- -------------------------------------------------------------------------------- Securities Act File No. As filed with the Securities and Exchange Commission on ____, 2002 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM N-14 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] Pre-Effective Amendment No. [_] Post-Effective Amendment No. [_] SBL FUND (Exact Name of Registrant as Specified in Charter) One Security Benefit Place, Topeka, Kansas 66636-0001 (Address of Principal Executive Offices) (Zip Code) (785) 438-3000 (Registrant's Area Code and Telephone Number) Amy J. Lee Security Management Company, LLC One Security Benefit Place Topeka, Kansas 66636-0001 (Name and Address of Agent for Service) Approximate Date of Proposed Public Offering: As soon as practicable after this Registration Statement becomes effective. It is proposed that this filing will become effective on ______, 2002 pursuant to Rule 488 under the Securities Act of 1933. No filing fee is required because an indefinite number of shares has previously been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended. Pursuant to Rule 429 under the Securities Act of 1933, this registration statement relates to shares of common stock previously registered on Form N-1A (File No. 2-59353).SBL Fund One Security Benefit Place Topeka, KS 66636-0001 (800) 888-2461 ____, 2002 Dear Shareholder: Your Board of Directors has called a special meeting of Shareholders of the SBL Fund, Series M ("Global Total Return Fund"), to be held at 9:30 a.m., local time, on August 20, 2002, at the offices of the Fund, Security Benefit Group Building, One Security Benefit Place, Topeka, Kansas 66636-0001. The Board of Directors of SBL Fund has approved a reorganization of the Global Total Return Fund, into SBL Fund, Series D ("Global Fund") (the "Reorganization"). Security Management Company, LLC serves as investment adviser to the Global Fund and the Global Total Return Fund. Security Management Company, LLC has engaged OppenheimerFunds, Inc. to serve as sub-adviser of the Global Fund and Wellington Management Company, LLP to serve as sub-adviser of the Global Total Return Fund. The Global Fund has investment objectives and policies that are similar in many respects to those of the Global Total Return Fund. The Reorganization will provide shareholders with the opportunity to participate in a larger fund and is expected to result in operating expenses that are lower for shareholders. You are asked to vote to approve a Plan of Reorganization. The accompanying document describes the proposed transaction and compares the policies and expenses of the Funds for your evaluation. After careful consideration, the Board of Directors of SBL Fund unanimously approved this proposal with respect to Global Total Return Fund and recommended that shareholders of the Fund vote "FOR" the proposal. A Proxy Statement/Prospectus that describes the Reorganization is enclosed. We urge you to vote your shares by completing and returning the enclosed proxy in the envelope provided, or vote by Internet or telephone, at your earliest convenience. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. IN ORDER TO AVOID THE ADDED COST OF FOLLOW-UP SOLICITATIONS AND POSSIBLE ADJOURNMENTS, PLEASE TAKE A FEW MINUTES TO READ THE PROXY STATEMENT/PROSPECTUS AND CAST YOUR VOTE. IT IS IMPORTANT THAT YOUR VOTE BE RECEIVED NO LATER THAN AUGUST _, 2002. We appreciate your participation and prompt response in this matter and thank you for your continued support. Sincerely, James R. Schmank President SBL Fund One Security Benefit Place Topeka, KS 66636-0001 (800) 888-2461 NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF SBL FUND, SERIES M TO BE HELD AUGUST 20, 2002 To the Shareholders: A special meeting of Shareholders of SBL Fund, Series M (the "Global Total Return Fund") will be held August 20, 2002 at 9:30 a.m., local time, at the Security Benefit Group Building, One Security Benefit Place, Topeka, Kansas 66636-0001. The purposes of the special meeting of the Global Total Return Fund are as follows: 1. To approve a Plan of Reorganization providing for the acquisition of all of the assets and liabilities of the Global Total Return Fund by SBL Fund, Series D (the "Global Fund") solely in exchange for shares of the Global Fund, followed by the complete liquidation of the Global Total Return Fund; and 2. To transact such other business as may properly come before the special meeting of Shareholders or any adjournments thereof. Shareholders of record at the close of business on June 24, 2002 are entitled to notice of, and to vote at, the meeting. Your attention is called to the accompanying Proxy Statement/Prospectus. Regardless of whether you plan to attend the meeting, PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY CARD OR VOTE BY TELEPHONE OR INTERNET so that a quorum will be present and a maximum number of shares may be voted. If you are present at your meeting, you may change your vote, if desired, at that time. By Order of the Board of Directors Amy J. Lee Secretary ______, 2002 TABLE OF CONTENTS INTRODUCTION............................................................... 5 SUMMARY.................................................................... 6 The Proposed Reorganization............................................. 6 Purchase and Redemption Information..................................... 7 Federal Income Tax Consequences of the Reorganization................... 7 Principal Risk Factors of Investing in Global Fund...................... 7 INVESTMENT OBJECTIVES AND STRATEGIES....................................... 9 Comparison of Objectives and Strategies................................. 9 Comparison of Portfolio Characteristics................................. 10 Relative Performance.................................................... 11 Comparison of Investment Techniques and Risks of the Funds.............. 12 COMPARISON OF FEES AND EXPENSES............................................ 15 Operating Expenses...................................................... 15 Example................................................................. 16 ADDITIONAL INFORMATION ABOUT GLOBAL FUND................................... 16 Investment Manager...................................................... 16 Investment Personnel.................................................... 17 Performance of Global Fund.............................................. 17 INFORMATION ABOUT THE REORGANIZATION....................................... 18 The Reorganization Plan................................................. 18 Reasons for the Reorganization.......................................... 18 Board Consideration..................................................... 18 Tax Considerations...................................................... 19 Expenses of the Reorganization.......................................... 19 ADDITIONAL INFORMATION ABOUT THE FUNDS..................................... 19 Form of Organization.................................................... 19 Dividends and Other Distributions....................................... 19 Capitalization.......................................................... 19 GENERAL INFORMATION ABOUT THE PROXY STATEMENT.............................. 19 Solicitation of Proxies................................................. 19 Voting Rights........................................................... 20 Other Matters to Come Before the Meeting................................ 20 Shareholder Proposals................................................... 20 Information about the Funds............................................. 21 Reports to Shareholders................................................. 21 MORE INFORMATION REGARDING THE FUNDS....................................... 22 APPENDIX A................................................................. 25 APPENDIX B................................................................. 35 PROXY STATEMENT/PROSPECTUS SBL FUND ONE SECURITY BENEFIT PLACE TOPEKA, KANSAS 66636-0001 (800) 888-2461 SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 20, 2002 SBL FUND, SERIES M RELATING TO THE REORGANIZATION INTO SBL FUND, SERIES D (EACH A "FUND" AND COLLECTIVELY, THE "FUNDS") INTRODUCTION This Proxy Statement/Prospectus provides you with information about the proposed transaction. The transaction involves the transfer of all of the assets and liabilities of SBL Fund, Series M (the "Global Total Return Fund") to SBL Fund, Series D (the "Global Fund"), an open-end management investment company, solely in exchange for shares of Global Fund (the "Reorganization"). The Global Total Return Fund would then distribute to you your portion of the shares of Global Fund it received in the Reorganization. The result would be a liquidation of Global Total Return Fund. You would receive shares of the Global Fund having an aggregate value equal to the aggregate value of the shares of Global Total Return Fund held by you as of the close of business on the business day preceding the closing of the Reorganization. You are being asked to vote on the Plan of Reorganization through which these transactions would be accomplished. Because you, as a shareholder of Global Total Return Fund are being asked to approve a transaction that will result in your holding shares of Global Fund, this Proxy Statement also serves as a Prospectus for Global Fund. The Reorganization will allow you to participate in a larger fund with compatible investment objectives and policies. Global Fund seeks long-term growth of capital primarily through investment in common stocks and equivalents of companies in foreign countries and the United States. This Proxy Statement/Prospectus, which you should retain for future reference, contains important information about Global Fund that you should know before investing. A Statement of Additional Information ("SAI") dated ____, 2002, containing additional information about the Reorganization has been filed with the U.S. Securities and Exchange Commission ("SEC"), is incorporated herein by reference, and is available, without charge, by calling (800) 888-2461. For a more detailed discussion of the investment objectives, policies, restrictions and risks of each of the Funds, see the SBL Fund Prospectus and the SAI for the Funds dated May 1, 2002, which are incorporated herein by reference and may be obtained, without charge, by calling (800) 888-2461. Each of the Funds also provides periodic reports to its shareholders, which highlight certain important information about the Funds, including investment results and financial information. The annual report for the Funds dated December 31, 2001, is included herewith and is incorporated herein by reference. The annual report and any subsequent semiannual report for the Funds may be obtained, without charge, by calling (800) 888-2461. You may also obtain proxy materials, reports and other information filed by Global Fund from the SEC's Public Reference Section (1-202-942-8090) or from the SEC's internet website at www.sec.gov. Copies of materials may also be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, DC 20549-0102. THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED THAT THIS PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. DATE: JUNE _, 2002 SUMMARY You should read this entire Proxy Statement/Prospectus carefully. For additional information, you should consult the SBL Fund Prospectus and the Plan of Reorganization, which is attached hereto as Appendix A. THE PROPOSED REORGANIZATION -- On May 3, 2002, the Board of Directors of SBL Fund approved a Plan of Reorganization (the "Reorganization Plan"). Subject to approval of Global Total Return Fund shareholders, the Reorganization Plan provides for: o the transfer of all of the assets of Global Total Return Fund to Global Fund, in exchange for shares of Global Fund; o the assumption by Global Fund of all of the liabilities of Global Total Return Fund; o the distribution of shares of Global Fund to the shareholders of Global Total Return Fund; and o the complete liquidation of Global Total Return Fund. The Reorganization is expected to be effective upon the opening of business on August 28, 2002, or on a later date as the parties may agree (the "Closing"). As a result of the Reorganization, each shareholder of Global Total Return Fund would become a shareholder of the Global Fund. Each shareholder would hold, immediately after the Closing, shares of Global Fund having an aggregate value equal to the aggregate value of the shares of Global Total Return Fund held by that shareholder as of the close of business on the business day preceding the Closing. The Reorganization is intended to eliminate duplication of costs and other inefficiencies arising from having two substantially similar mutual funds within the same group of funds, as well as to assist in achieving economies of scale. Shareholders in Global Total Return Fund are expected to benefit from the elimination of this duplication and from the larger asset base that will result from the Reorganization. Approval of the Reorganization Plan with respect to Global Total Return Fund requires the affirmative vote of a majority of the outstanding shares of the Fund. In the event that the shareholders of Global Total Return Fund do not approve the Reorganization, the Fund would continue to operate as a separate entity, and the Fund's Board of Directors would determine what further action, if any, to take. AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF SBL FUND UNANIMOUSLY APPROVED THE PROPOSED REORGANIZATION. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED REORGANIZATION. In considering whether to approve the Reorganization, you should note that: o Global Total Return Fund has investment objectives and policies that are similar in many respects to the investment objectives and policies of Global Fund. Global Total Return Fund seeks high total return, consisting of capital appreciation and current income. Global Fund seeks long-term growth of capital primarily through investment in common stocks and equivalents of companies in foreign countries and the United States. Global Fund employs a growth approach to stock selection, whereas Global Total Return Fund invests in both growth and value securities and employs asset allocation criteria that results in the possibility that a significant portion of the Fund's net assets may be invested in fixed income securities. o Global Fund is a significantly larger fund (with net assets of $431 million compared to $25 million for Global Total Return Fund, as of December 31, 2001). o Global Fund has a longer performance record than that of Global Total Return Fund. o The Funds have the same investment adviser, Security Management Company, LLC ("Security Management"), One Security Benefit Place, Topeka, Kansas 66636-0001. Security Management Company, LLC has engaged OppenheimerFunds, Inc. ("Oppenheimer"), 498 Seventh Avenue, New York, New York 10018 to provide investment advisory services to Global Fund, and Wellington Management Company, LLP ("Wellington"), 75 State Street, Boston, Massachusetts, 02109 to provide investment advisory services to Global Total Return Fund. o The proposed Reorganization is expected to offer a reduction in total operating expenses for current shareholders of Global Total Return Fund. This chart compares the current operating expenses, management fees, and distribution fees of the Funds and an estimate of the expenses after the Reorganization. ================================================================================ ANNUAL FUND EXPENSES (as a percentage of each Fund's average daily net assets)(1) - -------------------------------------------------------------------------------- BROKERAGE PLAN MANAGEMENT DISTRIBUTION OTHER TOTAL FEES FEES(2) EXPENSES EXPENSES - -------------------------------------------------------------------------------- Global Total Return Fund 1.00% 0.00% 0.53% 1.53% - -------------------------------------------------------------------------------- Global Fund 1.00% 0.00% 0.20% 1.20% - -------------------------------------------------------------------------------- PRO FORMA - Global Fund including Global 1.00% 0.00% 0.20% 1.20% Total Return Fund - -------------------------------------------------------------------------------- 1 Expenses for the Funds are based on expenses incurred during the fiscal year ended December 31, 2001. All expenses are expressed as a percentage of average daily net assets. 