved the amendment of the
Administrative Agreement to provide that the Management Company would provide
general administrative, fund accounting, transfer agency, and dividend
disbursing services to each class of the High Yield Series under the terms and
conditions of the Administrative Agreement;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Management Company hereby amend
the Administrative Agreement, dated April 1, 1987, as follows, effective July 1,
1996,
1. Schedule B shall be deleted in its entirety and the attached Schedule B
inserted in lieu thereof.
2. The Administrative Agreement is hereby amended to cover the High Yield
Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Administrative Agreement this 13th day of May, 1996.
SECURITY INCOME FUND
By: John D. Cleland
-----------------------------------
John D. Cleland, President
ATTEST:
Amy J. Lee
- -----------------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY
By: Jeffrey B. Pantages
-----------------------------------
Jeffrey B. Pantages, President
ATTEST:
Amy J. Lee
- -----------------------------------
Amy J. Lee, Secretary
<PAGE>
SECURITY INCOME FUND ADMINISTRATIVE SERVICES
AND TRANSFER AGENCY AGREEMENT
SCHEDULE B
The following charges apply to all Series of Security Income Fund:
Maintenance Fee: $8.00 per account
Transaction Fee: $1.00
Dividend Fee: $1.00
Annual Administration Fee: 0.09% (based on daily net asset value)
The following charges apply only to Global Aggressive Bond Series of the
Security Income Fund:
Global Administration Fee: In addition to the above fees, Global Aggressive Bond
Series shall pay an annual fee equal to (i) the greater of .10 percent of its
average net assets or $30,000 in the year beginning April 30, 1995 and ending
April 29, 1996; (ii) the greater of .10 percent of its average net assets or
$45,000 in the year beginning April 30, 1996 and ending April 29, 1997; and
(iii) the greater of .10 percent of its average net assets or $60,000
thereafter. If this Agreement shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees set forth
above.
<PAGE>
AMENDMENT TO ADMINISTRATIVE SERVICES
AND TRANSFER AGENCY AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Management Company (the
"Management Company") are parties to an Administrative Services and Transfer
Agency Agreement, dated April 1, 1987, as amended (the "Administrative
Agreement"), under which the Management Company provides general administrative,
fund accounting, transfer agency and dividend disbursing services to the Fund in
return for the compensation specified in the Administrative Agreement;
WHEREAS, on October 31, 1996, the operations of the Management Company, a Kansas
corporation, will be transferred to Security Management Company, LLC ("SMC,
LLC"), a Kansas limited liability company; and
WHEREAS, SMC, LLC desires to assume all rights, duties and obligations of the
Management Company under the Administrative Agreement.
NOW THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties hereto agree as follows:
1. The Administrative Agreement is hereby amended to substitute SMC, LLC for
Security Management Company, with the same effect as though SMC, LLC were
the originally named management company, effective November 1, 1996;
2. SMC, LLC agrees to assume the rights, duties and obligations of Security
Management Company pursuant to the terms of the Administrative Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Administrative Services and Transfer Agency Agreement this 1st day of November,
1996.
SECURITY INCOME FUND SECURITY MANAGEMENT COMPANY, LLC
By: JOHN D. CLELAND By: JAMES R. SCHMANK
------------------------------ ------------------------------
John D. Cleland, President James R. Schmank, President
ATTEST: ATTEST:
AMY J. LEE AMY J. LEE
- ----------------------------------- -----------------------------------
Amy J. Lee, Secretary Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO
ADMINISTRATIVE SERVICES AND TRANSFER AGENCY AGREEMENT
WHEREAS, Security Income Fund (the "Fund") and Security Management Company, LLC
("SMC") are parties to an Administrative Services and Transfer Agency Agreement
dated April 1, 1987, as amended (the "Administrative Agreement"), under which
the Management Company provides general administrative, fund accounting,
transfer agency and dividend disbursing services to the Fund in return for the
compensation specified in the Administrative Agreement;
WHEREAS, on February 10, 1999, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Capital
Preservation Series, in addition to its presently offered series of common stock
of Corporate Bond Series, Limited Maturity Bond Series, U.S. Government Series,
Global High Yield Series, High Yield Series, Emerging Markets Total Return
Series and Global Asset Allocation Series;
WHEREAS, on February 10, 1999, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Capital Preservation Series in three
classes, designated Class A shares, Class B shares and Class C shares; and
WHEREAS, on February 10, 1999, the Board of Directors approved the amendment of
the Administrative Agreement to provide that SMC would provide general
administrative, fund accounting, transfer agency, and dividend disbursing
services to each class of the Capital Preservation Series under the terms and
conditions of the Administrative Agreement;
NOW, THEREFORE BE IT RESOLVED, that the Fund and SMC hereby amend the
Administrative Agreement, dated April 1, 1987, as follows, effective April 30,
1999:
1. Schedule B shall be deleted in its entirety and the attached Schedule B
inserted in lieu thereof.
