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Securities Act File No. ___
As filed with the Securities and Exchange Commission on August 29, 2008
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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 Investors, 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 October 3, 2008
pursuant to Rule 488 under the Securities Act of 1933, as amended.
No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended.
SBL Fund
One Security Benefit Place
Topeka, KS 66636-0001
(Toll Free) (800) 888-2461
October 1, 2008
Dear Policyowner:
The Board of Directors (the "Board") of SBL Fund has called a special meeting of
shareholders of Series H (Enhanced Index Series) (the "Acquired Series"), a
series of SBL Fund, to be held on November 14, 2008 at 1:00 PM (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 the Acquired Series into Series Z
(Alpha Opportunity Series) (the "Acquiring Series"), another series of SBL Fund
(the "Reorganization"). Security Investors, LLC serves as investment manager to
both the Acquired and Acquiring Series. As a result of the Reorganization,
shareholders of the Acquired Series would become shareholders of the Acquiring
Series. Each Series currently is available as an investment option under your
insurance contract.
After careful consideration, the Board has unanimously approved this proposal
with respect to the Acquired Series and recommends that shareholders of the
Acquired Series vote "FOR" the proposal. Accordingly, you are asked to authorize
the Reorganization.
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, vote by Internet or by 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 11:59 P.M. ON
NOVEMBER 13, 2008.
We appreciate your participation and prompt response in this matter and thank
you for your continued support.
Sincerely,
/s/ Richard M. Goldman
Richard M. Goldman
President
SBL Fund
One Security Benefit Place
Topeka, KS 66636-0001
(Toll Free) (800) 888-2461
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
SERIES H (ENHANCED INDEX SERIES)
TO BE HELD NOVEMBER 14, 2008
To the Shareholders:
The Board of Directors of SBL Fund has called a special meeting of shareholders
of Series H (Enhanced Index Series) (the "Acquired Series"), a series of SBL
Fund, to be held on November 14, 2008 at 1:00 PM 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 by Series Z (Alpha
Opportunity Series) (the "Acquiring Series"), a series of SBL Fund, 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 September 29, 2008 are
entitled to notice of, and to vote at, the Special Meeting. Your attention is
called to the accompanying Proxy Statement/Prospectus. You are requested to
complete, date, and sign the enclosed proxy card and return it promptly in the
envelope provided for that purpose. Your proxy card also provides instructions
for voting via telephone or the Internet, if you wish to take advantage of these
voting options. Proxies may be revoked at any time by executing and submitting a
revised proxy, by giving written notice of revocation to SBL Fund, or by voting
in person at the Special Meeting.
By Order of the Board of Directors
/s/ Amy J. Lee
Amy J. Lee
Secretary
October 1, 2008
TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
SUMMARY ..........................................................................................................................4
THE PROPOSED REORGANIZATION..............................................................................................4
COMPARISON OF INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, RISKS AND MANAGEMENT OF THE
ACQUIRED AND THE ACQUIRING SERIES........................................................................................5
PRINCIPAL RISKS OF INVESTING IN THE SERIES...............................................................................8
COMPARISON OF FEES AND EXPENSES FOR ACQUIRED AND ACQUIRING SERIES................................................................11
COMPARISON OF ANNUAL OPERATING EXPENSES.................................................................................11
EXAMPLE ................................................................................................................11
COMPARISON OF SERIES PERFORMANCE.................................................................................................12
PERFORMANCE OF THE SERIES...............................................................................................12
ADDITIONAL INFORMATION ABOUT THE ACQUIRING SERIES................................................................................14
INVESTMENT MANAGER......................................................................................................14
SUB-ADVISERS............................................................................................................14
PORTFOLIO MANAGERS......................................................................................................14
FORM OF ORGANIZATION....................................................................................................15
INFORMATION ABOUT THE REORGANIZATION.............................................................................................15
THE REORGANIZATION PLAN.................................................................................................15
REASONS FOR THE REORGANIZATION..........................................................................................16
BOARD CONSIDERATIONS....................................................................................................16
TAX CONSIDERATIONS......................................................................................................16
IMPORTANT INFORMATION ABOUT PORTFOLIO TRANSITIONING.....................................................................16
EXPENSES OF THE REORGANIZATION..........................................................................................17
DIVIDENDS AND OTHER DISTRIBUTIONS.......................................................................................17
CAPITALIZATION OF THE SERIES............................................................................................17
GENERAL INFORMATION..............................................................................................................17
OTHER BUSINESS..........................................................................................................17
PROXY SOLICITATION......................................................................................................17
SHAREHOLDER VOTING......................................................................................................17
VOTE REQUIRED...........................................................................................................18
INVESTMENT MANAGER, ADMINISTRATOR, TRANSFER AGENT AND PRINCIPAL UNDERWRITER.............................................18
SHAREHOLDER REPORTS.....................................................................................................18
SHAREHOLDER PROPOSALS...................................................................................................18
INFORMATION ABOUT THE SERIES............................................................................................19
MORE INFORMATION REGARDING THE SERIES............................................................................................20
PURCHASE AND REDEMPTION OF SHARES.......................................................................................20
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REVENUE SHARING PAYMENTS................................................................................................20
MARKET TIMING/SHORT-TERM TRADING........................................................................................20
DISTRIBUTIONS AND FEDERAL INCOME TAX CONSIDERATIONS.....................................................................21
DETERMINATION OF NET ASSET VALUE........................................................................................22
MANAGEMENT OF THE ACQUIRING SERIES......................................................................................22
INVESTMENT MANAGER AND INVESTMENT ADVISORY AGREEMENT....................................................................22
ADMINISTRATIVE AGENT....................................................................................................22
TRANSFER AGENT..........................................................................................................22
FINANCIAL HIGHLIGHTS FOR THE ACQUIRING SERIES....................................................................................24
APPENDIX A - PLAN OF REORGANIZATION.............................................................................................A-1
APPENDIX B - ADDITIONAL INVESTMENT TECHNIQUES AND ASSOCIATED RISKS..............................................................B-1
APPENDIX C- PERFORMANCE UPDATE..................................................................................................C-1
APPENDIX D - OWNERSHIP INFORMATION..............................................................................................D-1
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PROXY STATEMENT
FOR
SERIES H (ENHANCED INDEX SERIES)
(a series of SBL Fund)
PROSPECTUS
FOR
SERIES Z (ALPHA OPPORTUNITY SERIES)
(a series of SBL Fund)
One Security Benefit Place
Topeka, Kansas 66636-0001
(Toll Free) (800) 888-2461
INTRODUCTION
At a meeting held on August 15, 2008, the Board of Directors (the "Board") of
SBL Fund approved a Plan of Reorganization (the "Reorganization Plan") relating
to the proposed reorganization of Series H (Enhanced Index Series) (the
"Acquired Series") into Series Z (Alpha Opportunity Series) (the "Acquiring
Series") (collectively, the "Series"), both of which are series of SBL Fund.
Each Series currently is available as an investment option under your insurance
contract. This Proxy Statement/Prospectus provides you with information about
this proposed reorganization.
If shareholders of the Acquired Series approve the proposed reorganization, the
Acquired Series will transfer all of its assets and liabilities to the Acquiring
Series in exchange solely for shares of the Acquiring Series (the
"Reorganization"). Following the transfer of its assets and liabilities to the
Acquiring Series in exchange for shares of the Acquiring Series, the Acquired
Series will distribute to you your pro rata portion of the shares of the
Acquiring Series that it receives in the Reorganization. You will receive shares
of the Acquiring Series having an aggregate value equal to the aggregate value
of shares of the Acquired Series held by you immediately prior to the
Reorganization. Following the Reorganization, the Acquired Series will
liquidate.
This Proxy Statement/Prospectus solicits your vote in connection with a special
meeting ("Special Meeting") of shareholders of the Acquired Series, to be held
on November 14, 2008, at which shareholders of the Acquired Series will vote on
the Reorganization Plan through which the Reorganization 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 October 1,
2008 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 August 18, 2008,
each of which is incorporated herein by reference (File No. 002-59353) and is
available, without charge, by calling (800) 888-2461. The SBL Fund annual report
for the fiscal year ended December 31, 2007 and the SBL Fund semi-annual report
for the six month period ended June 30, 2008 are also incorporated herein by
reference (File No. 811-02753).
You may obtain proxy materials, reports and other information filed by SBL Fund
from the SEC's Public Reference Section (1-202-551-8090) 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: OCTOBER 1, 2008
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SUMMARY
You should read this entire Proxy Statement/Prospectus and accompanying
materials 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 August 15, 2008, the Board of Directors of SBL
Fund ("Board") approved the Reorganization Plan. 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 on November 21, 2008, 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 of
the Acquired Series 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 Acquired Series and Acquiring Series each will each bear one-third of the
expenses relating to the Reorganization and Security Investors, LLC, the Funds'
investment manager (the "Investment Manager" or "Security Investors"), will bear
the remaining one-third of the expenses relating to the Reorganization.
Shareholders in the Acquired Series are expected to benefit from the larger
asset base as a result of the Reorganization and will become shareholders of the
Acquiring Series which has a stronger investment performance record than the
Acquired Series over the past one- and three-year periods and has had
performance superior to the record of the Standard & Poor's 500(R) Composite
Stock Price Index (the "S&P 500 Index"), which is the Series' common benchmark
index, over these periods. (Shareholders should note, however, that past
performance is not an indication of future results.)
Approval of the Reorganization Plan 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 and the Acquiring Series have different
investment objectives and principal investment strategies. The Acquired
Series' investment objective is to seek to outperform the S&P 500 Index
while the Acquiring Series' investment objective is to seek long-term
growth of capital. The Acquired Series pursues its objective by investing
at least 80% of its net assets (including any borrowings for investment
purposes) in equity securities of companies in the S&P 500 Index and
futures contracts representative of the stocks that make up the index. The
Acquiring Series pursues its objective by investing approximately 37.5% of
its total assets according to a long/short strategy with an emphasis on
securities of domestic issuers, 37.5% of its total assets according to a
long/short strategy with an emphasis on securities of non-U.S. issuers, and
25% of its total assets in a portfolio of equity securities, equity
derivatives and fixed income securities that is intended to closely track
the performance of the S&P 500 Index.
o Security Investors, One Security Benefit Place, Topeka, Kansas 66636-0001,
serves as investment adviser for both Series; however, while only Northern
Trust Investments, N.A. ("NTI"), 50 South LaSalle Street, Chicago, Illinois
60603, serves as a sub-adviser to, and directly manages the assets of, the
Acquired Series, three different entities: (i) Mainstream Investment
Advisers, LLC ("Mainstream"), 101 West Spring Street, Fourth Floor, New
Albany, Indiana 47150, (ii) Security Global Investors, LLC ("SGI"), and
(iii) Security Investors each directly manage 37.5%, 37.5% and 25% of the
total assets of the Acquiring Series, respectively.
o As a result of the proposed Reorganization, shareholders of the Acquired
Series would invest in the Acquiring Series that is more actively traded
and managed and therefore could potentially be subject to higher investment
risks.
4
o As a result of the proposed Reorganization, shareholders of the Acquired
Series will incur higher investment advisory fee and total and net annual
operating expenses.
o The share purchase, exchange and redemption provisions for each Series are
the same. For additional information on purchase and redemption provisions,
see "More Information Regarding the 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."
o If the Reorganization is approved by shareholders, certain holdings of the
Acquired Series could be sold shortly prior to the Closing. The Investment
Manager may also sell portfolio securities that the Acquiring Series
acquired from the Acquired Series after the Closing. In addition, both
Series may engage in transition management techniques to facilitate the
portfolio transition process. Such sales and purchases could result in
increased transaction costs, all or part of which are ultimately borne by
shareholders.
COMPARISON OF INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, RISKS AND
MANAGEMENT OF THE ACQUIRED AND THE ACQUIRING SERIES
The investment objectives, principal investment strategies, and risks of the
Series are similar in several respects. The chart below summarizes the primary
similarities and differences between the Series' investment objectives,
principal investment strategies and principal risks. There can be no assurance
that a Series will achieve its stated objective.
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THE ACQUIRED SERIES THE ACQUIRING SERIES
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INVESTMENT OBJECTIVE Outperform the S&P Index Long-term growth of capital
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BENCHMARK S&P 500 Index S&P 500 Index
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PRINCIPAL INVESTMENT The Series seeks to outperform the S&P 500 The Series pursues its objective by investing,
STRATEGIES Index through stock selection resulting in under normal market conditions, approximately
different weightings of common stocks 37.5% of its total assets according to a
relative to the index. The Series pursues long/short strategy with an emphasis on
its objective by investing, under normal securities of domestic issuers managed by
market conditions, at least 80% of its net Mainstream (the "Mainstream Sub-Portfolio"),
assets (including any borrowings for one of the Series' sub-advisers, 37.5% of its
investment purposes) in equity securities total assets according to a long/short strategy
of companies in the S&P 500 Index and futures with an emphasis on securities of non-U.S.
contracts representative of the stocks issuers managed by SGI (the "SGI
that make up the index. Sub-Portfolio"), another of the Series'
sub-advisers, and 25% of its total assets,
managed directly by the Investment Manager, in
a portfolio of equity securities, equity
derivatives and fixed income securities (the
"Investment Manager Sub-Portfolio") that
is intended to closely track the performance
of the S&P 500 Index. Mainstream, SGI and
the Investment Manager each manages its
allocation of the Series' assets according
to its respective strategy, and their
trading decisions are made independently.
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INVESTMENT MANAGER Security Investors, LLC Security Investors, LLC
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SUB-ADVISERS Northern Trust Investments, N.A. ("NTI") Mainstream Investment Advisers, LLC ("Mainstream") and
Security Global Investors, LLC ("SGI")
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PORTFOLIO MANAGERS Steven M. Bowser and Mark Lamb, each a portfolio manager of
Security Investors
Peter C. Stournaras, a portfolio manager William H. Jenkins and Charles F. Craig, each a portfolio
of NTI manager of Mainstream
John Boich, Scott F. Klimo and David Whittall, each a
portfolio manager of SGI
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COMPARISON SIMILAR o The Acquired Series' principal investment strategies are to invest in
OF PRINCIPAL STRATEGIES equity securities of companies in the S&P 500 Index and futures
INVESTMENT contracts representative of the stocks that make up the index. About
STRATEGIES 25% of the total assets of the Acquiring Series is invested in equity
derivatives whose value depends on, or is "derived" from, the value of
the S&P 500 Index.
o Each Series may invest a portion of its assets in options and futures
contracts.
o Under adverse or unstable market conditions, the Series could invest
some or all of its assets in cash, repurchase agreements and money
market instruments of foreign or domestic issuers and the U.S. and
foreign governments.
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DIFFERENCES THE ACQUIRED SERIES
IN o The Investment Manager has engaged Northern Trust Investments, N.A.
STRATEGIES ("NTI") to provide investment advisory services to the Series as a
sub-adviser. Using a quantitative discipline, NTI determines whether
the Series should, relative to the proportion of the S&P 500 Index that
the stock represents, (1) overweight - invest more in a particular
stock, (2) underweight - invest less in a particular stock, or (3) hold
a neutral position in the stock - invest a similar amount in a
particular stock. In addition, NTI may determine that certain S&P 500
stocks should not be held by the Series in any amount. NTI believes
that its quantitative criteria will result in a portfolio with an
overall risk similar to that of the S&P 500 Index.
o The Series also may invest a portion of its assets in options and
futures contracts. These instruments may be used to hedge the Series'
portfolio, to increase return potential or to maintain exposure to the
equity markets. In addition, to enhance return potential, the Series
may invest a limited portion of its assets in equity securities that
are not included in the S&P 500 Index.
THE ACQUIRING SERIES
o The Series has a target allocation of approximately 37.5% of total
assets in the Mainstream Sub-Portfolio, 37.5% of the total assets in
the SGI Sub-Portfolio and 25% of total assets in the Investment Manager
Sub-Portfolio to be managed in accordance with the respective
strategies of each sub-portfolio. All daily cash inflows and outflows
will be allocated to the Investment Manager Sub-Portfolio of the
Series. Approximately once a month, the Investment Manager will review
the allocations in each of the sub-portfolios. When the Investment
Manager Sub-Portfolio is greater than 25% or less than 15% of the
Series' total assets, the Investment Manager usually will rebalance the
Series' portfolio by reallocating the assets among the sub-portfolios
so that the Series returns to the target allocation. The Investment
Manager will also usually rebalance the SGI and Mainstream
Sub-Portfolios of the Series when the difference between those
sub-portfolios is more than 10% of the Series' total assets so that the
percentage of the Series' total assets in each of the Mainstream and
SGI Sub-Portfolios returns to approximately 37.5%.
o The Series may invest up to 50% of its net assets in foreign
securities, not including ADRs. ADRs are dollar-denominated receipts
issued generally by U.S. banks, which represent the deposit with the
bank of a foreign company's securities. ADRs are publicly traded on
exchanges or over-the-counter in the United States. Each of the Series'
sub-portfolios can invest in foreign securities although the SGI
Sub-Portfolio will invest a larger portion of its assets in foreign
securities so that the assets in the SGI Sub-Portfolio generally will
be diversified among investments in a number of different countries
throughout the world. The Series may invest in issuers of any size,
including small-capitalization issuers.
o STRATEGIES OF THE MAINSTREAM SUB-PORTFOLIO: The Series pursues its
domestic long/short strategy by investing primarily in publicly-traded
equity securities, principally common stocks, but to a lesser degree in
exchange traded funds and other securities with equity characteristics.
