UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [SEC]240.14a-12
(Name of Registrant as Specified In Its Charter)
SBL FUND
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
SECURITY EQUITY FUND
SECURITY LARGE CAP VALUE FUND
SECURITY MID CAP GROWTH FUND
SECURITY INCOME FUND
SBL FUND
Dear Insurance Product Owner and Shareholder:
I am writing you on an important matter relating to the Security Global
Investors family of funds (the "Funds"). On February 16, 2010, Security Benefit
Mutual Holding Company ("SBHC"), the parent company of Security Investors, LLC,
the Funds' investment manager (the "Investment Manager"), and Security Global
Investors, LLC, the sub-adviser to certain Funds (the "Sub-Adviser), and certain
of SBHC's affiliates entered into agreements with an investor group led by
Guggenheim Partners, LLC (the "Purchaser"). Under the agreements, the Purchaser
will acquire control of the Investment Manager, Sub-Adviser and affiliates.
Guggenheim Partners, LLC is a global, independent, privately-held, diversified
financial services firm with more than $100 billion in assets under supervision.
This transaction should not result in material changes to the day-to-day
management and operations of the Funds or any increase in fees. For example, the
portfolio managers of the Funds are expected to remain the same and your daily
experience in dealing with the Funds should remain unchanged. However, for legal
reasons, this transaction will have the effect of terminating the Funds'
investment management agreements with the Investment Manager and the
sub-advisory agreement between the Investment Manager and the Sub-Adviser, as
well as any other sub-advisory agreement.
Accordingly, by this joint proxy statement, we are requesting that you vote
to approve substantially identical investment management agreements and, as
applicable, sub-advisory agreements to take the place of the current agreements,
so that the Investment Manager and, as applicable, the Sub-Adviser and any other
sub-adviser may continue to manage the Funds.
With respect to SBL Fund, the Funds are available as an investment option
under variable annuity contracts and variable life insurance policies
("insurance products").
A Special Joint Meeting of Shareholders (the "Meeting") of each of the
Funds, which are listed in an attachment to the Notice of Special Joint Meeting
of Shareholders, has been scheduled for April 23, 2010 to vote on these matters.
If you are a shareholder (or, with respect to SBL Fund, an insurance product
owner) of record of any of the Funds as of the close of business on February 24,
2010, you are entitled to vote at the Meeting and any adjournment of the
Meeting, even if you no longer own an insurance product or Fund shares.
Pursuant to these materials, you are being asked to approve proposals for
the Funds, as listed above. Please note that you may receive similar materials
if you own
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shares of other funds in the Rydex|SGI fund complex asking you to approve
proposals for the other funds.
You can vote in one of four ways:
o By mail with the enclosed proxy card - be sure to sign, date and return it
in the enclosed postage-paid envelope,
o Through the web site listed in the proxy voting instructions,
o By telephone using the toll-free number listed in the proxy voting
instructions, or
o In person at the shareholder meeting on April 23, 2010.
We encourage you to vote over the Internet or by telephone, using the voting
control number that appears on your proxy card. Your vote is extremely
important. Shareholder meetings of the Funds do not generally occur with great
frequency, so we ask that you take the time to carefully consider these
proposals and vote on these important proposals. Please read the enclosed
information carefully before voting. If you have questions, please call The
Altman Group at 1-877-864-5058.
Proxies may be revoked prior to the Meeting by timely executing and
submitting a revised proxy (following the methods noted above), by giving
written notice of revocation to the Fund(s) prior to the Meeting, or by voting
in person at the Meeting.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
/s/ Richard M. Goldman
Richard M. Goldman
President, Chairman of the Boards of Directors
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A SELF-
ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, ALONG WITH
INSTRUCTIONS ON HOW TO VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU PREFER
TO VOTE BY ONE OF THOSE METHODS.
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VERY IMPORTANT NEWS FOR SHAREHOLDERS
By its very nature, the following "Questions and Answers" section is a
summary and is not intended to be as detailed as the discussion found later in
the proxy materials. For that reason, the information is qualified in its
entirety by reference to the enclosed joint proxy statement to shareholders
("Joint Proxy Statement").
QUESTIONS AND ANSWERS
Q. WHY AM I RECEIVING THIS JOINT PROXY STATEMENT?
A. You are receiving these proxy materials -- a booklet that includes the Joint
Proxy Statement and your proxy card -- because you have the right to vote on
important proposals concerning your investment in the Security Global
Investors family of funds (the "Funds").