2. The Administrative Agreement is hereby amended to cover the Capital
Preservation Series of the Fund.
3. The following paragraph 2(a) is added:
a) For each of the Fund's full fiscal years this Administrative Agreement
remains in force, SMC agrees that if total annual expenses of the
Capital Preservation Series of the Fund, exclusive of interest, taxes,
extraordinary expenses (such as litigation), and brokerage fees and
commissions, and Rule 12b-1 fees, but inclusive of SMC's compensation,
exceeds the amount of 1.50% (the "Expense Cap"), SMC will contribute to
such Series such funds or waive such portion of its fee, adjusted
monthly, as may be required to insure that the total annual expenses of
the Series will not exceed the Expense Cap. If this Administrative
Agreement shall be effective for only a portion of the Series' fiscal
year, then the maximum annual expenses shall be prorated for such
portion.
4. Paragraph 7 shall be deleted in its entirety and the following paragraph
inserted in lieu thereof:
DELEGATION OF DUTIES
SMC may, at is discretion, delegate, assign or subcontract any of the
duties, responsibilities and services governed by this agreement, to an
affiliated company, whether or not be formal written agreement, or to any
third party, provided that such arrangement with a third party has been
approved by the Board of Directors of the Fund. SMC shall, however, retain
ultimate responsibility to the Fund and shall implement such reasonable
procedures as may be necessary for assuring that any duties,
responsibilities or services so assigned, subcontracted or delegated are
performed in conformity with the terms and conditions of this agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Administrative Agreement this 30th day of April, 1999.
ATTEST: SECURITY INCOME FUND
AMY J. LEE By: JAMES R. SCHMANK
- ---------------------------------- ----------------------------------
Amy J. Lee, Secretary James R. Schmank, President
ATTEST: SECURITY MANAGEMENT COMPANY, LLC
AMY J. LEE By: JAMES R. SCHMANK
- ---------------------------------- ----------------------------------
Amy J. Lee, Secretary James R. Schmank, President
<PAGE>
SECURITY INCOME FUND ADMINISTRATIVE SERVICES
AND TRANSFER AGENCY AGREEMENT
SCHEDULE B
The following charges apply to all Series of Security Income Fund:
Maintenance Fee: $8.00 per account
Transaction Fee: $1.00
Dividend Fee: $1.00
Annual Administration Fee: 0.09% (based on daily net asset value)
The following charges apply only to Global High Yield Series of the Security
Income Fund: Global Administration Fee: In addition to the above fees, Global
High Yield Series shall pay an annual fee equal to (i) the greater of .10
percent of its average net assets or $30,000 in the year beginning April 30,
1995 and ending April 29, 1996; (ii) the greater of .10 percent of its average
net assets or $45,000 in the year beginning April 30, 1996 and ending April 29,
1997; and (iii) the greater of .10 percent of its average net assets or $60,000
thereafter. If this Agreement shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees set forth
above.
<PAGE>
SECURITY INCOME FUND
CLASS B
DISTRIBUTION PLAN
1. THE PLAN. This Distribution Plan (the "Plan"), provides for the financing by
Security Income Fund (the "Fund") of activities which are, or may be deemed
to be, primarily intended to result in the sale of class B shares of the
Fund (hereinafter called "distribution-related activities"). The principal
purpose of this Plan is to enable the Fund to supplement expenditures by
Security Distributors, Inc., the Distributor of its shares (the
"Distributor") for distribution-related activities. This Plan is intended to
comply with the requirements of Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940 (the "1940 Act").
The Board of Directors, in considering whether the Fund should implement the
Plan, has requested and evaluated such information as it deemed necessary to
make an informed determination as to whether the Plan should be implemented
and has considered such pertinent factors as it deemed necessary to form the
basis for a decision to use assets of the Fund for such purposes.