If there are an insufficient number of available securities meeting the
purchase criteria of Mainstream, the Series may also hold a portion of
its assets in cash and money market instruments, and such holdings may
be substantial. Dividend and interest income will be an incidental
consideration. The Series may engage in short sales of securities
believed to be overvalued.
o Mainstream seeks to identify individual stocks with solid underlying
financial fundamentals, trading at levels representing value relative
to the market generally. Mainstream uses technical and fundamental
methods of analysis to choose stocks for the Series' portfolio. The
technical analyses used include a relative strength index ("RSI"),
price moving averages and price relative to historical market averages.
o Mainstream also uses bottom-up analysis by evaluating the 2,000 or so
most actively traded stocks in the marketplace. The bottom-up analysis
reviews stock prices in relationship to their stock price moving
averages and ranks them by their RSIs. A purchase candidate is
identified as a stock that is at fair value or undervalued to the
marketplace. A sale candidate is identified as a stock that is
expensive or overbought. These action candidates are then grouped by
industry. Mainstream prefers that the candidates are concentrated in a
particular industry. Mainstream also considers the industry and
underlying financial fundamentals of the action candidates. Where the
fundamentals are positive relative to their valuations, the stocks may
be purchased. Stocks with high RSIs may be sold. Stocks with high RSIs
and deteriorating fundamentals may be sold short.
o A top-down evaluation of the stock and bond markets, primarily based on
their RSIs, is also used. A high RSI may indicate that the marketplace
is expensive or overbought; conversely, a low RSI may indicate that the
marketplace is inexpensive or oversold. Mainstream uses the RSI in
combination with an analysis of the short-term outlook for corporate
earnings, interest rates, currencies and commodities to determine the
overall stock to cash and long stock to short stock allocations.
o Mainstream actively manages its portion of the Series' portfolio and
will buy and sell securities frequently. This active trading will
increase the costs the Series incurs and may increase the amount of tax
an investor pays on the Series' returns.
o STRATEGIES OF THE SGI SUB-PORTFOLIO: The Series pursues a global
long/short strategy by holding long (purchasing) foreign and domestic
common stocks or convertible stocks of companies SGI believes will
outperform the market
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6
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and by selling short those securities believed to
be overvalued or expected to underperform the market.
o SGI may also invest a portion of the Series' assets in options, futures
contracts and foreign currencies, which may be used to hedge its
portion of the Series' portfolio, to increase returns or to maintain
exposure to the equity markets. SGI may engage in short sales of
securities believed to be overvalued or expected to underperform the
market. SGI may also invest in emerging market countries.
o SGI uses both quantitative and qualitative techniques to identify long
and short investment opportunities. SGI's universe of securities begins
with the 5,000 largest publicly traded companies globally. Through
quantitative screening and fundamental analysis, SGI narrows the
universe of securities to a list of long and short investment
opportunities. SGI then builds a portfolio of securities designed to
maximize the absolute returns of the sub-portfolio from SGI's selection
methodology while working to maintain prudent risk controls.
o SGI will consider buying a security that is not currently held in its
sub-portfolio when the security candidate has passed through the
research process and SGI believes that there is a potential for upside
price movement over the following year with a return to risk ratio that
meets SGI's criteria. In the case of a security already held in its
sub-portfolio, SGI will consider adding to the position in the event
the security has been unusually weak in the market based on SGI's
analysis and SGI continues to believe that the one year price objective
is valid. SGI will consider selling a security if SGI believes that the
price objective is no longer valid. SGI may also reduce a position in
its sub-portfolio with respect to a security if the position approaches
its price objective and the risk/return is deteriorating. SGI makes
additions and reductions in its portion of the Series' portfolio and
will buy and sell securities frequently. This active trading will
increase the costs the Series incurs and may increase the amount of tax
an investor pays on the Series' returns.
o STRATEGIES OF THE INVESTMENT MANAGER SUB-PORTFOLIO: With respect to the
portion of the Series that it manages, the Investment Manager seeks
investment returns that are similar to those of the S&P 500 Index by
primarily investing in equity derivatives, such as futures contracts,
options on futures contracts, and equity options. An equity derivative
is a financial instrument whose value depends on, or is "derived" from,
the value of an underlying asset or index, such as the S&P 500 Index.
Using S&P 500 equity derivatives, the Investment Manager can obtain
investment exposure to the S&P 500 Index equal to the net asset value
of the portion of the Series that it manages with a fraction of the
assets that would be needed to purchase an equivalent amount of equity
securities directly. Getting magnified investment exposure on a small
investment is referred to as "leverage," and it can increase the
volatility of the Series' performance. However, because the Series
ultimately is responsible for the entire amount of the investment
exposure under an equity derivative, the Investment Manager will manage
the remainder of its portion of the Series so that any leverage
achieved through equity derivatives is completely offset by other
investments. While there are a number of ways of offsetting the
leverage achieved through equity derivatives, the Investment Manager
generally will do so by investing in fixed income securities in an
amount sufficient to meet the Series' obligations under the equity
derivatives.
o The Investment Manager actively manages the fixed income securities
with a view toward enhancing the Series' total return and recouping
some of the transaction and financing costs associated with investing
in equity derivatives, which are reflected in the operating costs of
the Series. The Series' overall portfolio duration for its investments
in fixed income securities is normally not expected to exceed one year.
The fixed income securities in which the Series may invest include
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; corporate debt securities of U.S. issuers, including
mortgage backed and other asset-backed securities; and bank
certificates of deposit, fixed time deposits and bankers' acceptances.
o Although the Investment Manager does not normally invest this portion
of the Series' portfolio directly in S&P 500 securities, when equity
derivatives appear to be overvalued relative to the S&P 500 Index, the
Series may invest in a "basket" of S&P 500 stocks. The S&P 500 Index is
a well known stock market index composed of 500 selected common stocks
that represent approximately two-thirds of the total market value of
all U.S. common stocks. Individual stocks are selected based on an
analysis of the historical correlation between the return of every S&P
500 stock and the return of the S&P 500 Index itself. The Investment
Manager may employ fundamental analysis of factors such as earnings and
earnings growth, price to earnings ratio, dividend growth, and cash
flows to choose among stocks that satisfy the correlation tests. Stocks
chosen for the Series are not limited to those with any particular
weighting in the S&P 500 Index. The Series may also invest in exchange
traded funds based on the S&P 500 Index, such as Standard & Poor's
Depositary Receipts.
- ------------------------------------------------------------------------------------------------------------------------------------
7
- ---------------- ------------- -----------------------------------------------------------------------------------------------------
COMPARISON SIMILAR o Under adverse or unstable market conditions, each Series' policies
OF PRINCIPAL RISKS allow it to invest some or all of its assets in cash, repurchase
RISKS agreements and 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 shares the following principal investment risks:
o Equity Derivatives Risk
o Growth Stocks Risk
o Leverage Risk
o Market Risk
A summary description of each of these risks, as well as other principal
investment risks associated with an investment in the Series, is provided below
under "Principal Risks of Investing in the Series." In addition, Appendix B
contains additional information regarding other investment strategies and risk
considerations of the Series.
- ---------------- ------------- -----------------------------------------------------------------------------------------------------
DIFFERENCES o In addition to the above risks, the Acquiring Series is also subject to
IN RISKS the following principal investment risks:
o Active Trading Risk
o Credit Risk
o Emerging Markets Risk
o Foreign Securities Risk
o Interest Rate Risk
o Investment in Investment Companies Risk
o Management Risk
o Overweighting Risk
o Short Sales Risk
o Smaller Companies Risk
o Value Stocks Risk
A summary description of these risks is provided below under "Principal Risks of
Investing in the Series."
- ---------------- ------------- -----------------------------------------------------------------------------------------------------
PRINCIPAL RISKS OF INVESTING IN THE SERIES - The discussion below provides more
information about the principal risks of investing in the Series. Each Series
may invest in various types of securities or use certain investment techniques
to achieve its objective. The following is a summary of the principal risks
associated with such securities and investment techniques. As with any security,
an investment in a Series involves certain risks, including loss of principal.
The Series are subject to varying degrees of financial, market and credit risk.
An investment in the Series is not a deposit of a bank and is not insured by the
Federal Deposit Insurance Corporation or any other government agency. The fact
that a particular risk is not identified means only that it is not a principal
risk of investing in the Series, but it does not mean that a Series is
prohibited from investing its assets in securities or other assets that give
rise to that risk. Please refer to Appendix B for information about additional
investment techniques that the Series may utilize and related risks.
ACTIVE TRADING RISK -- Active trading will increase the costs a Series incurs
and, as a result, may lower a Series' performance.
CREDIT RISK -- It is possible that some issuers of fixed-income securities will
not make payments on debt securities held by a Series, or there could be
defaults on repurchase agreements held by a Series. The risk may be especially
acute with respect to high yield securities (i.e., "junk bonds") and
asset-backed securities. Also, an issuer may suffer adverse changes in financial
condition that could lower the credit quality of a security, leading to greater
volatility in the price of the security and in shares of a Series. A change in
the quality rating of a bond can affect the bond's liquidity and make it more
difficult for a Series to sell.
LEVERAGE RISK -- 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 a Series. Leveraging may cause a Series to be more
volatile than if it had not been leveraged. To mitigate leveraging risk, a
Series segregates liquid assets to meet its obligations under, or otherwise
covers, the transactions that may give rise to this risk.
EQUITY DERIVATIVES RISK -- 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. In addition, when a Series sells covered call options, it receives
cash but limits its opportunity to profit from an increase in the market value
of the security beyond the exercise price (plus the premium received). The gain
may be less than if the Series had not sold an option on the underlying
security. 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.
8
SHORT SALES RISK -- A short sale entails selling a borrowed security with the
expectation that the price of the security will decline, so that a Series may
purchase the security at a lower price when the Series must return the security
that it borrowed. While the potential losses associated with investing in stocks
are typically limited to the original cost of the securities, the potential for
losses associated with short positions is much greater than the original value
of the securities sold short. The Series may not always be able to close out a
short position at a particular time or at an acceptable price. A lender may
request that borrowed securities be returned to it on short notice, and the
Series may have to buy the borrowed securities at an unfavorable price,
resulting in a loss. The use of short sales may cause the Series to have higher
expenses than those of equity mutual funds that do not engage in short sales,
including the cost of paying the lender an amount equal to any dividends on the
borrowed securities.
FOREIGN SECURITIES RISK -- Investing in foreign securities, including investing
in foreign securities through American Depository Receipts ("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. These risks may
increase in underdeveloped capital markets.
EMERGING MARKETS RISK -- All of the risks of investing in foreign securities are
heightened by investing in developing countries and emerging market countries.
The markets of developing countries historically have been more volatile than
the markets of developed countries with mature economies. These markets often
have provided higher rates of return, and greater risks, to investors.
An EMERGING MARKET FOREIGN COUNTRY is any country determined by the Investment
Manager or a sub-adviser to have developing or emerging economy and markets.
Countries included in the definition of "emerging market foreign country" may
change over time as a result of developments in national or regional economies
and capital markets.
GROWTH STOCKS RISK -- 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.
INTEREST RATE RISK -- Investments in fixed-income securities are subject to the
possibility that interest rates could rise sharply, causing the value of a
Series' securities, and share price, to decline. Longer term bonds and zero
coupon bonds are generally more sensitive to interest rate changes than
shorter-term bonds. Generally, the longer the average maturity of the bonds in a
Series, the more a Series' share price will fluctuate in response to interest
rate changes. Securities with floating interest rates, such as senior secured
floating rate corporate loans, generally are less sensitive to interest rate
changes, but may decline in value if their interest rates do not rise as much or
as fast as interest rates in general.
INVESTMENT IN INVESTMENT COMPANIES RISK -- 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 or more 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.
Investment in other investment companies or investment vehicles may include
index-based unit investment trusts 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). The issuers of such index-based investments typically hold
substantially all of their assets in securities representing a specific index.
In the case of the SPDRs, the index represented is the S&P 500, but the Series
may invest in other index based investments designed to track other indexes or
market sectors. The Series may use index-based investments as a way of managing
its cash position, to maintain liquidity while gaining exposure to the equity
markets, or a particular sector of the equity market, or to seek to avoid losses
in declining market conditions.
MANAGEMENT RISK -- The Acquiring Series is an actively managed investment
portfolio. There is no guarantee that the management techniques employed with
respect to the index strategy will closely track the performance of the S&P 500
Index. Also, Mainstream and its portfolio managers will apply investment
techniques and risk analyses in making investment decisions for the portion of
the Acquiring Series managed by Mainstream, but there can be no guarantee that
these will produce the desired results.
MARKET RISK -- Most securities fluctuate in price, and equity 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. Market conditions may directly impact the liquidity and
valuation of the securities in which a Series invests.
OVERWEIGHTING RISK -- Overweighting investments in certain sectors or industries
of the stock market increases the risk that a Series will suffer a loss because
of general declines in the prices of stocks in those sectors or industries.
9
VALUE STOCK RISK -- 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 a 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.
SMALLER COMPANIES RISK -- 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.
10
COMPARISON OF FEES AND EXPENSES FOR ACQUIRED AND ACQUIRING SERIES
The following describes and compares the fees and expenses that you may pay if
you buy and hold shares of each Series.
COMPARISON OF ANNUAL OPERATING EXPENSES - The current expenses of the Acquired
and the Acquiring Series 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, 2007 (unless otherwise indicated). Pro forma fees and expenses show
estimated fees and expenses of the Acquiring Series after giving effect to the
proposed Reorganization as of December 31, 2007. Pro forma numbers are estimated
in good faith and are hypothetical. The table below does not reflect the fees
and expenses of the variable insurance product through which shares of the
Series are purchased. If such fees and expenses were reflected, the overall
expenses would be higher.
- -----------------------------------------------------------------------------------------------------
ACQUIRED SERIES ACQUIRING SERIES(1) PRO FORMA
- -----------------------------------------------------------------------------------------------------
Advisory Fees 0.75% 1.25% 1.25%
- -----------------------------------------------------------------------------------------------------
Other expenses 0.19% 0.45% 0.34%
- -----------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 0.94% 1.70% 1.59%
- -----------------------------------------------------------------------------------------------------
Fee reduction (0.25)%(2) - -
- -----------------------------------------------------------------------------------------------------
NET EXPENSES (AFTER FEE WAIVERS) 0.69% 1.70% 1.59%
- -----------------------------------------------------------------------------------------------------
- -----------------
(1) Based on fees and expenses of Series Z for the fiscal year ended
December 31, 2007 and restated to reflect a new contractual advisory
fee effective August 18, 2008.
(2) The Investment Manager contractually agreed to waive 0.25% of its
investment advisory fee for the Acquired Series through April 30, 2010.
EXAMPLES - 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 does
not reflect separate account or insurance contract fees and charges, which if
reflected would increase expenses.
The example assumes that you invest $10,000 in each Series and in the Acquiring
Series 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 each 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
- -------------------------------------------------------------------------
1 Year $ 71 $ 173 $ 162
- -------------------------------------------------------------------------
3 Years $221 $ 536 $ 502
- -------------------------------------------------------------------------
5 Years $384 $ 923 $ 866
- -------------------------------------------------------------------------
10 Years $859 $2,009 $1,889
- -------------------------------------------------------------------------
11
COMPARISON OF SERIES PERFORMANCE
PERFORMANCE OF THE SERIES - The charts and tables below provide some indication
of the risks of investing in each Series by showing changes in the Series'
performance from year to year and by showing how the Series' average annual
returns have compared to those of the S&P 500 Index, a broad-based securities
market index. In the absence of voluntary fee waivers, performance would be
reduced. The performance does not reflect fees and expenses associated with an
investment in variable insurance products through which shares of each Series
are purchased and, if such fees and expenses were reflected, performance would
be lower. As with all mutual funds, past performance is not a prediction of
future results.
ACQUIRED SERIES - SERIES H (ENHANCED INDEX SERIES)(1)
HIGHEST AND LOWEST RETURNS
(Quarterly 2000-2007)
- ----------------------------------- ------------
HIGHEST QUARTER
Q2 ended June 30, 2003 14.85%
LOWEST QUARTER
Q3 ended September 30, 2002 -17.43%
Year-to-date returns -12.88%
(as of June 30, 2008)
Bar Chart:
2000 2001 2002 2003 2004 2005 2006 2007
- -10.20% -12.99% -22.98% 27.78% 9.85% 5.04% 15.55% 0.99%
- -------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 2007)
- -------------------------------------------------------------------------------------------------------------------
1 Year 5 Years Since Inception
- -------------------------------------------------------------------------------------------------------------------
Series H 0.99% 11.47% 1.76%(2)
- -------------------------------------------------------------------------------------------------------------------
S&P 500 Index (reflects no deduction for fees, expenses or 5.49% 12.83% 2.76%(4)
taxes)(3)
- -------------------------------------------------------------------------------------------------------------------
1 Northern Trust Investments, N.A. was engaged to provide investment
advisory services to Series H effective May 1, 2003.
2 For the period beginning May 3, 1999 (date of inception) to December
31, 2007.
3 The S&P 500 Index 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.
4 Index performance is only available to the Series at the beginning of
each month. Performance shown for the S&P 500 Index is for the period
April 30, 1999 to December 31, 2007.
12
ACQUIRING SERIES - SERIES Z (ALPHA OPPORTUNITY SERIES)(1)
HIGHEST AND LOWEST RETURNS
(Quarterly 2004-2007)
- ----------------------------------- ------------ -------------------------------
HIGHEST QUARTER
Q1 ended March 31, 2006 10.21%
LOWEST QUARTER
Q2 ended June 30, 2006 -2.50%
Year-to-date returns -4.06%
(as of June 30, 2008)
Bar Chart:
2004 2005 2006 2007
12.58% 6.66% 13.13% 18.19%
AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 2007)
- -------------------------------------------------------------------------------------------------------------------
1 Year Since Inception
- -------------------------------------------------------------------------------------------------------------------
Series Z 18.19% 15.38%(2)
- -------------------------------------------------------------------------------------------------------------------
S&P 500 Index (reflects no deduction for fees, expenses or taxes)(3) 5.49% 11.31%(4)
- -------------------------------------------------------------------------------------------------------------------
1 Effective August 18, 2008, certain changes to Series Z's principal
investment strategies, advisory fees and sub-advisers became effective,
including the addition of SGI as an additional sub-adviser to the
Series.
