- -------------------------------------------------------------------------------- Securities Act File No. As filed with the Securities and Exchange Commission on ____, 2002 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 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 L ("Capital Growth 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 Capital Growth Fund, into SBL Fund, Series G ("Large Cap Growth Fund") (the "Reorganization"). Security Management Company, LLC serves as investment adviser to both the Capital Growth Fund and Large Cap Growth Fund, and Alliance Capital Management L.P. serves as sub-adviser of the Capital Growth Fund. The Large Cap Growth Fund has investment objectives and policies that are similar in many respects to those of the Capital Growth Fund. The Reorganization is expected to result in operating expenses that are slightly 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 Capital Growth 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 L TO BE HELD ON AUGUST 20, 2002 To the Shareholders: A special meeting of Shareholders of SBL Fund, Series L (the "Capital Growth Fund") will be held on 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 Capital Growth Fund are as follows: 1. To approve a Plan of Reorganization providing for the acquisition of all of the assets and liabilities of the Capital Growth Fund by SBL Fund, Series G (the "Large Cap Growth Fund") solely in exchange for shares of the Large Cap Growth Fund, followed by the complete liquidation of the Capital Growth 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 Risks of Investing in Large Cap Growth Fund................... 7 INVESTMENT OBJECTIVES AND STRATEGIES....................................... 7 Comparison of Portfolio Characteristics................................. 8 Relative Performance.................................................... 9 Comparison of Investment Techniques and Risks of the Funds.............. 9 COMPARISON OF FEES AND EXPENSES............................................ 12 Operating Expenses...................................................... 12 Example................................................................. 12 ADDITIONAL INFORMATION ABOUT LARGE CAP GROWTH FUND......................... 13 Investment Manager...................................................... 13 Investment Personnel.................................................... 13 Performance of Large Cap Growth Fund.................................... 13 INFORMATION ABOUT THE REORGANIZATION....................................... 14 The Reorganization Plan................................................. 14 Reasons for the Reorganization.......................................... 14 Board Consideration..................................................... 14 Tax Considerations...................................................... 15 Expenses of the Reorganization.......................................... 15 ADDITIONAL INFORMATION ABOUT THE FUNDS..................................... 15 Form of Organization.................................................... 15 Dividends and Other Distributions....................................... 15 Capitalization.......................................................... 15 GENERAL INFORMATION ABOUT THE PROXY STATEMENT.............................. 16 Solicitation of Proxies................................................. 16 Voting Rights........................................................... 16 Other Matters to Come Before the Meeting................................ 17 Shareholder Proposals................................................... 17 Information about the Funds............................................. 17 Reports to Shareholders................................................. 17 MORE INFORMATION REGARDING THE FUNDS....................................... 18 APPENDIX A................................................................. 21 APPENDIX B................................................................. 30 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 L RELATING TO THE REORGANIZATION INTO SBL FUND, SERIES G (EACH A "FUND" AND COLLECTIVELY, THE "FUNDS") INTRODUCTION This Proxy Statement/Prospectus provides you with information about the proposed transfer of all of the assets and liabilities of SBL Fund, Series L (the "Capital Growth Fund") to SBL Fund, Series G (the "Large Cap Growth Fund"), an open-end management investment company, solely in exchange for shares of Large Cap Growth Fund (the "Reorganization"). The Capital Growth Fund would then distribute to you your portion of the shares of Large Cap Growth Fund received in the Reorganization, resulting in the liquidation of Capital Growth Fund. You would receive shares of the Large Cap Growth Fund having an aggregate value equal to the aggregate value of the shares of Capital Growth 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 Capital Growth Fund are being asked to approve a transaction that will result in your holding shares of Large Cap Growth Fund, this Proxy Statement also serves as a Prospectus for Large Cap Growth Fund. The Reorganization will allow you to participate in a fund with compatible investment objectives and policies. The Large Cap Growth Fund seeks long-term capital growth, which it attempts to achieve by investing, under normal market conditions, at least 80% of its net assets in common stock of large capitalization companies that, in the opinion of Security Management, have long-term capital growth potential. This Proxy Statement/Prospectus, which you should retain for future reference, contains important information about Large Cap Growth 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 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. You may obtain the annual report and any more recent semiannual report for either of the Funds by calling (800) 888-2461. You may also obtain proxy materials, reports and other information filed by either 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, D.C. 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 with respect to each of the Funds a Plan of Reorganization (the "Reorganization Plan"). Subject to approval of Capital Growth Fund shareholders, the Reorganization Plan provides for: o the transfer of all of the assets of Capital Growth Fund to Large Cap Growth Fund, in exchange for shares of Large Cap Growth Fund; o the assumption by Large Cap Growth Fund of all of the liabilities of Capital Growth Fund; o the distribution of shares of Large Cap Growth Fund to the shareholders of Capital Growth Fund; and o the complete liquidation of Capital Growth Fund. The Reorganization is expected to be effective upon the opening of business on August 28, 2002, or on such later date as the parties may agree (the "Closing"). As a result of the Reorganization, each shareholder of Capital Growth Fund would become a shareholder of the Large Cap Growth Fund. Each shareholder would hold, immediately after the Closing, shares of Large Cap Growth Fund having an aggregate value equal to the aggregate value of the shares of Capital Growth 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 Capital Growth 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 Capital Growth Fund requires the affirmative vote of a majority of the outstanding shares of the Fund. In the event that the shareholders of Capital Growth 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 Capital Growth Fund seeks growth of capital by pursuing aggressive investment policies. Large Cap Growth Fund seeks long-term capital growth. Each Fund invests in securities of companies with strong growth prospects. However, unlike Capital Growth Fund, Large Cap Growth Fund is a concentrated, non-diversified series. Although the Fund is diversified, Capital Growth Fund also tends to invest in a relatively small number of securities. Additionally, Large Cap Growth Fund invests primarily in large capitalization companies, whereas Capital Growth Fund has no particular market capitalization strategy. o Large Cap Growth Fund is the slightly smaller fund (with net assets of $15 million versus $22 million for Capital Growth Fund, as of December 31, 2001). o The stock selection criteria for the Funds is substantially similar. o Security Management Company, LLC