In voting to approve the implementation of the Plan, the Directors have
concluded, in the exercise of their reasonable business judgment and in
light of their respective fiduciary duties, that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
2. COVERED EXPENSES.
(a) The Fund may make payments under this Plan, or any agreement relating
to the implementation of this Plan, in connection with any activities
or expenses primarily intended to result in the sale of class B shares
of the Fund, including, but not limited to, the following
distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus and
Statement of Additional Information and any supplement thereto
used in connection with the offering of shares to the public;
(ii) Printing of additional copies for use by the Distributor as
sales literature, of reports and other communications which were
prepared by the Fund for distribution to existing shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of shares to the
public;
(iv) Expenses incurred in advertising, promoting and selling shares
of the Fund to the public;
(v) Any fees paid by the Distributor to securities dealers who have
executed a Dealer's Distribution Agreement with the Distributor
for account maintenance and personal service to shareholders (a
"Service Fee");
(vi) Commissions to sales personnel for selling shares of the Fund
and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the Fund by
securities dealers, including the costs of preparation of
materials for presentations, travel expenses, costs of
entertainment, and other expenses incurred in connection with
promoting sales of Fund shares by dealers.
(b) Any payments for distribution-related activities shall be made pursuant
to an agreement. As required by the Rule, each agreement relating to
the implementation of this Plan shall be in writing and subject to
approval and termination pursuant to the provisions of Section 7 of
this Plan. However, this Plan shall not obligate the Fund or any other
party to enter into such agreement.
3. AGREEMENT WITH DISTRIBUTOR. All payments to the Distributor pursuant to this
Plan shall be subject to and be made in compliance with a written agreement
between the Fund and the Distributor containing a provision that the
Distributor shall furnish the Fund with quarterly written reports of the
amounts expended and the purposes for which such expenditures were made and
such other information relating to such expenditures or to the other
distribution-related activities undertaken or proposed to be undertaken by
the Distributor during such fiscal year under its Distribution Agreement
with the Fund as the Fund may reasonably request.
4. DEALER'S DISTRIBUTION AGREEMENT. The Dealer's Distribution Agreement (the
"Agreement") contemplated by Section 2(a)(v) above shall permit payment of
Service Fees to securities dealers by the Distributor only in accordance
with the provisions of this paragraph and shall have the approval of the
majority of the Board of Directors of the Fund, including the affirmative
vote of a majority of those Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the operation
of the Plan or any agreement related to the Plan ("Independent Directors"),
as required by the Rule. The Distributor may pay to the other party to any
Agreement a Service Fee for distribution and marketing services provided by
such other party. Such Service Fee shall be payable (a) for the first year,
initially, in any amount equal to .25 percent annually of the aggregate net
asset value of the shares purchased by such other party's customers or
clients, and (b) for each year thereafter, quarterly, in arrears in an
amount equal to such percentage (not in excess of .000685 percent per day or
.25 percent annually) of the aggregate net asset value of the shares held by
such other party's customers or clients at the close of business each day as
determined from time to time by the Distributor. The distribution and
marketing services contemplated hereby shall include, but are not limited
to, answering inquiries regarding the Fund, account designations and
addresses, maintaining the investment of such other party's customers or
clients in the Fund and similar services. In determining the extent of such
other party's assistance in maintaining such investment by its customers or
clients, the Distributor may take into account the possibility that the
shares held by such customer or client would be redeemed in the absence of
such fee.
5. LIMITATIONS ON COVERED EXPENSES. The basic limitation on the expenses
incurred by the Fund under Section 2 of this Plan (including Service Fees)
in any fiscal year of the Fund shall be one percent (1.00%) of the Fund's
average daily net assets for such fiscal year. The payments to be paid
pursuant to this Plan shall be calculated and accrued daily and paid monthly
or at such other intervals as the Directors shall determine, subject to any
applicable restriction imposed by rules of the National Association of
Securities Dealers, Inc.
6. INDEPENDENT DIRECTORS. While this Plan is in effect, the selection and
nomination of Independent Directors of the Fund shall be committed to the
discretion of the Independent Directors. Nothing herein shall prevent the
involvement of others in such selection and nomination if the final decision
on any such selection and nomination is approved by a majority of the
Independent Directors.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan and each
Agreement relating to the implementation of this Plan shall go into effect
when approved.
(a) By vote of the Fund's Directors, including the affirmative vote of a
majority of the Independent Directors, cast in person at a meeting
called for the purpose of voting on the Plan or the Agreement;
(b) By a vote of holders of at least a majority of the outstanding voting
securities of the Fund; and
(c) Upon the effectiveness of an amendment to the Fund's registration
statement, reflecting this Plan, filed with the Securities and Exchange
Commission under the Securities Act of 1933.