2 For the period beginning July 7, 2003 (date of inception) to December
31, 2007.
3 The S&P 500 Index 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.
4 Index performance is only available to the Series at the beginning of
each month. Performance shown for the S&P 500 Index is for the period
June 30, 2003 to December 31, 2007.
- --------------------------------------------------------------------------------
For additional information about the Acquiring Series' performance, please refer
to Appendix C.
13
ADDITIONAL INFORMATION ABOUT THE ACQUIRING SERIES
INVESTMENT MANAGER- Security Investors, LLC, One Security Benefit Place, Topeka,
Kansas 66636-0001, is the Acquiring Series' Investment Manager. On December 31,
2007, the aggregate assets of all accounts under management of the Investment
Manager were approximately $9.91 billion.
The Investment Manager has overall responsibility for the management of the
Acquiring Series. The Investment Manager, subject to the control and supervision
of the Board, furnishes investment advisory, statistical and research services
to the Acquiring Series, supervises and arranges for the purchase and sale of
securities on behalf of the Acquiring Series, provides for the maintenance and
compilation of records pertaining to the investment advisory functions. For such
services, the Investment Manager is entitled to receive compensation on an
annual basis equal to 1.25% of the average net assets of the Acquiring Series
computed on a daily basis and payable monthly. Prior to August 18, 2008, the
Investment Management received compensation in the form of a "fulcrum-type"
performance fee that varied on a monthly basis depending on the Acquiring
Series' investment performance against the investment record of the S&P 500
Index over a rolling 12-month period. It amounted to 2.05% of the average net
assets of the Acquiring Series for the fiscal year ended December 31, 2007.
If the proposed Reorganization is approved by shareholders of the Acquired
Series, the Acquiring Series will continue to pay the same advisory fee
currently in place. A discussion regarding the basis of the Board's approval of
the Acquiring Series' investment advisory and sub-advisory agreements is
available in the Series' annual report for the fiscal year ended December 31,
2007 and the Series' semi-annual report for the fiscal period ended June 30,
2008.
SUB-ADVISERS
The Investment Manager has engaged each of Mainstream Investment Advisers, LLC
and Security Global Investors, LLC to provide investment sub-advisory services
to long/short portions of the assets of the Acquiring Series. The Investment
Manager directly manages the remaining portion of the assets of the Acquiring
Portfolio. Mainstream, 101 West Spring Street, Fourth Floor, New Albany, Indiana
47150, managed approximately $608.1 million in client assets as of December 31,
2007. SGI, 801 Montgomery Street, 2nd Floor, San Francisco, California
94133-5164, SGI managed more than $481 million in assets as of March 31, 2008.
SGI is a wholly owned subsidiary of Security Benefit Life Insurance Company,
which in turn is controlled by Security Benefit Corporation. Security Benefit
Corporation is a wholly owned subsidiary of Security Benefit Mutual Holding
Company. SGI is an affiliate of the Investment Manager. Together, SGI and the
Investment Manager operate as Security Global Investors, the investment advisory
arm of Security Benefit Corporation. The Investment Manager pays Mainstream and
SGI each an annual fee equal to 1.45% of the portion of Series Z's average daily
net assets managed by Mainstream and SGI, respectively.
PORTFOLIO MANAGERS - STEVEN M. BOWSER, Senior Portfolio Manager of the
Investment Manager, has been a co-manager of a portion of the Acquiring Series
since its inception in July 2003. Mr. Bowser joined the Investment Manager in
1992. From 1989 to 1992, he was Assistant Vice President and Portfolio Manager
with the Federal Home Loan Bank of Topeka. He was employed at the Federal
Reserve Bank of Kansas City in 1988 and began his career with the Farm Credit
System from 1982 to 1987, serving as a Senior Financial Analyst and Assistant
Controller. He graduated with a Bachelor of Science degree from Kansas State
University in 1982. He is a Chartered Financial Analyst charter-holder and FINRA
Series 7 license holder.
MARK LAMB, has been a co-manager of a portion of the Acquiring Series since its
inception in July 2003. Mr. Lamb joined the Investment Manager in February 2003.
Prior to joining the Investment Manager, Mr. Lamb was employed by ARM Financial
Group as director of investment risk management and senior derivatives portfolio
manager. From 1997 to 1998, Mr. Lamb was director of financial engineering for
LG&E Energy Marketing and from 1989 to 1997, he was project manager of corporate
finance and director of derivative securities for Providian Corporation
(formerly Capital Holding Corporation). Mr. Lamb holds a Bachelor of Science
degree in engineering physics and a Masters of Business Administration from
Murray State University. He is a Chartered Financial Analyst charter-holder.
WILLIAM H. JENKINS, Manager of Mainstream, has been a co-manager of a portion of
the Acquiring Series managing the long/short portion of the Series since its
inception in July 2003. He has more than 35 years of investment experience.
Prior to co-founding Mainstream in July 1997, Mr. Jenkins spent the most recent
15 years with Providian Corporation as their equity portfolio manager. From 1988
to 1991, he was head of new asset and liability strategies for Providian, in
addition to his equity portfolio management responsibilities. Prior to
Providian, Mr. Jenkins worked as a portfolio manager/analyst at McGlinn Capital,
Delaware Investment Advisors and Mellon Bank and Trust. Mr. Jenkins holds a
Bachelor of Arts degree from Grove City College and a Masters of Business
Administration from New York University. He is a Chartered Financial Analyst
charter-holder.
CHARLES F. CRAIG, Portfolio Manager at Mainstream, has primary responsibility
for the international long/short strategy of the portion of the Acquiring Series
managed by Mainstream. He has a long history with the firm and its personnel
dating back over 11 years ago when he began an internship with William Jenkins
at Providian Corporation. In addition to his experience in equity analysis,
trading and portfolio management with Mainstream, Mr. Craig worked in futures
trading for RQSI and financial planning with American
14
Express. Mr. Craig holds a Bachelor's degree from the University of Louisville
and a Masters of Business Administration from the Kelley School of Business at
Indiana University. He is a Chartered Financial Analyst charter-holder.
JOHN BOICH, Head of Global Equity of SGI, has managed a portion of the Acquiring
Series since August 2008 when SGI became an additional sub-adviser to the
Acquiring Series. Mr. Boich has a track record in global equity investing that
dates back to 1990. Prior to joining SGI in June 2007, Mr. Boich founded Avera
Global Partners, L.P. ("Avera") in August 2001, where he served as Chief
Investment Officer until June 2007. Prior to founding Avera, he was a founding
partner and senior portfolio manager in the global equities division of
Montgomery Asset Management. In this capacity, Mr. Boich spent eight years
directing research and investment decisions for Montgomery Asset Management's $4
billion global and international mandates. Prior to joining Montgomery Asset
Management in March 1993, he was an analyst and portfolio manager at The Boston
Company Institutional Investor Inc. where he led the development and subsequent
management of the flagship international equity product. Mr. Boich holds a
Bachelor of Arts degree in Economics from the University of Colorado and is a
Chartered Financial Analyst charter-holder.
SCOTT F. KLIMO, Portfolio Manager of SGI has managed a portion of the Acquiring
Series since August 2008 when SGI became an additional sub-adviser to the
Acquiring Series. Mr. Klimo was a portfolio manager of Avera from October 2001
until he joined SGI in June 2007. Prior to joining Avera, he worked as a senior
international analyst for Founders Asset Management in Denver from December 1999
to September 2001, focusing on consumer durables and non-durables,
telecommunications and telecom equipment. Before joining Founders, Mr. Klimo was
an assistant portfolio manager for the State of Wisconsin Investment Board from
May 1998 to November 1999, where he helped manage a $4 billion international
portfolio with a value-oriented investment style. He began his investment career
in 1987 as an analyst for Crosby Securities in Hong Kong, before progressing to
Thailand Research Director for Smith New Court Far East. Mr. Klimo graduated
from Hamilton College with a Bachelor of Arts degree in Asian Studies and
immediately left for Asia, where he spent the next eleven years. He is a
Chartered Financial Analyst charter-holder.
DAVID WHITTALL, Portfolio Manager of SGI has managed a portion of the Acquiring
Series since August 2008 when SGI became an additional sub-adviser to the
Acquiring Series. Mr. Whittall was a portfolio manager of Avera from March 2004
until June 2007. Prior to joining Avera, Mr. Whittall was senior vice president
and the senior international equity salesman at HSBC in San Francisco from
January 2003. Prior to HSBC, he was a vice president at JP Morgan and their
senior European equity salesman in San Francisco from May 2001 to October 2002.
Before his work in international equity sales, Mr. Whittall spent seven years at
Montgomery Asset Management where he was a senior analyst, portfolio manager and
principal. Mr. Whittall graduated from UC Berkeley with a Bachelor of Arts
degree in Asian Studies. He spent one year as a UC Regent's scholar at Beijing
University in the People's Republic of China.
The Statement of Additional Information provides additional information about
the portfolio managers' compensation, other accounts managed, and ownership of
Acquiring Series shares.
FORM OF ORGANIZATION - The Acquiring Series is a series of SBL Fund, a Kansas
corporation registered as an open-end management investment company. SBL Fund is
governed by the Board, which currently consists of six directors.
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 Acquired Series for the redemption of
Acquiring Series shares received by the shareholders 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.
The foregoing summarizes the material aspects of the Reorganization Plan. 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.
15
REASONS FOR THE REORGANIZATION -- As the Board considered at a meeting held on
August 15, 2008, the investment objectives and strategies of the Acquired and
the Acquiring Series differ in several respects (although there also are
similarities), and the advisory fees and operating expenses of the Acquiring
Series are higher than those of the Acquired Series. However, the Acquired
Series' performance has been lower than the performance of the S&P 500 Index.
The proposed Reorganization would allow shareholders of the Acquired Series to
participate in the Acquiring Series which is a professionally and actively
managed portfolio whose performance has been better than the performance of the
S&P 500 Index since its inception. Also, a larger Acquiring Series offers the
potential benefits of a more diversified portfolio of securities, may improve
trading efficiency and may realize economies of scale and lower operating
expenses.
The Investment Manager may be deemed to have a material interest in the proposed
Reorganization due to the higher advisory fees payable to it by the Acquiring
Series, as compared to the Acquired Series, and due to payment of sub-advisory
fees to SGI, an affiliate of the Investment Manager, for its management of a
portion of the assets of the Acquiring Series.
The proposed Reorganization was presented to the Board for consideration and
approval at the meeting held on August 15, 2008. 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.
BOARD CONSIDERATIONS -- The Board, in recommending the Reorganization,
considered a number of factors, including the following:
1. the Reorganization would not dilute the interests of either Series'
current shareholders;
2. the stronger relative past investment performance of the Acquiring
Series as compared to the Acquired Series since the Acquiring Series'
inception;
3. the similarities and differences between the investment objectives and
strategies of the Acquired and the Acquiring Series;
4. expense ratios and information regarding fees and expenses of the
Acquired Series and the Acquiring Series, which indicate that the
current shareholders of the Acquired Series will incur higher
investment advisory fee and total and net annual operating expenses as
a result of the Reorganization;
5. the tax-free nature of the Reorganization to each Series and its
shareholders.
6. the Reorganization will allow shareholders of the Acquiring Series to
continue to participate in a professionally managed portfolio.
The Board also considered the future potential benefits to the Acquiring Series
in that its operating costs 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, pursuant to
this treatment, neither the Acquired Series, the Acquiring Series, nor the
shareholders will 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.
Immediately prior to the Reorganization, the Acquired Series will pay a dividend
or dividends which, together with all previous dividends, will have the effect
of distributing to the shareholders all of the Acquired Series' investment
company taxable income for taxable years ending on or prior to the
Reorganization (computed without regard to any deduction for dividends paid) and
all of its net capital gains, if any, realized in taxable years ending on or
prior to the Reorganization (after reduction for any available capital loss
carryforward). The distributed amounts will include any net gains realized as a
result of portfolio transitioning. Such dividends will be included in the
taxable income of the Acquired Series' shareholders.
IMPORTANT INFORMATION ABOUT PORTFOLIO TRANSITIONING Upon shareholders' approval
of the Reorganization and prior to the Closing, the Investment Manager or NTI
may sell a portion of the Acquired Series' holdings to transition the Acquired
Series' portfolio holdings to the Acquiring Series. The proceeds of such sales
may be held in temporary investments or invested in assets that the Acquiring
Series may hold or wish to hold. After the Closing, the Investment Manager may
also sell Acquiring Series portfolio
16
securities that were acquired from the Acquired Series, and the Acquiring Series
may not be immediately fully invested in accordance with its long-term
investment strategies. Both Series also may engage in a variety of transition
management techniques to facilitate the portfolio transition process. During
this transition period, the Acquired Series may not be pursuing its investment
objective and strategies, and certain previous non-fundamental limitations on
permissible investments and investment restrictions may not apply. Furthermore,
sales and purchases of securities by the Series may be made at disadvantageous
times and could result in increased transactional costs (all or part of which
are ultimately borne by shareholders).
EXPENSES OF THE REORGANIZATION -- The Acquired Series and Acquiring Series each
will each bear one-third of the expenses relating to the Reorganization and
Security Investors will bear the remaining one-third 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, proxy solicitation expenses, legal fees,
accounting fees, securities registration fees, and expenses of holding the
Special Meeting. The estimated cost of the Reorganization is approximately
$66,500.
DIVIDENDS AND OTHER DISTRIBUTIONS - Each Series pays its shareholders dividends
from its net investment income and distributes any net capital gains that it has
realized, at least annually. Your dividends and distributions will be reinvested
in shares of the Series, unless you instruct the Investment Manager otherwise.
There are no fees or sales charges on reinvestments.
If the Reorganization Plan is approved by shareholders of the Acquired Series,
then as soon as practicable before the Closing, the Acquired Series will pay its
shareholders a cash distribution of all undistributed net investment income and
undistributed realized net capital gains.
CAPITALIZATION OF THE SERIES - The following table shows on an unaudited basis
the capitalization of each Series as of June 30, 2008 and on a pro forma basis
as of June 30, 2008, after giving effect to the Reorganization.
- ---------------------------- ------------------------- ------------------------- ------------------------- -------------------------
ACQUIRED SERIES ACQUIRING SERIES ADJUSTMENT PRO FORMA
- ---------------------------- ------------------------- ------------------------- ------------------------- -------------------------
Net Assets $64,208,296 $48,556,701 $112,764,997
- ---------------------------- ------------------------- ------------------------- ------------------------- -------------------------
Net Assets Per Share $9.74 $15.83 $15.83
- ---------------------------- ------------------------- ------------------------- ------------------------- -------------------------
Shares Outstanding 6,594,755 3,066,757 4,056,115 7,122,872
- ---------------------------- ------------------------- ------------------------- ------------------------- -------------------------
GENERAL INFORMATION
OTHER BUSINESS. The Directors do not know of any matters to be presented at the
Special Meeting other than those set forth in this proxy statement. If other
business should properly come before the Special Meeting, proxies will be voted
in accordance with the judgment of the persons named in the accompanying proxy.
PROXY SOLICITATION. The Board is soliciting Acquired Series shareholders'
proxies on behalf of SBL Fund. The principal solicitation of proxies will be by
the mailing of this Proxy Statement/Prospectus commencing on or about October 6,
2008, but proxies may also be solicited by telephone and/or in person by
representatives of Security Investors or its affiliate(s), or The Altman Group,
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 these parties to ask
for your vote. Arrangements will be made with brokerage houses and other
custodians, nominees, and fiduciaries to forward proxies and proxy materials to
their principals.
The costs of the Special Meeting, including the costs of retaining The Altman
Group, 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 allocated one-third to Security Investors and/or its affiliates and one-third
to each of the Acquired Fund and the Acquiring Fund. The estimated cost of
retaining The Altman Group is approximately $17,171.
SHAREHOLDER VOTING. Shareholders of record at the close of business on September
29, 2008 (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 the Acquired Series. Security Benefit Life Insurance Company ("SBL")
and First Security Benefit Life Insurance and Annuity Company of New York
("FSBL" and collectively, the "Insurance Companies") are the only shareholders
of record of the Acquired Series.
The Insurance Companies owning of record or beneficially 5% or more of the
outstanding shares of the each Series as of the Record Date, are set forth in
Appendix D. As of the Record Date, SBL Fund's Directors and officers, as a
group, owned less than 1.00% of the outstanding shares of the each Series.
By investing in a variable annuity or variable life insurance policy issued by
the Insurance Companies, you indirectly purchased shares of the Acquired Series.
The Insurance Companies own shares of the Acquired Series for your benefit in
the separate account funding
17
your variable annuity or variable life insurance policy. The Insurance Companies
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. The enclosed form of proxy is provided for this purpose. If no
instructions are given on the proxy (but the proxy is properly executed) it will
be voted FOR the proposal. 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. As a result, a small number of
owners of variable annuity contracts and variable life policies could determine
the outcome of the vote if other owners fail to vote.
Shareholders are entitled to one vote for each share held and fractional votes
for fractional shares held. The presence in person or by proxy of the holders of
a majority of the outstanding shares of the Acquired Series entitled to vote 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 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 not counted as shares eligible
to vote at the Special Meeting in determining whether a quorum is present, and
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 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, unless you later elect to
change your vote.
VOTE REQUIRED. Approval of the Reorganization Plan requires the affirmative vote
of a majority of the outstanding shares of the Acquired Series. Accordingly,
assuming the presence of a quorum, abstentions and broker non-votes have the
effect of a negative vote on the proposed Reorganization.
INVESTMENT MANAGER, ADMINISTRATOR, TRANSFER AGENT AND PRINCIPAL UNDERWRITER.