manages the Large Cap Growth Fund directly, whereas, a Sub-Adviser, Alliance Capital Management L.P. ("Alliance") manages the Capital Growth Fund. o The proposed Reorganization is expected to result in a reduction in total operating expenses for current shareholders of Capital Growth Fund. This chart compares the current operating expenses, management fees, and distribution fees of the Funds an estimate of the expected expenses following the reorganization. ================================================================================ ANNUAL FUND OPERATING EXPENSES (as a percentage of each Fund's average daily net assets)(1) - -------------------------------------------------------------------------------- BROKERAGE PLAN TOTAL FUND MANAGEMENT DISTRIBUTION OTHER OPERATING FEES (12B-1) FEES(2) EXPENSES EXPENSE - -------------------------------------------------------------------------------- Large Cap Growth Fund 1.00% 0.01% 0.22% 1.23% - -------------------------------------------------------------------------------- Capital Growth Fund 1.00% 0.00% 0.20% 1.20% - -------------------------------------------------------------------------------- PRO FORMA - Large Cap 1.00% 0.00% 0.18% 1.18% Growth including Capital Growth - -------------------------------------------------------------------------------- 1 Based on 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 12 and "More Information Regarding the Funds," page 18. 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 RISKS OF INVESTING IN LARGE CAP GROWTH FUND -- Because the Funds have similar investment objectives and policies, the risks of an investment in the Funds are 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. Both Funds invest primarily in equity securities, the prices of which tend to fluctuate more dramatically over the shorter term than other asset classes. Both Funds are also subject to the risk of using a growth-oriented strategy to select securities for the Fund. Both Funds are also subject to the risks of investing in options and futures. Finally, Large Cap Growth Fund is subject to the risks of concentration and non-diversification. See "Comparison of Risks and Investment Techniques" for more information about the risks of investing in the Funds. 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. ================================================================================ CAPITAL GROWTH FUND LARGE CAP GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE Seeks growth of capital Seeks long-term by pursuing aggressive capital growth investment policies - -------------------------------------------------------------------------------- INVESTMENT ADVISER Security Management Security Management Company, LLC Company, LLC - -------------------------------------------------------------------------------- SUB-ADVISER Alliance Capital None Management L.P. - -------------------------------------------------------------------------------- PORTFOLIO MANAGERS Syed J. Hasnain Cindy L. Shields ================================================================================ PRIMARY INVESTMENT STRATEGIES-- Each Fund invests primarily in equity securities of U.S. companies. LARGE CAP GROWTH FUND. o The Fund invests at least 80% of its net assets in common stock and other equity securities of large capitalization companies, which in the opinion of the Sub-Adviser, have long-term capital growth potential. Large cap stocks are defined as companies whose total market value is at least $5 billion at the time of purchase. o The portfolio manager invests in companies whose earnings are believed to be in a relatively strong growth trend. o In identifying companies with favorable growth prospects, the portfolio manager considers factors such as prospects for above average sales and earnings growth; high return on invested capital; overall financial strength; competitive advantages, including innovative products and services; effective research, product development and marketing; and stable, effective management. o The Fund is non-diversified and may concentrate its investments in a particular industry or group of industries. o The Fund may invest in common stocks, American Depository Receipts, or other securities with common stock characteristics (such as securities convertible into common stock). o The Fund may invest in options and futures contracts to hedge the Fund's portfolio, to increase returns, or to maintain exposure to the equity markets. o The Fund may also invest in other investment companies, including those that seek to track the composition and performance of a specific index. o Under adverse market conditions, the Fund could invest some or all of its assets in cash or money market securities. o The Fund typically sells a stock when the reasons for buying it no longer apply, or when the company begins to show deteriorating fundamentals or poor relative performance. CAPITAL GROWTH FUND. o The Fund may invest up to 20% of its net assets in convertible or foreign securities; make short sales against the box with up to 15% of its net assets; and invest up to 10% of its assets in illiquid securities. o The Fund focuses on a relatively small number of intensely researched companies and selects securities that have strong management, superior industry positions, excellent balance sheets and superior earnings growth prospects. o The Fund generally invests in approximately 40-60 companies, with the 25 most highly regarding companies constituting 70% of the Fund's net assets. o The Fund is permitted to invest in options and futures contracts to hedge the Fund's portfolio, to increase returns or to maintain exposure to the equity markets. o Under adverse market conditions, the Fund may invest some or all of its assets in cash and money market instruments. As you can see from the information above, both Funds have similar investment objectives and utilize a growth-oriented investment strategy. However, the Funds differ in that the Large Cap Growth Fund invests primarily in large capitalization securities whereas Capital Growth Fund has no particular market capitalization strategy. Additionally, Large Cap Growth Fund is a non-diversified, concentrated series; however, the Sub-Adviser for Capital Growth Fund also invests in a relatively small number of securities. Following the Reorganization and in the ordinary course of business as a mutual fund, certain holdings of the Capital Growth Fund that were transferred to the Large Cap Growth Fund in connection with the Reorganization may be sold. Such sales may result in increased transactional costs for Large Cap Growth Fund. COMPARISON OF PORTFOLIO CHARACTERISTICS -- The following tables compare certain characteristics of the portfolios of the Funds as of December 31, 2001: ================================================================================ LARGE CAP CAPITAL GROWTH FUND GROWTH FUND - -------------------------------------------------------------------------------- Net Assets $15,688,643 $21,912,726 - -------------------------------------------------------------------------------- Number of Holdings 91 50 - -------------------------------------------------------------------------------- Portfolio Turnover Rate (12 months ended 12/31/01) 4% 82% - -------------------------------------------------------------------------------- Average Market Capitalization - -------------------------------------------------------------------------------- Top 5 Industries ================================================================================ TOP 10 HOLDINGS (AS A % OF NET ASSETS) ================================================================================ LARGE CAP GROWTH FUND | CAPITAL GROWTH FUND - --------------------------------------------|----------------------------------- General Electric Company 7.2% | General Electric Company 5.4% - --------------------------------------------|----------------------------------- Microsoft Corporation 5.7% | Pfizer, Inc. 5.3% - --------------------------------------------|----------------------------------- Pfizer, Inc. 4.2% | Kohl's Corporation 5.2% - --------------------------------------------|----------------------------------- S&P 500/Barra Growth Index Fund 3.9% | Tyco International, Ltd. 5.1% - --------------------------------------------|----------------------------------- Wal-Mart