This Plan and any Agreements relating to the implementation of this Plan
shall, unless terminated as hereinafter provided, continue in effect from
year to year only so long as such continuance is specifically approved at
least annually by vote of the Fund's Directors, including the affirmative
vote of a majority of its Independent Directors, cast in person at a meeting
called for the purpose of voting on such continuance. This Plan and any
Agreements relating to the implementation of this Plan may be terminated, in
the case of the plan, at any time or, in the case of any agreements upon not
more than sixty (60) days' written notice to any other party to the
Agreement by vote of a majority of the Independent Directors or by the vote
of the holders of a majority of the outstanding voting securities of the
Fund. Any Agreement relating to the implementation of this Plan shall
terminate automatically in the event it is assigned. Any material amendment
to this Plan shall require approval by vote of the Fund's Directors,
including the affirmative vote of a majority of the Independent Directors,
cast in person at a meeting called for the purpose of voting on such
amendment and, if such amendment materially increases the limitations on
expenses payable under the Plan, it shall also require approval by a vote of
holders of at least a majority of the outstanding voting securities of the
Fund. As applied to the Fund the phrase "majority of the outstanding voting
securities" shall have the meaning specified in Section 2(a) of the 1940
Act.
In the event this Plan should be terminated by the shareholders or Directors
of the Fund, the payments paid to the Distributor pursuant to the Plan up to
the date of termination shall be retained by the Distributor. Any expenses
incurred by the Distributor in excess of those payments will be the sole
responsibility of the Distributor.
8. RECORDS. The Fund shall preserve copies of this Plan and any related
Agreements and all reports made pursuant to Section 3 hereof, for a period
of not less than six (6) years from the date of this Plan, any such
Agreement or any such report, as the case may be, the first two years in an
easily accessible place.
SECURITY INCOME FUND
Date: September 24, 1993 By: AMY J. LEE
------------------------------- ----------------------------------
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION PLAN
WHEREAS, Security Income Fund (the "Fund") has adopted a Class B Distribution
Plan dated September 24, 1993 (the "Distribution Plan"), under which the Fund
supplements the expenditures of its principal underwriter, Security
Distributors, Inc. (the "Distributor") for distribution related activities with
respect to Fund shares;
WHEREAS, on February 10, 1999, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated Capital Preservation
Series, in addition to its presently offered series of common stock of Corporate
Bond Series, U.S. Government Series, Limited Maturity Bond Series, Global High
Yield Series, High Yield Series, Emerging Markets Total Return Series and Global
Asset Allocation Series;
WHEREAS, on February 10, 1999 the Board of Directors of the Fund further
authorized the Capital Preservation Series of the Fund in three classes,
designated Class A, Class B and Class C shares; and
WHEREAS, on February 10, 1999, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Plan with respect to Class B shares of the
Capital Preservation Series.
NOW, THEREFORE BE IT RESOLVED, that the Fund amend its Distribution Plan as
follows:
Paragraph 5 shall be deleted in its entirety and replaced with the following new
Paragraph:
5. LIMITATION ON COVERED EXPENSES. The basic limitation on the expenses
incurred by each Series of the Fund, other than the Capital Preservation
Series, under Section 2 of this Plan (including Service Fees) in any fiscal
year of the Fund shall be one percent (1.00%) of the Fund's average daily
net assets for such fiscal year, and with respect to the Capital
Preservation Series, shall be .75% (75 basis points) of its average daily
net assets for its fiscal year. The payments to be paid pursuant to this
Plan shall be calculated and accrued daily and paid monthly or at such other
intervals as the Directors shall determine, subject to any applicable
restrictions imposed by the National Association of Securities Dealers, Inc.
IN WITNESS WHEREOF, the Security Income Fund has adopted this Amendment to the
Class B Distribution Plan this 30th day of April, 1999.
SECURITY INCOME FUND
By: AMY J. LEE
--------------------------------
Amy J. Lee
Title: Secretary
<PAGE>
SECURITY INCOME FUND
CLASS C
DISTRIBUTION PLAN
1. THE PLAN. This Distribution Plan (the "Plan"), provides for the financing
by Security Income Fund (the "Fund") of activities which are, or may be
deemed to be, primarily intended to result in the sale of class C shares of
the Fund (hereinafter called "distribution-related activities") with
respect to those Series of the Fund set forth in Appendix A to the Plan
(referred to herein as the "Series"). Appendix A, as it may be amended from
time to time, is incorporated herein by reference. The principal purpose of
this Plan is to enable the Fund to supplement expenditures by Security
Distributors, Inc., the Distributor of its shares (the "Distributor") for
distribution-related activities. This Plan is intended to comply with the
requirements of Rule 12b-1 (the "Rule") under the Investment Company Act of
1940 (the "1940 Act").