Security Investors, the Series' investment adviser, administrator and transfer
agent, is located at One Security Benefit Place, Topeka, Kansas 66636-0001. The
Investment Manager is controlled by its members, SBL and Security Benefit
Corporation ("SBC"). SBL, a stock life insurance company which is incorporated
under the laws of Kansas, is controlled by SBC. SBC is wholly-owned by Security
Benefit Mutual Holding Company, which is controlled by SBL policyholders. The
principal underwriter/distributor of the Series, Security Distributors, Inc., is
located at One Security Benefit Place, Topeka, KS 66636-0001. Security Investors
and Security Distributors, Inc. are affiliates of each other.
SHAREHOLDER REPORTS. Shareholders can find important information about the
Series in the Annual Report for the fiscal year ended December 31, 2007 and the
Semi-Annual Report for the six month period ended June 30, 2008. You may obtain
a copy of the Series' Annual and Semi-Annual Reports without charge by writing
to the Series at the address above or by calling the Series at 1-800-888-2461.
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
that are not included herein and that may require a vote (such as proposals
submitted on an untimely basis).
18
INFORMATION ABOUT THE SERIES. SBL Fund is subject to the informational
requirements of the Securities Exchange Act of 1934, 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 SPECIAL MEETING, WE REQUEST PROMPT
EXECUTION AND RETURN OF THE ENCLOSED PROXY. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors,
/s/ Amy J. Lee
Amy J. Lee
Secretary
SBL Fund
October 1, 2008
One Security Benefit Place
Topeka, Kansas 66636-0001
19
MORE INFORMATION REGARDING THE SERIES
Both the Acquired and Acquiring Series share the following policies:
PURCHASE AND REDEMPTION OF SHARES
The Insurance Companies purchase shares of the Series for their variable annuity
and variable life insurance separate accounts. The Insurance 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
by SBL Fund or its agents. 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 PAYMENTS -- SBL 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 SBL's variable annuity products that invest in 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 -- Some investors try to profit from various
short-term or frequent trading strategies known as market timing; for example,
transferring money into mutual funds when they expect prices to rise and taking
money out when they expect prices to fall, or transferring from one Series to
another and then back again after a short period of time. As money is
transferred in and out, a Series incurs expenses for buying and selling
securities. Excessive purchases, redemptions or exchanges of a Series' shares
disrupt portfolio management, hurt Series performance and drive Series expenses
higher. These costs are borne by all shareholders, including long-term investors
who do not generate these costs. Investors may be more likely to attempt to
engage in market timing with respect to Series that invest a significant portion
of their assets in the securities of foreign issuers, securities that are thinly
traded (such as certain small- and mid-cap issuers), and/or securities such as
certain high yield securities that do not routinely have readily available
market quotations.
The Board of Directors has adopted policies and procedures against market
timing, and the Series discourage market timing or excessive trading. If you
wish to engage in such practices, we request that you do 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
20
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 may 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 transfers or other electronic transfers and instead requiring
that the shareholder submit transfer requests in writing via regular U.S. mail
for a disclosed period that begins on the date of the letter. In addition, after
the shareholder makes four "round trip transfers" during any prior 12-month
period, the insurance company will prohibit further transfers until transfers
may be made that do not exceed this limitation. 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.
In their sole discretion, the Series may revise their market timing procedures
at any time without prior notice as they deem necessary or appropriate,
including changing the criteria for monitoring market timing and other harmful
trading (including, without limitation, imposing dollar or percentage limits on
transfers). For purposes of applying the criteria used to detect potential
market timing and other potentially harmful trading activity, the insurance
company on behalf of the Series may aggregate transfers made in two or more
variable insurance contracts that the insurance company believes are connected
(for example, two contracts with the same owner, or owned by spouses, or owned
by different partnerships or corporations that are under common control, etc.).
The Series' policies and procedures do not require insurance companies to
include transfers made pursuant to dollar cost averaging and asset reallocation
options available under their variable insurance contracts.
Shareholders who seek to engage in programmed, frequent, or high volume transfer
activity may employ a variety of strategies to avoid detection, and an insurance
company's ability to detect and deter harmful trading activity may be limited by
operational and information systems capabilities. In addition, the terms of an
insurance company's variable insurance contract may also limit the insurance
company's ability to restrict or deter harmful trading. Furthermore, the
identification of contract owners determined to engage in harmful trading
activity involves judgments that are inherently subjective. Accordingly, despite
their best efforts, neither the Series nor the insurance companies can guarantee
that the policies and procedures will detect every potential market timer, but
the Series do require insurance companies to apply the policies and procedures
adopted by the Board consistently to all their contract owners without special
arrangement, waiver, or exception, except with respect to transfers in and out
of Series C (Money Market Series), which are not restricted or limited.
Because the Series cannot guarantee that all harmful trading activity will be
detected, and because the cooperation of insurance companies and other financial
intermediaries cannot be assured, shareholders bear the risks associated with
such activity, including potential disruption of portfolio management,
potentially lower performance, and higher expenses. Due to the risk that an
insurance company implementing the policies and procedures may not detect all
harmful trading activity, it is possible that some shareholders may
inadvertently be treated differently than shareholders who are not permitted to
engage in harmful trading activity. Those shareholders that do not engage in
harmful trading activity nonetheless will bear the costs associated with such
activity.
DISTRIBUTIONS AND FEDERAL INCOME TAX CONSIDERATIONS
Each Series pays its shareholders dividends from its net investment income and
distributes any net capital gains that it has realized, at least annually. Such
dividends and distributions will be reinvested in additional shares of the
Series.
Each Series intends to qualify and to elect to be taxed as a "regulated
investment company" under the provisions of Subchapter M of the Internal Revenue
Code of 1986, as amended (Code), including requirements with respect to
diversification of assets, distribution of income, and sources of income. If a
Series qualifies as a "regulated investment company" and complies with the
appropriate provisions of the Code, such Series will not be liable for federal
income tax on income it distributes. Each Series also intends to comply with the
diversification requirements of Section 817(h) of the Code and the underlying
regulations for variable annuity and variable life insurance contract so that
owners of these contracts should not be subject to federal tax on distributions
of dividends and income from a Series to the insurance company's separate
accounts.
Since you may purchase shares of a Series only indirectly through the purchase
of a variable annuity or variable life insurance contract issued by Security
Benefit Life Insurance Company or its affiliated life insurance company, no
discussion is included here as to the federal income tax consequences at the
Series' shareholder level. For information concerning the federal income tax
consequences to you as the purchaser of a variable annuity or variable life
insurance contract based on a Series, see the prospectus for such variable
annuity or variable life insurance contract. See the Statement of Additional
Information for more information on taxes.
21
DETERMINATION OF NET ASSET VALUE
The NAV of each Series is computed as of the close of regular trading hours on
the NYSE (normally 3:00 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 do not price their
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 the Funds' valuation procedures. The
types of securities for which such fair value pricing may be required include,
but are not limited to: foreign securities, where a significant event occurs
after the close of the foreign market on which such security principally trades,
but before the close of the NYSE, that is likely to have changed the value of
such security, or the closing value is otherwise deemed unreliable; securities
of an issuer that has entered into a restructuring; securities whose trading has
been halted or suspended; fixed-income securities that have gone into default
and for which there is no current market value quotation; and securities that
are restricted as to transfer or resale.
Valuing securities at fair value involves greater reliance on judgment than
valuing securities that have readily available market quotations. Fair value
determinations can also involve reliance on quantitative models employed by a
fair value pricing service. The Investment Manager makes such determinations in
good faith in accordance with the Series' valuation procedures, with the goal of
accurately reflecting the current value of each Series' portfolio holdings in
the Series' net asset value per share. There can be no assurance that a Series
could obtain the fair value assigned to a security if it were to sell the
security at approximately the time at which the Series determines its net asset
value per share.
For further information about valuation of investments, see the Statement of
Additional Information.
MANAGEMENT OF THE ACQUIRING SERIES
INVESTMENT MANAGER AND INVESTMENT ADVISORY AGREEMENT -- Security Investors is a
Kansas limited liability company. Security Investors serves as the Investment
Manager under an Investment Advisory Contract which was approved by SBL Fund's
Board of Directors on November 30, 1999 and was approved by shareholders on
January 26, 2000 and which became effective on January 27, 2000. The Board of
Directors approved an amendment of the Investment Advisory Contract on May 2,
2003, to provide for the Investment Manager to provide investment advisory
services to the Acquiring Series. The contract may be terminated without penalty
at any time by either party on 60 days' written notice and is automatically
terminated in the event of its assignment.
ADMINISTRATIVE AGENT -- Pursuant to a Fund Accounting and Administration
Agreement dated February 1, 2004, as amended December 1, 2005, the Investment
Manager also acts as the administrative agent for the Acquiring Series and as
such performs administrative functions and the bookkeeping, accounting and
pricing functions for the Acquiring Series. For this service the Investment
Manager receives, on an annual basis, a fee of 0.15% for the Acquiring Series
(based on average daily net assets) or $25,000 per year, whichever is greater.
TRANSFER AGENT -- Under a Transfer Agency Agreement dated February 1, 2004, as
amended on November 17, 2006, the Investment Manager acts as the transfer agent
for the Acquiring Series. As such, it processes purchase and redemption
transactions and acts as the dividend disbursing agent for the separate accounts
of participating insurers to which shares of the Acquiring Series are sold. For
this service, the Investment Manager receives the following fees with respect to
the Acquiring 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.
22
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).
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.
The Acquiring Series is also subject to a minimum fee per year of $25,000.
23
FINANCIAL HIGHLIGHTS FOR THE ACQUIRING SERIES
The financial highlights table is intended to help you understand the financial
performance of the Acquiring Series during the past five years. Certain
information reflects financial results for a single Acquiring Series share. The
total returns in the table represent the rate that an investor would have earned
(or lost) on an investment in the Acquiring Series assuming reinvestment of all
dividends and distributions. During each respective period, except for the six
month period ended June 30, 2008, this information 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 the Acquiring Series' financial statements, are included in the annual
report. You may obtain a copy of the Series' Annual and Semi-Annual Reports
without charge by writing to the Series at One Security Benefit Place, Topeka,
KS 66636-0001 or by calling the Series at 1-800-888-2461.
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
2008(a) 2007 2006 2005 2004 2003(b)
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of period $16.50 $13.96 $12.34 $11.57 $11.18 $10.00
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income (loss)(c) (0.10) 0.01 - (0.02) (0.07) (0.06)
Net gain (loss) on securities
(realized and unrealized) (0.57) 2.53 1.62 0.79 1.42 1.88
-----------------------------------------------------------------------------------------
Total from investment operations (0.67) 2.54 1.62 0.77 1.35 1.82
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Distributions from realized gains - - - - (0.96) (0.64)
-----------------------------------------------------------------------------------------
Total distributions - - - - (0.96) (0.64)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.83 $16.50 $13.96 $12.34 $11.57 $11.18
=========================================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURND (4.06%) 18.19% 13.13% 6.66% 12.58% 18.33%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands) $48,557 $48,869 $36,442 $25,660 $19,161 $6,738
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income (loss) (1.28%) 0.10% (0.03%) (0.21%) (1.12%) (1.33%)
Total expensese 3.06% 2.50% 2.78% 2.50% 2.78% 2.62%
Net expensesf 2.87% 2.39% 2.62% 2.50% 2.57% 2.50%
Net expenses prior to custodian
earnings credits and net of
expense waivers 3.06% 2.50% 2.78% 2.50% 2.57% 2.52%
Net expenses prior to performance fee
adjustmentsg 2.38% 2.34% 2.47% 2.47% -% -%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 1,317% 1,770% 1,285% 1,509% 1,054% 966%
- ----------------------------
a Unaudited figures for the six months ended June 30, 2008. Percentage amounts,
except total return, have been annualized.
b Series Z was initially capitalized on July 7, 2003 with a net asset value of
$10 per share. Percentage amounts for the period, except for total return, have
been annualized.
c Net investment income (loss) was computed using average shares outstanding
throughout the period.
d 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. If total return had taken into account these expenses,
performance would have been lower. Shares of a series of SBL Fund are available
only through the purchase of such products.
e Total expense information reflects the expense ratios absent expense
reductions by the Investment Manager, and earnings credits, as applicable.
f Net expense information reflects the expense ratios after voluntary expense
waivers, reimbursements and custodian earnings credits, as applicable.
g Net expenses prior to performance fee adjustments reflect ratios after
voluntary expense waivers, reimbursements, custodian earnings credits, and
before performance fee adjustments, as applicable.
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APPENDIX A - Plan of Reorganization
THIS PLAN OF REORGANIZATION (the "Reorganization Plan") is adopted as of
this 15th day of August, 2008, 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, Series H (Enhanced Index Series) and Series Z (Alpha
Opportunity 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 (each a
"Reorganization") will consist of the transfer of all of the assets of Series H
(the "Acquired Series") to Series Z (the "Acquiring Series") in exchange solely
for voting shares 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.
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 Acquired Series and the
Acquiring Series separately, hereby approves the Reorganization Plan on the
following terms and conditions:
1. 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 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").
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 (as defined in paragraph 2.1). 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.
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1.4. Immediately after the transfer of assets provided for in paragraph
1.1, the Acquired Series will distribute to its 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 paragraph 2.3. The Acquiring Series will 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.
2. 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 an 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 an 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.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be November 21, 2008, 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 (the "1940 Act"), as of the
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Closing Date by book entry in accordance with the customary practices
of such depositories and the custodian for Acquiring Series.
3.3. Security Investors, 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.
4. 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 ("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 (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 each prospectus and statement of
additional information of the Acquired Series used during the
three years previous to 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 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
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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, 2007 have been audited by Ernst & Young
LLP, an 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, 2007, 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, 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 and has met the diversification and other requirements of
Section 817(h) of the Code and Treasury Regulation Section
1.817-5 thereunder;
(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;
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(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 each prospectus and statement of
additional information of the Acquiring Series used during the
three years previous to 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, 2007 have been audited by Ernst &
Young LLP, an 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, 2007, 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
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 and has met the diversification and other requirements of
Section 817(h) of the Code and Treasury Regulation Section
1.817-5 thereunder;
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(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.
5. 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.
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.
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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.
6. 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.
7. 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;
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; and
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.
8. 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:
A-7
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.
9. 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 and Acquiring Series each shall bear one-third of
the expenses relating to the Reorganization and Security Investors,
LLC shall bear the remainder of the expenses relating to the
Reorganization. The costs of the Reorganization shall include, but not
be limited to, costs associated with obtaining any necessary order of
exemption from the 1940 Act, preparation of the Registration
Statement, printing and distributing the Acquiring 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.
10. 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.
11. 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.
12. 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.
A-8
13. 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.
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/ RICHARD M. GOLDMAN
------------------------------
NAME: RICHARD M. GOLDMAN
TITLE: PRESIDENT
A-9
APPENDIX B - ADDITIONAL INVESTMENT TECHNIQUES AND ASSOCIATED RISKS
This section takes a detailed look at some of the types of securities the Series
may hold in their respective portfolios and the various kinds of management
practices that may be used in the portfolios. The Series' holdings of certain
types of investments cannot exceed a maximum percentage of net assets. These
percentage limitations are set forth in the Statement of Additional Information.
While the percentage limitations provide a useful level of detail about a
Series' investment program, they should not be viewed as an accurate gauge of
the potential risk of the investment. For example, in a given period, a 5%
investment in futures contracts could have significantly more of an impact on a
Series' share price than its weighting in the portfolio. The net effect of a
particular investment depends on its volatility and the size of its overall
return in relation to the performance of the Series' other investments. The
Portfolio Managers have considerable leeway in choosing investment strategies
and selecting securities they believe will help a Series achieve its objective.
In seeking to meet its investment objective, a Series may invest in any type of
security or instrument whose investment characteristics are consistent with the
Series' investment program. Investors should be aware that the investments made
by a Series and the results achieved by a Series at any given time are not
expected to be the same as those made by other mutual funds for which the
Investment Manager or a sub-adviser acts as investment adviser, including mutual
funds with names, investment objectives and policies similar to the Series.
To the extent authorized by law, each of the Series reserves the right to
discontinue offering shares or cease operations at any time.
The following pages describe some of the investments that may be made by the
Series, as well as some of the management practices of the Series.
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.
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)
B-1
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. These securities are subject to high degrees of
credit, valuation and liquidity risks. At times, the Series may invest in
asset-backed securities through "structured investment vehicles" (or "SIVs").
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.
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 investment grade or in default, or unrated securities
determined to be of comparable quality) 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 or relevant sub-adviser's credit analysis. A real or perceived economic
downturn or higher interest rates could cause a decline in high-yield bond
prices by lessening the ability of issuers to make principal and interest
payments. These bonds are often thinly traded and can be more difficult to sell
and value accurately than high-quality bonds. Because objective pricing data may
be less available, judgment may play a greater role in the valuation process. In
addition, the entire junk bond market can experience sudden and sharp price
swings due to a variety of factors, including changes in economic forecasts,
stock market activity, large or sustained sales by major investors, a
high-profile default, or just a change in the market's psychology. This type of
volatility is usually associated more with stocks than bonds, but junk bond
investors should be prepared for it.
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.
FUTURES AND OPTIONS -- The Series may utilize futures contracts and options on
futures. The Series may also purchase call and put options and write call and
put options on a "covered" basis. Futures (a type of potentially high-risk
derivative) are often used to manage or hedge risk because they enable the
investor to buy or sell an asset in the future at an agreed-upon price. Options
(another type of potentially high-risk derivative) give the investor the right
(where the investor purchases the options), or the obligation (where the
investor writes (sells) the options), to buy or sell an asset at a predetermined
price in the future. 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). If a Series sells a covered call option, it receives a premium from
the purchaser of the call option, which may provide additional income to the
Series. The selling of covered call options may tend to reduce the volatility of
a Series because the premiums received from selling the options will reduce any
losses on the underlying securities by the amount of the premiums. However,
selling covered call options will also limit a Series' gain, if any, on the
underlying securities if the option is exercised by the purchaser. If a call
option expires unexercised, the Series that wrote the option realizes a gain in
the amount of the premium received. 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
B-2
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 basis, there is a risk that the
securities may not be delivered and that the Series may incur a loss.