The proposals relate to actions that need to be taken in response to an
impending change in control of Security Investors, LLC (the "Investment
Manager"), the investment manager to each of the Funds, and Security Global
Investors, LLC, the sub-adviser to certain Funds (the "Sub-Adviser" and,
together with the Investment Manager, the "Advisers"). This change in
control affects the Funds' advisory agreement with the Investment Manager
and the Investment Manager's sub-advisory agreement with the Sub-Adviser.
Q. WHY AM I BEING ASKED TO VOTE?
A. The Investment Company Act of 1940 (the "1940 Act"), the law that regulates
mutual funds, including the Funds, requires that a fund's investment advisory
agreement terminate whenever there is deemed to be a change in control of the
investment adviser. (In this context, the term "investment adviser" applies
to both an investment manager and a sub-adviser.) Before an investment
advisory agreement terminates, a new investment advisory agreement must be in
effect in order for the investment adviser to continue to manage the fund's
investments. For that reason, we are seeking shareholder approval of new
investment advisory agreements for the Funds.
Security Benefit Mutual Holding Company ("SBHC"), the parent company of the
Advisers, and certain of SBHC's affiliates have entered into agreements with
an investor group led by Guggenheim Partners, LLC (the "Purchaser").
Guggenheim Partners, LLC is a global, independent, privately-held,
diversified financial services firm with more than $100 billion in assets
under supervision. Under the agreements, the Purchaser will acquire control
of the Advisers and affiliates (the "Transaction").
The Transaction should not result in material changes to the day-to-day
management and operations of the Funds or any increase in fees. However, the
Transaction will result in a change in control of the Advisers within the
meaning of the 1940 Act. This will, in turn, result in the termination of the
current investment management agreements between the Investment Manager and
each
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of the Funds (the "Current Investment Management Agreements"). In addition,
the Transaction will result in the termination of the current sub-advisory
agreements between the Investment Manager and the Sub-Adviser, with respect
to certain Funds (the "Current Sub-Advisory Agreements" and, together with
the Current Investment Management Agreements, the "Current Agreements").
At a Special Meeting of the Boards of Directors of each of Security Equity
Fund, Security Large Cap Value Fund, Security Mid Cap Growth Fund, Security
Income Fund and SBL Fund (collectively, the "Board") held on January 28,
2010, the Board considered and voted in favor of new investment management
agreements between the Investment Manager and each of the Funds (the "New
Investment Management Agreements"), as well as new sub-advisory agreements
between the Investment Manager and the Sub-Adviser, with respect to certain
Funds (the "New Sub-Advisory Agreements" and, together with the New
Investment Management Agreements, the "New Agreements"), pursuant to which,
subject to their approval by each Fund's shareholders, as applicable, the
Investment Manager will continue to serve as investment manager to each Fund
and the Sub-Adviser will continue to serve as sub-adviser to certain Funds
after the completion of the Transaction. The fees charged by the Advisers for
their services to the Funds under each New Agreement will be the same as
their fees under the corresponding Current Agreement. The other terms of the
New Agreements will also be the same in all material respects to those of the
Current Agreements.
Q. WILL THE PROPOSED TRANSACTION AFFECT ME?
A. No. The operations of the Advisers, the fees payable to the Advisers and the
persons responsible for the day-to-day investment management of the Funds are
expected to remain unchanged. The Board has been assured that there will be
no reduction in the nature or quality of the investment management and sub-
advisory services provided to each Fund, as applicable, due to the change in
control.
Q. WILL THERE BE ANY CHANGES TO THE FUNDS' OTHER SERVICE PROVIDERS?
A. The Purchaser will also acquire control of certain of the Funds' other
service providers ("Affiliated Service Providers") as a result of the
Transaction. The Affiliated Service Providers include Rydex Distributors,
Inc. and Security Distributors, Inc., which serve as the principal
underwriters/distributors to the Funds, as applicable. Under the 1940 Act,
shareholder approval is not required in order for such Affiliated Service
Providers to continue providing services to the Funds after the closing of
the Transaction. In addition, the Investment Manager, which also serves as
each Fund's administrator and transfer agent under separate agreements with
the Funds, will continue to serve in those roles without the need for
shareholder approval. The Board has been assured that there will be no
material change in the nature or quality of the services provided by the
Affiliated Service Providers to each Fund, as applicable, due to the change
in control.