The Board of Directors, in considering whether the Fund should implement
the Plan, has requested and evaluated such information as it deemed
necessary to make an informed determination as to whether the Plan should
be implemented and has considered such pertinent factors as it deemed
necessary to form the basis for a decision to use assets of the Fund for
such purposes.
In voting to approve the implementation of the Plan, the Directors have
concluded, in the exercise of their reasonable business judgment and in
light of their respective fiduciary duties, that there is a reasonable
likelihood that the Plan will benefit the Series and its shareholders.
2. COVERED EXPENSES.
(a) The Fund may make payments under this Plan, or any agreement relating
to the implementation of this Plan, in connection with any activities
or expenses primarily intended to result in the sale of Class C shares
of the Series, including, but not limited to, the following
distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus and
Statement of Additional Information and any supplement thereto
used in connection with the offering of Series' shares to the
public;
(ii) Printing of additional copies for use by the Distributor as
sales literature, of reports and other communications which
were prepared by the Fund for distribution to existing
shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of Series'
shares to the public;
(iv) Expenses incurred in advertising, promoting and selling shares
of the Series to the public;
(v) Any fees paid by the Distributor to securities dealers who
have executed a Dealer's Distribution Agreement with the
Distributor for account maintenance and personal service to
shareholders (a "Service Fee");
(vi) Commissions to sales personnel for selling shares of the
Series and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the Fund by
securities dealers, including the costs of preparation of
materials for presentations, travel expenses, costs of
entertainment, and other expenses incurred in connection with
promoting sales of Series shares by dealers.
(b) Any payments for distribution-related activities shall be made
pursuant to an agreement. As required by the Rule, each agreement
relating to the implementation of this Plan shall be in writing and
subject to approval and termination pursuant to the provisions of
Section 7 of this Plan. However, this Plan shall not obligate the Fund
or any other party to enter into such agreement.
3. AGREEMENT WITH DISTRIBUTOR. All payments to the Distributor pursuant to
this Plan shall be subject to and be made in compliance with a written
agreement between the Fund and the Distributor containing a provision that
the Distributor shall furnish the Fund with quarterly written reports of
the amounts expended and the purposes for which such expenditures were made
and such other information relating to such expenditures or to the other
distribution-related activities undertaken or proposed to be undertaken by
the Distributor during such fiscal year under its Distribution Agreement
with the Fund as the Fund may reasonably request.
4. DEALER'S DISTRIBUTION AGREEMENT. The Dealer's Distribution Agreement (the
"Agreement") contemplated by Section 2(a)(v) above shall permit payment of
Service Fees to securities dealers by the Distributor only in accordance
with the provisions of this paragraph and shall have the approval of the
majority of the Board of Directors of the Fund, including the affirmative
vote of a majority of those Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the operation
of the Plan or any agreement related to the Plan ("Independent Directors"),
as required by the Rule. The Distributor may pay to the other party to any
Agreement a Service Fee for account maintenance and shareholder services
provided by such other party. Such Service Fee shall be payable (a) for the
first year, initially, in any amount equal to 0.25 percent annually of the
aggregate net asset value of the shares purchased by such other party's
customers or clients, and (b) for each year thereafter, quarterly, in
arrears in an amount equal to such percentage (not in excess of .000685
percent per day or 0.25 percent annually) of the aggregate net asset value
of the shares held by such other party's customers or clients at the close
of business each day as determined from time to time by the Distributor.
The distribution and marketing services contemplated hereby shall include,
but are not limited to, answering inquiries regarding the Series, account
designations and addresses, maintaining the investment of such other
party's customers or clients in the Series and similar services. In
determining the extent of such other party's assistance in maintaining such
investment by its customers or clients, the Distributor may take into
account the possibility that the shares held by such customer or client
would be redeemed in the absence of such fee.
5. LIMITATIONS ON COVERED EXPENSES. The basic limitation on the expenses
incurred by each Series of the Fund identified in Appendix A, other than
the Capital Preservation Series under Section 2 of this Plan (including
Service Fees) in any fiscal year of the Fund shall be one percent (1.00%)
of the Fund's average daily net assets for such fiscal year, with respect
to the Capital Preservation Series, shall be 0.50% (50 basis points) of its
average daily net assets for its fiscal year. The payments to be paid
pursuant to this Plan shall be calculated and accrued daily and paid
monthly or at such other intervals as the Directors shall determine,
subject to any applicable restrictions imposed by the National Association
of Securities Dealers, Inc.
