Securities Act File No. __________
As filed with the Securities and Exchange Commission on March 6, 2006
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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 April 3, 2006 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).
April 3, 2006
Dear Shareholder:
We are writing to inform you of the upcoming special meeting of shareholders of
SBL Fund, Series G (Large Cap Growth Series) to be held Friday, April 28, 2006.
You are being asked to vote on a plan that merges this fund into SBL Fund,
Series Y (Select 25 Series). Large Cap Growth Series has investment objectives
and policies comparable to Select 25 Series.
Your proxy statement is enclosed. You can vote in one of four ways:
o By mail with the enclosed proxy card - be sure to sign, date and
return it in the enclosed postage-paid envelope,
o Through the Web site listed in the proxy voting instructions,
o By telephone using the toll-free number listed in the proxy voting
instructions, or
o In person at the shareholder meeting on April 28, 2006.
We encourage you to vote over the Internet or by telephone, using the voting
control number that appears on your proxy card. Please read the enclosed
information carefully before voting. Your vote is extremely important. If you
have questions, please call InvestorConnectTM at 1-800-361-2782.
We appreciate your consideration of this important proposal. Thank you for
investing in Security Funds.
Sincerely,
MICHAEL G. ODLUM
Michael G. Odlum, President
Security Management Company, LLC
SBL Fund
One Security Benefit Place
Topeka, KS 66636-0001
(Toll Free) (800) 888-2461
April 3, 2006
Dear Shareholder:
The Board of Directors ("Board") has called a special meeting of shareholders of
the SBL Fund, Series G (Large Cap Growth Series) (referred to herein as "Series
G" or the "Acquired Series") to be held on April 28, 2006 at 1:00 p.m. (Central
time), or any adjournment(s) or postponement(s) thereof (the "Special Meeting"),
at the executive offices of SBL Fund, One Security Benefit Place, Topeka, Kansas
66636-0001. The Board has called the Special Meeting so that shareholders can
vote on a proposed Plan of Reorganization ("Reorganization Plan") regarding the
Acquired Series, as discussed below.
The Board has approved the reorganization of Series G into SBL Fund, Series Y
(Select 25 Series) (referred to herein as "Series Y" or the "Acquiring Series")
(such transaction referred to herein as the "Reorganization"). Security
Management Company, LLC serves as investment adviser to the Acquired and
Acquiring Series, and the Acquired Series has investment objectives and policies
that are comparable in many respects to those of the Acquiring Series. The
Reorganization is expected to result in operating expenses that are lower for
shareholders of the Acquired Series.
After careful consideration, the Board unanimously approved this proposal with
respect to the Acquired Series and recommended that shareholders of the Acquired
Series vote "FOR" the proposal. Accordingly, you are asked to approve the
Reorganization Plan.
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, fax 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 9:00 A.M.
(CENTRAL TIME), APRIL 28, 2006.
We appreciate your participation and prompt response in this matter and thank
you for your continued support.
Sincerely,
/s/Michael G. Odlum
-------------------
Michael G. Odlum
President
SBL Fund
One Security Benefit Place
Topeka, KS 66636-0001
(Toll Free) (800) 888-2461
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
SBL FUND, SERIES G (LARGE CAP GROWTH SERIES)
TO BE HELD APRIL 28, 2006
To the Shareholders:
The Board of Directors ("Board") has called a special meeting of shareholders of
SBL Fund, Series G (Large Cap Growth Series) (referred to herein as "Series G"
or the "Acquired Series"), to be held on April 28, 2006 at 1:00 p.m. (Central
time), or any adjournment(s) or postponement(s) thereof (the "Special Meeting"),
at the executive offices of SBL Fund, One Security Benefit Place, Topeka, Kansas
66636-0001.
At the Special Meeting you will be asked:
1. To approve a Plan of Reorganization providing for the acquisition of all of
the assets and liabilities of the Acquired Series in which you invest by a
separate series of SBL Fund (the "Acquiring Series") solely in exchange for
shares of the Acquiring Series, followed by the complete liquidation of the
Acquired Series; and
2. To transact such other business as may properly come before the Special
Meeting or any adjournments thereof.
Shareholders of record at the close of business on March 1, 2006 are entitled to
notice of, and to vote at, the Special Meeting. Your attention is called to the
accompanying Proxy Statement/Prospectus. You are cordially invited to attend the
Special Meeting. Shareholders who do not expect to attend the Special Meeting in
person are requested to complete, date, and sign the enclosed proxy card and
return it promptly in the envelope provided for that purpose. Your proxy card
also provides instructions for voting via telephone, fax or the Internet, if you
wish to take advantage of these voting options. Proxies may be revoked at any
time by executing and submitting a revised proxy, by giving written notice of
revocation to Security Equity Fund or by voting in person at the Special
Meeting.
By Order of the Board of Directors
/s/Amy J. Lee
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Amy J. Lee
Secretary
April 3, 2006
TABLE OF CONTENTS
INTRODUCTION.....................................................................................................................1
SUMMARY..........................................................................................................................2
COMPARISON OF INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, RISKS AND MANAGEMENT FOR SERIES G AND SERIES Y.............2
Principal Types of Securities, Investment Techniques and Other Related Risks of Investing in the Series.....................4
Comparison of Portfolio Characteristics.....................................................................................5
COMPARISON OF FEES AND EXPENSES FOR SERIES G AND SERIES Y........................................................................5
Comparison of Series G and Series Y Operating Expenses......................................................................6
Example.....................................................................................................................6
PERFORMANCE OF SERIES G AND SERIES Y.............................................................................................6
Series G Performance........................................................................................................7
Series Y Performance........................................................................................................8
ADDITIONAL.......................................................................................................................8
Investment Manager..........................................................................................................8
Investment Personnel........................................................................................................8
Form of Organization........................................................................................................9
Dividends and Other Distributions...........................................................................................9
Capitalization Of Series G And Series Y.....................................................................................9
INFORMATION ABOUT THE REORGANIZATION.............................................................................................9
The Reorganization Plan.....................................................................................................9
Reasons for the Reorganization..............................................................................................9
Board Considerations.......................................................................................................10
Tax Considerations.........................................................................................................10
Expenses of the Reorganization.............................................................................................10
GENERAL INFORMATION.............................................................................................................10
MORE INFORMATION REGARDING THE ACQUIRED AND ACQUIRING SERIES....................................................................13
Shareholder Guide..........................................................................................................13
Purchase And Redemption Of Shares......................................................................................13
Management of the Acquiring Series.........................................................................................14
FINANCIAL HIGHLIGHTS FOR THE ACQUIRED AND ACQUIRING SERIES......................................................................16
APPENDIX A ...................................................................................................................A-1
APPENDIX B ...................................................................................................................B-1
APPENDIX C ...................................................................................................................C-1
APPENDIX D ...................................................................................................................D-1
PROXY STATEMENT/PROSPECTUS
SBL FUND
ONE SECURITY BENEFIT PLACE
TOPEKA, KANSAS 66636-0001
(800) 888-2461
INTRODUCTION
This Proxy Statement/Prospectus provides you with information about the proposed
transfer of all of the assets of the Acquired Series set forth in the table
below to the Acquiring Series set forth in the table below in exchange solely
for shares of the Acquiring Series; the assumption by the Acquiring Series of
all liabilities of the Acquired Series; and the distribution of the Acquiring
Series shares to the shareholders of the Acquired Series in complete liquidation
of the Acquired Series (such transaction referred to herein as a
"Reorganization") as provided upon the terms and conditions set forth in a Plan
of Reorganization ("Reorganization Plan").
ACQUIRED SERIES ACQUIRING SERIES
SBL Fund Series G (Large Cap Growth Series) SBL Fund Series Y (Select 25 Series)
("Series G") ("Series Y")
This Proxy Statement/Prospectus solicits your vote in connection with a special
meeting ("Special Meeting") of shareholders, to be held April 28, 2006, at which
shareholders of the Acquired Series will vote on the Reorganization Plan through
which this transaction will be accomplished. Because you, as a shareholder of
the Acquired Series, are being asked to approve a transaction that will result
in your holding shares of the Acquiring Series, this document also serves as a
prospectus for the Acquiring Series, whose investment objective is long-term
growth of capital.
This Proxy Statement/Prospectus, which you should retain for future reference,
contains important information about the Acquiring Series that you should know
before investing. A Statement of Additional Information ("SAI") dated April 3,
2006 relating to this Proxy Statement/Prospectus and containing additional
information about the Reorganization and the parties thereto, has been filed
with the U.S. Securities and Exchange Commission ("SEC") and is incorporated
herein by reference. For a more detailed discussion of the investment
objectives, policies, restrictions and risks of each of the Series, see the SBL
Fund Prospectus and Statement of Additional Information dated May 1, 2005, each
of which is incorporated herein by reference and is available, without charge,
by calling (800) 888-2461. The SBL Fund annual report relating to the Series,
dated December 31, 2005, is included herewith and incorporated herein by
reference.
You also may obtain proxy materials, reports and other information filed by
either Series from the SEC's Public Reference Section (1-202-942-8090) in
Washington, D.C., or from the SEC's internet website at www.sec.gov. Copies of
materials also may 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 Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, 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: APRIL 3, 2006
SUMMARY
You should read this entire Proxy Statement/Prospectus carefully. For additional
information, you should consult the SBL Fund Prospectus and the Reorganization
Plan, which is attached hereto as Appendix A.
THE PROPOSED REORGANIZATION - On November 18, 2005, the Board of Directors of
SBL Fund ("Board") approved the Reorganization Plan with respect to each of the
Series. Subject to the approval of shareholders of the Acquired Series, the
Reorganization Plan provides for:
o the transfer of all of the assets of the Acquired Series to the Acquiring
Series, in exchange for shares of the Acquiring Series;
o the assumption by the Acquiring Series of all of the liabilities of the
Acquired Series;
o the distribution of shares of the Acquiring Series to the shareholders of
the Acquired Series; and
o the complete liquidation of the Acquired Series.
The Reorganization is expected to be effective immediately after the close of
business May 5, 2006, or on a later date as the parties may agree (the
"Closing"). As a result of the Reorganization, each shareholder of the Acquired
Series will become a shareholder of the Acquiring Series. Each shareholder will
hold, immediately after the Closing, shares of the Acquiring Series having an
aggregate value equal to the aggregate value of the shares of the Acquired
Series held by that shareholder as of the close of business on the date of the
Closing.
The Reorganization is intended to eliminate duplication of costs and other
inefficiencies arising from having comparable mutual funds within the same
family of funds, as well as to assist in achieving economies of scale.
Shareholders in the Acquired Series are expected to benefit from the larger
asset base and lower operating expenses as a percentage of Acquiring Fund assets
that will result from the Reorganization.
Approval of the Reorganization Plan with respect to the Acquired Series requires
the affirmative vote of a majority of the outstanding voting securities of the
Acquired Series. In the event that the shareholders of the Acquired Series do
not approve the Reorganization, the Acquired Series will continue to operate as
a separate entity, and the Board will determine what further action, if any, to
take.
AFTER CAREFUL CONSIDERATION, THE BOARD 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 As described below, the Acquired Series has investment objectives and
investment policies that are comparable in many respects to the investment
objectives and investment policies of the Acquiring Series.
o The Series have the same investment manager, Security Management Company,
LLC (the "Investment Manager" or "SMC"), One Security Benefit Place,
Topeka, Kansas 66636-0001.
o The proposed Reorganization offers potential reductions in total operating
expenses for shareholders of the Acquired Series.
o The purchase and redemption provisions for each Series are the same. For
additional information on purchase and redemption provisions, see "More
Information Regarding the Acquired and Acquiring Series."
o The Series 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 (the "Code"). As such, shareholders of the Series will
not recognize gain or loss as a result of the Reorganization. See
"Information About the Reorganization - Tax Considerations."
COMPARISON OF INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, RISKS AND
MANAGEMENT FOR SERIES G AND SERIES Y
The investment objectives, principal investment strategies, and risks of the
Series are similar. Each Series is managed by the same investment manager.
Because Series G and Series Y have similar investment objectives and policies,
the principal investment strategies and principal risks of an investment in the
Series are generally comparable, although there are certain differences. The
chart below summarizes the similarities and differences between the Series'
principal investment strategies and principal risks. There can be no assurance
that a Series will achieve its stated objective.
2
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ACQUIRED SERIES ACQUIRING SERIES
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SERIES G SERIES Y
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INVESTMENT OBJECTIVE Long-term growth of capital Long-term growth of capital
- ------------------------------ ---------------------------------------------------- -----------------------------------------------
PRINCIPAL INVESTMENT Series G pursues its objective by investing, under Series Y pursues its objective by focusing its
STRATEGIES normal market conditions, at least 80% of its net investments in a core position of 20-30 common
assets (including any borrowings for investment stocks of growth companies which have exhibited
purposes) in common stock and other equity consistent above average earnings and/or
securities of large capitalization companies revenue
growth. primarily investing in those companies
that, in the opinion of the Investment Manager,
have long-term capital growth potential.
- ------------------------------ ---------------------------------------------------- -----------------------------------------------
INVESTMENT MANAGER Security Management Company, LLC Security Management Company, LLC
- ------------------------------ ---------------------------------------------------- -----------------------------------------------
SUB-ADVISER None None
- ------------------------------ ---------------------------------------------------- -----------------------------------------------
PORTFOLIO MANAGER Mark Mitchell Mark Mitchell
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COMPARISON OF SIMILAR o Each Series has as its investment objective long term growth of capital.
PRINCIPAL STRATEGIES
INVESTMENT o Each Series may invest a portion of its assets in options and futures contracts, which may be
STRATEGIES used to hedge each Series' portfolio, maintain exposure to the equity markets or
to increase returns.
o Each Series may invest in a variety of investment vehicles, including those that seek
to track the composition and performance of a specific index. Each Series may use these
index-based investments as a way of managing its cash position or to gain exposure to the
equity markets or a particular sector of the equity market, while maintaining liquidity.
- ---------------- ------------- ----------------------------------------------------------------------------------------------------
DIFFERENCES
IN STRATEGY o Series G pursues its objective by o Series Y pursues its objective by
investing, under normal market conditions, at focusing its investments in a core position
least 80% of its net assets (including of 20-30 common stocks of growth companies
borrowings for investment purposes) in common which have exhibited consistent above average
stock and other equity securities of large earnings and/or revenue growth.
capitalization companies (i.e., company market
value is = $5 billion at the time of purchase), o The Investment Manager selects what it
primarily investing in those companies that, in believes to be premier growth companies as
the opinion of the Investment Manager, have the core position for the Series using a
long-term capital growth potential. "bottom-up" approach in selecting growth
stocks. Portfolio holdings will be replaced
o The Series also may concentrate its when one or more of the company's
investments in a particular industry that fundamentals have changed and, in the
represents 20% or more of the Series' benchmark opinion of the Investment Manager, it is
index, the Russell 1000 Growth Index. no longer a premier growth company.