Stores, Inc. 3.6% | MBNA Corporation 5.0% - --------------------------------------------|----------------------------------- Intel Corporation 3.4% | Citigroup, Inc. 5.0% - --------------------------------------------|----------------------------------- International Business 3.4% | Nokia Oyj ADR 4.7% Machines Corporation | - --------------------------------------------|----------------------------------- Johnson & Johnson 3.4% | Microsoft Corporation 4.5% - --------------------------------------------|----------------------------------- American International Group, Inc. 2.8% | Electronic Data 4.1% | Systems Corporation - --------------------------------------------|----------------------------------- S&P Midcap 400 Index Fund 2.7% | Freddie Mac 3.9% ================================================================================ RELATIVE PERFORMANCE -- The following table shows, for calendar years 2000 and 2001, the average annual total return for each Fund and the S&P Barra Growth Index and the S&P 500 Index. The S&P Barra Growth and S&P 500 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/ LARGE CAP CAPITAL S&P BARRA S&P 500 PERIOD ENDED GROWTH FUND GROWTH FUND GROWTH INDEX INDEX - -------------------------------------------------------------------------------- 12/31/00(1) -20.2% -19.5% -30.1% -12.3% - -------------------------------------------------------------------------------- 12/31/01 -15.4% -14.7% -12.7% -11.9% - -------------------------------------------------------------------------------- 1. For the period May 1, 2000 (date of each Fund's inception) to December 31, 2000. ================================================================================ COMPARISON OF INVESTMENT TECHNIQUES AND RISKS OF THE FUNDS -- The following is a summary of the types of securities in which the Funds may invest and strategies the Funds may employ in pursuit of their investment objectives. As with any security, an investment in a Fund's shares involves certain risks, including loss of principal. Because the Funds have similar investment objectives and policies, the risks of an investment in the Funds are similar. Risks of the Funds differ in that Large Cap Growth Fund invests primarily in large capitalization companies whereas Capital Growth Fund has no particular market capitalization strategy. Additionally, risks differ in that Large Cap Growth Fund is a non-diversified, concentrated series; although Capital Growth Fund also generally invests in a relatively small number of securities. 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. The Funds are subject to varying degrees of financial, market and credit risk. An investment in 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. Each Fund uses a growth-oriented strategy to select equity securities. 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. 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). 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 Fund. 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. 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 Series. 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 a 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 those with a small asset base. There is no guarantee that as a Fund's assets grow, they 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. HARD ASSET SECURITIES. The Funds may invest in Hard Asset Securities, which are equity securities of issuers that are directly or indirectly engaged to a significant extent in the exploration, development or distribution of one or more of the following: precious metals; ferrous and non-ferrous metals; gas, petroleum, petrochemical and/or other commodities (collectively, "Hard Assets"). The production and marketing of Hard Assets may be affected by actions and changes in governments. In addition, Hard Asset securities may be cyclical in nature. During periods of economic or financial instability, the securities of some Hard Asset companies may be subject to broad price fluctuations, reflecting the volatility of energy and basic materials prices and the possible instability of supply of various Hard Assets. In addition, some Hard Asset companies also may be subject to the risks generally associated with extraction of natural resources, such as the risks of mining and oil drilling, and the risks of the hazard associated with natural resources, such as fire, drought, increased regulatory and environmental costs, and others. Securities of Hard Asset companies may also experience greater price fluctuations than the relevant Hard Asset. In periods of rising Hard Asset prices, such securities may rise at a faster rate, and, conversely, in times of falling Hard Asset prices, such securities may suffer a greater price decline. Each of the Series which invest in equity securities as part of their investment program may invest in hard asset securities. 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 a Fund's total return, and the potential loss from the use of futures can exceed the Fund's initial investment in such contracts. HYBRID INSTRUMENTS. The Funds may invest in certain hybrid instruments (which are derivatives) that can combine the characteristics of securities, futures and options. For example, the principal amount, redemption or conservation terms of a security could be related to the market price of some commodity, currency or securities index. The risks of such investments would reflect the risks of investing in futures, options and securities, including volatility and illiquidity. Such securities may bear interest or pay dividends at below market (or even relatively nominal) rates. Under certain conditions, the redemption value of such an investment could be zero. Hybrids can have volatile prices and limited liquidity and their use by a Fund may not be successful. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENT CONTRACTS. The Funds may invest in "when issued," "forward commitment" or "delayed delivery" securities, the price of which is fixed at the time of the commitment to buy, but delivery and payment can take place a month or more later. During the interim period, the market value of the securities can fluctuate, and no interest accrues to the purchaser. At the time of delivery, the value of the securities may be more or less than the purchase or sale price. When a Fund purchases securities on this basis, there is a risk that the securities may not be delivered and that the Fund may incur a loss. 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. Large Cap Growth Fund and Capital Growth Fund may establish and maintain reserves as Security Management or Alliance, 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. SHARES OF OTHER INVESTMENT COMPANIES. The Funds may invest in shares of other investment companies. Such investment may not exceed immediately after purchase 10% of the Fund's total assets and no more than 5% of its total assets may be invested in the shares of any one investment company. Investment in the shares of other investment companies has the effect of requiring shareholders to pay the operating expenses of two mutual funds. BORROWING. Borrowings may be collateralized with Fund assets. To the extent that a Fund purchases securities while it has outstanding borrowings, it is using leverage, i.e., using borrowed funds for investment. Leveraging will exaggerate the effect on net asset value of any increase or decrease in the market value of a Fund's portfolio. Money borrowed for leveraging will be subject to interest costs that may or may not be recovered by appreciation of the securities purchased; in certain cases, interest costs may exceed the return received on the securities purchased. A Fund also may be required to maintain minimum average balances in connection with such borrowing or to pay a commitment or other fee to maintain a line of credit; either of these requirements would increase the cost of borrowing over the stated interest rate. SECURITIES LENDING. The Funds may lend their portfolio securities to certain borrowers. Any such loan will be continuously secured by collateral at least equal to the value of the security loaned. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in receiving additional collateral or in the recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. Loans will only be made to firms deemed by Security Management to be of good standing and will not be made unless, in the judgment of Security Management, the consideration to be earned from such loans would justify the risk. 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 to realize economies of scale. While the Reorganization is anticipated to reduce the total operating expenses of the Large Cap Growth Fund and will not affect the management fee paid by the Fund to Security Management (as a percentage of the Fund's average daily net assets), Security Management may be deemed to have a material interest in the proposed Reorganization because combination of the Funds will relieve Security Management of its obligation to pay sub-advisory fees to Alliance under the investment sub-advisory agreement applicable to the Capital Growth Fund. For further information on the fees and expenses of Large Cap Growth Fund, see "More Information Regarding the Funds," page 18. OPERATING EXPENSES -- The total fund operating expenses of Capital Growth Fund, expressed as a ratio of expenses to average daily net assets ("expense ratio"), currently are slightly lower than the expenses of the Large Cap Growth Fund. o The management fee for the Large Cap Growth Fund was the same as the management fee for the Capital Growth Fund for the year ended December 31, 2001. o The "other expenses" for the Large Cap Growth Fund were slightly higher than for the Capital Growth Fund for the year ended December 31, 2001. It is expected that combining the Funds will reduce the operating expenses to a lower level than the operating expense ratio of the Funds prior to the Reorganization. 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 Large Cap Growth 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 - -------------------------------------------------------------------------------- Large Cap Growth Fund 1.00% 0.01% 0.22% 1.23% - -------------------------------------------------------------------------------- Capital Growth Fund 1.00% 0.00% 0.20% 1.20% - -------------------------------------------------------------------------------- PRO FORMA - Large Cap Growth including 1.00% 0.00% 0.18% 1.18% Capital Growth - -------------------------------------------------------------------------------- 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* - -------------------------------------------------------------------------------- Large Cap Growth Fund $124 $387 $670 $1,477 - -------------------------------------------------------------------------------- Capital Growth Fund 122 381 660 1,455 - -------------------------------------------------------------------------------- PRO FORMA - Large Cap Growth Fund including Capital Growth Fund 120 375 649 1,432 - -------------------------------------------------------------------------------- *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 LARGE CAP GROWTH 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. INVESTMENT PERSONNEL -- The following individual is responsible for the day-to-day management of the Large Cap Growth Fund: o Cindy L. Shields, Vice President and Senior Portfolio Manager of Security Management, has managed Large Cap Growth Fund since its inception in May of 2000. She joined Security Management in 1989. Ms. Shields graduated from Washburn University with a bachelor of business administration degree, majoring in finance and economics. She is a Chartered Financial Analyst charterholder with 13 years of investment experience. PERFORMANCE OF LARGE CAP GROWTH FUND -- The bar chart and table shown below provide an indication of the risks of investing in the Large Cap Growth Fund by showing (on a calendar year basis) Large Cap Growth Fund's annual total return for the year ended December 31, 2001 and by showing (on a calendar year basis) how Large Cap Growth Fund's average annual returns for one year and the period May 1, 2000 (date of inception) through December 31, 2001, compare to those of a broad-based securities market index--the S&P Barra Growth Index. The information below is based on the performance of the shares of Large Cap Growth 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] 2001 ---- -14.7% *During the period shown in the chart, the Fund's best quarterly performance was 12.9% for the quarter ended December 31, 2001 and the Fund's worst quarterly performance was -16.6% for the quarter ended September 30, 2001. The Fund's year-to-date total return as of March 31, 2002 is ___%. The table below shows the average annual total returns of Large Cap Growth, compared to the S&P Barra Growth Index, an unmanaged index. An index has an inherent performance advantage over the Large Cap Growth 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 Large Cap Growth 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) -------------------------------------------------------- LIFE OF FUND PAST 1 YEAR (SINCE 5/1/00) -------------------------------------------------------- Large Cap Growth Fund -15.4% -21.0% -------------------------------------------------------- S&P Barra Growth -12.7% -20.2% ======================================================== Additional information about Large Cap Growth Fund is included in the section, "More Information Regarding the Funds," page 18. INFORMATION ABOUT THE REORGANIZATION THE REORGANIZATION PLAN -- The Reorganization Plan provides for the transfer of all of the assets and liabilities of Capital Growth Fund to Large Cap Growth Fund solely in exchange for shares of Large Cap Growth Fund. Capital Growth Fund will distribute the shares of Large Cap Growth Fund received in the exchange to its shareholders, and then Capital Growth Fund will be liquidated. After the Reorganization, each shareholder of Capital Growth Fund will own shares in Large Cap Growth Fund having an aggregate value equal to the aggregate value of the shares of Capital Growth Fund held by that shareholder as of the close of business on the business day preceding the Closing. Until the Closing, shareholders of Capital Growth Fund will continue to be able to redeem their shares. Redemption requests received after the Closing will be treated as requests received by the Large Cap Growth 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 Capital Growth 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 are relatively small in asset size. Because the Capital Growth Fund may invest in similar types of securities as Large Cap Growth Fund, the Funds are largely duplicative. In addition, the Reorganization would create a larger Large Cap Growth Fund, which should benefit shareholders of the Funds by spreading costs across a larger, combined asset base, and which would allow shareholders of Capital Growth Fund to continue to participate in a professionally-managed portfolio which invests primarily in equity securities of U.S. companies. Also, a larger Large Cap Growth Fund offers the potential benefit of improved 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 Capital Growth Fund and Large Cap Growth Fund; 2. estimates that show that combining the Funds should result in lower expense ratios because of economies of scale; 3. elimination of duplication of costs and inefficiencies of having two similar funds in the same fund group; 4. the Reorganization would not dilute the interests of the Funds' current shareholders; 5. the relative investment performance and risks of Large Cap Growth Fund as compared to Capital Growth Fund; 6. the similarity of Large Cap Growth Fund's investment objectives, policies and restrictions to those of Capital Growth Fund and the fact that the Funds are duplicative within the overall group of funds; and 7. the tax-free nature of the Reorganization to Capital Growth Fund and its shareholders. THE BOARD OF DIRECTORS OF SBL FUND RECOMMENDS THAT SHAREHOLDERS OF THE CAPITAL GROWTH 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 Capital Growth Fund, nor its shareholders, nor the Large Cap Growth 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, Capital Growth Fund will pay a dividend or dividends which, together with all previous dividends, will have the effect of distributing to their respective shareholders all of the Capital Growth 