0000891804-10-000857.txt : 20120626
0000891804-10-000857.hdr.sgml : 20120626
20100224134453
ACCESSION NUMBER: 0000891804-10-000857
CONFORMED SUBMISSION TYPE: PRE 14A
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 20100223
FILED AS OF DATE: 20100224
DATE AS OF CHANGE: 20120120
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SECURITY EQUITY FUND
CENTRAL INDEX KEY: 0000088525
IRS NUMBER: 486104426
STATE OF INCORPORATION: KS
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: PRE 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 811-01136
FILM NUMBER: 10629150
BUSINESS ADDRESS:
STREET 1: SECURITY INVESTORS, LLC
STREET 2: ONE SECURITY BENEFIT PLACE
CITY: TOPEKA
STATE: KS
ZIP: 66636-0001
BUSINESS PHONE: 7854383127
MAIL ADDRESS:
STREET 1: SECURITY INVESTORS, LLC
STREET 2: ONE SECURITY BENEFIT PLACE
CITY: TOPEKA
STATE: KS
ZIP: 66636-0001
0000088525
S000008805
Large Cap Core
C000023958
A
SECEX
C000023959
B
SEQBX
C000023960
C
SFECX
0000088525
S000008806
Alpha Opportunity
C000023961
A
SAOAX
C000023962
B
SAOBX
C000023963
C
SAOCX
C000071557
Institutional
0000088525
S000008807
Global
C000023964
A
SEQAX
C000023965
B
SGOBX
C000023966
C
SFGCX
0000088525
S000008809
Mid Cap Value
C000023970
A
SEVAX
C000023971
B
SVSBX
C000023972
C
SEVSX
0000088525
S000008810
Small Cap Growth
C000023973
A
SSCAX
C000023974
B
SEPBX
C000023975
C
SESCX
0000088525
S000008812
Large Cap Concentrated Growth
C000023979
A
SEFAX
C000023980
B
SEFBX
C000023981
C
SSSCX
0000088525
S000022639
Large Cap Value
C000065501
A
C000065502
B
C000065503
C
0000088525
S000022640
Mid Cap Growth
C000065504
A
C000065505
B
C000065506
C
0000088525
S000022641
Small Cap Value
C000065507
A
SSUAX
C000065508
C
SSVCX
C000065509
Institutional
SSUIX
0000088525
S000022642
Large Cap Value Institutional
C000065510
Large Cap Value Institutional
0000088525
S000022643
Global Institutional
C000065511
Global Institutional
SGOLX
0000088525
S000022644
Mid Cap Value Institutional
C000065512
Mid Cap Value Institutional
SVUIX
0000088525
S000024251
All Cap Value
C000071554
A
C000071555
C
C000071556
Institutional
0000088525
S000024764
All Cap Growth
C000073582
A
C000073583
C
C000073584
Institutional
PRE 14A
1
sb48358-pre14a.txt
PRELIMINARY PROXY STATEMENT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the Securities Exchange Act of
1934 (Amendment No.)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
(Name of Registrant as Specified In Its Charter)
SECURITY EQUITY FUND
SECURITY LARGE CAP VALUE FUND
SECURITY MID CAP GROWTH FUND
SECURITY INCOME FUND
SBL FUND
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
SECURITY EQUITY FUND
SECURITY LARGE CAP VALUE FUND
SECURITY MID CAP GROWTH FUND
SECURITY INCOME FUND
SBL FUND
Dear Shareholder:
I am writing you on an important matter relating to the Security Global
Investors family of funds (the "Funds"). On February 16, 2010, Security Benefit
Mutual Holding Company ("SBHC"), the parent company of Security Investors, LLC,
the Funds' investment manager (the "Investment Manager"), and Security Global
Investors, LLC, the sub-adviser to certain Funds (the "Sub-Adviser), and certain
of SBHC's affiliates entered into agreements with an investor group (the
"Investors") led by Guggenheim Partners, LLC. Under the agreements, the
Investors will acquire control of the Investment Manager, Sub-Adviser and
affiliates. Guggenheim Partners, LLC is a global, independent, privately held,
diversified financial services firm with more than $100 billion in assets under
supervision.
This transaction should not result in material changes to the day-to-day
management and operations of the Funds or any increase in fees. For example, the
portfolio managers of the Funds are expected to remain the same and your daily
experience in dealing with the Funds should remain unchanged. However, for legal
reasons, this transaction will have the effect of terminating the Funds'
investment management agreements with the Investment Manager and the
sub-advisory agreement between the Investment Manager and the Sub-Adviser, as
well as any other sub-advisory agreement.
Accordingly, by this joint proxy statement, we are requesting that you vote to
approve substantially identical investment management agreements and, as
applicable, sub-advisory agreements to take the place of the current agreements,
so that the Investment Manager and, as applicable, the Sub-Adviser and any other
sub-adviser may continue to manage the Funds.
A Special Joint Meeting of Shareholders (the "Meeting") of each of the Funds,
which are listed in an attachment to the Notice of Special Joint Meeting of
Shareholders, has been scheduled for April 23, 2010 to vote on these matters. If
you are a shareholder (or, with respect to SBL Fund, an insurance contract
owner) of record of any of the Funds as of the close of business on February 24,
2010, you are entitled to vote at the Meeting and any adjournment of the
Meeting, even if you, as a shareholder, have since sold those shares.
You can vote in one of [four] ways:
o By mail with the enclosed proxy card - be sure to sign, date and
return it in the enclosed postage-paid envelope,
o Through the web site listed in the proxy voting instructions,
o By telephone using the toll-free number listed in the proxy voting
instructions, or
o In person at the shareholder meeting on April 23, 2010.
We encourage you to vote over the Internet or by telephone, using the voting
control number that appears on your proxy card. Your vote is extremely
important. Please read the enclosed information carefully before voting. If you
have questions, please call The Altman Group at [INSERT PROXY SOLICITOR'S
TELEPHONE NUMBER].
We appreciate your participation and prompt response in this matter and thank
you for your continued support.
Sincerely,
/s/Richard M. Goldman
Richard M. Goldman
President, Chairman of the Boards of Directors
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, ALONG
WITH INSTRUCTIONS ON HOW TO VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU
PREFER TO VOTE BY ONE OF THOSE METHODS.
2
VERY IMPORTANT NEWS FOR SHAREHOLDERS
By its very nature, the following "Questions and Answers" section is a summary
and is not intended to be as detailed as the discussion found later in the proxy
materials. For that reason, the information is qualified in its entirety by
reference to the enclosed joint proxy statement to shareholders ("Joint Proxy
Statement").
QUESTIONS AND ANSWERS
Q. WHY AM I RECEIVING THIS JOINT PROXY STATEMENT?
A. You are receiving these proxy materials -- a booklet that includes the Joint
Proxy Statement and your proxy card -- because you have the right to vote on
important proposals concerning your investment in the Security Global Investors
family of funds (the "Funds").
The proposals relate to actions that need to be taken in response to an
impending change in control of Security Investors, LLC (the "Investment
Manager"), the investment manager to each of the Funds, and Security Global
Investors, LLC, the sub-adviser to certain Funds (the "Sub-Adviser" and,
together with the Investment Manager, the "Advisers"). This change in control
affects the Funds' advisory agreement with the Investment Manager and the
Investment Manager's sub-advisory agreement with the Sub-Adviser.
Q. WHY AM I BEING ASKED TO VOTE?
A. The Investment Company Act of 1940 (the "1940 Act"), the law that regulates
mutual funds, including the Funds, requires that a fund's investment advisory
agreement terminate whenever there is deemed to be a change in control of the
investment adviser. (In this context, the term "investment adviser" applies to
both an investment manager and a sub-adviser.) Before an investment advisory
agreement terminates, a new investment advisory agreement must be in effect in
order for the investment adviser to continue to manage the fund's investments.
For that reason, we are seeking shareholder approval of new investment advisory
agreements for the Funds.
Security Benefit Mutual Holding Company ("SBHC"), the parent company of the
Advisers, and certain of SBHC's affiliates have entered into agreements with an
investor group (the "Investors") led by Guggenheim Partners, LLC, which is a
global, independent, privately held, diversified financial services firm with
more than $100 billion in assets under supervision. Under the agreements, the
Investors will acquire control of the Advisers and affiliates (the
"Transaction").
The Transaction should not result in material changes to the day-to-day
management and operations of the Funds or any increase in fees. However, the
Transaction will result in a change in control of the Advisers within the
meaning of the 1940 Act. This will, in turn, result in the termination of the
current investment management agreements between the Investment Manager and each
of the Funds (the "Current Investment Management Agreements"). In addition, the
Transaction will result in the termination of the current sub-advisory
agreements between the Investment Manager and the Sub-Adviser, with respect to
certain Funds (the "Current Sub-Advisory Agreements" and, together with the
Current Investment Management Agreements, the "Current Agreements").
At a Special Meeting of the Boards of Directors (collectively, the "Board") of
each of Security Equity Fund, Security Large Cap Value Fund, Security Mid Cap
Growth Fund, Security Income Fund and SBL Fund held on January 28, 2010, the
Board considered and voted in favor of new investment management agreements
between the Investment Manager and each of the Funds (the "New Investment
Management
3
Agreements"), as well as new sub-advisory agreements between the Investment
Manager and the Sub-Adviser, with respect to certain Funds (the "New
Sub-Advisory Agreements" and, together with the New Investment Management
Agreements, the "New Agreements"), pursuant to which, subject to their approval
by each Fund's shareholders, as applicable, the Investment Manager will continue
to serve as investment manager to each Fund and the Sub-Adviser will continue to
serve as sub-adviser to certain Funds after the completion of the Transaction.
The fees charged by the Advisers for their services to the Funds under each New
Agreement will be the same as their fees under the corresponding Current
Agreement. The other terms of the New Agreements will also be the same in all
material respects to those of the Current Agreements.
Q. WILL THE PROPOSED TRANSACTION AFFECT ME?
A. No. The operations of the Advisers, the fees payable to the Advisers and the
persons responsible for the day-to-day investment management of the Funds are
expected to remain unchanged. The Board has been assured that there will be no
reduction in the nature or quality of the investment management and sub-advisory
services provided to each Fund, as applicable, due to the change in control.
Q. WILL THERE BE ANY CHANGES TO THE FUNDS' OTHER SERVICE PROVIDERS?
A. The Investors will also acquire control of certain of the Funds' other
service providers ("Affiliated Service Providers") as a result of the
Transaction. The Affiliated Service Providers include Rydex Distributors, Inc.
and Security Distributors, Inc., which serve as the principal
underwriters/distributors to the Funds, as applicable. Under the 1940 Act,
shareholder approval is not required in order for such Affiliated Service
Providers to continue providing services to the Funds after the closing of the
Transaction. In addition, the Investment Manager, which also serves as each
Fund's administrator and transfer agent under separate agreements with the
Funds, will continue to serve in those roles without the need for shareholder
approval. The Board has been assured that there will be no material change in
the nature or quality of the services provided by the Affiliated Service
Providers to each Fund, as applicable, due to the changes in control.
Q. WILL MY FUND'S FEES FOR INVESTMENT MANAGEMENT AND SUB-ADVISORY SERVICES
INCREASE?
A. No. The fee rates under the New Agreements are identical to those under the
Current Agreements.
Q. WHO IS ASKING FOR MY VOTE?
A. The enclosed proxy is being solicited by the Board of your Fund for use at
the Special Joint Meeting of Shareholders to be held on April 23, 2010 (the
"Meeting"), and, if the Meeting is adjourned or postponed, at any later
meetings, for the purposes stated in the Notice of Meeting.
Q. HOW DOES THE BOARD SUGGEST THAT I VOTE?
A. After careful consideration, the Board unanimously approved the New
Agreements and recommends that you vote "FOR" all of the proposals contained in
the Joint Proxy Statement. Please see the section entitled "Board
Recommendation" with respect to each proposal for a discussion of the Board's
considerations in making such recommendations.
4
Q. WHY AM I RECEIVING INFORMATION ABOUT FUNDS I DO NOT OWN?
A. The proposals are similar for each Fund, and management of the Funds has
concluded that it is cost-effective to hold the Meeting for all of the Funds.
You will be asked to vote separately on the proposals with respect to the
Fund(s) that you own. An unfavorable vote on a proposal by the shareholders of
one Fund will not affect the implementation of a comparable proposal by another
Fund if such proposal is approved by shareholders of that Fund assuming that the
Transaction is completed.
Q. WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
A. To be approved with respect to a particular Fund, the New Investment
Management Agreement and New Sub-Advisory Agreement, if applicable, must be
approved by a vote of a majority of the outstanding voting securities of that
Fund. The "vote of a majority of the outstanding voting securities" is defined
in the 1940 Act as the lesser of the vote of (i) 67% or more of the voting
securities of a Fund entitled to vote thereon present at the Meeting or
represented by proxy, if more than 50% of the Fund's outstanding voting
securities are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities of the Fund entitled to vote thereon.
Q. WILL MY VOTE MAKE A DIFFERENCE?
A. Yes! Your vote is needed to ensure that the proposals can be acted upon. We
encourage all shareholders to participate in the governance of their Fund(s).
Additionally, your immediate response on the enclosed proxy card, on the
Internet or over the phone will help save the costs of any further
solicitations.
Q. IF I AM A SMALL INVESTOR, WHY SHOULD I BOTHER TO VOTE?
A. You should vote because every vote is important. If numerous shareholders
just like you fail to vote, the Funds may not receive enough votes to go forward
with the Meeting. If this happens, the Funds will need to solicit votes again.
This may delay the Meeting and the approval of the New Agreements.
Q. HOW DO I PLACE MY VOTE?
A. You may provide a Fund with your vote by mail with the enclosed proxy card,
by Internet by following the instructions in the proxy voting instructions, by
telephone using the toll-free number listed in the proxy voting instructions, or
in person at the Meeting. You may use the enclosed postage-paid envelope to mail
your proxy card. Please follow the enclosed instructions to utilize any of these
voting methods. If you need more information on how to vote, or if you have any
questions, please call the Funds' proxy solicitation agent at the telephone
number below.
Q. WHOM DO I CALL IF I HAVE QUESTIONS?
A. We will be happy to answer your questions about this proxy solicitation. If
you have questions, please call The Altman Group at [INSERT PROXY SOLICITOR'S
TELEPHONE NUMBER].
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, ALONG
WITH INSTRUCTIONS ON HOW TO VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU
PREFER TO VOTE BY ONE OF THOSE METHODS.
5
SECURITY EQUITY FUND
SECURITY LARGE CAP VALUE FUND
SECURITY MID CAP GROWTH FUND
SECURITY INCOME FUND
SBL FUND
One Security Benefit Place
Topeka, Kansas 66636-0001
[1-800-888-2461]
NOTICE OF SPECIAL JOINT MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 2010
Notice is hereby given that a Special Joint Meeting of Shareholders (the
"Meeting") of each of Security Equity Fund, Security Large Cap Value Fund,
Security Mid Cap Growth Fund, Security Income Fund and SBL Fund (each, a
"Company" and collectively, the "Companies") and each of their respective series
listed on the attached list (each, a "Fund" and collectively, the "Funds") will
be held at the Companies' offices at One Security Benefit Place, Topeka, Kansas
66636-0001 on April 23, 2010 at 1:00 p.m. Central Time for the purposes listed
below:
------ --------------------------------------------------- -----------------------------------------------------
PROPOSAL SHAREHOLDERS SOLICITED TO VOTE
------ --------------------------------------------------- -----------------------------------------------------
1. THE APPROVAL OF A NEW INVESTMENT MANAGEMENT ALL FUNDS
AGREEMENT BETWEEN EACH COMPANY AND SECURITY
INVESTORS, LLC, WITH RESPECT TO EACH FUND
------ --------------------------------------------------- -----------------------------------------------------
2. THE APPROVAL OF A NEW SUB-ADVISORY AGREEMENT RYDEX | SGI ALPHA OPPORTUNITY FUND
BETWEEN SECURITY INVESTORS, LLC AND SECURITY RYDEX | SGI GLOBAL FUND
GLOBAL INVESTORS, LLC, WITH RESPECT TO CERTAIN RYDEX | SGI GLOBAL INSTITUTIONAL FUND
FUNDS SERIES D (GLOBAL SERIES)
SERIES Z (ALPHA OPPORTUNITY SERIES)
------ --------------------------------------------------- -----------------------------------------------------
3. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
After careful consideration, the Board of Directors of each Company unanimously
approved the New Agreements and recommends that shareholders vote "FOR" Proposal
1 and "FOR" Proposal 2.
Shareholders (or, with respect to SBL Fund, insurance contract owners) of record
at the close of business on February 24, 2010 are entitled to notice of, and to
vote at, the Meeting, even if you, as a shareholder, have since sold those
shares.
We call your attention to the accompanying Joint Proxy Statement. You are
requested to complete, date, and sign the enclosed proxy card and return it
promptly in the envelope provided for that purpose. Your proxy card also
provides instructions for voting via telephone or the Internet if you wish to
take advantage of these voting options. Proxies may be revoked at any time by
executing and submitting a revised proxy, by giving written notice of revocation
to the Companies, or by voting in person at the Meeting.
By Order of the Boards,
/s/ Amy J. Lee
Amy J. Lee
Secretary
YOUR VOTE IS VERY IMPORTANT TO US REGARDLESS OF THE NUMBER OF VOTES YOU HOLD.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REQUESTED TO COMPLETE,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE,
WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IT IS IMPORTANT THAT YOUR
PROXY CARD BE RETURNED PROMPTLY.
FOR YOUR CONVENIENCE, YOU MAY ALSO VOTE BY TELEPHONE OR INTERNET BY FOLLOWING
THE ENCLOSED INSTRUCTIONS. IF YOU VOTE BY TELEPHONE OR VIA THE INTERNET, PLEASE
DO NOT RETURN YOUR PROXY CARD UNLESS YOU ELECT TO CHANGE YOUR VOTE.
2
FUNDS PARTICIPATING IN THE MEETING
ON APRIL 23, 2010
--------------------------------------------------------------------------------
Security Equity Fund
Rydex | SGI All Cap Value Fund
Rydex | SGI Alpha Opportunity Fund
Rydex | SGI Global Fund
Rydex | SGI Global Institutional Fund
Rydex | SGI Large Cap Concentrated Growth Fund (formerly Rydex
| SGI Select 25 Fund)
Rydex | SGI Large Cap Core Fund (formerly Rydex | SGI Equity
Fund)
Rydex | SGI Mid Cap Value Fund
Rydex | SGI Mid Cap Value Institutional Fund
Rydex | SGI Small Cap Growth Fund
Rydex | SGI Small Cap Value Fund
--------------------------------------------------------------------------------
Security Large Cap Value Fund
Rydex | SGI Large Cap Value Fund
Rydex | SGI Large Cap Value Institutional Fund
3
--------------------------------------------------------------------------------
Security Mid Cap Growth Fund
Rydex | SGI Mid Cap Growth Fund
--------------------------------------------------------------------------------
Security Income Fund
Rydex | SGI High Yield Fund
Rydex | SGI U.S. Intermediate Bond Fund
4
--------------------------------------------------------------------------------
SBL Fund
Series A (Equity Series)
Series B (Large Cap Value Series)
Series C (Money Market Series)
Series D (Global Series)
Series E (U.S. Intermediate Bond Series)
Series H (Enhanced Index Series)
Series J (Mid Cap Growth Series)
Series N (Managed Asset Allocation Series)
Series O (All Cap Value Series)
Series P (High Yield Series)
Series Q (Small Cap Value Series)
Series V (Mid Cap Value Series)
Series X (Small Cap Growth Series)
Series Y (Select 25 Series)
Series Z (Alpha Opportunity Series)
5
TABLE OF CONTENTS
OVERVIEW OF THE PROPOSALS.........................................................................................3
Approval of New Investment Management and Sub-Advisory Agreements..............................................3
Information Regarding the Change in Control of the Advisers....................................................3
Section 15(f) of the 1940 Act..................................................................................5
Approval of the New Agreements by the Board....................................................................5
Board Considerations in Approving the New Agreements...........................................................5
PROPOSAL 1 - THE APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENTS.................................................9
The Investment Manager.........................................................................................9
Material Terms of the New Investment Management Agreements....................................................10
BOARD RECOMMENDATION ON PROPOSAL 1...............................................................................11
PROPOSAL 2 - THE APPROVAL OF NEW SUB -ADVISORY AGREEMENTS........................................................12
Information About the Sub-Adviser.............................................................................13
Material Terms of the New Sub-Advisory Agreements.............................................................13
BOARD RECOMMENDATION ON PROPOSAL 2...............................................................................14
OTHER BUSINESS...................................................................................................15
ADDITIONAL INFORMATION...........................................................................................15
Administrator, Principal Underwriters and Transfer Agent......................................................15
Other Sub-Advisers for Certain Funds..........................................................................15
Affiliations and Affiliated Brokerage.........................................................................16
Other Information.............................................................................................16
Voting Information............................................................................................16
Shareholder Proposals.........................................................................................18
i
APPENDICES
Appendix A FORMS OF INVESTMENT MANAGEMENT AGREEMENTS.....................................................A-1
Appendix B INFORMATION REGARDING THE INVESTMENT MANAGEMENT AGREEMENTS AND FEES PAID TO THE
INVESTMENT MANAGER AND DISTRIBUTOR............................................................B-1
Appendix C DIRECTORS/MANAGERS AND OFFICERS...............................................................C-1
Appendix D-1 ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT OBJECTIVES ADVISED BY SECURITY
INVESTORS, LLC D-1-1
Appendix D-2 ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT OBJECTIVES SUB-ADVISED BY SECURITY
GLOBAL INVESTORS, LLC.......................................................................D-2-1
Appendix E FORM OF SUB-ADVISORY AGREEMENT WITH SECURITY GLOBAL INVESTORS, LLC............................E-1
Appendix F INFORMATION REGARDING THE SUB-ADVISORY AGREEMENTS AND FEES PAID TO THE SUB-ADVISER............F-1
Appendix G OUTSTANDING SHARES............................................................................G-1
Appendix H BENEFICIAL OWNERS OF MORE THAN 5% OF A CLASS OF EACH FUND......................................H-1
ii
SECURITY EQUITY FUND
SECURITY LARGE CAP VALUE FUND
SECURITY MID CAP GROWTH FUND
SECURITY INCOME FUND
SBL FUND
One Security Benefit Place
Topeka, Kansas 66636-0001
[1-800-888-2461]
JOINT PROXY STATEMENT
SPECIAL JOINT MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 2010
This joint proxy statement ("Joint Proxy Statement") and enclosed notice and
proxy card are being furnished in connection with the solicitation of proxies by
the Boards of Directors (collectively, the "Board") of each of Security Equity
Fund, Security Large Cap Value Fund, Security Mid Cap Growth Fund, Security
Income Fund and SBL Fund (each, a "Company" and collectively, the "Companies").
The proxies are being solicited for use at a special joint meeting of
shareholders of each Company to be held at the Companies' offices at One
Security Benefit Place, Topeka, Kansas 66636-0001 on April 23, 2010 at 1:00 p.m.
Central Time, and at any and all adjournments or postponements thereof (the
"Meeting").
The Board has called the Meeting and is soliciting proxies from shareholders of
each series of the Companies listed in the accompanying notice to this Joint
Proxy Statement (each, a "Fund" and collectively, the "Funds") with respect to
the following proposals (the "Proposals") as follows:
------ --------------------------------------------------- -----------------------------------------------------
PROPOSAL SHAREHOLDERS SOLICITED TO VOTE
------ --------------------------------------------------- -----------------------------------------------------
1. THE APPROVAL OF A NEW INVESTMENT MANAGEMENT ALL FUNDS
AGREEMENT BETWEEN EACH COMPANY AND SECURITY
INVESTORS, LLC, WITH RESPECT TO EACH FUND
------ --------------------------------------------------- -----------------------------------------------------
2. THE APPROVAL OF A NEW SUB-ADVISORY AGREEMENT RYDEX | SGI ALPHA OPPORTUNITY FUND
BETWEEN THE INVESTMENT MANAGER RYDEX | SGI GLOBAL FUND
AND SECURITY GLOBAL INVESTORS, LLC, RYDEX | SGI GLOBAL INSTITUTIONAL FUND
WITH RESPECT TO CERTAIN FUNDS SERIES D (GLOBAL SERIES)
SERIES Z (ALPHA OPPORTUNITY SERIES)
------ ---------------------------------------------------------------------------------------------------------
3. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
This Joint Proxy Statement and the accompanying notice and the proxy card are
being first mailed to shareholders on or about [INSERT MAILING DATE].
The Board has determined that the use of this Joint Proxy Statement for the
Meeting is in the best interests of each Fund and its shareholders in light of
the similar matters being considered and voted on by the shareholders of the
other Funds.
You are entitled to vote at the Meeting of each Fund of which you are a
shareholder as of the close of business on February 24, 2010 (the "Record
Date"). Shares of each series of SBL Fund are not offered directly to the public
but are sold only to insurance companies and their separate accounts as the
underlying investment medium for owners of variable annuity contracts and
variable life insurance
policies. As such, for SBL Fund, Security Benefit Life Insurance Company, First
Security Benefit Life Insurance and Annuity Company of New York and Nationwide
Life Insurance Company (each, an "Insurance Company" and collectively, the
"Insurance Companies") are the only Fund shareholders of record. SBL Fund is
soliciting voting instructions from insurance contract owners invested in each
Fund in connection with the Proposals, as applicable. As such and for ease of
reference, throughout this Joint Proxy Statement, insurance contract owners may
be referred to as "shareholders" of a Fund.
If you have any questions about the Proposals or about voting, please call The
Altman Group, the Funds' proxy solicitor, at [INSERT PROXY SOLICITOR'S PHONE
NUMBER].
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE MEETING
TO BE HELD ON APRIL 23, 2010
This Joint Proxy Statement is available at [INSERT WEBSITE ADDRESS]. In
addition, with respect to Security Income Fund and SBL Fund, shareholders can
find important information about each Fund in the Fund's annual report, dated
December 31, 2008 or, if available, December 31, 2009, including financial
reports for the fiscal years ended December 31, 2008 or, if available, December
31, 2009, and in any recent semi-annual report succeeding such annual reports,
if any. With respect to Security Equity Fund, Security Large Cap Value Fund or
Security Mid Cap Growth Fund, shareholders can find important information about
each Fund in the Fund's annual report, dated September 30, 2009, including
financial reports for the fiscal year ended September 30, 2009, and in any
recent semi-annual report succeeding such annual report, if any. You may obtain
copies of these reports without charge by writing to a Company, or by calling
the telephone number shown on the front page of this Joint Proxy Statement.
2
OVERVIEW OF THE PROPOSALS
APPROVAL OF NEW INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
The Proposals relate to actions that need to be taken in response to an
impending change in control of Security Investors, LLC, the investment manager
to each of the Funds (the "Investment Manager"), and Security Global Investors,
LLC, the sub-adviser to certain Funds (the "Sub-Adviser" and together, with the
Investment Manager, the "Advisers").
The Investment Company Act of 1940, as amended (the "1940 Act"), the law that
regulates mutual funds, such as the Funds, requires that a fund's investment
advisory agreement terminate whenever there is deemed to be a change in control
of the investment adviser. (In this context, the term "investment adviser"
applies to both an investment manager and a sub-adviser.) Before an investment
advisory agreement terminates, a new investment advisory agreement must be in
effect in order for the investment adviser to continue to manage the fund's
investments. For that reason, we are seeking shareholder approval of new
investment advisory agreements for the Funds.
Upon completion of a transaction involving the Advisers, which is discussed in
more detail below, the Funds' current investment management agreements with the
Investment Manager will be terminated. In addition, the transaction will result
in the termination of the current sub-advisory agreements between the Investment
Manager and the Sub-Adviser, with respect to certain Funds (the "Sub-Advised
Funds"). Accordingly, Proposal 1 relates to the approval by shareholders of new
investment management agreements between the Investment Manager and the Funds
(the "New Investment Management Agreements"). Similarly, Proposal 2 relates to
the approval by shareholders of new sub-advisory agreements between the
Investment Manager and the Sub-Adviser with respect to the Sub-Advised Funds
(the "New Sub-Advisory Agreements" and, together with the New Investment
Management Agreements, the "New Agreements").