Concentration means investment of more than 25%
of the value of the Series' assets in any one
industry. The Series' concentration policy
would allow it to overweight an industry
relative to the index even if such
overweighting resulted in investment of more
than 25% of the Series' assets in that
industry. Currently, no industry represents
20% or more of the index.
o The Investment Manager uses a growth-oriented
strategy to choose equity securities, which
means that it invests in companies whose
earnings are believed to be in a relatively
strong growth trend. In identifying companies
with favorable growth prospects, the
Investment Manager considers many factors
including, but not limited to: 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 Series 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.
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3
- ---------------- ------------- ---------------------------------------------------- -----------------------------------------------
ACQUIRED SERIES ACQUIRING SERIES
- ------------------------------ ---------------------------------------------------- -----------------------------------------------
SERIES G SERIES Y
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COMPARISON OF SIMILAR o Under adverse or unstable market
PRINCIPAL RISKS RISKS conditions, each Series' policies allows
it to invest some or all of its assets in
cash or money market securities for the
purpose of avoiding losses, in which case
each Series may be unable to pursue its
investment objective during that time or
benefit from any market upswings.
o Each Series also share the following
principal investment risks:
o market risk
o growth stock risk
o foreign securities risk
o equity derivatives risk
o leverage risk
o non-diversification risk
o investment in investment companies
and investment vehicles risk
A descriptive summary of each of the above risks,
along with other risks associated with each
Series' investment in certain types of securities
and investment techniques is provided in Appendix
B, "Summary of Principal Risks and Investment
Techniques."
- ---------------- ------------- ---------------------------------------------------- -----------------------------------------------
DIFFERENCES o INDUSTRY CONCENTRATION RISK - Series G o FOCUSED INVESTMENT STRATEGY RISK - Series
IN RISKS may be prone to industry concentration risk due Y may be prone to focused investment strategy
to its investment strategy which allows it to risk due to its investment strategy focusing
concentrate its investments in a particular on investing in a smaller number of stocks
industry that represents 20% or more of its than a typical diversified mutual fund,
benchmark index. Industry concentration risk which might hold between 80 and 120 stocks.
is the risk that the Series' return could be Thus, Series Y may be more volatile than the
hurt significantly by problems affecting a typical diversified fund because a change in
particular industry or sector. For this the market value of a single security may
Series, "concentration" refers to investment of have a greater impact on Series Y's net
more than 25% of the value of the Series' asset value and total return.
assets in any one industry. The Series'
concentration policy allows it to overweight an
industry relative to its index, even if
overweighting resulted in investment of more
than 25% of the Series' assets in that
industry. When the Series concentrates its
investments in a particular industry or group
of related industries, its performance may
significantly increase or decrease due to
developments in that particular industry or
group of industries.
- ---------------- ------------- ---------------------------------------------------- -----------------------------------------------
PRINCIPAL TYPES OF SECURITIES, INVESTMENT TECHNIQUES AND OTHER RELATED RISKS OF
INVESTING IN THE SERIES - Series G and Series Y may both invest in certain types
of securities or use certain investment techniques to achieve its objective.
Each Series are subject to varying degrees of financial, market and credit risk.
An investment in a Series is not a deposit of a bank and is not insured by the
Federal Deposit Insurance Corporation or any other government agency. Appendix
B, attached hereto, provides a summary of the principal types of securities in
which each Series may invest, the techniques that may be employed in pursuit of
its investment objectives, and the risks associated with such securities and
investment techniques. As with any security, an investment in a Series involves
certain risks, including loss of principal.
4
COMPARISON OF PORTFOLIO CHARACTERISTICS - The following tables compare certain
characteristics of the portfolios of the Series as of December 31, 2005:
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
ACQUIRED SERIES ACQUIRING SERIES
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
SERIES G SERIES Y
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Net Assets (thousands) $51,772 $37,018
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Number of Common Stock Holdings 38 27
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Portfolio Turnover Rate (12 months 40% 28%
ended 12/31/[05]
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
As a percentage of Net Assets
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
U.S. Government Obligations
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
U.S. Government Agency Obligations 1.93%
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Foreign Government Obligations
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Corporate Debt Securities
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Convertible Bonds
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Convertible Preferred Stocks
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Preferred Stocks
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Common 96.96% 96.15%
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Security Lending Collateral
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Liabilities in excess of other assets
- ----------------------------------------- ------------------------------------------- ----------------------------------------------
Other assets in excess of liabilities 1.11% 3.85%
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TOP 10 HOLDINGS (AS A % OF NET ASSETS)
----------------------------------------------------------------- ---------------------------------------------------------------
ACQUIRED SERIES ACQUIRING SERIES
---------------------------------------------------------- ------ --------------------------------------------------------- -----
SERIES G % SERIES Y %
---------------------------------------------------------- ------ --------------------------------------------------------- -----
AMERICAN INTERNATIONAL GROUP, INC. 4.32 SHAW GROUP, INC. 7.31
---------------------------------------------------------- ------ --------------------------------------------------------- -----
GENERAL ELECTRIC COMPANY 4.11 KFX, INC. 6.23
---------------------------------------------------------- ------ --------------------------------------------------------- -----
CARNIVAL CORPORATION 3.90 FEDEX CORPORATION 5.08
---------------------------------------------------------- ------ --------------------------------------------------------- -----
MICROSOFT CORPORATION 3.78 BJ SERVICES COMPANY 4.51
---------------------------------------------------------- ------ --------------------------------------------------------- -----
UNIVISION COMMUNICATIONS, INC. 3.71 CARNIVAL CORPORATION 4.45
---------------------------------------------------------- ------ --------------------------------------------------------- -----
MEDTRONIC, INC. 3.55 L-3 COMMUNICATIONS HOLDINGS, INC. 4.28
---------------------------------------------------------- ------ --------------------------------------------------------- -----
FEDEX CORPORATION 3.47 WILLIAMS COMPANIES, INC. 4.26
---------------------------------------------------------- ------ --------------------------------------------------------- -----
J.B. HUNT TRANSPORT SERVICES, INC. 3.47 MEDTRONIC, INC. 4.18
---------------------------------------------------------- ------ --------------------------------------------------------- -----
HOME DEPOT, INC. 3.44 AMERICAN INTERNATIONAL GROUP, INC. 4.11
---------------------------------------------------------- ------ --------------------------------------------------------- -----
FIRST DATA CORPORATION 3.26 PRAXAIR, INC. 4.06
---------------------------------------------------------- ------ --------------------------------------------------------- -----
COMPARISON OF FEES AND EXPENSES FOR SERIES G AND SERIES Y
The following describes and compares the fees and expenses that you may pay if
you buy and hold shares of each Series. It is expected that combining the Series
in the manner proposed in the Reorganization Plan would allow shareholders of
Series G to realize economies of scale and lower expenses. For further
information on the fees and expenses of Series G and Series Y, please see
estimated pro forma expenses in the table under "Comparison of Series G and
Series Y Operating Expenses" below and "More Information Regarding the Acquired
and the Acquiring Series" in this Proxy Statement /Prospectus
5
COMPARISON OF SERIES G AND SERIES Y OPERATING EXPENSES - The current expenses of
Series G and Series Y and estimated pro forma expenses after giving effect to
the proposed Reorganization are shown in the table below. Expenses for the
Series are based on the operating expenses incurred for the year ended December
31, 2005. Pro forma fees and expenses show estimated fees and expenses of Series
Y after giving effect to the proposed Reorganization as of December 31, 2005.
Pro forma numbers are estimated in good faith and are hypothetical.
--------------------------------------------- -------------------------- ------------------------- ---------------------------
ACQUIRED SERIES ACQUIRING SERIES PRO FORMA
--------------------------------------------- -------------------------- ------------------------- ---------------------------
SERIES G SERIES Y
--------------------------------------------- -------------------------- ------------------------- ---------------------------
Management Fees 1.00% 0.75% 0.75%
--------------------------------------------- -------------------------- ------------------------- ---------------------------
Distribution (12b-1) Fees None None None
--------------------------------------------- -------------------------- ------------------------- ---------------------------
Other expenses 0.20% 0.24% 0.17%
--------------------------------------------- -------------------------- ------------------------- ---------------------------
TOTAL ANNUAL OPERATING EXPENSES 1.20% 0.99% 0.92%
--------------------------------------------- -------------------------- ------------------------- ---------------------------
--------------------------------------------- -------------------------- ------------------------- ---------------------------
WAIVERS/ REIMBURSEMENTS 0.25%(2) --- ---
--------------------------------------------- -------------------------- ------------------------- ---------------------------
--------------------------------------------- -------------------------- ------------------------- ---------------------------
TOTAL NET 0.95% 0.99% 0.92%
--------------------------------------------- -------------------------- ------------------------- ---------------------------
(1) Expenses are shown for each Series, and on a pro forma basis, based upon
expenses incurred by each Series during the 12 months ended December 31,
2005.
(2) Beginning February 1, 2004, the Investment Manager began voluntarily
waiving 0.25% of its investment advisory fee for Series G. The total
annual operating expenses for Series G after taking this voluntary waiver
into account and giving effect to a new fund accounting and
administration agreement and a new transfer agency agreement, were 0.95%
during the last fiscal year. The investment advisory fee waiver may be
discontinued at any time without notice to shareholders.
EXAMPLE - The example below is intended to help you compare the cost of
investing in the Series and in the combined Series (after the Reorganization) on
a pro forma basis. Your actual costs may be higher or lower. The example assumes
that you invest $10,000 in Series G and in Series Y after the Reorganization for
the time periods indicated and redeemed your shares at the end of each period.
The Example also assumes that your investment has a 5% return each year and that
the Series' 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 each period shown.
--------------------------------------------- -------------------------- ------------------------- ---------------------------
ACQUIRED SERIES ACQUIRING SERIES PRO FORMA
--------------------------------------------- -------------------------- ------------------------- ---------------------------
SERIES G SERIES Y
--------------------------------------------- -------------------------- ------------------------- ---------------------------
--------------------------------------------- -------------------------- ------------------------- ---------------------------
1 YEAR $122 $ 100 $ 94
--------------------------------------------- -------------------------- ------------------------- ---------------------------
3 YEARS 381 315 293
--------------------------------------------- -------------------------- ------------------------- ---------------------------
5 YEARS 660 547 509
--------------------------------------------- -------------------------- ------------------------- ---------------------------
10 YEARS 1,455 1,212 1,131
--------------------------------------------- -------------------------- ------------------------- ---------------------------
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* The expense examples above do not reflect separate account or insurance
contract fees and charges, which if reflected would increase expenses.
------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE OF SERIES G AND SERIES Y
The bar charts and tables shown below provide some indication of the risks of
investing in Series G and Series Y by showing changes in each Series'
performance from year to year and by showing how the Series' average annual
total returns have compared to those of a broad-based securities market index -
the S&P 500 Index in the case of Series G, and the S&P 500 Index and Russell
1000 Growth Index in the case of Series Y. Fee waivers and/or expense
reimbursements for Series G during certain time periods reduced its expenses and
in the absence of such waivers and/or reimbursements, the performance quoted
would be reduced. Note that an index has an inherent performance advantage over
each Series since it incurs no operating expenses. An investor cannot invest
directly in an index. The information below is based on the performance of the
Series and does not reflect fees and expenses associated with an investment in
variable insurance products through which shares of the Acquiring Series are
purchased. The Series' performance would be lower if the fees and expenses of
such products were reflected. The Series' past performance is not an indication
of how the Series will perform in the future.
6
SERIES G PERFORMANCE
HIGHEST AND LOWEST RETURNS
(Quarterly 2001-2005)
- ----------------------------------------------------
HIGHEST QUARTER
ended December 31, 2001 12.88%
LOWEST QUARTER
ended September 30, 2001 -17.44%
* The most recent discussion of the Series' performance, as of June 30, 2005,
is included in Appendix C.
Bar Chart:
2001 -15.54%
2002 -27.11%
2003 23.98%
2004 3.28%
2005 3.33%
- ----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 2005)
- ----------------------------------------------------------------------------------------------------------------------------
Since
1 Year 5 Years Inception(2)
- ----------------------------------------------------------------------------------------------------------------------------
Series G 3.33% -3.99% -7.29%(1)
- ----------------------------------------------------------------------------------------------------------------------------
Russell 1000 Growth Index (reflects no deduction for fees, expenses 5.26% -3.58% -7.74%
or taxes)(2)
- ----------------------------------------------------------------------------------------------------------------------------
1. For the period beginning May 1, 2000 (date of inception) to December 31, 2005.
2. The Russell 1000 Growth Index is an unmanaged capitalization-weighted index
which includes stocks incorporated in the United States and its territories
and measures the performance of the Russell 1000 companies with higher
price-to-book ratios and higher forecasted growth values.
- ----------------------------------------------------------------------------------------------------------------------------
7
SERIES Y PERFORMANCE
HIGHEST AND LOWEST RETURNS
(Quarterly 2001-2005)
- ----------------------------------------------------
HIGHEST QUARTER
ended December 31, 2001 21.59%
LOWEST QUARTER
ended September 30, 2001 -19.14%
* The most recent discussion of the Series' performance, as of December 31,
2005, is included in Appendix C.
Bar Chart:
2000 -16/09%
2001 -9.92%
2002 -26.63%
2003 17.78%
2004 11.63%
2005 11.75%
- ----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 2005)
- ----------------------------------------------------------------------------------------------------------------------------
1 Year 5 Years Since Inception
- ----------------------------------------------------------------------------------------------------------------------------
Series Y 11.75% -0.58% 0.12(1)
- ----------------------------------------------------------------------------------------------------------------------------
Russell 1000 Growth Index (reflects no deduction for fees, expenses 5.26% -3.58% -2.95%
or taxes)2, 3, (4)
- ----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index (reflects no deduction for fees, expenses or 4.91% 0.54% 1.19%
taxes)(3,4)
- ----------------------------------------------------------------------------------------------------------------------------
1 For the period beginning May 3, 1999 (date of inception) to December 31,
2005.
2 The Russell 1000 Growth Index is an unmanaged capitalization-weighted index
which includes stocks incorporated in the United States and its territories
and measures the performance of the Russell 1000 companies with higher
price-to-book ratios and higher forecasted growth values.
3 The Series changed its benchmark index to the Russell 1000 Growth Index.
The Investment Manager has determined that the Russell 1000 Growth Index is
a more appropriate index than the S&P 500 Index, which is a
capitalization-weighted index composed of 500 selected common stocks that
represent the broad domestic economy and is a widely recognized unmanaged
index of market performance, because the Russell 1000 Growth Index more
closely reflects the types of securities in which the Series invests and
thus provides shareholders with a more appropriate benchmark against which
to compare the Series' performance.