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Q. WILL MY FUND'S FEES FOR INVESTMENT MANAGEMENT AND SUB-ADVISORY SERVICES
INCREASE?
A. No. The fee rates under the New Agreements are identical to those under the
Current Agreements.
Q. I OWN SHARES OF OTHER FUNDS IN THE RYDEX|SGI FUND COMPLEX AND RECEIVED
SIMILAR SOLICITATION MATERIALS REGARDING THOSE FUNDS. AM I ALSO BEING ASKED
TO APPROVE THE PROPOSALS CONTAINED IN THIS PROXY STATEMENT?
A. Yes. You are being asked to approve the proposals contained in this Proxy
Statement, in addition to any other proposals contained in other proxy
statements that you may receive for funds in the Rydex|SGI fund complex.
Q. WHO IS ASKING FOR MY VOTE?
A. The enclosed proxy is being solicited by the Board of your Fund for use at
the Special Joint Meeting of Shareholders to be held on April 23, 2010 (the
"Meeting"), and, if the Meeting is adjourned or postponed, at any later
meetings, for the purposes stated in the Notice of Meeting.
Q. HOW DOES THE BOARD SUGGEST THAT I VOTE?
A. After careful consideration, the Board unanimously approved the New
Agreements and recommends that you vote "FOR" all of the proposals contained
in the Joint Proxy Statement. Please see the section entitled "Board
Recommendation" with respect to each proposal for a discussion of the Board's
considerations in making such recommendations.
Q. WHY AM I RECEIVING INFORMATION ABOUT FUNDS I DO NOT OWN?
A. The proposals are similar for each Fund, and management of the Funds has
concluded that it is cost-effective to hold the Meeting for all of the Funds.
You will be asked to vote separately on the proposals with respect to the
Fund(s) that you own. An unfavorable vote on a proposal by the shareholders
of one Fund will not affect the implementation of a comparable proposal by
another Fund if such proposal is approved by shareholders of that Fund
assuming that the Transaction is completed.
Q. WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
A. To be approved with respect to a particular Fund, the New Investment
Management Agreement and New Sub-Advisory Agreement, if applicable, must be
approved by a vote of a majority of the outstanding voting securities of that
Fund. The "vote of a majority of the outstanding voting securities" is
defined in the 1940 Act as the lesser of the vote of (i) 67% or more of the
voting securities of a Fund entitled to vote thereon present at the Meeting
or represented by proxy, if more than 50% of the Fund's outstanding voting
securities are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities of the Fund entitled to vote thereon.
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Q. WILL MY VOTE MAKE A DIFFERENCE?
A. Yes! Your vote is needed to ensure that the proposals can be acted upon. We
encourage all shareholders to participate in the governance of their Fund(s).
Additionally, your immediate response on the enclosed proxy card, on the
Internet or over the phone will help save the costs of any further
solicitations.
Q. IF I AM A SMALL INVESTOR, WHY SHOULD I BOTHER TO VOTE?
A. You should vote because every vote is important. If numerous shareholders
just like you fail to vote, the Funds may not receive enough votes to go
forward with the Meeting. If this happens, the Funds will need to solicit
votes again. This may delay the Meeting and the approval of the New
Agreements.
Q. I'M AN INSURANCE PRODUCT OWNER. HOW WILL MY VOTE BE COUNTED?
A. As a variable annuity contract or variable life insurance policy owner of
record at the close of business on the record date, you have the right to
instruct the life insurance company that issued your product as to how the
shares of the Fund(s) attributable to your product should be voted. If no
voting instructions are received, the life insurance company will vote the
shares attributable to your product in proportion ("for" or "withhold
authority") to those shares for which instructions are received. As a result,
a small number of product owners could determine the outcome of the vote if
other product owners fail to vote.
Q. HOW DO I PLACE MY VOTE?
A. You may provide a Fund with your vote by mail with the enclosed proxy card,
by Internet by following the instructions in the proxy voting instructions,
by telephone using the toll-free number listed in the proxy voting
instructions, or in person at the Meeting. You may use the enclosed
postage-paid envelope to mail your proxy card. Please follow the enclosed
instructions to utilize any of these voting methods. If you need more
information on how to vote, or if you have any questions, please call the
Funds' proxy solicitation agent at the telephone number below.