FOR THE REASONS DISCUSSED BELOW, THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE APPROVAL OF THE NEW AGREEMENTS.
INFORMATION REGARDING THE CHANGE IN CONTROL OF THE ADVISERS
On February 16, 2010, Security Benefit Mutual Holding Company ("SBHC"), the
parent company of the Advisers, and certain of SBHC's affiliates (collectively,
"SecBen") entered into agreements with Guggenheim SBC Holdings LLC
("Purchaser"), a special purpose entity managed by Guggenheim Partners, LLC
("Guggenheim"), which is a global, independent, privately held, diversified
financial services firm with more than $100 billion in assets under supervision
and 800 dedicated professionals. Headquartered in Chicago and New York, the firm
operates through offices in 20 cities in the U.S., Europe and Asia. Guggenheim
operates businesses in investment management, capital markets, wealth management
and merchant banking. Within the investment and wealth management businesses,
Guggenheim specializes in fixed income and alternative investments, and in
providing sophisticated wealth advisory and family office services. Within
capital markets, it specializes in providing debt financing and structured
finance solutions to clients. Merchant banking activities include its portfolio
of investments in funds managed by it, joint venture business investments, and
new business launch activities not integrated into other primary operating
businesses. Guggenheim is a wholly-owned subsidiary of Guggenheim Capital, LLC,
227 West Monroe Street, 48th Floor, Chicago, Illinois 60606. Sage Assets, Inc.,
5949 Sherry Lane, Suite 1900, Dallas, Texas 75225, a wholly-owned subsidiary of
Sammons Enterprises, Inc., 5949 Sherry Lane, Suite 1900, Dallas, Texas 75225, is
a control person of Guggenheim as a result of its equity ownership in excess of
25% (but less than 50%) of Guggenheim Capital, LLC. Under the agreements, the
Purchaser will acquire control of the Advisers and affiliates (the
"Transaction").
3
The final form of the Purchaser's controlling stake in the Advisers and
affiliates will depend upon whether certain conditions are satisfied. In the
Transaction, Purchaser will either receive: (a) a 100% ownership stake in
Security Benefit Corporation ("SBC"), the parent company of the Advisers and
affiliates (the "Purchase Transaction"); or, (b) if the Purchase Transaction is
terminated for any reason other than a breach of the related agreement by the
Purchaser or the failure to meet a specific closing condition relating to
execution of employment agreements by certain employees of the SBC group of
companies, a 100% ownership stake in SBC's asset management business, which
includes the Advisers and certain affiliates (the "Contingent Asset Management
Purchase and Sale").
In anticipation of the Transaction, the parties have entered into an interim
recapitalization transaction in which the Purchaser has made a secured loan to
SBC. Upon the closing of the Purchase Transaction, the Purchaser will make a
capital contribution to SBC and the secured loan will convert into equity in SBC
and SBHC will transfer all of the issued and outstanding shares of capital stock
of SBC to the Purchaser. The Purchase Transaction is conditioned on the approval
of a corporate restructuring called a demutualization pursuant to which the
insurance policyholders who presently own SBHC are expected to receive cash
payments or policy credits in connection with the cancellation of their
ownership interests. In the event that the Contingent Asset Management Purchase
and Sale occurs following termination of the Purchase Transaction, SBC will
receive a senior unsecured note and have certain debt extinguished, and the
Purchaser will receive all of the issued and outstanding membership interests of
each entity in SBC's asset management business, which includes the Advisers and
certain affiliates.
The Transaction should not result in material changes to the day-to-day
management and operations of the Funds. For example, the portfolio managers of
the Funds are expected to remain the same and your daily experience in dealing
with the Funds should remain unchanged. However, the Transaction is expected to
result in a "change in control" of the Advisers within the meaning of the 1940
Act. This will automatically terminate each of the current investment management
or advisory agreements between the Investment Manager and the Funds (each, a
"Current Investment Management Agreement" and collectively, the "Current
Investment Management Agreements") and the current sub-advisory agreements
between the Investment Manager and the Sub-Adviser, with respect to the
Sub-Advised Funds (each, a "Current Sub-Advisory Agreement" and collectively,
the "Current Sub-Advisory Agreements") (together, the Current Investment
Management and Current Sub-Advisory Agreements are referred to as the "Current
Agreements").
In addition, the Purchaser will acquire control of certain of the Funds' other
service providers ("Affiliated Service Providers") as a result of the
Transaction. The Affiliated Service Providers include Rydex Distributors, Inc.
and Security Distributors, Inc., which serve as the principal
underwriters/distributors to the Funds, as applicable. Under the 1940 Act,
shareholder approval is not required in order for such Affiliated Service
Providers to continue providing services to the Funds after the closing of the
Transaction. In addition, the Investment Manager, which also serves as each
Fund's administrator and transfer agent under separate agreements with the
Funds, will continue to serve in those roles without the need for shareholder
approval.
Completion of the Transaction will be subject to certain closing conditions,
including: (a) the receipt of approvals required for the assignment or
replacement of investment advisory contracts relating to 80% or more of the
total net assets under management by the Investment Manager and certain
affiliates that will be controlled by the Purchaser; and, (b) with respect to
the Purchase Transaction only, the approval of the members of SBHC to the extent
required by applicable law in order to effect the demutualization transaction
described above.
While the parties expect the Transaction to be completed by May 31, 2010, it is
subject to various conditions, and may be delayed or even terminated due to
unforeseen circumstances. If for some reason the Transaction does not occur, the
Current Agreements will not automatically terminate and will remain
4
in effect, and the New Agreements will not be entered into, even if they have
been approved by Fund shareholders. If Proposal 1 is not approved by
shareholders of any Fund, the Board will evaluate other short- and long-term
options permitted by law, which include interim investment management agreements
and reorganization or liquidation of the Fund.
SECTION 15(F) OF THE 1940 ACT
Section 15(f) of the 1940 Act provides that, when a change in control of an
investment adviser occurs, the investment adviser or any of its affiliated
persons may receive any amount or benefit in connection with the change in
control as long as two conditions are met. The first condition specifies that no
"unfair burden" may be imposed on the fund as a result of a transaction relating
to the change in control, or any express or implied terms, conditions or
understandings. The term "unfair burden," as defined in the 1940 Act, includes
any arrangement during the two-year period after the change in control
transaction whereby the investment adviser (or predecessor or successor
adviser), or any "interested person" (as defined in the 1940 Act) of any such
investment adviser, receives or is entitled to receive any compensation,
directly or indirectly, from the investment company or its security holders
(other than fees for bona fide investment advisory or other services) or from
any person in connection with the purchase or sale of securities or other
property to, from, or on behalf of the fund (other than fees for bona fide
principal underwriting services). The second condition specifies that, during
the three-year period immediately following consummation of the change in
control transaction, at least 75% of the fund's board of directors must not be
"interested persons" (as defined in the 1940 Act) of the investment adviser or
predecessor adviser.
Consistent with the conditions of Section 15(f), SecBen and the Purchaser have
agreed that they will not take any action that would have the effect, directly
or indirectly, of causing any requirement of the provisions of Section 15(f) to
be violated with respect to the Transaction. The Advisers represented to the
Board that no unfair burden would be imposed on the Funds as a result of the
Transaction.
APPROVAL OF THE NEW AGREEMENTS BY THE BOARD
At a Special Meeting of the Board held on January 28, 2010 (the "January 2010
Meeting"), at which a majority of the members of the Board (the "Directors"),
including a majority of the Directors who are not "interested persons" (as
defined under the 1940 Act) of the Companies and who are not interested persons
of any party to the New Agreements (the "Independent Directors"), were present,
the Directors considered and voted in favor of the New Agreements, pursuant to
which, subject to their approval by each Fund's shareholders, as applicable, the
Investment Manager and Sub-Adviser will continue to serve as investment manager
and sub-adviser to each Fund, as applicable, after the completion of the
Transaction. Each Adviser's rate of fees for its services to each Fund under a
New Agreement, as applicable, will be the same as its fees under the Current
Agreement. The other terms of the New Agreements will also be the same in all
material respects to those of the Current Agreements. As a result, in reviewing
the New Agreements at the January 2010 Meeting, the Directors also considered
their review of relevant materials relating to the Current Agreements at the
annual renewal meeting on November 10, 2009 (the "2009 Renewal Meeting").
BOARD CONSIDERATIONS IN APPROVING THE NEW AGREEMENTS
Prior to the January 2010 Meeting, representatives of SecBen informed the
Directors that it was in discussions with Guggenheim regarding a potential
arrangement pursuant to which an investor group led by Guggenheim would acquire
control of the Advisers and affiliates. With respect to the Transaction, the
Directors reviewed materials received from SecBen and Guggenheim, including
information relating to the terms of the Transaction. The Directors also
reviewed information regarding Guggenheim, including, but not limited
5
to: (a) certain representations concerning Guggenheim's financial condition; (b)
information regarding Guggenheim's affiliated investment advisers; (c)
information regarding Guggenheim's litigation and regulatory matters, including
representations that there were no material matters; and (d) potential conflicts
of interest. SecBen and Guggenheim also provided the Directors with
presentations that discussed the Transaction and intentions for the business,
operations and personnel of the Investment Manager and Sub-Adviser after the
closing of the Transaction.
In considering the New Agreements at the January 2010 Meeting, the Directors
determined that the New Agreements would enable shareholders of the Funds to
continue to obtain high quality services at a cost that is appropriate,
reasonable, and in the best interests of their shareholders. The Directors,
including the Independent Directors, unanimously approved the New Agreements. In
reaching their decision, the Directors carefully considered information that
they had received throughout the year as part of their regular oversight of the
Funds, including, in particular, information from the Investment Manager and
Sub-Adviser that was provided in connection with the 2009 Renewal Meeting. The
Directors noted that, at the 2009 Renewal Meeting, they had obtained and
reviewed a wide variety of information, including certain comparative
information regarding performance of the Funds relative to performance of other
comparable mutual funds.
The Directors, including the Independent Directors, evaluated a number of
considerations, including among others: (a) the nature, extent and quality of
the services to be provided by the Investment Manager and Sub-Adviser; (b) the
investment performance of the Funds, the Investment Manager and the Sub-Adviser;
(c) the costs of services provided by the Investment Manager and the profits
derived by the Investment Manager from its relationship with the Funds; (d) a
comparison of each Fund's expense ratios and those of similarly situated funds;
(e) benefits (such as soft dollars) to the Investment Manager, Sub-Adviser and
their affiliates from their relationship with the Funds; (f) the expense
limitation/fee waiver agreements between the Investment Manager and certain of
the Funds; and (g) other factors the Directors deemed to be relevant. The
Directors also took into account other considerations that they believed, in
light of the legal advice furnished to them by independent legal counsel and
their own business judgment, to be relevant. Overall, the Directors, including
the Independent Directors, based their decisions on the following
considerations, among others, although they did not identify any consideration
or particular information that was controlling of their decisions:
The nature, extent and quality of the advisory services to be provided. The
Directors concluded that the Investment Manager and Sub-Adviser are capable of
providing high quality services to the Funds, as indicated by the nature and
quality of services provided in the past, their management capabilities, the
professional qualifications and experience of the Investment Manager's and
Sub-Adviser's portfolio managers, and the Investment Manager's investment and
management oversight processes. At the January 2010 Meeting, the Directors noted
that most of the key investment and management personnel of the Investment
Manager and Sub-Adviser servicing the Funds are expected to remain with the
Investment Manager and Sub-Adviser following the Transaction and that the
services provided to the Funds by the Investment Manager and Sub-Adviser, as
applicable, are not expected to materially change. The Directors also considered
SecBen's and Guggenheim's representations to the Directors that the Investment
Manager and Sub-Adviser would continue to provide investment and related
services that were of materially the same quality and quantity as services
provided to the Funds in the past, and that these services are appropriate in
scope and extent in light of the Funds' operations, the competitive landscape of
the investment company business and investor needs. Based on this review, the
Directors concluded that the range and quality of services provided by the
Advisers to the Funds, as applicable, were expected to continue under the New
Agreements at comparable levels.
The investment performance of the Funds. The Directors concluded on the basis of
information supplied by Morningstar, Inc. ("Morningstar") at the 2009 Renewal
Meeting that the Investment Manager and Sub-
6
Adviser had generally achieved investment performance that was satisfactory
relative to comparable funds over trailing periods. Based on the representations
made by SecBen and Guggenheim at the January 2010 Meeting that the Advisers
would continue to operate following the closing of the Transaction in much the
same manner as they operate today, the Directors concluded that the investment
performance of the Advisers was not expected to be affected by the Transaction.
The cost of investment management and sub-advisory services provided and the
level of profitability. At the 2009 Renewal Meeting, on the basis of the
Directors' review of the fees to be charged by the Advisers for their services
and the level of the profitability of the Advisers' relationship with each Fund
under the Current Agreements, the Directors concluded that the level of the
advisory fees and profitability under the Current Agreements are appropriate in
light of the fees and overall expense ratios of comparable investment companies
and the anticipated profitability of the relationship between each Fund and the
Advisers, as applicable. Also, at the 2009 Renewal Meeting, the Directors
determined that the fees and estimated overall expense ratio of the Funds under
the Current Agreements are consistent with, and often below, industry medians,
particularly with respect to mutual funds of comparable size based on
comparative information compiled by Morningstar.
At the January 2010 Meeting, the Directors considered the fact that the fee
rates payable to the Advisers would be the same under each Fund's New Agreement
as they are under such Fund's Current Agreement. The Directors also noted that
the Funds' applicable fee waiver/expense limitations agreements with the
Investment Manager would remain in effect, if the New Agreements are approved by
shareholders and the Transaction is completed. With respect to anticipated
profitability, the Directors noted that it was too early to predict how the
Transaction would affect the Advisers' profitability with respect to the Funds,
but noted that this matter would be given further consideration on an ongoing
basis. Overall, the Directors concluded that the fees to be paid under the
Current Agreements are reasonable.
Whether the investment management fees and sub-advisory fees reflect economies
of scale. The Directors had concluded at the 2009 Renewal Meeting that the fees
paid under the Current Agreements appropriately reflect the current economic
environment for the Advisers and the competitive nature of the mutual fund
market.
The extent to which economies of scale will be realized as the Funds grow. While
the Funds' fees under the Current Agreements do not reduce should Fund assets
grow meaningfully, the Directors determined at the 2009 Renewal Meeting that the
fees payable by the Funds reflect potential future economies of scale to some
extent by virtue of their competitive levels (determined with reference to
industry standards as reported by Morningstar). The Directors noted that the
fees would not change under the New Agreements and that they will have the
opportunity to again review the appropriateness of the fee payable to the
Advisers under the New Agreements when the next renewal of these Agreements
comes before the Board. The Directors further noted Guggenheim's statement that
economies of scale could not be predicted in advance of the closing of the
Transaction.
Benefits (such as soft dollars) to the Advisers from their relationship with the
Funds. The Directors concluded at their 2009 Renewal Meeting that other benefits
described by the Advisers from their past or future relationship with the Funds,
including "soft dollar" benefits in connection with brokerage transactions, are
reasonable and fair, and consistent with industry practice and the best
interests of the Fund and its shareholders. In addition, the Directors also
determined at the 2009 Renewal Meeting that the administration, transfer agency
and fund accounting fees paid by the Funds to the Investment Manager are
reasonable, fair and in the best interests of shareholders in light of the
nature and quality of the services provided, the associated costs, and the
necessity of the services for the Funds' operations and would remain the same
under the proposed arrangements after the Transaction. The Directors also
considered the terms of the Transaction and the financial benefits that it
brings to the parent company of
7
the Investment Manager and noted that those financial benefits are available, in
part, because of the involvement of the Investment Manager in the Transaction.
The Directors also noted that the Transaction is expected to put the Investment
Manager on strong financial footing, enhancing its ability to provide continuous
services to the Funds.
Other considerations. In approving the Agreements, the Directors considered
information and representations made about the Guggenheim organization and its
personnel and the ongoing role that Guggenheim would play with Investors. The
Directors also considered representations that the Advisers, SecBen and
Guggenheim would make a substantial commitment to the recruitment and retention
of high quality personnel, and maintain the financial, compliance and
operational resources reasonably necessary to manage the Funds in a professional
manner that is consistent with the best interests of the Funds and their
shareholders. The Directors also noted that, although the Affiliated Service
Providers will also experience a change of control as a result of the
Transaction, SecBen and Guggenheim have assured the Directors that the there
will be no reduction in the nature and quality of the services provided by the
Affiliated Service Providers to each Fund, as applicable, as a result of the
change of control. The Directors considered these representations and the
financial stability the Transaction was expected to bring to the Advisers and
the Affiliated Service Providers in the context of the current financial
challenges facing certain SBHC affiliates. The Directors also considered
representations by Guggenheim regarding additional resources that could be made
available to the Advisers and the Affiliated Service Providers if beneficial to
their operations.
THE DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE NEW AGREEMENTS. UNMARKED,
PROPERLY SIGNED AND DATED PROXIES WILL BE SO VOTED.
8
PROPOSAL 1
THE APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENTS
WITH RESPECT TO ALL FUNDS
As discussed above, Proposal 1 relates to the approval by shareholders of the
New Investment Management Agreements between the Investment Manager and each of
the Funds. Each Company, on behalf of its underlying Funds, has executed a
Current Investment Management Agreement with the Investment Manager in
connection with advisory services to such Funds. Therefore, this Joint Proxy
Statement solicits proxies with respect to five separate investment management
agreements (i.e., one investment management agreement for each Company). You are
being asked to vote separately on Proposal 1 solely with respect to the Fund(s)
that you own. Forms of the New Investment Management Agreements are attached in
Appendix A.
The terms of each New Investment Management Agreement are substantially
identical to those of the corresponding Current Investment Management Agreement,
except with respect to the date of execution. Consequently, upon shareholder
approval, the Investment Manager will continue to render substantially the same
services to the Funds under the New Investment Management Agreements that it
currently renders to the Funds under the Current Investment Management
Agreements.
As discussed above, the Directors unanimously approved the New Investment
Management Agreements and recommend the approval of the New Investment
Management Agreements to shareholders. For information regarding the Board's
considerations in approving the New Investment Management Agreements, please see
the section above entitled "Board Considerations in Approving the New
Agreements."
The Current Investment Management Agreements will remain in place until the
completion of the Transaction, at which time, as a result of the change in the
control of the Investment Manager, the Current Investment Management Agreements
will terminate. However, completion of the Transaction will be subject to
certain closing conditions, including: (a) the receipt of approvals required for
the assignment or replacement of investment advisory contracts relating to 80%
or more of the total net assets under management by the Investment Manager and
certain affiliates that will be controlled by the Investors; and, (b) with
respect to the Purchase Transaction only, the approval of a corporate
restructuring called a demutualization by the insurance policyholders who
presently own SBHC, to the extent required by applicable law. If for some reason
the Transaction does not occur, the Current Investment Management Agreements
will not automatically terminate and will remain in effect, and the New
Investment Management Agreements will not be entered into, even if they have
been approved by Fund shareholders.
THE INVESTMENT MANAGER
Security Investors, LLC, located at One Security Benefit Place, Topeka, Kansas
66636-0001, currently serves as investment manager to the Funds pursuant to the
Current Investment Management Agreements. Information regarding the Current
Investment Management Agreements, including (a) the date of the agreement, (b)
the date on which it was last approved by shareholders and (c) the rate of
compensation to the Investment Manager, is provided in Appendix B. If the New
Investment Management Agreements are approved by shareholders, they will
continue for an initial term of two years and for subsequent one-year terms so
long as they are renewed annually in accordance with their terms (see discussion
under "Term and Continuance" below).
Information regarding the name(s), address(es) and principal occupation(s) of
the principal executive officer(s) and managing member(s) of the Investment
Manager is set forth in Appendix C. A list of the
9
Directors and officers of each Company who hold positions with the Investment
Manager also is set forth in Appendix C. In addition, set forth in Appendix D-1
is a list of other registered investment companies with similar investment
objectives as each Fund, for which the Investment Manager acts as investment
manager, adviser or sub-adviser.
Currently, the Investment Manager is a wholly-owned subsidiary of SBC. SBC is
wholly owned by SBHC, One Security Benefit Place, Topeka, Kansas 66636-0001.
Upon completion of the Transaction, the Investors will either receive: (a) a
100% ownership stake in SBC, the parent company of the Advisers and affiliates;
or (b) a 100% ownership stake in SBC's asset management business, which includes
the Advisers and certain affiliates. For more information on the Transaction,
please see the section above entitled "Information Regarding the Change in
Control of the Advisers."
MATERIAL TERMS OF THE NEW INVESTMENT MANAGEMENT AGREEMENTS
The following summary of the New Investment Management Agreements summarizes the
material terms of the New Investment Management Agreements and is qualified in
its entirety by reference to the New Investment Management Agreements, forms of
which are attached in Appendix A.
Duties of the Investment Manager. Under the Current Investment Management
Agreements and the New Investment Management Agreements (each, a "Management
Agreement" and collectively, the "Management Agreements"), the Investment
Manager manages the investment operations of the Funds and supervises the
composition of the Funds' portfolios, including the purchase, retention and
disposition of portfolio securities, subject to supervision by the Board. It is
authorized to enter into sub-advisory agreements for investment advisory
services in connection with the management of the Funds. The Investment Manager
has responsibility for all investment advisory services furnished pursuant to
any sub-advisory agreement. The Investment Manager bears: (a) all expenses
incurred by the Investment Manager or by the Funds in connection with managing
the ordinary course of the business of the Funds, other than those assumed by
the Fund; and (b) the fees payable to a sub-adviser pursuant to sub-advisory
agreements between the Investment Manager and any sub-advisers.
Limitation of Liability. Under each Management Agreement, so long as the
Investment Manager provides a Fund the benefit of its best judgment and effort
in rendering investment advisory services, the Investment Manager is not be
liable for any errors of judgment or mistake of law, or for any loss arising out
of any investment if the investment is made with due care and in good faith. The
Investment Manager is not protected for losses arising by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its investment advisory duties.
Term and Continuance. Each Management Agreement provides for an initial term of
two years from the date of implementation. Thereafter, consistent with the
applicable provision of the 1940 Act, if not terminated, each Management
Agreement continues in effect for successive 12-month periods thereafter, unless
terminated, provided each such continuance is specifically approved at least
annually by (a) the vote of a majority of the entire Board of a Company, or by
the vote of holders of a majority of the outstanding voting securities of a
Fund, and (b) the vote of a majority of the Independent Directors cast in person
at a meeting of such Directors called for the purpose of voting upon such
approval.
Each Management Agreement may be terminated with respect to a Fund at any time
without payment of any penalty, by a Fund upon the vote of either a majority of
the Board or by a majority of the outstanding voting securities of the Fund, or
by the Investment Manager, in each case on 60 days' written notice to the other
party. Each Management Agreement will terminate automatically in the event of
its "assignment" (as that term is defined under the 1940 Act).
10
BOARD RECOMMENDATION ON PROPOSAL 1
At the January 2010 Meeting, based on their deliberations on and evaluation of
the information described above, the Directors, including all of the Independent
Directors, unanimously: (a) concluded that the terms of the New Investment
Management Agreements are fair and reasonable; (b) concluded that the Investment
Manager's fees are reasonable in light of the services that the Investment
Manager will provide to the Funds; and (c) agreed to approve the New Investment
Management Agreements for an initial term of two years and to recommend the
approval of the New Investment Management Agreements to shareholders.
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS
OF THE FUNDS VOTE "FOR" PROPOSAL 1
11
PROPOSAL 2
THE APPROVAL OF NEW SUB -ADVISORY AGREEMENTS WITH RESPECT TO:
RYDEX | SGI ALPHA OPPORTUNITY FUND
RYDEX | SGI GLOBAL FUND
RYDEX | SGI GLOBAL INSTITUTIONAL FUND
SERIES D (GLOBAL SERIES)
SERIES Z (ALPHA OPPORTUNITY SERIES)
As discussed above, Proposal 2 relates to the approval by shareholders of the
New Sub-Advisory Agreements between the Investment Manager and the Sub-Adviser
with respect to (a) Rydex | SGI Alpha Opportunity Fund; (b) Rydex | SGI Global
Fund; (c) Rydex | SGI Global Institutional Fund; (d) Series D (Global Series);
and (e) Series Z (Alpha Opportunity Series). This Joint Proxy Statement solicits
proxies with respect to two separate sub-advisory agreements. You are being
asked to vote separately on Proposal 2 solely with respect to the Sub-Advised
Fund(s) that you own. Forms of the New Sub-Advisory Agreements are attached in
Appendix E.
The terms of each New Sub-Advisory Agreement are substantially identical to
those of the corresponding Current Sub-Advisory Agreement, except with respect
to the date of execution. Consequently, upon shareholder approval, the
Sub-Adviser will continue to render substantially the same services to the
Sub-Advised Funds under the New Sub-Advisory Agreements that it currently
renders to the Sub-Advised Funds under the Current Sub-Advisory Agreements.
As discussed above, the Directors unanimously approved the New Sub-Advisory
Agreements and recommend the approval of the New Sub-Advisory Agreements to
shareholders. For information regarding the Board's considerations in approving
the New Sub-Advisory Agreements, please see the section above entitled "Board
Considerations in Approving the New Agreements."
The Current Sub-Advisory Agreements will remain in place until the completion of
the Transaction, at which time, as a result of the change in the control of the
Sub-Adviser, the Current Sub-Advisory Agreements will terminate. Thereafter,
subject to shareholder approval, the New Sub-Advisory Agreements will go into
effect.
However, completion of the Transaction will be subject to certain closing
conditions, including: (a) the receipt of approvals required for the assignment
or replacement of investment advisory contracts relating to 80% or more of the
total net assets under management by the Investment Manager and certain
affiliates that will be controlled by the Investors; and, (b) with respect to
the Purchase Transaction only, the approval of a corporate restructuring called
a demutualization by the insurance policyholders who presently own SBHC, to the
extent required by applicable law. If for some reason the Transaction does not
occur, the Current Sub-Advisory Agreements will not automatically terminate and
will remain in effect, and the New Sub-Advisory Agreements will not be entered
into, even if they have been approved by Fund shareholders.
The Investment Manager and the Funds have received an order from the SEC that
permits them to retain sub-advisers or amend the terms of an existing
sub-advisory agreement without shareholder approval, except when the sub-adviser
is affiliated with the Investment Manager. Since the Sub-Adviser is affiliated
with the Investment Manager, shareholder approval is required to approve the New
Sub-Advisory Agreements.
12
The effectiveness of Proposal 2 is also contingent on the approval of Proposal 1
by shareholders of the corresponding Sub-Advised Funds.
INFORMATION ABOUT THE SUB-ADVISER
Security Global Investors, LLC, located at 801 Montgomery Street, 2nd Floor, San
Francisco, CA 94133-5164, currently serves as sub-adviser to the Sub-Advised
Funds pursuant to the Current Sub-Advisory Agreements. Information regarding the
Current Sub-Advisory Agreement, including (a) the date of the agreement, (b) the
date on which it was last approved by shareholders and (c) the rate of
compensation to the Sub-Adviser, is provided in Appendix F. If the New
Sub-Advisory Agreements are approved by shareholders, they will continue for an
initial term of two years and for subsequent one-year terms so long as they are
renewed annually in accordance with their terms (see discussion under "Term and
Continuance" below).
Information regarding the name(s), address(es) and principal occupation(s) of
the principal executive officer(s) and managing member(s) of the Sub-Adviser is
set forth in Appendix C. A list of the Directors and officers of each Company
who hold positions with the Sub-Adviser also is set forth in Appendix C. In
addition, set forth in Appendix D-2 is a list of other registered investment
companies with similar investment objectives as each Sub-Advised Fund, for which
the Sub-Adviser acts as investment manager, adviser or sub-adviser.