2 Amounts included as distribution expenses under this caption are the amounts received by the Funds' distributor under the Brokerage Plan in the last fiscal year in connection with the purchase and sale of securities held by the Funds. ================================================================================ For further information on fees and expenses, see "Comparison of Fees and Expenses." PURCHASE AND REDEMPTION INFORMATION -- The purchase and redemption provisions for the Funds are the same. For additional information on purchase and redemption, see "Comparison of Fees and Expenses," page 15 and "More Information Regarding the Funds," page 22. FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION -- The Funds expect that the Reorganization will be considered a tax-free reorganization within the meaning of section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"). As such, you are not expected to recognize gain or loss as a result of the Reorganization. See "Information About The Reorganization - Tax Considerations." PRINCIPAL RISK FACTORS OF INVESTING IN GLOBAL FUND -- The main risk of investing in either Fund is the market risk associated with investing in equity securities, which are generally more volatile than other asset classes. Both Funds are also subject to the risks of foreign investments, including emerging securities markets and the risks of investing in options and futures contracts. Global Fund is also subject to the risks of growth oriented equity securities. See "Comparison of Investment Techniques and Risks of the Funds" for additional information about investing in either of the Funds. Because the Funds have similar investment objectives and policies, the risks of an investment in the Funds are substantially similar. The principal risk of an investment in one of the Funds is fluctuation in the net asset value of the Fund's shares. Market conditions, investment policies, portfolio management, and other factors affect such fluctuations. Each Fund is subject to risks associated with investing in equity securities, the prices of which tend to fluctuate more dramatically over the shorter term than do the prices of other asset classes. These movements may result from factors affecting individual companies, or from broader influences like changes in interest rates, market conditions, investor confidence or announcements of economic, political or financial information. o Global Total Return Fund invests in value stocks, which are subject to the risk that their intrinsic values may never be realized by the market, that a stock judged to be undervalued may actually be appropriately priced, and that their prices may go down. While the Fund's investments in value stocks may limit downside risk over time, the Fund may, as a trade-off, produce more modest gains than riskier stock funds. o Each Fund may invest in growth stocks. While potentially offering greater or more rapid capital appreciation potential than value stocks, investments in growth stocks may lack the dividend yield that can cushion stock prices in market downturns. Growth companies often are expected to increase their earnings at a certain rate. If expectations are not met, investors can punish the stocks, even if earnings do increase. o Each Fund may invest in foreign securities. Investing in foreign securities involves additional risks such as currency fluctuations, differences in financial reporting standards, a lack of adequate company information and political or economic instability. The risks may be particularly acute in underdeveloped capital markets. o Each Fund may invest in emerging markets. All of the risks of investing in foreign securities are heightened by investing in developing countries and emerging markets. The markets of developing countries historically have been more volatile than the markets of developed countries with mature economies. These markets often have provided higher rates of return, and greater risks, to investors. o Each Fund may invest in options and futures, which may be used to hedge the Fund's portfolio, to gain exposure to a market without buying individual securities or to increase returns. There is the risk that such practices sometimes may reduce returns or increase volatility. These practices also entail transactional expenses. o Each Fund may engage in active trading, which involves higher expenses including higher brokerage commissions. o Global Total Return Fund may make short sales. A short sale is a transaction in which the Fund sells a security or currency in anticipation that the market price of that security or currency will decline. Global Total Return Fund may make short sales as a form of hedging to offset potential declines in long positions in securities it owns and in order to maintain portfolio flexibility. The Fund may also enter into short sales of securities and currencies in order to hedge the currency exchange risk associated with assets denominated in foreign currencies, adjust the portfolio's exposure to a particular currency, manage risk or enhance income, or as a substitute for purchasing or selling securities. The loss to the Fund could be substantial if the price of the security or currency sold short does not decline in value. o Global Total Return Fund makes investments that are subject to interest rate risk. Investments in fixed-income securities are subject to the possibility that interest rates could rise sharply, causing the value of the Fund's securities, and share price, to decline. Longer term bonds and zero coupon bonds are generally more sensitive to interest rate changes than shorter-term bonds. Generally, the longer the average maturity of the bonds in the Fund, the more the Fund's share price will fluctuate in response to interest rate changes. o Global Total Return Fund makes investments that are subject to credit risk. It is possible that some issuers of fixed-income securities will not make payments on debt securities held by the Global Total Return Fund, or there could be defaults on repurchase agreements held by the Fund. Also, an issuer may suffer adverse changes in financial condition that could lower the credit quality of a security, leading to greater volatility in the price of the security and in shares of the Fund. A change in the quality rating of a bond can affect the bond's liquidity and make it more difficult for the Fund to sell. o Global Total Return Fund makes investments that are subject to prepayment risk. The issuers of securities held by the Fund may be able to prepay principal due on the securities, particularly during periods of declining interest rates. Securities subject to prepayment risk generally offer less potential for gains when interest rates decline, and may offer a greater potential for loss when interest rates rise. In addition, rising interest rates may cause prepayments to occur at a slower than expected rate, thereby effectively lengthening the maturity of the security and making the security more sensitive to interest rate changes. Prepayment risk is a major risk of mortgage-backed securities. o Global Total Return Fund makes investments in mortgage-backed securities. A Fund that invests in mortgage-backed securities will receive payments that are part interest and part return of principal. These payments may vary based on the rate at which homeowners pay off their loans. When a homeowner makes a prepayment, the Fund receives a larger portion of its principal investment back, which means that there will be a decrease in monthly interest payments. Some mortgage-backed securities may have structures that make their reaction to interest rates and other factors difficult to predict, making their prices very volatile. o Global Total Return Fund makes investments in restricted securities. Restricted securities cannot be sold to the public without registration under the Securities Act of 1933 ("1933 Act"). Unless registered for sale, restricted securities can be sold only in privately negotiated transactions or pursuant to an exemption from registration. Restricted securities may be considered illiquid and, therefore, subject to the Fund's limitation on illiquid securities. Restricted securities (including Rule 144A Securities) may involve a high degree of business and financial risk which may result in substantial losses. The securities may be less liquid than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by the Fund. In particular, Rule 144A Securities may be resold only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933. Rule 144A permits the resale to "qualified institutional buyers" of "restricted securities" that, when issued, were not of the same class as securities listed on a U.S. securities exchange or quoted in the National Association of Securities Dealers Automated Quotation System (the "Rule 144A Securities"). Investing in Rule 144A Securities and other restricted securities could have the effect of increasing the amount of the Fund's assets invested in illiquid securities to the extent that qualified institutional buyers become uninterested, for a time, in purchasing these securities. o Global Total Return Fund makes investments in high yield securities. Higher yielding, high risk debt securities may present additional risk because these securities may be less liquid than investment grade bonds and they tend to be more susceptible to high interest rates and to real or perceived adverse economic and competitive industry conditions. High yield securities are subject to more credit risk than higher quality securities. INVESTMENT OBJECTIVES AND STRATEGIES COMPARISON OF OBJECTIVES AND PRIMARY INVESTMENT STRATEGIES -- The investment objectives, policies and restrictions of the Funds are similar, although there are certain differences. There can be no assurance that any Fund will achieve its stated objective. ================================================================================ | GLOBAL TOTAL RETURN FUND | GLOBAL FUND - ---------------------|--------------------------|------------------------------- INVESTMENT OBJECTIVE | High total return | Long-term growth of capital | consisting of capital | primarily through investment | appreciation and current | in common stocks and | income | equivalents of companies in | | foreign countries and the | | United States - ---------------------|--------------------------|------------------------------- INVESTMENT ADVISER | Security Management | Security Management | Company, LLC | Company, LLC - ---------------------|--------------------------|------------------------------- SUB-ADVISER | Wellington Management | OppenheimerFunds, Inc. | Company, LLP | - ---------------------|--------------------------|------------------------------- PORTFOLIO MANAGER | Scott M. Elliot | William L. Wilby ================================================================================ PRIMARY INVESTMENT STRATEGIES. o Each Fund invests primarily in equity securities of U.S. and foreign companies. GLOBAL FUND o Normally invests at least 65% of its total assets in at least three countries, one of which may be the United States. o The Fund primarily invests in foreign and domestic common stocks or convertible stocks of growth-oriented companies considered to have appreciation possibilities. o The Fund's Sub-Adviser uses a disciplined theme approach to choose securities. By considering the effect of key worldwide growth trends, the Sub-Adviser focuses on areas that it believes offers the best opportunities for long-term growth. These trends include: (1) the growth of mass affluence; (2) the development of new technologies; (3) corporate restructuring; and (4) demographics. o When choosing securities for the Fund, the Sub-Adviser currently looks for the following: (1) stocks of small, medium and large growth-oriented companies worldwide; (2) companies that stand to benefit from global growth trends; (3) businesses with strong competitive positions and high demand for their products or services; and (4) cyclical opportunities in the business cycle and sectors or industries that may benefit from those opportunities. o The Fund may invest in options, futures contracts, and foreign currencies to hedge the Fund's portfolio, to increase returns or to maintain exposure to the equity markets. o The Fund may invest in emerging markets securities. o The Fund may engage in active trading of its portfolio securities, without regard to the length of time that the investment was held by the Fund. o Under adverse or unstable market conditions, the Fund may invest some of it assets in cash, repurchase agreements and money market instruments of foreign or domestic countries and the U.S. and foreign governments. GLOBAL TOTAL RETURN FUND o The Fund seeks to achieve its objective through asset allocation and security selection by investing in a diversified portfolio of global equity and fixed income securities. The Sub-Adviser normally allocates approximately 80% of the Fund's total assets to equity securities and the remaining 20% to fixed income securities. Allocations will vary based on the Sub-Adviser's view regarding the relative attractiveness of industries, sectors, countries, currencies and asset classes. The Fund normally invests at least 65% of its total assets in equity and fixed income securities of issuers worldwide. o The Fund's Sub-Adviser uses a disciplined portfolio management approach which seeks to balance investment risk and expected return to determine the overall asset allocation and country and currency exposure of the Fund. o The Fund may invest in common stocks, preferred stocks, convertible securities, warrants and rights and ADRs and depository receipts. These investments will generally be broadly diversified by country, industry and company. o Under normal circumstances, the Fund's fixed income investments may be made, without limitation, in the following: fixed income securities issued or guaranteed by governments, governmental entities or supranational entities; fixed income securities and commercial paper issued by corporations; bank obligations; mortgage-backed and asset backed securities, collaterialized mortgage obligations, and convertible bonds; privately-issued securities deemed to be liquid by the Sub-Adviser. o Investments in global equity securities are selected using a proprietary quantitative analysis and qualitative fundamental evaluation of the securities. Equity investments are evaluated based on valuation and timeliness measures combined with fundamental analysis of a company's management, cash flow, earnings, dividends and business environment. A disciplined analytical process attempts to balance the expected return and control portfolio risk. o Investments in fixed income securities are based on a variety of fundamental and economic considerations to determine interest rate and sector allocation, country and currency selection, and quality emphasis. o Individual fixed income securities are purchased and sold on the basis of relative value in the context of the Fund's overall strategy. o The Fund may invest in futures and options contracts on securities, financial indices and currencies, as well as options on futures and currency forwards. The Fund may also enter into short sales on securities and currencies. The Fund uses derivatives to reallocate exposure to asset classes, countries and currencies. The Sub-Adviser uses derivatives may also be used to manage risk and enhance income; though they will not be used to leverage the portfolio. o The Fund may invest in investment grade and high yield debt obligations (commonly referred to as "junk bonds"). o The Fund generally sells an investment when the company or issuer begins to show deteriorating relative fundamentals or when alternative investments become significantly more attractive. o Under adverse market conditions, the Fund could invest some or all of its assets in cash, foreign currencies, high quality debt securities or money market securities. As you can see from the information above, the Funds have compatible investment objectives and strategies. Both Funds provide investors with the opportunity to participate in securities markets throughout the world, including the United States. Global Fund invests primarily in equity securities with the potential for growth, whereas Global Total Return Fund uses more of a value approach to securities selection. Further, Global Total Return Fund employs an asset allocation strategy which may result in a significant portion of the Fund's net assets being invested in fixed income securities, whereas the Global Fund invests primarily in equity securities. Following the Reorganization and in the ordinary course of business as a mutual fund, certain holdings of the Global Total Return Fund that were transferred to the Global Fund may be sold. Such sales may result in increased transactional costs for Global Fund. COMPARISON OF PORTFOLIO CHARACTERISTICS -- The following tables compare certain characteristics of the portfolios of the Funds as of December 31, 2001: ================================================================================ GLOBAL TOTAL GLOBAL FUND RETURN FUND - -------------------------------------------------------------------------------- Net Assets $431,252,291 $25,007,144 - -------------------------------------------------------------------------------- Number of Holdings 125 204 - -------------------------------------------------------------------------------- Portfolio Turnover Rate (12 months ended 12/31/01) 41% 139% - -------------------------------------------------------------------------------- Average Market Capitalization - -------------------------------------------------------------------------------- As a Percentage of Net Assets: - -------------------------------------------------------------------------------- Equity Securities - -------------------------------------------------------------------------------- Debt Securities - -------------------------------------------------------------------------------- Non-U.S. Equities - -------------------------------------------------------------------------------- Developed Markets - -------------------------------------------------------------------------------- Emerging Markets - -------------------------------------------------------------------------------- Top 5 Industries (as a percentage of Net Assets) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Top 5 Countries (as a percentage of Net Assets) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ TOP 10 HOLDINGS (AS A % OF NET ASSETS) ================================================================================ GLOBAL FUND | GLOBAL TOTAL RETURN FUND - ---------------------------------------|---------------------------------------- Cadence Design Systems, Inc. 4.8% | U.S. Treasury Bill 3.2% | (1.95% - 2002) - ---------------------------------------|---------------------------------------- Reckitt Benklser, plc 3.4% | Citigroup, Inc. 2.1% - ---------------------------------------|---------------------------------------- Porsche AG 3.0% | Microsoft Corporation 1.8% - ---------------------------------------|---------------------------------------- Sanofi - Synthelabo S.A. 2.9% | Deutschland Republic 1.7% | (5.25% - 2011) - ---------------------------------------|---------------------------------------- Electronic Arts, Inc. 2.5% | Swedish Government 1.6% | (3.50% - 2006) - ---------------------------------------|---------------------------------------- Fannie Mae 2.2% | Tyco International, Ltd. 1.5% - ---------------------------------------|---------------------------------------- Nintendo Company, Ltd. 2.0% | Pharmacia Corporation 1.4% - ---------------------------------------|---------------------------------------- Bank One Corporation 2.0% | Astrazeneca Group, plc 1.4% - ---------------------------------------|---------------------------------------- Cadbury Schweppes plc 1.9% | First Data Corporation 1.4% - ---------------------------------------|---------------------------------------- Johnson & Johnson 1.9% | Japan Government, 1.2% | #213 (1.40% - 2009) ================================================================================ RELATIVE PERFORMANCE -- The following table shows, for calendar years 1991 through 2001, the average annual total return for each Fund, the MSCI World Index and the blended index which consists of 80% MSCI World Equity Index and 20% Salomon World Government Index-unhedged. The Indexes have an inherent performance advantage over the Funds, since an index has no cash in its portfolio, and incurs no operating expenses. An investor cannot invest in an index. Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of any sales charges. The information below does not reflect fees and expenses associated with an investment in variable insurance products offered by Security Benefit Life Insurance Company. Shares of the Fund are available only through the purchase of such products. ================================================================================ CALENDAR YEAR/ GLOBAL GLOBAL TOTAL MSCI BLENDED PERIOD ENDED FUND RETURN FUND WORLD INDEX INDEX - -------------------------------------------------------------------------------- 12/31/91 12.7% --- 18.3% 18.5% - -------------------------------------------------------------------------------- 12/31/92 -2.6% --- -5.2% -2.6% - -------------------------------------------------------------------------------- 12/31/93 31.6% --- 22.5% 21.2% - -------------------------------------------------------------------------------- 12/31/94 2.7% --- 5.1% 5.0% - -------------------------------------------------------------------------------- 12/31/95 10.9% 7.1%(1) 20.7% 20.9%(2) - -------------------------------------------------------------------------------- 12/31/96 17.5% 14.2% 13.5% 11.9% - -------------------------------------------------------------------------------- 12/31/97 6.5% 6.2% 15.8% 13.0% - -------------------------------------------------------------------------------- 12/31/98 20.1% 12.6% 24.3% 23.3% - -------------------------------------------------------------------------------- 12/31/99(3) 53.7% 14.0% 24.9% 19.0% - -------------------------------------------------------------------------------- 12/31/00 3.5% -10.6% 13.2% -10.1% - -------------------------------------------------------------------------------- 12/31/01 -12.3% -13.1% -16.8% -13.6% - -------------------------------------------------------------------------------- 1 For the period June 1, 1995 (Global Total Return Fund's date of inception) to December 31, 1995. 2 For the period June 1, 1995 to December 31, 1995, the blended index's performance was 6.7% and the MSCI World Index's performance was __%. 3 Effective May 14, 1999, Wellington became sub-adviser for Global Total Return Fund. ================================================================================ COMPARISON OF INVESTMENT TECHNIQUES AND RISKS OF THE FUNDS -- Because the Funds have similar investment objectives and policies, the risks of an investment in the Funds are substantially similar. The risks of investing in the Funds differ to the extent that Global Fund invests in stocks with a growth emphasis and Global Total Return Fund invests in securities with a value emphasis. Further, the risks of investing in the Funds differ to the extent that Global Total Return Fund uses an asset allocation approach to investing , which may result in the Fund having a significant portion of its net assets invested in fixed income securities. The principal risk of an investment in either of the Funds is fluctuation in the net asset value of the Fund's shares. Market conditions, investment policies, portfolio management, and other factors affect such fluctuations. The Funds are subject to varying degrees of financial, market and credit risk. An investment in either of the Funds is not a deposit of a bank and is not insured by the Federal Deposit Insurance Corporation or any other government agency. The following discussion addresses the primary risks of investing in the Funds. However, the fact that a particular risk is not identified as a main risk for the Fund does not mean that the Fund is prohibited from investing in assets in securities that give rise to that risk. It simply means that the risk is not a main risk of the Funds. EQUITY SECURITIES. Each Fund is subject to risks associated with investing in equity securities, the prices of which tend to fluctuate more dramatically over the shorter term than do the prices of other asset classes. These movements may result from factors affecting individual companies, or from broader influences like changes in interest rates, market conditions, investor confidence or announcements of economic, political or financial information. o Global Total Return Fund invests in value stocks, which are subject to the risk that their intrinsic values may never be realized by the market, that a stock judged to be undervalued may actually be appropriately priced, and that their prices may go down. While the Fund's investments in value stocks may limit downside risk over time, the Fund may, as a trade-off, produce more modest gains than riskier stock funds. o Each Fund may invest in growth stocks. While potentially offering greater or more rapid capital appreciation potential than value stocks, investments in growth stocks may lack the dividend yield that can cushion stock prices in market downturns. Growth companies often are expected to increase their earnings at a certain rate. If expectations are not met, investors can punish the stocks, even if earnings do increase. FOREIGN SECURITIES. The Funds may invest in foreign securities, which involve certain special risks, including, but not limited to: (i) unfavorable changes in currency exchange rates; (ii) adverse political and economic developments; (iii) unreliable or untimely information; (iv) limited legal recourse; (v) limited markets; and (vi) higher operational expenses. Foreign investments are normally issued and traded in foreign currencies. As a result, their values may be affected by changes in the exchange rates between particular foreign currencies and the U.S. dollar. Foreign investments may be subject to the risks of seizure by a foreign government, imposition of restrictions on the exchange or transport of foreign currency, and tax increases. There may also be less information publicly available about a foreign company than about most U.S. companies, and foreign companies are usually not subject to accounting, auditing and financial reporting standards and practices comparable to those in the United States. The legal remedies for investors in foreign investments may be more limited than those available in the United States. Certain foreign investments may be less liquid (harder to buy and sell) and more volatile than domestic investments, which means a Fund may at times be unable to sell its foreign investments at desirable prices. For the same reason, a Fund may at times find it difficult to value its foreign investments. Brokerage commissions and other fees are generally higher for foreign investments than for domestic investments. The procedures and rules for settling foreign transactions may also involve delays in payment, delivery or recovery of money or investments. Foreign withholding taxes may reduce the amount of income available to distribute to shareholders of the Funds. INTEREST RATE RISK. Both Funds are subject to interest-rate risk. Investments in fixed-income [and convertible] securities are subject to the possibility that interest rates could rise sharply, causing the value of the Fund's securities, and share price, to decline. Longer term bonds and zero coupon bonds are generally more sensitive to interest rate changes than shorter-term bonds. Generally, the longer the average maturity of the bonds in the Fund, the more the Fund's share price will fluctuate in response to interest rate changes. CREDIT RISK. Both Funds are subject to credit risk. It is possible that some issuers of fixed-income and convertible securities will not make payments on debt securities held by a Fund, or there could be defaults on repurchase agreements held by a Fund. Also, an issuer may suffer adverse changes in financial condition that could lower the credit quality of a security, leading to greater volatility in the price of the security and in shares of a Fund. A change in the quality rating of a bond can affect the bond's liquidity and make it more difficult for a Fund to sell. PREPAYMENT RISK. The issuers of securities held by the Global Total Return Fund may be able to prepay principal due on the securities, particularly during periods of declining interest rates. Securities subject to prepayment risk generally offer less potential for gains when interest rates decline, and may offer a greater potential for loss when interest rates rise. In addition, rising interest rates may cause prepayments to occur at a slower than expected rate, thereby effectively lengthening the maturity of the security and making the security more sensitive to interest rate changes. Prepayment risk is a major risk of mortgage-backed securities. ACTIVE TRADING. Both Funds may engage in active trading of their portfolio securities which involves higher expenses, including higher brokerage commissions. CONVERTIBLE SECURITIES AND WARRANTS. The Funds may invest in debt or preferred equity securities convertible into, or exchangeable for, equity securities. Traditionally, convertible securities have paid dividends or interest at rates higher than common stocks but lower than nonconvertible securities. They generally participate in the appreciation or depreciation of the underlying stock into which they are convertible, but to a lesser degree. In recent years, convertible securities have been developed which combine higher or lower current income with options and other features. Warrants are options to buy a stated number of shares of common stock at a specified price anytime during the life of the warrants (generally, two or more years). EMERGING MARKET SECURITIES. The risks associated with foreign investments are typically increased in less developed and developing countries, which are sometimes referred to as emerging markets. For example, political and economic structures in these countries may be young and developing rapidly, which can cause instability. These countries are also more likely to experience high levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. HIGH YIELD SECURITIES. Both Funds may invest in high yield securities. Higher yielding debt securities in the lower rating (higher risk) categories of the recognized rating services are commonly referred to as "junk bonds." The total return and yield of junk bonds can be expected to fluctuate more than the total return and yield of higher-quality bonds. Junk bonds (those rated below BBB or in default) are regarded as predominantly speculative with respect to the issuer's continuing ability to meet principal and interest payments. Successful investment in lower-medium- and low-quality bonds involves greater investment risk and is highly dependent on the Sub-Adviser's credit analysis. A real or perceived economic downturn or higher interest rates could cause a decline in high-yield bond prices by lessening the ability of issuers to make principal and interest payments. These bonds are often thinly traded and can be more difficult to sell and value accurately than high-quality bonds. Because objective pricing data may be less available, judgment may play a greater role in the valuation process. In addition, the entire junk bond market can experience sudden and sharp price swings due to a variety of factors, including changes in economic forecasts, stock market activity, large or sustained sales by major investors, a high-profile default, or just a change in the market's psychology. This type of volatility is usually associated more with stocks than bonds, but junk bond investors should be prepared for it. SHORT SALES. Global Total Return Fund may make short sales. A short sale is a transaction in which the Fund sells a security or currency in anticipation that the market price of that security or currency will decline. Global Total Return Fund may make short sales as a form of hedging to offset potential declines in long positions in securities it owns and in order to maintain portfolio flexibility. The Fund may also enter into short sales of securities and currencies in order to hedge the currency exchange risk associated with assets denominated in foreign currencies, adjust the portfolio's exposure to a particular currency, manage risk or enhance income, or as a substitute for purchasing or selling securities. The loss to the Fund could be substantial if the price of the security or currency sold short does not decline in value. SMALLER COMPANIES. The Funds may invest in small- or medium-sized companies. Such companies are more likely than larger companies to have limited product lines, markets or financial resources, or to depend on a small, inexperienced management group. Stocks of these companies may trade less frequently and in limited volume, and their prices may fluctuate more than stocks of other companies. Stocks of these companies may therefore be more vulnerable to adverse developments than those of larger companies. FUTURES AND OPTIONS. The Funds may utilize futures contracts, options on futures and may purchase call and put options and write call and put options on a "covered" basis. Futures (a type of potentially high-risk derivative) are often used to manage or hedge risk because they enable the investor to buy or sell an asset in the future at an agreed-upon price. Options (another type of potentially high-risk derivative) give the investor the right (where the investor purchases the options), or the obligation (where the investor writes (sells) the options), to buy or sell an asset at a predetermined price in the future. These instruments may be bought or sold for any number of reasons, including: to manage exposure to changes in securities prices, to manage exposure to changes in interest rates and bond prices; as an efficient means of adjusting overall exposure to certain markets; in an effort to enhance income; to protect the value of portfolio securities; and to adjust portfolio duration. Futures contracts and options may not always be successful hedges; their prices can be highly volatile. Using them could lower the Fund's total return, and the potential loss from the use of futures can exceed the Fund's initial investment in such contracts. ASSET-BACKED SECURITIES. Global Total Return Fund may invest in asset-backed securities. An underlying pool of assets, such as credit card receivables, automobile loans, or corporate loans or bonds back these bonds and provides the interest and principal payments to investors. On occasion, the pool of assets may also include a swap obligation, which is used to change the cash flows on the underlying assets. As an example, a swap may be used to allow floating rate assets to back a fixed rate obligation. Credit quality depends primarily on the quality of the underlying assets, the level of credit support, if any, provided by the issuer, and the credit quality of the swap counterparty, if any. The underlying assets (i.e., loans) are subject to prepayments, which can shorten the securities' weighted average life and may lower their return. The value of these securities also may change because of actual or perceived changes in the creditworthiness of the originator, the servicing agent, the financial institution providing credit support, or swap counterparty. MORTGAGE-BACKED SECURITIES. Global Total Return Fund may invest in mortgage-backed securities. Mortgage lenders pool individual home mortgages with similar characteristics to back a certificate or bond, which is sold to investors such as the Fund. Interest and principal payments generated by the underlying mortgages are passed through to the investors. The three largest issuers of these securities are the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). GNMA certificates are backed by the full faith and credit of the U.S. Government, while others, such as Fannie Mae and Freddie Mac certificates, are only supported by the ability to borrow from the U.S. Treasury or supported only by the credit of the agency. Private mortgage bankers and other institutions also issue mortgage-backed securities. Mortgage-backed securities are subject to scheduled and unscheduled principal payments as homeowners pay down or prepay their mortgages. As these payments are received, they must be reinvested when interest rates may be higher or lower than on the original mortgage security. Therefore, these securities are not an effective means of locking in long-term interest rates. In addition, when interest rates fall, the pace of mortgage prepayments picks up. These refinanced mortgages are paid off at face value (par), causing a loss for any investor who may have purchased the security at a price above par. In such an environment, this risk limits the potential price appreciation of these securities and can negatively affect the Fund's net asset value. When rates rise, the prices of mortgage-backed securities can be expected to decline, although historically these securities have experienced smaller price declines than comparable quality bonds. In addition, when rates rise and prepayments slow, the effective duration of mortgage-backed securities extends, resulting in increased volatility. Additional mortgage-backed securities in which the Global Total Return Fund may invest include Collateralized Mortgage Obligations (CMOs) and stripped mortgage securities. CMOs are debt securities that are fully collateralized by a portfolio of mortgages or mortgage-backed securities. All interest and principal payments from the underlying mortgages