6. INDEPENDENT DIRECTORS. While this Plan is in effect, the selection and
nomination of Independent Directors of the Fund shall be committed to the
discretion of the Independent Directors. Nothing herein shall prevent the
involvement of others in such selection and nomination if the final
decision on any such selection and nomination is approved by a majority of
the Independent Directors.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan and each
Agreement relating to the implementation of this Plan shall go into effect
when approved.
(a) By vote of the Fund's Directors, including the affirmative vote of a
majority of the Independent Directors, cast in person at a meeting
called for the purpose of voting on the Plan or the Agreement;
(b) By a vote of holders of at least a majority of the outstanding voting
securities of the Fund; and
(c) Upon the effectiveness of an amendment to the Fund's registration
statement, reflecting this Plan, filed with the Securities and
Exchange Commission under the Securities Act of 1933.
This Plan and any Agreements relating to the implementation of this Plan
shall, unless terminated as hereinafter provided, continue in effect from
year to year only so long as such continuance is specifically approved at
least annually by vote of the Fund's Directors, including the affirmative
vote of a majority of its Independent Directors, cast in person at a
meeting called for the purpose of voting on such continuance. This Plan and
any Agreements relating to the implementation of this Plan may be
terminated, in the case of the plan, at any time or, in the case of any
agreements upon not more than sixty (60) days' written notice to any other
party to the Agreement by vote of a majority of the Independent Directors
or by the vote of the holders of a majority of the outstanding voting
securities of the Fund. Any Agreement relating to the implementation of
this Plan shall terminate automatically in the event it is assigned. Any
material amendment to this Plan shall require approval by vote of the
Fund's Directors, including the affirmative vote of a majority of the
Independent Directors, cast in person at a meeting called for the purpose
of voting on such amendment and, if such amendment materially increases the
limitations on expenses payable under the Plan, it shall also require
approval by a vote of holders of at least a majority of the outstanding
voting securities of the Fund. As applied to the Fund the phrase "majority
of the outstanding voting securities" shall have the meaning specified in
Section 2(a) of the 1940 Act.
In the event this Plan should be terminated by the shareholders or
Directors of the Fund, the payments paid to the Distributor pursuant to the
Plan up to the date of termination shall be retained by the Distributor.
Any expenses incurred by the Distributor in excess of those payments will
be the sole responsibility of the Distributor.
8. RECORDS. The Fund shall preserve copies of this Plan and any related
Agreements and all reports made pursuant to Section 3 hereof, for a period
of not less than six (6) years from the date of this Plan, any such
Agreement or any such report, as the case may be, the first two years in an
easily accessible place.
SECURITY INCOME FUND
Date: April 30, 1999 By: AMY J. LEE
----------------------- ---------------------------------
<PAGE>
APPENDIX A
Series of Security Income Fund:
Capital Preservation Series
<PAGE>
SECURITY FUNDS MULTIPLE CLASS PLAN
JULY 23, 1999
1. THE PLAN. This Plan is the written multiple class plan for each of the
open-end management investment companies (individually the "Fund" and
collectively the "Funds") named on Exhibit A hereto, which exhibit may be
revised from time to time, for Security Distributors, Inc. (the
"Distributor"), the general distributor of shares of the Funds, and
Security Management Company, LLC (the "Advisor"), the investment advisor of
the Funds. In instances where such investment companies issue shares
representing interests in different portfolios ("Series"), the term "Fund"
and "Funds" shall separately refer to each Series. It is the written plan
contemplated by Rule 18f-3 (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Funds may issue multiple
classes of shares. The terms and provisions of this Plan shall be
interpreted and defined in a manner consistent with the provisions and
definitions contained in the Rule.
2. FEATURES OF THE CLASSES. Each class of a Fund shall represent an equal pro
rata interest in such Fund and generally shall have identical voting,
dividend, liquidation and other rights, preferences, powers, restrictions,
limitations, qualifications and terms and conditions, except that each
class:
(i) shall have a different designation;
(ii) shall bear any Class Expenses as defined below;
(iii) shall have exclusive voting rights on any matters that relate
solely to that class's arrangements, including, without
limitation, voting with respect to a 12b-1 Plan for that class;
and
(iv) shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the
interests of any other class.