4 Index performance is only available to the Series at the beginning of each
month. The S&P and Russell indices are for the period April 30, 1999 to
December 31, 2005.
- ----------------------------------------------------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT SERIES G AND SERIES Y
INVESTMENT MANAGER - The Investment Manager has overall responsibility for the
management of both Series G and Series Y. The Investment Manager furnishes
investment advisory, statistical and research facilities, supervises and
arranges for the purchase and sale of securities on behalf of each Series, and
provides for the compilation and maintenance of records pertaining to such
investment advisory services, subject to the control and supervision of the
Board. For such services, the Investment Manager is entitled to receive
compensation on an annual basis equal to 1.00% of the average net assets of
Series G, and 0.75% of the average net assets of Series Y, each computed on a
daily basis and payable monthly.
A discussion regarding the basis of the Board of Directors approving any
investment advisory contract or sub-advisory contract of the Series will be
available in the Series' semi-annual report for fiscal half-year ending June 30,
2005.
INVESTMENT PERSONNEL - Mark Mitchell has responsibility for the day-to-day
management of both Series G and Series Y. Mr. Mitchell, Vice President and
Portfolio Manager of the Investment Manager, has managed Series G since joining
the Investment Manager in September 2002, and Series Y since February 2004. He
has 16 years of finance and investment experience and is a Chartered Financial
Analyst charterholder. Prior to joining the Investment Manager, Mr. Mitchell was
employed by GE Investments and its successor company, GE Asset Management from
1994 to 2002, serving as Vice President, Sector Portfolio Manager and Research
Analyst from 1999 to 2001; and most recently as Vice President, Portfolio
Manager, US Equities. Prior to 1999, Mr. Mitchell served in various portfolio
management-related positions with GE Asset Management and its predecessor or
affiliates.
8
The Statement of Additional Information provides additional information about
the portfolio manager's compensation, other accounts managed, and ownership of
Series shares.
FORM OF ORGANIZATION - Series G and Series Y are series of SBL Fund, a Kansas
corporation registered as an open-end management investment company. SBL Fund is
governed by a Board of Directors, which consists of seven directors.
DIVIDENDS AND OTHER DISTRIBUTIONS - Both Series G and Series Y pay dividends
from net investment income, and each distributes net capital gains, if any, at
least annually. Dividends and distributions of each Series are automatically
reinvested in additional shares of the Series. There are no fees or sales
charges on reinvestments.
If the Reorganization Plan is approved by shareholders of Series G, then as soon
as practicable before the Closing, Series G will pay its shareholders a cash
distribution of all undistributed net investment income and undistributed
realized net capital gains.
CAPITALIZATION OF SERIES G AND SERIES Y - The following table shows on an
unaudited basis the capitalization of Series G and Series Y as of December 31,
2005 and on a pro forma basis as of December 31, 2005, after giving effect to
the Reorganization.
- ---------------------------- ---------------------------- ------------------------- ----------------------------------------------
ACQUIRED SERIES ACQUIRING SERIES PRO FORMA
- ---------------------------- ---------------------------- ------------------------- ----------------------------------------------
SERIES G SERIES Y
- ---------------------------- ---------------------------- ------------------------- ----------------------------------------------
Net Assets $51,771,896 $37,017,859 $88,789,755
- ---------------------------- ---------------------------- ------------------------- ----------------------------------------------
Net Assets Per Share $6.51 $10.08 $10.08
- ---------------------------- ---------------------------- ------------------------- ----------------------------------------------
Shares Outstanding 7,946,827 3,673,845 8,809,946
- ---------------------------- ---------------------------- ------------------------- ----------------------------------------------
INFORMATION ABOUT THE REORGANIZATION
THE REORGANIZATION PLAN - The Reorganization Plan provides for the transfer of
all of the assets and liabilities of the Acquired Series to the Acquiring Series
solely in exchange for shares of the Acquiring Series. The Acquired Series will
distribute the shares of the Acquiring Series received in the exchange to its
shareholders, and then the Acquired Series will be liquidated.
After the Reorganization, each shareholder of the Acquired Series will own
shares in the Acquiring Series, having an aggregate value equal to the aggregate
value of shares of the Acquired Series held by that shareholder as of the close
of business on the business day preceding the Closing.
Until the Closing, shareholders of the Acquired Series will continue to be able
to redeem their shares. Redemption requests received after the Closing will be
treated as requests received by the Acquiring Series for the redemption of its
shares received by the shareholder in the Reorganization.
The obligations of the Series under the Reorganization Plan are subject to
various conditions, including approval of the shareholders of the Acquired
Series. The Reorganization Plan also requires that the Series 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 qualifies in its entirety the foregoing
summary of the Reorganization Plan.
REASONS FOR THE REORGANIZATION - The Series have investment objectives,
investment strategies and risks that are similar in many respects. Accordingly,
the Series are somewhat duplicative. In addition, the Reorganization would
create a larger Acquiring Series, which should benefit shareholders of each of
the Series by spreading costs across a larger asset base, and which will allow
shareholders of the Acquired Series to continue to participate in a
professionally managed portfolio at a lower level of operating expenses. Also,
the larger Acquiring Series may improve trading efficiency and may eventually
realize economies of scale and lower operating expenses. Based upon these
considerations, the Board determined that the Series should be reorganized.
The proposed Reorganization was presented to the Board for consideration and
approval at a meeting held on November 18, 2005. 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 Series 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 Series and its
shareholders.
9
BOARD CONSIDERATIONS - The Board, in recommending the proposed transaction,
considered a number of factors, including the following:
1. expense ratios and information regarding fees and expenses of the Acquired
Series and the Acquiring Series, which indicate that current shareholders
of the Acquired Series will benefit from the Reorganization by getting a
comparable investment at a lower cost than their current investment;
2. the Reorganization would not dilute the interests of either Series' current
shareholders;
3. the stronger relative investment performance of the Acquiring Series as
compared to the Acquired Series;
4. the similarity of the Acquired Series' investment objectives, policies and
restrictions to those of the Acquired Series, which indicates that Acquired
Series shareholders will continue as investors in a comparable investment
vehicle;
5. elimination of duplication of costs and inefficiencies of having similar
Series; and
6. the tax-free nature of the Reorganization to each Series and its
shareholders.
The Board also considered the future potential benefits to the Acquiring Series
in that their costs to administer may be reduced if the Reorganization is
approved.
THE BOARD RECOMMENDS THAT SHAREHOLDERS OF THE ACQUIRED SERIES 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, the
Acquired Series, the Acquiring Series, and the shareholders will not 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 Series will receive an opinion from the law firm of Dechert
LLP 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
Series.
As of December 31, 2005, the Acquired Series had accumulated capital loss
carryforwards in the amount of approximately $16,946,598. After the
Reorganization, these losses will be available to the Acquiring Series, which
had an accumulated capital loss carryforward of $20,768,691, to offset its
capital gains. The amount of accumulated capital losses of the Acquired Series,
Acquiring Series, or both which may be used in any given year following the
Reorganization may be limited. As a result of these potential limitations, it is
possible that the Acquiring Series may not be able to use these losses as
rapidly as each Series may have used the losses in the absence of the
Reorganization, and part of these losses may not be useable at all. The ability
of the Acquiring Series 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 the
respective Series. After the Reorganization, however, these benefits of these
losses will inure to the benefit of all shareholders of the Acquiring Series.
EXPENSES OF THE REORGANIZATION -The Acquired Series will bear one-half of the
expenses relating to the Reorganization, including but not limited to the costs
of the proxy solicitation. The Investment Manager will bear the remainder of the
expenses relating to the Reorganization. The costs of the Reorganization
include, but are not limited to, costs associated with preparation of the
Acquiring Series' registration statement, printing and distributing the
Acquiring Series' prospectus and the Acquired Series' proxy materials, legal
fees, accounting fees, securities registration fees, and expenses of holding the
shareholders' meeting.
GENERAL INFORMATION
OTHER BUSINESS -- The Directors do not know of any matters to be presented at
the Meeting other than those set forth in this proxy statement. If other
business should properly come before the Meeting, proxies will be voted in
accordance with the judgment of the persons named in the accompanying proxy.
PROXY SOLICITATION -- The principal solicitation of proxies will be by the
mailing of this Proxy Statement/Prospectus commencing on or about April 3, 2006,
but proxies may also be solicited by telephone and/or in person by
representatives of SMC or its affiliate(s), or InvestorConnectTM, a private
proxy services firm. If we have not received your vote as the date of the
Special Meeting approaches, you may receive a call from InvestorConnect to ask
for your vote. Arrangements will be made with brokerage houses and other
custodians, nominees, and fiduciaries to forward proxies and proxy materials to
their principals.
The estimated cost of retaining InvestorConnect is approximately $20,000.00. As
previously discussed, the costs of the Special Meeting, including the
preparation and mailing of the Notice, Proxy Statement/Prospectus and proxy, and
the solicitation of proxies, including reimbursements to broker-dealers and
others who forwarded proxy materials to their clients, will be borne one-half by
the Acquired Series and one-half by SMC.
10
Security Benefit Life Insurance Company ("Security Benefit") and First Security
Benefit Life Insurance and Annuity Company of New York ("First Security") are
the owners of record of all of the Series' outstanding shares. By investing in a
variable annuity or variable life insurance policy issued by Security Benefit or
First Security, you indirectly purchased shares of Series G. Security Benefit or
First Security owns shares of Series G for the benefit of the Series'
shareholders in the separate account funding a shareholder's variable annuity or
variable life insurance policy. Security Benefit or First Security will vote
shares of the Series 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, First Security, or an 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.
SHAREHOLDER VOTING --Shareholders of record at the close of business on March 1,
2006 (the "Record Date") are entitled to notice of, and to vote at, the Special
Meeting. As of the Record Date, there were issued and outstanding [________]
shares of Series G, each representing an equal number of votes.
The persons owning of record or beneficially 5% or more of the outstanding
shares of the Acquired Series as of the Record Date, are set forth in Appendix
D. As of the Record Date, the Series' Directors and officers, as a group, owned
less than 1.00% of the outstanding shares of either Series.
Shareholders are entitled to one vote for each share held and fractional votes
for fractional shares, with no shares having cumulative voting rights. The
presence in person or by proxy of the holders of a majority of the outstanding
shares of the Series on the Record Date is required to constitute a quorum at
the Special Meeting, and therefore must be present for the transaction of
business at the Special Meeting. Shares held by shareholders present in person
or represented by proxy at the Special Meeting will be counted both for the
purposes of determining the presence of a quorum and for calculating the votes
cast on the issues before the Special Meeting.
Abstentions and "broker non-votes" are counted as shares eligible to vote at the
Special Meeting in determining whether a quorum is present, but do not represent
votes cast with respect to the proposal. "Broker non-votes" are shares held by a
broker or nominee as to which instructions have not been received from the
beneficial owners or persons entitled to vote, and the broker or nominee does
not have discretionary voting power.
In the event that a quorum is not present at the Special Meeting, or a quorum is
present but sufficient votes to approve a proposal are not received, the persons
named as proxies may propose one or more adjournments of the Special Meeting to
permit further solicitation of proxies or to obtain the vote required for
approval of one or more proposals. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Special
Meeting in person or by proxy. The persons named as proxies will vote those
proxies which they are entitled to vote FOR the proposal in favor of such an
adjournment and will vote those proxies required to be voted AGAINST the
proposal against any such adjournment. A shareholder vote may be taken prior to
any adjournment of the Special Meeting on any proposal for which there are
sufficient votes for approval, even though the Special Meeting is adjourned as
to other proposals.
In order that your shares may be represented at the Special Meeting, you are
requested to vote your shares by mail, the Internet, or by telephone by
following the enclosed instructions. If you wish to participate in the Special
Meeting, please submit the proxy card(s) originally sent with the Proxy
Statement/Prospectus or attend the Special Meeting in person. Any proxy given by
a shareholder, whether in writing, by telephone or via the Internet is
revocable. A shareholder may revoke the proxy at any time prior to its use by
filing with SBL Fund a written revocation or a duly executed proxy card bearing
a later date. In addition, any shareholder who attends the Special Meeting in
person may vote by ballot at the Special Meeting, thereby canceling any proxy
previously given. However, attendance in-person at the Special Meeting, by
itself, will not revoke a previously tendered proxy. If you vote by telephone or
the Internet, please do not return your proxy card(s), unless you later elect to
change your vote.
VOTE REQUIRED --To approve Proposal 1, the affirmative vote of the majority of
the outstanding voting securities of the Acquired Series is required.
Accordingly, assuming the presence of a quorum, abstentions and broker non-votes
have the effect of a negative vote on the Proposal.
INVESTMENT MANAGER, ADMINISTRATOR AND PRINCIPAL UNDERWRITER --SMC, SBL Fund's
investment adviser and administrator, is located at One Security Benefit Place,
Topeka, KS 66636-0001. The principal underwriter/distributor, Security
Distributors, Inc., is located at One Security Benefit Place, Topeka, KS
66636-0001. SMC and Security Distributors, Inc. are affiliates of each other.
SHAREHOLDER REPORTS --Shareholders can find important information about SBL Fund
in the Semiannual Report dated June 30, 2005 and Annual Report dated December
31, 2005. You may obtain a copy of SBL Fund's Annual Report and Semiannual
Report without charge by writing to SBL Fund at the address above or by calling
SBL Fund at 1-800-888-2461.
11
SHAREHOLDER PROPOSALS --As a general matter, SBL Fund does not hold annual
meetings of shareholders. Shareholders wishing to submit proposals for inclusion
in a proxy statement for a subsequent meeting (if any) should send their written
proposals to the secretary of SBL Fund, One Security Benefit Place, Topeka, KS
66636-0001.
Proposals must be received 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
shareholders' meeting will vote in their discretion with respect to proposals
submitted on an untimely basis.
INFORMATION ABOUT THE SERIES - SBL Fund is subject to the informational
requirements of the Securities Exchange Act and certain other federal securities
statutes, and files reports and other information with the SEC. Proxy materials,
reports and other information filed by the Series can be inspected and copied at
the Public Reference Facilities maintained by the SEC at 100 F Street, NE,
Washington, DC 20549. The SEC maintains an Internet web site (at
http://www.sec.gov) which contains other information about the Series.