are passed through to the CMOs in such a way as to create, in most cases, more definite maturities than is the case with the underlying mortgages. CMOs may pay fixed or variable rates of interest, and certain CMOs have priority over others with respect to the receipt of prepayments. Stripped mortgage securities (a type of potentially high-risk derivative) are created by separating the interest and principal payments generated by a pool of mortgage-backed securities or a CMO to create additional classes of securities. Generally, one class receives only interest payments (IOs) and another receives principal payments (POs). Unlike with other mortgage-backed securities and POs, the value of IOs tends to move in the same direction as interest rates. The Fund can use IOs as a hedge against falling prepayment rates (interest rates are rising) and/or a bear market environment. POs can be used as a hedge against rising prepayment rates (interest rates are falling) and/or a bull market environment. IOs and POs are acutely sensitive to interest rate changes and to the rate of principal prepayments. A rapid or unexpected increase in prepayments can severely depress the price of IOs, while a rapid or unexpected decrease in prepayments could have the same effect on POs. These securities are very volatile in price and may have lower liquidity than most other mortgage-backed securities. Certain non-stripped CMOs may also exhibit these qualities, especially those that pay variable rates of interest that adjust inversely with, and more rapidly than, short-term interest rates. In addition, if interest rates rise rapidly and prepayment rates slow more than expected, certain CMOs, in addition to losing value, can exhibit characteristics of longer-term securities and become more volatile. There is no guarantee the Fund's investment in CMOs, IOs, or POs will be successful, and total return could be adversely affected as a result. RESTRICTED SECURITIES. The Funds may invest in restricted securities, which cannot be sold to the public without registration under the Securities Act of 1933 ("1933 Act"). Unless registered for sale, restricted securities can be sold only in privately negotiated transactions or pursuant to an exemption from registration. Restricted securities are generally considered illiquid and, therefore, subject to the Fund's limitation on illiquid securities. Restricted securities (including Rule 144A Securities) may involve a high degree of business and financial risk which may result in substantial losses. The securities may be less liquid than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by the Fund. In particular, Rule 144A Securities may be resold only to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933. Rule 144A permits the resale to "qualified institutional buyers" of "restricted securities" that, when issued, were not of the same class as securities listed on a U.S. securities exchange or quoted in the National Association of Securities Dealers Automated Quotation System (the "Rule 144A Securities"). A "qualified institutional buyer" is defined by Rule 144A generally as an institution, acting for its own account or for the accounts of other qualified institutional buyers, that in the aggregate owns and invests on a discretionary basis at least $100 million in securities of issuers not affiliated with the institution. A dealer registered under the Securities Exchange Act of 1934 (the "Exchange Act"), acting for its own account or the accounts of other qualified institutional buyers, that in the aggregate owns and invests on a discretionary basis at least $10 million in securities of issuers not affiliated with the dealer may also qualify as a qualified institutional buyer, as well as an Exchange Act registered dealer acting in a riskless principal transaction on behalf of a qualified institutional buyer. Investing in Rule 144A Securities and other restricted securities could have the effect of increasing the amount of the Fund's assets invested in illiquid securities to the extent that qualified institutional buyers become uninterested, for a time, in purchasing these securities. INITIAL PUBLIC OFFERING RISK. The Funds may invest in securities offered through initial public offerings (IPOs). Such securities may have a magnified performance impact, either positive or negative, on a Fund and particularly a Fund with a small asset base. There is no guarantee that as the Fund's assets grow, it will continue to experience substantially similar performance by investing in IPOs. A Fund's investments in IPOs may make it subject to more erratic price movements than the overall equity market. CASH RESERVES. Cash reserves maintained by the Funds may include domestic and foreign money market instruments as well as certificates of deposit, bank demand accounts and repurchase agreements. Global Fund and Global Total Return Fund may establish and maintain reserves as OppenheimerFunds or Wellington, respectively, believes is advisable to facilitate the Fund's cash flow needs (e.g., redemptions, expenses and, purchases of portfolio securities) or for temporary, defensive purposes. COMPARISON OF FEES AND EXPENSES The following describes and compares the fees and expenses that you may pay if you buy and hold shares of the Funds. It is expected that combining the Funds would allow shareholders of Global Total Return Fund to realize economies of scale. For further information on the fees and expenses of Global Fund, see "More Information Regarding the Funds," page 22. OPERATING EXPENSES -- The total fund operating expenses of Global Total Return Fund, expressed as a ratio of expenses to average daily net assets ("expense ratio"), currently are higher than the expenses of the Global Fund. o The management fee for the Global Fund was the same as the management fee for the Global Total Return Fund for the year ended December 31, 2001. o The "other expenses" for the Global Total Return Fund were higher than for the Global Fund for the year ended December 31, 2001. It is expected that combining the Funds will reduce the operating expense ratio for current shareholders of Global Total Return Fund. For more information, see estimated PRO FORMA expenses in the table, "Annual Fund Operating Expenses," below. The current expenses of each Fund and estimated PRO FORMA expenses giving effect to the proposed Reorganization are shown in the table below. Expenses for the Funds are based on the operating expenses incurred for the year ended December 31, 2001. PRO FORMA fees and expenses show estimated fees and expenses of Global Fund after giving effect to the proposed Reorganization. PRO FORMA numbers are estimated in good faith and are hypothetical. ================================================================================ ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets, shown as a ratio of expenses to average daily net assets)(1) - -------------------------------------------------------------------------------- BROKERAGE PLAN TOTAL FUND MANAGEMENT DISTRIBUTION OTHER OPERATING FEES (12B-1) FEES(2) EXPENSES EXPENSE - -------------------------------------------------------------------------------- Global Fund 1.00% 0.00% 0.20% 1.20% - -------------------------------------------------------------------------------- Global Total Return Fund 1.00% 0.00% 0.53% 1.53% - -------------------------------------------------------------------------------- PRO FORMA - Global including Global 1.00% 0.00% 0.20% 1.20% Total Return - -------------------------------------------------------------------------------- 1 Expenses are shown for each Fund, and on a pro forma basis, based upon expenses incurred by each Fund for the 12 months ended December 31, 2001. 2 Amounts included as distribution expenses under this caption are the amounts received by the Funds' distributor under the Brokerage Plan in the last fiscal year in connection with the purchase and sale of securities held by the Funds. ================================================================================ EXAMPLE -- This example is intended to help you compare the cost of investing in the Funds and in the combined Funds on a PRO FORMA basis. The example assumes that you invest $10,000 in each Fund and in the surviving Fund after the Reorganization for the time periods indicated. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The 5% return is an assumption and is not intended to portray past or future investment results. Based on the above assumptions, you would pay the following expenses if you redeemed your shares at the end of such period shown; your actual costs may be higher or lower. ================================================================================ 1 YEAR* 3 YEARS* 5 YEARS* 10 YEARS* - -------------------------------------------------------------------------------- Global Fund $122 $381 $660 $1,455 - -------------------------------------------------------------------------------- Global Total Return Fund 156 483 834 1,824 - -------------------------------------------------------------------------------- PRO FORMA - Global Fund including 122 381 660 1,455 Global Total Return Fund - -------------------------------------------------------------------------------- *The expense examples above do not reflect the expenses of the variable annuity or variable life insurance contracts through which shares of the Funds are purchased. ================================================================================ ADDITIONAL INFORMATION ABOUT GLOBAL FUND INVESTMENT MANAGER -- Security Management, each Fund's investment manager, is a Kansas limited liability company. On December 31, 2001, the aggregate assets of all of the mutual funds under the investment management of Security Management were approximately $7.9 billion. Security Management has overall responsibility for the management of the Funds. SBL Fund and Security Management have entered into an agreement that requires Security Management to provide investment advisory, statistical and research services to the Funds, supervise and arrange for the purchase and sale of securities on behalf of the Funds, and provide for the maintenance and compilation of records pertaining to the investment advisory function. The agreement with Security Management can be terminated by the Board of Directors of SBL Fund upon 60 days' written notice. Investment management fees are computed and accrued daily and paid monthly. Security Management has engaged OppenheimerFunds, Inc., 498 Seventh Avenue, New York, New York, 10018 to provide investment advisory services to Global Fund. OppenheimerFunds, Inc. (including subsidiaries and affiliates) managed more than $130 billion in assets as of March 31, 2002, including other mutual funds with more than 6.3 million shareholder accounts. Pursuant to this agreement, OppenheimerFunds, Inc. furnishes investment advisory and research facilities, supervises and arranges for the purchase and sale of securities on behalf of Global Fund and provides for the compilation and maintenance of records pertaining to such investment advisory services, subject to the control and supervision of SBL Fund's Board of Directors and Security Management. INVESTMENT PERSONNEL -- The following individual is responsible for the day-to-day management of the Global Fund: o WILLIAM L. WILBY, Senior Vice President and Director of International Equities of OppenheimerFunds, became manager of Global Fund in November 1998. Prior to joining OppenheimerFunds in 1991, he was an international investment strategist at Brown Brothers Harriman & Co. Prior to Brown Brothers, Mr. Wilby was a managing director and portfolio manager at AIG Global Investors. He joined AIG from Northern Trust Bank in Chicago, where he was an international pension manager. Before starting his career in portfolio management, Mr. Wilby was an international financial economist at Northern Trust Bank and at the Federal Reserve Bank in Chicago. Mr. Wilby is a graduate of the United States Military Academy and holds a M.A. and a Ph.D. in International Monetary Economics from the University of Colorado. He is a Chartered Financial Analyst charterholder. PERFORMANCE OF GLOBAL FUND -- The bar chart and table shown below provide an indication of the risks of investing in the Global Fund by showing (on a calendar year basis) Global Fund's annual total return for the years ended December 31, 1992 through December 31, 2001 and by showing (on a calendar year basis) how Global Fund's average annual returns for each yearly period beginning in 1992, compare to those of a broad-based securities market index--the MSCI World Index. The information below is based on the performance of the shares of Global Fund and does not reflect fees and expenses associated with an investment in variable insurance products offered by Security Benefit Life Insurance Company. Shares of the Fund are available only through the purchase of such products. The Fund's past performance is not an indication of how the Fund will perform in the future. [BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW] 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -2.6% 31.6% 2.7% 10.9% 17.5% 6.5% 20.1% 53.7% 3.5% -12.3% *During the period shown in the above chart, the Fund's best quarterly performance was 34.9% for the quarter ended December 31, 1999, and the Fund's worst quarterly performance was -18.2% for the quarter ended September 30, 2001. The Fund's year-to-date total return as of March 31, 2002 was __%. The table below shows the average annual total returns of Global Fund, compared to the MSCI World Index, an unmanaged index. An index has an inherent performance advantage over the Global Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Global Fund's performance reflected in the table does not reflect fees and expenses associated with an investment in variable insurance products offered by Security Benefit Life Insurance Company. =================================================================== AVERAGE ANNUAL TOTAL RETURNS (through December 31, 2001) ------------------------------------------------------------------- PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS ------------------------------------------------------------------- Global Fund -12.3% 12.3% 11.8% ------------------------------------------------------------------- MSCI World Index -16.8% 5.4% 8.1% =================================================================== Additional information about Global Fund is included in the section, "More Information Regarding the Funds," page 22. INFORMATION ABOUT THE REORGANIZATION THE REORGANIZATION PLAN -- The Reorganization Plan provides for the transfer of all of the assets and liabilities of Global Total Return Fund to Global Fund solely in exchange for shares of Global Fund. Global Total Return Fund will distribute the shares of Global Fund received in the exchange to its shareholders, and then Global Total Return Fund will be liquidated. After the Reorganization, each shareholder of Global Total Return Fund will own shares of Global Fund having an aggregate value equal to the aggregate value of the shares of Global Total Return Fund held by that shareholder as of the close of business on the business day preceding the Closing. Until the Closing, shareholders of Global Total Return Fund will continue to be able to redeem their shares. Redemption requests received after the Closing will be treated as requests received by the Global Fund for the redemption of its shares received by the shareholder in the Reorganization. The obligations of the Funds under the Reorganization Plan are subject to various conditions, including approval of the shareholders of Global Total Return Fund. The Reorganization Plan also requires that the Funds take, or cause to be taken, all actions, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by the Reorganization Plan. The Reorganization Plan may be terminated by mutual agreement of the parties or on certain other grounds. For a complete description of the terms and conditions of the Reorganization, see the Reorganization Plan at Appendix A, which modifies the foregoing summary of the Reorganization Plan in its entirety. REASONS FOR THE REORGANIZATION -- The Funds have similar investment objectives, strategies and risks and Global Total Return Fund is relatively small in asset size compared to Global Fund ($25 million versus $431 million). Because the Global Total Return Fund may invest in similar types of securities as Global Fund, the Funds are largely duplicative. In addition, the Reorganization would create a larger Global Fund, which should benefit shareholders of the Funds by spreading costs across a larger, combined asset base, and which would allow shareholders of Global Total Return Fund to continue to participate in a professionally managed portfolio which invests primarily in securities of U.S. and foreign companies. Also, a larger Global fund offers the potential benefit of a more diversified portfolio of securities and may improve trading efficiency. Based upon these considerations, the Board of Directors of SBL Fund determined that the Funds should be reorganized. The proposed Reorganization was presented to the Board of Directors of SBL Fund for consideration and approval at a meeting held May 3, 2002. For the reasons discussed below, the Directors, including all of the Directors who are not "interested persons" (as defined in the Investment Company Act of 1940) of SBL Fund, determined that the interests of the shareholders of the respective Funds would not be diluted as a result of the proposed Reorganization, and that the proposed Reorganization was in the best interests of each of the Funds and its shareholders. BOARD CONSIDERATION -- The Board of Directors of SBL Fund, in recommending the proposed transaction, considered a number of factors, including the following: 1. expense ratios and information regarding fees and expenses of Global Total Return Fund and Global Fund; 2. estimates that show that combining the Funds should result in a lower expense ratio for Global Total Return Fund because of economies of scale; 3. elimination of duplication