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 Capital Growth Fund's shareholders. As of December 31, 2001, Capital Growth Fund had accumulated capital loss carryforwards in the amount of approximately $5,058,642. After the Reorganization, these losses will be available to Large Cap Growth Fund to offset its capital gains, although the amount of these losses which may offset Large Cap Growth Fund's capital gains in any given year may be limited. As a result of this limitation, it is possible that Large Cap Growth Fund may not be able to use these losses as rapidly as Capital Growth Fund might have, and part of these losses may not be useable at all. The ability of Large Cap Growth 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 Capital Growth Fund. After the Reorganization, however, these benefits will inure to the benefit of all shareholders of Large Cap Growth Fund. EXPENSES OF THE REORGANIZATION -- Security Management will bear one-third, and the Funds will bear two-thirds, of the expenses relating to 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 Capital Growth Fund, then as soon as practicable before the Closing, Capital Growth 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 --------------------------------------------------------------------------- Large Cap Growth Fund $15,688,643 $6.75 2,325,957 --------------------------------------------------------------------------- Capital Growth Fund 21,912,726 6.84 3,203,372 --------------------------------------------------------------------------- Pro Forma - Large Cap Growth 37,601,369 6.75 5,570,573 including Capital Growth 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 Capital Growth 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 Capital Growth Fund a written revocation or duly executed proxy bearing a later date. In addition, any shareholder who attends the meeting of Capital Growth 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 Capital Growth 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 Capital Growth 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 Capital Growth 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 Capital Growth Fund requires the affirmative vote of a majority of the outstanding shares of the Fund. The Capital Growth 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. 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 Fund's outstanding shares. Appendix B hereto lists the persons that, as of June 24, 2002, owned beneficially 5% or more of the outstanding shares of either Fund. 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. 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 a 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, Large Cap Growth Fund paid $202,306 in management fees to Security Management. Security Management has engaged Alliance Capital Management L.P., 1345 Avenue of the Americas, New York, New York 10105 to provide investment advisory services to Capital Growth Fund. Alliance Capital is a leading international investment manager supervising client accounts with assets as of December 31, 2001, totaling more than $455 billion (of which approximately $156 billion represented the assets of investment companies). Pursuant to this agreement, Alliance Capital furnishes investment advisory and research facilities, supervises and arranges for the purchase and sale of securities on behalf of Capital Growth 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 Fund 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 0.09% of the average net assets of each Fund, 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, Security Management 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 -- Security Management will place orders to execute securities transactions that are designed to implement each Fund's investment objectives and policies. Security Management uses its 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, Security Management may consider brokerage and research services provided by a broker to Security Management 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 Security Management 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 Security Management with respect to all accounts as to which it exercises investment discretion. Security Management 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 each Fund. In addition, Security Management also may consider a broker's sale of Fund shares if Security Management 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 Security Management, including other investment companies. In addition, Security Management's parent company, Security Benefit, may also hold some of the same securities as the Funds. When selecting securities for purchase or sale for a Fund, Security Management may at the same time be purchasing or selling the same securities for one or more of such other accounts. Subject to Security Management's obligation to seek best execution, such purchases or sales may be executed simultaneously or "bunched." It is the policy of Security Management not to favor one account over the other. Any purchase or sale orders executed simultaneously (which may also include orders from Security Benefit) 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 LARGE CAP GROWTH FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD The financial highlights table is intended to help you understand certain of the Fund's financial performance during the period since commencement of the Fund. 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 G (LARGE CAP GROWTH FUND) - -------------------------------------------------------------------------------- FISCAL YEAR ENDED DECEMBER 31 ---------------------- 2001(a) 2000(a)(b) ------- ---------- PER SHARE DATA Net asset value beginning of period.................... $ 7.98 $10.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)........................... (0.02) (0.02) Net gain (loss) on securities (realized & unrealized).. (1.21) (2.00) ----- ----- Total from investment operations....................... (1.23) (2.02) LESS DISTRIBUTIONS: Dividends (from net investment income)................. --- --- Distributions (from capital gains)..................... --- --- ----- ----- Total distributions.................................... --- --- ----- ----- NET ASSET VALUE END OF PERIOD.......................... $ 6.75 $ 7.98 ===== ===== TOTAL RETURN (c)....................................... (15.4)% (20.2)% RATIOS/SUPPLEMENTAL DATA Net assets end of period (thousands)................... $15,689 $12,139 Ratio of expenses to average net assets................ 1.23% 1.28% Ratio of net investment income (loss) to average net assets......................... (0.30)% (0.47)% Portfolio turnover rate................................ 4% 5% ================================================================================ (a) Expense ratios were calculated without reduction for earnings credits and marketing fees paid indirectly. Expense ratios with such reductions would have been as follows: ============================ 2001 2000 ---------------------------- Series G 1.22% 1.23% ============================ (b) Large Cap Growth Fund was initially capitalized on May 1, 2000, with a net asset value of $10.00 per share. Percentage amounts for the period have been annualized, except for total return. (c) 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 G (Large Cap Growth) (the "Acquiring Fund"), a separate series of the Company, and Series L (Capital Growth) (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 Large Cap Growth Fund: ================================================================================ % OF LARGE CAP GROWTH FUND % OF LARGE CAP GROWTH 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 Capital Growth Fund: ================================================================================ % OF CAPITAL GROWTH FUND % OF CAPITAL GROWTH FUND NAME AND ADDRESS BEFORE REORGANIZATION AFTER REORGANIZATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ SBL FUND, SERIES L (Capital Growth) 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 L (the "Capital Growth 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 Capital Growth Fund by the SBL Fund, Series G (the "Large Cap Growth Fund") solely in exchange for shares of the Large Cap Growth Fund, followed