TO ENSURE THE PRESENCE OF A QUORUM AT THE MEETING, PROMPT EXECUTION AND RETURN
OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
/s/ Amy J. Lee
--------------
Secretary
SBL Fund
April 3, 2006
One Security Benefit Place
Topeka, Kansas 66636-0001
12
MORE INFORMATION REGARDING THE ACQUIRED AND ACQUIRING SERIES
SHAREHOLDER GUIDE
Each of the Acquired Series and Acquiring Series share the following policies:
PURCHASE AND REDEMPTION OF SHARES - Security Benefit and First Security purchase
shares of the Series for their variable annuity and variable life insurance
separate accounts. The companies buy and sell shares of the Series at the net
asset value per share (NAV) next determined after receipt and acceptance of an
order to buy or receipt of an order to sell. Each Series reserves the right to
reject or refuse, in its discretion, any order for the purchase of its shares,
in whole or in part. A Series' NAV is generally calculated as of the close of
trading on every day the NYSE is open (usually 3:00 p.m. Central Time).
SBL Fund may suspend the right of redemption during any period when trading on
the NYSE is restricted or the NYSE is closed for other than weekends or
holidays, or any emergency is deemed to exist by the Securities and Exchange
Commission. To the extent authorized by law, each Series reserves the right to
discontinue offering shares at any time, or to cease operations entirely.
SBL Fund intends to pay redemption proceeds in cash; however, under unusual
conditions that make payment in cash disadvantageous to SBL Fund, SBL Fund
reserves the right to pay all, or part, of the redemption proceeds in liquid
securities with a market value equal to the redemption price ("redemption in
kind"). In the event of a redemption in kind of portfolio securities of SBL
Fund, it would be the responsibility of the shareholder to dispose of the
securities. The shareholder would be at risk that the value of the securities
would decline prior to their sale, that it would be difficult to sell the
securities, and that brokerage fees could be incurred.
REVENUE SHARING - Security Benefit and/or its affiliates may participate in
arrangements whereby they compensate, out of their own resources and at no
additional cost to SBL Fund or SBL Fund's shareholders, financial
representatives who sell Security Benefit or First Security's variable annuity
products that invest in the SBL Fund. The compensation received by such
financial representatives via these payments may be more or less than the
overall compensation received by the intermediaries in connection with the sale
of other investment products and may influence the products offered or
recommended by the intermediary Additional information about these arrangements
is provided in the prospectus of the variable life insurance or variable annuity
product or through a financial representative.
MARKET TIMING/SHORT-TERM TRADING - The Board of Directors has adopted policies
and procedures against market timing and the Series discourage market timing or
excessive trading. If you shareholder wishes to engage in such practices, we
request that he or she not purchase shares of any of the Series. Each Series
reserves the right to reject any request to purchase shares, including purchases
in connection with an exchange transaction, that it reasonably determines to be
market timing or excessive trading by a shareholder or accounts under common
control. Transactions placed through the same insurance company on an omnibus
basis may be rejected in whole or in part by a Series. Transactions accepted by
an insurance company in violation of the market timing/short-term trading
policies and procedures are not deemed accepted by the Series and may be
cancelled or revoked by the Series by the close of business on the next business
day following receipt.
The policies and procedures of the Series are intended to restrict transfers
that are disruptive to the Series or potentially disadvantageous to other
shareholders. Although the Series have adopted policies and procedures, the
Series are dependant upon insurance companies offering the Series' shares to
implement the policies and procedures to its contract owners investing in the
Series. When considering if certain restrictions or limitations should be
applied to shareholder transactions, the Series' policies and procedures take
into account, among other things, the following factors:
o the total dollar amount being transferred;
o the number of transfers made within the previous 12 months;
o transfers to and from (or from and to) the same Series;
o whether a shareholder's transfers appear to follow a pattern designed to
take advantage of short-term market fluctuations; and
o whether a shareholder's transfers appear to be part of a group of transfers
made by a third party on behalf of individual shareholders in the group.
If it is determined that a shareholder's transfer patterns among the Series are
disruptive or potentially disadvantageous to other shareholders, the Series'
policies and procedures require the insurance company to send the shareholder
(the insurance company's contract owner) a letter notifying the shareholder that
the insurance company is prohibiting the shareholder from making telephone
13
transfers or other electronic transfers and instead requiring that the
shareholder submit transfer requests in writing via regular U.S. mail for a
90-day period that begins on the date of the letter. In addition, the insurance
company will require that a shareholder submit subsequent transfer requests in
writing via regular U.S. mail for a 90-day period after the shareholder makes
four "round trip transfers" during any prior 12-month period. A "round trip
transfer" is a transfer involving $5,000 or more (1) from a Series followed by a
transfer to that Series or (2) to a Series followed by a transfer from that
Series, although SBL Fund reserves the right to consider transfers in lesser
amounts to constitute round trips.
DETERMINATION OF NET ASSET VALUE - The NAV of each Series is computed as of the
close of regular trading hours on the NYSE (normally 3 p.m. Central time) on
days when the NYSE 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.
Foreign securities are valued based on quotations from the primary market in
which they are traded, and are converted from the local currency into U.S.
dollars using current exchange rates. Foreign securities may trade in their
primary markets on weekends or other days when the Series does not price its
shares. Therefore, the NAV of Series holding foreign securities may change on
days when shareholders will not be able to buy or sell shares of the Series.
Portfolio securities and other investments are valued at market value when
market quotations are readily available. Securities traded on a domestic
securities exchange are valued at the last sale price on that exchange on the
day the valuation is made, provided, however, that securities listed on Nasdaq
will be valued at the Nasdaq Official Closing Price, which may not necessarily
represent the last sale price. If no sale is reported, the last current bid
price is used. Securities traded over-the-counter are valued at the last current
bid price. Market quotations for securities prices may be obtained from
automated pricing services. Investments in securities maturing in 60 days or
less may be valued at amortized cost.
When a market quotation for a security is not readily available (which may
include closing prices deemed to be unreliable because of the occurrence of a
subsequent event), the Investment Manager, in good faith, establishes a fair
value for the security in accordance with SBL Funds' valuation procedures.
MANAGEMENT OF THE ACQUIRING SERIES
INVESTMENT MANAGER - SMC is a Kansas limited liability company. On December 31,
2005, the aggregate assets of all of the mutual funds under the investment
management of SMC were approximately $5.5 billion. SMC has overall
responsibility for the management of the Acquiring Series. SBL Fund and SMC have
entered into an agreement that requires SMC to provide investment advisory,
statistical and research services to the SBL Fund's Series, supervise and
arrange for the purchase and sale of securities on behalf of the Acquiring
Series, and provide for the maintenance and compilation of records pertaining to
the investment advisory function. The agreement with SMC can be terminated by
the Board upon 60 days' written notice. The investment management fee for the
Acquiring Series is equal to 0.75%, on an annual basis, of the average daily net
assets of the Acquiring Series. The investment management fee is computed and
accrued daily and paid monthly. For the fiscal year ended December 31, 2005,
Series Y paid investment management fees of $240,285 to SMC.
PARENT COMPANY AND DISTRIBUTOR - SMC is controlled by its members, Security
Benefit and Security Benefit Corporation. Security Benefit, a life insurance
company, incorporated under the laws of Kansas is controlled by Security Benefit
Corporation. Security Benefit Corporation is wholly-owned by Security Benefit
Mutual Holding Company, One Security Benefit Place, Topeka, Kansas 66636-0001.
SMC is adirect, and Security Distributors is an indirect, wholly-owned
subsidiary of Security Benefit.
ADMINISTRATIVE AGENT - SMC also acts as the administrative agent for SBL Fund
and as such performs administrative functions and the bookkeeping, accounting
and pricing functions for the Acquiring Series. For these services, SMC
receives, on an annual basis, a fee of 0.095% of the average net assets of the
Acquiring Series, calculated daily and payable monthly.
Under a Transfer Agency Agreement dated February 1, 2004, SMC acts as the
transfer agent for the Series. As such, it processes purchase and redemption
transactions and acts as the dividend disbursing agent for the separate accounts
of SBL and its affiliated life insurance company to which shares of the Series
are sold. For this service, SMC receives the following fees with respect to each
Series:
1. Account Set-Up Charge - A fee of $4 to open an account on the
Investment Manager's transfer agency system to hold shares of the
Series.
2. Annual Maintenance Charge - An annual per account fee of (i) $8 per
open account for regular accounts; (ii) $6.50 per open account with
respect to accounts which are Matrix Level III pursuant to the
National Securities Clearing Corporation networking systems; and (iii)
$5 per account for closed accounts that remain outstanding on the
Investment Manager's transfer agency system (regardless of whether
such accounts are regular or Matrix Level III).
14
3. Transaction Charge - A per transaction charge of (i) $1.10 per
transaction for regular accounts; and (ii) $0.60 per transaction for
accounts that are Matrix Level III.
Each Series is also subject to a minimum fee per year of $25,000.
PORTFOLIO TRANSACTIONS - Transactions in portfolio securities shall be effected
in such manner as deemed to be in the best interests of SBL Fund and the Series.
In reaching a judgment relative to the qualifications of a broker-dealer
("broker") to obtain the best execution of a particular transaction, all
relevant factors and circumstances will be taken into account by the Investment
Manager, including the overall reasonableness of commissions paid to the broker,
the firm's general execution and operational capabilities and its reliability
and financial condition. The execution of portfolio transactions may be directed
to brokers who furnish investment information or research services to the
Investment Manager. Such information and research services include advice as to
the value of securities, the advisability of investing in, purchasing, or
selling securities, the availability of securities or purchasers or sellers of
securities, and furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy, and performance of
accounts. Such investment information and research services may be furnished by
brokers in many ways, including: (1) on-line data base systems, the equipment
for which is provided by the broker, that enable registrant to have real-time
access to market information, including quotations; (2) economic research
services, such as publications, chart services and advice from economists
concerning macroeconomic information; and (3) analytical investment information
concerning particular corporations.
If a transaction is directed to a broker supplying such information or services,
the transaction charges (i.e., a commission or a charge that is deemed to be the
equivalent of a commission) paid for such transaction may be in excess of the
transaction charges another broker would have charged for effecting that
transaction, provided that the Investment Manager shall have determined in good
faith that the transaction charges are reasonable in relation to the value of
the investment information or research services provided.
Portfolio transactions, including options, futures contracts and options on
futures transactions and the purchase or sale of underlying securities upon the
exercise of options, for the Series may be executed through an affiliate of the
Investment Manager to the extent and in the manner permitted by applicable law.
In addition, brokerage transactions may be placed with brokers who sell variable
contracts offered by Security Benefit or First Security or shares of the Series
managed by the Investment Manager and who may or may not also provide investment
information and research services.
PURCHASING AND HOLDING ACQUIRING SERIES SHARES - You may purchase and hold
shares of the Acquiring Series only indirectly through the purchase of a
variable annuity or variable life insurance contract issued by Security Benefit
or First Security. 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.
15
FINANCIAL HIGHLIGHTS FOR THE ACQUIRED AND ACQUIRING SERIES
The financial highlights table is intended to help you understand the financial
performance of the Acquired and Acquiring Series during the past five years.
Certain information reflects financial results for a single Series share. The
total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment assuming reinvestment of all dividends and
distributions. The total returns do not reflect fees and expenses associated
with an investment in variable insurance products through which shares of the
Acquiring Series are purchased and, if such fees and expenses were reflected,
the total returns would be lower. Information for the fiscal years ended
December 31, 2000 through December 31, 2005 has been derived from financial
statements that have been audited by Ernst & Young LLP, One Kansas City Place,
1200 Main Street, Kansas City, Missouri 64105, whose report, along with SBL
Fund's financial statements, is included in SBL Fund's annual report. SBL
Fund's annual report is available upon request.
- -------------------------------------------------------------------------------------------------------------------------
SERIES G
- -------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------
2005 2004 2003 2002 2001
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD......... $6.30 $6.10 $4.92 $ 6.75 $ 7.98
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................ --- 0.03 (0.02) (0.02)
Net gain (loss) on securities
(realized & unrealized).................. .21 0.17 1.18 (1.81) (1.21)
Total from investment operations............ 0.21 0.20 1.18 (1.83) (1.23)
LESS DISTRIBUTIONS:
Dividends (from net investment income)...... --- --- --- --- ---
Distributions (from capital gains).......... --- --- --- --- ---
Total distributions......................... --- --- --- --- ---
NET ASSET VALUE END OF PERIOD............... $6.51 $6.30 $ 6.10 $ 4.92 $ 6.75
TOTAL RETURN (A)............................ 3.33% 3.28% 23.98% (27.11)% (15.41)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)........ $51,772 $44,278 $46,457 $29,099 $15,689
Ratio of expenses to average net assets(b).. 0.95% 0.97% 1.19% 1.21% 1.23%
Ratio of net investment income
(loss) to average net assets............. 0.09% 0.50% (0.05)% (0.20)% (0.30)%
Portfolio turnover rate..................... 40% 63% 30% 48% 4%
- -------------------------------------------------------------------------------------------------------------------------
16
SERIES Y
- -------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------
2005 2004 2003 2002 2001
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD......... $9.02 $8.08 $6.86 $ 9.35 $10.38
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................ --- (0.01) --- (0.01) (0.02)
Net gain (loss) on securities
(realized & unrealized).................. 1.06 0.95 1.22 (2.48) (1.01)
Total from investment operations............ 1.06 0.94 1.22 (2.49) (1.03)
LESS DISTRIBUTIONS:
Dividends (from net investment income)...... --- --- --- --- ---
Distributions (from capital gains).......... --- --- --- --- ---
Total distributions......................... --- --- --- --- ---
NET ASSET VALUE END OF PERIOD............... $10.08 $9.02 $8.08 $ 6.86 $ 9.35
TOTAL RETURN (A)............................ 11.75% 11.63% 17.78% (26.63)% (9.92)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)........ $37,018 $33,832 $34,790 $34,286 $52,998
Ratio of expenses to average net assets..... 0.99% 0.95% 0.93% 0.89% 0.88%
Ratio of net investment income
(loss) to average net assets............. (0.04)% (0.15)% (0.01)% (0.18)% (0.20)%
Portfolio turnover rate..................... 28% 42% 49% 34% 38%
- -------------------------------------------------------------------------------------------------------------------------
(a) Total return does not take into account any of the expenses associated with
an investment in variable insurance products offered by Security Benefit
Life Insurance Company or its affiliated life insurance company. If such
expenses were reflected, the total return would be lower. Shares of a
series of SBL Fund are available only through the purchase of such
products.
(b) Expense ratios were calculated without the reduction for voluntary expense
waivers, and custodian earnings credits. Expense ratios with such
reductions would have been as follows:
- --------------------------------------------------------------------------------
2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------
Series G 1.20% 1.20% 1.19% 1.21% 1.22%
- --------------------------------------------------------------------------------
17
A-1
APPENDIX A
PLAN OF REORGANIZATION
THIS PLAN OF REORGANIZATION (the "Reorganization Plan") is adopted as of this
18th day of November, 2005, by SBL Fund (the "Company") with its principal place
of business at One Security Benefit Place, Topeka, Kansas 66636-0001, on behalf
of its Series G (Large Cap Growth Series) and Series Y (Select 25 Series).