of costs and inefficiencies of having two similar funds; 4. the Reorganization would not dilute the interests of the Funds' current shareholders; 5. the relative investment performance and risks of Global Fund as compared to Global Total Return Fund; 6. the similarity of Global Fund's investment objectives, policies and restrictions to those of Global Total Return Fund and the fact that the Funds are duplicative within the overall group of funds; 7. the relative size of the Funds; and 8. the tax-free nature of the Reorganization to Global Total Return Fund and its shareholders. THE BOARD OF DIRECTORS OF SBL FUND RECOMMENDS THAT SHAREHOLDERS OF THE GLOBAL TOTAL RETURN FUND APPROVE THE REORGANIZATION. TAX CONSIDERATIONS -- The Reorganization is intended to qualify for Federal income tax purposes as a tax-free reorganization under Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, pursuant to this treatment, neither the Global Total Return Fund, nor its shareholders, nor the Global Fund is expected to recognize any gain or loss for federal income tax purposes from the transactions contemplated by the Reorganization Plan. As a condition to the closing of the Reorganization, the Funds will receive an opinion from the law firm of Dechert to the effect that the Reorganization will qualify as a tax-free reorganization for Federal income tax purposes. That opinion will be based in part upon certain assumptions and upon certain representations made by the Funds. Immediately prior to the Reorganization, Global Total Return Fund will pay a dividend or dividends which, together with all previous dividends, will have the effect of distributing to its shareholders all of the Global Total Return Fund's investment company taxable income for taxable years ending on or prior to the Reorganization (computed without regard to any deduction for dividends paid) and all of its net capital gains, if any, realized in taxable years ending on or prior to the Reorganization (after reduction for any available capital loss carryforward). Such dividends will be included in the taxable income of the Global Total Return Fund's shareholders. As of December 31, 2001, Global Total Return Fund had accumulated capital loss carryforwards in the amount of approximately $2,697,057. After the Reorganization, these losses will be available to Global Fund to offset its capital gains, although the amount of these losses which may offset Global Fund's capital gains in any given year may be limited. As a result of this limitation, it is possible that Global Fund may not be able to use these losses as rapidly Global Total Return Fund might have, and part of these losses may not be useable at all. The ability of Global Fund to absorb losses in the future depends upon a variety of factors that cannot be known in advance, including the existence of capital gains against which these losses may be offset. In addition, the benefits of any capital loss carryforwards currently are available only to shareholders of Global Total Return Fund. After the Reorganization, however, these benefits will inure to the benefit of all shareholders of Global Fund. EXPENSES OF THE REORGANIZATION -- Security Management will bear one-third, and the Funds will bear two-thirds, of the expenses relating the Reorganization, including but not limited to the costs of the proxy solicitation. The Funds' share of the expenses will be allocated ratably on the basis of their relative net asset values immediately before Closing. ADDITIONAL INFORMATION ABOUT THE FUNDS FORM OF ORGANIZATION -- Each of the Funds is a series of SBL Fund, a Kansas corporation. SBL Fund is governed by a Board of Directors, which consists of six directors. DIVIDENDS AND OTHER DISTRIBUTIONS -- Each Fund pays dividends from net investment income, and distributes net capital gains, if any, at least annually. Dividends and distributions of each Fund are automatically reinvested in additional shares of the Fund. There are no fees or sales charges on reinvestments. If the Reorganization Plan is approved by shareholders of Global Total Return Fund, then as soon as practicable before the Closing, Global Total Return Fund will pay its shareholders a cash distribution of all undistributed 2002 net investment income and undistributed realized net capital gains. CAPITALIZATION -- The following table shows on an unaudited basis the capitalization of each Fund as of December 31, 2001 and on a PRO FORMA basis as of December 31, 2001, giving effect to the Reorganization: =========================================================================== NET ASSET VALUE SHARES NET ASSETS PER SHARE OUTSTANDING --------------------------------------------------------------------------- Global Fund $431,252,291 $6.31 68,300,938 --------------------------------------------------------------------------- Global Total Return Fund $ 25,007,144 $8.80 2,840,169 --------------------------------------------------------------------------- Pro Forma - Global including $456,259,435 $6.31 72,261,871 Global Total Return Fund =========================================================================== GENERAL INFORMATION ABOUT THE PROXY STATEMENT SOLICITATION OF PROXIES -- Proxies are being solicited at the request of the Board of Directors of SBL Fund. Solicitation of proxies is being made primarily by the mailing of this Notice and Proxy Statement with its enclosures on or about ______, 2002. Shareholders of Global Total Return Fund whose shares are held by nominees, such as brokers, can vote their proxies by contacting their respective nominee. In addition to the solicitation of proxies by mail, employees of Security Management and its affiliates, without additional compensation, may solicit proxies in person or by telephone, telegraph, facsimile, or oral communication. A shareholder may revoke the accompanying proxy at any time prior to its use by filing with Global Total Return Fund a written revocation or duly executed proxy bearing a later date. In addition, any shareholder who attends the meeting of Global Total Return Fund shareholders in person may vote by ballot at the Meeting, thereby canceling any proxy previously given. The persons named in the accompanying proxy will vote as directed by the proxy, but in the absence of voting directions in any proxy that is signed and returned, they intend to vote "FOR" the Reorganization proposal and may vote in their discretion with respect to other matters not now known to the Board of Directors of SBL Fund that may be presented at the meeting. VOTING RIGHTS -- Shares of the Funds entitle their holders to one vote per share as to any matter on which the holder is entitled to vote, and each fractional share shall be entitled to a proportionate fractional vote. Shareholders of Global Total Return Fund at the close of business on June 24, 2002 (the "Record Date") will be entitled to be present and give voting instructions for the Fund at the meeting with respect to their shares owned as of that Record Date. As of the Record Date, ________ shares of the Global Total Return Fund were outstanding and entitled to vote. By investing in a variable annuity or variable life insurance policy issued by Security Benefit, you indirectly purchased shares of the Global Total Return Fund. Security Benefit owns shares of the Fund for your benefit in the separate account funding your variable annuity or variable life insurance policy. Security Benefit will vote shares of the Fund in accordance with voting instructions received from you and other owners of such variable annuity and variable life insurance policies. Shareholders have certain voting rights with respect to their beneficially owned shares, and Security Benefit, or its appointee, will vote the shares beneficially owned by each shareholder in accordance with the shareholder's instructions. The enclosed form of proxy is provided for this purpose. All shares for which shareholders do not provide voting instructions will be voted in the same proportion as those shares for which voting instructions have been received. Approval of the Reorganization with respect to Global Total Return Fund requires the affirmative vote of a majority of the outstanding shares of the Fund. The Global Total Return Fund must have a quorum to conduct its business at the meeting. The holders of a MAJORITY of outstanding shares present in person or by proxy shall constitute a quorum. In the absence of a quorum, a majority of outstanding shares of the Fund entitled to vote, in person or by proxy, may adjourn the meeting from time to time until a quorum shall be present. If a shareholder abstains from voting as to any matter, or if a broker returns a "non-vote" proxy, indicating a lack of authority to vote on a matter, the shares represented by the abstention or non-vote will be deemed present at the meeting for purposes of determining a quorum. However, abstentions and broker non-votes will not be deemed represented at the meeting for purposes of calculating the vote on any matter. As a result, an abstention or broker non-vote will have the same effect as a vote against the Reorganization. Prior to the meeting, the Fund expects that broker-dealer firms holding their shares of the Funds in "street name" for their customers will request voting instructions from their customers and beneficial owners. To the knowledge of SBL Fund, as of June 24, 2002, no Director of SBL Fund beneficially owned 1% or more of the outstanding shares of either Fund, and the officers and Directors of SBL Fund beneficially owned, as a group, less than 1% of the shares of either Fund. Security Benefit Life Insurance Company ("Security Benefit") is the owner of record of all of the Funds' outstanding shares. Appendix B hereto lists the persons that, as of June 24, 2002, owned beneficially 5% or more of the outstanding shares of the Funds. OTHER MATTERS TO COME BEFORE THE MEETING -- The Board of Directors does not know of any matters to be presented at the meeting other than those described in this Proxy Statement/Prospectus. If other business should properly come before the meeting, the proxy holders will vote thereon in accordance with their best judgment. SHAREHOLDER PROPOSALS -- The Fund is not required to hold regular annual meetings and, in order to minimize its costs, does not intend to hold meetings of shareholders unless so required by applicable law, regulation, regulatory policy or if otherwise deemed advisable by the Fund's management. Therefore it is not practicable to specify a date by which shareholder proposals must be received in order to be incorporated in an upcoming proxy statement for an annual meeting or to be submitted to shareholders of the Fund. Shareholders wishing to submit proposals should send their written proposals to the address set forth on the cover of this proxy statement/prospectus a reasonable time prior to the date of a meeting of shareholders to be considered for inclusion in the proxy materials for a meeting. Timely submission of a proposal does not, however, necessarily mean that the proposal will be included. Persons named as proxies for any subsequent shareholder meeting will vote in their discretion with respect to proposals submitted on an untimely basis. INFORMATION ABOUT THE FUNDS -- 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 450 Fifth Street, NW, Washington, DC 20549. The SEC maintains an Internet World Wide Web site (at http://www.sec.gov) which contains other information about the Funds. REPORTS TO SHAREHOLDERS -- Security Management will furnish, without charge, a copy of the most recent Annual Report regarding the Funds upon request. Requests for such reports should be directed to Security Management at One Security Benefit Place, Topeka, KS 66636-0001 or at (800) 888-2461. PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. Amy J. Lee, Secretary ________, 2002 One Security Benefit Place Topeka, KS 66636-0001 MORE INFORMATION REGARDING THE FUNDS PURCHASE AND REDEMPTION OF SHARES. Security Benefit purchases shares of the Funds for its variable annuity and variable life insurance separate accounts. Security Benefit buys and sells shares of the Funds at the net asset value per share (NAV) next determined after it submits the order to buy or sell. A Fund's NAV is generally calculated as of the close of trading on every day the New York Stock Exchange is open. You may purchase shares of the Funds only indirectly through the purchase of a variable annuity or variable life insurance contract issued by Security Benefit. The prospectus for such variable annuity or variable life insurance contract describes any sales charges applicable to your contract. DETERMINATION OF NET ASSET VALUE. The NAV per share of each Fund is computed as of the close of regular trading hours on the New York Stock Exchange (normally 3 p.m. Central time) on days when the Exchange is open. The Exchange is open Monday through Friday, except on observation of the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Each Fund's NAV is generally based upon the market value of securities held in the Fund's portfolio. If market prices are not available, the fair value of securities is determined using procedures approved by the Board of Directors of SBL Fund. Foreign securities are valued based on quotations from the primary market in which they are traded and are converted from the local currency into U.S. dollars using current exchange rates. Foreign securities may trade in their primary markets on weekends or other days when the Funds do not price their shares. Therefore, the NAV of the Funds may change on days when shareholders will not be able to buy or sell shares. BROKERAGE ENHANCEMENT PLAN. The Funds have adopted, in accordance with the provisions of Rule 12b-1 under the Investment Company Act of 1940, a Brokerage Enhancement Plan (the "Plan"). The Plan uses available brokerage commissions to promote the sale and distribution of Fund shares (through the sale of variable insurance products funded by the Funds). Under the Plan, a Fund may direct Security Management or the Fund's Sub-Advisor to use certain broker-dealers for securities transactions, subject to the obligation to obtain best execution of such transactions. These are broker-dealers that have agreed either (1) to pay a portion of their commission from the sale and purchase of securities to the Fund's Distributor or other introducing brokers ("Brokerage Payments"), or (2) to provide brokerage credits, benefits or services ("Brokerage Credits"). The Distributor will use all Brokerage Payments and Credits (other than a minimal amount to defray its legal and administrative costs) to finance activities that are meant to result in the sale of the Fund's shares, including: o holding or participating in seminars and sales meetings promoting the sale of the Fund's shares o paying marketing fees requested by broker-dealers who sell the Fund's shares o training sales personnel o creating and mailing advertising and sales literature o financing any other activity that is intended to result in the sale of the Fund's shares. The Plan permits the Brokerage Payments and Credits generated by securities transactions from one Fund to inure to the benefit of other series of SBL Fund as well. The Plan is not expected to increase the brokerage costs of the Funds. OTHER EXPENSES. In addition to the management fee and other fees described previously, each Fund pays other expenses, such as legal, audit, transfer agency and custodian fees, proxy solicitation costs, and the compensation of Directors who are not affiliated with Security Management. Most Fund expenses are allocated proportionately among all of the outstanding shares of the Fund. MANAGEMENT OF THE FUNDS INVESTMENT MANAGER -- Security Management, each Fund's investment manager, is a Kansas limited liability company. On December 31, 2001, the aggregate assets of all of the mutual funds under the investment management of Security Management were approximately $7.9 billion. Security Management has overall responsibility for the management of the Funds. SBL Fund and Security Management have entered into an agreement that requires Security Management to provide investment advisory, statistical and research services to the Funds, supervise and arrange for the purchase and sale of securities on behalf of the Funds, and provide for the maintenance and compilation of records pertaining to the investment advisory function. The agreement with Security Management can be terminated by the Board of Directors of SBL Fund upon 60 days written notice. Investment management fees are computed and accrued daily and paid monthly. For the year ended December 31, 2001, Global Fund paid $4,730,305 in investment management fees to Security Management. Security Management has engaged OppenheimerFunds, Inc., 498 Seventh Avenue, New York, New York, 10018 to provide investment advisory services to Global Fund. Pursuant to this agreement, OppenheimerFunds furnishes investment advisory and research facilities, supervises and arranges for the purchase and sale of securities on behalf of Global Fund and provides for the compilation and maintenance of records pertaining to such investment advisory services, subject to the control and supervision of SBL Fund's Board of Directors and Security Management. PARENT COMPANY AND DISTRIBUTOR -- Security Management is controlled by its members, Security Benefit Life Insurance Company and Security Benefit Group, Inc. ("SBG"). SBG is an insurance and financial services holding company wholly-owned by Security Benefit Life Insurance Company, One Security Benefit Place, Topeka, Kansas 66636-0001. Security Benefit Life, a life insurance company, is incorporated under the laws of Kansas. Security Management is a direct, and the Distributor, the Fund's principal underwriter, is an indirect, wholly owned subsidiary of Security Benefit. ADMINISTRATIVE AGENT -- Security Management also acts as the administrative agent for the Funds and as such performs administrative functions and the bookkeeping, accounting and pricing functions for the Funds. For these services Security Management receives, on an annual basis, a fee of 