Certain classes have adopted a service plan or distribution and service
plan ("12b-1 Plan"), and shall pay all of the expenses incurred pursuant to
that arrangement. Expenses incurred in connection with a class's 12b-1 Plan
are referred to herein as "Class Expenses."
Because Class Expenses may be accrued at different rates for each class of
a Fund, dividends distributable to shareholders and net asset values per
share may differ for shares of different classes of the same Fund.
3. ALLOCATIONS OF INCOME AND EXPENSES. The gross income of each Fund, and
expenses of each Fund other than Class Expenses, are allocated among the
classes on the basis of the relative net assets of each class of such Fund.
Each class of shares may at the Directors' discretion also pay a different
share of expenses, not including advisory fees or other expenses related to
management of the Fund's assets, if such expenses are actually incurred in
a different amount by that class, or if the class received services of a
different kind or to a different degree than that of other classes.
4. FEE WAIVERS AND REIMBURSEMENTS. The investment advisor may waive or
reimburse its management fee in whole or in part provided that the fee is
waived or reimbursed to all shares of a Fund in proportion to their
relative average daily net asset values.
The investment advisor, or an entity related to the investment advisor, who
charges a fee for a Class Expense may waive or reimburse that fee in whole
or in part only if the revised fee more accurately reflects the relative
costs of providing to each class the service for which the Class Expense is
charged.
A distributor of a Fund may waive or reimburse a Rule 12b-1 Plan fee in
whole or in part.
5. EXCHANGE PRIVILEGES. Shareholders may exchange shares of one class of a
Fund for shares of an identical class of any other Fund based upon each
Fund's relative net asset value per share. Shareholders may also exchange
shares of one class of a Fund for shares of the Security Cash Fund. Any
applicable contingent deferred sales charge will be calculated from the
date of initial purchase without regard to the time that shares are
invested in Security Cash Fund. Because Cash Fund does not impose a sales
charge, any exchange of Cash Fund shares acquired through direct purchase
will be based upon the respective net asset values of the shares involved
and subject to any applicable sales charges.
6. CONVERSIONS OF SHARES. Class B shares automatically convert to Class A
shares on the eighth anniversary of purchase. This is advantageous because
Class A shares are subject to a lower distribution fee than Class B shares.
A pro rata amount of Class B shares purchased through the reinvestment of
dividends or other distributions is also converted to Class A shares each
time that shares purchased directly are converted.
7. DISCLOSURE. The classes of shares to be offered by each Fund, and the
initial, asset-based or contingent deferred sales charges and other
material distribution arrangements with respect to such classes, shall be
disclosed in the prospectus and/or statement of additional information used
to offer that class of shares. Such prospectus or statement of additional
information shall be supplemented or amended to reflect any change(s) in
classes of shares to be offered or in the material distribution
arrangements with respect to such classes.
8. INDEPENDENT AUDIT. The methodology and procedures for calculating the net
asset value, dividends and distributions of each class shall be reviewed by
an independent auditing firm (the "Expert"). At least annually, the Expert,
or an appropriate substitute expert, will render a report to the Funds on
policies and procedures placed in operation and tests of operating
effectiveness as defined and described in SAS 70 of the AICPA.
9. RULE 12B-1 PAYMENTS. The Treasurer of each Fund shall provide to the
Directors of that Fund, and the Directors shall review, at least quarterly,
the written report required by that Fund's distribution and service plan(s)
and/or service plan (the "Plan"), if any, adopted pursuant to 1940 Act Rule
12b-1. The report shall include information on (i) the amounts expended
pursuant to the Plan, (ii) the purposes for which such expenditures were
made and (iii) the amount of the Distributor's unreimbursed distribution
costs (if recovery of such costs in future periods is permitted by that
Plan), taking into account Plan payments and contingent deferred sales
charges paid to the Distributor.
10. CONFLICTS. On an ongoing basis, the Directors of the Funds, pursuant to
their fiduciary responsibilities under the 1940 Act and otherwise, will
monitor the Funds for the existence of any material conflicts among the
interests of the classes. The Advisor and the Distributor will be
responsible for reporting any potential or existing conflicts to the
Directors. In the event a conflict arises, the Directors shall take such
action as they deem appropriate.