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 or relevant
sub-adviser 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. Each Series may invest in the shares of
other investment vehicles.
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.
STRUCTURED INVESTMENT VEHICLES ("SIVS") -- The Series may invest in structured
investment vehicles ("SIVs"), which are legal entities that are sponsored by
banks, broker-dealers or other financial firms specifically created for the
purpose of issuing particular securities or instruments. SIVs often invest in
asset-backed and mortgage-backed securities, which are subject to the risks
described above. SIVs are often leveraged, and securities issued by SIVs may
have differing credit preferences. Investments in SIVs present counterparty
risks, although they may be subject to a guarantee or other financial support by
the sponsoring entity. Investments in SIVs may be more volatile, less liquid and
more difficult to price accurately than other types of investments.
B-3
APPENDIX C- PERFORMANCE UPDATE
Series Z
Performance Summary (Alpha Opportunity Series)
June 30, 2008 (unaudited)
Line Chart:
Series Z vs. S&P 500 Index
SBL Series Z $18,225 S&P 500 Index $13,981
7/7/03 $10,000.00 $10,000.00
12/03 $11,833.00 $11,169.00
6/04 $12,288.00 $11,554.00
12/04 $13,321.00 $12,385.00
6/05 $13,090.00 $12,284.00
12/05 $14,207.00 $12,993.00
6/06 $15,266.00 $13,344.00
12/06 $16,072.00 $15,045.00
6/07 $18,271.00 $16,092.00
12/07 $18,996.00 $15,871.00
6/08 $18,225.00 $13,981.00
$10,000 SINCE INCEPTION
The chart above assumes a hypothetical $10,000 investment in Series Z (Alpha
Opportunity Series) on July 7, 2003 (date of inception), and reflects the fees
and expenses of Series Z. The S&P 500 Index 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.
- -----------------------------------------------------------------
AVERAGE ANNUAL RETURNS
- -----------------------------------------------------------------
PERIOD ENDED 6-30-08(1) 1 YEAR SINCE INCEPTION (7-7-03)
- -----------------------------------------------------------------
Series Z (0.25%) 12.80%
- -----------------------------------------------------------------
(1) Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. 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, when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------
PORTFOLIO COMPOSITION BY SECTOR*
- --------------------------------------------------------
Consumer Discretionary 1.29%
- --------------------------------------------------------
Consumer Staples 1.98
- --------------------------------------------------------
Energy 6.08
- --------------------------------------------------------
Financials 1.89
- --------------------------------------------------------
Health Care (0.02)
- --------------------------------------------------------
Industrials 7.62
- --------------------------------------------------------
Information Technology 2.88
- --------------------------------------------------------
Materials 3.80
- --------------------------------------------------------
Telecommunications 0.13
- --------------------------------------------------------
Utilities 1.09
- --------------------------------------------------------
Exchange Traded funds 4.27
- --------------------------------------------------------
U.S. Governments Sponsored Agencies 37.98
- --------------------------------------------------------
Repurchase Agreement 2.43
- --------------------------------------------------------
Other Assets in Excess of Liabilities 28.60
- --------------------------------------------------------
Total Net Assets 100.00%
============
- --------------------------------------------------------
*Securities sold short are netted with long positions in common stocks in the
appropriate sectors.
C-1
D-1
APPENDIX D - OWNERSHIP INFORMATION
As of the Record Date, to the knowledge of each Series, the name, address, and
share ownership of persons who owned of record or beneficially 5% or more of the
Series' outstanding shares are set forth below:
SERIES H (ENHANCED INDEX SERIES)
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
PERCENTAGE OF COMBINED SERIES
NAME AND ADDRESS OF SHAREHOLDER TYPE OF OWNERSHIP PERCENTAGE OF SERIES AFTER THE REORGANIZATION*
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
SERIES Z (ALPHA OPPORTUNITY SERIES)
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
NAME AND ADDRESS OF SHAREHOLDER TYPE OF OWNERSHIP PERCENTAGE OF SERIES PERCENTAGE OF COMBINED SERIES
AFTER THE REORGANIZATION*
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- -------------------------------------------- ------------------------- ------------------------ -----------------------------------
- ---------------
* On a pro forma basis, assuming that the value of the shareholder's interest
in the Series on the date of consummation of the Reorganization is the same
as on the Record Date.
D-1
SBL FUND
ONE SECURITY BENEFIT PLACE
TOPEKA, KS 66636-0001
(TOLL-FREE) 1-800-888-2461
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 14, 2008
The undersigned hereby appoint(s) Amy J. Lee, Donald A. Chubb, Jr. 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 Series H (Enhanced
Index Series) (the "Acquired Series") 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 Place, Topeka, Kansas 66636, November
14, 2008 at 1:00 PM (Central time) and at any adjournment(s) or postponements
thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This proxy card
will be voted as instructed. IF NO SPECIFICATION IS MADE, THE PROXY CARD WILL BE
VOTED "FOR" PROPOSAL 1. THE PROXIES ARE AUTHORIZED, IN THEIR DISCRETION, TO VOTE
UPON SUCH MATTERS AS MAY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENTS.
-- FOLD AND DETACH HERE --
.................................................................................
SERIES H (ENHANCED INDEX SERIES)
(the "Acquired Series")
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 14, 2008
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL
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 the Acquired Series by Series Z (Alpha
Opportunity Series) (the "Acquiring Series"), a series of SBL Fund, solely
in exchange for shares of the Acquiring Series, followed by the complete
liquidation of the Acquired Series.
FOR AGAINST ABSTAIN
| | | | | |
PLEASE VOTE BY |X|
CHECKING THE
APPROPRIATE BOX
AS IN THIS EXAMPLE
Date: __________________
________________________
Signature
This proxy card must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add title(s) as such. Joint owners must each sign. By
signing this proxy card, you acknowledge that you have received the proxy
statement/prospectus that the proxy card accompanies.
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.
Online 1. Click on www.myproxyonline.com.
2. Enter the 12 digit control number.
3. Follow the instructions on the Web site.
4. Once you have voted, you do not need to mail your proxy card.
By Phone 1. Call toll-free 1-866-628-9070.
2. Enter the 12 digit control number.
3. Follow the recorded instructions.
4. Once you have voted, you do not need to mail your proxy card.
By Mail Complete and sign your proxy card and mail it in the postage-paid
envelope received with your shareholder mailing. To ensure your
vote is validated properly, please sign your proxy card as
described in the "Instructions for Signing Proxy Cards" section
of your proxy materials.
In Person The Shareholder Meeting will take place November 14, 2008, at
1:00 PM, Central time, at the office of SBL Fund, located at One
Security Benefit Place, Topeka, Kansas 66636.
-- 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 The Altman Group to assist our shareholders in
the voting process. If we have not received your proxy card as the date of the
Special Meeting approaches, representatives from The Altman Group 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
October 1, 2008
- --------------------------------------------------------------------------------
Acquisition of the Assets and
Liabilities of: By and in Exchange for Shares of:
Series H (Enhanced Index Series) Series Z (Alpha Opportunity Series)
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 H in connection with a proposed transaction whereby all of the assets and
liabilities of Series H will be transferred to Series Z in exchange for shares
of Series Z.
This Statement of Additional Information of Series Z consists of this cover
page, the accompanying pro forma financial statements and related notes, and the
following documents, each of which were filed electronically with the Securities
and Exchange Commission and are incorporated by reference herein:
1. The Statement of Additional Information for SBL Fund dated August 18, 2008
(File No. 002-59353); and
2. The Financial Statements of Series H and Series Z as included in SBL Fund's
Annual Report filed for the fiscal year ended December 31, 2007 and
Semi-Annual Report for the fiscal period ended June 30, 2008 (File No.
811-02753).
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus dated October 1, 2008 relating to the reorganization of
Series H may be obtained, without charge, by writing to Security Investors, 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 FINANCIAL STATEMENTS
In connection with a proposed transaction whereby all of the assets and
liabilities of Series H (Enhanced Index Series) will be transferred to Series Z
(Alpha Opportunity Series), in exchange for shares of Series Z, shown below are
financial statements for each Series and Pro Forma Financial Statements for the
combined Series, assuming the Reorganization is consummated, as of June 30,
2008. The first table presents Statements of Assets and Liabilities for each
Series and estimated pro forma figures for the combined Series. The second table
presents Statements of Operations for each Series and estimated pro forma
figures for the combined Series. The third table presents Schedule of
Investments for each Series and estimated pro forma figures for the combined
Series. The tables are followed by Notes to the Pro Forma Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 2008 SERIES H SERIES Z ADJUSTMENTS PRO FORMA
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at value(1).................................... $64,096,627 $36,574,519 $ --- $100,671,146
Cash........................................................ 219 11,252,139 --- 11,252,358
Receivables:
Fund shares sold......................................... 123,769 125,192 --- 248,961
Securities sold.......................................... --- 4,289,371 --- 4,289,371
Dividends................................................ 95,068 13,493 --- 108,561
Variation margin on futures.............................. 825 16,775 --- 17,600
Prepaid expenses............................................ 1,567 596 --- 2,163
----------------------------------------------------------------------
Total assets................................................ 64,318,075 52,272,085 --- 116,590,160
----------------------------------------------------------------------
LIABILITIES:
Common stock sold short, at value(2) --- 1,907,266 --- 1,907,266
Payable for:
Securities purchased..................................... 1,651,713 --- 1,651,713
Fund shares redeemed..................................... 54,005 31,854 --- 85,859
Dividends on short sales................................. --- 1,462 --- 1,462
Management fees.......................................... 27,669 101,888 --- 129,557
Administration fees...................................... 6,757 7,196 --- 13,953
Custodian fees........................................... 3,505 --- --- 3,505
Transfer agent/maintenance fees.......................... 2,083 2,083 --- 4,166
Director's fees.......................................... 1,121 303 --- 1,424
Professional fees........................................ 9,685 11,003 --- 20,688
Other.................................................... 4,954 616 --- 5,570
----------------------------------------------------------------------
Total liabilities........................................... 109,779 3,715,384 --- 3,825,163
----------------------------------------------------------------------
NET ASSETS.................................................. $64,208,296 $48,556,701 $ --- $112,764,997
======================================================================
NET ASSETS CONSIST OF:
Paid in capital............................................. $67,682,385 $44,256,214 $ --- $111,938,599
Accumulated undistributed net investment income (loss)...... 1,766,036 (254,716) --- 1,511,320
Accumulated undistributed net realized gain (loss)
on sale of investments................................... (1,363,076) 6,404,194 --- 5,041,118
Net unrealized depreciation in value of investments......... (3,877,049) (1,848,991) --- (5,726,040)
----------------------------------------------------------------------
Net Assets.................................................. $64,208,296 $48,556,701 $112,764,997
======================================================================
CLASS A:
Capital shares outstanding (unlimited number of shares
authorized).............................................. 6,594,755 3,066,757 4,056,115 7,122,872
------------------------------------
Net asset value per share (net assets divided by shares
outstanding)............................................. $ 9.74 $ 15.83
====================================
(1)Investments, at cost..................................... $ 67,917,149 $37,263,114 $105,180,263
(2)Common stock sold short, at proceeds..................... $ --- $ 1,905,762 $ 1,905,762
2
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2008 SERIES H SERIES Z ADJUSTMENTS PRO FORMA
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends................................................. $ 735,713 $ 99,468 $ --- $ 835,181
Interest.................................................. 10,523 264,674 --- 275,197
---------------------------------------------------------------------
Total investment income................................... 746,236 364,142 --- 1,110,378
---------------------------------------------------------------------
EXPENSES:
Management fees........................................... 266,023 570,511 (135,604) 4 700,930
Custodian fees............................................ 9,212 46,199 10,791 3 66,202
Transfer agent/maintenance fees........................... 12,597 12,569 (12,667) 2 12,499
Administration fees....................................... 35,858 36,416 16,473 1 88,747
Directors' fees........................................... 2,169 1,268 --- 3,437
Professional fees......................................... 6,486 8,842 (5,801) 2 9,527
Reports to shareholders................................... 3,503 1,058 --- 4,561
Other expenses............................................ 2,231 820 --- 3,051
Dividends on short sales.................................. --- 23,287 25,561 3 48,848
---------------------------------------------------------------------
Total expenses............................................ 338,079 700,970 (101,247) 937,802
Less: Expenses waived.................................... (88,675) --- 88,675 4 ---
Earnings credits applied........................... (20) (43,432) --- (43,452)
---------------------------------------------------------------------
Net expenses.............................................. 249,384 657,538 (12,572) 894,350
---------------------------------------------------------------------
Net investment income (loss).............................. 496,852 (293,396) 12,572 216,028
---------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) during the period on:
Investments............................................... (3,504,941) 1,446,538 --- (2,058,403)
Securities sold short..................................... --- 552,678 --- 552,678
Foreign currency transactions............................. --- (1) --- (1)
Futures (100,773) (1,909,766) --- (2,010,539)
---------------------------------------------------------------------
Net realized gain (loss).................................. (3,605,714) 89,449 --- (3,516,265)
---------------------------------------------------------------------
Net unrealized depreciation during the period on:
Investments............................................... (7,156,978) (780,562) --- (7,937,540)
Securities sold short..................................... --- (115,617) --- (115,617)
Futures (41,115) (819,899) --- (861,014)
---------------------------------------------------------------------
Net unrealized depreciation............................... (7,198,093) (1,716,078) --- (8,914,171)
---------------------------------------------------------------------
Net loss.................................................. (10,803,807) (1,626,629) --- (12,430,436)
---------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations....................... $(10,306,955) $(1,920,025) $ 12,572 $(12,214,408)
=====================================================================
(1) Based on contract in effect for the surviving fund
(2) Decrease due to the elimination of duplicative expenses achieved by merging
the funds
(3) Adjustment due to increase in activity by merging the funds.
(4) Based on new contractual agreement that is effective August 15, 2008.