by the complete liquidation of the Capital Growth 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 By and in Exchange for Shares of and Liabilities of SBL Fund, Series G SBL Fund, Series L (the "Large Cap Growth Fund") (the "Capital Growth 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 Capital Growth Fund in connection with a proposed transaction whereby all of the assets and liabilities of Capital Growth Fund will be transferred to Large Cap Growth Fund in exchange for shares of Large Cap Growth Fund. This Statement of Additional Information of the Large Cap Growth 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 Large Cap Growth Fund and Capital Growth Fund are 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 Capital Growth 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. The following tables set forth the unaudited pro forma statements of assets and liabilities and unaudited pro forma statements of operations of the Funds as of and for the year ended December 31, 2001 and as adjusted to give effect to the reorganization. PRO FORMA STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2001 (UNAUDITED) Combined Large Cap Capital Pro Forma Large Cap Growth Fund Growth Fund Adjustments Growth Fund ------------------------------------------------------------ ASSETS Investments, at value(1)... $14,133,102 $21,713,879 --- $35,846,981 Repurchase agreements, at value(1).............. 1,555,122 232,592 1,787,714 Collateral received for securities loaned, at value......... 1,481,240 3,177,608 4,658,848 Receivables: Fund shares sold......... 39,744 29,659 --- 69,403 Securities sold.......... --- 99,803 --- 99,803 Interest................. --- 18,010 --- 18,010 Dividends................ 8,695 --- --- 8,695 Prepaid expenses........... 147 222 --- 369 ---------- ---------- ---------- ---------- Total assets........... 17,218,050 25,271,773 --- 42,489,823 ---------- ---------- ---------- ---------- LIABILITIES Cash overdraft:............ 86 10 --- 96 Payable for: Securities loaned........ 1,481,240 3,177,608 --- 4,658,848 Securities purchased..... --- 115,624 --- 115,624 Fund shares redeemed..... 26,022 38,082 6,809,309 (A) 6,873,413 Management fees.......... 13,280 18,646 --- 31,926 Custodian fees........... 481 286 --- 767 Transfer and administration fees.... 1,479 1,955 --- 3,434 Professional fees........ 5,500 5,500 --- 11,000 Other.................... 1,319 1,336 --- 2,655 ---------- ---------- ---------- ---------- Total liabilities...... 1,529,407 3,359,047 6,809,309 11,697,763 ---------- ---------- ---------- ---------- NET ASSETS $15,688,643 $21,912,726 $(6,809,309) $30,792,060 ========== ========== ========== ========== NET ASSETS CONSIST OF: Paid in capital............ $20,632,471 $29,493,412 $(6,809,309)(A) $43,316,574 Accumulated undistributed net investment income (loss)................... --- --- --- --- Accumulated undistributed net realized gain (loss) on sale of investments.. (574,898) (6,443,761) -- (7,018,659) Net unrealized appreciation (depreciation) in value of investments........... (4,368,930) (1,136,925) --- (5,505,855) ---------- ---------- ---------- ---------- Total net assets...... $15,688,643 $21,912,726 $(6,809,309) $30,792,060 ========== ========== ========== ========== Capital shares authorized.. indefinite indefinite Indefinite Indefinite Capital shares outstanding. 2,325,957 3,203,372 (966,075)(B) 4,563,254 Net asset value per share (net assets divided by shares outstanding)...... $6.75 $6.84 $6.75 ========== ========== ========== ========== 1 Investments, including repurchase agreements at cost................. $20,057,154 $23,083,396 --- $43,140,550 A Reflects liquidation of seed money investment in Large Cap Growth Fund ($3,375,000) and Capital Growth Fund ($3,434,309). B Reflects new shares issued, net of retired shares of Capital Growth Fund and liquidation of seed money investment of Large Cap Growth Fund and Capital Growth Fund. PRO FORMA STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 (UNAUDITED) Combined Large Cap Capital Pro Forma Large Cap Growth Fund Growth Fund Adjustments(a) Growth Fund ----------------------------------------------------------- INVESTMENT INCOME: Dividends................. $ 88,188 $ 152,405 $ --- $ 240,593 Securities lending........ 3,680 8,617 --- 12,297 Interest.................. 31,433 18,099 --- 49,532 ---------- ---------- ------- ---------- Total investment income. 123,301 179,121 --- 302,422 EXPENSES: Management fees........... 134,436 202,306 (62,882) 273,860 Custodian fees............ 4,758 8,543 (7,000) 6,301 Transfer/maintenance fees. 3,116 3,095 (3,000) 3,211 Administration fees....... 12,100 18,208 (5,659) 24,649 Directors' fees........... 364 532 (5,216) 896 Professional fees......... 6,843 5,873 --- 7,500 Reports to shareholders... 1,539 2,020 --- 3,559 Registration fees......... 7 149 --- 156 Other expenses............ 1,604 1,497 --- 3,101 Marketing fees paid indirectly......... 959 --- --- 959 ---------- ---------- ------- ---------- Total expenses............ 165,726 242,223 (83,757) 324,192 Less: Earnings credits applied........... (792) --- --- (792) Fees paid indirectly (959) --- --- (959) ---------- ---------- ------- ---------- Net expenses............ 163,975 242,223 (83,757) 322,441 ---------- ---------- ------- ---------- Net investment loss..... (40,674) (63,102) 83,757 (20,019) NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) during the period on: Investments............... (477,277) (5,562,039) --- (6,039,316) ---------- ---------- ------- ---------- Net realized loss....... (477,277) (5,562,039) --- (6,039,316) ---------- ---------- ------- ---------- Net change in unrealized appreciation (depreciation) during the period on: Investments............... (1,684,988) 1,840,433 --- 155,445 Net unrealized appreciation (depreciation)............ (1,684,988) 1,840,433 --- 155,445 ---------- ---------- ------- ---------- Net loss................ (2,162,265) (3,721,606) --- (5,883,871) ---------- ---------- ------- ---------- Net decrease in net assets resulting from operations....... $(2,202,939) $(3,784,708) $ 83,757 $(5,903,890) ========== ========== ======= ========== (a) Reflects reduction in expenses due to economies of scale and elimination of duplicate expenses. Amounts also represent reduced fees due to liquidation of seed money investments in Large Cap Growth Fund and Capital Growth Fund. NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) NOTE 1: BASIS OF COMBINATION -- On May 3, 2002, the Board of SBL Fund approved a Plan of Reorganization (the "Plan") whereby, subject to approval by the shareholders of SBL Fund, Series L (the "Capital Growth Fund"), SBL Fund, Series G (the "Large Cap Growth Fund") will acquire all the assets of the Capital Growth Fund subject to the liabilities of such Fund, in exchange for a number of shares equal to the pro rata net assets of shares of the Large Cap Growth Fund (the "Reorganization"). The Reorganization will be accounted for as a tax-free reorganization of investment companies. The pro forma combined financial statements are presented for the information of the reader and may not necessarily be representative of what the actual combined financial statements would have been had the reorganization occurred at December 31, 2001. The unaudited pro forma portfolio of investments and statement of assets and liabilities reflect the financial position of the Large Cap Growth and Capital Growth Funds at December 31, 2001. The unaudited pro forma statement of operations reflects the results of operations of the Large Cap Growth and Capital Growth Funds for the year ended December 31, 2001. These statements have been derived from the Funds' respective books and records utilized in calculating daily net asset value at the dates indicated above for the Large Cap Growth and Capital Growth Funds under generally accepted accounting principles. The historical cost of investment securities will be carried forward to the surviving entity and results of operations of Large Cap Growth Fund for pre-combination periods will not be restated. The pro forma portfolio of investments and statements of assets and liabilities and operations should be read in conjunction with the historical financial statements of the Funds incorporated by reference in the