0.045% of the average net assets of each Fund, plus an annual global administration fee equal to the greater of 0.10% of its average net assets or $60,000, calculated daily and payable monthly. Security Management also acts as the transfer agent for the Funds. As such, Security Management performs all shareholder servicing functions, including transferring record ownership, processing purchase and redemption transactions, answering inquiries, mailing shareholder communications and acting as the dividend disbursing agent. For these services, the Investment Manager receives an annual maintenance fee of $8.00 per account, a fee of $1.00 per shareholder transaction, and a fee of $1.00 per dividend transaction. PORTFOLIO TRANSACTIONS -- Each Fund's Sub-Advisor will place orders to execute securities transactions that are designed to implement the Fund's investment objectives and policies. The Sub-Advisors use reasonable efforts to place all purchase and sale transactions with brokers and dealers ("brokers") that provide "best execution" of these orders. In placing purchase and sale transactions, Sub-Advisors may consider brokerage and research services provided by a broker to the Sub-Advisor or its affiliates, and the Fund may pay a commission for effecting a securities transaction that is in excess of the amount another broker would have charged if the Sub-Advisor determines in good faith that the amount of commission is reasonable in relation to the value of the brokerage and research services provided by the broker viewed in terms of either that particular transaction or the overall responsibilities of the Sub-Advisor with respect to all accounts as to which it exercises investment discretion. The Sub-Advisor may use all, none, or some of such information and services in providing investment advisory services to each of the mutual funds under its management, including the Fund. In addition, the Sub-Advisor also may consider a broker's sale of Fund shares if the Sub-Advisor is satisfied that the Fund would receive best execution of the transaction from that broker. Securities held by the Funds may also be held by other investment advisory clients of the Sub-Advisor, including other investment companies. When selecting securities for purchase or sale for a Fund, the Sub-Advisor may at the same time be purchasing or selling the same securities for one or more of such other accounts. Subject to the Sub-Advisor's obligation to seek best execution, such purchases or sales may be executed simultaneously or "bunched." It is the policy of the Sub-Advisor not to favor one account over the other. Any purchase or sale orders executed simultaneously are allocated at the average price and as nearly as practicable on a pro rata basis (transaction costs will also generally be shared on a pro rata basis) in proportion to the amounts desired to be purchased or sold by each account. In those instances where it is not practical to allocate purchase or sale orders on a pro rata basis, then the allocation will be made on a rotating or other equitable basis. While it is conceivable that in certain instances this procedure could adversely affect the price or number of shares involved in a Fund's transaction, it is believed that the procedure generally contributes to better overall execution of the Funds' portfolio transactions. TAXES FEDERAL TAXES -- You may purchase shares of the Fund only indirectly through the purchase of a variable annuity or variable life insurance contract issued by Security Benefit. The prospectus for such variable annuity or variable life insurance contract describes the federal tax consequences of your purchase or sale of the contract. Please see your tax adviser for further information. FINANCIAL HIGHLIGHTS FOR GLOBAL FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD The financial highlights table is intended to help you understand the Fund's financial performance during the period shown. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund assuming reinvestment of all dividends and distributions. This information has been derived from financial statements that have been audited by Ernst & Young LLP, whose report, along with the SBL Fund's financial statements, is included in its annual report, which is available upon request. - ------------------------------------------------------------------------------------------ SERIES D (GLOBAL FUND) - ------------------------------------------------------------------------------------------ FISCAL YEAR ENDED DECEMBER 31 ---------------------------------------------------- 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- PER SHARE DATA Net asset value beginning of period $ 8.49 $ 9.08 $ 6.74 $ 6.14 $ 6.14 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)....... --- --- 0.02 0.03 0.04 Net gain (loss) on securities (realized & unrealized).......... (0.97) 0.37 3.29 1.18 0.38 ----- ----- ----- ----- ----- Total from investment operations... (0.97) 0.37 3.31 1.21 0.42 LESS DISTRIBUTIONS: Dividends (from net investment income)............... --- --- --- (0.09) (0.13) Distributions (from capital gains). (0.94) (0.96) (0.97) (0.52) (0.29) Distributions (in excess of capital gains)................ (0.27) --- --- --- --- ----- ----- ----- ----- ----- Total distributions................ (1.21) (0.96) (0.97) (0.61) (0.42) ----- ----- ----- ----- ----- NET ASSET VALUE END OF PERIOD...... $ 6.31 $ 8.49 $ 9.08 $ 6.74 $ 6.14 ===== ===== ===== ===== ===== TOTAL RETURN (A)................... (12.3)% 3.5% 53.7% 20.1% 6.5% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands)............ $431,252 $565,950 $525,748 $349,794 $285,782 Ratio of expenses to average net assets............... 1.20% 1.21% 1.21% 1.26% 1.24% Ratio of net investment income (loss) to average net assets..... 0.07% (0.08)% 0.32% 0.92% 0.74% Portfolio turnover rate............ 41% 55% 76% 166% 129% - ------------------------------------------------------------------------------------------ (a) Total Return does not take into account any of the expenses associated with an investment in variable insurance products offered by Security Benefit Life Insurance Company. Shares of the Fund are available only through the purchase of such products. APPENDIX A FORM OF PLAN OF REORGANIZATION THIS PLAN OF REORGANIZATION (the "Plan") is adopted as of this 3rd day of May, 2002, by SBL Fund (the "Company") with its principal place of business at One Security Benefit Place, Topeka, Kansas 66636-0001, on behalf of Series D ("Global") (the "Acquiring Fund"), a separate series of the Company, and Series M (the "Acquired Fund"), another separate series of the Company. This Plan is intended to be and is adopted as a plan of reorganization and liquidation within the meaning of Section 368(a)(1) of the United States Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the "Reorganization") will consist of the transfer of all of the assets of the Acquired Fund to the Acquiring Fund in exchange solely for voting shares ($1.00 par value per share) of the Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the Acquiring Fund of all liabilities of the Acquired Fund, and the distribution of the Acquiring Fund Shares to the shareholders of the Acquired Fund in complete liquidation of the Acquired Fund as provided herein, all upon the terms and conditions hereinafter set forth in this Plan. WHEREAS, the Company is an open-end, registered investment company of the management type and the Acquired Fund owns securities which generally are assets of the character in which the Acquiring Fund is permitted to invest; WHEREAS, the Directors of the Company have determined that the exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares and the assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in the best interests of the Acquiring Fund and its shareholders and that the interests of the existing shareholders of the Acquiring Fund would not be diluted as a result of this transaction; and WHEREAS, the Directors of the Company also have determined, with respect to the Acquired Fund, that the exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares and the assumption of all liabilities of the Acquired Fund by the Acquiring Fund is in the best interests of the Acquired Fund and its shareholders and that the interests of the existing shareholders of the Acquired Fund would not be diluted as a result of this transaction; NOW, THEREFORE, the Company, on behalf of the Acquiring Fund and the Acquired Fund separately, hereby approves the Plan on the following terms and conditions: 1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND 1.1 Subject to the requisite approvals of the shareholders of the Acquired Fund and Acquiring Fund and the other terms and conditions herein set forth and on the basis of the representations and warranties contained herein, the Company will transfer all of the Acquired Fund's assets, as set forth in paragraph 1.2, to the Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to deliver to the Acquired Fund the number of full and fractional Acquiring Fund Shares determined by dividing the value of the Acquired Fund's net assets, computed in the manner and as of the time and date set forth in paragraph 2.1, by the net asset value of one Acquiring Fund Share, computed in the manner and as of the time and date set forth in paragraph 2.2; and (ii) to assume all liabilities of the Acquired Fund. Such transactions shall take place at the closing provided for in paragraph 3.1 (the "Closing"). 1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund shall consist of all assets and property, including, without limitation, all cash, securities, commodities and futures interests and dividends or interests receivable that are owned by the Acquired Fund and any deferred or prepaid expenses shown as an asset on the books of the Acquired Fund on the closing date provided for in paragraph 3.1 (the "Closing Date"). 1.3 The Acquired Fund will endeavor to discharge all of its known liabilities and obligations prior to the Closing Date. The Acquiring Fund shall also assume all of the liabilities of the Acquired Fund, whether accrued or contingent, known or unknown, existing at the Valuation Date. On or as soon as practicable prior to the Closing Date, the Acquired Fund will declare and pay to its shareholders of record one or more dividends and/or other distributions that, together with all previous distributions, shall have the effect of distributing to its shareholders (i) all of its investment company taxable income and all of its net realized capital gains, if any, for the period from the close of its last taxable year to the end of the business day on the Closing; and (ii) any undistributed investment company taxable income and net capital gain from any period to the extent not otherwise distributed. 1.4 Immediately after the transfer of assets provided for in paragraph 1.1, the Acquired Fund will distribute to the Acquired Fund's shareholders of record, determined as of immediately after the close of business on the Closing Date (the "Acquired Fund Shareholders"), on a pro rata basis, the Acquiring Fund Shares received by the Acquired Fund pursuant to paragraph 1.1, and will completely liquidate. Such distribution and liquidation will be accomplished, with respect to the Acquired Fund's shares, by the transfer of the Acquiring Fund Shares then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of the Acquired Fund Shareholders. The aggregate net asset value of Acquiring Fund Shares to be so credited to Acquired Fund Shareholders shall be equal to the aggregate net asset value of the Acquired Fund shares owned by such shareholders on the Closing Date. All issued and outstanding shares of the Acquired Fund will simultaneously be canceled on the books of the Acquired Fund, although share certificates representing interests in shares of the Acquired Fund will represent a number of the Acquiring Fund Shares after the Closing Date, as determined in accordance with Section 2.3. The Acquiring Fund shall not issue certificates representing the Acquiring Fund Shares in connection with such exchange. 1.5 Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued in the manner described in the Acquiring Fund's then-current prospectus and statement of additional information. 1.6 Any reporting responsibility of the Acquired Fund including, but not limited to, the responsibility for filing of regulatory reports, tax returns, or other documents with the Securities and Exchange Commission (the "Commission"), any state securities commission, and any federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Acquired Fund. 2. VALUATION 2.1 The value of the Acquired Fund's assets to be acquired by the Acquiring Fund hereunder shall be the value of such assets computed as of immediately after the close of business of the New York Stock Exchange and after the declaration of any dividends on the Closing Date (such time and date being hereinafter called the "Valuation Date"), using the valuation procedures set forth in the Company's Articles of Incorporation, as amended (the "Articles of Incorporation"), and the then-current prospectus or statement of additional information with respect to the Acquiring Fund, and valuation procedures established by the Company's Board of Directors. 2.2 The net asset value of an Acquiring Fund Share shall be the net asset value per share computed as of immediately after the close of business of the New York Stock Exchange and after the declaration of any dividends on the Valuation Date, using the valuation procedures set forth in the Company's Articles of Incorporation and the then-current prospectus or statement of additional information with respect to the Acquiring Fund, and valuation procedures established by the Company's Board of Directors. 2.3 The number of the Acquiring Fund Shares to be issued (including fractional shares, if any) in exchange for the Acquired Fund's assets shall be determined by dividing the value of the net assets of the Acquired Fund determined using the same valuation procedures referred to in paragraph 2.1, by the net asset value of an Acquiring Fund Share, determined in accordance with paragraph 2.2. 2.4 All computations of value shall be made by the Acquiring Fund's designated record keeping agent. 3. CLOSING AND CLOSING DATE 3.1 The Closing Date shall be August 27, 2002, or such other date as the parties may agree to in writing. All acts taking place at the Closing shall be deemed to take place simultaneously as of immediately after the close of business on the Closing Date unless otherwise agreed to by the parties. The close of business on the Closing Date shall be as of 4:00 p.m., Eastern Time. The Closing shall be held at the offices of the Company or at such other time and/or place as the Board of Directors or officers of the Company may designate. 3.2 The Company shall direct State Street Bank and Trust Company, as custodian for the Acquired Fund (the "Custodian"), to deliver, at the Closing, a certificate of an authorized officer stating that (i) the Acquired Fund's portfolio securities, cash, and any other assets ("Assets") shall have been delivered in proper form to the Acquiring Fund within two business days prior to or on the Closing Date, and (ii) all necessary taxes in connection with the delivery of the Assets, including all applicable federal and state stock transfer stamps, if any, have been paid or provision for payment has been made. The Acquired Fund's portfolio securities represented by a certificate or other written instrument shall be transferred and delivered by the Acquired Fund as of the Closing Date for the account of the Acquiring Fund duly endorsed in proper form for transfer in such condition as to constitute good delivery thereof. The Acquired Fund shall direct the Custodian to deliver portfolio securities and instruments deposited with a securities depository, as defined in Rule 17f-4 under the Investment Company Act of 1940, as amended (the "1940 Act") as of the Closing Date by book entry in accordance with the customary practices of such depositories and the custodian for Acquiring Fund. 3.3 Security Management Company, LLC, as transfer agent for the Acquired Fund (the "Transfer Agent"), shall deliver, on behalf of the Acquired Fund, at the Closing a certificate of an authorized officer stating that its records contain the names and addresses of the Acquired Fund Shareholders and the number and percentage ownership of outstanding shares owned by each such shareholder immediately prior to the Closing. 