3
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS (UNAUDITED)(3)
JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SERIES H SERIES Z TOTAL SERIES H SERIES Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 71.0%
- ------------------------------------------------------------------------------------------------------------------------------------
ADVERTISING - 0.2%
4,800 --- 4,800 Omnicom Group, Inc.......................... $ 215,424 $ --- $ 215,424
---------------------------------------------
AEROSPACE & DEFENSE - 1.8%
3,971 --- 3,971 Boeing Company.............................. 260,974 --- 260,974
2,300 --- 2,300 General Dynamics Corporation................ 193,660 --- 193,660
--- 1,419 1,419 Hexcel Corporation*......................... --- 27,387 27,387
1,300 --- 1,300 Honeywell International, Inc................ 65,364 --- 65,364
3,000 --- 3,000 L-3 Communications Holdings, Inc............ 272,610 --- 272,610
4,047 --- 4,047 Lockheed Martin Corporation................. 399,277 --- 399,277
5,322 --- 5,322 Northrop Grumman Corporation................ 356,042 --- 356,042
6,100 --- 6,100 Raytheon Company............................ 343,308 --- 343,308
2,365 --- 2,365 United Technologies Corporation............. 145,920 --- 145,920
---------------------------------------------
2,037,155 27,387 2,064,542
---------------------------------------------
AGRICULTURAL PRODUCTS - 0.9%
9,900 --- 9,900 Archer-Daniels-Midland Company.............. 334,125 --- 334,125
--- 6,381 6,381 Bunge, Ltd.(1).............................. --- 687,170 687,170
--- 321 321 Fresh Del Monte Produce, Inc.*.............. --- 7,566 7,566
---------------------------------------------
334,125 694,736 1,028,861
---------------------------------------------
AIR FREIGHTS & LOGISTICS - 0.3%
2,000 --- 2,000 CH Robinson Worldwide, Inc.................. 109,680 --- 109,680
500 --- 500 FedEx Corporation........................... 39,395 --- 39,395
2,493 --- 2,493 United Parcel Services, Inc. (Cl.B)......... 153,245 --- 153,245
---------------------------------------------
302,320 --- 302,320
---------------------------------------------
AIRLINES - 0.2%
8,300 12,958 21,258 Southwest Airlines Company.................. 108,232 168,972 277,204
---------------------------------------------
ALUMINUM - 0.1%
300 2,635 2,935 Alcoa, Inc.................................. 10,686 93,859 104,545
---------------------------------------------
APPAREL RETAIL - 0.6%
16,000 16,000 Gap, Inc.................................... 266,720 --- 266,720
--- 8,474 8,474 Ross Stores, Inc............................ --- 300,997 300,997
--- 4,655 4,655 Urban Outfitters, Inc.*..................... --- 145,189 145,189
---------------------------------------------
266,720 446,186 712,906
---------------------------------------------
APPAREL, ACCESSORIES & LUXURY GOODS - 0.4%
1,200 --- 1,200 Jones Apparel Group, Inc.................... 16,500 --- 16,500
--- 4,845 4,845 Polo Ralph Lauren Corporation............... --- 304,169 304,169
2,400 --- 2,400 V.F. Corporation............................ 170,832 --- 170,832
---------------------------------------------
187,332 304,169 491,501
---------------------------------------------
APPLICATION SOFTWARE - 0.8%
5,600 --- 5,600 Adobe Systems, Inc.*........................ 220,584 --- 220,584
200 --- 200 Autodesk, Inc.*............................. 6,762 --- 6,762
17,800 --- 17,800 Compuware Corporation*...................... 169,812 --- 169,812
--- 4,655 4,655 Salesforce.com, Inc.*....................... --- 317,611 317,611
--- 1,349 1,349 SAP AG ADR.................................. --- 70,296 70,296
--- 2,605 2,605 Synopsys, Inc.*............................. --- 62,286 62,286
---------------------------------------------
397,158 450,193 847,351
---------------------------------------------
4
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS (UNAUDITED)(3)
JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SERIES H SERIES Z TOTAL SERIES H SERIES Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET MANAGEMENT & CUSTODY BANKS - 0.3%
9,455 --- 9,455 Bank of New York Mellon Corporation......... 357,683 --- 357,683
---------------------------------------------
AUTOMOBILE MANUFACTURERS - 0.0%
11,026 --- 11,026 Ford Motor Company*......................... 53,035 --- 53,035
---------------------------------------------
AUTOMOTIVE RETAIL - 0.1%
1,200 --- 1,200 Autozone, Inc.*............................. 145,212 --- 145,212
---------------------------------------------
BIOTECHNOLOGY - 1.0%
7,442 --- 7,442 Amgen, Inc.*................................ 350,965 --- 350,965
900 --- 900 Biogen Idec, Inc.*.......................... 50,301 --- 50,301
1,976 1,976 BioMarin Pharmaceutical, Inc.*.............. --- 57,264 57,264
8,500 3,150 11,650 Gilead Sciences, Inc.*...................... 450,075 166,793 616,868
---------------------------------------------
851,341 224,057 1,075,398
---------------------------------------------
BREWERS - 0.2%
2,100 --- 2,100 Anheuser-Busch Companies, Inc............... 130,452 --- 130,452
2,500 --- 2,500 Molson Coors Brewing Company................ 135,825 --- 135,825
---------------------------------------------
266,277 --- 266,277
---------------------------------------------
BROADCASTING & CABLE TV - 0.3%
8,900 --- 8,900 CBS Corporation (Cl.B)...................... 173,461 --- 173,461
6,936 --- 6,936 Comcast Corporation......................... 131,576 --- 131,576
---------------------------------------------
305,037 --- 305,037
---------------------------------------------
BUILDING PRODUCTS - 0.2%
--- 8,645 8,645 Owens Corning, Inc.*........................ --- 196,674 196,674
---------------------------------------------
COMMERCIAL PRINTING - 0.0%
500 --- 500 RR Donnelley & Sons Company................. 14,845 --- 14,845
---------------------------------------------
COMMODITY CHEMICALS - 0.0%
--- 1,213 1,213 Braskem S.A. ADR............................ --- 19,250 19,250
---------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.3%
1,400 --- 1,400 Ciena Corporation*.......................... 32,438 --- 32,438
27,883 --- 27,883 Cisco Systems, Inc.*........................ 648,558 --- 648,558
6,900 --- 6,900 Corning, Inc................................ 159,045 --- 159,045
5,600 --- 5,600 JDS Uniphase Corporation*................... 63,616 --- 63,616
1,900 --- 1,900 Juniper Networks, Inc.*..................... 42,142 --- 42,142
2,000 --- 2,000 Motorola, Inc............................... 14,680 --- 14,680
7,524 2,660 10,184 Qualcomm, Inc............................... 333,840 118,024 451,864
---------------------------------------------
1,294,319 118,024 1,412,343
---------------------------------------------
COMPUTER & ELECTRONICS RETAIL - 0.4%
7,700 --- 7,700 Best Buy Company, Inc....................... 304,920 --- 304,920
13,000 --- 13,000 RadioShack Corporation...................... 159,510 --- 159,510
---------------------------------------------
464,430 --- 464,430
---------------------------------------------
COMPUTER HARDWARE - 2.6%
4,146 --- 4,146 Apple, Inc.*................................ 694,206 --- 694,206
13,776 --- 13,776 Dell, Inc.*................................. 301,419 --- 301,419
18,936 --- 18,936 Hewlett-Packard Company..................... 837,161 --- 837,161
8,816 --- 8,816 International Business Machines Corporation. 1,044,960 --- 1,044,960
---------------------------------------------
2,877,746 --- 2,877,746
---------------------------------------------
5
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS (UNAUDITED)(3)
JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SERIES H SERIES Z TOTAL SERIES H SERIES Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
COMPUTER STORAGE & PERIPHERALS - 0.6%
6,300 6,300 Lexmark International, Inc.*................ 210,609 --- 210,609
15,100 15,100 Qlogic Corporation*......................... 220,309 --- 220,309
--- 6,972 6,972 Western Digital Corporation*................ --- 240,743 240,743
---------------------------------------------
430,918 240,743 671,661
---------------------------------------------
CONSTRUCTION & ENGINEERING - 1.2%
--- 602 602 Empresas ICA SAB de CV ADR*................. --- 14,954 14,954
400 400 Fluor Corporation........................... 74,432 --- 74,432
--- 5,959 5,959 Foster Wheeler, Ltd.*....................... --- 435,901 435,901
--- 2,660 2,660 Jacobs Engineering Group, Inc.*............. --- 214,662 214,662
--- 6,393 6,393 KBR, Inc.................................... --- 223,179 223,179
--- 4,631 4,631 Quanta Services, Inc.*...................... --- 154,073 154,073
---- 3,154 3,154 Shaw Group, Inc.*........................... --- 194,886 194,886
---------------------------------------------
74,432 1,237,655 1,312,087
---------------------------------------------
CONSTRUCTION & FARM MACHINERY &
HEAVY TRUCKS - 0.4%
394 --- 394 Caterpillar, Inc............................ 29,085 --- 29,085
800 --- 800 Cummins, Inc................................ 52,416 --- 52,416
--- 3,325 3,325 Joy Global, Inc............................. --- 252,135 252,135
--- 1,235 1,235 Kubota Corporation ADR...................... --- 44,200 44,200
200 --- 200 Manitowoc Company, Inc...................... 6,506 --- 6,506
2,000 --- 2,000 Terex Corporation*.......................... 102,740 --- 102,740
---------------------------------------------
190,747 296,335 487,082
---------------------------------------------
CONSTRUCTION MATERIALS - 0.2%
--- 3,667 3,667 Texas Industries, Inc....................... --- 205,829 205,829
---------------------------------------------
CONSUMER ELECTRONICS - 0.2%
Matsushita Electric Industrial Company, Ltd.
--- 4,971 4,971 ADR...................................... --- 106,479 106,479
--- 1,615 1,615 Sony Corporation ADR........................ --- 70,640 70,640
---------------------------------------------
--- 177,119 177,119
---------------------------------------------
CONSUMER FINANCE - 0.3%
6,262 --- 6,262 American Express Company.................... 235,889 --- 235,889
3,200 --- 3,200 Capital One Financial Corporation........... 121,632 --- 121,632
1,246 --- 1,246 Discover Financial Services................. 16,410 --- 16,410
---------------------------------------------
373,931 --- 373,931
---------------------------------------------
DATA PROCESSING & OUTSOURCED SERVICES - 0.4%
5,100 --- 5,100 Affiliated Computer Services, Inc.*......... 272,799 --- 272,799
4,500 --- 4,500 Total System Services, Inc.*................ 99,990 --- 99,990
4,600 --- 4,600 Western Union Company....................... 113,712 --- 113,712
---------------------------------------------
486,501 --- 486,501
---------------------------------------------
DEPARTMENT STORES - 0.2%
9,400 --- 9,400 Macy's, Inc................................. 182,548 --- 182,548
---------------------------------------------
DISTILLERS & VINTNERS - 0.1%
1,700 --- 1,700 Brown-Forman Corporation.................... 128,469 --- 128,469
---------------------------------------------
6
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS (UNAUDITED)(3)
JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SERIES H SERIES Z TOTAL SERIES H SERIES Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED BANKS - 1.2%
--- 783 783 Banco Santander Chile S.A. ADR.............. --- 33,677 33,677
--- 6,598 6,598 Mizuho Financial Group, Inc. ADR............ --- 61,164 61,164
--- 5,555 5,555 New York Community Bancorp, Inc.*........... --- 99,101 99,101
2,525 20,708 23,233 U.S. Bancorp(1)............................. 70,422 577,546 647,968
17,428 --- 17,428 Wachovia Corporation........................ 270,657 --- 270,657
11,738 --- 11,738 Wells Fargo & Company....................... 278,778 --- 278,778
---------------------------------------------
619,857 771,488 1,391,345
---------------------------------------------
DIVERSIFIED CHEMICALS - 0.7%
11,289 --- 11,289 Dow Chemical Company........................ 394,099 --- 394,099
9,800 --- 9,800 E.I. Du Pont de Nemours & Company........... 420,322 --- 420,322
200 --- 200 PPG Industries, Inc......................... 11,474 --- 11,474
---------------------------------------------
825,895 --- 825,895
---------------------------------------------
DIVERSIFIED METALS & MINING - 1.2%
4,200 2,665 6,865 Freeport McMoRan Copper & Gold, Inc. (Cl.B). 492,198 312,311 804,509
--- 548 548 Southern Cooper Corporation................. --- 58,433 58,433
--- 9,264 9,264 Teck Cominco, Ltd. (Cl.B)................... --- 444,209 444,209
---------------------------------------------
492,198 814,953 1,307,151
---------------------------------------------
DRUG RETAIL - 0.5%
13,600 --- 13,600 CVS Caremark Corporation.................... 538,152 --- 538,152
---------------------------------------------
ELECTRIC UTILITIES - 1.6%
20,700 --- 20,700 Duke Energy Corporation..................... 359,766 --- 359,766
6,578 --- 6,578 Edison International........................ 337,978 --- 337,978
3,300 --- 3,300 Entergy Corporation......................... 397,584 --- 397,584
1,000 1,653 2,653 Exelon Corporation.......................... 89,960 148,704 238,664
10,300 --- 10,300 Pepco Holdings, Inc......................... 264,195 --- 264,195
6,400 --- 6,400 Southern Company............................ 223,488 --- 223,488
---------------------------------------------
1,672,971 148,704 1,821,675
---------------------------------------------
ELECTRICAL COMPONENTS & EQUIPMENT - 0.9%
6,200 --- 6,200 Cooper Industries, Ltd...................... 244,900 --- 244,900
5,700 1,605 7,305 Emerson Electric Company.................... 281,865 79,367 361,232
--- 988 988 Powell Industries, Inc.*.................... --- 49,805 49,805
--- 3,524 3,524 Roper Industries, Inc....................... --- 232,161 232,161
--- 3,800 3,800 Solarfun Power Holdings Company, Ltd. ADR*.. --- 66,500 66,500
---------------------------------------------
526,765 427,833 954,598
---------------------------------------------
ELECTRONIC EQUIPMENT MANUFACTURERS - 0.3%
4,000 --- 4,000 Agilent Technologies, Inc.*................. 142,160 --- 142,160
--- 2,033 2,033 Itron, Inc.*................................ --- 199,945 199,945
---------------------------------------------
142,160 199,945 342,105
---------------------------------------------
ELECTRONIC MANUFACTURING SERVICES - 0.3%
9,346 --- 9,346 Tyco Electronics, Ltd....................... 334,774 --- 334,774
---------------------------------------------
ENVIRONMENTAL & FACILITIES SERVICES - 0.2%
16,700 --- 16,700 Allied Waste Industries, Inc.*.............. 210,754 --- 210,754
---------------------------------------------
7
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS (UNAUDITED)(3)
JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SERIES H SERIES Z TOTAL SERIES H SERIES Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
EXCHANGE TRADED FUNDS - 2.3%
--- 15,413 15,413 Claymore.................................... --- 295,776 295,776
--- 2,375 2,375 iShares MSCI Hong Kong Index Fund........... --- 40,209 40,209
--- 4,655 4,655 iShares Silver Trust*(1).................... --- 803,127 803,127
--- 7,480 7,480 Market Vectors Agribusiness ETF*(1)......... --- 460,992 460,992
--- 3,277 3,277 Market Vectors Steel Index Fund............. --- 346,969 346,969
--- 8,660 8,660 Powershares QQQ............................. --- 391,172 391,172
--- 3,325 3,325 SPDR Gold Trust*............................ --- 303,905 303,905
---------------------------------------------
--- 2,642,150 2,642,150
---------------------------------------------
FERTILIZERS & AGRICULTURAL CHEMICALS - 0.5%
4,000 --- 4,000 Monsanto Company............................ 505,760 --- 505,760
---------------------------------------------
FOOD DISTRIBUTORS - 0.2%
8,300 --- 8,300 SYSCO Corporation........................... 228,333 --- 228,333
---------------------------------------------
FOOD RETAIL - 0.3%
10,200 --- 10,200 Safeway, Inc................................ 291,210 --- 291,210
---------------------------------------------
FOOTWEAR - 0.1%
2,400 --- 2,400 Nike, Inc. (Cl.B)........................... 143,064 --- 143,064
---------------------------------------------
GENERAL MERCHANDISE STORES - 0.3%
7,100 --- 7,100 Big Lots, Inc.*............................. 221,804 --- 221,804
5,700 --- 5,700 Family Dollar Stores, Inc................... 113,658 --- 113,658
---------------------------------------------
335,462 --- 335,462
---------------------------------------------
HEALTH CARE DISTRIBUTORS - 0.1%
1,584 --- 1,584 AmerisourceBergen Corporation............... 63,344 --- 63,344
900 --- 900 Cardinal Health, Inc........................ 46,422 --- 46,422
800 --- 800 McKesson Corporation........................ 44,728 --- 44,728
---------------------------------------------
154,494 --- 154,494
---------------------------------------------
HEALTH CARE EQUIPMENT - 1.1%
4,400 --- 4,400 Baxter International, Inc................... 281,336 --- 281,336
23,800 --- 23,800 Boston Scientific Corporation*.............. 292,502 --- 292,502
800 --- 800 CR Bard, Inc................................ 70,360 --- 70,360
10,825 --- 10,825 Medtronic, Inc.............................. 560,194 --- 560,194
---------------------------------------------
1,204,392 --- 1,204,392
---------------------------------------------
HEALTH CARE SERVICES - 0.3%
3,000 --- 3,000 Express Scripts, Inc.*...................... 188,160 --- 188,160
900 --- 900 Laboratory Corporation of America Holdings*. 62,667 --- 62,667
900 --- 900 Medco Health Solutions, Inc.*............... 42,480 --- 42,480
---------------------------------------------
293,307 --- 293,307
---------------------------------------------
HEALTH CARE TECHNOLOGY - 0.1%
4,100 --- 4,100 IMS Health, Inc............................. 95,530 --- 95,530
---------------------------------------------
HEAVY ELECTRICAL EQUIPMENT - 0.1%
--- 4,750 4,750 ABB, Ltd. ADR*.............................. --- 134,520 134,520
---------------------------------------------
HOME ENTERTAINMENT SOFTWARE - 0.0%
--- 1,225 1,225 Shanda Interactive Entertainment, Ltd. ADR*. --- 33,259 33,259
---------------------------------------------
8
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS (UNAUDITED)(3)
JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SERIES H SERIES Z TOTAL SERIES H SERIES Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
HOME IMPROVEMENT RETAIL - 0.1%
3,276 --- 3,276 Home Depot, Inc............................. 76,724 --- 76,724
800 --- 800 Sherwin-Williams Company.................... 36,744 --- 36,744
---------------------------------------------
113,468 --- 113,468
---------------------------------------------
HOMEBUILDING - 0.3%
4,100 --- 4,100 Centex Corporation.......................... 54,817 --- 54,817
7,400 --- 7,400 DR Horton, Inc.............................. 80,290 --- 80,290
1,800 --- 1,800 KB Home..................................... 30,474 --- 30,474
9,100 --- 9,100 Lennar Corporation.......................... 112,294 --- 112,294
2,100 --- 2,100 Pulte Homes, Inc............................ 20,223 --- 20,223
---------------------------------------------
298,098 --- 298,098
---------------------------------------------
HOTELS, RESORTS & CRUISE LINES - 0.0%
600 --- 600 Carnival Corporation........................ 19,776 --- 19,776
---------------------------------------------
HOUSEHOLD APPLIANCES - 0.1%
3,200 --- 3,200 Stanley Works............................... 143,456 --- 143,456