Currently, the Sub-Adviser is a wholly-owned subsidiary of SBC. SBC is a
wholly-owned subsidiary of SBHC, located at One Security Benefit Place, Topeka,
Kansas 66636-0001. Upon completion of the Transaction, the Investors will either
receive: (a) a 100% ownership stake in SBC, the parent company of the Advisers
and affiliates; or (b) a 100% ownership stake in SBC's asset management
business, which includes the Advisers and certain affiliates. For more
information on the Transaction, please see the section above entitled
"Information Regarding the Change in Control of the Advisers."
MATERIAL TERMS OF THE NEW SUB-ADVISORY AGREEMENTS
The following summary of the New Sub-Advisory Agreements between the Investment
Manager and Sub-Adviser summarizes their material terms and is qualified in its
entirety by reference to such New Sub-Advisory Agreements, forms of which are
attached in Appendix F.
Duties of the Sub-Adviser. Under the Current Sub-Advisory Agreements and the New
Sub-Advisory Agreements, each between the Investment Manager and Sub-Adviser
(collectively, the "Sub-Advisory Agreements"), the Sub-Adviser, subject to the
supervision of the Investment Manager and the Board, is responsible for managing
a Sub-Advised Fund's assets (or a portion thereof, as applicable), including
making investment decisions and placing orders to purchase and sell securities
for the Sub-Advised Fund, all in accordance with the investment objective and
policies of the Sub-Advised Fund as reflected in its current prospectus and
statement of additional information and as may be adopted from time to time by
the Board. In accordance with applicable requirements, the Sub-Adviser will also
maintain, and provide the Investment Manager with, all books and records
relating to the transactions it executes or that are otherwise required, and
render to a Sub-Advised Fund and the Investment Manager such periodic and
special reports at any time upon reasonable request.
Limitation of Liability. The Sub-Advisory Agreements provide that, in the
absence of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or breach of its duties thereunder, the Sub-Adviser
will not be liable for any act or omission in connection with its activities as
sub-adviser to the Sub-Advised Funds.
13
Term and Continuance. Under their terms, the Sub-Advisory Agreements will remain
in full force and effect for a period of up to two years from the date of their
execution, and, consistent with the applicable provision of the 1940 Act, will
continue thereafter as long as their continuance is approved at least annually
by the Board or by vote of a majority of the outstanding shares of a Sub-Advised
Fund, as well as by a majority of the Independent Directors by vote cast in
person at a meeting called for that purpose. However, the Sub-Advisory
Agreements may be terminated at any time upon 60 days' written notice without
the payment of any penalty, either by vote of a majority of the Board, by vote
of a majority of the outstanding shares of a Sub-Advised Fund, or by the
Investment Manager. The Investment Manager may terminate a Sub-Advisory
Agreement upon breach by the Sub-Adviser of its representations or warranties,
which shall not have been cured within 20 days of receipt of written notice of
such breach, or the Sub-Adviser becoming unable to discharge its duties and
obligations under such Sub-Advisory Agreement. Additionally, each New
Sub-Advisory Agreement will terminate immediately in the event of its assignment
or upon the termination of the corresponding Investment Management Agreement.
The Sub-Adviser may terminate a Sub-Advisory Agreement with respect to a
Sub-Advised Fund on 120 days' written notice to the Investment Manager and the
corresponding Fund.
BOARD RECOMMENDATION ON PROPOSAL 2
At the January 2010 Meeting, based on their deliberations on and evaluation of
the information described above, the Directors, including all of the Independent
Directors, unanimously: (a) concluded that the terms of the New Sub-Advisory
Agreements are fair and reasonable; (b) concluded that the Sub-Adviser's fees
are reasonable in light of the services that the Sub-Adviser will provide to the
Sub-Advised Funds; and (c) agreed to approve the New Sub-Advisory Agreements for
an initial term of two years and to recommend the approval of the New
Sub-Advisory Agreements to shareholders.
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS
OF THE SUB-ADVISED FUNDS VOTE "FOR" PROPOSAL 2
14
OTHER BUSINESS
The Directors do not know of any matters to be presented at the Meeting other
than those set forth in this Joint Proxy Statement. If other business should
properly come before the Meeting, proxies will be voted in accordance with the
judgment of the persons named in the accompanying proxy.
ADDITIONAL INFORMATION
ADMINISTRATOR, PRINCIPAL UNDERWRITERS AND TRANSFER AGENT
The Investment Manager also serves as each Fund's administrator and transfer
agent. The principal underwriter/distributor of each of Security Equity Fund,
Security Large Cap Value Fund, Security Mid Cap Growth Fund, Security Income
Fund and SBL Fund is Rydex Distributors, Inc. ("Rydex Distributors"), located at
9601 Blackwell Road, Suite 500, Rockville, Maryland 20850, an affiliate of the
Advisers. Another affiliate of the Advisers, Security Distributors, Inc.
("Security Distributors"), located at One Security Benefit Place, Topeka, Kansas
66636, also serves as principal underwriter/distributor of SBL Fund. Information
regarding the fees paid by each Fund to the Investment Manager for
administrative and transfer agent services during the previous fiscal year is
provided in Appendix B. Information regarding the fees paid by each Fund to
Rydex Distributors and/or Security Distributors (or any predecessor affiliated
distributor), as applicable, during the previous fiscal year also is provided in
Appendix B.
Although the Investors will acquire control of the Affiliated Service Providers
as a result of the Transaction, shareholder approval is not required in order
for the Affiliated Service Providers to continue providing services to the Funds
after the closing of the Transaction. In addition, the Investment Manager, which
also serves as each Fund's administrator and transfer agent under separate
agreements with the Funds, will continue to serve the Funds in those roles
without shareholder approval. The Directors have been assured that there will be
no material change in the nature or quality of the services provided by the
Affiliated Service Providers to each Fund, as applicable, due to the changes in
control.
OTHER SUB-ADVISERS FOR CERTAIN FUNDS
Mainstream Investment Advisers, LLC ("Mainstream"), 101 West Spring Street, New
Albany, Indiana 47150, is currently the sub-adviser to Rydex | SGI Alpha
Opportunity Fund and Series Z (Alpha Opportunity Series). Northern Trust
Investments, N.A. ("Northern Trust"), 50 South LaSalle Street, Chicago, Illinois
60603, is currently the sub-adviser to Series H (Enhanced Index Series). T. Rowe
Price Associates, Inc. ("T. Rowe Price"), 100 East Pratt Street, Baltimore,
Maryland 21202, is currently the sub-adviser to Series N (Managed Asset
Allocation Series).
The Investment Manager and the Funds have received an order from the SEC that
permits them to retain sub-advisers or amend the terms of an existing
sub-advisory agreement without shareholder approval, except when the sub-adviser
is affiliated with the Investment Manager. As a result, although the
sub-advisory agreements with Mainstream, Northern Trust and T. Rowe Price will
be terminated upon completion of the Transaction, shareholder approval of the
new sub-advisory agreements with Mainstream, Northern Trust and T. Rowe Price is
not required under the SEC exemptive order. At the January 2010 Meeting, the
Directors have unanimously approved the new sub-advisory agreements with
Mainstream, Northern Trust and T. Rowe Price.
15
AFFILIATIONS AND AFFILIATED BROKERAGE
During the Funds' most recent fiscal years, the Funds paid no commissions on
portfolio brokerage transactions to brokers who may be deemed to be affiliated
persons of the Funds, the Investment Manager or the Sub-Adviser, or affiliated
persons of such persons ("Affiliated Brokers").
OTHER INFORMATION
Proxy materials, reports and other information filed by the Funds can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
100 F Street, NE, Washington, DC 20549. The SEC maintains an Internet web site
(at http://www.sec.gov) which contains other information about the Funds.
VOTING INFORMATION
Proxy Solicitation. The principal solicitation of proxies will be by the mailing
of this Joint Proxy Statement on or about [INSERT MAILING DATE], but proxies may
also be solicited by telephone and/or in person by representatives of the
Companies, regular employees of the Investment Manager or Sub-Adviser, their
affiliate(s), or The Altman Group, a private proxy services firm. If we have not
received your vote as the date of the Meeting approaches, you may receive a
telephone call from these parties to ask for your vote. Arrangements will be
made with brokerage houses and other custodians, nominees, and fiduciaries to
forward proxies and proxy materials to their principals.
Cost of the Meeting. The cost of the Meeting, including the costs of retaining
The Altman Group, preparing and mailing of the notice, proxy statement and
proxy, and the solicitation of proxies, including reimbursement to
broker-dealers and others who forwarded proxy materials to their clients, will
be borne by SecBen and/or the Investors. The estimated cost of retaining The
Altman Group is approximately $[o].
Shareholder Voting. Shareholders of the Funds who own shares at the close of
business on the Record Date will be entitled to notice of, and vote at, the
Meeting. Shareholders are entitled to one vote for each share held and
fractional votes for fractional shares held. With respect to SBL Fund, the
number of shares of each Fund as to which voting instructions may be given to
the Company is determined by dividing the amount of the shareholder's variable
contract account value attributable to a Fund on the Record Date by the net
asset value per share of the Fund as of the same date. Fractional votes will be
counted.
Information regarding the number of issued and outstanding shares of each Fund
as of the Record Date is provided in Appendix G, representing the same number of
votes for each of such Funds. The persons (or, with respect to SBL Fund, the
Insurance Companies) who are known to have owned beneficially 5% or more of each
Fund's outstanding shares as of the Record Date are listed in Appendix H. [As of
the Record Date, the Directors and officers, as a group, owned less than 1% of
the outstanding shares of each Fund. As of the Record Date, there were no
persons who were known to control each Fund.]
With respect to SBL Fund, Insurance Companies that use shares of a Fund as
funding media for their variable annuity contracts and variable life policies
will vote shares of the Fund held by their separate accounts in accordance with
the instructions received from owners of the variable insurance contracts. An
Insurance Company also will vote shares of a Fund held in such separate account
for which it has not received timely instructions in the same proportion as it
votes shares held by that separate account for which it has received
instructions. An Insurance Company whose separate account invests in a Fund will
vote shares by its general account and its subsidiaries in the same proportion
as other votes cast by its
16
separate account in the aggregate. As a result, a small number of owners of
variable annuity contracts and variable life policies could determine the
outcome of the vote if other owners fail to vote.
More than 50% of a Fund's shares, represented in person or by proxy, will
constitute a quorum for the Meeting and must be present for the transaction of
business at the Meeting with respect to the Fund. Only proxies that are voted,
abstentions and "broker non-votes" will be counted toward establishing a quorum.
"Broker non-votes" are shares held by a broker or nominee as to which
instructions have not been received from the beneficial owners or persons
entitled to vote, and the broker or nominee does not have discretionary voting
power.
In the event that a quorum is not present at the Meeting, or a quorum is present
but sufficient votes to approve Proposal 1 and/or Proposal 2 are not received,
the persons named as proxies may propose one or more adjournments of the Meeting
to permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of a Fund's shares represented at the Meeting in
person or by proxy (excluding abstentions and broker non-votes). The persons
named as proxies will vote those proxies that they are entitled to vote "FOR"
Proposal 1 and "FOR" Proposal 2 in favor of an adjournment of the Meeting, and
will vote those proxies required to be voted "AGAINST" Proposals 1 and 2 against
such adjournment. A shareholder vote may be taken on any proposal prior to any
such adjournment if sufficient votes have been received and it is otherwise
appropriate.
The person(s) named as proxies on the enclosed proxy card will vote in
accordance with your directions, if your proxy is received properly executed. If
we receive your proxy, and it is executed properly, but you give no voting
instructions with respect to any proposal, your shares will be voted "FOR"
Proposal 1 and "FOR" Proposal 2. The duly appointed proxies may, in their
discretion, vote upon such other matters as may properly come before the
Meeting.
In order that your shares may be represented at the Meeting, you are requested
to vote your shares by mail, Internet or telephone by following the enclosed
instructions. IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT RETURN YOUR
PROXY CARD, UNLESS YOU LATER ELECT TO CHANGE YOUR VOTE. You may revoke your
proxy: (a) at any time prior to its exercise by written notice of its revocation
to the secretary of a Company prior to the Meeting; (b) by the subsequent
execution and return of another proxy prior to the Meeting; or (c) by being
present and voting in person at the Meeting and giving oral notice of revocation
to the chair of the Meeting. However, attendance in-person at the Meeting, by
itself, will not revoke a previously-tendered proxy.
Required Vote. Approval of Proposal 1 and Proposal 2 requires the vote of a
"majority of the outstanding voting securities" of a Fund, which means the vote
of 67% or more of the shares that are present at the Meeting, if the holders of
more than 50% of the outstanding shares are present or represented by proxy, or
the vote of more than 50% of the Fund's outstanding shares, whichever is less.
Accordingly, assuming the presence of a quorum, abstentions and broker non-votes
have the effect of a negative vote on Proposal 1 and Proposal 2.
The Current Agreements will remain in place until the completion of the
Transaction, at which time, as a result of the change in the control of the
Advisers, the Current Agreements will terminate and, subject to shareholder
approval, the New Agreements will go into effect. As discussed in the section
above entitled "Information Regarding the Change in Control of the Advisers,"
completion of the Transaction will be subject to certain closing conditions. As
a result, if for some reason the Transaction does not occur, the Current
Agreements will not automatically terminate and will remain in effect, and the
New Agreements will not be entered into, even if they have been approved by Fund
shareholders. If Proposal 1 and/or Proposal 2 are not approved by shareholders
of any Fund, the Board will evaluate other short- and long-term options.
17
In a separate Proxy Statement/Prospectus, shareholders of SBL Fund, Series H are
being asked to approve a Plan of Reorganization relating to the reorganization
of SBL Fund, Series H into SBL Fund, Series A (the "Reorganization"). However,
the consummation of the Reorganization is contingent upon approval by
shareholders of SBL Fund, Series H and SBL Fund, Series A of Proposal 1
contained in this Joint Proxy Statement, if such shareholder vote on Proposal 1
takes place. Thus, upon approval by shareholders of SBL Fund, Series H of the
Reorganization and if a vote on Proposal 1 contained in this Joint Proxy
Statement takes place, the Reorganization will be consummated only if
shareholders of both SBL Fund, Series H and SBL Fund, Series A approve Proposal
1.
Shareholders Sharing the Same Address. As permitted by law, only one copy of
this Joint Proxy Statement may be delivered to shareholders residing at the same
address, unless such shareholders have notified the Companies of their desire to
receive multiple copies of the shareholder reports and proxy statements that the
Companies send. If you would like to receive an additional copy, please contact
the Companies by writing to the Companies' address, or by calling the telephone
number shown on the front page of this Joint Proxy Statement. A Company will
then promptly deliver, upon request, a separate copy of this Joint Proxy
Statement to any shareholder residing at an address to which only one copy was
mailed. Shareholders wishing to receive separate copies of a Company's
shareholder reports and proxy statements in the future, and shareholders sharing
an address that wish to receive a single copy if they are receiving multiple
copies, should also send a request as indicated.
SHAREHOLDER PROPOSALS
As a general matter, each Company does not hold annual meetings of shareholders.
Shareholders wishing to submit proposals for inclusion in a proxy statement for
a subsequent shareholders' meeting should send their written proposal to the
secretary of a Company, One Security Benefit Place, Topeka, Kansas 66636-0001.
Proposals must be received a reasonable time before the Companies begin to print
and set the proxy materials in order to be considered for inclusion in the proxy
materials for the meeting. Timely submission of a proposal does not, however,
necessarily mean that the proposal will be included. Persons named as proxies
for any subsequent shareholders' meeting will vote in their discretion with
respect to proposals submitted on an untimely basis.
TO ENSURE THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING, PROMPT EXECUTION AND
RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, ALONG WITH INSTRUCTIONS ON HOW TO
VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU PREFER TO VOTE BY ONE OF THOSE
METHODS.
By Order of the Boards of Directors,
Sincerely,
/s/Richard M. Goldman
Richard M. Goldman
President, Chairman of the
Boards of Directors
18
APPENDIX A
FORMS OF INVESTMENT MANAGEMENT AGREEMENTS
A-1
INVESTMENT MANAGEMENT AGREEMENT
This Agreement, made and entered into this [ ] day of [ ], 2010 by and between
SECURITY EQUITY FUND, a Kansas corporation (hereinafter referred to as the
"Fund"), and SECURITY INVESTORS, LLC, a Kansas limited liability company
(hereinafter referred to as the "Adviser").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end, management investment
company registered under the Investment Company Act of 1940 ("1940 Act"); and
WHEREAS, the Adviser is willing to provide investment research and advice to the
Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties agree as follows:
1. EMPLOYMENT OF THE ADVISER. The Fund hereby employs the Adviser to act
as investment adviser to the Fund with respect to the investment of
its assets and to supervise and arrange for the purchase of securities
of the Fund and the sales of securities held in the portfolio of the
Fund, subject always to the supervision of the Board of Directors of
the Fund (or a duly appointed committee thereof), during the period
and upon and subject to the terms and conditions described herein. The
Adviser agrees to maintain sufficient trained personnel and equipment
and supplies to perform its responsibilities under this Agreement and
in conformity with the current Prospectus(es) of the Fund and such
other reasonable standards of performance as the Fund may from time to
time specify.
The Adviser hereby accepts such employment and agrees to perform the
services required by this Agreement for the compensation herein
provided.
2. ALLOCATION OF EXPENSES AND CHARGES.
(a) EXPENSES OF THE ADVISER. The Adviser shall pay all expenses in
connection with the performance of its services under this Agreement,
except as provided otherwise herein.
(b) EXPENSES OF THE FUND. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse the Adviser for the
payment of the following described expenses of the Fund whether or not
billed to the Fund, the Adviser or any related entity:
(i) brokerage fees and commissions;
(ii) taxes;
(iii)interest expenses;
(iv) any extraordinary expenses approved by the Board of Directors of
the Fund; and
(v) distribution fees paid under the Fund's Class A, Class B and
Class C Distribution Plans;
A-2
and, in addition to those expenses set forth above, the Fund
shall pay all of its expenses whether or not billed to the Fund,
the Adviser or any related entity.
(c) EXPENSE CAP. For each of the Fund's full fiscal years that this
Agreement remains in force, the Adviser agrees that if total annual
expenses of each Series of the Fund identified below, exclusive of
interest, taxes, extraordinary expenses (such as litigation),
brokerage fees and commissions, and 12b-1 fees paid under a Fund's
Class A, Class B or Class C Distribution Plans, but inclusive of the
Adviser's compensation, exceeds the amount set forth below (the
"Expense Cap"), the Adviser shall 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 shall not
exceed the Expense Cap. If this Agreement shall be effective for only
a portion of a Series' fiscal year, then the maximum annual expenses
shall be prorated for such portion.
EXPENSE CAP
Large Cap Concentrated Growth Series, Class A, B and C - 1.75%
3. COMPENSATION OF THE ADVISER.
(a) As compensation for the investment advisory services to be rendered by
the Adviser to Global Series, Global Institutional Fund and Small Cap
Value Series, for each of the years this Agreement is in effect, each
of the foregoing shall pay the Adviser an annual fee equal to 1.00% of
its respective average daily net assets. Such fee shall be calculated
daily and payable monthly. As compensation for the investment advisory
services to be rendered by the Adviser to Large Cap Core Series, All
Cap Growth Series, Large Cap Concentrated Growth Series and Mid Cap
Value Institutional Fund, for each of the years this Agreement is in
effect, each of the foregoing shall pay the Adviser an annual fee
equal to 0.75% of its respective average daily net assets. As
compensation for the investment advisory services to be rendered by
the Adviser to Small Cap Growth Series, for each of the years this
Agreement is in effect, Small Cap Growth Series shall pay the Adviser
an annual fee equal to 0.85% of average daily net assets. Such fee
shall be calculated daily and payable monthly. As compensation for the
investment advisory services to be rendered by the Adviser to Mid Cap
Value Series for each of the years this Agreement is in effect, the
Mid Cap Value Series shall pay the Adviser an annual fee equal to
1.00% of its average daily net assets of $200 million or less; plus an
annual rate of 0.75% of its average daily net assets of more than $200
million. Such fee shall be calculated daily and payable monthly. As
compensation for the investment advisory services to be rendered by
the Adviser to All Cap Value Series for each of the years this
Agreement is in effect, the All Cap Value Series shall pay the Adviser
an annual fee equal to 0.70% of its average daily net assets. Such fee
shall be calculated daily and payable monthly. As compensation for the
investment advisory services to be rendered by the Adviser to Alpha
Opportunity Series for each of the years this Agreement is in effect,
the Alpha Opportunity Series shall pay the Adviser an annual fee equal
to 1.25% of its average daily net assets. Such fee shall be calculated
daily and payable monthly. If this Agreement shall be effective for
only a portion of a year, then the Adviser's compensation for said
year shall be prorated for such portion. For purposes of this Section
3, the value of the net assets of each Series shall be computed in the
same manner at the end of the
A-3
business day as the value of such net assets is computed in connection
with the determination of the net asset value of the Fund's shares as
described in the Fund's prospectus(es).
(b) For each of the Fund's fiscal years this Agreement remains in force,
the Adviser agrees that if total annual expenses of any Series of the
Fund, exclusive of interest and taxes, extraordinary expenses (such as
litigation) and distribution fees paid under the Fund's Class A, Class
B and Class C Distribution Plans, but inclusive of the Adviser's
compensation, exceed any expense limitation imposed by state
securities law or regulation in any state in which shares of such
Series of the Fund are then qualified for sale, as such regulations
may be amended from time to time, the Adviser will contribute to such
Series such funds or waive such portion of its fee, adjusted monthly,
as may be requisite to insure that such annual expenses will not
exceed any such limitation. If this Agreement shall be effective for
only a portion of any Series' fiscal year, then the maximum annual
expenses shall be prorated for such portion. Brokerage fees and
commissions incurred in connection with the purchase or sale of any
securities by a Series shall not be deemed to be expenses within the
meaning of this paragraph (b).
4. INVESTMENT ADVISORY DUTIES.
(a) INVESTMENT ADVICE. The Adviser shall regularly provide the Fund with
investment research, advice and supervision, continuously furnish an
investment program, recommend which securities shall be purchased and
sold and what portion of the assets of the Fund shall be held
uninvested and arrange for the purchase of securities and other
investments for the Fund and the sale of securities and other
investments held in the portfolio of the Fund. All investment advice
furnished by the Adviser to the Fund under this Section 4 shall at all
times conform to any requirements imposed by the provisions of the
Fund's Articles of Incorporation and Bylaws, the 1940 Act, the
Investment Advisors Act of 1940 and the rules and regulations
promulgated thereunder, and other applicable provisions of law, and
the terms of the registration statements of the Fund under the
Securities Act of 1933 ("1933 Act") and/or the 1940 Act, as may be
applicable at the time, all as from time to time amended. The Adviser
shall advise and assist the officers or other agents of the Fund in
taking such steps as are necessary or appropriate to carry out the
decisions of the Board of Directors of the Fund (and any duly
appointed committee thereof) with regard to the foregoing matters and
the general account of the Fund's business.
(b) SUBADVISERS. Subject to the provisions of the 1940 Act and any
applicable exemptions thereto, the Adviser is authorized, but is under
no obligation, to enter into sub-advisory agreements (the
"Sub-Advisory Agreements") with one or more subadvisers (each a
"Subadviser") to provide investment advisory services to any series of
the Fund. Each Subadviser shall have investment discretion with
respect to the assets of the series assigned to that Subadviser by the
Adviser. Consistent with the provisions of the 1940 Act and any
applicable exemption thereto, the Adviser may enter into Sub-Advisory
Agreements or amend Sub-Advisory Agreements without the approval of
the shareholders of the affected series.
A-4
(c) PORTFOLIO TRANSACTIONS AND BROKERAGE.
(i) Transactions in portfolio securities shall be effected by the
Adviser, through brokers or otherwise (including affiliated
brokers), in the manner permitted in this Section 4 and in such
manner as the Adviser shall deem to be in the best interests of
the Fund after consideration is given to all relevant factors.
(ii) In reaching a judgment relative to the qualification of a broker
to obtain the best execution of a particular transaction, the
Adviser may take into account all relevant factors and
circumstances, including the size of any contemporaneous market
in such securities; the importance to the Fund of speed and
efficiency of execution; whether the particular transaction is
part of a larger intended change of portfolio position in the
same securities; the execution capabilities required by the
circumstances of the particular transaction; the capital required
by the transaction; the overall capital strength of the broker;
the broker's apparent knowledge of or familiarity with sources
from or to whom such securities may be purchased or sold; as well
as the efficiency, reliability and confidentiality with which the
broker has handled the execution of prior similar transactions.
(iii) Subject to any statements concerning the allocation of brokerage
contained in the Fund's Prospectus(es) or Statement(s) of
Additional Information, the Adviser is authorized to direct the
execution of portfolio transactions for the Fund to brokers who
furnish investment information or research service to the
Adviser. Such allocations shall be in such amounts and
proportions as the Adviser may determine. If the transaction is
directed to a broker providing brokerage and research services to
the Adviser, the commission paid for such transaction may be in
excess of the commission another broker would have charged for
effecting that transaction, if the Adviser shall have determined
in good faith that the commission is reasonable in relation to
the value of the brokerage and research services provided, viewed
in terms of either that particular transaction or the overall
responsibilities of the Adviser with respect to all accounts as
to which it now or hereafter exercises investment discretion For
purposes of the immediately preceding sentence, "providing
brokerage and research services" shall have the meaning generally
given such terms or similar terms under Section 28(e)(3) of the
Securities Exchange Act of 1934, as amended.
(iv) In the selection of a broker for the execution of any transaction
not subject to fixed commission rates, the Adviser shall have no
duty or obligation to seek advance competitive bidding for the
most favorable negotiated commission rate to be applicable to
such transaction, or to select any broker solely on the basis of
its purported or "posted" commission rates.
(v) In connection with transactions on markets other than national or
regional securities exchanges, the Fund will deal directly with
the selling principal or market maker without incurring charges
for the services of a
A-5
broker on its behalf unless, in the best judgment of the Adviser,
better price or execution can be obtained by utilizing the
services of a broker.
(d) LIMITATION OF LIABILITY OF THE ADVISER WITH RESPECT TO RENDERING
INVESTMENT ADVISORY SERVICES. So long as the Adviser shall give the
Fund the benefit of its best judgment and effort in rendering
investment advisory services hereunder, the Adviser shall not be
liable for any errors of judgment or mistake of law, or for any loss
sustained by reason of the adoption of any investment policy or the
purchase, sale or retention of any security on its recommendation
shall have been based upon its own investigation and research or upon
investigation and research made by any other individual, firm or
corporation, if such recommendation shall have been made and such
other individual, firm or corporation shall have been selected with
due care and in good faith. Nothing herein contained shall, however,
be construed to protect the Adviser against any liability to the Fund
or its shareholders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Section 4.
As used in this Section 4, the "Adviser" shall include directors,
officers and employees of the Adviser, as well as the Adviser itself.
5. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent
the Adviser or any officer thereof from acting as investment adviser for
any other person, firm or corporation, nor shall it in any way limit or
restrict the Adviser or any of its directors, officers, stockholders or
employees from buying, selling, or trading any securities for their own
accounts or for the accounts of others for whom they may be acting;
provided, however, that the Adviser expressly represents that it will
undertake no activities which, in its judgment, will conflict with the
performance of its obligations to the Fund under this Agreement. The Fund
acknowledges that the Adviser acts as investment adviser to other
investment companies, and it expressly consents to the Adviser acting as
such; provided, however, that if in the opinion of the Adviser, particular
securities are consistent with the investment objectives of, and desirable
purchases or sales for the portfolios of one or more of such other
investment companies or series of such companies at approximately the same
time, such purchases or sales will be made on a proportionate basis if
feasible, and if not feasible, then on a rotating or other equitable basis.