Q. WHOM DO I CALL IF I HAVE QUESTIONS?
A. We will be happy to answer your questions about this proxy solicitation. If
you have questions, please call The Altman Group at 1-877-864-5058.
Proxies may be revoked prior to the Meeting by timely executing and
submitting a revised proxy (following the methods noted above), by giving
written notice of revocation to the Fund(s) prior to the Meeting, or by
voting in person at the Meeting.
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A SELF-
ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, ALONG WITH
INSTRUCTIONS ON HOW TO VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU PREFER
TO VOTE BY ONE OF THOSE METHODS.
vi
SECURITY EQUITY FUND
SECURITY LARGE CAP VALUE FUND
SECURITY MID CAP GROWTH FUND
SECURITY INCOME FUND
SBL FUND
One Security Benefit Place
Topeka, Kansas 66636-0001
1-800-888-2461
NOTICE OF SPECIAL JOINT MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 23, 2010
Notice is hereby given that a Special Joint Meeting of Shareholders (the
"Meeting") of each of Security Equity Fund, Security Large Cap Value Fund,
Security Mid Cap Growth Fund, Security Income Fund and SBL Fund (each, a
"Company" and collectively, the "Companies") and each of their respective series
listed on the attached list (each, a "Fund" and collectively, the "Funds") will
be held at the Companies' offices at One Security Benefit Place, Topeka, Kansas
66636-0001 on April 23, 2010 at 1:00 p.m. Central Time for the purposes listed
below:
PROPOSAL SHAREHOLDERS SOLICITED TO VOTE
1. THE APPROVAL OF A NEW INVESTMENT ALL FUNDS
MANAGEMENT AGREEMENT BETWEEN EACH
COMPANY AND SECURITY INVESTORS, LLC,
WITH RESPECT TO EACH FUND
2. THE APPROVAL OF A NEW SUB-ADVISORY RYDEX|SGI ALPHA OPPORTUNITY FUND
AGREEMENT BETWEEN SECURITY INVESTORS, RYDEX|SGI GLOBAL FUND
LLC AND SECURITY GLOBAL INVESTORS, RYDEX|SGI GLOBAL INSTITUTIONAL FUND
LLC, WITH RESPECT TO CERTAIN FUNDS SERIES D (GLOBAL SERIES)
SERIES Z (ALPHA OPPORTUNITY SERIES)
3. TO TRANSACT SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING
After careful consideration, the Board of Directors of each Company
unanimously approved the New Agreements and recommends that shareholders vote
"FOR" Proposal 1 and "FOR" Proposal 2.
Shareholders (or, with respect to SBL Fund, variable annuity contract or
variable life insurance policy ("insurance products") owners) of record at the
close of business on February 24, 2010 are entitled to notice of, and to vote
at, the Meeting, even if you no longer own an insurance product or Fund shares.
With respect to SBL Fund, you are invested in the Fund through the insurance
products that you own.
We call your attention to the accompanying Joint Proxy Statement. You are
requested to complete, date, and sign the enclosed proxy card and return it
promptly in the envelope provided for that purpose. Your proxy card also
provides instructions
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for voting via telephone or the Internet if you wish to take advantage of these
voting options. Proxies may be revoked prior to the Meeting by timely executing
and submitting a revised proxy (following the methods noted above), by giving
written notice of revocation to the Fund(s) prior to the Meeting, or by voting
in person at the Meeting.
By Order of the Boards,
/s/ Amy J. Lee
Amy J. Lee
Secretary
YOUR VOTE IS VERY IMPORTANT TO US REGARDLESS OF THE NUMBER OF VOTES YOU HOLD.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE REQUESTED TO COMPLETE,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE,
WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IT IS IMPORTANT THAT YOUR
PROXY CARD BE RETURNED PROMPTLY.
FOR YOUR CONVENIENCE, YOU MAY ALSO VOTE BY TELEPHONE OR INTERNET BY FOLLOWING
THE ENCLOSED INSTRUCTIONS. IF YOU VOTE BY TELEPHONE OR VIA THE INTERNET, PLEASE
DO NOT RETURN YOUR PROXY CARD UNLESS YOU ELECT TO CHANGE YOUR VOTE.