Statements of Additional Information. NOTE 2: SECURITY VALUATION -- Valuations of Large Cap Growth and Capital Growth Funds' securities are supplied by pricing services approved by the Board of Directors. Securities listed or traded on a national securities exchange are valued on the basis of the last sales price. If there are no sales on a particular day, then the securities are valued at the last bid price. Securities for which market quotations are not readily available are valued by a pricing service considering securities with similar yields, quality, type of issue, coupon, duration and rating. If there is no bid price or if the bid price is deemed to be unsatisfactory by the Board of Directors or by the Funds' investment manager, then the securities are valued in good faith by such method as the Board of Directors determines will reflect the fair value. The Funds' officers, under the general supervision of the Board of Directors, regularly review procedures used by, and valuations provided by, the pricing service. NOTE 3: CAPITAL SHARES -- The pro forma net asset value per share assumes additional shares of common stock issued in connection with the proposed acquisition of Capital Growth Fund by Large Cap Growth Fund as of December 31, 2001. The number of additional shares issued was calculated by dividing the net asset value of Capital Growth Fund by the net asset value per share of Large Cap Growth Fund. NOTE 4: PRO FORMA ADJUSTMENTS -- The accompanying pro forma financial statements reflect changes in fund shares as if the merger had taken place on December 31, 2001. Capital Growth Fund's expenses were adjusted assuming Large Cap Growth Fund's fee structure was in effect for the year ended December 31, 2001. NOTE 5: COSTS OF REORGANIZATION -- The costs of the Reorganization for these Funds are estimated at approximately $8,405 and are not included in the pro forma statement of operations since these costs are not reoccurring. These costs represent the estimated expense of the Funds carrying out their obligations under the Plan and consist of management's estimate of legal fees, accounting fees, printing costs and mailing charges related to the proposed reorganization. It is the policy of the Funds, to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute substantially all of their net investment income and any net realized gains to their shareholders. Therefore, a federal income tax or excise tax provision is not required. In addition, by distributing during each calendar year substantially all of its net investment income and net realized capital gains, each Fund intends not to be subject to any federal excise tax. The Board of Directors intends to offset any net capital gains with any available capital loss carryforward until each carryforward has been fully utilized or expires. In addition, no capital gain distribution shall be made until the capital loss carryforward has been fully utilized or expires. Large Cap Growth and Capital Growth Funds will distribute substantially all their investment income and any realized gains prior to the merger date. PROFORMA SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2001 (UNAUDITED) PRINCIPAL AMOUNT OR NUMBER OF SHARES MARKET VALUE - ---------------------------------- ----------------------------------------- CAPITAL LARGE CAP CAPITAL LARGE CAP GROWTH GROWTH COMBINED GROWTH GROWTH COMBINED - ------------------------------------------------------------------------------------------------------------ COMMON STOCKS ------------- ADVERTISING - 0.2% --- 900 900 Omnicom Group, Inc......... $ --- $ 80,415 $ 80,415 APPLICATION SOFTWARE - 0.3% --- 300 300 Check Point Software Technologies, Ltd........ --- 11,967 11,967 --- 1,200 1,200 i2 Technologies, Inc.*..... --- 9,480 9,480 --- 200 200 Mercury Interactive Corporation*............. --- 6,796 6,796 --- 1,300 1,300 Rational Software Corporation*............. --- 25,350 25,350 --- 1,900 1,900 Siebel Systems, Inc.*...... --- 53,162 53,162 ----------------------------------------- --- 106,755 106,755 BANKS - 0.3% --- 1,800 1,800 Bank of New York Company, Inc............. --- 73,440 73,440 --- 700 700 Northern Trust Corporation. --- 42,154 42,154 ----------------------------------------- --- 115,594 115,594 BIOTECHNOLOGY - 0.5% --- 3,100 3,100 Amgen, Inc.*............... --- 174,964 174,964 BREWERS - 0.3% --- 2,300 2,300 Anheuser-Busch Companies, Inc........... --- 103,983 103,983 BROADCASTING & CABLE TV - 1.3% 3,000 676 3,676 Clear Channel Communications, Inc.*.... 152,730 34,415 187,145 4,900 1,400 6,300 Comcast Corporation*....... 176,400 50,400 226,800 4,400 --- 4,400 Liberty Media Corporation*. 61,600 --- 61,600 --- 700 700 Univision Communications, Inc.*.... --- 28,322 28,322 ----------------------------------------- 390,730 113,137 503,867 COMPUTER HARDWARE - 3.2% 3,700 6,300 10,000 Dell Computer Corporation*. 100,566 171,234 271,800 1,300 4,400 5,700 International Business Machines Corporation..... 157,248 532,224 689,472 7,100 13,200 20,300 Sun Microsystems, Inc.*.... 87,614 162,888 250,502 --- 400 400 Sycamore Networks, Inc.*... --- 2,144 2,144 ----------------------------------------- 345,428 868,490 1,213,918 COMPUTER STORAGE & PERIPHERALS - 0.4% --- 6,600 6,600 EMC Corporation............ --- 88,704 88,704 --- 2,900 2,900 Network Appliance, Inc.*... --- 63,423 63,423 ----------------------------------------- --- 152,127 152,127 CONSUMER FINANCE - 4.5% --- 1,400 1,400 Capital One Financial Corporation.............. --- 75,530 75,530 9,100 --- 9,100 Household International, Inc....... 527,254 --- 527,254 31,200 --- 31,200 MBNA Corporation........... 1,098,240 --- 1,098,240 ----------------------------------------- 1,625,494 75,530 1,701,024 DATA PROCESSING SERVICES - 0.9% 3,000 --- 3,000 Concord EFS, Inc.*......... 98,340 --- 98,340 2,000 --- 2,000 First Data Corporation..... 156,900 --- 156,900 --- 1,850 1,850 Paychex, Inc............... --- 64,824 64,824 ----------------------------------------- 255,240 64,824 320,064 DEPARTMENT STORES - 3.3% 16,100 900 17,000 Kohl's Corporation*........ 1,134,084 63,396 1,197,480 --- 1,600 1,600 May Department Stores Company........... --- 59,168 59,168 ----------------------------------------- 1,134,084 122,564 1,256,648 DIVERSIFIED FINANCIAL SERVICES - 7.1% --- 2,200 2,200 Charles Schwab Corporation. --- 34,034 34,034 21,720 --- 21,720 Citigroup, Inc............. 1,096,425 --- 1,096,425 1,500 --- 1,500 Fannie Mae................. 119,250 --- 119,250 13,200 --- 13,200 Freddie Mac................ 863,280 --- 863,280 900 --- 900 Goldman Sachs Group, Inc... 83,475 --- 83,475 3,700 1,000 4,700 Merrill Lynch & Company, Inc............. 192,844 52,120 244,964 3,000 600 3,600 Morgan Stanley Dean Witter & Company......... 167,820 33,564 201,384 1,100 --- 1,100 Principal Financial Group, Inc.*............. 26,400 --- 26,400 ----------------------------------------- 2,549,494 119,718 2,669,212 DRUG RETAIL - 1.6% --- 1,300 1,300 CVS Corporation............ --- 38,480 38,480 13,500 3,400 16,900 Walgreen Company........... 454,410 114,444 568,854 ----------------------------------------- 454,410 152,924 607,334 ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.4% --- 1,300 1,300 Celestica, Inc.*........... --- 52,507 52,507 --- 2,000 2,000 Flextronics International, Ltd.*..... --- 47,980 47,980 --- 2,200 2,200 Sanmina SCI Corporation*... --- 43,780 43,780 ----------------------------------------- --- 144,267 144,267 FOOD RETAIL - 0.2% --- 1,400 1,400 Safeway, Inc.*............. --- 58,450 58,450 GENERAL MERCHANDISE STORES - 3.0% 8,500 --- 8,500 Target Corporation......... 348,925 --- 348,925 4,000 9,700 13,700 Wal-Mart Stores, Inc....... 230,200 558,235 788,435 ----------------------------------------- 579,125 558,235 1,137,360 HEALTH CARE DISTRIBUTORS & SERVICES - 1.3% 7,400 --- 7,400 Cardinal Health, Inc....... 478,484 --- 478,484 HEALTH CARE EQUIPMENT - 2.3% --- 500 500 Applera Corporation - Applied Biosystems Group. --- 19,635 19,635 7,500 --- 7,500 Baxter International, Inc.. 402,225 --- 402,225 3,900 4,400 8,300 Medtronic, Inc............. 199,719 225,324 425,043 --- 650 650 Zimmer Holding, Inc.*...... --- 19,851 19,851 ----------------------------------------- 601,944 264,810 866,754 HEALTH CARE FACILITIES - 1.3% 8,500 --- 8,500 Tenet Healthcare Corporation.............. 