6. AMENDMENT. This Agreement may be amended at any time, without shareholder
approval to the extent permitted by applicable law, 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(es) which would
require a change in the Adviser's obligations hereunder shall be subject to
the Adviser's approval, which shall not be unreasonably withheld.
7. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall continue in
force with respect to a Series for an initial term of up to two years, and
then for successive 12-month periods thereafter, unless terminated,
provided each such continuance is specifically approved at least annually
by (a) the vote of a majority of the entire Board of Directors of the Fund,
or by the vote of the holders of a majority of the outstanding voting
securities of each series of the Fund (as defined in the 1940 Act), and (b)
the vote of a majority of the directors of the Fund who are not parties to
this Agreement or interested persons (as such terms are defined in the
Investment Company Act of 1940) of any such party cast in person at a
meeting of such directors called for the purpose of voting upon such
approval.
A-6
In the event a majority of the outstanding shares of one series vote for
continuance of the Agreement, it will be continued for that series even
though the Agreement is not approved by either a majority of the
outstanding shares of any other series or by a majority of outstanding
shares of the Fund.
Upon this Agreement becoming effective, any previous Agreement between the
Fund and the Adviser providing for investment advisory services shall
concurrently terminate, except that such termination shall not affect any
fees accrued and guarantees of expenses with respect to any period prior to
termination.
This Agreement may be terminated at any time as to any series of the Fund
without payment of any penalty, by the Fund upon the vote of a majority of
the Fund's Board of Directors or, by a majority of the outstanding voting
securities of the applicable series of the Fund, or by the Adviser, in each
case on sixty (60) days' written notice to the other party. This Agreement
shall automatically terminate in the event of its assignment (as such term
is defined in the 1940 Act).
8. 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.
9. APPLICABLE LAW. This Agreement shall be subject to and construed in
accordance with the laws of the State of Kansas.
A-7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereto duly authorized on the day, month
and year first above written.
SECURITY EQUITY FUND
By:
---------------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
---------------------------------------
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By:
---------------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
---------------------------------------
Name: Amy J. Lee
Title: Secretary
A-8
INVESTMENT MANAGEMENT AGREEMENT
This Agreement, made and entered into as of [ ], by and between SECURITY LARGE
CAP VALUE FUND, a Kansas corporation (hereinafter referred to as the "Fund"),
and SECURITY INVESTORS, LLC, a limited liability company (hereinafter referred
to as the "Adviser").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management investment
company registered under the Investment Company Act of 1940 ("1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of capital stock in separate
Series, with each such Series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund currently offers shares in two separate series, including the
Large Cap Value Series and the Large Cap Value Institutional Series, such series
together with all other series subsequently established by the Fund with respect
to which the Fund desires to retain the Adviser to render investment advisory
services hereunder and with respect to which the Adviser is willing so to do,
being herein collectively referred to as the "Series"; and
WHEREAS, the Adviser is willing to provide investment research and advice to the
Fund on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties agree as follows:
1. EMPLOYMENT OF THE ADVISER. The Fund hereby employs the Adviser to act
as investment adviser to the Fund with respect to the investment of
its assets and to supervise and arrange for the purchase of securities
of the Fund and the sales of securities held in the portfolio of the
Fund, subject always to the supervision of the Board of Directors of
the Fund (or a duly appointed committee thereof), during the period
and upon and subject to the terms and conditions described herein. The
Adviser agrees to maintain sufficient trained personnel and equipment
and supplies to perform its responsibilities under this Agreement and
in conformity with the current Prospectus(es) of the Fund and such
other reasonable standards of performance as the Fund may from time to
time specify.
The Adviser hereby accepts such employment and agrees to perform the
services required by this Agreement for the compensation herein
provided.
2. ALLOCATION OF EXPENSES AND CHARGES.
(a) EXPENSES OF THE ADVISER. The Adviser shall pay all expenses in
connection with the performance of its services under this
Agreement, except as provided otherwise herein.
(b) EXPENSES OF THE FUND. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse the Adviser for
the payment of the following described expenses of the Fund
whether or not billed to the Fund, the Adviser or any related
entity;
A-9
(i) brokerage fees and commissions;
(ii) taxes;
(iii) interest expenses;
(iv) any extraordinary expenses approved by the Board of
Directors of the Fund; and
(v) distribution feespaid under the Fund's Class A, Class B and
Class C Distribution Plans;
and, in addition to those expenses set forth above, the Fund
shall pay all of its expenses whether or not billed to the
Fund, the Adviser or any related entity.
3. COMPENSATION OF THE ADVISER.
(a) As compensation for the investment advisory services to be
rendered by the Adviser to the Fund for each of the years this
Agreement is in effect, the Fund shall pay the Adviser an annual
fee equal to 0.65% of the Fund's average daily net assets. Such
fee shall be calculated daily and payable monthly. If this
Agreement shall be effective for only a portion of a year, then
the Adviser's compensation for said year shall be prorated for
such portion. For purposes of this Section 3, the value of the
net assets of the Fund shall be computed in the same manner at
the end of the business day as the value of such net assets is
computed in connection with the determination of the net asset
value of the Fund's shares as described in the Fund's
Prospectus(es).
(b) For each of the Fund's fiscal years that this Agreement remains
in force, the Adviser agrees that if total annual expenses of any
Series of the Fund, exclusive of interest and taxes,
extraordinary expenses (such as litigation), distribution fees
paid by the Fund under the Fund's Class A, Class B and Class C
Distribution Plans, but inclusive of the Adviser's compensation,
exceed any expense limitation imposed by state securities law or
regulation in any state in which shares of such Series of the
Fund are then qualified for sale, as such regulations may be
amended from time to time, the Adviser will contribute to such
Series such funds or waive such portion of its fee, adjusted
monthly, as may be requisite to insure that such annual expenses
will not exceed any such limitation. If this Agreement shall be
effective for only a portion of any fiscal year, then the maximum
annual expenses shall be prorated for such portion. Brokerage
fees and commissions incurred in connection with the purchase or
sale of any securities by the Fund shall not be deemed to be
expenses within the meaning of this paragraph (b).
4. INVESTMENT ADVISORY DUTIES.
(a) INVESTMENT ADVICE. The Adviser shall regularly provide the Fund
with investment research, advice and supervision, continuously
furnish an investment program, recommend which securities shall
be purchased and sold and what portion of the assets of the Fund
shall be held uninvested and arrange for the purchase of
securities and other investments for the Fund and the sale of
securities and other investments held in the portfolio of the
Fund. All investment advice furnished by the Adviser to the Fund
under this Section 4 shall at all times conform to any
requirements imposed by the provisions of the Fund's Articles of
Incorporation and Bylaws, the 1940 Act, the Investment Advisors
Act of 1940
A-10
and the rules and regulations promulgated thereunder, and other
applicable provisions of law, and the terms of the registration
statement of the Fund under the Securities Act of 1933 ("1933
Act") and/or the 1940 Act, as may be applicable at the time, all
as from time to time amended The Adviser shall advise and assist
the officers or other agents of the Fund in taking such steps as
are necessary or appropriate to carry out the decisions of the
Board of Directors of the Fund (and any duly appointed committee
thereof) with regard to the foregoing matters and the general
account of the Fund's business.
(b) SUBADVISERS. Subject to the provisions of the 1940 Act and any
applicable exemptions thereto, the Adviser is authorized, but is
under no obligation, to enter into sub-advisory agreements (the
"Sub-Advisory Agreements") with one or more subadvisers (each a
"Subadviser") to provide investment advisory services to any
series of the Fund. Each Subadviser shall have investment
discretion with respect to the assets assigned to that Subadviser
by the Adviser. Consistent with the provisions of the 1940 Act
and any applicable exemption thereto, the Adviser may enter into
Sub-Advisory Agreements or amend Sub-Advisory Agreements without
the approval of the shareholders of the affected series.
(c) PORTFOLIO TRANSACTIONS AND BROKERAGE.
(i) Transactions in portfolio securities shall be effected by
the Adviser, through brokers or otherwise (including
affiliated brokers), in the manner permitted in this Section
4 and in such manner as the Adviser shall deem to be in the
best interests of the Fund after consideration is given to
all relevant factors.
(ii) In reaching a judgment relative to the qualification of a
broker to obtain the best execution of a particular
transaction, the Adviser may take into account all relevant
factors and circumstances, including the size of any
contemporaneous market in such securities; the importance to
the Fund of speed and efficiency of execution; whether the
particular transaction is part of a larger intended change
of portfolio position in the same securities; the execution
capabilities required by the circumstances of the particular
transaction; the capital required by the transaction; the
overall capital strength of the broker; the broker's
apparent knowledge of or familiarity with sources from or to
whom such securities may be purchased or sold; as well as
the efficiency, reliability and confidentiality with which
the broker has handled the execution of prior similar
transactions.
(iii) Subject to any statements concerning the allocation of
brokerage contained in the Fund's Prospectus(es) or
Statement(s) of Additional Information, the Adviser is
authorized to direct the execution of portfolio transactions
for the Fund to brokers who furnish investment information
or research service to the Adviser. Such allocations shall
be in such amounts and proportions as the Adviser may
determine. If the transaction is directed to a broker
providing brokerage and research services to the Adviser,
the commission paid for such transaction may be in excess of
the commission another broker would have charged for
effecting that transaction, if the Adviser shall have
determined in good
A-11
faith that the commission is reasonable in relation to the
value of the brokerage and research services provided,
viewed in terms of either that particular transaction or the
overall responsibilities of the Adviser with respect to all
accounts as to which it now or hereafter exercises
investment discretion. For purposes of the immediately
preceding sentence, "providing brokerage and research
services" shall have the meaning generally given such terms
or similar terms under Section 28(e)(3) of the Securities
Exchange Act of 1934, as amended.
(iv) In the selection of a broker for the execution of any
transaction not subject to fixed commission rates, the
Adviser shall have no duty or obligation to seek advance
competitive bidding for the most favorable negotiated
commission rate to be applicable to such transaction, or to
select any broker solely on the basis of its purported or
"posted" commission rates.
(v) In connection with transactions on markets other than
national or regional securities exchanges, the Fund will
deal directly with the selling principal or market maker
without incurring charges for the services of a broker on
its behalf unless, in the best judgment of the Adviser,
better price or execution can be obtained by utilizing the
services of a broker.
(d) LIMITATION OF LIABILITY OF THE ADVISER WITH RESPECT TO RENDERING
INVESTMENT ADVISORY SERVICES. So long as the Adviser shall give the
Fund the benefit of its best judgment and effort in rendering
investment advisory services hereunder, the Adviser shall not be
liable for any errors of judgment or mistake of law, or for any loss
sustained by reason of the adoption of any investment policy or the
purchase, sale or retention of any security on its recommendation,
whether or not such recommendation shall have been based upon its own
investigation and research or upon investigation and research made by
any other individual, firm or corporation, if such recommendation
shall have been made and such other individual, firm or corporation
shall have been selected with due care and in good faith. Nothing
herein contained, however, shall be construed to protect the Adviser
against any liability to the Fund or its shareholders by reason of
willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its
obligations and duties under this Section 4. As used in this Section
4, "the Adviser" shall include directors, officers and employees of
the Adviser, as well as the Adviser itself.
5. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent
the Adviser or any officer thereof from acting as investment adviser for
any other person, firm or corporation, nor shall it in any way limit or
restrict the Adviser or any of its directors, officers, stockholders or
employees from buying, selling, or trading any securities for its own
accounts or for the accounts of others for whom it may be acting; provided,
however, that the Adviser expressly represents that it will undertake no
activities which, in its judgment, will conflict with the performance of
its obligations to the Fund under this Agreement. The Fund acknowledges
that the Adviser acts as investment adviser to other investment companies,
and it expressly consents to the Adviser acting as such; provided, however,
that if in the opinion of the Adviser, particular securities are consistent
with the investment objectives of, and desirable purchases or sales for the
portfolios of one or more of such other investment companies or series of
such companies
A-12
at approximately the same time, such purchases or sales will be made on a
proportionate basis if feasible, and if not feasible, then on a rotating or
other equitable basis.
6. AMENDMENT. This Agreement may be amended at any time, without shareholder
approval to the extent permitted by applicable law, 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 the Adviser's obligations hereunder shall be subject to
the Adviser's approval, which shall not be unreasonably withheld.
7. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall continue in
force with respect to a Series for an initial term of up to two years, and
then for successive 12-month periods thereafter, unless terminated,
provided each such continuance is specifically approved at least annually
by (a) the vote of the majority of the entire Board of Directors of the
Fund, and the vote of the majority of those directors who are not parties
to this Agreement or interested persons (as such terms are defined in the
1940 Act) of any such party cast in person at a meeting called for the
purpose of voting on such approval, or (b) by the vote of a majority of
those directors who are not parties to this Agreement or interested persons
(as such terms are defined in the 1940 Act) of any such party cast in
person at a meeting called for the purpose of voting on such approval.
Upon this Agreement becoming effective, any previous Agreement between the
Fund and the Adviser providing for investment advisory services shall
concurrently terminate, except that such termination shall not affect any
fees accrued and guarantees of expenses with respect to any period prior to
termination.
This Agreement may be terminated at any time without payment of any
penalty, by the Fund upon the vote of a majority of the Fund's Board of
Directors or, by a majority of the outstanding voting securities of the
Fund, or by the Adviser, in each case on sixty (60) days' written notice to
the other party. This Agreement shall automatically terminate in the event
of its assignment (as such term is defined in the 1940 Act).
8. 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.
9. APPLICABLE LAW. This Agreement shall be subject to and construed in
accordance with the laws of the State of Kansas.
A-13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereto duly authorized on this [ ] day of
[ ], 2010.
SECURITY LARGE CAP VALUE FUND
By:
-----------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
-----------------------------------
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By:
-------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
-----------------------------------
Name: Amy J. Lee
Title: Secretary
A-14
INVESTMENT MANAGEMENT AGREEMENT
This Agreement, made and entered into as of this [ ] day of [ ], 2010, by and
between SECURITY MID CAP GROWTH FUND, a Kansas corporation (hereinafter referred
to as the "Fund"), and SECURITY INVESTORS, LLC, a limited liability company
(hereinafter referred to as "SI") .
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management investment
company registered under the Investment Company Act of 1940 ("1940 Act"); and
WHEREAS, SI is willing to provide investment research and advice to the Fund on
the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties agree as follows:
1. EMPLOYMENT OF SI. The Fund hereby employs SI to act as investment adviser
to the Fund with respect to the investment of its assets and to supervise
and arrange for the purchase of securities for the Fund and the sale of
securities held in the portfolio of the Fund, subject always to the
supervision of the Board of Directors of the Fund (or a duly appointed
committee thereof), during the period and upon and subject to the terms and
conditions described herein. SI agrees to maintain sufficient trained
personnel and equipment and supplies to perform its responsibilities under
this Agreement and 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.
SI hereby accepts such employment and agrees to perform the services
required by this Agreement for the compensation herein provided.
2. ALLOCATION OF EXPENSES AND CHARGES.
(a) EXPENSES OF SI. SI shall pay all expenses in connection with the
performance of its services under this Agreement, except as provided
otherwise herein.
(b) EXPENSES OF THE FUND. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse SI for the payment of
the following described expenses of the Fund whether or not billed to
the Fund, SI or any related entity;
(i) brokerage fees and commissions;
(ii) taxes;
(iii)interest expenses;
(iv) any extraordinary expenses approved by the Board of Directors of
the Fund; and
(v) distribution fees paid under the Fund's Class A, Class B and
Class C Distribution Plans;
and, in addition to those expenses set forth above, the Fund shall pay
all of its expenses whether or not billed to the Fund, SI or any
related entity.
A-15
3. COMPENSATION OF SI.
(a) As compensation for the investment advisory services to be rendered by
SI to the Fund for each of the years this Agreement is in effect, the
Fund shall pay SI an annual fee equal to 0.75% of the Fund's average
daily net assets. Such fee shall be calculated daily and payable
monthly. If this Agreement shall be effective for only a portion of a
year, then SI's compensation for said year shall be prorated for such
portion. For purposes of this Section 3, the value of the net assets
of the Fund shall be computed in the same manner at the end of the
business day as the value of such net assets is computed in connection
with the determination of the net asset value of the Fund's shares as
described in the Fund's prospectus.
(b) For each of the Fund's fiscal years that this Agreement remains in
force, SI agrees that if total annual expenses of the Fund, exclusive
of interest and taxes, extraordinary expenses (such as litigation),
distribution fees paid under the Fund's Class A, Class B and Class C
Distribution Plans, but inclusive of SI's compensation, exceed any
expense limitation imposed by state securities law or regulation in
any state in which shares of the Fund are then qualified for sale, as
such regulations may be amended from time to time, SI will contribute
to the Fund such funds or waive such portion of its fee, adjusted
monthly, as may be requisite to insure that such annual expenses will
not exceed any such limitation. If this Agreement shall be effective
for only a portion of any fiscal year, then the maximum annual
expenses shall be prorated for such portion. Brokerage fees and
commissions incurred in connection with the purchase or sale of any
securities by the Fund shall not be deemed to be expenses within the
meaning of this paragraph (b).
4. INVESTMENT ADVISORY DUTIES.
(a) INVESTMENT ADVICE. SI shall regularly provide the Fund with investment
research, advice and supervision, continuously furnish an investment
program, recommend which securities shall be purchased and sold and
what portion of the assets of the Fund shall be held uninvested and
arrange for the purchase of securities and other investments for the
Fund and the sale of securities and other investments held in the
portfolio of the Fund. All investment advice furnished by SI to the
Fund under this Section 4 shall at all times conform to any
requirements imposed by the provisions of the Fund's Articles of
Incorporation and Bylaws, the 1940 Act, the Investment Advisors Act of
1940 and the rules and regulations promulgated thereunder, and other
applicable provisions of law, and the terms of the registration
statement of the Fund under the Securities Act of 1933 ("1933 Act")
and/or the 1940 Act, as may be applicable at the time, all as from
time to time amended SI shall advise and assist the officers or other
agents of the Fund in taking such steps as are necessary or
appropriate to carry out the decisions of the Board of Directors of
the Fund (and any duly appointed committee thereof) with regard to the
foregoing matters and the general account of the Fund's business.
(b) SUBADVISERS. Subject to the provisions of the 1940 Act and any
applicable exemptions thereto, SI is authorized, but is under no
obligation, to enter into sub-advisory agreements (the "Sub-Advisory
Agreements") with one or more subadvisers (each a "Subadviser") to
provide investment advisory services to the
A-16
Fund, or any series thereof. Each Subadviser shall have investment
discretion with respect to the assets assigned to that Subadviser by
SI. Consistent with the provisions of the 1940 Act and any applicable
exemption thereto, SI may enter into Sub-Advisory Agreements or amend
Sub-Advisory Agreements without the approval of the shareholders of
the Fund, or series thereof as applicable.
(c) PORTFOLIO TRANSACTIONS AND BROKERAGE.
(i) Transactions in portfolio securities shall be effected by SI,
through brokers or otherwise (including affiliated brokers), in
the manner permitted in this Section 4 and in such manner as SI
shall deem to be in the best interests of the Fund after
consideration is given to all relevant factors.
(ii) In reaching a judgment relative to the qualification of a broker
to obtain the best execution of a particular transaction, SI may
take into account all relevant factors and circumstances,
including the size of any contemporaneous market in such
securities; the importance to the Fund of speed and efficiency of
execution; whether the particular transaction is part of a larger
intended change of portfolio position in the same securities; the
execution capabilities required by the circumstances of the
particular transaction; the capital required by the transaction;
the overall capital strength of the broker; the broker's apparent
knowledge of or familiarity with sources from or to whom such
securities may be purchased or sold; as well as the efficiency,
reliability and confidentiality with which the broker has handled
the execution of prior similar transactions.
(iii) Subject to any statements concerning the allocation of brokerage
contained in the Fund's Prospectus or Statement of Additional
Information, SI is authorized to direct the execution of
portfolio transactions for the Fund to brokers who furnish
investment information or research service to SI. Such
allocations shall be in such amounts and proportions as SI may
determine. If the transaction is directed to a broker providing
brokerage and research services to SI, the commission paid for
such transaction may be in excess of the commission another
broker would have charged for effecting that transaction, if SI
shall have determined in good faith that the commission is
reasonable in relation to the value of the brokerage and research
services provided, viewed in terms of either that particular
transaction or the overall responsibilities of SI with respect to
all accounts as to which it now or hereafter exercises investment
discretion. For purposes of the immediately preceding sentence,
"providing brokerage and research services" shall have the
meaning generally given such terms or similar terms under Section
28(e)(3) of the Securities Exchange Act of 1934, as amended.
(iv) In the selection of a broker for the execution of any transaction
not subject to fixed commission rates, SI shall have no duty or
obligation to seek advance competitive bidding for the most
favorable negotiated commission rate to be applicable to such
transaction, or to select any broker solely on the basis of its
purported or "posted" commission rates.
A-17
(v) In connection with transactions on markets other than national or
regional securities exchanges, the Fund will deal directly with
the selling principal or market maker without incurring charges
for the services of a broker on its behalf unless, in the best
judgment of SI, better price or execution can be obtained by
utilizing the services of a broker.
(d) LIMITATION OF LIABILITY OF SI WITH RESPECT TO RENDERING INVESTMENT
ADVISORY SERVICES. So long as SI shall give the Fund the benefit of
its best judgment and effort in rendering investment advisory services
hereunder, SI shall not be liable for any errors of judgment or
mistake of law, or for any loss sustained by reason of the adoption of
any investment policy or the purchase, sale or retention of any
security on its recommendation, whether or not such recommendation
shall have been based upon its own investigation and research or upon
investigation and research made by any other individual, firm or
corporation, if such recommendation shall have been made and such
other individual, firm or corporation shall have been selected with
due care and in good faith. Nothing herein contained, however, shall
be construed to protect SI against any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Section 4
As used in this Section 4, "SI" shall include directors, officers and
employees of SI, as well as SI itself.
5. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent SI
or any officer thereof from acting as investment adviser for any other
person, firm or corporation, nor shall it in any way limit or restrict SI
or any of its directors, officers, stockholders or employees from buying,
selling, or trading any securities for its own accounts or for the accounts
of others for whom it may be acting; provided, however, that SI expressly
represents that it will undertake no activities which, in its judgment,
will conflict with the performance of its obligations to the Fund under
this Agreement. The Fund acknowledges that SI acts as investment adviser to
other investment companies, and it expressly consents to SI acting as such;
provided, however, that if in the opinion of SI, particular securities are
consistent with the investment objectives of, and desirable purchases or
sales for the portfolios of one or more of such other investment companies
or series of such companies at approximately the same time, such purchases
or sales will be made on a proportionate basis if feasible, and if not
feasible, then on a rotating or other equitable basis.
6. AMENDMENT. This Agreement may be amended at any time, without shareholder
approval to the extent permitted by applicable law, 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 SI's obligations hereunder shall be subject to SI's approval,
which shall not be unreasonably withheld.
7. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall continue in
force with respect to the Fund for an initial term of up to two years, and
then for successive 12-month periods thereafter, unless terminated,
provided each such continuance is specifically approved at least annually
by (a) the vote of the majority of the entire Board of Directors of the
Fund, and the vote of the majority of those directors who are not parties
to this Agreement or interested persons (as such terms are defined in the
1940 Act) of any such party cast in person at a meeting called for the
purpose of voting on such
A-18
approval, or (b) by the vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act).
Upon this Agreement becoming effective, any previous Agreement between the
Fund and SI providing for investment advisory services shall concurrently
terminate, except that such termination shall not affect any fees accrued
and guarantees of expenses with respect to any period prior to termination.
This Agreement may be terminated at any time without payment of any
penalty, by the Fund upon the vote of a majority of the Fund's Board of
Directors or, by a majority of the outstanding voting securities of the
Fund, or by SI, in each case on sixty (60) days' written notice to the
other party This Agreement shall automatically terminate in the event of
its assignment (as such term is defined in the 1940 Act).
8. 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.
9. APPLICABLE LAW. This Agreement shall be subject to and construed in
accordance with the laws of the State of Kansas.
A-19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereto duly authorized on the day, month
and year first above written.
SECURITY MID CAP GROWTH FUND
By:
--------------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
--------------------------------------
Name: Amy J.Lee
Title: Secretary
SECURITY INVESTORS, LLC
By:
--------------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
--------------------------------------
Name: Amy J. Lee
Title: Secretary
A-20
INVESTMENT ADVISORY CONTRACT
THIS AGREEMENT, made and entered into this [ ] day of [ ] 2010, between SECURITY
INCOME FUND, a Kansas corporation (hereinafter referred to as the "Fund"), and
SECURITY INVESTORS, LLC, a Kansas limited liability company (hereinafter
referred to as the "Management Company").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management investment
company registered under the Federal Investment Company Act of 1940; and
WHEREAS, the Fund is authorized to issue shares of capital stock in separate
Series, with each such Series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund currently offers shares in two separate series, the
Intermediate Bond Series and the High Yield Series, such series together with
all other series subsequently established by the Fund with respect to which the
Fund desires to retain the Management Company to render investment advisory
services hereunder and with respect to which the Management Company is willing
so to do, being herein collectively referred to as the "Series"; and
WHEREAS, the Management Company is willing to provide investment research and
advice to the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties hereto agree as follows:
1. Employment of Management Company. The Fund hereby employs the
Management Company to act as investment adviser to each Series of the
Fund with respect to the investment of its assets, and to supervise and
arrange the purchase of securities for and the sale of securities held
in the portfolios of the Series of the Fund, subject always to the
supervision of the Board of Directors of the Fund, during the period
and upon and subject to the terms and conditions herein set forth. The
Management Company hereby accepts such employment and agrees to perform
the services required by this Agreement for the compensation herein
provided.
In the event the Fund establishes additional series with respect to
which it desires to retain the Management Company to render investment
advisory services hereunder, it shall notify the Management Company in
writing. If the Management Company is willing to render such services
it shall notify the Fund in writing, whereupon such series shall become
a Series subject to the terms and conditions hereunder, and to such
amended or additional provisions as shall be specifically agreed to by
the Fund and the Management Company in accordance with applicable law.
2. Investment Advisory Duties.
(a) The Management Company shall regularly provide each Series of the
Fund with investment research, advice and supervision,
continuously furnish an investment program and recommend that
securities shall be purchased and sold and what portion of the
assets of each Series shall be held uninvested and shall arrange
for the purchase of securities and other investments for and the
sale of securities and
A-21
other investments held in the portfolio of each Series. All
investment advice furnished by the Management Company to each
Series under this Section 2 shall at all times conform to any
requirements imposed by the provisions of the Fund's Articles of
Incorporation and Bylaws, the Investment Company Act of 1940 and
the rules and regulations promulgated thereunder, any other
applicable provisions of law, and the terms of the registration
statements of the Fund under the Securities Act of 1933 and the
Investment Company Act of 1940, all as from time to time amended.
The Management Company shall advise and assist the officers or
other agents of the Fund in taking such steps as are necessary or
appropriate to carry out the decisions of the Fund's Board of
Directors (and any duly appointed committee thereof) with regard
to the foregoing matters and the general conduct of the Fund's
business.
(b) Subject to the provisions of the Investment Company Act of 1940
(the "1940 Act") and any applicable exemptions thereto, the
Management Company is authorized, but is under no obligation, to
enter into sub-advisory agreements (the "Sub-Advisory
Agreements") with one or more sub-advisers (each a "Sub-adviser")
to provide investment advisory services to any Series of the
Fund. Each Sub-adviser shall have investment discretion with
respect to the assets of the Series assigned to that Sub-adviser
by the Management Company. The Management Company shall not be
responsible or liable with respect to any investment decision
made by a Sub-adviser, whether such decision be to purchase, sell
or hold such investment. Consistent with the provisions of the
1940 Act and any applicable exemption thereto, the Investment
Manager may enter into Sub-Advisory Agreements or amend
Sub-Advisory Agreements without the approval of the shareholders
of the affected Series.