viii
FUNDS PARTICIPATING IN THE MEETING
ON APRIL 23, 2010
SECURITY EQUITY FUND
Rydex|SGI All Cap Value Fund Rydex|SGI Large Cap Concentrated Growth Fund Rydex|SGI Mid Cap Value Fund
(formerly Rydex|SGI Select 25 Fund)
Rydex|SGI Alpha Opportunity Fund Rydex|SGI Mid Cap Value Institutional Fund
Rydex|SGI Global Fund Rydex|SGI Large Cap Core Rydex|SGI Small Cap Growth Fund
Fund (formerly Rydex|SGI Equity Fund)
Rydex|SGI Global Institutional Fund Rydex|SGI Small Cap Value Fund
SECURITY LARGE CAP VALUE FUND
Rydex|SGI Large Cap Value Fund Rydex|SGI Large Cap Value Institutional Fund
SECURITY MID CAP GROWTH FUND
Rydex|SGI Mid Cap Growth Fund
SECURITY INCOME FUND
Rydex|SGI High Yield Fund Rydex|SGI U.S. Intermediate Bond Fund
SBL FUND
Series A (Equity Series) Series H (Enhanced Index Series) Series Q (Small Cap Value Series)
Series B (Large Cap Value Series) Series J (Mid Cap Growth Series) Series V (Mid Cap Value Series)
Series C (Money Market Series) Series N (Managed Asset Allocation Series) Series X (Small Cap Growth Series)
Series D (Global Series) Series O (All Cap Value Series) Series Y (Select 25 Series)
Series E (U.S. Intermediate Bond Series) Series P (High Yield Series) Series Z (Alpha Opportunity Series)
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TABLE OF CONTENTS
OVERVIEW OF THE PROPOSALS ..................................................... 3
Approval of New Investment Management and Sub-Advisory Agreements ......... 3
Information Regarding the Change in Control of the Advisers ............... 3
Section 15(f) of the 1940 Act ............................................. 5
Approval of the New Agreements by the Board ............................... 6
Board Considerations in Approving the New Agreements ...................... 6
PROPOSAL 1 - THE APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENTS ............. 11
The Investment Manager .................................................... 12
Material Terms of the New Investment Management Agreements ................ 12
BOARD RECOMMENDATION ON PROPOSAL 1 ............................................ 13
PROPOSAL 2 - THE APPROVAL OF NEW SUB-ADVISORY AGREEMENTS ...................... 14
Information About the Sub-Adviser ......................................... 15
Material Terms of the New Sub-Advisory Agreements ......................... 15
BOARD RECOMMENDATION ON PROPOSAL 2 ............................................ 16
OTHER BUSINESS ................................................................ 17
ADDITIONAL INFORMATION ........................................................ 17
Administrator, Principal Underwriters and Transfer Agent .................. 17
Other Sub-Advisers for Certain Funds ...................................... 17
Affiliations and Affiliated Brokerage ..................................... 18
Other Information ......................................................... 18
Voting Information ........................................................ 18
Shareholder Proposals ..................................................... 21
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APPENDICES
Appendix A FORMS OF INVESTMENT MANAGEMENT AGREEMENTS ..................... A-1
Appendix B INFORMATION REGARDING THE INVESTMENT MANAGEMENT AGREEMENTS
AND FEES PAID TO THE INVESTMENT MANAGER AND DISTRIBUTOR ....... B-1
Appendix C DIRECTORS/MANAGERS AND OFFICERS ............................... C-1
Appendix D-1 ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT
OBJECTIVES ADVISED BY SECURITY INVESTORS, LLC ................. D-1-1
Appendix D-2 ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT
OBJECTIVES SUB-ADVISED BY SECURITY GLOBAL INVESTORS, LLC ...... D-2-1
Appendix E FORM OF SUB-ADVISORY AGREEMENT WITH SECURITY GLOBAL
INVESTORS, LLC ................................................ E-1
Appendix F INFORMATION REGARDING THE SUB-ADVISORY AGREEMENTS AND
FEES PAID TO THE SUB-ADVISER .................................. F-1
Appendix G OUTSTANDING SHARES ............................................ G-1
Appendix H BENEFICIAL OWNERS OF MORE THAN 5% OF A CLASS OF EACH FUND ..... H-1
Appendix I MANAGEMENT OWNERSHIP .......................................... I-1
xi
SECURITY EQUITY FUND
SECURITY LARGE CAP VALUE FUND
SECURITY MID CAP GROWTH FUND
SECURITY INCOME FUND
SBL FUND
One Security Benefit Place
Topeka, Kansas 66636-0001
1-800-888-2461
JOINT PROXY STATEMENT SPECIAL JOINT MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 23, 2010
This joint proxy statement ("Joint Proxy Statement") and enclosed notice and
proxy card are being furnished in connection with the solicitation of proxies by
the Boards of Directors (collectively, the "Board") of each of Security Equity
Fund, Security Large Cap Value Fund, Security Mid Cap Growth Fund, Security
Income Fund and SBL Fund (each, a "Company" and collectively, the "Companies").