499,120 --- 499,120 HOME IMPROVEMENT RETAIL - 2.9% 14,700 6,800 21,500 Home Depot, Inc............ 749,847 346,868 1,096,715 HOUSEHOLD PRODUCTS - 0.8% --- 1,300 1,300 Colgate-Palmolive Company.. --- 75,075 75,075 --- 1,900 1,900 Kimberly-Clark Corporation. --- 113,620 113,620 --- 1,600 1,600 Procter & Gamble Company... --- 126,608 126,608 ----------------------------------------- --- 315,303 315,303 INDUSTRIAL CONGLOMERATES - 10.3% 29,400 28,300 57,700 General Electric Company... 1,178,352 1,134,264 2,312,616 --- 1,000 1,000 Minnesota Mining & Manufacturing Company.... --- 118,210 118,210 19,000 5,600 24,600 Tyco International, Ltd.... 1,119,100 329,840 1,448,940 ----------------------------------------- 2,297,452 1,582,314 3,879,766 INSURANCE BROKERS - 0.3% --- 1,100 1,100 Marsh & McLennan Companies, Inc........... --- 118,195 118,195 INTEGRATED TELECOMMUNICATION SERVICE - 0.3% --- 2,200 2,200 Qwest Communications, Inc.. --- 31,086 31,086 --- 2,000 2,000 SBC Communications, Inc.... --- 78,340 78,340 ----------------------------------------- --- 109,426 109,426 IT CONSULTING & SERVICES - 2.4% 3,000 --- 3,000 Electronic Data Systems Corporation...... 891,150 --- 891,150 --- 1,200 1,200 Sapient Corporation*....... --- 9,264 9,264 ----------------------------------------- 891,150 9,264 900,414 MANAGED HEALTH CARE - 1.3% 4,700 --- 4,700 UnitedHealth Group, Inc.... 332,619 --- 332,619 1,300 --- 1,300 Wellpoint Health Networks, Inc.*.......... 151,905 --- 151,905 ----------------------------------------- 484,524 --- 484,524 MOTORCYCLE MANUFACTURERS - 0.4% 2,800 --- 2,800 Harley-Davidson, Inc....... 152,068 --- 152,068 MOVIES & ENTERTAINMENT - 4.3% 24,525 8,900 33,425 AOL Time Warner, Inc.*..... 787,253 285,690 1,072,943 8,200 4,400 12,600 Viacom, Inc. (Cl. B)*...... 362,030 194,260 556,290 ----------------------------------------- 1,149,283 479,950 1,629,233 MULTI-LINE INSURANCE - 2.3% 5,600 5,500 11,100 American International Group, Inc............... 444,640 436,700 881,340 NETWORKING EQUIPMENT - 2.5% 29,300 21,100 50,400 Cisco Systems, Inc.*....... 530,623 382,121 912,744 --- 2,000 2,000 Juniper Networks, Inc.*.... --- 37,900 37,900 --- --- --- McDATA Corporation*........ --- --- --- ----------------------------------------- 530,623 420,021 950,644 PHARMACEUTICALS - 13.6% --- 1,100 1,100 Allergan, Inc.............. --- 82,555 82,555 1,800 4,000 5,800 American Home Products Corporation.............. 110,448 245,440 355,888 --- 7,400 7,400 Bristol-Myers Squibb Company........... --- 377,400 377,400 --- 5,000 5,000 Eli Lilly & Company........ --- 392,700 392,700 --- 1,300 1,300 Forest Laboratories, Inc.*. --- 106,535 106,535 9,400 8,944 18,344 Johnson & Johnson.......... 555,540 528,590 1,084,130 --- 3,800 3,800 Merck & Company, Inc....... --- 223,440 223,440 28,900 16,550 45,450 Pfizer, Inc................ 1,151,665 659,518 1,811,183 --- 5,400 5,400 Pharmacia Corporation...... 230,310 230,310 6,200 4,900 11,100 Schering-Plough Corporation 222,022 175,469 397,491 --- 1,300 1,300 Watson Pharmaceuticals, Inc.*... --- 40,807 40,807 ----------------------------------------- 2,039,675 3,062,764 5,102,439 SEMICONDUCTOR EQUIPMENT - 0.5% --- 2,100 2,100 Applied Materials, Inc.*... --- 84,210 84,210 --- 700 700 KLA-Tencor Corporation..... --- 34,692 34,692 --- 1,600 1,600 Novellus Systems, Inc.*.... --- 63,120 63,120 ----------------------------------------- --- 182,022 182,022 SEMICONDUCTORS - 3.7% --- 1,700 1,700 Analog Devices, Inc.*...... --- 75,463 75,463 --- 400 400 Applied Micro Circuits Corporation.............. --- 4,528 4,528 --- 500 500 Broadcom Corporation....... --- 20,490 20,490 13,400 17,000 30,400 Intel Corporation.......... 421,430 534,650 956,080 1,300 --- 1,300 Maxim Integrated Products, Inc............ 68,263 --- 68,263 --- 1,800 1,800 Micron Technology*......... --- 55,800 55,800 --- 400 400 PMC - Sierra, Inc.*........ --- 8,504 8,504 2,600 --- 2,600 Texas Instruments, Inc..... 72,800 --- 72,800 --- 2,800 2,800 Xilinx, Inc.*.............. --- 109,340 109,340 ----------------------------------------- 562,493 808,775 1,371,268 SOFT DRINKS - 1.3% --- 5,500 5,500 Coca-Cola Company.......... --- 259,325 259,325 --- 4,500 4,500 PepsiCo, Inc............... --- 219,105 219,105 ----------------------------------------- --- 478,430 478,430 SYSTEMS SOFTWARE - 6.1% --- 1,400 1,400 Adobe Systems, Inc......... --- 43,470 43,470 --- 1,300 1,300 BEA Systems, Inc........... --- 20,033 20,033 14,900 13,400 28,300 Microsoft Corporation*..... 987,423 888,018 1,875,441 --- 11,600 11,600 Oracle Corporation*........ --- 160,196 160,196 2,300 2,000 4,300 VERITAS Software Corporation*............. 103,086 89,640 192,726 ----------------------------------------- 1,090,509 1,201,357 2,291,866 TELECOMMUNICATIONS EQUIPMENT - 3.3% --- 600 600 Comverse Technology, Inc.*. --- 13,422 13,422 --- 1,600 1,600 Corning, Inc.*............. --- 14,272 14,272 --- 200 200 Corvis Corporation*........ --- 646 646 --- 1,900 1,900 JDS Uniphase Corporation*.. --- 16,587 16,587 41,700 --- 41,700 Nokia Oyj ADR.............. 1,022,901 --- 1,022,901 --- 2,100 2,100 QUALCOMM, Inc.*............ --- 106,050 106,050 --- 1,700 1,700 Scientific-Atlantic, Inc... --- 40,698 40,698 --- 1,300 1,300 Sonus Networks, Inc.*...... --- 6,006 6,006 ----------------------------------------- 1,022,901 197,681 1,220,582 TOBACCO - 0.3% 2,100 --- 2,100 Philip Morris Companies, Inc........... 96,285 --- 96,285 UNIT INVESTMENT TRUST - 2.7% --- 10,300 10,300 S&P 500/BARRA Growth Index Fund (Cl.I)........ --- 610,893 610,893 --- 4,100 4,100 S&P MidCap 400 Index Fund (Cl.I).............. --- 415,699 415,699 ----------------------------------------- --- 1,026,592 1,026,592 WIRELESS TELECOMMUNICATION SERVICES - 3.6% 46,200 --- 46,200 AT&T Wireless Services, Inc.*.......... 663,894 --- 663,894 --- 900 900 Nextel Communications, Inc.*.... --- 9,864 9,864 13,400 2,900 16,300 Sprint Corporation (PCS Group)*............. 327,094 70,789 397,883 11,600 --- 11,600 Vodafone Group plc ADR..... 297,888 --- 297,888 ----------------------------------------- 1,288,876 80,653 1,369,529 ----------------------------------------- Total common stocks - 95.3%......... 21,713,879 14,133,102 35,846,981 REPURCHASE AGREEMENT - 4.8% --------------------------- --- $1,555,122 $1,555,122 State Street, 0.65%, 01-02-02 (Collateralized by FHLMC, 2.21%, 11-26-02 with a value of $1,589,585)........... --- 1,555,122 1,555,122 $232,592 --- $232,592 State Street, 0.65%, 01-02-02 (Collateralized by FHLB, 2.16%, 12-05-02 with a value of $240,138)............. 232,592 --- 232,592 ----------------------------------------- Total repurchase agreements - 4.8%...... 232,592 1,555,122 1,787,714 Total investments - 100.1%... 21,946,471 15,688,224 37,634,695 Liabilities, less cash and other assets - (0.1)%........ (33,745) 419 (33,326) ----------------------------------------- Total net assets - 100.0% $21,912,726 $15,688,643 $37,601,369 ========================================= *Non-Income producing security. Note: Management does not anticipate any sales of investments as a result of the reorganization. PROFORMA FEE TABLE ========================================================================================== DISTRI- TOTAL MANAGE- BUTION ANNUAL FUND REIMBURSE- NET MENT (12B-1) OTHER OPERATING MENT/ EXPENSE FEES FEES EXPENSES EXPENSES WAIVERS RATIO - ------------------------------------------------------------------------------------------ 2001 ACTUAL Large Cap Growth Fund 1.00% 0.01% 0.22% 1.23% (0.01)% 1.22% Capital Growth Fund 1.00% N/A 0.20% 1.20% N/A 1.20% - ------------------------------------------------------------------------------------------ 2001 PRO FORMA Large Cap Growth 1.00% N/A 0.18% 1.18% N/A 1.18% including Capital Growth 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) Investment Advisory Contract(a) (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 SBL Fund's Post-Effective Amendment No. 71 to Registration Statement No. 2-38414 on Form N-1A as filed on January 11, 2002. 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) 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
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N-14 Filing
Guggenheim Variable Funds Trust N-14Registration statement for investment companies business combination
Filed: 6 Jun 02, 12:00am