3. Portfolio Transactions and Brokerage.
(a) Transactions in portfolio securities shall be effected by the
Management Company, through brokers or otherwise, in the manner
permitted in this Section 3 and in such manner as the Management
Company shall deem to be in the best interests of the Fund after
consideration is given to all relevant factors.
(b) In reaching a judgment relative to the qualification of a broker
to obtain the best execution of a particular transaction, the
Management Company may take into account all relevant factors and
circumstances, including the size of any contemporaneous market
in such securities; the importance to the Fund of speed and
efficiency of execution; whether the particular transaction is
part of a larger intended change in portfolio position in the
same securities; the execution capabilities required by the
circumstances of the particular transaction; the capital required
by the transaction; the overall capital strength of the broker;
the broker's apparent knowledge of or familiarity with sources
from or to whom such securities may be purchased or sold; as well
as the efficiency, reliability and confidentiality with which the
broker has handled the execution of prior similar transactions.
(c) Subject to any statements concerning the allocation of brokerage
contained in the Fund's prospectus or statement of additional
information, the Management Company is authorized to direct the
execution of portfolio transactions for the Fund to brokers who
furnish investment information or research service to the
A-22
Management Company. Such allocation shall be in such amounts and
proportions as the Management Company may determine. If the
transaction is directed to a broker providing brokerage and
research services to the Management Company, the commission paid
for such transaction may be in excess of the commission another
broker would have charged for effecting that transaction, if the
Management Company shall have determined in good faith that the
commission is reasonable in relation to the value of the
brokerage and research services provided, viewed in terms of
either that particular transaction or the overall
responsibilities of the Management Company with respect to all
accounts as to which it now or hereafter exercises investment
discretion. For purposes of the immediately preceding sentence,
"providing brokerage and research services" shall have the
meaning generally given such terms or similar terms under Section
28(e)(3) of the Securities Exchange Act of 1934, as amended.
(d) In the selection of a broker for the execution of any transaction
not subject to fixed commission rates, the Management Company
shall have no duty or obligation to seek advance competitive
bidding for the most favorable negotiated commission rate to be
applicable to such transaction, or to select any broker solely on
the basis of its purported or "posted" commission rates.
(e) In connection with transactions on markets other than national or
regional securities exchanges, the Fund will deal directly with
the selling principal or market maker without incurring charges
for the services of a broker on its behalf unless, in the best
judgment of the Management Company, better price or execution can
be obtained in utilizing the services of a broker.
4. Allocation of Expenses and Charges. The Management Company shall provide
investment advisory, statistical and research facilities and all clerical
services relating to research, statistical and investment work, and shall
provide for the compilation and maintenance of such records relating to
these functions as shall be required under applicable law and the rules and
regulations of the Securities and Exchange Commission. The Management
Company will also provide the Fund with a president, a chief financial
officer, and a secretary, subject to the approval of the Board of
Directors, and will pay the salaries and expenses of such officers of the
Fund who are also directors, officer or employees of the Management
Company.
Other than as specifically indicated in the preceding sentences, the
Management Company shall not be required to pay any expenses of the Fund,
and in particular, but without limiting the generality of the foregoing,
the Management Company shall not be required to pay office rental or
general administrative expenses; Board of Directors' fees; legal, auditing
and accounting expenses; insurance premiums; broker's commissions; taxes
and governmental fees and any membership dues; fees of custodian, transfer
agent, registrar and dividend disbursing agent (if any); expenses of
obtaining quotations on the Fund's portfolio securities and pricing of the
Fund's shares; cost of stock certificates and any other expenses (including
clerical expenses) of issue, sale, repurchase or redemption of shares of
the Fund's capital stock; costs and expenses in connection with the
registration of the Fund's capital stock under the Securities Act of 1933
and qualification of the Fund's capital stock under the Blue Sky laws of
the states where such stock is offered; costs and expenses in connection
with the registration of the Fund under the Investment Company Act of 1940
and all periodic and other reports required thereunder;
A-23
expenses of preparing, printing and distributing reports, proxy statements,
prospectuses, statements or additional information, notices and
distributions to stockholders; costs of stationery; costs of stockholder
and other meetings; expenses of maintaining the Fund's corporate existence;
and such nonrecurring expenses as may arise including litigation affecting
the Fund and the legal obligations the Fund may have to indemnify its
officers and directors.
5. Compensation of Management Company.
(a) As compensation for the services to be rendered by the Management
Company as provided for herein, for each of the years this Agreement
is in effect, the Fund shall pay the Management Company an annual fee
equal to 0.60 percent of the average daily net assets of High Yield
Series and 0.50 percent of the average daily net assets of
Intermediate Bond Series.. Such fee shall be adjusted and payable
monthly. If this Agreement shall be effective for only a portion of a
year, then the Management Company's compensation for said year shall
be prorated for such portion. For purposes of this Section 5, the
value of the net assets of each such Series shall be computed in the
same manner at the end of the business day as the value of such net
assets is computed in connection with the determination of the net
asset value of the Fund's shares as described in the Fund's
prospectus.
(b) For each of the Fund's full fiscal years this Agreement remains in
force, the Management Company agrees that if the total annual expenses
of each Series of the Fund, exclusive of interest and taxes,
extraordinary expenses (such as litigation), and distribution fees
paid under the Fund's Class B and Class C Distribution Plans, but
inclusive of the Management Company's compensation, exceed any expense
limitation imposed by state securities law or regulation in any state
in which shares of the Fund are then qualified for sale, as such
regulations may be amended from time to time, the Management Company
will contribute to such Series such funds or waive such portion of its
fee, adjusted monthly as may be requisite to insure that such annual
expenses will not exceed any such limitation. If this Contract shall
be effective for only a portion of one of the Series' fiscal years,
then the maximum annual expenses shall be prorated for such portion.
Brokerage fees and commissions incurred in connection with the
purchase or sale of any securities by a Series shall not be deemed to
be expenses with the meaning of this paragraph (b).
6. Management Company Not to Receive Commissions. In connection with the
purchase or sale of portfolio securities for the account of the Fund,
neither the Management Company nor any officer or director of the
Management Company shall act as principal or receive any compensation from
the Fund other than its compensation as provided for in Section 5 above. If
the Management Company, or any "affiliated person" (as defined in the
Investment Company Act of 1940) receives any cash, credits, commissions or
tender fees from any person in connection with transactions in the Fund's
portfolio securities (including but not limited to the tender or delivery
of any securities held in the Fund's portfolio), the Management company
shall immediately pay such amount to the Fund in cash or as a credit
against any then earned but unpaid management fees due by the Fund to the
Management Company.
A-24
7. Limitation of Liability of Management Company. So long as the Management
Company shall give the Fund the benefit of its best judgment and effort in
rendering services hereunder, the Management Company shall not be liable
for any errors of judgment or mistake of law, or for any loss sustained by
reason of the adoption of any investment policy or the purchase, sale or
retention of any security on its recommendation, whether or not such
recommendation shall have been based upon its own investigation and
research or upon investigation and research made by any other individual,
firm or corporation, if such recommendation shall have been made and such
other individual, firm or corporation shall have been selected with due
care and in good faith. Nothing herein contained shall, however, be
construed to protect the Management Company against any liability to the
Fund or its security holders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement. As
used in this Section 7, "Management Company" shall include directors,
officers and employees of the Management Company, as well as the Management
Company itself.
8. Other Activities Not Restricted. Nothing in this Agreement shall prevent
the Management Company or any officer thereof from acting as investment
adviser for any other person, firm, or corporation, nor shall it in any way
limit or restrict the Management Company or any of its directors, officers,
stockholders or employees from buying, selling, or trading any securities
for its own accounts or for the accounts of others for whom it may be
acting; provided, however, that the Management Company expressly represents
that it will undertake no activities which, in its judgment, will conflict
with the performance of its obligations to the Fund under this Agreement.
The Fund acknowledges that the Management Company acts as investment
adviser to other investment companies, and it expressly consents to the
Management Company acting as such; provided, however, that if in the
opinion of the Management Company, particular securities are consistent
with the investment objectives of and are desirable purchases or sales for
the portfolios of one or more Series and one or more of such other
investment companies or series of such companies at approximately the same
time, such purchases or sales will be made on a proportionate basis if
feasible, and if not feasible, then on a rotating or other equitable basis.
9. Duration and Termination of Agreement. This Agreement shall continue in
force with respect to a Series for an initial term of up to two years, and
then for successive 12-month periods thereafter, unless terminated,
provided each such continuance is specifically approved at least annually
by (a) the vote of a majority of the entire Board of Directors of the Fund,
or by the vote of the holders of a majority of the outstanding voting
securities of each series of the Fund (as defined in the 1940 Act), and (b)
the vote of a majority of the directors of the Fund who are not parties to
this Agreement or interested persons (as such terms are defined in the
Investment Company Act of 1940) of any such party cast in person at a
meeting of such directors called for the purpose of voting upon such
approval. In the event a majority of the outstanding shares of one series
vote for continuance of the Advisory Contract, it will be continued for
that series even though the Advisory Contract is not approved by either a
majority of the outstanding shares of any other series or by a majority of
outstanding shares of the Fund. Upon this Agreement becoming effective, any
previous agreement between the Fund and the Management Company providing
for investment advisory and management services shall concurrently
terminate, except that such termination shall not affect fees accrued and
guarantees of expenses with respect to any period prior to termination.
A-25
This Agreement may be terminated at any time as to any series of the Fund,
without payment of any penalty, by vote of the Board of Directors of the
Fund or by vote of the holders of a majority of the outstanding voting
securities of that series of the Fund, or by the Management Company, upon
60 days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
"assignment" (as defined in the Investment Company Act of 1940).
A-26
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 EQUITY FUND
By:
--------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
--------------------------------
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By:
------------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
--------------------------------
Name: Amy J. Lee
Title: Secretary
A-27
INVESTMENT ADVISORY CONTRACT
THIS AGREEMENT, made and entered into this [ ] day of [ ], 2010, by and between
SBL FUND, a Kansas corporation (hereinafter referred to as the "Fund"), and
SECURITY INVESTORS, LLC, a Kansas limited liability company (hereinafter
referred to as the "Management Company").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end, management investment
company registered under the Federal Investment Company Act of 1940; and
WHEREAS, the Management Company is willing to provide investment research and
advice to the Fund on the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties hereto agree as follows:
1. EMPLOYMENT OF MANAGEMENT COMPANY. The Fund hereby employs the
Management Company to act as investment adviser to the Fund with
respect to the investment of its assets and to supervise and arrange
the purchase of securities for the Fund and the sale of securities
held in the portfolio of the Fund, subject always to the supervision
of the board of directors of the Fund (or a duly appointed committee
thereof), during the period and upon and subject to the terms and
conditions herein set forth. The Management Company hereby accepts
such employment and agrees to perform the services required by this
Agreement for the compensation herein provided.
2. INVESTMENT ADVISORY DUTIES.
(a) The Management Company shall regularly provide the Fund with
investment research, advice and supervision, continuously furnish
an investment program and recommend what securities shall be
purchased and sold and what portion of the assets of the Fund
shall be held uninvested and shall arrange for the purchase of
securities and other investments for the Fund and the sale of
securities and other investments held in the portfolio of the
Fund. All investment advice furnished by the Management Company
to the Fund under this Section 2 shall at all times conform to
any requirements imposed by the provisions of the Fund's Articles
of Incorporation and Bylaws, the Investment Company Act of 1940,
the Investment Advisors Act of 1940 and the rules and regulations
promulgated thereunder, any other applicable provisions of law,
and the terms of the registration statements of the Fund under
the Securities Act of 1933 and the Investment Company Act of
1940, all as from time to time amended. The Management Company
shall advise and assist the officers or other agents of the Fund
in taking such steps as are necessary or appropriate to carry out
the decisions of the board of directors of the Fund (and any duly
appointed committee thereof) in regard to the foregoing matters
and the general conduct of the Fund's business.
(b) Subject to the provisions of the Investment Company Act of 1940
and any applicable exemptions thereto, the Management Company is
authorized, but is under no obligation, to enter into
sub-advisory agreements (the "Sub-Advisory
A-28
Agreements") with one or more subadvisers (each a "Subadviser")
to provide investment advisory services to any series of the
Fund. Each Subadviser shall have investment discretion with
respect to the assets of the series assigned to that Subadviser
by the Management Company. Consistent with the provisions of the
Investment Company Act of 1940 and any applicable exemption
thereto, the Management Company may enter into Sub-Advisory
Agreements or amend Sub-Advisory Agreements without the approval
of the shareholders of the effected series.
3. PORTFOLIO TRANSACTIONS AND BROKERAGE.
(a) Transactions in portfolio securities shall be effected by the
Management Company, through brokers or otherwise (including
affiliated brokers), in the manner permitted in this Section 3
and in such manner as the Management Company shall deem to be in
the best interests of the Fund after consideration is given to
all relevant factors.
(b) In reaching a judgment relative to the qualification of a broker
to obtain the best execution of a particular transaction, the
Management Company may take into account all relevant factors and
circumstances, including the size of any contemporaneous market
in such securities; the importance to the Fund of speed and
efficiency of execution; whether the particular transaction is
part of a larger intended change of portfolio position in the
same securities; the execution capabilities required by the
circumstances of the particular transaction; the capital to be
required by the transaction; the overall capital strength of the
broker; the broker's apparent knowledge of or familiarity with
sources from or to whom such securities may be purchased or sold;
as well as the efficiency, reliability and confidentiality with
which the broker has handled the execution of prior similar
transactions.
(c) Subject to any statements concerning the allocation of brokerage
contained in the Fund's prospectus, the Management Company is
authorized to direct the execution of the portfolio transactions
of the Fund to brokers who furnish investment information or
research services to the Management Company. Such allocation
shall be in such amounts and proportions as the Management
Company may determine. If a transaction is directed to a broker
supplying brokerage and research services to the Management
Company, the commission paid for such transaction may be in
excess of the commission another broker would have charged for
effecting that transaction, provided that the Management Company
shall have determined in good faith that the commission is
reasonable in relation to the value of the brokerage and research
services provided, viewed in terms of either that particular
transaction or the overall responsibilities of the Management
Company with respect to all accounts as to which it now or
hereafter exercises investment discretion. For purposes of the
immediately preceding sentence, "providing brokerage and research
services" shall have the meaning generally given such terms or
similar terms under Section 28 (e)(3) of the Securities Exchange
Act of 1934, as amended.
(d) In the selection of a broker for the execution of any transaction
not subject to fixed commission rates, the Management Company
shall have no duty or obligation to seek advance competitive
bidding for the most favorable negotiated
A-29
commission rate to be applicable to such transaction, or to
select any broker solely on the basis of its purported or
"posted" commission rates.
(e) In connection with transactions on markets other than national or
regional securities exchanges, the Fund will deal directly with
the selling principal or market maker without incurring charges
for the services of a broker on its behalf unless, in the best
judgment of the Management Company, better price or execution can
be obtained by utilizing the services of a broker.
4. ALLOCATION OF EXPENSES AND CHARGES. The Management Company shall provide
investment advisory, statistical and research facilities and all clerical
services relating to research, statistical and investment work, and shall
provide for the compilation and maintenance of such records relating to
these functions as shall be required under applicable law and the rules and
regulations of the Securities and Exchange Commission. Other than as
specifically indicated in the preceding sentence, the Management Company
shall not be required to pay any expenses of the Fund, and in particular,
but without limiting the generality of the foregoing, the Management
Company shall not be required to pay office rental or general
administrative expenses; board of directors' fees; legal, auditing and
accounting expenses; broker's commissions; taxes and governmental fees;
membership dues; fees of custodian, transfer agent, registrar and dividend
disbursing agent (if any); expenses (including clerical expenses) of issue,
sale or redemption of shares of the Fund's capital stock; costs and
expenses in connection with the registration of such capital stock under
the Securities Act of 1933 and qualification of the Fund's capital stock
under the "Blue Sky" laws of the states where such stock is offered; costs
and expenses in connection with the registration of the Fund under the
Investment Company Act of 1940 and all periodic and other reports required
thereunder; expenses of preparing and distributing reports, proxy
statements, notices and distributions to stockholders; costs of stationery;
expenses of printing prospectuses; costs of stockholder and other meetings;
and such nonrecurring expenses as may arise including litigation affecting
the Fund and the legal obligations the Fund may have to indemnify its
officers and the members of its board of directors.
5. COMPENSATION OF MANAGEMENT COMPANY.
(a) As compensation for the services to be rendered by the Management
Company as provided for herein, for each of the years this Agreement
is in effect, the Series shall pay the Management Company an annual
fee computed on a daily basis equal to 0.50 percent of the average
daily closing value of the net assets of Series C of the Fund, 0.65
percent of the average daily closing value of the net assets of Series
B of the Fund, 0.70 percent of the average daily closing value of the
net assets of Series O, 0.75 percent of the average daily closing
value of the net assets of Series A, Series E, Series H, Series J,
Series P, Series V, and Series Y of the Fund, 0.85 percent of the
average daily closing value of the net assets of Series X, 0.95
percent of the average daily closing value of the net assets of Series
Q, 1.00 percent of the average daily closing value of the net assets
of Series D, and Series N, and 1.25 percent of the average daily
closing value of the net assets of Series Z of the Fund. Such fee
shall be adjusted and payable monthly. If this Agreement shall be
effective for only a portion of a year, then the Management Company's
compensation for said year shall be prorated for such portion. For
purposes of this Section 5, the value of the net assets of each such
Series shall be computed in the same manner at the end of the business
day
A-30
as the value of such net assets is computed in connection with the
determination of the net asset value of the Fund's shares as described
in the Fund's prospectus.
(b) For each of the Fund's full fiscal years this Agreement remains in
force, the Management Company agrees that if total annual expenses of
each Series of the Fund, exclusive of interest and taxes and
extraordinary expenses (such as litigation), but inclusive of the
Management Company's compensation, exceed any expense limitation
imposed by state securities law or regulation in any state in which
shares of the Fund are then qualified for sale, as such regulations
may be amended from time to time, the Management Company will
contribute to such Series such funds or to waive such portion of its
fee, adjusted monthly, as may be requisite to insure that such annual
expenses will not exceed any such limitation. If this contract shall
be effective for only a portion of one of the Series' fiscal years,
then the maximum annual expenses shall be prorated for such portion.
Brokerage fees and commissions incurred in connection with the
purchase or sale of any securities by a Series shall not be deemed to
be expenses within the meaning of this paragraph (b).
(c) For each of the Fund's full fiscal years this Agreement remains in
force, the Management Company agrees that if total annual expenses of
each Series of the Fund identified below, exclusive of interest,
taxes, extraordinary expenses (such as litigation), and brokerage fees
and commissions, but inclusive of the Management Company's
compensation, exceeds the amount set forth below (the "Expense Cap"),
the Management Company 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 Agreement shall be effective for only a
portion of a Series' fiscal year, then the maximum annual expenses
shall be prorated for such portion.
EXPENSE CAP
Series H -- 1.75%
Series Y -- 1.75%
6. LIMITATION OF LIABILITY OF MANAGEMENT COMPANY. So long as the Management
Company shall give the Fund the benefit of its best judgment and effort in
rendering services hereunder, the Management Company shall not be liable
for any errors of judgment or mistake of law, or for any loss sustained by
reason of the adoption of any investment policy or the purchase, sale or
retention of any security on its recommendation, whether or not such
recommendation shall have been based upon its own investigation and
research or upon investigation and research made by any other individual,
firm or corporation, if such recommendation shall have been made and such
other individual firm or corporation shall have been selected with due care
and in good faith. Nothing herein contained shall, however, be construed to
protect the Management Company against any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the Agreement. As used in
this Section 6, "Management Company" shall include directors, officers and
employees of the Management Company, as well as the Management Company
itself.
A-31
7. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent
the Management Company or any officer thereof from acting as investment
adviser for any other person, firm or corporation, nor shall it in any way
limit or restrict the Management Company or any of its directors, officers,
stockholders or employees from buying, selling, or trading any securities
for its own accounts or for the accounts of others for whom it may be
acting; provided, however, that the Management Company expressly represents
that it will undertake no activities which, in its judgment, will conflict
with the performance of its obligations to the Fund under this Agreement.
The Fund acknowledges that the Management Company acts as investment
adviser to other investment companies, and it expressly consents to the
Management Company acting as such; provided, however, that if securities of
one issuer are purchased or sold, the purchase or sale of such securities
is consistent with the investment objectives of, and, in the opinion of the
Management Company, such securities are desirable purchases or sales for
the portfolios of the Fund and one or more of such other investment
companies at approximately the same time, such purchases or sales will be
made on a proportionate basis if feasible, and if not feasible, then on a
rotating or other equitable basis.
8. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall continue in
force with respect to a Series for an initial term of up to two years, and
then for successive 12-month periods thereafter, unless terminated,
provided each such continuance is specifically approved at least annually
by (a) the vote of a majority of the entire Board of Directors of the Fund,
or by the vote of the holders of a majority of the outstanding voting
securities of each Series of the Fund (as defined in the 1940 Act) and (b)
the vote of a majority of the directors of the Fund who are not parties to
this Agreement or interested persons (as such terms are defined in the
Investment Company Act of 1940) of any such party cast in person at a
meeting of such directors called for the purpose of voting upon such
approval. In the event a majority of the outstanding shares of one series
vote for continuance of the Agreement, it will be continued for that series
even though the Agreement is not approved by either a majority of the
outstanding shares of any other series or by a majority of outstanding
shares of the Fund. Upon this Agreement becoming effective, any previous
agreement between the Fund and the Management Company providing for
investment advisory and management services shall concurrently terminate,
except that such termination shall not affect fees accrued and guarantees
of expenses with respect to any period prior to termination.
This Agreement may be terminated at any time as to any series of the Fund,
without payment of any penalty, by vote of the Board of Directors of the Fund or
by vote of the holders of a majority of the outstanding voting securities of
that series of the Fund, or by the Management Company, in each case upon 60
days' written notice to the other party.
This Agreement shall automatically terminate in the event of its "assignment"
(as defined in the Investment Company Act of 1940).
A-32
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereto duly authorized on the day, month
and year first above written.
SBL FUND
By:
---------------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
---------------------------------------
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By:
---------------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
---------------------------------------
Name: Amy J. Lee
Title: Secretary
A-33
APPENDIX B
INFORMATION REGARDING THE INVESTMENT MANAGEMENT AGREEMENTS AND FEES
PAID TO THE INVESTMENT MANAGER AND DISTRIBUTOR
Security Investors, LLC (the "Investment Manager") currently serves as
investment manager to all series (collectively, the "Funds") of Security Equity
Fund, Security Large Cap Value Fund, Security Mid Cap Growth Fund, Security
Income Fund and SBL Fund (collectively, the "Companies") pursuant to investment
management agreements between each of the Companies, on behalf of its series,
and the Investment Manager. The Investment Manager also serves as the
administrator and transfer agent for the Funds. Rydex Distributors, Inc. ("RDI")
and Security Distributors, Inc. ("SDI" and, together with RDI, the
"Distributors") serve as principal underwriters to the Funds, as applicable. The
table below and its accompanying footnotes provide the following information:
(i) the date of each investment management agreement;
(ii) the date on which each Fund's shareholders last approved the Fund's
investment management agreement;
(iii) the annual rate of management fees paid by each Fund to the Investment
Manager, stated as a percentage of that Fund's average daily net
assets;
(iv) the Investment Manager's expense limits for certain Funds (determined
as a percentage of each Fund's average daily net assets and including
distribution fees but not brokerage costs, dividends on securities sold
short, acquired fund fees and expenses, interest, taxes, litigation,
indemnification, or extraordinary expenses) effective until (a) January
31, 2011 for certain series of Security Equity Fund and Security Large
Cap Value Fund and (b) April 30, 2011 for certain series of Security
Income Fund and SBL Fund.
(v) the aggregate amount of management fees paid by each Fund to the
Investment Manager, as well as fee waivers/reimbursements from the
Investment Manager, for the Fund's fiscal year ended September 30, 2009
for series of Security Equity Fund, Security Large Cap Value Fund and
Security Mid Cap Growth Fund, and December 31, 2008 for series of
Security Income Fund and SBL Fund;
(vi) the amount of administrative service fees paid by each Fund to the
Investment Manager for the Investment Manager's services as the
administrative agent for the Fund during the Fund's fiscal year ended
September 30, 2009 for series of Security Equity Fund, Security Large
Cap Value Fund and Security Mid Cap Growth Fund, and December 31, 2008
for series of Security Income Fund and SBL Fund;
(vii) the amount of transfer agency service fees paid by each Fund to the
Investment Manager for the Investment Manager's services as the
transfer agent for the Fund during the Fund's fiscal year ended
September 30, 2009 for series of Security Equity Fund, Security Large
Cap Value Fund and Security Mid Cap Growth Fund, and December 31, 2008
for series of Security Income Fund and SBL Fund; and
(viii) the amount of distribution fees, as applicable, paid by each Fund to
RDI and SDI, each an affiliate of the Investment Manager, for each
Distributor's services as principal underwriter to the Fund pursuant
to the Fund's distribution agreement with each Distributor during the
Fund's fiscal year ended September 30, 2009 for series of Security
Equity Fund, Security Large Cap Value Fund and Security Mid Cap Growth
Fund, and December 31, 2008 for series of Security Income Fund and SBL
Fund. Prior to March 16, 2009, SDI served as the sole principal
underwriter for series of Security Equity Fund, Security Large Cap
Value Fund, Security Mid Cap Growth Fund and Security Income Fund.
Effective March 16, 2009, SDI and RDI served as co-principal
underwriters for those Funds and, effective October 16, 2009, RDI
began serving as the sole principal underwriter for those Funds.
Effective January 1, 2010, SDI and RDI serve as co-principal
underwriters for series of SBL Fund.