This Reorganization 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 to which this Reorganization Plan applies (the "Reorganization")
will consist of the transfer of all of the assets of the Acquired Series to the
Acquiring Series in exchange solely for voting shares ($1.00 par value per
share) of the Acquiring Series (the "Acquiring Series Shares"); the assumption
by the Acquiring Series of all liabilities of the Acquired Series; and the
distribution of the Acquiring Series Shares to the shareholders of the Acquired
Series in complete liquidation of the Acquired Series as provided herein, all
upon the terms and conditions hereinafter set forth in this Reorganization Plan:
ACQUIRED SERIES ACQUIRING SERIES
Series G (Large Cap Growth Series) Series Y (Select 25 Series)
WHEREAS, the Company is an open-end, registered investment company of the
management type and the Acquired Series owns securities which generally are
assets of the character in which the Acquiring Series is permitted to invest;
WHEREAS, the Directors of the Company have determined that the exchange of all
of the assets of the Acquired Series for the Acquiring Series Shares and the
assumption of all liabilities of the Acquired Series by the Acquiring Series is
in the best interests of the Acquiring Series and its shareholders and that the
interests of the existing shareholders of the Acquiring Series 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 Series, that the exchange of all of the assets of the Acquired Series
for the Acquiring Series Shares and the assumption of all liabilities of the
Acquired Series by the Acquiring Series is in the best interests of the Acquired
Series and its shareholders and that the interests of the existing shareholders
of the Acquired Series would not be diluted as a result of this transaction;
NOW, THEREFORE, the Company, on behalf of the Acquiring Series and the Acquired
Series separately, hereby approves the Reorganization Plan on the following
terms and conditions:
TRANSFER OF ASSETS OF THE ACQUIRED SERIES TO THE ACQUIRING SERIES IN EXCHANGE
FOR THE ACQUIRING SERIES SHARES, THE ASSUMPTION OF ALL ACQUIRED SERIES
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED SERIES
1.1. Subject to the requisite approvals of the shareholders of the Acquired
Series and Acquiring Series 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 Series'
assets, as set forth in paragraph 1.2, to the Acquiring Series, and the
Acquiring Series agrees in exchange therefor: (i) to deliver to the
Acquired Series the number of full and fractional Acquiring Series
Shares determined by dividing the value of the Acquired Series' 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 Series 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
Series. Such transactions shall take place at the closing provided for
in paragraph 3.1 (the "Closing").
1.2. The assets of the Acquired Series to be acquired by the Acquiring
Series 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 Series
and any deferred or prepaid expenses shown as an asset on the books of
the Acquired Series on the closing date provided for in paragraph 3.1
(the "Closing Date").
A-1
1.3. The Acquired Series will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring
Series shall also assume all of the liabilities of the Acquired Series,
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 Series 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 Series will distribute to the Acquired Series'
shareholders of record, determined as of immediately after the close of
business on the Closing Date (the "Acquired Series Shareholders"), on a
pro rata basis, the Acquiring Series Shares received by the Acquired
Series pursuant to paragraph 1.1, and will completely liquidate. Such
distribution and liquidation will be accomplished, with respect to the
Acquired Series' shares, by the transfer of the Acquiring Series Shares
then credited to the account of the Acquired Series on the books of the
Acquiring Series to open accounts on the share records of the Acquiring
Series in the names of the Acquired Series Shareholders. The aggregate
net asset value of Acquiring Series Shares to be so credited to
Acquired Series Shareholders shall be equal to the aggregate net asset
value of the Acquired Series shares owned by such shareholders on the
Closing Date. All issued and outstanding shares of the Acquired Series
will simultaneously be canceled on the books of the Acquired Series,
although share certificates representing interests in shares of the
Acquired Series will represent a number of the Acquiring Series Shares
after the Closing Date, as determined in accordance with Section 2.3.
The Acquiring Series shall not issue certificates representing the
Acquiring Series Shares in connection with such exchange.
1.5. Ownership of Acquiring Series Shares will be shown on the books of the
Acquiring Series' transfer agent. Shares of the Acquiring Series will
be issued in the manner described in the Acquiring Series' then-current
prospectus and statement of additional information.
1.6. Any reporting responsibility of the Acquired Series 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
Series.
VALUATION
2.1. The value of the Acquired Series' assets to be acquired by the
Acquiring Series hereunder shall be the value of such assets computed
as of the close of business of the New York Stock Exchange (NYSE) 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"), the
then-current prospectus or statement of additional information with
respect to the Acquiring Series, and valuation procedures established
by the Company's Board of Directors.
2.2. The net asset value of the Acquiring Series Share shall be the net
asset value per share computed as of the close of business of the NYSE
and after the declaration of any dividends on the Valuation Date, using
the valuation procedures set forth in the Company's Articles of
Incorporation, the then-current prospectus or statement of additional
information with respect to the Acquiring Series, and valuation
procedures established by the Company's Board of Directors.
2.3. The number of Acquiring Series Shares to be issued (including
fractional shares, if any) in exchange for the Acquired Series' assets
shall be determined by dividing the value of the net assets of the
Acquired Series determined using the same valuation procedures referred
to in paragraph 2.1, by the net asset value of the Acquiring Series
Share, determined in accordance with paragraph 2.2.
2.4. All computations of value shall be made by the Acquiring Series'
designated record keeping agent.
A-2
CLOSING AND CLOSING DATE
3.1. The Closing Date shall be May 5, 2006, 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 the Custodian of the Acquired Series (the
"Custodian"), to deliver, at the Closing, a certificate of an
authorized officer stating that (i) the Acquired Series' portfolio
securities, cash, and any other assets ("Assets") shall have been
delivered in proper form to the Acquiring Series 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 Series' portfolio
securities represented by a certificate or other written instrument
shall be transferred and delivered by the Acquired Series as of the
Closing Date for the account of the Acquiring Series duly endorsed in
proper form for transfer in such condition as to constitute good
delivery thereof. The Acquired Series 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 Series.
3.3. Security Management Company, LLC, as transfer agent for the Acquired
Series (the "Transfer Agent"), shall deliver, on behalf of the Acquired
Series, at the Closing a certificate of an authorized officer stating
that its records contain the names and addresses of the Acquired Series
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 NYSE or another primary
trading market for portfolio securities of the Acquiring Series or the
Acquired Series shall be closed to trading or trading thereupon shall
be restricted, or (b) trading or the reporting of trading on the NYSE
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 Series or the Acquired Series 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.
REPRESENTATIONS AND WARRANTIES
4.1. The Company, on behalf of the Acquired Series, represents and warrants
to the Acquiring Series as follows:
(a) The Acquired Series 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 Series 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 Series and the prospectus and statement of
additional information of the Acquired Series used during the
three years previous to the
A-3
date of this Reorganization 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 Series will have good and
marketable title to the Acquired Series' assets to be
transferred to the Acquiring Series 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 Series 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 Series;
(f) The Acquired Series is not engaged currently, and the
execution, delivery and performance of this Reorganization
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 Series 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 Series is a party or by which it is bound;
(g) The Acquired Series has no material contracts or other
commitments (other than this Reorganization 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 Series, 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 Series 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 Series 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 Series as of and for
the year ended December 31, 2005 have been audited by Ernst &
Young, LLP, independent registered public accounting firm.
Such statements are in accordance with U.S. generally accepted
accounting principles ("GAAP") consistently applied, and such
statements (copies of which have been furnished to the
Acquiring Series) present fairly, in all material respects,
the financial condition of the Acquired Series as of such date
in accordance with GAAP, and there are no known contingent
liabilities of the Acquired Series required to be reflected on
the balance sheet or in the notes thereto;
(j) Since December 31, 2005, there has not been any material
adverse change in the Acquired Series' financial condition,
assets, liabilities or business, other than changes occurring
in the ordinary course of business, or any incurrence by the
Acquired Series of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as
otherwise disclosed to and accepted by the Acquiring Series.
For the purposes of this subparagraph (j), a decline in net
asset value per share of the Acquired Series due to declines
in market values of securities in the Acquired Series'
portfolio, the discharge of Acquired Series liabilities, or
the redemption of Acquired Series shares by shareholders of
the Acquired Series shall not constitute a material adverse
change;
(k) On the Closing Date, all Federal and other tax returns and
reports of the Acquired Series 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,
A-4
and to the best of the Acquired Series' 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 Series 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 Series 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 Series 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 Series, as provided
in paragraph 3.3. The Acquired Series does not have
outstanding any options, warrants or other rights to subscribe
for or purchase any of the shares of the Acquired Series, nor
is there outstanding any security convertible into any of the
Acquired Series shares;
(n) The adoption and performance of this Reorganization 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 Series, this Reorganization Plan will constitute
a valid and binding obligation of the Acquired Series,
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 Series 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 Series, represents and warrants
to the Acquired Series as follows:
(a) The Acquiring Series 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 Series, 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 Series 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 Series and the prospectus and statement of
additional information of the Acquiring Series used during the
three years previous to
A-5
the date of this Reorganization 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 Series will have good and
marketable title to the Acquiring Series' assets, free of any
liens of other encumbrances, except those liens or
encumbrances as to which the Acquired Series has received
notice and necessary documentation at or prior to the Closing;
(f) The Acquiring Series is not engaged currently, and the
execution, delivery and performance of this Reorganization
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 Series 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 Series is a party or by which it is bound;
(g) Except as otherwise disclosed in writing to and accepted by
the Acquired Series, 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 Series 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 Series 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 Series as of and for
the year ended December 31, 2005 have been audited by Ernst &
Young LLP, independent registered public accounting firm. Such
statements are in accordance with GAAP consistently applied,
and such statements (copies of which have been furnished to
the Acquired Series) present fairly, in all material respects,
the financial condition of the Acquiring Series as of such
date in accordance with GAAP, and there are no known
contingent liabilities of the Acquiring Series required to be
reflected on the balance sheet or in the notes thereto;
(i) Since December 31, 2005, there has not been any material
adverse change in the Acquiring Series' financial condition,
assets, liabilities or business, other than changes occurring
in the ordinary course of business, or any incurrence by the
Acquiring Series of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as
otherwise disclosed to and accepted by the Acquired Series.
For purposes of this subparagraph (i), a decline in net asset
value per share of the Acquiring Series due to declines in
market values of securities in the Acquiring Series'
portfolio, the discharge of Acquiring Series liabilities, or
the redemption of Acquiring Series Shares by shareholders of
the Acquiring Series, shall not constitute a material adverse
change;
(j) On the Closing Date, all Federal and other tax returns and
reports of the Acquiring Series 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 Series' 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 Series
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
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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 Series 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 Series does not have
outstanding any options, warrants or other rights to subscribe
for or purchase any Acquiring Series Shares, nor is there
outstanding any security convertible into any Acquiring Series
Shares;
(m) The adoption and performance of this Reorganization 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 Series and this
Reorganization Plan will constitute a valid and binding
obligation of the Acquiring Series, 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 Series Shares to be issued and delivered to the
Acquired Series, for the account of the Acquired Series
Shareholders, pursuant to the terms of this Reorganization
Plan, will on the Closing Date have been duly authorized and,
when so issued and delivered, will be duly and validly issued
Acquiring Series Shares, and will be fully paid and
non-assessable by the Company;
(o) The information to be furnished by the Acquiring Series 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 Series,
the Registration Statement relating to the Acquiring Series
Shares issuable hereunder, and the proxy materials of the
Acquired Series 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 Series
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 Series 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.
COVENANTS OF THE ACQUIRING SERIES AND THE ACQUIRED SERIES
5.1. The Acquiring Series and the Acquired Series 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 Series to consider and act
upon this Reorganization Plan and to take all other action necessary to
obtain approval of the transactions contemplated herein.
5.3. The Acquired Series covenants that the Acquiring Series 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
Reorganization Plan.
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5.4. The Acquired Series will assist the Acquiring Series in obtaining such
information as the Acquiring Series reasonably requests concerning the
beneficial ownership of the Acquired Series shares.
5.5. Subject to the provisions of this Reorganization Plan, the Acquiring
Series and the Acquired Series 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 Reorganization Plan.
5.6. As soon as is reasonably practicable after the Closing, the Acquired
Series will make a liquidating distribution to its shareholders
consisting of the Acquiring Series Shares received at the Closing.
5.7. The Acquiring Series and the Acquired Series shall each use its
reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent to effect the transactions contemplated by this
Reorganization Plan as promptly as practicable.
5.8. The Acquired Series covenants that it will, from time to time, as and
when reasonably requested by the Acquiring Series, 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 Series may reasonably deem necessary or desirable in
order to vest in and confirm the Acquiring Series' title to and
possession of all the assets and otherwise to carry out the intent and
purpose of this Reorganization Plan.
5.9. The Acquiring Series 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.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED SERIES
The obligations of the Acquired Series to consummate the transactions
provided for herein shall be subject, at the Acquired Series' election,
to the performance by the Acquiring Series 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 Series and the
Company contained in this Reorganization 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 Reorganization
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 Series shall have performed all of the
covenants and complied with all of the provisions required by this
Reorganization Plan to be performed or complied with by the Company and
the Acquiring Series on or before the Closing Date; and
6.3. The Acquired Series and the Acquiring Series shall have agreed on the
number of full and fractional Acquiring Series Shares to be issued in
connection with the Reorganization after such number has been
calculated in accordance with paragraph 1.1.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING SERIES
The obligations of the Acquiring Series to complete the transactions
provided for herein shall be subject, at the Acquiring Series'
election, to the performance by the Acquired Series 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
Series contained in this Reorganization 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 Reorganization
Plan, as of the Closing Date, with the same force and effect as if made
on and as of the Closing Date;
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7.2. The Company and the Acquired Series shall have performed all of the
covenants and complied with all of the provisions required by this
Reorganization Plan to be performed or complied with by the Company or
the Acquired Series on or before the Closing Date;
7.3. The Acquired Series and the Acquiring Series shall have agreed on the
number of full and fractional Acquiring Series 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 Series 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.
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING SERIES AND THE
ACQUIRED SERIES
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Series or the Acquiring
Series, the other party to this Reorganization Plan shall, at its
option, not be required to consummate the transactions contemplated by
this Reorganization Plan:
8.1. The Reorganization 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 Series 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 Series. Notwithstanding anything herein to the contrary,
neither the Acquiring Series nor the Acquired Series 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 Reorganization
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 Series or the Acquired Series 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
Series or the Acquired Series, 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 LLP 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
Reorganization 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 LLP determines that the
transaction contemplated by this Reorganization Plan does not qualify
as such. The delivery of such opinion is conditioned upon receipt by
Dechert LLP 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.