3.4 In the event that on the Valuation Date (a) the New York Stock Exchange or another primary trading market for portfolio securities of the Acquiring Fund or the Acquired Fund shall be closed to trading or trading thereupon shall be restricted, or (b) trading or the reporting of trading on such Exchange or elsewhere shall be disrupted so that, in the judgment of the Board of Directors of the Company, accurate appraisal of the value of the net assets of the Acquiring Fund or the Acquired Fund is impracticable, the Closing Date shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored. 4. REPRESENTATIONS AND WARRANTIES 4.1 The Company, on behalf of the Acquired Fund, represents and warrants to the Acquiring Fund as follows: (a) The Acquired Fund is duly organized as a series of the Company, which is a corporation duly organized and validly existing under the laws of the State of Kansas, with power under the Company's Articles of Incorporation to own all of its properties and assets and to carry on its business as it is now being conducted; (b) The Company is a registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the 1940 Act, and the registration of its shares under the Securities Act of 1933, as amended ("1933 Act"), are in full force and effect; (c) No consent, approval, authorization, or order of any court or governmental authority is required for the consummation by the Acquired Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act") and the 1940 Act, and such as may be required by state securities laws; (d) The current prospectus and statement of additional information of the Acquired Fund and each prospectus and statement of additional information of the Acquired Fund used during the three years previous to the date of this Plan conforms or conformed at the time of its use in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and does not or did not at the time of its use include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading; (e) On the Closing Date, the Acquired Fund will have good and marketable title to the Acquired Fund's assets to be transferred to the Acquiring Fund pursuant to paragraph 1.2 and full right, power, and authority to sell, assign, transfer and deliver such assets hereunder free of any liens or other encumbrances, and upon delivery and payment for such assets, the Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including such restrictions as might arise under the 1933 Act, other than as disclosed to the Acquiring Fund; (f) The Acquired Fund is not engaged currently, and the execution, delivery and performance of this Plan will not result, in (i) a material violation of the Company's Articles of Incorporation or By-Laws or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Acquired Fund is a party or by which it is bound, or (ii) the acceleration of any obligation, or the imposition of any penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree to which the Acquired Fund is a party or by which it is bound; (g) The Acquired Fund has no material contracts or other commitments (other than this Plan) that will be terminated with liability to it prior to the Closing Date; (h) Except as otherwise disclosed in writing to and accepted by the Acquiring Fund, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to its knowledge, threatened against the Acquired Fund or any of its properties or assets that, if adversely determined, would materially and adversely affect its financial condition or the conduct of its business. The Acquired Fund knows of no facts which might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions herein contemplated; (i) The financial statements of the Acquired Fund as of and for the year ended December 31, 2001 have been audited by Ernst & Young, LLP, independent accountants. Such statements are in accordance with accounting principles generally accepted in the United States ("GAAP") consistently applied, and such statements (copies of which have been furnished to the Acquiring Fund) present fairly, in all material respects, the financial condition of the Acquired Fund as of such date in accordance with GAAP, and there are no known contingent liabilities of the Acquired Fund required to be reflected on the balance sheet or in the notes thereto; (j) Since December 31, 2001, there has not been any material adverse change in the Acquired Fund's financial condition, assets, liabilities or business, other than changes occurring in the ordinary course of business, or any incurrence by the Acquired Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed to and accepted by the Acquiring Fund. For the purposes of this subparagraph (j), a decline in net asset value per share of the Acquired Fund due to declines in market values of securities in the Acquired Fund's portfolio, the discharge of Acquired Fund liabilities, or the redemption of Acquired Fund shares by shareholders of the Acquired Fund shall not constitute a material adverse change; (k) On the Closing Date, all Federal and other tax returns and reports of the Acquired Fund required by law to have been filed by such date (including any extensions) shall have been filed and are or will be correct in all material respects, and all Federal and other taxes shown as due or required to be shown as due on said returns and reports shall have been paid or provision shall have been made for the payment thereof, and to the best of the Acquired Fund's knowledge, no such return is currently under audit and no assessment has been asserted with respect to such returns; (l) For each taxable year of its operation (including the taxable year ending on the Closing Date), the Acquired Fund has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such, has been eligible to and has computed its Federal income tax under Section 852 of the Code, and will have distributed all of its investment company taxable income and net capital gain (as defined in the Code) that has accrued through the Closing Date, and before the Closing Date will have declared dividends sufficient to distribute all of its investment company taxable income and net capital gain for the period ending on the Closing Date; (m) All issued and outstanding shares of the Acquired Fund are, and on the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by the Company and have been offered and sold in every state and the District of Columbia in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws. All of the issued and outstanding shares of the Acquired Fund will, at the time of Closing, be held by the persons and in the amounts set forth in the records of the Transfer Agent, on behalf of the Acquired Fund, as provided in paragraph 3.3. The Acquired Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of the shares of the Acquired Fund, nor is there outstanding any security convertible into any of the Acquired Fund shares; (n) The adoption and performance of this Plan will have been duly authorized prior to the Closing Date by all necessary action, if any, on the part of the Directors of the Company, and, subject to the approval of the shareholders of the Acquired Fund, this Plan will constitute a valid and binding obligation of the Acquired Fund, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles; (o) The information to be furnished by the Acquired Fund for use in registration statements, proxy materials and other documents filed or to be filed with any federal, state or local regulatory authority (including the National Association of Securities Dealers, Inc.), which may be necessary in connection with the transactions contemplated hereby, shall be accurate and complete in all material respects and shall comply in all material respects with Federal securities and other laws and regulations thereunder applicable thereto. 4.2 The Company, on behalf of the Acquiring Fund, represents and warrants to the Acquired Fund as follows: (a) The Acquiring Fund is duly organized as a series of the Company, which is a corporation duly organized and validly existing under the laws of the State of Kansas, with power under the Company's Articles of Incorporation to own all of its properties and assets and to carry on its business as it is now being conducted; (b) The Company is a registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the 1940 Act and the registration of its shares under the 1933 Act, including the shares of the Acquiring Fund, are in full force and effect; (c) No consent, approval, authorization, or order of any court or governmental authority is required for the consummation by the Acquiring Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state securities laws; (d) The current prospectus and statement of additional information of the Acquiring Fund and each prospectus and statement of additional information of the Acquiring Fund used during the three years previous to the date of this Plan conforms or conformed at the time of its use in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and does not or did not at the time of its use include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not materially misleading; (e) On the Closing Date, the Acquiring Fund will have good and marketable title to the Acquiring Fund's assets, free of any liens of other encumbrances, except those liens or encumbrances as to which the Acquired Fund has received notice and necessary documentation at or prior to the Closing; (f) The Acquiring Fund is not engaged currently, and the execution, delivery and performance of this Plan will not result, in (i) a material violation of the Company's Articles of Incorporation or By-Laws or of any agreement, indenture, instrument, contract, lease or other undertaking to which the Acquiring Fund is a party or by which it is bound, or (ii) the acceleration of any obligation, or the imposition of any penalty, under any agreement, indenture, instrument, contract, lease, judgment or decree to which the Acquiring Fund is a party or by which it is bound; (g) Except as otherwise disclosed in writing to and accepted by the Acquired Fund, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to its knowledge, threatened against the Acquiring Fund or any of its properties or assets that, if adversely determined, would materially and adversely affect its financial condition or the conduct of its business. The Acquiring Fund knows of no facts which might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects its business or its ability to consummate the transactions herein contemplated; (h) The financial statements of the Acquiring Fund as of and for the year ended December 31, 2001 have been audited by Ernst & Young LLP, independent accountants. Such statements are in accordance with GAAP consistently applied, and such statements (copies of which have been furnished to the Acquired Fund) present fairly, in all material respects, the financial condition of the Acquiring Fund as of such date in accordance with GAAP, and there are no known contingent liabilities of the Acquiring Fund required to be reflected on the balance sheet or in the notes thereto; (i) Since December 31, 2001, there has not been any material adverse change in the Acquiring Fund's financial condition, assets, liabilities or business, other than changes occurring in the ordinary course of business, or any incurrence by the Acquiring Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed to and accepted by the Acquired Fund. For purposes of this subparagraph (i), a decline in net asset value per share of the Acquiring Fund due to declines in market values of securities in the Acquiring Fund's portfolio, the discharge of Acquiring Fund liabilities, or the redemption of Acquiring Fund Shares by shareholders of the Acquiring Fund, shall not constitute a material adverse change; (j) On the Closing Date, all Federal and other tax returns and reports of the Acquiring Fund required by law to have been filed by such date (including any extensions) shall have been filed and are or will be correct in all material respects, and all Federal and other taxes shown as due or required to be shown as due on said returns and reports shall have been paid or provision shall have been made for the payment thereof, and to the best of the Acquiring Fund's knowledge no such return is currently under audit and no assessment has been asserted with respect to such returns; (k) For each taxable year of its operation, the Acquiring Fund has met the requirements of Subchapter M of the Code for qualification as a regulated investment company and has elected to be treated as such, has been eligible to and has computed its Federal income tax under Section 852 of the Code, has distributed all of its investment company taxable income and net capital gain (as defined in the Code) for periods ending prior to the Closing Date, and will do so for the taxable year including the Closing Date; (l) All issued and outstanding Acquiring Fund Shares are, and on the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by the Company and have been offered and sold in every state and the District of Columbia in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws. The Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquiring Fund Shares, nor is there outstanding any security convertible into any Acquiring Fund Shares; (m) The adoption and performance of this Plan will have been fully authorized prior to the Closing Date by all necessary action, if any, on the part of the Directors of the Company on behalf of the Acquiring Fund and this Plan will constitute a valid and binding obligation of the Acquiring Fund, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles; (n) The Acquiring Fund Shares to be issued and delivered to the Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to the terms of this Plan, will on the Closing Date have been duly authorized and, when so issued and delivered, will be duly and validly issued Acquiring Fund Shares, and will be fully paid and non-assessable by the Company; (o) The information to be furnished by the Acquiring Fund for use in the registration statements, proxy materials and other documents that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with Federal securities and other laws and regulations applicable thereto; and (p) That insofar as it relates to Company or the Acquiring Fund, the Registration Statement relating to the Acquiring Fund Shares issuable hereunder, and the proxy materials of the Acquired Fund to be included in the Registration Statement, and any amendment or supplement to the foregoing, will, from the effective date of the Registration Statement through the date of the meeting of shareholders of the Acquired Fund contemplated therein (i) not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not materially misleading provided, however, that the representations and warranties in this subparagraph (p) shall not apply to statements in or omissions from the Registration Statement made in reliance upon and in conformity with information that was furnished by the Acquired Fund for use therein, and (ii) comply in all material respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder. 5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND 5.1 The Acquiring Fund and the Acquired Fund each will operate its business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business will include the declaration and payment of customary dividends and distributions, and any other distribution that may be advisable. 5.2 To the extent required by applicable law, the Company will call a meeting of the shareholders of the Acquired Fund to consider and act upon this Plan and to take all other action necessary to obtain approval of the transactions contemplated herein. 5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be issued hereunder are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms of this Plan. 5.4 The Acquired Fund will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the beneficial ownership of the Acquired Fund shares. 5.5 Subject to the provisions of this Plan, the Acquiring Fund and the Acquired Fund will each take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Plan. 5.6 As soon as is reasonably practicable after the Closing, the Acquired Fund will make a liquidating distribution to its shareholders consisting of the Acquiring Fund Shares received at the Closing. 5.7 The Acquiring Fund and the Acquired Fund shall each use its reasonable best efforts to fulfill or obtain the fulfillment of the conditions precedent to effect the transactions contemplated by this Plan as promptly as practicable. 5.8 The Acquired Fund covenants that it will, from time to time, as and when reasonably requested by the Acquiring Fund, execute and deliver or cause to be executed and delivered all such assignments and other instruments, and will take or cause to be taken such further action as the Acquiring Fund may reasonably deem necessary or desirable in order to vest in and confirm the Acquiring Fund's title to and possession of all the assets and otherwise to carry out the intent and purpose of this Plan. 5.9 The Acquiring Fund will use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act and such of the state blue sky or securities laws as may be necessary in order to continue its operations after the Closing Date. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND The obligations of the Acquired Fund to consummate the transactions provided for herein shall be subject, at the Acquired Fund's election, to the performance by the Acquiring Fund of all the obligations to be performed by it hereunder on or before the Closing Date, and, in addition thereto, the following further conditions: 6.1 All representations and warranties of the Acquiring Fund and the Company contained in this Plan shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Plan, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date; 6.2 The Company and the Acquiring Fund shall have performed all of the covenants and complied with all of the provisions required by this Plan to be performed or complied with by the Company and the Acquiring Fund on or before the Closing Date; and 6.3 The Acquired Fund and the Acquiring Fund shall have agreed on the number of full and fractional Acquiring Fund Shares to be issued in connection with the Reorganization after such number has been calculated in accordance with paragraph 1.1. 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND The obligations of the Acquiring Fund to complete the transactions provided for herein shall be subject, at the Acquiring Fund's election, to the performance by the Acquired Fund of all of the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions: 7.1 All representations and warranties of the Company and the Acquired Fund contained in this Plan shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Plan, as of the Closing Date, with the same force and effect as if made on and as of the Closing Date; 7.2 The Company and the Acquired Fund shall have performed all of the covenants and complied with all of the provisions required by this Plan to be performed or complied with by the Company or the Acquired Fund on or before the Closing Date; 7.3 The Acquired Fund and the Acquiring Fund shall have agreed on the number of full and fractional Acquiring Fund Shares to be issued in connection with the Reorganization after such number has been calculated in accordance with paragraph 1.1; 7.4 The Acquired Fund shall have declared and paid a distribution or distributions prior to the Closing that, together with all previous distributions, shall have the effect of distributing to its shareholders (i) all of its investment company taxable income and all of its net realized capital gains, if any, for the period from the close of its last taxable year to 4:00 p.m. Eastern Time on the Closing; and (ii) any undistributed investment company taxable income and net realized capital gains from any period to the extent not otherwise already distributed. 