The proxies are being solicited for use at a special joint meeting of
shareholders of each Company to be held at the Companies' offices at One
Security Benefit Place, Topeka, Kansas 66636-0001 on April 23, 2010 at 1:00 p.m.
Central Time, and at any and all adjournments or postponements thereof (the
"Meeting").
The Board has called the Meeting and is soliciting proxies from shareholders
of each series of the Companies listed in the accompanying notice to this Joint
Proxy Statement (each, a "Fund" and collectively, the "Funds") with respect to
the following proposals (the "Proposals") as follows:
PROPOSAL SHAREHOLDERS SOLICITED TO VOTE
1. THE APPROVAL OF A NEW INVESTMENT ALL FUNDS
MANAGEMENT AGREEMENT BETWEEN
EACH COMPANY AND SECURITY INVESTORS,
LLC, WITH RESPECT TO EACH FUND
2. THE APPROVAL OF A NEW SUB-ADVISORY RYDEX|SGI ALPHA OPPORTUNITY FUND
AGREEMENT BETWEEN SECURITY INVESTORS, RYDEX|SGI GLOBAL FUND
LLC AND SECURITY GLOBAL INVESTORS, RYDEX|SGI GLOBAL INSTITUTIONAL FUND
LLC, WITH RESPECT TO CERTAIN FUNDS SERIES D (GLOBAL SERIES)
SERIES Z (ALPHA OPPORTUNITY SERIES)
3. TO TRANSACT SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING
This Joint Proxy Statement and the accompanying notice and the proxy card
are being first mailed to shareholders on or about March 22, 2010.
The Board has determined that the use of this Joint Proxy Statement for the
Meeting is in the best interests of each Fund and its shareholders in light of
the similar matters being considered and voted on by the shareholders of the
other Funds.
1
You are entitled to vote at the Meeting of each Fund of which you are a
shareholder as of the close of business on February 24, 2010 (the "Record
Date"). Shares of each series of SBL Fund are not offered directly to the
public but are sold only to insurance companies and their separate accounts as
the underlying investment medium for owners of variable annuity contracts and
variable life insurance policies ("insurance products"). As such, for SBL Fund,
Security Benefit Life Insurance Company, First Security Benefit Life Insurance
and Annuity Company of New York and Nationwide Life Insurance Company (each, an
"Insurance Company" and collectively, the "Insurance Companies") are the only
Fund shareholders of record. SBL Fund is soliciting voting instructions from
insurance product owners invested in each Fund in connection with the Proposals,
as applicable. As such and for ease of reference, throughout this Joint Proxy
Statement, insurance product owners may be referred to as "shareholders" of a
Fund.
If you have any questions about the Proposals or about voting, please call
The Altman Group, the Funds' proxy solicitor, at 1-877-864-5058.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE MEETING TO BE HELD ON APRIL 23, 2010
This Joint Proxy Statement is available at www.proxyonline.com/docs/
rydexSGI3.pdf. In addition, with respect to Security Income Fund and SBL Fund,
shareholders can find important information about each Fund in the Fund's annual
report, dated December 31, 2009, including financial reports for the fiscal year
ended December 31, 2009, and in any recent semi-annual report succeeding such
annual report, if any. With respect to Security Equity Fund, Security Large Cap
Value Fund or Security Mid Cap Growth Fund, shareholders can find important
information about each Fund in the Fund's annual report, dated September 30,
2009, including financial reports for the fiscal year ended September 30, 2009,
and in any recent semi-annual report succeeding such annual report, if any. You
may obtain copies of these reports without charge by writing to a Company, or by
calling the telephone number shown on the front page of this Joint Proxy
Statement.
2
OVERVIEW OF THE PROPOSALS
APPROVAL OF NEW INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
The Proposals relate to actions that need to be taken in response to an
impending change in control of Security Investors, LLC, the investment manager
to each of the Funds (the "Investment Manager"), and Security Global Investors,
LLC, the sub-adviser to certain Funds (the "Sub-Adviser" and together, with the
Investment Manager, the "Advisers").