B-1
------------------------------------------------------------------------------------------------------------------------------------
TRANSFER DISTRI-
COMPANIES AND FUND DATE OF LAST MANAGEMENT EXPENSE MANAGEMENT MANAGEMENT FEES ADMINISTRATIVE AGENCY UTION FEES
SHAREHOLDER FEES LIMITS FEES WAIVED BY AND SERVICE FEES SERVICE FEES PAID TO
APPROVAL PAID TO REIMBURSEMENTS PAID TO FEES PAID TO RDI/SDI
INVESTMENT FROM INVESTMENT INVESTMENT INVESTMENT
MANAGER MANAGER MANAGER MANAGER
------------------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY FUND(1)
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI All Cap [ ] 0.70% Class A: 1.27% $6,241 $56,488 $1,553 $977 $3,624
Value Fund Class C: 2.02%
Institutional
Class: 1.02%
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Alpha [ ] 1.25% Class A: 2.11% $239,679 $360,351 $44,418 $103,234 $76,113
Opportunity Fund Class B: 2.86%
Class C: 2.86%
Institutional
Class: 1.86%
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Global Fund [ ] 1.00% None $950,941 None $146,768 $279,019 $247,813
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Global [ ] 1.00% 1.00% $54,932 $88,806 $12,913 $350 None
Institutional Fund
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Large Cap [ ] 0.75% Class A: 1.35% $227,777 $208,564 $29,040 $210,211 $148,659
Concentrated Growth Class B: 2.10%
Fund (formerly Rydex | Class C: 2.10%
SGI Select 25 Fund)
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Large Cap [ ] 0.75% None $1,232,832 None $156,586 $460,788 $482,294
Core Fund (formerly
Rydex | SGI
Equity Fund)
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Mid Cap [ ] 1.00% for the None $6,087,439 None $708,652 $1,795,195 $2,929,464
Value Fund first $200
million and
0.75%
thereafter
------------------------------------------------------------------------------------------------------------------------------------
B-2
------------------------------------------------------------------------------------------------------------------------------------
TRANSFER DISTRI-
COMPANIES AND FUND DATE OF LAST MANAGEMENT EXPENSE MANAGEMENT MANAGEMENT FEES ADMINISTRATIVE AGENCY BUTION FEES
SHAREHOLDER FEES LIMITS FEES WAIVED BY AND SERVICE FEES SERVICE FEES PAID TO
APPROVAL PAID TO REIMBURSEMENTS PAID TO FEES PAID TO RDI/SDI
INVESTMENT FROM INVESTMENT INVESTMENT INVESTMENT
MANAGER MANAGER MANAGER MANAGER
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Mid Cap [ ] 0.75% 0.90% $661,755 $56,387 $84,343 $39,724 None
Value Institutional
Fund
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Small Cap [ ] 0.85% None $104,632 $8,423 $25,000 $92,540 $54,502
Growth Fund
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Small Cap [ ] 1.00% Class A: 1.30% $18,673 $68,867 $2,573 $2,723 $6,965
Value Fund Class C: 2.05%
Institutional
Class: 1.05%
------------------------------------------------------------------------------------------------------------------------------------
SECURITY LARGE CAP
VALUE FUND(2)
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Large Cap [ ] 0.65% Class A: 1.15% $312,763 $216,463 $45,884 $221,025 $130,999
Value Fund Class B: 1.90%
Class C: 1.90%
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Large Cap [ ] 0.65% 0.96% $17,758 $38,034 $2,476 $377 None
Value Institutional
Fund
------------------------------------------------------------------------------------------------------------------------------------
SECURITY MID CAP GROWTH
FUND(3)
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Mid Cap [ ] 0.75% None $508,100 None $64,752 $334,742 $250,109
Growth Fund
------------------------------------------------------------------------------------------------------------------------------------
SECURITY INCOME FUND(4)
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI High Yield [ ] 0.60% Class A: 1.16% $399,347 $217,711 $77,002 $176,727 $189,19
Fund Class B: 1.91%
Class C: 1.91%
Institutional
Class: 0.91%(5)
------------------------------------------------------------------------------------------------------------------------------------
B-3
------------------------------------------------------------------------------------------------------------------------------------
TRANSFER DISTRI-
COMPANIES AND FUND DATE OF LAST MANAGEMENT EXPENSE MANAGEMENT MANAGEMENT FEES ADMINISTRATIVE AGENCY BUTION FEES
SHAREHOLDER FEES LIMITS FEES WAIVED BY AND SERVICE FEES SERVICE FEES PAID TO
APPROVAL PAID TO REIMBURSEMENTS PAID TO FEES PAID TO RDI/SDI
INVESTMENT FROM INVESTMENT INVESTMENT INVESTMENT
MANAGER MANAGER MANAGER MANAGER
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI U.S. [ ] 0.50% Class A: 1.00% $238,771 $185,745 $71,096 $218,266 $251,070
Intermediate Bond Fund Class B: 1.75%
Class C:1.75%(6)
------------------------------------------------------------------------------------------------------------------------------------
SBL FUND(7)
------------------------------------------------------------------------------------------------------------------------------------
Series A (Equity [ ] 0.75% None $1,891,460 None $240,200 $25,295 None
Series)
------------------------------------------------------------------------------------------------------------------------------------
Series B (Large Cap [ ] 0.65% None $2,422,416 None $354,943 $25,307 None
Value Series)
------------------------------------------------------------------------------------------------------------------------------------
Series C (Money Market [ ] 0.50% None $1,091,650 None $217,809 $25,358 None
Series)
------------------------------------------------------------------------------------------------------------------------------------
Series D (Global [ ] 1.00% None $4,167,035 None $640,532 $25,328 None
Series)
------------------------------------------------------------------------------------------------------------------------------------
Series E (U.S. [ ] 0.75% 0.81%(8) $862,296 $172,461 $118,606 $25,288 None
Intermediate Bond
Series)
------------------------------------------------------------------------------------------------------------------------------------
Series H (Enhanced [ ] 0.75% 1.00%(9) $467,057 $155,686 $64,417 $25,176 None
Index Series)
------------------------------------------------------------------------------------------------------------------------------------
Series J (Mid Cap [ ] 0.75% None $1,436,241 None $182,985 $25,246 None
Growth Series)
------------------------------------------------------------------------------------------------------------------------------------
Series N (Managed Asset [ ] 1.00% None $1,001,329 None $314,352 $25,275 None
Allocation Series)
------------------------------------------------------------------------------------------------------------------------------------
Series O (All Cap Value [ ] 0.70% 1.00%(10) $2,178,000 $42,237 $229,153 $25,280 None
Series)
------------------------------------------------------------------------------------------------------------------------------------
Series P (High Yield [ ] 0.75% None $716,980 None $102,712 $25,201 None
Series)
------------------------------------------------------------------------------------------------------------------------------------
B-4
------------------------------------------------------------------------------------------------------------------------------------
TRANSFER DISTRI-
COMPANIES AND FUND DATE OF LAST MANAGEMENT EXPENSE MANAGEMENT MANAGEMENT FEES ADMINISTRATIVE AGENCY BUTION FEES
SHAREHOLDER FEES LIMITS FEES WAIVED BY AND SERVICE FEES SERVICE FEES PAID TO
APPROVAL PAID TO REIMBURSEMENTS PAID TO FEES PAID TO RDI/SDI
INVESTMENT FROM INVESTMENT INVESTMENT INVESTMENT
MANAGER MANAGER MANAGER MANAGER
------------------------------------------------------------------------------------------------------------------------------------
Series Q (Small Cap [ ] 0.95% None $1,347,358 None $135,559 $25,186 None
Value Series)
------------------------------------------------------------------------------------------------------------------------------------
Series V (Mid Cap Value [ ] 0.75% None $2,444,876 None $311,463 $25,199 None
Series)
------------------------------------------------------------------------------------------------------------------------------------
Series X (Small Cap [ ] 0.85% None $486,393 None $48,355 $25,194 None
Growth Series)
------------------------------------------------------------------------------------------------------------------------------------
Series Y (Select 25 [ ] 0.75% None $385,731 None $49,079 $25,195 None
Series)
------------------------------------------------------------------------------------------------------------------------------------
Series Z (Alpha [ ] 1.25% 2.35%(11) $891,815 None $72,776 $25,127 None
Opportunity Series)
------------------------------------------------------------------------------------------------------------------------------------
------------------
(1) The investment management agreement between Security Equity Fund, on behalf
of its series, and Security Investors, LLC was made and entered into on
January 27, 2000, amended and restated effective as of November 18, 2005,
amended and restated as of February 8, 2008, amended and restated as of May
9, 2008, and amended as of August 15, 2008, November 24, 2008 and February
2, 2009.
(2) The investment management agreement between Security Large Cap Value Fund,
on behalf of its series, and Security Investors, LLC was made and entered
into on May 1, 2002, amended and restated effective as of February 1, 2004,
amended and restated effective as of June 30, 2005, and amended and
restated effective as of October 14, 2008.
(3) The investment management agreement between Security Mid Cap Growth Fund,
on behalf of its series, and Security Investors, LLC was made and entered
into on May 1, 2002 and amended and restated effective as of February 1,
2004.
(4) The investment management agreement between Security Income Fund, on behalf
of its series, and Security Investors, LLC was made on November 1, 1999 and
amended and restated effective as of October 13, 2008.
(5) Effective May 1, 2010. The Rydex | SGI High Yield Fund currently has in
place expense limits of 1.10%, 1.85%, 1.85% and 0.85% for Class A, Class B,
Class C, and Institutional Class, respectively. These expense limits will
expire April 30, 2010.
(6) Effective May 1, 2010. The Rydex | SGI U.S. Intermediate Bond Fund
currently has in place expense limits of 0.95%, 1.70% and 1.70% for Class
A, Class B and Class C, respectively. These expense limits will expire
April 30, 2010.
(7) The investment management agreement between SBL Fund, on behalf of its
series, and Security Investors, LLC was made and entered into on January
27, 2000, amended and restated effective August 15, 2008, and amended as of
November 24, 2008.
B-5
(8) Effective May 1, 2010. Series E (U.S. Intermediate Bond Series) currently
has in place a fee waiver of 0.15% (reflecting the Investment Manager's
waiver of a portion of its management fees under the Fund's investment
management agreement). This fee waiver will expire April 30, 2010.
(9) Effective May 1, 2010. Series H (Enhanced Index Series) currently has in
place a fee waiver of 0.25% (reflecting the Investment Manager's waiver of
a portion of its management fees under the Fund's investment management
agreement). This fee waiver will expire April 30, 2010.
(10) Effective May 1, 2010. Series O (All Cap Value Series) currently has in
place an expense limit of 0.85%. This expense limit will expire April 30,
2010.
(11) Effective May 1, 2010. Series Z (Alpha Opportunity Series) currently has in
place an expense limit of 1.70%. This expense limit will expire April 30,
2010.
B-6
APPENDIX C
DIRECTORS/MANAGERS AND OFFICERS
MANAGER REPRESENTATIVE AND PRINCIPAL EXECUTIVE OFFICER OF SECURITY INVESTORS,
LLC. The business address of the manager representative and principal executive
officer is One Security Benefit Place, Topeka, Kansas 66636-0001.
----------------------------- ---------------------------- --------------------------------------------------
NAME POSITION HELD WITH OTHER PRINCIPAL OCCUPATION/POSITION
SECURITY INVESTORS, LLC
----------------------------- ---------------------------- --------------------------------------------------
Richard M. Goldman President and Manager Senior Vice President, Security Benefit
Representative Corporation; Director, First Security Benefit
Life Insurance and Annuity Company of New York;
President & Manager, Security Global Investors,
LLC; CEO, President, & Director, Rydex
Distributors, Inc.; President & CEO, Rydex
Holdings, LLC; CEO & Director, PADCO Advisors,
Inc.; CEO & Director, PADCO Advisors II, Inc.;
Director, Rydex Fund Services, Inc.
----------------------------- ---------------------------- --------------------------------------------------
MANAGERS AND PRINCIPAL EXECUTIVE OFFICERS OF SECURITY GLOBAL INVESTORS, LLC. The
business address of the managers and principal executive officers is 801
Montgomery Street, 2nd Floor, San Francisco, California 94133.
----------------------------- ---------------------------- --------------------------------------------------
NAME POSITION HELD WITH OTHER PRINCIPAL OCCUPATION/POSITION
SECURITY GLOBAL INVESTORS,
LLC
----------------------------- ---------------------------- --------------------------------------------------
Richard M. Goldman President and Manager Senior Vice President, Security Benefit
Corporation; Director, First Security Benefit
Life Insurance and Annuity Company of New York;
President and Manager Representative, Security
Investors, LLC; CEO, President, & Director,
Rydex Distributors, Inc.; President & CEO, Rydex
Holdings, LLC; CEO & Director, PADCO Advisors,
Inc.; CEO & Director, PADCO Advisors II, Inc.;
Director, Rydex Fund Services, Inc.
----------------------------- ---------------------------- --------------------------------------------------
Kris A. Robbins Manager Chairman of the Board, President and Chief
Executive Officer, Security Benefit Corporation,
Security Benefit Life Insurance Company, First
Security Benefit Life Insurance and Annuity
Company of New York and Security Benefit Mutual
Holding Company.
----------------------------- ---------------------------- --------------------------------------------------
DIRECTORS/OFFICERS OF THE FUNDS WHO HOLD POSITION(S) WITH SECURITY INVESTORS,
LLC AND SECURITY GLOBAL INVESTORS, LLC. The business address of each of the
following persons is One Security Benefit Place, Topeka, Kansas 66636-0001.
----------------------------- ---------------------------- --------------------------------------------------
NAME POSITION HELD WITH THE POSITION HELD WITH SECURITY INVESTORS, LLC AND
FUNDS SECURITY GLOBAL INVESTORS, LLC
----------------------------- ---------------------------- --------------------------------------------------
Richard M. Goldman Director, President and President and Manager Representative, Security
Chairman of the Board of Investors, LLC; President & Manager, Security
each Company Global Investors, LLC
----------------------------- ---------------------------- --------------------------------------------------
C-1
----------------------------- ---------------------------- --------------------------------------------------
Brenda M. Harwood Treasurer and Chief Vice President and Chief Compliance Officer,
Compliance Officer Security Investors, LLC; Chief Compliance
Officer, Security Global Investors, LLC
----------------------------- ---------------------------- --------------------------------------------------
Amy J. Lee Secretary and Vice Secretary, Security Investors, LLC; Secretary,
President Security Global Investors, LLC
----------------------------- ---------------------------- --------------------------------------------------
Christopher L. Phalen Vice President Vice President, Security Investors, LLC; Vice
President, Security Global Investors, LLC
----------------------------- ---------------------------- --------------------------------------------------
Christopher D. Swickard Assistant Secretary Assistant Secretary, Security Investors, LLC
----------------------------- ---------------------------- --------------------------------------------------
C-2
APPENDIX D-1
ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT OBJECTIVES ADVISED
BY SECURITY INVESTORS, LLC
Each of the tables below lists the names of other mutual funds advised by
Security Investors, LLC (the "Investment Manager") with a similar investment
objective as the Funds, and information concerning the Funds' and such other
funds' net assets as of December 31, 2009 and the rate of compensation for the
Investment Manager for its services to the Funds and such other funds. The
Investment Manager has agreed to reduce or waive its investment advisory fees
for certain Funds as provided in Appendix B.
--------------------------------------- ------------------------------------- -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A PERCENTAGE
Fund(s) with Similar Objective OF AVERAGE DAILY NET ASSETS)
--------------------------------------- ------------------------------------- -------------------------------
RYDEX | SGI LARGE CAP CORE FUND 0.75% $197.03
(FORMERLY RYDEX | SGI EQUITY FUND)
--------------------------------------- ------------------------------------- -------------------------------
SERIES A (EQUITY SERIES) 0.75% $186.01
--------------------------------------- ------------------------------------- -------------------------------
--------------------------------------- ------------------------------------- -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A PERCENTAGE
Fund(s) with Similar Objective OF AVERAGE DAILY NET ASSETS)
--------------------------------------- ------------------------------------- -------------------------------
RYDEX | SGI ALPHA OPPORTUNITY FUND 1.25% $14.65
--------------------------------------- ------------------------------------- -------------------------------
SERIES Z (ALPHA OPPORTUNITY SERIES) 1.25% $22.63
--------------------------------------- ------------------------------------- -------------------------------
--------------------------------------- ------------------------------------- -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A PERCENTAGE
Fund(s) with Similar Objective OF AVERAGE DAILY NET ASSETS)
--------------------------------------- ------------------------------------- -------------------------------
RYDEX | SGI GLOBAL FUND 1.00% $112.39
--------------------------------------- ------------------------------------- -------------------------------
RYDEX | SGI GLOBAL INSTITUTIONAL FUND 1.00% $4.54
--------------------------------------- ------------------------------------- -------------------------------
SERIES D (GLOBAL SERIES) 1.00% $270.19
--------------------------------------- ------------------------------------- -------------------------------
-------------------------------------- -------------------------------------- -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A PERCENTAGE
Fund(s) with Similar Objective OF AVERAGE DAILY NET ASSETS)
-------------------------------------- -------------------------------------- -------------------------------
RYDEX | SGI MID CAP VALUE FUND 1.00% for the first $200 million and $1,108.51
0.75% thereafter
-------------------------------------- -------------------------------------- -------------------------------
RYDEX | SGI MID CAP VALUE 0.75% $353.92
INSTITUTIONAL FUND
-------------------------------------- -------------------------------------- -------------------------------
SERIES V (MID CAP VALUE SERIES) 0.75% $304.49
-------------------------------------- -------------------------------------- -------------------------------
D-1-1
---------------------------------------- ------------------------------------ -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A
Fund(s) with Similar Objective PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
---------------------------------------- ------------------------------------ -------------------------------
RYDEX | SGI SMALL CAP GROWTH FUND 0.85% $14.60
---------------------------------------- ------------------------------------ -------------------------------
SERIES X (SMALL CAP GROWTH SERIES) 0.85% $35.31
---------------------------------------- ------------------------------------ -------------------------------
---------------------------------------- ------------------------------------ -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A
Fund(s) with Similar Objective PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
---------------------------------------- ------------------------------------ -------------------------------
RYDEX | SGI SMALL CAP VALUE FUND 1.00% $6.95
---------------------------------------- ------------------------------------ -------------------------------
SERIES Q (SMALL CAP VALUE SERIES) 0.95% $125.25
---------------------------------------- ------------------------------------ -------------------------------
---------------------------------------- ------------------------------------ -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A
Fund(s) with Similar Objective PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
---------------------------------------- ------------------------------------ -------------------------------
RYDEX | SGI LARGE CAP CONCENTRATED 0.75% $42.05
GROWTH FUND (FORMERLY RYDEX | SGI
SELECT 25 FUND)
---------------------------------------- ------------------------------------ -------------------------------
SERIES Y (SELECT 25 SERIES) 0.75% $41.05
---------------------------------------- ------------------------------------ -------------------------------
---------------------------------------- ------------------------------------ -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A
Fund(s) with Similar Objective PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
---------------------------------------- ------------------------------------ -------------------------------
RYDEX | SGI ALL CAP VALUE FUND 0.70% $2.22
---------------------------------------- ------------------------------------ -------------------------------
SERIES O (ALL CAP VALUE SERIES) 0.70% $161.79
---------------------------------------- ------------------------------------ -------------------------------
---------------------------------------- ------------------------------------ -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A
Fund(s) with Similar Objective PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
---------------------------------------- ------------------------------------ -------------------------------
RYDEX | SGI LARGE CAP VALUE FUND 0.65% $53.18
---------------------------------------- ------------------------------------ -------------------------------
RYDEX | SGI LARGE CAP VALUE 0.65% $2.74
INSTITUTIONAL FUND
---------------------------------------- ------------------------------------ -------------------------------
SERIES B (LARGE CAP VALUE SERIES) 0.65% $280.40
---------------------------------------- ------------------------------------ -------------------------------
D-1-2
--------------------------------------- ------------------------------------- -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A PERCENTAGE
Fund(s) with Similar Objective OF AVERAGE DAILY NET ASSETS)
--------------------------------------- ------------------------------------- -------------------------------
RYDEX | SGI MID CAP GROWTH FUND 0.75% $80.90
--------------------------------------- ------------------------------------- -------------------------------
SERIES J (MID CAP GROWTH SERIES) 0.75% $153.74
--------------------------------------- ------------------------------------- -------------------------------
--------------------------------------- ------------------------------------- -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A PERCENTAGE
Fund(s) with Similar Objective OF AVERAGE DAILY NET ASSETS)
--------------------------------------- ------------------------------------- -------------------------------
RYDEX | SGI HIGH YIELD FUND 0.60% $173.90
--------------------------------------- ------------------------------------- -------------------------------
SERIES P (HIGH YIELD SERIES) 0.75% $139.16
--------------------------------------- ------------------------------------- -------------------------------
--------------------------------------- ------------------------------------- -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A PERCENTAGE
Fund(s) with Similar Objective OF AVERAGE DAILY NET ASSETS)
--------------------------------------- ------------------------------------- -------------------------------
RYDEX | SGI U.S. INTERMEDIATE BOND 0.50% $142.34
FUND
--------------------------------------- ------------------------------------- -------------------------------
SERIES E (U.S. INTERMEDIATE BOND 0.75% $130.23
SERIES)
--------------------------------------- ------------------------------------- -------------------------------
--------------------------------------- ------------------------------------- -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A PERCENTAGE
Fund(s) with Similar Objective OF AVERAGE DAILY NET ASSETS)
--------------------------------------- ------------------------------------- -------------------------------
SERIES C (MONEY MARKET SERIES) 0.50% [ ]
--------------------------------------- ------------------------------------- -------------------------------
None N/A N/A
--------------------------------------- ------------------------------------- -------------------------------
--------------------------------------- ------------------------------------- -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A PERCENTAGE
Fund(s) with Similar Objective OF AVERAGE DAILY NET ASSETS)
--------------------------------------- ------------------------------------- -------------------------------
SERIES H (ENHANCED INDEX SERIES) 0.75% [ ]
--------------------------------------- ------------------------------------- -------------------------------
None N/A N/A
--------------------------------------- ------------------------------------- -------------------------------
--------------------------------------- ------------------------------------- -------------------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE NET ASSETS (IN MILLIONS)
INVESTMENT MANAGER (AS A PERCENTAGE
Fund(s) with Similar Objective OF AVERAGE DAILY NET ASSETS)
--------------------------------------- ------------------------------------- -------------------------------
SERIES N (MANAGED ASSET ALLOCATION 1.00% [ ]
SERIES)
--------------------------------------- ------------------------------------- -------------------------------
None N/A N/A
--------------------------------------- ------------------------------------- -------------------------------
D-1-3
APPENDIX D-2
ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT OBJECTIVES SUB-ADVISED
BY SECURITY GLOBAL INVESTORS, LLC
Each of the tables below lists the names of other mutual funds advised or
sub-advised by Security Global Investors, LLC (the "Sub-Adviser") with a similar
investment objective as the Sub-Advised Funds, and information concerning the
Sub-Advised Funds' and such other funds' net assets as of December 31, 2009 and
the rate of compensation for the Sub-Adviser for its services to the Funds and
such other funds. The Sub-Adviser does not have any arrangement to reduce or
waive its sub-advisory fees for the Funds.
------------------------------------------ ------------------------------------------- ----------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE SUB-ADVISER NET ASSETS (IN
(AS A PERCENTAGE OF AVERAGE DAILY NET MILLIONS)
Fund(s) with Similar Objective A SSETS)
------------------------------------------ ------------------------------------------- ----------------------
RYDEX | SGI ALPHA OPPORTUNITY FUND 1.45%(1) $14.65
------------------------------------------ ------------------------------------------- ----------------------
SERIES Z (ALPHA OPPORTUNITY SERIES) 1.45%(1) $22.63
------------------------------------------ ------------------------------------------- ----------------------
------------------------------------------ ------------------------------------------- ----------------------
NAME OF FUNDS ANNUAL COMPENSATION TO THE SUB-ADVISER NET ASSETS (IN
MILLIONS)
Fund(s) with Similar Objective
------------------------------------------ ------------------------------------------- ----------------------
RYDEX | SGI GLOBAL FUND 0.35% on the first $300 million; $112.39
0.30% on the next $450 million; and
0.25% thereafter(2)
------------------------------------------ ------------------------------------------- ----------------------
RYDEX | SGI GLOBAL INSTITUTIONAL FUND 0.35% on the first $300 million; $4.54
0.30% on the next $450 million; and
0.25% thereafter(2)
------------------------------------------ ------------------------------------------- ----------------------
SERIES D (GLOBAL SERIES) 0.35% on the first $300 million; $270.193
0.30% on the next $450 million; and
0.25% thereafter(2)
------------------------------------------ ------------------------------------------- ----------------------
International Equity Fund, a series of 0.40% $96.75*
American Independence Funds Trust
------------------------------------------ ------------------------------------------- ----------------------
Rydex | SGI Global 130/30 Strategy Fund, 0.65% $14.06
a series of Rydex Series Funds
------------------------------------------ ------------------------------------------- ----------------------
Rydex | SGI Global Market Neutral Fund, 0.80% $18.75
a series of Rydex Series Funds
------------------------------------------ ------------------------------------------- ----------------------
-----------------------
(1) These annual fees are stated as a percentage of a portion of the Fund's net
assets managed by the Sub-Adviser. Another portion of the Fund's assets is
managed by Mainstream Investment Advisers, LLC, which is not affiliated
with the Fund.
(2) These annual fees are stated as a percentage of the combined average daily
net assets of the portion of Rydex | SGI Global Fund, Rydex | SGI Global
Institutional Fund and Series D (Global Series) managed by the Sub-Adviser.
* As of October 31, 2009.
D-2-1
APPENDIX E
FORM OF SUB-ADVISORY AGREEMENT
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SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into as of the [ ] day of [ ] 2010 between
Security Investors, LLC (the "Adviser"), a Kansas limited liability company,
registered under the Investment Advisers Act of 1940, as amended (the
"Investment Advisers Act"), and Security Global Investors, LLC (the
"Subadviser"), a Kansas limited liability company registered under the
Investment Advisers Act.
W I T N E S S E T H:
WHEREAS, SBL Fund and Security Equity Fund, Kansas corporations, are each
registered with the Securities and Exchange Commission (the "Commission") as
open-end management investment companies under the Investment Company Act of
1940, as amended (the "Investment Company Act");
WHEREAS, SBL Fund is authorized to issue shares of Series D ("Series D"), a
separate series of SBL Fund and Security Equity Fund is authorized to issue
shares of the Global Series ("Global Series") and Global Institutional Series
("Global Institutional Series"), each a separate series of Security Equity Fund
(Series D, Global Series and Global Institutional Series are referred to herein
individually as a "Fund" and collectively as the "Funds");
WHEREAS, each of the Funds has, pursuant to an Advisory Agreement with the
Adviser (the "Advisory Agreement"), retained the Adviser to act as investment
adviser for and to manage its assets;
WHEREAS, the Advisory Agreements permit the Adviser to delegate certain of its
duties under the Advisory Agreement to other investment advisers, subject to the
requirements of the Investment Company Act; and
WHEREAS, the Adviser desires to retain the Subadviser as subadviser to act as
investment adviser for and to manage the Funds' respective Investments (as
defined below) and the Subadviser desires to render such services.
NOW, THEREFORE, the Adviser and Subadviser do mutually agree and promise as
follows:
1. Appointment as Subadviser. The Adviser hereby retains the Subadviser to
act as investment adviser for and to manage the assets of the Funds, in each
case subject to the supervision of the Adviser and the Board of Directors of
such Fund and subject to the terms of this Agreement. The Subadviser hereby
accepts such employment. In such capacity, the Subadviser shall be responsible
for each Fund's Investments (as defined below).
2. Duties of Subadviser.
(a) Investments. The Subadviser is hereby authorized and directed and
hereby agrees, subject to the stated investment policies and restrictions
of each Fund as set forth in such Fund's prospectus and statement of
additional information as currently in effect and as supplemented or
amended from time to time (collectively referred to hereinafter as the
"Prospectus") and subject to the directions of the Adviser and the Fund's
Board of Directors to purchase, hold and sell investments for the account
of the
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Funds (hereinafter "Investments") and to monitor on a continuous basis the
performance of such Investments. The Subadviser shall give the Funds the
benefit of its best efforts in rendering its services as Subadviser. The
Subadviser may contract with or consult with such banks, other securities
firms, brokers or other parties, without additional expense to the Funds,
as it may deem appropriate regarding investment advice, research and
statistical data, clerical assistance or otherwise.
(b) Brokerage. The Subadviser is authorized, subject to the
supervision of the Adviser and the respective Fund's Board to establish and
maintain accounts on behalf of each Fund with, and place orders for the
purchase and sale of each Fund's Investments with or through, such persons,
brokers or dealers as Subadviser may select which may include, to the
extent permitted by the Adviser and the respective Fund's Board, brokers or
dealers affiliated with the Subadviser or Adviser, and negotiate
commissions to be paid on such transactions. The Subadviser agrees that in
placing such orders for a Fund it shall attempt to obtain best execution,
provided that, the Subadviser may, on behalf of such Fund, pay brokerage
commissions to a broker which provides brokerage and research services to
the Subadviser in excess of the amount another broker would have charged
for effecting the transaction, provided (i) the Subadviser determines in
good faith that the amount is reasonable in relation to the value of the
brokerage and research services provided by the executing broker in terms
of the particular transaction or in terms of the Subadviser's overall
responsibilities with respect to such Fund and the accounts as to which the
Subadviser exercises investment discretion, (ii) such payment is made in
compliance with Section 28(e) of the Securities Exchange Act of 1934, as
amended, and any other applicable laws and regulations, and (iii) in the
opinion of the Subadviser, the total commissions paid by such Fund will be
reasonable in relation to the benefits to the Fund over the long term. In
reaching such determination, the Subadviser will not be required to place
or attempt to place a specific dollar value on the brokerage and/or
research services provided or being provided by such broker. It is
recognized that the services provided by such brokers may be useful to the
Subadviser in connection with the Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale of a security
to be in the best interests of the Fund as well as other clients of the
Subadviser, the Subadviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the
securities to be sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such
event, allocation of securities so sold or purchased, as well as the
expenses incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser considers to be the most equitable and consistent
with its fiduciary obligations to the Fund or Funds involved and to such
other clients. The Subadviser will report on such allocations at the
request of the Adviser, or the respective Fund's Board, providing such
information as the number of aggregated trades to which a Fund was a party,
the broker(s) to whom such trades were directed and the basis of the
allocation for the aggregated trades.