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BROKERAGE FEES AND EXPENSES
9.1. The Acquiring Series 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 Acquired Series shall bear one-half of the expenses relating to the
proposed 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 Series' prospectus
and the Acquired Series' 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.
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
The representations, warranties and covenants contained in this
Reorganization 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.
TERMINATION
This Reorganization 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
Reorganization Plan inadvisable.
AMENDMENTS
This Reorganization 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 Series pursuant to paragraph 5.2 of
this Reorganization Plan, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring
Series Shares to be issued to the Acquired Series Shareholders under
this Reorganization Plan to the detriment of such shareholders without
their further approval.
HEADINGS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
13.1. The Article and paragraph headings contained in this Reorganization
Plan are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Reorganization Plan.
13.2. This Reorganization 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 Reorganization 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 Reorganization 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.
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IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Reorganization Plan to be approved on behalf of the Acquiring Series and the
Acquired Series.
SBL FUND
By: /s/ Michael G. Odlum
------------------------
Name: Michael G. Odlum
Title: President
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APPENDIX B
SUMMARY OF PRINCIPAL RISKS AND INVESTMENT TECHNIQUES
PRINCIPAL RISKS
MARKET RISK - Equity securities fluctuate in price and their prices 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 changes in economic, political or financial
market conditions.
VALUE STOCKS - Investments in value stocks are subject to the risk that their
intrinsic values may never be realized by the market, or that their prices may
go down. While the Series' investments in value stocks may limit downside risk
over time, a Series may, as a trade-off, produce more modest gains than riskier
stock funds.
GROWTH STOCKS - Investments in growth stocks may lack the dividend yield that
can cushion stock prices in market downturns. Growth companies often are
expected to increase their earnings at a certain rate. If expectations are not
met, investors can punish the stocks, even if earnings do increase.
FOREIGN SECURITIES - Investing in foreign securities, including investing in
foreign securities through ADRs, involves additional risks such as differences
in financial reporting, accounting and auditing standards, a lack of adequate
company information, a lesser degree of regulatory and legal oversight of
securities markets and participants therein, nationalization, expropriation or
confiscatory taxation, currency fluctuations, and political instability or
adverse diplomatic developments. The risks may increase in underdeveloped
capital markets.
EQUITY DERIVATIVES - Equity derivatives include options, futures and options on
futures, which may be used to hedge a Series' portfolio, to increase returns or
to maintain exposure to a market without buying individual securities. These
investments may pose risks in addition to those associated with investing
directly in securities or other investments. These risks may include illiquidity
of the equity derivative, imperfect correlation with underlying investments or
the Series' other portfolio holdings, and lack of availability. Accordingly,
there is the risk that such practices may fail to serve their intended purposes,
and may reduce returns or increase volatility. These practices also entail
transactional expenses.
LEVERAGE - The use of derivatives may create leveraging risk. For example,
because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in an immediate and substantial impact
on the net asset value of the Series. Leveraging may cause the Series to be more
volatile than if it had not been leveraged. To mitigate leveraging risk, the
Series segregates liquid assets to meet its obligations under, or otherwise
covers, the transactions that may give rise to this risk.
NON-DIVERSIFICATION - A non-diversified Series may hold larger positions in a
smaller number of securities than a diversified Series. As a result, a change in
the market value of a single security may have a greater impact on a Series' net
asset value and total return. A non-diversified Series is expected to be more
volatile than a diversified Series.
INVESTMENT IN INVESTMENT COMPANIES OR INVESTMENT VEHICLES - Investment in other
investment companies or investment vehicles may include index-based investments
such as SPDRs (based on the S&P 500 Index), MidCap SPDRs (based on the S&P
MidCap 400 Index), Select Sector SPDRs (based on sectors or industries of the
S&P 500 Index), Nasdaq-100 Index Tracking Stocks (based on the Nasdaq-100 Index)
and DIAMONDS (based on the Dow Jones Industrial Average). Such index-based
investments are securities issued by an investment company or investment vehicle
whose shares are intended to closely track the performance of the applicable
index. To the extent a Series invests in other investment companies or
investment vehicles, it will incur its pro rata share of the underlying
investment companies' or investment vehicles' expenses, such as investment
advisory and other management expenses, and shareholders will be required to pay
the operating expenses of two investment companies or investment vehicles. In
addition, a Series will be subject to the effects of business and regulatory
developments that affect an underlying investment company or investment vehicle
or the investment company industry generally.
TYPES OF SECURITIES INVESTMENTS, INVESTMENT TECHNIQUES AND ASSOCIATED RISKS
The following is a summary of the principal types of securities in which each of
the Acquired and Acquiring Series may invest, strategies they may employ in
pursuit of their investment objectives, and the associated primary risks.
However, the fact that a particular risk is not identified does not mean that a
Series is prohibited from investing its assets in securities that give rise to
that risk.
FOREIGN SECURITIES - Foreign investments 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.
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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 Series may at times
be unable to sell its foreign investments at desirable prices. For the same
reason, a Series 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 Series.
EMERGING MARKETS - The risks associated with foreign investments are typically
increased in less developed and developing countries, which are sometimes
referred to as emerging markets. For example, political and economic structures
in these countries may be young and developing rapidly, which can cause
instability. These countries are also more likely to experience high levels of
inflation, deflation or currency devaluation, which could hurt their economies
and securities markets. For these and other reasons, investments in emerging
markets are often considered speculative.
SMALLER COMPANIES - Small- or medium-sized 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.
CONVERTIBLE SECURITIES AND WARRANTS - The Series 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).
ASSET-BACKED SECURITIES - An underlying pool of assets, such as credit card
receivables, automobile loans, or corporate loans or bonds back these bonds and
provides the interest and principal payments to investors. On occasion, the pool
of assets may also include a swap obligation, which is used to change the cash
flows on the underlying assets. As an example, a swap may be used to allow
floating rate assets to back a fixed rate obligation. Credit quality depends
primarily on the quality of the underlying assets, the level of credit support,
if any, provided by the issuer, and the credit quality of the swap counterparty,
if any. The underlying assets (i.e. loans) are subject to prepayments, which can
shorten the securities' weighted average life and may lower their return. The
value of these securities also may change because of actual or perceived changes
in the creditworthiness of the originator, the servicing agent, the financial
institution providing credit support, or swap counterparty.
INITIAL PUBLIC OFFERING - A Series' investment in securities offered through
initial public offerings (IPOs) may have a magnified performance impact, either
positive or negative, on any Series and particularly those with a small asset
base. There is no guarantee that as a Series' assets grow, they will continue to
experience substantially similar performance by investing in IPOs. A Series'
investments in IPOs may make it subject to more erratic price movements than the
overall equity market. Series X may be particularly susceptible to IPO risk.
HIGH YIELD SECURITIES - Higher yielding debt securities in the lower rating
(higher risk) categories of the recognized rating services are commonly referred
to as "junk bonds." The total return and yield of junk bonds can be expected to
fluctuate more than the total return and yield of higher-quality bonds. Junk
bonds (those rated below BBB or in default) are regarded as predominantly
speculative with respect to the issuer's continuing ability to meet principal
and interest payments. Successful investment in lower-medium and low-quality
bonds involves greater investment risk and is highly dependent on the Investment
Manager's credit analysis. A real or perceived economic downturn or higher
interest rates could cause a decline in high-yield bond prices by lessening the
ability of issuers to make principal and interest payments. These bonds are
often thinly-traded and can be more difficult to sell and value accurately than
high-quality bonds. Because objective pricing data may be less available,
judgment may play a greater role in the valuation process. In addition, the
entire junk bond market can experience sudden and sharp price swings due to a
variety of factors, including changes in economic forecasts, stock market
activity, large or sustained sales by major investors, a high-profile default,
or just a change in the market's psychology. This type of volatility is usually
associated more with stocks than bonds, but junk bond investors should be
prepared for it.
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HARD ASSET SECURITIES - Hard asset securities are equity securities of issuers
which 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.
GUARANTEED INVESTMENT CONTRACTS ("GICS") - When investing in GICs, a Series
makes cash contributions to a deposit fund of an insurance company's general
account. The insurance company then credits guaranteed interest to the deposit
fund on a monthly basis. The GICs provide that this guaranteed interest will not
be less than a certain minimum rate. The insurance company may assess periodic
charges against a GIC for expenses and service costs allocable to it, and the
charges will be deducted from the value of the deposit fund. A Series may invest
only in GICs that have received the requisite ratings by one or more nationally
recognized statistical ratings organizations. Because a Series may not receive
the principal amount of a GIC from the insurance company on 7 days' notice or
less, the GIC is considered an illiquid investment. In determining average
portfolio maturity, GICs will be deemed to have a maturity equal to the period
of time remaining until the next readjustment of the guaranteed interest rate.
FUTURES AND OPTIONS - The Series may utilize futures contracts, options on
futures and may purchase call and put options and write call and put options on
a "covered" basis. A call option is "covered" if a Series owns the security
underlying the call or has an absolute right to acquire the security without
additional cash consideration (or, if additional cash consideration is required,
cash or cash equivalents in such amount as are segregated by the Series'
custodian). 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. Those Series
which invest in non-dollar denominated foreign securities may also engage in
forward foreign currency transactions. The instruments listed above may be
bought or sold for any number of reasons, including: to manage exposure to
changes in securities prices and foreign currencies, 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 Series' total return, and the
potential loss from the use of futures can exceed the Series' initial investment
in such contracts.
HYBRID INSTRUMENTS - Certain hybrid instruments (which are derivatives) 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 Series may not be successful.
SWAPS, CAPS, FLOORS AND COLLARS - Interest rate and/or index swaps, and the
purchase or sale of related caps, floors and collars are used primarily to
preserve a return or spread on a particular investment or portion of its
portfolio as a technique for managing the portfolio's duration (i.e. the price
sensitivity to changes in interest rates) or to protect against any increase in
the price of securities the Series anticipates purchasing at a later date. To
the extent a Series enters into these types of transactions, it will be done to
hedge and not as a speculative investment, and the Series will not sell interest
rate caps or floors if it does not own securities or other instruments providing
the income the Series may be obligated to pay. Interest rate swaps involve the
exchange by the Series with another party of their respective commitments to pay
or receive interest on a notional amount of principal. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling the cap to the extent that a specified index exceeds a
predetermined interest rate. The purchase of an interest rate floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling the floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENT CONTRACTS - The price of "when
issued", "forward commitment" or "delayed delivery" securities 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 Series purchases securities on this
B-3
basis, there is a risk that the securities may not be delivered and that the
Series may incur a loss. Each Series may purchase or sell securities on a when
issued, forward commitment or delayed delivery basis.
CASH RESERVES - Cash reserves maintained by a Series may include domestic, and
for certain Series, foreign money market instruments as well as certificates of
deposit, bank demand accounts and repurchase agreements. The Series may
establish and maintain reserves as the Investment Manager believes is advisable
to facilitate the Series' cash flow needs (e.g., redemptions, expenses and,
purchases of portfolio securities) or for temporary, defensive purposes.
SHARES OF OTHER INVESTMENT VEHICLES - A Series' investment in shares of other
investment vehicles may not exceed immediately after purchase 10% of the Series'
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 vehicles has the effect of requiring shareholders to pay the
operating expenses of two mutual funds.
BORROWING - While the Series have no present intention of borrowing for
investment purposes, the Series may borrow up to one-third of total assets for
purposes of investment. Borrowings may be collateralized with Series assets. To
the extent that a Series purchases securities while it has outstanding
borrowings, it may be deemed to be 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 the Series' 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
Series 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 - For purposes of realizing additional income, the Series 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 the
Investment Manager to be of good standing and will not be made unless, in the
judgment of the Investment Manager, the consideration to be earned from such
loans would justify the risk.
PORTFOLIO TURNOVER - Although the Series will not generally trade for short-term
profits, circumstances may warrant a sale without regard to the length of time a
security was held. A high turnover rate may increase transaction costs.
B-4
APPENDIX C
PERFORMANCE UPDATE
SERIES G
- ------------------------------------------------------------------- ----------------------------------------------------------------
SERIES G VS. RUSSELL 1000 GROWTH INDEX AVERAGE ANNUAL RETURNS
- ------------------------------------------------------------------- ----------------------------- -------- -------- ----------------
PERIODS ENDED 12-31-05(1) 1 YEAR 5 YEARS SINCE INCEPTION
(5-1-00)
- ------------------------------------------------------------------- ----------------------------- -------- -------- ----------------
Series G 3.33% -3.99% -7.29%
- ------------------------------------------------------------------- ................................................................
(1) Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company or First Security Benefit Life Insurance and Annuity
Company of New York. If returns had taken into account these fees and
expenses, performance would have been lower. Shares of a Series of SBL Fund
are available only through the purchase of such products. The performance
data quoted above represents past performance. Past performance is not
predictive of future performance. The investment return and principal value
of an investment will fluctuate so that an investor's shares, which
redeemed, may be worth more or less than their original cost.
Line Chart:
Series G Russell 1000 Growth
5/1/2000 $10,000.00 $10,000.00
12/31/2000 $7,980.00 $7,603.20
12/31/2001 $6,750.00 $6,050.69
12/31/2002 $4,920.00 $4,363.25
12/31/2003 $6,100.00 $5,662.10
12/31/2004 $6,300.00 $6,018.96
12/31/2005 $6,510.00 $6,336.28
$10,000 SINCE INCEPTION
This chart assumes a hypothetical $10,000 investment in Series G (Large Cap
Growth Series) on May 1, 2000 (date of inception) and reflects the fees and
expenses of Series G.
SERIES Y
- ------------------------------------------------------------------- ----------------------------------------------------------------
SERIES Y VS. S&P 500 INDEX AND AVERAGE ANNUAL RETURNS
RUSSELL 1000 GROWTH INDEX
- ------------------------------------------------------------------- ----------------------------- -------- -------- ----------------
PERIODS ENDED 12-31-05(1) 1 YEAR 5 YEARS SINCE INCEPTION
(5-3-99)
- ------------------------------------------------------------------- ----------------------------- -------- -------- ----------------
Series Y 1.75% -0.58% 0.12%
- ------------------------------------------------------------------- ................................................................
(1) Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company or First Security Benefit Life Insurance and Annuity
Company of New York. If returns had taken into account these fees and
expenses, performance would have been lower. Shares of a Series of SBL Fund
are available only through the purchase of such products. The performance
data quoted above represents past performance. Past performance is not
predictive of future performance. The investment return and principal value
of an investment will fluctuate so that an investor's shares, which
redeemed, may be worth more or less than their original cost.