---------------------------------------------
HOUSEHOLD PRODUCTS - 1.4%
3,500 --- 3,500 Clorox Company.............................. 182,700 --- 182,700
2,300 --- 2,300 Kimberly-Clark Corporation.................. 137,494 --- 137,494
20,729 --- 20,729 Procter & Gamble Company.................... 1,260,530 --- 1,260,530
---------------------------------------------
1,580,724 --- 1,580,724
---------------------------------------------
HUMAN RESOURCES & EMPLOYMENT SERVICES - 0.2%
7,300 --- 7,300 Robert Half International, Inc.............. 174,981 --- 174,981
---------------------------------------------
HYPERMARKETS & SUPER CENTERS - 1.1%
--- 5,947 5,947 BJ's Wholesale Club, Inc.*.................. --- 230,149 230,149
17,213 --- 17,213 Wal-Mart Stores, Inc........................ 967,371 --- 967,371
---------------------------------------------
967,371 230,149 1,197,520
---------------------------------------------
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS - 0.6%
17,100 22,521 39,621 Dynegy, Inc.*............................... 146,205 192,554 338,759
--- 2,660 2,660 Mirant Corporation*......................... --- 104,139 104,139
--- 1,029 1,029 NRG Energy, Inc.*........................... --- 44,144 44,144
--- 4,392 4,392 Ormat Technologies, Inc..................... --- 215,999 215,999
---------------------------------------------
146,205 556,836 703,041
---------------------------------------------
INDUSTRIAL CONGLOMERATES - 1.8%
976 --- 976 3M Company.................................. 67,920 --- 67,920
53,169 --- 53,169 General Electric Company.................... 1,419,080 --- 1,419,080
--- 4,798 4,798 Otter Tail Corporation...................... --- 186,306 186,306
8,200 --- 8,200 Tyco International, Ltd..................... 328,328 --- 328,328
---------------------------------------------
1,815,328 186,306 2,001,634
---------------------------------------------
INDUSTRIAL MACHINERY - 1.8%
5,600 5,390 10,990 Dover Corporation........................... 270,872 260,714 531,586
1,600 1,605 3,205 Eaton Corporation........................... 135,952 136,377 272,329
--- 988 988 Flowserve Corporation....................... --- 135,059 135,059
--- 2,565 2,565 Harsco Corporation.......................... --- 139,562 139,562
7,000 --- 7,000 Illinois Tool Works, Inc.................... 332,570 --- 332,570
2,600 --- 2,600 Ingersoll-Rand Company, Ltd................. 97,318 --- 97,318
4,200 --- 4,200 Parker Hannifin Corporation................. 299,544 --- 299,544
9
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS (UNAUDITED)(3)
JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SERIES H SERIES Z TOTAL SERIES H SERIES Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
--- 5,320 5,320 Timken Company.............................. --- 175,241 175,241
---------------------------------------------
1,136,256 846,953 1,983,209
---------------------------------------------
INSURANCE BROKERS - 0.1%
1,900 --- 1,900 Marsh & McLennan Companies, Inc............. 50,445 --- 50,445
---------------------------------------------
INTEGRATED OIL & GAS - 6.9%
13,968 --- 13,968 Chevron Corporation......................... 1,384,648 --- 1,384,648
11,217 --- 11,217 ConocoPhillips.............................. 1,058,773 --- 1,058,773
32,541 --- 32,541 Exon Mobil Corporation(1)................... 2,867,838 --- 2,867,838
1,500 3,964 5,464 Hess Corporation(1)......................... 189,285 500,217 689,502
7,400 7,400 Occidental Petroleum Corporation............ 664,964 --- 664,964
--- 14,243 14,243 Petroleo Brasileiro S.A. ADR(1)............. --- 1,008,832 1,008,832
--- 1,995 1,995 Suncor Energy, Inc.......................... --- 115,949 115,949
---------------------------------------------
6,165,508 1,624,998 7,790,506
---------------------------------------------
INTEGRATED TELECOMMUNICATION SERVICES - 1.7%
27,582 --- 27,582 AT&T, Inc................................... 929,237 --- 929,237
7,400 --- 7,400 CenturyTel, Inc............................. 263,366 --- 263,366
900 --- 900 Embarq Corporation.......................... 42,543 --- 42,543
--- 1,470 1,470 Telefonos de Mexico SAB de CV ADR........... --- 34,810 34,810
9,642 --- 9,642 Verizon Communications, Inc................. 341,327 --- 341,327
20,900 --- 20,900 Windstream Corporation...................... 257,906 --- 257,906
---------------------------------------------
1,834,379 34,810 1,869,189
---------------------------------------------
INTERNET RETAIL - 0.3%
1,600 --- 1,600 Amazon.com, Inc.*........................... 117,328 --- 117,328
4,600 --- 4,600 Expedia, Inc.*.............................. 84,548 --- 84,548
5,300 --- 5,300 IAC*........................................ 102,184 --- 102,184
---------------------------------------------
304,060 --- 304,060
---------------------------------------------
INTERNET SOFTWARE & SERVICES - 1.1%
5,600 --- 5,600 eBay, Inc.*................................. 153,048 --- 153,048
--- 1,996 1,996 GigaMedia, Ltd.*............................ --- 23,812 23,812
1,175 --- 1,175 Google, Inc.*............................... 618,543 --- 618,543
--- 1,605 1,605 j2 Global Communications, Inc.*............. --- 36,915 36,915
--- 4,258 4,258 Open Text Corporation*...................... --- 136,682 136,682
--- 1,840 1,840 Sina Corporation*........................... --- 78,292 78,292
9,074 --- 9,074 Yahoo!, Inc.*............................... 187,469 --- 187,469
---------------------------------------------
959,060 275,701 1,234,761
---------------------------------------------
INVESTMENT BANKING & BROKERAGE - 0.9%
14,500 --- 14,500 Charles Schwab Corporation.................. 297,830 --- 297,830
3,536 --- 3,536 Goldman Sachs Group, Inc.................... 618,446 --- 618,446
4,300 --- 4,300 Lehman Brothers Holdings, Inc............... 85,183 --- 85,183
1,053 --- 1,053 Merrill Lynch & Company, Inc................ 33,391 --- 33,391
---------------------------------------------
1,034,850 --- 1,034,850
---------------------------------------------
IT CONSULTING & OTHER SERVICES - 0.0%
--- 1,972 1,972 Wipro, Ltd. ADR............................. --- 24,019 24,019
---------------------------------------------
LEISURE PRODUCTS - 0.1%
3,300 --- 3,300 Hasbro, Inc................................. 117,876 --- 117,876
---------------------------------------------
LIFE & HEALTH INSURANCE - 0.7%
7,864 --- 7,864 MetLife, Inc................................ 414,983 --- 414,983
5,700 --- 5,700 Prudential Financial, Inc................... 340,518 --- 340,518
---------------------------------------------
755,501 --- 755,501
---------------------------------------------
10
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS (UNAUDITED)(3)
JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SERIES H SERIES Z TOTAL SERIES H SERIES Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES - 0.3%
Applera Corporation - Applied
6,900 --- 6,900 Biosystems Group......................... 231,012 --- 231,012
2,500 --- 2,500 Thermo Fisher Scientific, Inc.*............. 139,325 --- 139,325
---------------------------------------------
370,337 --- 370,337
---------------------------------------------
MANAGED HEALTH CARE - 0.5%
6,200 --- 6,200 Aetna, Inc.................................. 251,286 --- 251,286
4,200 --- 4,200 Cigna Corporation........................... 148,638 --- 148,638
4,620 --- 4,620 UnitedHealth Group, Inc..................... 121,275 --- 121,275
1,684 --- 1,684 WellPoint, Inc.*............................ 80,259 --- 80,259
---------------------------------------------
601,458 --- 601,458
---------------------------------------------
METAL & GLASS CONTAINERS - 0.2%
--- 7,979 7,979 Crown Holdings, Inc.*....................... --- 207,374 207,374
---------------------------------------------
MOVIES & ENTERTAINMENT - 1.4%
16,794 --- 16,794 News Corporation............................ 252,582 --- 252,582
35,758 --- 35,758 Time Warner, Inc............................ 529,218 --- 529,218
8,300 --- 8,300 Viacom, Inc. (Cl.B)*........................ 253,482 --- 253,482
18,222 --- 18,222 Walt Disney Company......................... 568,527 --- 568,527
---------------------------------------------
1,603,809 --- 1,603,809
---------------------------------------------
MULTI-LINE INSURANCE - 0.5%
10,065 --- 10,065 American International Group, Inc........... 266,320 --- 266,320
500 --- 500 Assurant, Inc............................... 32,980 --- 32,980
4,400 --- 4,400 Hartford Financial Services Group, Inc...... 284,108 --- 284,108
---------------------------------------------
583,408 --- 583,408
---------------------------------------------
MULTI-UTILITIES - 0.6%
6,400 --- 6,400 DTE Energy Company.......................... 271,616 --- 271,616
8,500 --- 8,500 Public Service Enterprise Group, Inc........ 390,405 --- 390,405
---------------------------------------------
662,021 --- 662,021
---------------------------------------------
OFFICE ELECTRONICS - 0.1%
9,400 --- 9,400 Xerox Corporation........................... 127,464 --- 127,464
---------------------------------------------
OFFICE REITS - 0.1%
1,500 --- 1,500 Boston Properties, Inc...................... 135,330 --- 135,330
---------------------------------------------
OIL & GAS DRILLING - 1.1%
4,300 --- 4,300 ENSCO International, Inc.................... 347,182 --- 347,182
800 --- 800 Noble Corporation........................... 51,968 --- 51,968
--- 6,649 6,649 Rowan Companies, Inc........................ --- 310,841 310,841
3,379 --- 3,379 Transocean, Inc............................. 514,926 --- 514,926
---------------------------------------------
914,076 310,841 1,224,917
---------------------------------------------
OIL & GAS EQUIPMENT & SERVICES - 1.5%
--- 1,995 1,995 Cameron International Corporation*.......... --- 110,423 110,423
1,600 --- 1,600 Halliburton Company......................... 84,912 --- 84,912
5,362 --- 5,362 National Oilwell Varco, Inc.*............... 475,717 --- 475,717
4,247 5,320 9,567 Schlumberger, Ltd.(1)....................... 456,255 571,528 1,027,783
---------------------------------------------
1,016,884 681,951 1,698,835
---------------------------------------------
11
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS (UNAUDITED)(3)
JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SERIES H SERIES Z TOTAL SERIES H SERIES Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
OIL & GAS EXPLORATION & PRODUCTION - 1.9%
5,600 --- 5,600 Anadarko Petroleum Corporation.............. 419,104 --- 419,104
3,600 --- 3,600 Apache Corporation.......................... 500,400 --- 500,400
--- 6,636 6,636 Carrizo Oil & Gas, Inc.*(1)................. --- 451,845 451,845
2,500 --- 2,500 Devon Energy Corporation.................... 300,400 --- 300,400
--- 1,657 1,657 Nexen, Inc.................................. --- 65,866 65,866
3,600 --- 3,600 Noble Energy, Inc........................... 362,016 --- 362,016
---------------------------------------------
1,581,920 517,711 2,099,631
---------------------------------------------
OIL & GAS REFINING & MARKETING - 0.2%
300 --- 300 Sunoco, Inc................................. 12,207 --- 12,207
4,884 --- 4,884 Valero Energy Corporation................... 201,123 --- 201,123
---------------------------------------------
213,330 --- 213,330
---------------------------------------------
OIL & GAS STORAGE & TRANSPORTATION - 0.0%
200 --- 200 Spectra Energy Corporation.................. 5,748 --- 5,748
---------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES - 2.0%
28,428 --- 28,428 Bank of America Corporation................. 678,576 --- 678,576
27,280 --- 27,280 Citigroup, Inc.............................. 457,213 --- 457,213
20,610 --- 20,610 JPMorgan Chase & Company.................... 707,129 --- 707,129
11,693 --- 11,693 Morgan Stanley.............................. 421,767 --- 421,767
---------------------------------------------
2,264,685 --- 2,264,685
---------------------------------------------
PACKAGED FOODS & MEATS - 0.4%
3,500 --- 3,500 Campbell Soup Company....................... 117,110 --- 117,110
3,300 --- 3,300 General Mills, Inc.......................... 200,541 --- 200,541
--- 741 741 HQ Sustainable Maritime Industries, Inc.*... --- 9,818 9,818
849 --- 849 Kraft Foods, Inc............................ 24,154 --- 24,154
--- 4,508 4,508 Tyson Foods, Inc............................ --- 67,350 67,350
---------------------------------------------
341,805 77,168 418,973
---------------------------------------------
PAPER PACKAGING - 0.0%
400 --- 400 Bemis Company, Inc.......................... 8,968 --- 8,968
---------------------------------------------
PAPER PRODUCTS - 0.0%
--- 1,545 1,545 Votorantim Celulose e Papel S.A. ADR........ --- 41,267 41,267
PERSONAL PRODUCTS - 0.0%
1,000 --- 1,000 Avon Products, Inc.......................... 36,020 --- 36,020
---------------------------------------------
PHARMACEUTICALS - 3.5%
4,447 --- 4,447 Abbott Laboratories......................... 235,558 --- 235,558
575 --- 575 Bristol-Myers Squibb Company................ 11,805 --- 11,805
9,871 --- 9,871 Eli Lilly & Company......................... 455,645 --- 455,645
6,500 --- 6,500 Forest Laboratories, Inc.*.................. 225,810 --- 225,810
19,483 --- 19,483 Johnson & Johnson........................... 1,253,536 --- 1,253,536
2,900 --- 2,900 King Pharmaceuticals, Inc.*................. 30,363 --- 30,363
16,276 --- 16,276 Merck & Company, Inc........................ 613,442 --- 613,442
48,838 --- 48,838 Pfizer, Inc................................. 853,200 --- 853,200
1,700 --- 1,700 Schering-Plough Corporation................. 33,473 --- 33,473
2,900 --- 2,900 Watson Pharmaceuticals, Inc.*............... 78,793 --- 78,793
2,155 --- 2,155 Wyeth....................................... 103,354 --- 103,354
---------------------------------------------
3,894,979 --- 3,894,979
---------------------------------------------
12
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS (UNAUDITED)(3)
JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SERIES H SERIES Z TOTAL SERIES H SERIES Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE - 0.9%
1,300 --- 1,300 ACE, Ltd.................................... 71,617 --- 71,617
6,500 --- 6,500 Chubb Corporation........................... 318,565 --- 318,565
7,900 --- 7,900 Cincinnati Financial Corporation............ 200,660 --- 200,660
--- 3,990 3,990 Progressive Corporation..................... --- 74,693 74,693
500 --- 500 Safeco Corporation.......................... 33,580 --- 33,580
7,681 --- 7,681 Travelers Companies, Inc.................... 333,355 --- 333,355
---------------------------------------------
957,777 74,693 1,032,470
---------------------------------------------
RAILROADS - 0.3%
4,300 --- 4,300 CSX Corporation............................. 270,083 --- 270,083
800 --- 800 Norfolk Southern Corporation................ 50,136 --- 50,136
---------------------------------------------
320,219 --- 320,219
---------------------------------------------
REGIONAL BANKS - 0.5%
10,000 --- 10,000 BB&T Corporation............................ 227,700 --- 227,700
600 --- 600 M&T Corporation............................. 42,324 --- 42,324
9,600 --- 9,600 Regions Financial Corporation............... 104,736 --- 104,736
6,600 --- 6,600 SunTrust Banks, Inc......................... 239,052 --- 239,052
---------------------------------------------
613,812 --- 613,812
---------------------------------------------
RESIDENTIAL REITS - 0.2%
7,300 --- 7,300 Equity Residential.......................... 279,371 --- 279,371
---------------------------------------------
RESTAURANTS - 0.5%
9,075 --- 9,075 McDonald's Corporation...................... 510,197 --- 510,197
---------------------------------------------
SEMICONDUCTOR EQUIPMENT - 0.0%
3,000 --- 3,000 Teradyne, Inc.*............................. 33,210 --- 33,210
---------------------------------------------
SEMICONDUCTORS - 1.4%
--- 742 742 Advanced Semiconductor Engineering, Inc. ADR --- 3,302 3,302
800 --- 800 Altera Corporation.......................... 16,560 --- 16,560
--- 1,657 1,657 Himax Technologies, Inc. ADR................ --- 8,484 8,484
29,501 --- 29,501 Intel Corporation........................... 633,682 --- 633,682
7,900 --- 7,900 LSI Corporation*............................ 48,506 --- 48,506
6,800 --- 6,800 National Semiconductor Corporation.......... 139,672 --- 139,672
Taiwan Semiconductor Manufacturing
--- 22,077 22,077 Company, Ltd. ADR........................ --- 240,860 240,860
15,394 --- 15,394 Texas Instruments, Inc...................... 433,495 --- 433,495
3,900 --- 3,900 Xilinx, Inc................................. 98,475 --- 98,475
---------------------------------------------
1,370,390 252,646 1,623,036
---------------------------------------------
SOFT DRINKS - 0.8%
8,934 --- 8,934 Coca-Cola Company........................... 464,389 --- 464,389
2,300 --- 2,300 Pepsi Bottling Group, Inc................... 64,216 --- 64,216
6,647 --- 6,647 PepsiCo, Inc................................ 422,683 --- 422,683
---------------------------------------------
951,288 --- 951,288
---------------------------------------------
SPECIALIZED FINANCE - 0.4%
600 --- 600 CME Group, Inc.............................. 229,914 --- 229,914
--- 3,990 3,990 Plum Creek Timber Company, Inc.............. --- 170,413 170,413
2,000 --- 2,000 NYSE Euronext, Inc.......................... 101,320 --- 101,320
---------------------------------------------
331,234 170,413 501,647
---------------------------------------------
13
PRO FORMA COMBINING
SCHEDULE OF INVESTMENTS (UNAUDITED)(3)
JUNE 30, 2008
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER NUMBER
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SERIES H SERIES Z TOTAL SERIES H SERIES Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIALIZED REITS - 0.2%
2,600 --- 2,600 Host Hotels & Resorts, Inc.................. 35,490 --- 35,490
2,300 --- 2,300 Public Storage, Inc......................... 185,817 --- 185,817
---------------------------------------------
221,307 --- 221,307
---------------------------------------------
SPECIALTY CHEMICALS - 0.1%
1,700 --- 1,700 Sigma-Aldrich Corporation................... 91,562 --- 91,562
---------------------------------------------
STEEL - 1.0%
--- 1,976 1,976 Commercial Metals Company................... --- 74,495 74,495
5,211 --- 5,211 Nucor Corporation........................... 389,105 --- 389,105
--- 10,445 10,445 Steel Dynamics, Inc......................... --- 408,086 408,086
1,500 --- 1,500 United States Steel Corporation............. 277,170 --- 277,170
---------------------------------------------
666,275 482,581 1,148,856
---------------------------------------------
SYSTEMS SOFTWARE - 1.9%
2,908 --- 2,908 BMC Software, Inc.*......................... 104,688 --- 104,688
53,250 --- 53,250 Microsoft Corporation*...................... 1,464,908 --- 1,464,908
16,129 --- 16,129 Oracle Corporation*......................... 338,709 --- 338,709
14,600 --- 14,600 Symantec Corporation*....................... 282,510 --- 282,510
---------------------------------------------
2,190,815 --- 2,190,815
---------------------------------------------
THRIFTS & MORTGAGE FINANCE - 0.2%
3,300 --- 3,300 Countrywide Financial Corporation........... 14,025 --- 14,025
2,500 --- 2,500 Federal Home Loan Mortgage Corporation...... 41,000 --- 41,000
4,669 --- 4,669 Federal National Mortgage Association....... 91,092 --- 91,092