(c) Securities Transactions. The Subadviser and any affiliated person
of the Subadviser will not purchase securities or other instruments from or
sell securities or other instruments to a Fund ("Principal Transactions");
provided, however, the Subadviser or an affiliated person of the Subadviser
may enter into a Principal Transaction with a Fund if (i) the transaction
is permissible under applicable laws and regulations, including, without
limitation, the Investment Company Act and the Investment Advisers Act and
the rules and regulations promulgated thereunder, and (ii)
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the transaction or category of transactions receives the express written
approval of the Adviser.
The Subadviser agrees to observe and comply with Rule 17j-1 under the
Investment Company Act and its Code of Ethics, as the same may be amended from
time to time. The Subadviser agrees to provide the Adviser and the Funds with a
copy of such Code of Ethics.
(d) Books and Records. The Subadviser will maintain all books and
records required to be maintained pursuant to the Investment Company Act
and the rules and regulations promulgated thereunder solely with respect to
transactions made by it on behalf of the Funds including, without
limitation, the books and records required by Subsections (b)(1), (5), (6),
(7), (9), (10) and (11) and Subsection (f) of Rule 31a-1 under the
Investment Company Act and shall timely furnish to the Adviser all
information relating to the Subadviser's services hereunder needed by the
Adviser to keep such other books and records of the Funds required by Rule
31a-1 under the Investment Company Act. The Subadviser will also preserve
all such books and records for the periods prescribed in part (e) of Rule
31a-2 under the Investment Company Act, and agrees that such books and
records shall remain the sole property of the respective Fund and shall be
immediately surrendered to the appropriate Fund upon request. The
Subadviser further agrees that all books and records maintained hereunder
shall be made available to the respective Fund or the Adviser at any time
upon reasonable request and notice, including telecopy, during any business
day.
(e) Information Concerning Investments and Subadviser. From time to
time as the Adviser or a Fund may request, the Subadviser will furnish the
requesting party reports on portfolio transactions and reports on
Investments held in the portfolios, all in such detail as the Adviser or
the applicable Fund may reasonably request. The Subadviser will make
available its officers and employees to meet with the Board of Directors of
a Fund at the Fund's principal place of business on due notice to review
the Investments of the Fund.
The Subadviser will also provide such information as is customarily
provided by a subadviser and may be required for each Fund or the Adviser to
comply with their respective obligations under applicable laws, including,
without limitation, the Internal Revenue Code of 1986, as amended (the "Code"),
the Investment Company Act, the Investment Advisers Act, the Securities Act of
1933, as amended (the "Securities Act") and any state securities laws, and any
rule or regulation thereunder.
During the term of this Agreement, the Adviser agrees to furnish the
Subadviser at its principal office all registration statements, proxy
statements, reports to stockholders, sales literature or other materials
prepared for distribution to stockholders of each Fund, or the public that refer
to the Subadviser for Subadviser's review and approval. The Subadviser shall be
deemed to have approved all such materials unless the Subadviser reasonably
objects by giving notice to the Adviser in writing within five business days (or
such other period as may be mutually agreed) after receipt thereof. The
Subadviser's right to object to such materials is limited to the portions of
such materials that expressly relate to the Subadviser, its services and its
clients. The Adviser agrees to use its best efforts to ensure that materials
prepared by its employees or agents or its affiliates that refer to the
Subadviser or its clients in any way are consistent with those materials
previously approved by the Subadviser as referenced in this paragraph. Sales
literature may be furnished to the Sub-Adviser by first class or overnight mail,
facsimile transmission equipment or hand delivery.
E-4
(f) Custody Arrangements. The Subadviser shall provide each Fund's
custodian, on each business day with information relating to all transactions
concerning the Fund's assets.
(g) Compliance with Applicable Laws and Governing Documents. In all matters
relating to the performance of this Agreement, the Subadviser and its directors,
officers, partners, employees and interested persons shall act in conformity
with each Fund's Articles of Incorporation, By-Laws, and currently effective
registration statement and with the written instructions and directions of each
Fund's Board and the Adviser, after receipt of such documents, from the relevant
Fund, and shall comply with the requirements of the Investment Company Act, the
Investment Advisers Act, the Commodity Exchange Act (the "CEA"), the rules
thereunder, and all other applicable federal and state laws and regulations.
In carrying out its obligations under this Agreement, the Subadviser shall
ensure that the Funds comply with all applicable statutes and regulations
necessary to qualify each Fund as a Regulated Investment Company under
Subchapter M of the Code (or any successor provision), and shall notify the
Adviser immediately upon having a reasonable basis for believing that a Fund has
ceased to so qualify or that it might not so qualify in the future.
In carrying out its obligations under this Agreement, the Subadviser shall
invest the assets of Series D in such a manner as to ensure that such
investments comply with the diversification provisions of Section 817(h) of the
Code (or any successor provision) and the regulations issued thereunder relating
to the diversification requirements for variable insurance contracts and any
prospective amendments or other enacted modifications to Section 817 or
regulations thereunder. Subadviser shall notify the Adviser immediately upon
having a reasonable basis for believing that Series D has ceased to comply and
will take all reasonable steps to adequately diversify the assets of Series D,
so as to achieve compliance within the grace period afforded by Regulation
1.817-5.
The Adviser has furnished the Subadviser with copies of each of the
following documents and will furnish the Subadviser at its principal office all
future amendments and supplements to such documents, if any, as soon as
practicable after such documents become available: (i) the Articles of
Incorporation of each Fund, (ii) the By-Laws of each Fund, (iii) each Fund's
registration statement under the Investment Company Act and the Securities Act
of 1933, as amended, as filed with the Commission, and (iv) any written
instructions of the respective Fund's Board and the Adviser.
(h) Voting of Proxies. The Subadviser shall direct the custodian as to
how to vote such proxies as may be necessary or advisable in connection
with any matters submitted to a vote of shareholders of Investments held by
a Fund.
3. Independent Contractor. In the performance of its duties hereunder, the
Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Funds or the Adviser in any way or
otherwise be deemed an agent of the Funds or the Adviser.
4. Compensation. The Adviser shall pay to the Subadviser, for the services
rendered hereunder, the fees set forth in Exhibit A to this Agreement.
5. Expenses. The Subadviser shall bear all expenses incurred by it in
connection with its services under this Agreement and will, from time to time,
at its sole expense employ or
E-5
associate itself with such persons as it believes to be particularly fitted to
assist it in the execution of its duties hereunder. However, the Subadviser
shall not assign or delegate any of its investment management duties under this
Agreement without the approval of the Adviser and the appropriate Fund's Board.
6. Representations and Warranties of Subadviser. The Subadviser represents
and warrants to the Adviser and the Funds as follows:
(a) The Subadviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Subadviser will immediately notify the Adviser of the
occurrence of any event that would disqualify the Subadviser from serving
as an investment adviser of an investment company pursuant to Section 9(a)
of the Investment Company Act;
(c) The Subadviser has filed a notice of exemption pursuant to Rule
4.14 under the CEA with the Commodity Futures Trading Commission (the
"CFTC") and the National Futures Association;
(d) The Subadviser is fully authorized under all applicable law to
serve as Subadviser to the Funds and to perform the services described
under this Agreement;
(e) The Subadviser is a limited liability company duly organized and
validly existing under the laws of the state of Kansas with the power to
own and possess its assets and carry on its business as it is now being
conducted;
(f) The execution, delivery and performance by the Subadviser of this
Agreement are within the Subadviser's powers and have been duly authorized
by all necessary action on the part of its members, and no action by or in
respect of, or filing with, any governmental body, agency or official is
required on the part of the Subadviser for the execution, delivery and
performance by the Subadviser of this Agreement, and the execution,
delivery and performance by the Subadviser of this Agreement do not
contravene or constitute a default under (i) any provision of applicable
law, rule or regulation, (ii) the Subadviser's governing instruments, or
(iii) any agreement, judgment, injunction, order, decree or other
instrument binding upon the Subadviser;
(g) This Agreement is a valid and binding agreement of the Subadviser;
(h) The Form ADV of the Subadviser previously provided to the Adviser
is a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date, and does not omit to state any material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
7. Non-Exclusivity. The services of the Subadviser with respect to the
Funds are not deemed to be exclusive, and the Subadviser and its officers shall
be free to render investment advisory and administrative or other services to
others (including other investment companies) and to engage in other activities
so long as its duties hereunder are not impaired thereby.
8. Representations and Warranties of Adviser. The Adviser represents and
warrants to the Subadviser as follows:
E-6
(a) The Adviser is registered as an investment adviser under the Investment
Advisers Act;
(b) The Adviser has filed a notice of exemption pursuant to Rule 4.14 under
the CEA with the Commodity Futures Trading Commission (the "CFTC") and the
National Futures Association;
(c) The Adviser is a limited liability company duly organized and validly
existing under the laws of the State of Kansas with the power to own and possess
its assets and carry on its business as it is now being conducted;
(d) The execution, delivery and performance by the Adviser of this
Agreement and the Advisory Agreement are within the Adviser's powers and have
been duly authorized by all necessary action on the part of its members, and no
action by or in respect of, or filing with, any governmental body, agency or
official is required on the part of the Adviser for the execution, delivery and
performance by the Adviser of this Agreement, and the execution, delivery and
performance by the Adviser of this Agreement do not contravene or constitute a
default under (i) any provision of applicable law, rule or regulation, (ii) the
Adviser's governing instruments, or (iii) any agreement, judgment, injunction,
order, decree or other instrument binding upon the Adviser;
(e) This Agreement and the Advisory Agreement are valid and binding
agreements of the Adviser;
(f) The Form ADV of the Adviser previously provided to the Subadviser is a
true and complete copy of the form filed with the Commission and the information
contained therein is accurate and complete in all material respects as of its
filing date and does not omit to state any material fact necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading;
(g) The Adviser acknowledges that it received a copy of the Subadviser's
Form ADV at least 48 hours prior to the execution of this Agreement.
9. Survival of Representations and Warranties; Duty to Update Information.
All representations and warranties made by the Subadviser and the Adviser
pursuant to Sections 6 and 8 hereof shall survive for the duration of this
Agreement and the parties hereto shall promptly notify each other in writing
upon becoming aware that any of the foregoing representations and warranties are
no longer true.
10. Liability and Indemnification.
(a) Liability. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Subadviser or a breach of its duties hereunder,
the Subadviser shall not be subject to any liability to the Adviser, to either
Fund, or any of either Fund's shareholders, and, in the absence of willful
misfeasance, bad faith or gross negligence on the part of the Adviser or a
breach of its duties hereunder, the Adviser shall not be subject to any
liability to the Subadviser, for any act or omission in the case of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of Investments; provided, however,
that nothing herein shall relieve the Adviser and the Subadviser from any of
their respective obligations under
E-7
applicable law, including, without limitation, the federal and state securities
laws and the CEA.
(b) Indemnification. The Subadviser shall indemnify the Adviser and the
Funds, and their respective officers and directors, for any liability and
expenses, including attorneys' fees, which may be sustained by the Adviser, or
the Funds, as a result of the Subadviser's willful misfeasance, bad faith, or
gross negligence, breach of its duties hereunder or violation of applicable law,
including, without limitation, the federal and state securities laws or the CEA.
The Adviser shall indemnify the Subadviser and its officers and partners, for
any liability and expenses, including attorneys' fees, which may be sustained as
a result of the Adviser's, or the Funds' willful misfeasance, bad faith, or
gross negligence, breach of its duties hereunder or violation of applicable law,
including, without limitation, the federal and state securities laws or the CEA.
11. Duration and Termination.
(a) Duration. This Agreement shall become effective upon the date first
above written, provided that this Agreement shall not take effect with respect
to a Fund unless it has first been approved by a vote of a majority of those
directors of SBL Fund and Security Equity Fund, as applicable, 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. This
Agreement shall continue in effect for a period of two years from the date
hereof, subject thereafter to being continued in force and effect from year to
year with respect to each Fund if specifically approved each year by the Board
of Directors of the applicable Fund. In addition to the foregoing, each renewal
of this Agreement with respect to each Fund must be approved by the vote of a
majority of the applicable Fund's directors 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. Prior to voting on the
renewal of this Agreement, the Board of Directors of the applicable Fund may
request and evaluate, and the Subadviser shall furnish, such information as may
reasonably be necessary to enable the Fund's Board of Directors to evaluate the
terms of this Agreement.
(b) Termination. Notwithstanding whatever may be provided herein to the
contrary, this Agreement may be terminated at any time, without payment of any
penalty:
(i) By vote of a majority of the Board of Directors of the applicable
Fund, or by vote of a majority of the outstanding voting securities of the
applicable Fund, or by the Adviser, in each case, upon sixty (60) days'
written notice to the Subadviser;
(ii) By the Adviser upon breach by the Subadviser of any
representation or warranty contained in Section 6 hereof, which shall not
have been cured within twenty (20) days of the Subadviser's receipt of
written notice of such breach;
(iii) By the Adviser immediately upon written notice to the Subadviser
if the Subadviser becomes unable to discharge its duties and obligations
under this Agreement; or
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(iv) By the Subadviser upon 120 days written notice to the Adviser and
the applicable Fund.
This Agreement shall not be assigned (as such term is defined in the
Investment Company Act) without the prior written consent of the parties hereto.
This Agreement shall terminate automatically in the event of its assignment
without such consent or upon the termination of the Advisory Agreement.
12. Duties of the Adviser. The Adviser shall continue to have
responsibility for all services to be provided to the Funds pursuant to the
Advisory Agreement and shall oversee and review the Subadviser's performance of
its duties under this Agreement.
13. Amendment. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment with respect to a Fund
shall be approved by the Board of Directors of the applicable Fund or by a vote
of a majority of the outstanding voting securities of the applicable Fund.
14. Notice. Any notice that is required to be given by the parties to each
other (or to the Fund) under the terms of this Agreement shall be in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Security Global Investors, LLC
2 Embarcadero Center, Suite 2350
San Francisco, CA 94111
Attention: John Boich, Vice President and Head of
Global Equity
Facsimile: (415) 274-7702
With a copy to:
Security Benefit Corporation
One Security Benefit Place
Topeka, KS 66636
Attention: General Counsel
Facsimile: (785) 438-3080
(b) If to the Adviser:
Security Investors, LLC
One Security Benefit Place
Topeka, KS 66636-0001
Attention: Richard Goldman, President
Facsimile: (785) 438-3080
(c) If to SBL Fund:
SBL Fund
One Security Benefit Place
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Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 438-3080
(d) If to Security Equity Fund:
Security Equity Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 438-3080
15. Governing Law; Jurisdiction. Except as indicated in Section 19(b) of
this Agreement, this Agreement shall be governed by and construed in accordance
with the laws of the State of Kansas, without regard to its conflicts of law
provisions.
16. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the same
instrument.
17. Captions. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
18. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and effect.
19. Certain Definitions.
(a) "Business day." As used herein, business day means any customary
business day in the United States on which the New York Stock Exchange is
open.
(b) Miscellaneous. As used herein, "investment company," "affiliated
person," "interested person," "assignment," "broker," "dealer" and
"affirmative vote of the majority of the Fund's outstanding voting
securities" shall all have such meaning as such terms have in the
Investment Company Act. The term "investment adviser" shall have such
meaning as such term has in the Investment Advisers Act and the Investment
Company Act, and in the event of a conflict between such Acts, the most
expansive definition shall control. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of
this Agreement is relaxed by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order .
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first written above.
Security Investors, LLC
By:
---------------------------
Name: Richard M. Goldman
Title: President
Attest:
---------------------------
Name: Amy J. Lee
Title: Secretary
Security Global Investors, LLC
By:
----------------------------
Name: Richard M. Goldman
Title: President
Attest:
---------------------------
Name: Amy J. Lee
Title: Secretary
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EXHIBIT A
Compensation
For all services rendered by the Subadviser hereunder, Adviser shall pay to
Subadviser a fee (the "Subadvisory Fee") as follows:
An annual rate of 0.35% of the combined average daily net assets of the Funds of
$300 million or less; and
An annual rate of 0.30% of the combined average daily net assets of the Funds of
more than $300 million but less than $750 million; and
An annual rate of 0.25% of the combined average daily net assets of the Funds of
more than $750 million.
For purposes of calculating the compensation to be paid hereunder, the value of
the net assets of a Fund shall be computed in the same manner at the end of the
business day as the value of such net assets is computed in connection with the
determination of the net asset value of the Fund's shares as described in the
then current prospectus for the applicable Fund.
The Subadvisory Fee shall be accrued for each calendar day the Subadviser
renders subadvisory services hereunder and the sum of the daily fee accruals
shall be paid monthly to the Subadviser as soon as practicable following the
last day of each month, by wire transfer if so requested by the Subadviser, but
no later than ten (10) calendar days thereafter. If this Agreement shall be
effective for only a portion of a year, then the Subadviser's fee for said year
shall be prorated for such portion.
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SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into as of the [ ] day of [ ], 2010 between
Security Investors, LLC (the "Adviser"), a Kansas limited liability company,
registered under the Investment Advisers Act of 1940, as amended (the
"Investment Advisers Act"), and Security Global Investors, LLC (the
"Subadviser"), a Kansas limited liability company registered under the
Investment Advisers Act.
W I T N E S S E T H:
WHEREAS, SBL Fund and Security Equity Fund, Kansas corporations, are each
registered with the Securities and Exchange Commission (the "Commission") as
open-end management investment companies under the Investment Company Act of
1940, as amended (the "Investment Company Act");
WHEREAS, SBL Fund is authorized to issue shares of Series Z ("Series Z"), a
separate series of SBL Fund and Security Equity Fund is authorized to issue
shares of the Alpha Opportunity Series ("Alpha Opportunity Series"), a separate
series of Security Equity Fund (Series Z, and the Alpha Opportunity Series are
referred to herein individually as a "Fund" and collectively as the "Funds");
WHEREAS, each of the Funds has, pursuant to an Advisory Agreement with the
Adviser (the "Advisory Agreement"), retained the Adviser to act as investment
adviser for and to manage its assets;
WHEREAS, the Advisory Agreements permit the Adviser to delegate certain of its
duties under the Advisory Agreement to other investment advisers, subject to the
requirements of the Investment Company Act; and
WHEREAS, the Adviser desires to retain the Subadviser as subadviser to act as
investment adviser for and to manage a portion of each Fund's respective
Investments (as defined below) and the Subadviser desires to render such
services.
NOW, THEREFORE, the Adviser and Subadviser do mutually agree and promise as
follows:
1. Appointment as Subadviser. The Adviser hereby retains the Subadviser
to act as investment adviser for and to manage the portion of the assets of
the Funds as determined by the Adviser from time to time, in each case
subject to the supervision of the Adviser and the Board of Directors of
such Fund and subject to the terms of this Agreement. The Subadviser hereby
accepts such employment. In such capacity, the Subadviser shall be
responsible for the portion of each Fund's Investments (as defined below)
allocated to it by the Adviser.
2. Duties of Subadviser.
(a) Investments. The Subadviser is hereby authorized and directed and
hereby agrees, subject to the stated investment policies and restrictions
of each Fund as set forth in such Fund's prospectus and statement of
additional information as currently in effect and as supplemented or
amended from time to time (collectively referred to hereinafter as the
"Prospectus") and subject to the directions of the Adviser and the Fund's
Board of Directors to purchase, hold and sell investments for the portion
of the
E-13
assets of the Funds allocated to the Subadviser by the Adviser (hereinafter
"Investments") and to monitor on a continuous basis the performance of such
Investments. The Subadviser shall give the Funds the benefit of its best
efforts in rendering its services as Subadviser. The Subadviser may
contract with or consult with such banks, other securities firms, brokers
or other parties, without additional expense to the Funds, as it may deem
appropriate regarding investment advice, research and statistical data,
clerical assistance or otherwise.
The Subadviser acknowledges that each Fund may engage in certain
transactions in reliance on exemptions under Rule 10f-3, Rule 12d3-1, Rule
17a-10 and Rule 17e-1 under the Investment Company Act. Accordingly, the
Subadviser hereby agrees that it will not consult with any other subadviser
of a Fund, or an affiliated person of such other subadviser, concerning
transactions for such Fund in securities or other fund assets. The
Subadviser shall be limited to providing investment advice with respect to
only the discrete portion of each Fund's portfolio as may be determined
from time-to-time by the Adviser, and shall not consult with any other
subadviser as to any other portion of such Fund's portfolio concerning
transactions for the Fund in securities or other assets.
(b) Brokerage. The Subadviser is authorized, subject to the
supervision of the Adviser and the respective Fund's Board to establish and
maintain accounts on behalf of each Fund with, and place orders for the
purchase and sale of each Fund's Investments with or through, such persons,
brokers or dealers as Subadviser may select which may include, to the
extent permitted by the Adviser and the respective Fund's Board, brokers or
dealers affiliated with the Subadviser or Adviser, and negotiate
commissions to be paid on such transactions. The Subadviser agrees that in
placing such orders for a Fund it shall attempt to obtain best execution,
provided that, the Subadviser may, on behalf of such Fund, pay brokerage
commissions to a broker which provides brokerage and research services to
the Subadviser in excess of the amount another broker would have charged
for effecting the transaction, provided (i) the Subadviser determines in
good faith that the amount is reasonable in relation to the value of the
brokerage and research services provided by the executing broker in terms
of the particular transaction or in terms of the Subadviser's overall
responsibilities with respect to such Fund and the accounts as to which the
Subadviser exercises investment discretion, (ii) such payment is made in
compliance with Section 28(e) of the Securities Exchange Act of 1934, as
amended, and any other applicable laws and regulations, and (iii) in the
opinion of the Subadviser, the total commissions paid by such Fund will be
reasonable in relation to the benefits to the Fund over the long term. In
reaching such determination, the Subadviser will not be required to place
or attempt to place a specific dollar value on the brokerage and/or
research services provided or being provided by such broker. It is
recognized that the services provided by such brokers may be useful to the
Subadviser in connection with the Subadviser's services to other clients.
On occasions when the Subadviser deems the purchase or sale of a security
to be in the best interests of the Fund as well as other clients of the
Subadviser, the Subadviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the
securities to be sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such
event, allocation of securities so sold or purchased, as well as the
expenses incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser considers to be the most equitable and consistent
with its fiduciary obligations to the Fund or Funds involved and to such
other clients. The Subadviser will report on such allocations at the
request of the Adviser, or the respective Fund's Board, providing such
information as the number of aggregated trades to which a
E-14
Fund was a party, the broker(s) to whom such trades were directed and the
basis of the allocation for the aggregated trades.
(c) Securities Transactions. The Subadviser and any affiliated person
of the Subadviser will not purchase securities or other instruments from or
sell securities or other instruments to a Fund ("Principal Transactions");
provided, however, the Subadviser or an affiliated person of the Subadviser
may enter into a Principal Transaction with a Fund if (i) the transaction
is permissible under applicable laws and regulations, including, without
limitation, the Investment Company Act and the Investment Advisers Act and
the rules and regulations promulgated thereunder, and (ii) the transaction
or category of transactions receives the express written approval of the
Adviser.
The Subadviser agrees to observe and comply with Rule 17j-1 under the
Investment Company Act and its Code of Ethics, as the same may be amended
from time to time. The Subadviser agrees to provide the Adviser and the
Funds with a copy of such Code of Ethics.
(d) Books and Records. The Subadviser will maintain all books and
records required to be maintained pursuant to the Investment Company Act
and the rules and regulations promulgated thereunder solely with respect to
transactions made by it on behalf of the Funds including, without
limitation, the books and records required by Subsections (b)(1), (5), (6),
(7), (9), (10) and (11) and Subsection (f) of Rule 31a-1 under the
Investment Company Act and shall timely furnish to the Adviser all
information relating to the Subadviser's services hereunder needed by the
Adviser to keep such other books and records of the Funds required by Rule
31a-1 under the Investment Company Act. The Subadviser will also preserve
all such books and records for the periods prescribed in part (e) of Rule
31a-2 under the Investment Company Act, and agrees that such books and
records shall remain the sole property of the respective Fund and shall be
immediately surrendered to the appropriate Fund upon request. The
Subadviser further agrees that all books and records maintained hereunder
shall be made available to the respective Fund or the Adviser at any time
upon reasonable request and notice, including telecopy, during any business
day.
(e) Information Concerning Investments and Subadviser. From time to
time as the Adviser or a Fund may request, the Subadviser will furnish the
requesting party reports on portfolio transactions and reports on
Investments held in the portfolios, all in such detail as the Adviser or
the applicable Fund may reasonably request. The Subadviser will make
available its officers and employees to meet with the Board of Directors of
a Fund at the Fund's principal place of business on due notice to review
the Investments of the Fund.
The Subadviser will also provide such information as is customarily
provided by a subadviser and may be required for each Fund or the Adviser
to comply with their respective obligations under applicable laws,
including, without limitation, the Internal Revenue Code of 1986, as
amended (the "Code"), the Investment Company Act, the Investment Advisers
Act, the Securities Act of 1933, as amended (the "Securities Act") and any
state securities laws, and any rule or regulation thereunder.
During the term of this Agreement, the Adviser agrees to furnish the
Subadviser at its principal office all registration statements, proxy
statements, reports to stockholders,
E-15
sales literature or other materials prepared for distribution to
stockholders of each Fund, or the public that refer to the Subadviser for
Subadviser's review and approval. The Subadviser shall be deemed to have
approved all such materials unless the Subadviser reasonably objects by
giving notice to the Adviser in writing within five business days (or such
other period as may be mutually agreed) after receipt thereof. The
Subadviser's right to object to such materials is limited to the portions
of such materials that expressly relate to the Subadviser, its services and
its clients. The Adviser agrees to use its best efforts to ensure that
materials prepared by its employees or agents or its affiliates that refer
to the Subadviser or its clients in any way are consistent with those
materials previously approved by the Subadviser as referenced in this
paragraph. Sales literature may be furnished to the Sub-Adviser by first
class or overnight mail, facsimile transmission equipment or hand delivery.
(f) Custody Arrangements. The Subadviser shall provide each Fund's
custodian, on each business day with information relating to all
transactions concerning the Fund's assets.
(g) Compliance with Applicable Laws and Governing Documents. In all
matters relating to the performance of this Agreement, the Subadviser and
its directors, officers, partners, employees and interested persons shall
act in conformity with each Fund's Articles of Incorporation, By-Laws, and
currently effective registration statement and with the written
instructions and directions of each Fund's Board and the Adviser, after
receipt of such documents, from the relevant Fund, and shall comply with
the requirements of the Investment Company Act, the Investment Advisers
Act, the Commodity Exchange Act (the "CEA"), the rules thereunder, and all
other applicable federal and state laws and regulations.
In carrying out its obligations under this Agreement, the Subadviser shall
ensure that the portion of the Funds allocated to it complies with all
applicable statutes and regulations necessary to qualify such portion of
each Fund as a Regulated Investment Company under Subchapter M of the Code
(or any successor provision), and shall notify the Adviser immediately upon
having a reasonable basis for believing that such portion of a Fund has
ceased to so qualify or that it might not so qualify in the future.
In carrying out its obligations under this Agreement, the Subadviser shall
invest the portion of the assets of Series Z allocated to it by the Adviser
in such a manner as to ensure that such portion complies with the
diversification provisions of Section 817(h) of the Code (or any successor
provision) and the regulations issued thereunder relating to the
diversification requirements for variable insurance contracts and any
prospective amendments or other enacted modifications to Section 817 or
regulations thereunder Subadviser shall notify the Adviser immediately upon
having a reasonable basis for believing that the portion of Series Z
allocated to the Subadviser has ceased to comply and will take all
reasonable steps to adequately diversify the assets of Series Z allocated
to the Subadviser, so as to achieve compliance within the grace period
afforded by Regulation 1.817-5.