Line Chart:
Series Y S&P 500 Russell 1000
5/3/1999 $10,000.00 $10,000.00 $10,000.00
12/31/1999 $12,370.00 $11,099.83 $12,503.51
12/31/2000 $10,380.00 $10,091.15 $9,699.57
12/31/2001 $9,350.00 $8,893.97 $7,719.01
12/31/2002 $6,860.00 $6,929.34 $5,566.29
12/31/2003 $8,080.00 $8,917.03 $7,223.28
12/31/2004 $9,020.00 $9,886.55 $7,678.53
12/31/2005 $1,080.00 $10,370.15 $8,083.34
$10,000 SINCE INCEPTION
This chart assumes a hypothetical $10,000 investment in Series Y (Select 25
Series) on May 3, 1999 (date of inception), and reflects the fees and expenses
of Series Y. Series Y changed its benchmark index to the Russell 1000 Growth
Index. The Investment Manager has determined that the Russell 1000 Growth Index
is a more appropriate index than the S&P 500 Index, which is a capitalization-
weighted index composed of 500 selected common stocks that represent the broad
domestic economy and is a widely recognized unmanaged index of market
performance, because the Russell 1000 Growth Index more closely reflects the
types of securities in which the Series invests and thus provides shareholders
with a more appropriate benchmark against which to compare the Series'
performance.
C-1
APPENDIX D
As of the Record Date, the name, address, and share ownership of persons who
owned of record or beneficially 5% or more of the outstanding shares of the
Acquired Series are set forth below:
SBL Fund, Series G (Large Cap
Growth Series)
Shares
Shareholder and Address Owned % Owned
Security Benefit Life Insurance Company
Topeka KS
VOTE TODAY BY MAIL,
TOUCH-TONE PHONE OR THE INTERNET
CALL TOLL FREE 1-866-437-4667
OR LOG ON TO WWW.MYPROXYONLINE.COM SECURITY BENEFIT
SBL FUND
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0001
(TOLL-FREE) 1-800-888-2461
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
APRIL 28, 2006
The undersigned hereby appoint(s) Donald A. Chubb, Jr., Amy J. Lee and Brenda M.
Harwood, or any one of them, proxies, each of them with full power of
substitution, to vote and act with respect to all shares of SBL Fund, Series G,
which the undersigned is entitled to vote at the Special Meeting of SBL Fund
shareholders to be held at the executive offices of SBL Fund, One Security
Benefit Topeka, Kansas 66636, April 28, 2006 at 1:00 p.m. (Central time) and at
any adjournment(s) or postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card
will be voted as instructed. IF NO SPECIFICATION IS MADE, THE PROXY CARD WILL BE
VOTED "FOR" PROPOSAL 1.
- FOLD AND DETACH HERE -
.................................................................................
SBL FUND, SERIES G
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 28, 2006
Please vote, date and sign this proxy card and return it promptly in the
enclosed envelope. Please indicate your vote by an "x" in the appropriate box
below:
1. To approve a Plan of Reorganization providing for the acquisition of
all of the assets and liabilities of SBL Fund, Series G (Large Cap
Growth Series) (the "Acquired Series") by SBL Fund, Series Y (Select 25
Series) (the "Acquiring Series"), solely in exchange for shares of the
Acquiring Series, followed by the complete liquidation of the Acquired
Series.
FOR AGAINST ABSTAIN
|_| |_| |_|
PLEASE VOTE BY
CHECKING THE
APPROPRIATE BOX
AS IN THIS EXAMPLE |X|
Date: ____________________________
__________________________________
Signature
PROXY VOTING INSTRUCTIONS
Your mailed proxy statement provides details on important issues relating to
your Series. The board of directors of SBL Fund recommends that you vote "FOR"
the proposal.
To make voting faster and more convenient for you, we are offering a variety of
ways to vote your proxy. You may vote using the Internet or by telephone instead
of completing and mailing the enclosed proxy card. The Internet and telephone
are generally available 24 hours a day and your vote will be confirmed and
posted immediately. Use whichever method is most convenient for you! If you
choose to vote via the Internet or by phone, you should not mail your proxy
card.
WAYS TO VOTE YOUR SHARES
Your vote is important no matter how many shares you own. Voting your shares
early will avoid costly follow-up mail and telephone solicitation.
- ------------------------- --------------------------------------------------------------------------------------------
1. Click on www.myproxyonline.com.
Online 2. Enter the 12 digit control number.
3. Follow the instructions on the Web site.
4. Once you have voted, you do not need to mail your proxy card.
- ------------------------- --------------------------------------------------------------------------------------------
1. Call toll-free 1-866-437-4675.
By Phone 2. Enter the 12 digit control number.
3. Follow the recorded instructions.
4. Once you have voted, you do not need to mail your
proxy card
- ------------------------- --------------------------------------------------------------------------------------------
Complete and sign your proxy card and mail it in the postage-paid envelope received with
By Mail your shareholder mailing. To ensure your vote is validated properly, please sign your
proxy card as described in the "Instructions for Signing Proxy Cards" section of your
proxy materials.
- ------------------------- --------------------------------------------------------------------------------------------
In Person The Shareholder Meeting will take place April 28, 2006, at 1:00p.m., Central time, at the
office of SBL Fund, located at One Security Benefit Place, Topeka, Kansas.
- ------------------------- --------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
- --------------------------------------------------------------------------------
Questions?
We urge you to spend time reviewing your proxy statement and the proposal
included in the package. Should you have any questions, we encourage you to call
1-866-304-2059 toll-free Monday through Friday from 9:30 a.m. to 10:00 p.m.
Eastern time. We have retained InvestorConnect to assist our shareholders in the
voting process. If we have not received your proxy card by April __, 2006,
representatives from InvestorConnect may call you to remind you to exercise your
vote
YOUR PROXY VOTE IS IMPORTANT! PLEASE VOTE TODAY
PART B
SBL FUND
- --------------------------------------------------------------------------------
Statement of Additional Information
April 3, 2006
- --------------------------------------------------------------------------------
Acquisition of the Assets and Liabilities of: By and in Exchange for Shares of:
SBL Fund, Series G (Large Cap Growth Series) ("Series G") SBL Fund, Series Y (Select 25 Series) ("Series Y")
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
Series G in connection with a proposed transaction whereby all of the assets and
liabilities of Series G will be transferred to Series Y in exchange for shares
of Series Y.
This Statement of Additional Information of Series Y consists of this cover
page, the accompanying pro forma financial statements and related notes, 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, 2005;
and
2. The Financial Statements of Series G and Series Y as included in SBL
Fund's Annual Report filed for the year ended December 31, 2005 and
Semiannual Report for the period ended June 30, 2005.
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus dated April 3, 2006 relating to the reorganization may be
obtained, without charge, by writing to Security Management Company, LLC, 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
Proxy Statement/Prospectus.
Pro Forma Combining
STATEMENT OF ASSETS AND LIABILITIES PRO FORMA
DECEMBER 31, 2005 (Unaudited) SBL G SBL Y ADJUSTMENTS COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value(1).................................... $53,697,941 $37,591,827 $91,289,768
Repurchase agreement, at value(1)........................... - $306,000 306,000
Cash........................................................ 549,540 744 550,284
Receivables:
Fund shares sold......................................... 189,070 316,092 505,162
Dividends................................................ 33,276 15,139 48,415
Prepaid expenses............................................ 849 562 1,411
---------------------------------------------------------------------
Total assets................................................ 54,470,676 38,230,364 92,701,040
---------------------------------------------------------------------
LIABILITIES:
Payable for:
Securities purchased..................................... 2,609,432 1,145,585 3,755,017
Fund shares redeemed..................................... 39,838 18,971 58,809
Written options, at value (Premiums received $18,771).... - 9,000 9,000
Management fees.......................................... 33,153 23,134 56,287
Custodian fees........................................... 81 1,200 1,281
Transfer agent and administration fees................... 6,343 5,049 11,392
Professional fees........................................ 7,743 7,481 15,224
Other.................................................... 2,190 2,085 4,275
---------------------------------------------------------------------
Total liabilities........................................... 2,698,780 1,212,505 3,911,285
---------------------------------------------------------------------
NET ASSETS.................................................. $51,771,896 $37,017,859 $88,789,755
=====================================================================
NET ASSETS CONSIST OF:
Paid in capital............................................. $ 64,614,422 $ 50,432,085 $ 115,046,507
Accumulated undistributed net investment income ............ 40,003 0 40,003
Accumulated undistributed net realized loss on sale of
investments.............................................. (17,773,446) (20,768,691) (38,542,137)
Net unrealized appreciation in value of investments and
written options.......................................... 4,890,917 7,354,465 12,245,382
---------------------------------------------------------------------
Net assets.................................................. $51,771,896 $37,017,859 $88,789,755
=====================================================================
Capital shares authorized................................... Indefinite indefinite Indefinite
Capital shares outstanding.................................. 7,946,827 3,673,845 5,136,101 8,809,946
Net asset value per share (net assets divided by shares
outstanding)............................................. $6.51 $10.08 $10.08
=====================================================================
(1)Investments, at cost..................................... $48,807,024 $30,553,133 $79,360,157
2
Pro Forma Combining
STATEMENT OF OPERATIONS PRO FORMA
FOR THE YEAR ENDED DECEMBER 31, 2005 (Unaudited) SBL G SBL Y ADJUSTMENTS COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................ $417,801 $258,589 $676,390
Interest................................................. 46,063 46,069 92,132
---------------------------------------------------------------------
Total investment income.................................. 463,864 304,658 768,522
---------------------------------------------------------------------
EXPENSES:
Management fees.......................................... 447,820 240,285 (111,955)(1) 576,150
Custodian fees........................................... 2,595 5,858 (2,595)(2) 5,858
Transfer agent/maintenance fees.......................... 25,116 25,131 (25,116)(2) 25,131
Administration fees...................................... 40,757 29,128 69,885
Directors' fees.......................................... 2,610 1,702 4,312
Professional fees........................................ 12,066 10,865 (7,931)(2) 15,000
Reports to shareholders.................................. 4,696 3,695 8,391
Other expenses........................................... 2,049 1,655 3,704
---------------------------------------------------------------------
Total expenses........................................... 537,709 318,319 (147,597) 708,431
Less: Expenses waived.................................... (111,955) - 111,955(1) -
Earnings credits applied........................... (1,893) - 1,893(1) -
---------------------------------------------------------------------
Net expenses............................................. 423,861 318,319 (33,749) 708,431
---------------------------------------------------------------------
Net investment income (loss)............................. 40,003 (13,661) 33,749 60,091
---------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain during the year:
Investments.............................................. 672,246 1,552,451 2,224,697
---------------------------------------------------------------------
Net realized gain........................................ 672,246 1,552,451 2,224,697
---------------------------------------------------------------------
Net unrealized appreciation during the year:
Investments.............................................. 983,969 2,058,436 3,042,405
Options written.......................................... - 9,771 9,771
---------------------------------------------------------------------
Net unrealized appreciation.............................. 983,969 2,068,207 3,052,176
---------------------------------------------------------------------
Net realized and unrealized gain......................... 1,656,215 3,620,658 5,276,873
---------------------------------------------------------------------
Net increase in net assets resulting from operations..... $1,696,218 $3,606,997 33,749 $5,336,964