8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE ACQUIRED FUND If any of the conditions set forth below do not exist on or before the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the other party to this Plan shall, at its option, not be required to consummate the transactions contemplated by this Plan: 8.1 The Plan and the transactions contemplated herein shall have been approved by the requisite vote, if any, of the holders of the outstanding shares of the Acquired Fund in accordance with the provisions of the Company's Articles of Incorporation, By-Laws, applicable Kansas law and the 1940 Act, and certified copies of the resolutions evidencing such approval shall have been delivered to the Acquiring Fund. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this paragraph 8.1; 8.2 On the Closing Date, no action, suit or other proceeding shall be pending or, to its knowledge, threatened before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Plan or the transactions contemplated herein; 8.3 All consents of other parties and all other consents, orders and permits of Federal, state and local regulatory authorities deemed necessary by the Acquiring Fund or the Acquired Fund to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of the Acquiring Fund or the Acquired Fund, provided that either party hereto may for itself waive any of such conditions; 8.4 The Registration Statement shall have become effective under the 1933 Act and no stop orders suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act; and 8.5 Dechert shall deliver an opinion addressed to the Company substantially to the effect that, based upon certain facts, assumptions, and representations, the transaction contemplated by this Plan shall constitute a tax-free reorganization for Federal income tax purposes, unless, based on the circumstances existing at the time of the Closing, Dechert determines that the transaction contemplated by this Plan does not qualify as such. The delivery of such opinion is conditioned upon receipt by Dechert of representations it shall request of the Company. Notwithstanding anything herein to the contrary, the Company may not waive the condition set forth in this paragraph 8.5. 9. BROKERAGE FEES AND EXPENSES 9.1 The Acquiring Fund represents and warrants to the other that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein. 9.2 The expenses relating to the proposed Reorganization will be paid by the Acquired Fund and the Acquiring Fund pro rata based upon the relative net assets of the Funds as of the close of business on the record date for determining the shareholders of the Acquired Fund entitled to vote on the Reorganization. The costs of the Reorganization shall include, but not be limited to, costs associated with obtaining any necessary order of exemption from the 1940 Act, preparation of the Registration Statement, printing and distributing the Acquiring Fund's prospectus and the Acquired Fund's proxy materials, legal fees, accounting fees, securities registration fees, and expenses of holding the shareholders' meeting. Notwithstanding any of the foregoing, expenses will in any event be paid by the party directly incurring such expenses if and to the extent that the payment by the other party of such expenses would result in the disqualification of such party as a "regulated investment company" within the meaning of Section 851 of the Code. 10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES The representations, warranties and covenants contained in this Plan or in any document delivered pursuant hereto or in connection herewith shall survive the consummation of the transactions contemplated hereunder. The covenants to be performed after the Closing shall survive the Closing. 11. TERMINATION This Plan and the transactions contemplated hereby may be terminated and abandoned by resolution of the Board of Directors, at any time prior to the Closing Date, if circumstances should develop that, in the opinion of the Board, make proceeding with the Plan inadvisable. 12. AMENDMENTS This Plan may be amended, modified or supplemented in such manner as may be set forth in writing by the authorized officers of the Company; provided, however, that following any meeting of the shareholders called by the Acquired Fund pursuant to paragraph 5.2 of this Plan, no such amendment may have the effect of changing the provisions for determining the number of the Acquiring Fund Shares to be issued to the Acquired Fund Shareholders under this Plan to the detriment of such shareholders without their further approval. 13. HEADINGS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY 13.1 The Article and paragraph headings contained in this Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of this Plan. 13.2 This Plan shall be governed by and construed in accordance with the laws of the State of Kansas without regard to its principles of conflicts of laws. 13.3 This Plan shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Plan. 13.4 It is expressly agreed that the obligations of the parties hereunder shall not be binding upon any of the Directors, shareholders, nominees, officers, agents, or employees of the Company personally, but shall bind only property of such party. The execution and delivery by such officers shall not be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the property of each party. IN WITNESS WHEREOF, the Board of Directors of the Company has caused this Plan to be approved on behalf of the Acquiring Fund and the Acquired Fund. SBL FUND By: ______________________________ Name: Title: APPENDIX B As of June 24, 2002, the following persons owned beneficially or of record 5% or more of the outstanding shares of the Global Fund: ================================================================================ % OF GLOBAL FUND % OF GLOBAL FUND NAME AND ADDRESS BEFORE REORGANIZATION AFTER REORGANIZATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ As of June 24, 2002, the following persons owned of record 5% or more of the outstanding shares of the Global Total Return Fund: ================================================================================ % OF GLOBAL TOTAL RETURN % OF GLOBAL TOTAL RETURN NAME AND ADDRESS FUND BEFORE REORGANIZATION FUND AFTER REORGANIZATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ SBL FUND, SERIES M (Global Total Return) PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS ON AUGUST 20, 2002 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoint(s) James R. Schmank, Donald Chubb and John D. Cleland or any one or more of them, proxies, with full power of substitution, to vote all shares of the SBL Fund, Series M (the "Global Total Return Fund") which the undersigned is entitled to vote at the Special Meeting of Shareholders of the Fund to be held at the offices of the Fund at One Security Benefit Place, Topeka, Kansas 66636-0001, on August 20, 2002 at 9:30 a.m., local time, and at any adjournment thereof. This proxy will be voted as instructed. If no specification is made, the proxy will be voted "FOR" the proposals. Please vote, date and sign this proxy and return it promptly in the enclosed envelope. Please indicate your vote by an "x" in the appropriate box below. PROXY VOTING INSTRUCTIONS THE FUND ENCOURAGES ALL SHAREHOLDERS TO VOTE THEIR PROXIES. WE NOW PROVIDE THREE CONVENIENT METHODS OF VOTING: 1. PROXY CARD: COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD ATTACHED BELOW IN THE ENCLOSED POSTAGE-PAID ENVELOPE; 2. TELEPHONE: CALL TOLL-FREE ON A TOUCH-TONE PHONE 1-800-690-6903, 7 DAYS A WEEK, 24 HOURS A DAY; OR 3. INTERNET: LOG ON TO THE WEB SITE WWW.PROXYVOTE.COM. IF YOU CHOOSE TO VOTE BY TELEPHONE OR INTERNET, YOU WILL BE GIVEN INSTRUCTIONS AND ASKED TO ENTER THE TWELVE-DIGIT CONTROL NUMBER LOCATED ON THE PROXY CARD. CHOOSING EITHER OF THESE OPTIONS ELIMINATES THE NEED TO RETURN YOUR PROXY CARD. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL: 1. To approve a Plan of Reorganization providing for the acquisition of all of the assets and liabilities of the Global Total Return Fund by the SBL Fund, Series D (the "Global Fund") solely in exchange for shares of the Global Fund, followed by the complete liquidation of the Global Total Return Fund. For [_] Against [_] Abstain [_] 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. - ---------------------------------------- ----------------------------------- Signature Date - ---------------------------------------- ----------------------------------- Signature (if held jointly) Date PART B SBL FUND - -------------------------------------------------------------------------------- Statement of Additional Information _______, 2002 - -------------------------------------------------------------------------------- Acquisition of the Assets and By and in Exchange for Shares of Liabilities of SBL Fund, Series M SBL Fund, Series D (the "Global Total Return Fund") (the "Global Fund") One Security Benefit Place One Security Benefit Place Topeka, Kansas 66636-0001 Topeka, Kansas 66636-0001 This Statement of Additional Information is available to the Shareholders of Global Total Return Fund in connection with a proposed transaction whereby all of the assets and liabilities of Global Total Return Fund will be transferred to Global Fund in exchange for shares of Global Fund. This Statement of Additional Information of the Global Fund consists of this cover page and the following documents, each of which was filed electronically with the Securities and Exchange Commission and is incorporated by reference herein: 1. The Statement of Additional Information for SBL Fund dated May 1, 2002. 2. The Financial Statements of Global Fund and Global Total Return Fund as included in the SBL Funds' Annual Report filed on Form N-30D for the year ended December 31, 2001, Registration No. 2-59353 (filed March 7, 2002). This Statement of Additional Information is not a prospectus. A Prospectus/Proxy Statement dated ____, 2002 relating to the reorganization of Global Total Return Fund may be obtained, without charge, by writing to Security Management at One Security Benefit Place, Topeka, Kansas 66636-0001 or calling (800) 888-2461. This Statement of Additional Information should be read in conjunction with the Prospectus/Proxy Statement. Pro forma financial statements of the Funds are not presented as the net assets of Global Total Return Fund are less than 10% of the net assets of Global Fund and will represent less than 10% of the net assets of the combined Fund. PART C OTHER INFORMATION ITEM 15. INDEMNIFICATION A policy of insurance covering Security Management Company, LLC, its subsidiaries, Security Distributors, Inc., and all of the registered investment companies advised by Security Management Company, LLC insures the Registrant's directors and officers and others against liability arising by reason of an alleged breach of duty caused by any negligent act, error or accidental omission in the scope of their duties. Paragraph 30 of the Registrant's Bylaws, as amended February 3, 1995, provides in relevant part as follows: 30. INDEMNIFICATION AND LIABILITY OF DIRECTORS AND OFFICERS. Each person who is or was a Director or officer of the Corporation or is or was serving at the request of the Corporation as a Director or officer of another corporation (including the heirs, executors, administrators and estate of such person) shall be indemnified by the Corporation as of right to the full extent permitted or authorized by the laws of the State of Kansas, as now in effect and as hereafter amended, against any liability, judgment, fine, amount paid in settlement, cost and expense (including attorneys' fees) asserted or threatened against and incurred by such person in his/her capacity as or arising out of his/her status as a Director or officer of the Corporation or, if serving at the request of the Corporation, as a Director or officer of another corporation. The indemnification provided by this bylaw provision shall not be exclusive of any other rights to which those indemnified may be entitled under the Articles of Incorporation, under any other bylaw or under any agreement, vote of stockholders or disinterested directors or otherwise, and shall not limit in any way any right which the Corporation may have to make different or further indemnification with respect to the same or different persons or classes of persons. No person shall be liable to the Corporation for any loss, damage, liability or expense suffered by it on account of any action taken or omitted to be taken by him/her as a Director or officer of the Corporation or of any other corporation which he/she serves as a Director or officer at the request of the Corporation, if such person (a) exercised the same degree of care and skill as a prudent man would have exercised under the circumstances in the conduct of his/her own affairs, or (b) took or omitted to take such action in reliance upon advice of counsel for the Corporation, or for such other corporation, or upon statement made or information furnished by Directors, officers, employees or agents of the Corporation, or of such other corporation, which he/she had no reasonable grounds to disbelieve. In the event any provision of this Section 30 shall be in violation of the Investment Company Act of 1940, as amended or of the rules and regulations promulgated thereunder, such provisions shall be void to the extent of such violations. On March 25, 1988, the shareholders approved the Board of Directors' recommendation that the Articles of Incorporation be amended by adopting the following Article Fifteenth: "A director shall not be personally liable to the corporation or to its stockholders for monetary damages for breach of fiduciary duty as a director, provided that this sentence shall not eliminate nor limit the liability of a director: A. for any breach of his or her duty of loyalty to the corporation or to its stockholders; B. for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; C. for any unlawful dividend, stock purchase or redemption under the provisions of Kansas Statutes Annotated (K.S.A.) 17-6424 and amendments thereto; or D. for any transaction from which the director derived an improper personal benefit." Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 16. EXHIBITS (1) Articles of Incorporation(a) (2) Bylaws(b) (3) Not Applicable (4) Form of Plan of Reorganization(c) (5) Certificate of Designation of Series and Classes of Common Stock(a) (6) (a) Investment Advisory Contract(a) (b) Sub-Advisory Contract - Oppenheimer (Series D)(f) (7) Distribution Agreement(a) (8) Not Applicable (9) Custodian Agreement(d) (10) (a) Brokerage Enhancement Plan(a) (b) Form of Shareholder Service Agreement(e) (11) Opinion of Counsel (12) Opinion and Consent of Counsel supporting tax matters and consequences (to be filed by amendment) (13) Administrative Services and Transfer Agency Agreement(a) (14) Consent of Independent Auditors (15) Not Applicable (16) Not Applicable (17) Not Applicable (a) Incorporated herein by reference to the Exhibits filed with the Registrant's Post-Effective Amendment No. 41 to Registration Statement No. 2-59353 on Form N-1A as filed on May 1, 2000. (b) Incorporated herein by reference to the Exhibits filed with the Registrant's Post-Effective Amendment No. 40 to Registration Statement No. 2-59353 on Form N-1A as filed on February 16, 2000. (c) See Appendix A to the prospectus. (d) Incorporated herein by reference to the Exhibits filed with Security Equity Fund's Post-Effective Amendment No. 92 to Registration Statement No. 2-19458 on Form N-1A as filed on January 15, 2002. (e) Incorporated herein by reference to the Exhibits filed with Security Income Fund's Post-Effective Amendment No. 71 to Registration Statement No. 2-38414 on Form N-1A as filed on January 11, 2002. (f) Incorporated herein by reference to the Exhibits filed with the Registrant's Post-Effective Amendment No. 36 to Registration Statement No. 2-59353 on Form N-1A as filed on November 11, 1998. ITEM 17. UNDERTAKINGS 1. The undersigned registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act 17 CFR 230.145(c), the reoffering prospectus will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. 2. The undersigned registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them. 3. The undersigned registrant undertakes to file a post-effective amendment to this registration statement upon the closing of the Reorganization described in this registration statement that contains an opinion of counsel supporting the tax matters discussed in this registration statement. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement on Form N-14 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Topeka and State of Kansas on the 3rd day of May, 2002. SBL FUND By: JAMES R. SCHMANK ------------------------------ James R. Schmank President Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated. SIGNATURE TITLE DATE JAMES R. SCHMANK Director and President May 3, 2002 - ------------------------------ (Principal Executive Officer) James R. Schmank JOHN D. CLELAND Director May 3, 2002 - ------------------------------ John D. Cleland DONALD A. CHUBB, JR. Director May 3, 2002 - ------------------------------ Donald A. Chubb, Jr. PENNY A. LUMPKIN Director May 3, 2002 - ------------------------------ Penny A. Lumpkin MARK L. MORRIS, JR. Director May 3, 2002 - ------------------------------ Mark L. Morris, Jr. MAYNARD OLIVERIUS Director May 3, 2002 - ------------------------------ Maynard Oliverius EXHIBIT INDEX (1) None (2) None (3) None (4) None (5) None (6) (a) None (b) None (c) None (7) None (8) None (9) None (10) (a) None (b) None (11) Opinion of Counsel (12) None (13) None (14) Consent of Independent Auditors (15) None (16) None (17) None
- Company Dashboard
- Filings
-
N-14 Filing
Guggenheim Variable Funds Trust N-14Registration statement for investment companies business combination
Filed: 6 Jun 02, 12:00am