(h) Information Concerning the Funds. The Adviser has furnished the
Subadviser with copies of each of the following documents and will furnish
the Subadviser at its principal office all future amendments and
supplements to such documents, if any, as soon as practicable after such
documents become available: (i) the Articles of Incorporation of each Fund,
(ii) the By-Laws of each Fund, (iii) each Fund's
E-16
registration statement under the Investment Company Act and the Securities
Act of 1933, as amended, as filed with the Commission, and (iv) any written
instructions of the respective Fund's Board and the Adviser.
(i) Voting of Proxies. The Subadviser shall direct the custodian as to
how to vote such proxies as may be necessary or advisable in connection
with any matters submitted to a vote of shareholders of Investments held by
a Fund.
3. Independent Contractor. In the performance of its duties hereunder, the
Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Funds or the Adviser in any way or
otherwise be deemed an agent of the Funds or the Adviser.
4. Compensation. The Adviser shall pay to the Subadviser, for the services
rendered hereunder, the fee set forth in Exhibit A to this Agreement.
5. Expenses. The Subadviser shall bear all expenses incurred by it in
connection with its services under this Agreement and will, from time to time,
at its sole expense employ or associate itself with such persons as it believes
to be particularly fitted to assist it in the execution of its duties hereunder.
However, the Subadviser shall not assign or delegate any of its investment
management duties under this Agreement without the approval of the Adviser and
the appropriate Fund's Board.
6. Representations and Warranties of Subadviser. The Subadviser represents
and warrants to the Adviser and the Funds as follows:
(a) The Subadviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Subadviser will immediately notify the Adviser of the
occurrence of any event that would disqualify the Subadviser from serving
as an investment adviser of an investment company pursuant to Section 9(a)
of the Investment Company Act;
(c) The Subadviser has filed a notice of exemption pursuant to Rule
4.14 under the CEA with the Commodity Futures Trading Commission (the
"CFTC") and the National Futures Association;
(d) The Subadviser is fully authorized under all applicable law to
serve as Subadviser to the Funds and to perform the services described
under this Agreement;
(e) The Subadviser is a limited liability company duly organized and
validly existing under the laws of the state of Kansas with the power to
own and possess its assets and carry on its business as it is now being
conducted;
(f) The execution, delivery and performance by the Subadviser of this
Agreement are within the Subadviser's powers and have been duly authorized
by all necessary action on the part of its members, and no action by or in
respect of or filing with, any governmental body, agency or official is
required on the part of the Subadviser for the execution, delivery and
performance by the Subadviser of this Agreement, and the execution,
delivery and performance by the Subadviser of this Agreement do not
contravene or constitute a default under (i) any provision of applicable
law, rule or
E-17
regulation, (ii) the Subadviser's governing instruments, or (iii) any
agreement, judgment, injunction, order, decree or other instrument binding
upon the Subadviser;
(g) This Agreement is a valid and binding agreement of the Subadviser;
(h) The Form ADV of the Subadviser previously provided to the Adviser
is a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date, and does not omit to state any material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
(i) The Subadviser has adopted compliance policies and procedures
reasonably designed to prevent violations of the Investment Advisers Act
and the rules thereunder, has provided the Adviser with a copy of such
compliance policies and procedures (and will provide them with any
amendments thereto), and agrees to assist the Funds in complying with the
Funds' compliance program adopted pursuant to Rule 38a-1 under the
Investment Company Act, to the extent applicable. The Subadviser
understands that the Boards of Directors of the Funds are required to
approve the Subadviser's compliance policies and procedures and
acknowledges that this Agreement is conditioned upon such Board approval;
and
(j) The Subadviser shall not divert any Fund's portfolio securities
transactions to a broker or dealer in consideration of such broker or
dealer's promotion or sales of shares of the Fund, any other series of
Security Equity Fund or SBL Fund, or any other registered investment
company.
7. Non-Exclusivity. The services of the Subadviser with respect to the
Funds are not deemed to be exclusive, and the Subadviser and its officers shall
be free to render investment advisory and administrative or other services to
others (including other investment companies) and to engage in other activities
so long as its duties hereunder are not impaired thereby.
8. Representations and Warranties of Adviser. The Adviser represents and
warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Adviser has filed a notice of exemption pursuant to Rule 4.14
under the CEA with the Commodity Futures Trading Commission (the "CFTC")
and the National Futures Association;
(c) The Adviser is a limited liability company duly organized and
validly existing under the laws of the State of Kansas with the power to
own and possess its assets and carry on its business as it is now being
conducted;
(d) The execution, delivery and performance by the Adviser of this
Agreement and the Advisory Agreement are within the Adviser's powers and
have been duly authorized by all necessary action on the part of its
members, and no action by or in respect of or filing with, any governmental
body, agency or official is required on the part of the Adviser for the
execution, delivery and performance by the Adviser of this Agreement, and
the execution, delivery and performance by the Adviser of this
E-18
Agreement do not contravene or constitute a default under (i) any provision
of applicable law, rule or regulation, (ii) the Adviser's governing
instruments, or (iii) any agreement, judgment, injunction, order, decree or
other instrument binding upon the Adviser;
(e) This Agreement and the Advisory Agreement are valid and binding
agreements of the Adviser;
(f) The Form ADV of the Adviser previously provided to the Subadviser
is a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
(g) The Adviser acknowledges that it received a copy of the
Subadviser's Form ADV at least 48 hours prior to the execution of this
Agreement.
9. Survival of Representations and Warranties; Duty to Update Information.
All representations and warranties made by the Subadviser and the Adviser
pursuant to Sections 6 and 8 hereof shall survive for the duration of this
Agreement and the parties hereto shall promptly notify each other in writing
upon becoming aware that any of the foregoing representations and warranties are
no longer true.
10. Liability and Indemnification.
(a) Liability. In the absence of willful misfeasance, bad faith or
gross negligence on the part of the Subadviser or a breach of its duties
hereunder, the Subadviser shall not be subject to any liability to the
Adviser, to either Fund, or any of either Fund's shareholders, and, in the
absence of willful misfeasance, bad faith or gross negligence on the part
of the Adviser or a breach of its duties hereunder, the Adviser shall not
be subject to any liability to the Subadviser, for any act or omission in
the case of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of
Investments; provided, however, that nothing herein shall relieve the
Adviser and the Subadviser from any of their respective obligations under
applicable law, including, without limitation, the federal and state
securities laws and the CEA.
(b) Indemnification. The Subadviser shall indemnify the Adviser and
the Funds, and their respective officers and directors, for any liability
and expenses, including attorneys' fees, which may be sustained by the
Adviser, or the Funds, as a result of the Subadviser's willful misfeasance,
bad faith, or gross negligence, breach of its duties hereunder or violation
of applicable law, including, without limitation, the federal and state
securities laws or the CEA. The Adviser shall indemnify the Subadviser and
its officers and partners, for any liability and expenses, including
attorneys' fees, which may be sustained as a result of the Adviser's, or
the Funds' willful misfeasance, bad faith, or gross negligence, breach of
its duties hereunder or violation of applicable law, including, without
limitation, the federal and state securities laws or the CEA.
11. Duration and Termination.
(a) Duration. This Agreement shall become effective upon the date
first above written, provided that this Agreement shall not take effect
with respect to a Fund
E-19
unless it has first been approved by a vote of a majority of those
directors of SBL Fund and Security Equity Fund, as applicable, 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. This
Agreement shall continue in effect for a period of two years from the date
hereof, subject thereafter to being continued in force and effect from year
to year with respect to each Fund if specifically approved each year by the
Board of Directors of the applicable Fund or by the vote of a majority of
the Fund's outstanding voting securities. In addition to the foregoing,
each renewal of this Agreement with respect to each Fund must be approved
by the vote of a majority of the applicable Fund's directors 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.
Prior to voting on the renewal of this Agreement, the Board of Directors of
the applicable Fund may request and evaluate, and the Subadviser shall
furnish, such information as may reasonably be necessary to enable the
Fund's Board of Directors to evaluate the terms of this Agreement.
(b) Termination. Notwithstanding whatever may be provided herein to
the contrary, this Agreement may be terminated at any time, without payment
of any penalty:
(i) By vote of a majority of the Board of Directors of the
applicable Fund, or by vote of a majority of the outstanding voting
securities of the applicable Fund, or by the Adviser, in each case,
upon sixty (60) days' written notice to the Subadviser;
(ii) By the Adviser upon breach by the Subadviser of any
representation or warranty contained in Section 6 hereof, which shall
not have been cured within twenty (20) days of the Subadviser's
receipt of written notice of such breach;
(iii) By the Adviser immediately upon written notice to the
Subadviser if the Subadviser becomes unable to discharge its duties
and obligations under this Agreement; or
(iv) By the Subadviser upon 120 days written notice to the
Adviser and the applicable Fund.
This Agreement shall not be assigned (as such term is defined in the
Investment Company Act) without the prior written consent of the parties hereto.
This Agreement shall terminate automatically in the event of its assignment
without such consent or upon the termination of the Advisory Agreement.
12. Duties of the Adviser. The Adviser shall continue to have
responsibility for all services to be provided to the Funds pursuant to the
Advisory Agreement and shall oversee and review the Subadviser's performance of
its duties under this Agreement.
13. Amendment. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment with respect to a Fund
shall be approved by the Board of Directors of the applicable Fund or by a vote
of a majority of the outstanding voting securities of the applicable Fund.
E-20
14. Notice. Any notice that is required to be given by the parties to each
other (or to the Fund) under the terms of this Agreement shall be in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Security Global Investors, LLC
2 Embarcadero Center, Suite 2350
San Francisco, CA 94111
Attention: John Boich, Vice President and Head of
Global Equity
Facsimile: (415) 274-7702
With a copy to:
Security Benefit Corporation
One Security Benefit Place
Topeka, KS 66636
Attention: General Counsel
Facsimile: (785) 438-3080
(b) If to the Adviser:
Security Investors, LLC
One Security Benefit Place
Topeka, KS 66636-0001
Attention: Richard Goldman, President
Facsimile: (785) 438-3080
(c) If to SBL Fund:
SBL Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 438-3080
(d) If to Security Equity Fund:
Security Equity Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 438-3080
15. Governing Law; Jurisdiction. Except as indicated in Section 19(b) of
this Agreement, this Agreement shall be governed by and construed in accordance
with the laws of the State of Kansas, without regard to its conflicts of law
provisions.
E-21
16. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the same
instrument.
17. Captions. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
18. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and effect.
19. Certain Definitions.
(a) "Business day." As used herein, business day means any customary
business day in the United States on which the New York Stock Exchange is
open.
(b) Miscellaneous. As used herein, "investment company," "affiliated
person," "interested person," "assignment," "broker," "dealer" and
"affirmative vote of the majority of the Fund's outstanding voting
securities" shall all have such meaning as such terms have in the
Investment Company Act. The term "investment adviser" shall have such
meaning as such term has in the Investment Advisers Act and the Investment
Company Act, and in the event of a conflict between such Acts, the most
expansive definition shall control. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of
this Agreement is relaxed by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
E-22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first written above.
Security Investors, LLC
By:
---------------------------------
Name: Richard M. Goldman
Title: President
Attest:
-----------------------------
Name: Amy J. Lee
Title: Secretary
Security Global Investors, LLC
By:
---------------------------------
Name: Richard M. Goldman
Title: President
Attest:
-----------------------------
Name: Amy J. Lee
Title: Secretary
E-23
EXHIBIT A
Compensation
For all services rendered by the Subadviser hereunder, Adviser shall pay to
Subadviser a fee (the "Subadvisory Fee") at an annual rate of 1.45% of that
portion of each Fund's net assets that the Adviser has allocated to Subadviser
for management ("Subadviser Assets").
For purposes of calculating the compensation to be paid hereunder, the
Subadviser Assets shall be computed in the same manner at the end of the
business day as the value of such net assets is computed in connection with the
determination of the net asset value of each Fund's shares as described in the
then current prospectus for the applicable Fund.
The Subadvisory Fee shall be accrued for each calendar day the Subadviser
renders subadvisory services hereunder and the sum of the daily fee accruals
shall be paid monthly to the Subadviser as soon as practicable following the
last day of each month, by wire transfer if so requested by the Subadviser, but
no later than ten (10) business days thereafter. If this Agreement shall be
effective for only a portion of a year, then the Subadviser's fee for said year
shall be prorated for such portion.
E-24
APPENDIX F
INFORMATION REGARDING THE SUB-ADVISORY AGREEMENTS AND FEES PAID
TO THE SUB-ADVISER
Security Global Investors, LLC (the "Sub-Adviser") currently serves as
sub-adviser to Rydex | SGI Alpha Opportunity Fund, Rydex | SGI Global Fund and
Rydex | SGI Global Institutional Fund, each a series of Security Equity Fund,
and Series D (Global Series) and Series Z (Alpha Opportunity Series), each a
series of SBL Fund (collectively, the "Funds"), pursuant to the investment
sub-advisory agreements (collectively, the "Sub-Advisory Agreements") between
Security Investors, LLC, the Funds' investment manager (the "Investment
Manager"), and the Sub-Adviser. The table and its accompanying footnotes below
provide the following information:
(i) the date of each Sub-Advisory Agreement;
(ii) the date on which a Fund's shareholders last approved the Fund's
Sub-Advisory Agreement;
(iii) the annual rate of sub-advisory fees paid by the Investment Manager to
the Sub-Adviser for the Sub-Adviser's sub-advisory services to a Fund;
and
(iv) the aggregate amount of advisory fees paid by the Investment Manager to
the Sub-Adviser for the Sub-Adviser's sub-advisory services to a Fund
during the Fund's fiscal year ended September 30, 2009 for series of
Security Equity Fund and December 31, 2008 for series of SBL Fund.
------------------------------------------------------------------------------------------------------------------------------------
COMPANIES AND FUNDS DATE OF DATE OF LAST SUB-ADVISORY FEES SUB-ADVISORY FEES
SUB-ADVISORY SHAREHOLDER PAID TO
AGREEMENT APPROVAL SUB-ADVISER
------------------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY FUND
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Alpha Opportunity Fund August 15, 2008 [ ] 1.45%(1) $224,704
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Global Fund February 8, 2008 [ ] 0.35% on the first $300 million; $325,729
0.30% on the next $450 million; and
0.25% thereafter(2)
------------------------------------------------------------------------------------------------------------------------------------
Rydex | SGI Global Institutional Fund [ ] [ ] 0.35% on the first $300 million; $19,912
0.30% on the next $450 million; and
0.25% thereafter(2)
------------------------------------------------------------------------------------------------------------------------------------
SBL FUND
------------------------------------------------------------------------------------------------------------------------------------
Series D (Global Series) February 8, 2008 [ ] 0.35% on the first $300 million; $1,085,801
0.30% on the next $450 million; and
0.25% thereafter(2)
------------------------------------------------------------------------------------------------------------------------------------
Series Z (Alpha Opportunity Series) August 15, 2008 [ ] 1.45%(1) $724,559
------------------------------------------------------------------------------------------------------------------------------------
F-1
-----------------
(1) These annual fees are stated as a percentage of a portion of the Fund's net
assets managed by the Sub-Adviser. Another portion of the Fund's assets is
managed by Mainstream Investment Advisers, LLC, which is not affiliated
with the Fund.
(2) These annual fees are stated as a percentage of the combined average daily
net assets of Rydex | SGI Global Fund, Rydex | SGI Global Institutional
Fund and Series D (Global Series) managed by the Sub-Adviser.
F-2
APPENDIX G
OUTSTANDING SHARES
[As of February 24, 2010, the total number of shares outstanding for each Fund
and for each class of each Fund is set forth in the table below:]
SECURITY EQUITY FUND
----------------------------------- -----------------------------------------------------------------------------
FUNDS SHARES OUTSTANDING
----------------------------------- -----------------------------------------------------------------------------
CLASS A CLASS B CLASS C INSTITUTIONAL TOTAL
CLASS
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI All Cap Value Fund
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI Alpha Opportunity Fund
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI Global Fund N/A
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI Global Institutional N/A N/A N/A
Fund
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI Large Cap
Concentrated Growth Fund
(formerly Rydex | SGI Select 25
Fund)
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI Large Cap Core Fund
(formerly Rydex | SGI Equity Fund)
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI Mid Cap Value Fund
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI Mid Cap Value N/A N/A N/A
Institutional Fund
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI Small Cap Growth Fund
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI Small Cap Value Fund
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
SECURITY LARGE CAP VALUE FUND
----------------------------------- -----------------------------------------------------------------------------
FUNDS SHARES OUTSTANDING
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
CLASS A CLASS B CLASS C INSTITUTIONAL TOTAL
CLASS
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI Large Cap Value Fund N/A
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
G-1
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI Large Cap Value N/A N/A N/A
Institutional Fund
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
SECURITY MID CAP GROWTH FUND
----------------------------------- ------------------------------------------------------------
FUNDS SHARES OUTSTANDING
----------------------------------- ------------------------------------------------------------
CLASS A CLASS B CLASS C TOTAL
----------------------------------- ------------- ------------- ------------- ------------------
Rydex | SGI Mid Cap Growth Fund
----------------------------------- ------------- ------------- ------------- ------------------
SECURITY INCOME FUND
----------------------------------- -----------------------------------------------------------------------------
FUNDS SHARES OUTSTANDING
----------------------------------- -----------------------------------------------------------------------------
CLASS A CLASS B CLASS C INSTITUTIONAL TOTAL
CLASS
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI High Yield Fund
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
Rydex | SGI U.S. Intermediate
Bond Fund
----------------------------------- ------------- ------------- ------------- ---------------- ------------------
SBL FUND
------------------------------------------------ ---------------
FUNDS SHARES
OUTSTANDING
---------------
TOTAL
------------------------------------------------ ---------------
Series A (Equity Series)
------------------------------------------------ ---------------
Series B (Large Cap Value Series)
------------------------------------------------ ---------------
Series C (Money Market Series)
------------------------------------------------ ---------------
Series D (Global Series)
------------------------------------------------ ---------------
Series E (U.S. Intermediate Bond Series)
------------------------------------------------ ---------------
Series H (Enhanced Index Series)
------------------------------------------------ ---------------
Series J (Mid Cap Growth Series)
------------------------------------------------ ---------------
Series N (Managed Asset Allocation Series)
------------------------------------------------ ---------------
Series O (All Cap Value Series)
------------------------------------------------ ---------------
Series P (High Yield Series)
------------------------------------------------ ---------------
Series Q (Small Cap Value Series)
------------------------------------------------ ---------------
Series V (Mid Cap Value Series)
------------------------------------------------ ---------------
G-2
Series X (Small Cap Growth Series)
------------------------------------------------ ---------------
Series Y (Select 25 Series)
------------------------------------------------ ---------------
Series Z (Alpha Opportunity Series)
------------------------------------------------ ---------------
G-3
APPENDIX H
BENEFICIAL OWNERS OF MORE THAN 5% OF A CLASS OF EACH FUND
[As of February 24, 2010, the following persons owned, of record and
beneficially (unless otherwise indicated), 5% or more of a class of each Fund's
outstanding securities:]
RYDEX | SGI ALL CAP VALUE FUND
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
Institutional Class
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI ALPHA OPPORTUNITY FUND
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class B
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
Institutional Class
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI GLOBAL FUND
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class B
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI GLOBAL INSTITUTIONAL FUND (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Rydex | SGI Global
Institutional Fund
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI LARGE CAP CONCENTRATED GROWTH FUND (FORMERLY RYDEX | SGI SELECT 25 FUND)
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class B
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI LARGE CAP CORE FUND (FORMERLY RYDEX | SGI EQUITY FUND)
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class B
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
H-1
RYDEX | SGI MID CAP VALUE FUND
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class B
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI MID CAP VALUE INSTITUTIONAL FUND (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Rydex | SGI Mid Cap Value
Institutional Fund
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI SMALL CAP GROWTH FUND
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class B
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI SMALL CAP VALUE FUND
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
Institutional Class
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI LARGE CAP VALUE FUND
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class B
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI LARGE CAP VALUE INSTITUTIONAL FUND (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Rydex | SGI Large Cap
Value Institutional Fund
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI MID CAP GROWTH FUND
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class B
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
H-2
RYDEX | SGI HIGH YIELD FUND
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class B
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
Institutional Class
---------------------------- -------------------------- -------------------------- --------------------------
RYDEX | SGI U.S. INTERMEDIATE BOND FUNDS
---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF THE CLASS NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Class A
---------------------------- -------------------------- -------------------------- --------------------------
Class B
---------------------------- -------------------------- -------------------------- --------------------------
Class C
---------------------------- -------------------------- -------------------------- --------------------------
SERIES A (EQUITY SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series A
---------------------------- -------------------------- -------------------------- --------------------------
SERIES B (LARGE CAP VALUE SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series B
---------------------------- -------------------------- -------------------------- --------------------------
SERIES C (MONEY MARKET SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series C
---------------------------- -------------------------- -------------------------- --------------------------
SERIES D (GLOBAL SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series D
---------------------------- -------------------------- -------------------------- --------------------------
SERIES E (U.S. INTERMEDIATE BOND SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series E
---------------------------- -------------------------- -------------------------- --------------------------
SERIES H (ENHANCED INDEX SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series H
---------------------------- -------------------------- -------------------------- --------------------------
H-3
SERIES J (MID CAP GROWTH SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series J
---------------------------- -------------------------- -------------------------- --------------------------
SERIES N (MANAGED ASSET ALLOCATION SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series N
---------------------------- -------------------------- -------------------------- --------------------------
SERIES O (ALL CAP VALUE SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series O
---------------------------- -------------------------- -------------------------- --------------------------
SERIES P (HIGH YIELD SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series P
---------------------------- -------------------------- -------------------------- --------------------------
SERIES Q (SMALL CAP VALUE SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series Q
---------------------------- -------------------------- -------------------------- --------------------------
SERIES V (MID CAP VALUE SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series V
---------------------------- -------------------------- -------------------------- --------------------------
SERIES X (SMALL CAP GROWTH SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series X
---------------------------- -------------------------- -------------------------- --------------------------
SERIES Y (SELECT 25 SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series Y
---------------------------- -------------------------- -------------------------- --------------------------
H-4
SERIES Z (ALPHA OPPORTUNITY SERIES) (A single-class fund)
---------------------------- -------------------------- -------------------------- --------------------------
NAME OF THE FUND NAME AND ADDRESS OF THE AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
BENEFICIAL OWNER
---------------------------- -------------------------- -------------------------- --------------------------
Series Z
---------------------------- -------------------------- -------------------------- --------------------------
H-5
[FORM OF PROXY CARD]
[FUND NAME PRINTS HERE]
ONE SECURITY BENEFIT PLACE
TOPEKA, KANSAS 66636-0001
1-800 -888-2461
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS
APRIL 23, 2010
The undersigned hereby appoint(s) [Amy J. Lee and Brenda M. Harwood], or any one
of them, proxies, each of them with full power of substitution, to vote and act
with respect to all shares of the above referenced fund (the "Fund") which the
undersigned is entitled to vote at the Special Meeting of shareholders of the
Fund to be held at the executive offices of Security Investors, LLC at One
Security Benefit Place, Topeka, Kansas 66636 on April 23, 2010 at 1:00 p.m.
Central Time, and at any adjournment(s) or postponements thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card
will be voted as instructed. IF NO SPECIFICATION IS MADE, THE PROXY CARD WILL BE
VOTED "FOR" THE PROPOSALS. THE PROXIES ARE AUTHORIZED, IN THEIR DISCRETION, TO
VOTE UPON SUCH MATTERS AS MAY COME BEFORE THE SPECIAL MEETING OR ANY
ADJOURNMENTS.
v FOLD AND DETACH HERE v
.................................................................................
[FUND NAME PRINTS HERE] (THE "FUND")
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 2010
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS
Please vote, date and sign this proxy card and return it promptly in the
enclosed envelope. Please indicate your vote by an "X" in the appropriate boxes
below:
1. To approve a new investment management agreement between the Fund and
Security Investors, LLC.
FOR AGAINST ABSTAIN
| | | | | |
2. To approve a new investment sub-advisory agreement between Security
Investors, LLC and Security Global Investors, LLC for Rydex | SGI Alpha
Opportunity Fund, Rydex | SGI Global Fund, Rydex | SGI Global Institutional
Fund, Series D (Global Series) and Series Z (Alpha Opportunity Series).
FOR AGAINST ABSTAIN
| | | | | |
PLEASE VOTE BY CHECKING THE |X|
APPROPRIATE BOX AS IN THIS
EXAMPLE
Signature: _______________________ Signature (if held jointly): ______________
Date: ____________________________ Date: _____________________________________
This proxy must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign. By
signing this proxy card, you acknowledge that you have received the proxy
statement that the proxy card accompanies.
PROXY VOTING INSTRUCTIONS
Your mailed proxy statement provides details on important issues relating to
your Fund. THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSALS.
To make voting faster and more convenient for you, we are offering a variety of
ways to vote your proxy. You may vote using the Internet or by telephone instead
of completing and mailing the enclosed proxy card. The Internet and telephone
are generally available 24 hours a day and your vote will be confirmed and
posted immediately. Use whichever method is most convenient for you! If you
choose to vote via the Internet or by phone, you should not mail your proxy
card.
WAYS TO VOTE YOUR SHARES
Your vote is important no matter how many shares you own. Voting your shares
early will avoid costly follow-up mail and telephone solicitation.
Online 1. Click on www.proxyonline.com.
2. Enter the 12 digit control number.
3. Follow the instructions on the Web site.
4. Once you have voted, you do not need to mail your proxy card.
By Phone 1. Call toll-free [1-________].
2. Enter the 12 digit control number.
3. Follow the recorded instructions.
4. Once you have voted, you do not need to mail your proxy card
By Mail Complete and sign your proxy card and mail it in the postage-paid
envelope received with your shareholder mailing. To ensure your
vote is validated properly, please sign your proxy card as
described in the "Instructions for Signing Proxy Cards" section
of your proxy materials.
In Person The Shareholder Meeting will take place on April 23, 2010 at
1:00 p.m., Central Time, at the offices of Security Investors,
LLC, located at One Security Benefit Place, Topeka, Kansas 66636.
v FOLD AND DETACH HERE v
--------------------------------------------------------------------------------
Questions?
We urge you to spend time reviewing your proxy statement and the proposals
included in the package. Should you have any questions, we encourage you to call
[1-_______] toll-free Monday through Friday from 9:30 a.m. to 10:00 p.m. Eastern
Time. We have retained The Altman Group to assist our shareholders in the voting
process. If we have not received your proxy card or vote as the date of the
special meeting approaches, representatives from [INSERT PROXY SOLICITOR] may
call you to remind you to exercise your vote.
YOUR PROXY VOTE IS IMPORTANT! PLEASE VOTE TODAY
COVER
2
filename2.txt
securitybenefit.com o 800-888-2461
SECURITY BENEFIT
February 22, 2010
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Subj: PROXY MATERIALS - PRELIMNARY FILING
SECURITY EQUITY FUND -
File Nos.: 811-01136 and 002-19458
SECURITY LARGE CAP VALUE FUND -
File Nos.: 811-00487 and 2-12187
SECURITY MID CAP GROWTH FUND -
Files Nos.: 811-01316 and 2-32791
SECURITY INCOME FUND -
File Nos.: 811-02120 and 2-38414
SBL FUND -
File Nos.: 811-02753 and 2-59353
Dear Sir or Madam:
Enclosed for filing pursuant to Securities Exchange Act of 1934 is a Schedule
14A - Preliminary Proxy Statement. No filing fee is required.
Please contact Julien Bourgeois, of Dechert LLP, at 202.261.3451 if you have any
questions about this filing. Thank you for your assistance.
Sincerely,
AMY J. LEE
Amy J. Lee
Secretary
Security Equity Fund, Security Large Cap Value Fund,
Security Mid Cap Growth Fund, Security Income Fund, SBL Fund
Enclosures
One Security Benefit Place o Topeka, Kansas 66636-0001