=====================================================================
1. Based on contract in efect for the surviving fund.
2. Decrease due to the elimination of duplicative expenses by merging the funds.
3
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES ProForma Combining MARKET VALUE
- ------------------------------------------------- Schedule of Investments ----------------------------------------------
SERIES G SERIES Y TOTAL December 31, 2005 (Unaudited) SERIES G SERIES Y TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 97.0%
AEROSPACE & DEFENSE - 5.0%
10,800 - 10,800 General Dynamics Corporation 1,231,740 - 1,231,740
- 21,300 21,300 L-3 Communications Holdings, Inc. - 1,583,655 1,583,655
28,300 - 28,300 United Technologies Corporation 1,582,253 - 1,582,253
----------------------------------------------
2,813,993 1,583,655 4,397,648
----------------------------------------------
AIR FREIGHT & LOGISTICS - 4.1%
17,400 18,200 35,600 FedEx Corporation 1,798,986 1,881,698 3,680,684
----------------------------------------------
BIOTECHNOLOGY - 2.3%
12,200 13,700 25,900 Amgen, Inc.* 962,092 1,080,382 2,042,474
----------------------------------------------
BROADCASTING & CABLE TV - 3.4%
65,300 36,300 101,600 Univision Communications, Inc.* 1,919,167 1,066,857 2,986,024
----------------------------------------------
COMMUNICATIONS EQUIPMENT - 7.7%
116,000 204,000 320,000 3Com Corporation* 417,600 734,400 1,152,000
47,229 64,742 111,971 ADC Telecommunications, Inc.* 1,055,086 1,446,336 2,501,422
73,500 63,300 136,800 Cisco Systems, Inc.* 1,258,320 1,083,696 2,342,016
19,500 - 19,500 Qualcomm, Inc. 840,060 - 840,060
----------------------------------------------
3,571,066 3,264,432 6,835,498
----------------------------------------------
CONSTRUCTION & ENGINEERING - 3.0%
- 93,000 93,000 Shaw Group, Inc.* - 2,705,370 2,705,370
----------------------------------------------
CONSUMER FINANCE - 1.3%
22,500 - 22,500 American Express Company 1,157,850 - 1,157,850
----------------------------------------------
DATA PROCESSING & OUTSOURCED
SERVICES - 3.5%
39,300 33,700 73,000 First Data Corporation 1,690,293 1,449,437 3,139,730
----------------------------------------------
DRUG RETAIL - 1.8%
59,900 - 59,900 CVS Corporation 1,582,558 - 1,582,558
----------------------------------------------
ELECTRICAL COMPONENTS & EQUIPMENT -
0.7%
100,100 - 100,100 Power-One, Inc.* 602,602 - 602,602
----------------------------------------------
EXCHANGE TRADED FUNDS - 3.6%
25,200 18,000 43,200 iShares Russell 1000 Growth Index
Fund 1,286,460 918,900 2,205,360
17,400 - 17,400 iShares S&P 500 Growth Index Funds 1,031,646 - 1,031,646
----------------------------------------------
2,318,106 918,900 3,237,006
----------------------------------------------
ELECTRIC UTILITIES - 2.6%
- 134,700 134,700 KFx, Inc.* - 2,304,717 2,304,717
----------------------------------------------
GENERAL MERCHANDISE STORES - 0.5%
8,000 - 8,000 Target Corporation 439,760 - 439,760
----------------------------------------------
HEALTH CARE EQUIPMENT - 5.5%
31,900 26,900 58,800 Medtronic, Inc. 1,836,483 1,548,633 3,385,116
22,400 - 22,400 Zimmer Holdings, Inc.* 1,510,656 - 1,510,656
----------------------------------------------
3,347,139 1,548,633 4,895,772
----------------------------------------------
HEALTH CARE SERVICES - 2.6%
28,100 19,000 47,100 Covance, Inc.* 1,364,255 922,450 2,286,705
----------------------------------------------
HOME IMPROVEMENT RETAIL - 3.2%
44,000 25,900 69,900 Home Depot, Inc. 1,781,120 1,048,432 2,829,552
----------------------------------------------
HOTELS, RESORTS & CRUISE LINES -
4.1%
37,800 30,800 68,600 Carnival Corporation 2,021,166 1,646,876 3,668,042
----------------------------------------------
4
NUMBER OF SHARES MARKET VALUE
- ------------------------------------------------- ----------------------------------------------
SERIES G SERIES Y TOTAL SERIES G SERIES Y TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
HYPERMARKETS & SUPERCENTERS - 3.0%
32,600 25,400 58,000 Wal-Mart Stores, Inc. 1,525,680 1,188,720 2,714,400
----------------------------------------------
INDUSTRIAL CONGLOMERATES - 2.4%
60,700 - 60,700 General Electric Company 2,127,535 - 2,127,535
----------------------------------------------
INDUSTRIAL GASES - 1.7%
- 28,400 28,400 Praxair, Inc. - 1,504,064 1,504,064
----------------------------------------------
MANAGED HEALTH CARE - 1.3%
18,800 - 18,800 UnitedHealth Group, Inc. 1,168,232 - 1,168,232
----------------------------------------------
MOVIES & ENTERTAINMENT - 3.0%
44,400 36,200 80,600 Viacom, Inc. (Cl.B) 1,447,440 1,180,120 2,627,560
----------------------------------------------
MULTI-LINE INSURANCE - 4.2%
32,800 22,300 55,100 American International Group, Inc. 2,237,944 1,521,529 3,759,473
----------------------------------------------
OIL & GAS EQUIPMENT & SERVICES -
3.7%
43,600 45,500 89,100 BJ Services Company 1,598,812 1,668,485 3,267,297
----------------------------------------------
OIL & GAS STORAGE & TRANSPORTATION
- 3.5%
67,700 68,000 135,700 Williams Companies, Inc. 1,568,609 1,575,560 3,144,169
----------------------------------------------
OTHER DIVERSIFIED FINANCIAL
SERVICES - 4.3%
20,200 14,000 34,200 Citigroup, Inc. 980,306 679,420 1,659,726
25,900 38,500 64,400 First Marblehead Corporation1 851,074 1,265,110 2,116,184
----------------------------------------------
1,831,380 1,944,530 3,775,910
----------------------------------------------
PHARMACEUTICALS - 2.9%
21,400 20,600 42,000 Johnson & Johnson 1,286,140 1,238,060 2,524,200
----------------------------------------------
SEMICONDUCTOR EQUIPMENT - 0.4%
- 145,000 145,000 Mindspeed Technologies, Inc.* - 340,750 340,750
----------------------------------------------
SEMICONDUCTORS - 2.6%
22,700 - 22,700 Analog Devices, Inc. 814,249 - 814,249
154,300 - 154,300 Applied Micro Circuits Corporation* 396,551 - 396,551
44,400 - 44,400 Intel Corporation 1,108,224 - 1,108,224
----------------------------------------------
2,319,024 - 2,319,024
----------------------------------------------
SOFT DRINKS - 1.4%
9,300 11,700 21,000 PepsiCo, Inc. 549,444 691,236 1,240,680
----------------------------------------------
SYSTEMS SOFTWARE - 2.2%
74,800 - 74,800 Microsoft Corporation 1,956,020 - 1,956,020
----------------------------------------------
TRADING COMPANIES & DISTRIBUTORS -
1.6%
19,900 - 19,900 W.W. Grainger, Inc. 1,414,890 - 1,414,890
----------------------------------------------
TRUCKING - 3.5%
79,400 58,200 137,600 J.B. Hunt Transport Services, Inc. 1,797,616 1,317,648 3,115,264
----------------------------------------------
TOTAL COMMON STOCKS (series Y
cost $28,247,847, series G
cost $45,308,002, total
cost $73,555,850) 50,198,919 35,592,541 85,791,460
----------------------------------------------
COMMERCIAL PAPER - 4.0%
BANKING - 1.2%
1,000,000 - 1,000,000 UBS Finance (De) Inc., 4.28%,
01-03-06 999,762 - 999,762
----------------------------------------------
BROKERAGE - 2.8%
- 1,000,000 1,000,000 Goldman Sachs Group Inc., 4.32%,
01-03-06 - 999,758 999,758
1,500,000 - 1,500,000 Morgan Stanley, 4.43%, 01-04-06 1,499,446 - 1,499,446
----------------------------------------------
1,499,446 999,758 2,499,204
----------------------------------------------
5
NUMBER OF SHARES MARKET VALUE
- ------------------------------------------------- ----------------------------------------------
SERIES G SERIES Y TOTAL SERIES G SERIES Y TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (series
Y cost $999,758, series G
cost $2,499,208, total cost
$3,498,966) 2,499,208 999,758 3,498,966
----------------------------------------------
ASSET BACKED COMMERCIAL PAPER - 1.1%
FINANCIAL COMPANIES - TRADE
RECEIVABLES - 1.1%
- 1,000,000 1,000,000 Sheffield Receivables Corporation,
4.25%, 01-05-06 - 999,528 999,528
----------------------------------------------
TOTAL ASSET BACKED COMMERCIAL PAPER
(series Y cost $999,528, series G
cost $0, total cost $999,528) - 999,528 999,528
----------------------------------------------
U.S. GOVERNMENT SPONSORED AGENCIES
- 1.1%
1,000,000 - 1,000,000 Federal Home Loan Bank, 3.35%,
01-03-06 999,814 - 999,814
----------------------------------------------
TOTAL U.S. GOVERNMENT SPONSORED
AGENCIES
(series Y cost $0, series G cost
$999,814, total cost $999,814) 999,814 - 999,814
----------------------------------------------
REPURCHASE AGREEMENT - 0.4%
- 306,000 306,000 United Missouri Bank, 3.78%, dated
12-30-05, matures 01-03-06;
repurchase amount of $306,129
(Collateralized by U.S. Treasury
Notes, 2.375%, 08-15-06 with a
value of $312,978) - 306,000 306,000
---------------
TOTAL REPURCHASE AGREEMENT
(series Y cost $306,000,
series G cost $0, total cost
$306,000)
TOTAL INVESTMENTS - 103.2%
(series Y cost $30,553,133,
series G cost $48,807,024,
total
cost $79,360,157) 53,697,941 37,897,827 91,595,768
CASH & OTHER ASSETS, LESS
LIABILITIES - (3.2%) (1,926,045) (879,968) (2,806,013)
----------------------------------------------
TOTAL NET ASSETS - 100.0% $51,771,896 $37,017,859 $88,789,755
==============================================
For federal income tax purposes, the identified cost of investments owned at
December 31, 2005 was $80,187,005.
* Non-income producing security
1 A portion of this security is segregated as collateral for written options
contracts.
6
SBL FUND - SERIES Y (SELECT 25 SERIES)
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS
DECEMBER 31, 2005
(UNAUDITED)
1. DESCRIPTION OF FUND
Series Y (Select 25 Series) ("Acquiring Fund"), a series of SBL Fund, is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company of the series type.
2. BASIS OF COMBINATION
The accompanying pro forma financial statements are presented to show the effect
of the proposed acquisition of Series G (Large Cap Growth Series), a series of
SBL Fund, by Series Y as if such acquisitions had taken place as of January 1,
2005.
Under the terms of the Plan of Reorganization, the combination of Series G with
Series Y will be accounted for by the method of accounting for tax-free mergers
of investment companies. The acquisition would be accomplished by an acquisition
of the net assets of Series G in exchange for shares of Series Y at net asset
value. The statement of assets and liabilities and the related statement of
operations of Series G and Series Y have been combined as of and for the twelve
months ended December 31, 2005. Following the acquisition, Series Y will be the
accounting survivor. In accordance with U.S. generally accepted accounting
principles , the historical cost of investment securities will be carried
forward to the surviving fund and the results of operations for pre-combination
periods of the surviving fund will not be restated.
The accompanying pro-forma financial statements should be read in conjunction
with the financial statements of Series G and Series Y included in their
respective annual reports dated December 31, 2005.
The following notes refer to the accompanying pro forma financial statements as
if the above-mentioned acquisition of Series G by Series Y had taken place as of
January 1, 2005.
3. PORTFOLIO VALUATION
Valuations of the Fund's securities are supplied by pricing services approved by
the Board of Directors. The Fund's officers, under the general supervision of
the Board of Directors, regularly review procedures used by, and valuations
provided by, the pricing services. Each security owned by a Fund that is listed
on a securities exchange is valued at its last sale price on that exchange on
the date as of which assets are valued. Where the security is listed on more
than one exchange, the Fund will use the price of that exchange that it
generally considers to be the principal exchange on which the stock is traded.
Securities listed on the Nasdaq Stock Market, Inc. ("Nasdaq") will be valued at
the Nasdaq Official Closing 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 Fund's investment manager, then the securities are
valued in good faith by such method as the Board of Directors determines will
reflect the fair value. If events occur after the close of the foreign exchange
that will affect the value of a fund's portfolio securities before the time as
of which NAV is calculated (a "significant event"), the security will generally
be priced using a fair value procedure. If the Valuation Committee determines a
significant event has occurred, it will evaluate the impact of that event on an
affected security or securities, to determine whether a fair value adjustment
would materially affect the Fund's net asset value per share. Some of the
factors which may be considered by the Board of Directors in determining fair
value are fundamental analytical data relating to the investment; the nature and
duration of any restrictions on disposition; trading in similar securities of
the same issuer or comparable companies; information from broker-dealers; and an
evaluation of the forces that influence the market in which the securities are
purchased and sold. The Fund generally will value short-term debt securities at
prices based on market quotations for such securities or securities of similar
type, yield, quality and duration, except those securities purchased within 60
days or less to maturity are valued on the basis of amortized cost which
approximates market value.
Generally, trading in foreign securities markets is substantially completed each
day at various times prior to the close of the New York Stock Exchange. The
values of foreign securities are determined as of the close of such foreign
markets or the close of the New York Stock Exchange, if earlier. All investments
quoted in foreign currency are valued in U.S. dollars on the basis of the
foreign currency exchange rates prevailing at the close of business. Investments
in foreign securities may involve risks not present in domestic investments. The
Valuation Committee will determine the current value of such foreign securities
by taking into consideration certain factors which may include those discussed
above, as well as the following factors, among others: the value of the
securities traded on other foreign markets, ADR trading, closed-end fund
trading, foreign currency exchange activity, and the trading prices of financial
7
products that are tied to foreign securities such as WEBS(R). In addition, the
Board of Directors has authorized the Valuation Committee and Administrator to
use prices and other information supplied by IDC's Fair Value Information
Service in valuing foreign securities. Since foreign securities may be
denominated in a foreign currency and involve settlement and pay interest or
dividends in foreign currencies, changes in the relationship of these foreign
currencies to the U.S. dollar can significantly affect the value of the
investments and earnings of the Fund. Foreign investments may also subject the
Series to foreign government exchange restrictions, expropriation, taxation or
other political, social or economic developments, all of which could affect the
market and/or credit risk of the investments.
4. CAPITAL SHARES
The pro forma net asset value per share assumes the issuance of shares of Series
Y that would have been issued at December 31, 2005, in connection with the
proposed reorganization. The number of shares assumed to be issued is equal to
the net asset value of shares of Series G as of December 31, 2005, divided by
the net asset value per share of the shares of Series Y as of December 31, 2005.
The pro forma number of shares outstanding for the combined fund consists of the
following at December 31, 2005:
ADDITIONAL SHARES TOTAL
SHARES OF SERIES Y ASSUMED ISSUED IN OUTSTANDING SHARES
PRE-COMBINATION REORGANIZATION POST-COMBINATION
---------------------------------------------------------------------
Series Y 3,673,845 5,136,101 8,809,946
5. FEDERAL INCOME TAXES
Each series has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code. After the acquisition, Series Y intends to continue
to qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the provisions available
to certain investment companies, as defined in applicable sections of the
Internal Revenue Code, and to make distributions of taxable income sufficient to
relieve it from all, or substantially all, federal income taxes.
8
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 Registrant's Bylaws, dated 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 Fifteen:
"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) Not Applicable
(6) Investment Advisory Contract(g)
(7) Distribution Agreement(a)
(8) Not Applicable
(9) (a) Custodian Agreement - UMB Bank, n.a.(e)
(b) Custodian Agreement - State Street Bank (f)
(c) Custodian Agreement - Banc of America (a)
(10) Form of Shareholder Service Agreement(d)
(11) Opinion of Counsel (filed herewith)
(12) Opinion and Consent of Counsel Supporting Tax Matters and Consequences
(to be filed by subsequent amendment)
(13) Administrative Services and Transfer Agency Agreement(a)
(14) Consent of Independent Registered Public Accounting Firm (filed
herewith)
(15) Not Applicable
(16) Powers of Attorney(h)
(17) Not Applicable
(a) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 45 to Registration Statement
No. 2-59353 on Form N-1A on February 14, 2003.
(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 on February 16, 2000.
(c) See Appendix A to the Proxy Statement/Prospectus.
(d) Incorporated herein by reference to the Exhibits filed with Security
Income Fund's Post-Effective Amendment No. 71 to Registration Statement
No. 2-38414 on Form N-1A on January 11, 2002.
(e) Incorporated herein by reference to the Exhibits filed with Security
Income Fund's Post-Effective Amendment No. 73 to Registration Statement
2-38414 (filed January 10, 2003).
(f) Incorporated herein by reference to the Exhibits filed with Security
Equity Fund's Post-Effective Amendment No. 94 to Registration Statement
2-19458 (filed January 14, 2003).
(g) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 47 to Registration Statement
No. 2-59353 (filed June 10, 2003).
(h) Incorporated herein by reference to the Exhibits filed with Security
Equity Fund's Registration Statement Filing No. 333-132032 on Form N-14
on February 24, 2006.
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
2
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.
3
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 6th day of March, 2006.
SBL FUND
By: /s/ MICHAEL G. ODLUM
--------------------
Michael G. Odlum
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 6th day of March, 2006.
SBL FUND
By: /s/ MICHAEL G. ODLUM
John D. Cleland Michael G. Odlum, as President and
Chairman of the Board and Director Director, and as Attorney-In-Fact
for the Officers and Directors
Donald A. Chubb, Jr. whose names appear opposite
Director
Penny A. Lumpkin /s/ BRENDA M. HARWOOD
Director Brenda M. Harwood, Treasurer
(Principal Financial Officer)
Harry W. Craig, Jr.
Director
Maynard Oliverius
Director
Jerry B. Farley
Director
4
EXHIBIT INDEX
(11) Opinion of Counsel
(14) Consent of Independent Registered Public Accounting Firm
5