8,659 --- 8,659 Washington Mutual, Inc...................... 42,689 --- 42,689
---------------------------------------------
188,806 --- 188,806
---------------------------------------------
TIRES & RUBBER - 0.0%
1,900 --- 1,900 Goodyear Tire & Rubber Company*............. 33,877 --- 33,877
---------------------------------------------
TOBACCO - 1.0%
15,600 --- 15,600 Altria Group, Inc........................... 320,736 --- 320,736
15,000 --- 15,000 Philip Morris International, Inc............ 740,850 --- 740,850
900 --- 900 UST, Inc.................................... 49,149 --- 49,149
---------------------------------------------
1,110,735 ----- 1,110,735
---------------------------------------------
TRUCKING - 0.3%
--- 5,938 5,938 J.B. Hunt Transport Services, Inc........... --- 197,617 197,617
--- 3,477 3,477 Knight Transportation, Inc.*................ --- 63,629 63,629
1,000 --- 1,000 Ryder System, Inc........................... 68,880 --- 68,880
---------------------------------------------
68,880 261,246 330,126
---------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES - 0.2%
--- 285 285 Millicom International Cellular S.A......... --- 29,497 29,497
16,300 --- 16,300 Sprint Nextel Corporation................... 154,850 --- 154,850
---------------------------------------------
154,850 29,497 184,347
---------------------------------------------
Total Common Stocks - (Cost $84,514,354).... $63,045,890 $16,961,200 $80,007,090
---------------------------------------------
14
MARKET MARKET MARKET
PRINCIPAL PRINCIPAL PRINCIPAL VALUE VALUE VALUE
AMOUNT AMOUNT AMOUNT SBL H SBL Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SPONSORED AGENCY BONDS &
NOTES - 16.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank
$ --- $ 250,000 $ 250,000 1.98% - 2008 (1)......................... $ --- $ 249,910 $ 249,910
--- 1,150,000 1,150,000 2.18% - 2008 (1)......................... --- 1,146,296 1,146,296
--- 200,000 200,000 2.19% - 2008 (1)......................... --- 199,380 199,380
--- 800,000 800,000 2.21% - 2008 (1)......................... --- 796,568 796,568
--- 700,000 700,000 2.35% - 2008 (1)......................... --- 696,678 696,678
Federal Home Loan Mortgage Corporation
--- 475,000 475,000 2.01% - 2008 (1)......................... --- 474,000 474,000
--- 1,100,000 1,100,000 2.11% - 2008 (1)......................... --- 1,097,206 1,097,206
--- 800,000 800,000 2.23% - 2008 (1)......................... --- 797,076 797,076
--- 725,000 725,000 2.34% - 2008 (1)......................... --- 721,419 721,419
Federal National Mortgage Association
--- 600,000 600,000 1.897% - 2008 (1)........................ --- 600,000 600,000
--- 1,300,000 1,300,000 2.00% - 2008 (1)......................... --- 1,297,504 1,297,504
--- 1,200,000 1,200,000 2.00% - 2008 (2)......................... --- 1,197,921 1,197,921
--- 875,000 875,000 2.02% - 2008 (1)......................... --- 874,582 874,582
--- 1,400,000 1,400,000 2.04% - 2008 (1)......................... --- 1,396,878 1,396,878
--- 1,200,000 1,200,000 2.04% - 2008 (1)......................... --- 1,198,925 1,198,925
--- 1,000,000 1,000,000 2.05% - 2008 (1)......................... --- 999,260 999,260
--- 1,200,000 1,200,000 2.08% - 2008 (2)......................... --- 1,198,567 1,198,567
--- 1,200,000 1,200,000 2.08% - 2008 (2)......................... --- 1,198,280 1,198,280
--- 1,000,000 1,000,000 2.15% - 2008 (1)......................... --- 997,213 997,213
--- 1,000,000 1,000,000 2.17% - 2008 (1)......................... --- 994,930 994,930
--- 300,000 300,000 2.34% - 2008 (1)......................... --- 298,616 298,616
---------------------------------------------
Total U.S. Government Sponsored Agency
Bonds & Notes - (cost $18,433,049)....... $ 0 $18,431,209 $ 18,431,209
---------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 0.1%
- ------------------------------------------------------------------------------------------------------------------------------------
140,000 --- 140,000 U.S. Treasury Bill, 2.06%, 12/04/08......... 138,737 --- 138,737
---------------------------------------------
Total Short Term Investments -
(cost $138,750).......................... $ 138,737 $ --- $ 138,737
---------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 1.9%
- ------------------------------------------------------------------------------------------------------------------------------------
State Street, 0.20%, dated 6/30/08,
matures 7/01/08; repurchase amount
$1,182,117 (Collateralized by FNMA,
5.25%, 1/09 with
--- 1,182,110 1,182,110 a value of $1,207,290)................... --- 1,182,110 1,182,110
United Missouri Bank, 1.89%, dated
6/30/08, matures 7/01/08; repurchase
amount $912,053 (Collateralized by
FHLMC, 5.45%,
912,000 --- 912,000 9/02/11 with a value of $930,773)........ 912,000 --- 912,000
---------------------------------------------
Total Repurchase Agreement -
(Cost $2,094,110)........................ 912,000 1,182,110 2,094,110
---------------------------------------------
Total Investments - (Cost $105,180,263)..... 64,096,627 36,574,519 100,671,146
Other Assets in Excess of Liabilities - 10.7% 111,669 11,982,182 12,093,851
---------------------------------------------
Total Net Assets - 100.0%................... $64,208,296 $48,556,701 $112,764,997
=============================================
15
NUMBER NUMBER NUMBER MARKET MARKET MARKET
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SBL H SBL Z TOTAL SBL H SBL Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
SCHEDULE OF SECURITIES SOLD SHORT
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
- ------------------------------------------------------------------------------------------------------------------------------------
APPAREL RETAIL - (0.0%)
--- (525) (525) AnnTaylor Stores Corporation*............... $ --- $ (12,579) $ (12,579)
--- (2,123) (2,123) Bebe Stores, Inc............................ --- (20,402) (20,402)
---------------------------------------------
--- (32,981) (32,981)
---------------------------------------------
BIOTECHNOLOGY - (0.2%)
--- (4,196) (4,196) Amgen, Inc.*................................ --- (197,883) (197,883)
---------------------------------------------
CONSUMER ELECTRONICS - (0.0%)
--- (901) (901) Garmin, Ltd................................. --- (38,599) (38,599)
---------------------------------------------
DATA PROCESSING & OUTSOURCED
SERVICES - (0.0%)
--- (525) (525) Automatic Data Processing, Inc.............. --- (21,997) (21,997)
---------------------------------------------
DEPARTMENT STORES - (0.0%)
--- (1,049) (1,049) Kohl's Corporation*......................... --- (42,002) (42,002)
---------------------------------------------
DISTILLERS & VINTNERS - (0.0%)
--- (2,092) (2,092) Constellation Brands, Inc.*................. --- (41,547) (41,547)
---------------------------------------------
EDUCATION SERVICES - (0.0%)
--- (525) (525) Apollo Group, Inc.*......................... --- (23,236) (23,236)
---------------------------------------------
ELECTRIC UTILITIES - (0.1%)
--- (2,654) (2,654) Progress Energy, Inc........................ --- (111,017) (111,017)
---------------------------------------------
ELECTRONIC MANUFACTURING SERVICES - (0.1%)
--- (749) (749) Benchmark Electronics, Inc.*................ --- (12,239) (12,239)
--- (6,459) (6,459) Jabil Circuit, Inc.......................... --- (105,992) (105,992)
---------------------------------------------
--- (118,231) (118,231)
EXCHANGE TRADED FUNDS - (0.5%)
--- (5,245) (5,245) iShares Lehman 20+ Year Treasury............ --- (484,323) (484,323)
--- (525) (525) iShares Lehman 7-10 Year.................... --- (46,200) (46,200)
--- (495) (495) Vanguard Total Bond Market ETF.............. --- (37,729) (37,729)
---------------------------------------------
--- (568,252) (568,252)
---------------------------------------------
FOOTWEAR - (0.0%)
--- (2,541) (2,541) K-Swiss, Inc................................ --- (37,353) (37,353)
---------------------------------------------
HEALTH CARE EQUIPMENT - (0.0%)
--- (531) (531) Stryker Corporation......................... --- (33,389) (33,389)
---------------------------------------------
INTEGRATED OIL & GAS - (0.2%)
--- (2,098) (2,098) Exxon Mobil Corporation..................... --- (184,897) (184,897)
---------------------------------------------
MARINE PORTS & SERVICES - (0.1%)
--- (1,049) (1,049) DryShips, Inc............................... --- (84,109) (84,109)
---------------------------------------------
MOTORCYCLE MANUFACTURERS - (0.0%)
--- (525) (525) Harley-Davidson, Inc........................ --- (19,037) (19,037)
---------------------------------------------
MULTI-UTILITIES - (0.1%)
--- (1,574) (1,574) DTE Energy Company.......................... --- (66,801) (66,801)
---------------------------------------------
REAL ESTATE MANAGEMENT & DEVLOPMENT - (0.0%)
--- (145) (145) Consolidated-Tomoka Land.................... --- (6,099) (6,099)
---------------------------------------------
16
NUMBER NUMBER NUMBER MARKET MARKET MARKET
OF SHARES OF SHARES OF SHARES VALUE VALUE VALUE
SBL H SBL Z TOTAL SBL H SBL Z TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
RESTAURANTS - (0.1%)
--- (5,095) (5,095) Starbucks Corporation*...................... --- (80,195) (80,195)
---------------------------------------------
RETAIL REIT'S - (0.1%)
--- (2,646) (2,646) General Growth Properties, Inc.............. --- (92,689) (92,689)
---------------------------------------------
SEMICONDUCTORS - (0.0%)
--- (11,975) (11,975) Cree, Inc.*................................. --- (11,975) (11,975)
---------------------------------------------
SPECIALIZED CONSUMER SERVICES - (0.0%)
--- (1,049) (1,049) Sotheby's................................... --- (27,662) (27,662)
---------------------------------------------
SPECIALTY CHEMICALS - (0.0%)
--- (525) (525) Ecolab, Inc................................. --- (22,570) (22,570)
TECHNOLOGY DISTRIBUTORS - (0.1%)
--- (525) (525) Arrow Electronics, Inc.*.................... --- (16,128) (16,128)
--- (1,049) (1,049) Avnet, Inc.*................................ --- (28,617) (28,617)
---------------------------------------------
--- (44,745) (44,745)
---------------------------------------------
Total Common Stocks - (proceeds $1,905,762). --- (1,907,266) (1,907,266)
---------------------------------------------
Total Securities Sold Short -
(proceeds $1,905,762).................... $ 0 $ (1,907,266) $ (1,907,266)
=============================================
For federal income tax purposes the identified cost of investments owned at June
30, 2008 was $106,538,137.
*Non-income producing security
ADR -American Depositary Receipt
(1) Security is segregated as collateral for open futures contracts.
(2) Security is segregated as collateral for short positions
(3) No adjustments are shown to the unaudited pro forma combined schedule of
investments due to the fact that upon consummation of the merger,
securities would need to be sold in order for the Acquiring Fund to comply
with its prospectus restrictions.
17
ACQUIRING FUND
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS
JUNE 30, 2008
(UNAUDITED)
1. Description of the Fund
Series Z - Alpha Opportunity Series ("Acquiring Fund") a series of SBL
Fund, is registered under the Investment Company Act of 1940, as amended,
as an open-end, diversified investment company.
2. Basis of Combination
The accompanying pro forma financial statements are presented to show the
effect of the proposed acquisition of Series H - Enhanced Index Series,
("Target Fund") a series of SBL Fund, by Series Z - Alpha Opportunity
Series as if such acquisition had taken place as of June 30, 2008.
Under the terms of the Plan of Reorganization, the combination of Series H
- Enhanced Index Series and Series Z - Alpha Opportunity Series 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 H - Enhanced Index Series in
exchange for shares of Series Z - Alpha Opportunity Series at net asset
value. The statement of assets and liabilities and the related statement
of operations of Series H - Enhanced Index Series and Series Z - Alpha
Opportunity Series have been combined as of and for the six months ended
June 30, 2008. Following the acquisition, the Series Z - Alpha Opportunity
Series will be the accounting survivor. In accordance with accounting
principles generally accepted in the United States of America, the
historical cost of investment securities will be carried forward to the
Series Z - Alpha Opportunity Series and the results of operations for
pre-combination periods of the Series Z - Alpha Opportunity Series will
not be restated.
The accompanying pro forma financial statements should be read in
conjunction with the financial statements of Series Z - Alpha Opportunity
Series and Series H - Enhanced Index Series included in their semi-annual
report dated June 30, 2008.
The following notes refer to the accompanying pro forma financial
statements as if the above mentioned acquisition of Series H - Enhanced
Index Series by Series Z - Alpha Opportunity Series had taken place as of
June 30, 2008.
3. Portfolio Valuation
Valuations of SBL 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 the 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 used
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, which may not necessarily represent the last sale price. If
there has been no sale on such exchange or NASDAQ on such day, the
security is valued at the closing bid price on such day. 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 that will affect the value of a Fund's portfolio
securities before the NAV has been 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 NAV 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 with 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
18
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 products that are tied to
foreign securities such as WEBSR. In addition, the Board of Directors has
authorized the Valuation Committee and Administrator to use prices and
other information supplied by a third party pricing vendor in valuing
foreign securities.
4. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of
the SBL Z - Alpha Opportunity Series that would have been issued at June
30, 2008, in connection with the proposed reorganization. The number of
shares assumed to be issued is equal to the net asset value of shares of
SBL H - Enhanced Index Series, as of June 30, 2008, divided by the net
asset value per share of the shares of SBL Z - Alpha Opportunity Series as
of June 30, 2008. The pro forma number of shares outstanding for the
combined fund consists of the following at June 30, 2008:
SHARES OF ADDITIONAL SHARES TOTAL
ACQUIRING FUND ASSUMED ISSUED OUTSTANDING SHARES
PRE-COMBINATION IN REORGANIZATION POST-COMBINATION
------------------------------------------------------------------
3,066,757 4,056,115 7,122,872
5. Federal Income Taxes
Each fund has elected to be taxed as a "regulated investment company"
under the Internal Revenue Code. After the acquisition, the Acquiring
Fund 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.
6. Acquiring Series' Advisory Agreement, effective August 15, 2008
Under the Advisory Agreement effective August 15, 2008, the Acquiring
Series pays the Investment Manager an annual fee of 1.25% of its average
daily net assets.
19
PART C
OTHER INFORMATION
Item 15 Indemnification
A policy of insurance covering Security Investors, LLC, its subsidiaries,
Security Distributors, Inc., and all of the registered investment companies
advised by Security Investors, 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
20
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) (a) Investment Advisory Contract(d)
(b) Sub-Advisory Contract - Mainstream (Series Z) (d)
(c) Sub-Advisory Contract - Security Global Investors (Series Z) (d)
(7) Distribution Agreement(e)
(8) Not Applicable
(9) (a) Form of Custodian Agreement - UMB Bank, n.a. (f)
(b) Custodian Agreement - State Street Bank(i)
(10) Not Applicable
(11) Opinion of Counsel - Filed herewith.
(12) Opinion and Consent of Counsel Supporting Tax Matters and Consequences -
Form filed herewith, definitive to be filed by subsequent amendment.
(13) (a) Fund Accounting and Administration Agreement(g)
(b) Transfer Agency Agreement(h)
(14) Consent of Independent Registered Public Accounting Firm - Filed herewith.
(15) Not Applicable
(16) Powers of Attorney - Filed herewith.
(17) Not Applicable
- -----------------
(a) Incorporated herein by reference to Exhibits filed with the Registrant's
Post-Effective Amendment No. 52 to Registration Statement No. 2-59353
(filed April 27, 2007).
(b) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 53 to Registration Statement
No. 2-59353 (filed April 30, 2008).
(c) See Appendix A to the Proxy Statement/Prospectus.
(d) Incorporated herein by reference to Exhibits filed with the Registrant's
Post-Effective Amendment No. 55 to Registration Statement No. 2-59353
(filed August 15, 2008).
(e) Incorporated herein by reference to Exhibits filed with the Registrant's
Post-Effective Amendment No. 45 to Registration Statement No. 2-59353
(filed February 14, 2003).
(f) Incorporated herein by reference to Exhibits filed with Security Equity
Fund's Post-Effective Amendment No. 106 to Registration Statement 2-19458
(filed April 25, 2008).
(g) Incorporated herein by reference to Exhibits filed with the Registrant's
Post-Effective Amendment No. 51 to Registration Statement No. 2-59353
(filed April 28, 2006).
(h) Incorporated herein by reference to Exhibits filed with the Registrant's
Post-Effective Amendment No. 52 to Registration Statement No. 2-59353
(filed April 27, 2007).
(i) Incorporated herein by reference to Exhibits filed with Security Equity
Fund's Post-Effective Amendment No. 108 to Registration Statement 2-19458
(filed July 16, 2008).
2
Item 17. Undertakings
1. The undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act (17
CFR 230.145(c)), the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the information called for
by the other items of the applicable form.
2. The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
3. The undersigned registrant undertakes to file a post-effective amendment
to this registration statement upon the closing of the Reorganization
described in this registration statement that contains an opinion of
counsel supporting the tax matters discussed in this registration
statement.
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 29th day of August, 2008.
SBL FUND
BY: /S/ RICHARD M. GOLDMAN
----------------------------
RICHARD M. GOLDMAN
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 29th day of August, 2008.
SBL FUND
Jerry B. Farley
Director By: /s/ RICHARD M. GOLDMAN
---------------------------------------
Donald A. Chubb, Jr. Richard M. Goldman, President, Director
Director and Chairman of the Board
Penny A. Lumpkin
Director /s/ BRENDA M. HARWOOD
---------------------------------------
Harry W. Craig, Jr. Brenda M. Harwood, as Attorney-In-Fact
Director for the Officers and Directors Whose
Names Appear Opposite
Maynard Oliverius
Director
/s/ BRENDA M. HARWOOD
---------------------------------------
Brenda M. Harwood, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
EXHIBIT INDEX
(11) Opinion and Consent of Counsel
(12) Form of Tax Opinion
(14) Consent of Independent Registered Public Accounting Firm
(16) Powers of Attorney