11. EFFECTIVENESS AND AMENDMENT. This Plan, as amended, takes effect as of the
date first shown above. This Plan, as amended, has been approved by a
majority vote of the Board of each Fund and of each Fund's Board members
who are not "interested persons" (as defined in the 1940 Act) and who have
no direct or indirect financial interest in the operation of the Plan or
any agreements relating to the Plan (the "Independent Directors") of each
Fund at a meeting called for the Security Funds listed on Exhibit A on July
23, 1999. Prior to that vote, (i) the Board was furnished by Security
Distributors, Inc. with information necessary to permit it to evaluate the
Plan, including without limitation the methodology used for net asset value
and dividend and distribution determinations for the Funds, and (ii) a
majority of each Board and its Independent Directors determined that the
Plan as proposed to be amended, including the expense allocation, is in the
best interests of each Fund as a whole and to each class of each Fund
individually. Prior to any material amendment to the Plan, each Board shall
request and evaluate, and Security Distributors, Inc. shall furnish, such
information as may be reasonably necessary to evaluate such amendment, and
a majority of each Board and its Independent Directors shall find that the
Plan as proposed to be amended, including the expense allocation, is in the
best interests of each class, each Fund as a whole and each class of each
Fund individually.
Adopted by the Board of Directors of the Funds on July 23, 1999.
AMY J. LEE
-------------------------------
Amy J. Lee, Secretary
Security Equity Fund
Security Growth and Income Fund
Security Ultra Fund
Security Income Fund
Security Municipal Bond Fund
<PAGE>
EXHIBIT A
SECURITY FUNDS
Security Equity Fund
Security Growth and Income Fund
Security Ultra Fund
Security Income Fund
Security Municipal Bond Fund
<PAGE>
POWER OF ATTORNEY
This Power of Attorney will be contingent upon the election of the Trustee
nominees at the Special Shareholder Meetings to be held in September and October
1999.
The undersigned Trustees and officers, as indicated respectively below, of BT
Investment Funds, BT Institutional Funds, BT Pyramid Mutual Funds, and BT
Advisor Funds (each, a "Trust") and Cash Management Portfolio, Treasury Money
Portfolio, Tax Free Money Portfolio, NY Tax Free Money Portfolio, International
Equity Portfolio, Equity 500 Index Portfolio, Asset Management Portfolio,
Capital Appreciation Portfolio, Intermediate Tax Free Portfolio, and BT
Investment Portfolios (each, a "Portfolio Trust") each hereby constitutes and
appoints the Secretary, each Assistant Secretary and each authorized signatory
of each Trust and each Portfolio Trust, each of them with full powers of
substitution, as his true and lawful attorney-in-fact and agent to execute in
his name and on his behalf in any and all capacities the Registration Statements
on Form N-1A, and any and all amendments thereto, and all other documents, filed
by a Trust or a Portfolio Trust with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940, as amended, and (as applicable)
the Securities Act of 1933, as amended, and any and all instruments which such
attorneys and agents, or any of them, deem necessary or advisable to enable the
Trust or Portfolio Trust to comply with such Acts, the rules, regulations and
requirements of the SEC, and the securities or Blue Sky laws of any state or
other jurisdiction and to file the same, with all exhibits thereto and other
documents in connection therewith, with the SEC and such other jurisdictions,
and the undersigned each hereby ratifies and confirms as his own act and deed
any and all acts that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents has, and
may exercise, all of the powers hereby conferred. The undersigned each hereby
revokes any Powers of Attorney previously granted with respect to any Trust or
Portfolio Trust concerning the filings and actions described herein.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand as of
the 8th day of September, 1999.
SIGNATURES TITLE
/s/ John Y. Keffer President and Chief Executive Officer of
John Y. Keffer each Trust and Portfolio Trust
/s/ Charles A. Rizzo Treasurer (Principal Financial and
Charles A. Rizzo Accounting Officer) of each Trust and
Portfolio Trust
/s/ Charles P. Biggar Trustee of each Trust and Portfolio Trust
Charles P. Biggar
/s/ S. Leland Dill Trustee of each Trust and Portfolio Trust
S. Leland Dill
/s/ Richard T. Hale Trustee of each Trust and Portfolio Trust
Richard T. Hale
/s/ Richard J. Herring Trustee of each Trust and Portfolio Trust
Richard J. Herring
/s/ Bruce E. Langton Trustee of each Trust and Portfolio Trust
Bruce E. Langton
/s/ Martin J. Gruber Trustee of each Trust and Portfolio Trust
Martin J. Gruber
/s/ Philip Saunders, Jr. Trustee of each Trust and Portfolio Trust
Philip Saunders, Jr.
/s/ Harry Van Benschoten Trustee of each Trust and Portfolio Trust
Harry Van Benschoten