The Investment Company Act of 1940, as amended (the "1940 Act"), the law
that regulates mutual funds, such as the Funds, requires that a fund's
investment advisory agreement terminate whenever there is deemed to be a change
in control of the investment adviser. (In this context, the term "investment
adviser" applies to both an investment manager and a sub-adviser.) Before an
investment advisory agreement terminates, a new investment advisory agreement
must be in effect in order for the investment adviser to continue to manage the
fund's investments. For that reason, we are seeking shareholder approval of new
investment advisory agreements for the Funds.
Upon completion of a transaction involving the Advisers, which is discussed
in more detail below, the Funds' current investment management agreements with
the Investment Manager will be terminated. In addition, the transaction will
result in the termination of the current sub-advisory agreements between the
Investment Manager and the Sub-Adviser, with respect to certain Funds (the
"Sub-Advised Funds"). Accordingly, Proposal 1 relates to the approval by
shareholders of new investment management agreements between the Investment
Manager and the Funds (the "New Investment Management Agreements"). Similarly,
Proposal 2 relates to the approval by shareholders of new sub-advisory
agreements between the Investment Manager and the Sub-Adviser with respect to
the Sub-Advised Funds (the "New Sub-Advisory Agreements" and, together with the
New Investment Management Agreements, the "New Agreements").
FOR THE REASONS DISCUSSED BELOW, THE BOARD
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE APPROVAL OF THE NEW AGREEMENTS.
INFORMATION REGARDING THE CHANGE IN CONTROL OF THE ADVISERS
On February 16, 2010, Security Benefit Mutual Holding Company ("SBHC"), the
parent company of the Advisers, and certain of SBHC's affiliates (collectively,
"SecBen") entered into agreements with Guggenheim SBC Holdings LLC
("Purchaser"), a special purpose entity managed by Guggenheim Partners, LLC
("Guggenheim"), which is a global, independent, privately-held, diversified
financial services firm with more than $100 billion in assets under supervision
and 800 dedicated professionals. Headquartered in Chicago and New York, the firm
operates through offices in 20 cities in the U.S., Europe and Asia. Guggenheim
operates businesses in investment management, capital markets, wealth management
and merchant banking. Within the investment and wealth management businesses,
3
Guggenheim specializes in fixed income and alternative investments, and in
providing sophisticated wealth advisory and family office services. Within
capital markets, it specializes in providing debt financing and structured
finance solutions to clients. Merchant banking activities include its portfolio
of investments in funds managed by it, joint venture business investments, and
new business launch activities not integrated into other primary operating
businesses. Guggenheim is a wholly-owned subsidiary of Guggenheim Capital, LLC,
227 West Monroe Street, 48th Floor, Chicago, Illinois 60606. Sage Assets, Inc.,
5949 Sherry Lane, Suite 1900, Dallas, Texas 75225, a wholly-owned subsidiary of
Sammons Enterprises, Inc., 5949 Sherry Lane, Suite 1900, Dallas, Texas 75225, is
a control person of Guggenheim as a result of its equity ownership in excess of
25% (but less than 50%) of Guggenheim Capital, LLC. Under the agreements, the
Purchaser will acquire control of the Advisers and affiliates (the
"Transaction").
The final form of the Purchaser's controlling stake in the Advisers and
affiliates will depend upon whether certain conditions are satisfied. In the
Transaction, the Purchaser will either receive: (a) a 100% ownership stake in
Security Benefit Corporation ("SBC"), a wholly-owned subsidiary of SBHC and the
parent company of the Advisers and affiliates (the "Purchase Transaction"); or,
(b) if the Purchase Transaction is terminated for any reason other than a breach
of the related agreement by the Purchaser or the failure to meet a specific
closing condition relating to execution of employment agreements by certain
employees of the SBC group of companies, a 100% ownership stake in SBC's asset
management business, which includes the Advisers and certain affiliates (the
"Contingent Asset Management Purchase and Sale").
In anticipation of the Transaction, the parties have entered into an interim
recapitalization transaction in which the Purchaser has made a secured loan to
SBC. Upon the closing of the Purchase Transaction, the Purchaser will make a
capital contribution to SBC and the secured loan will convert into equity in SBC
and SBHC will transfer all of the issued and outstanding shares of capital stock
of SBC to the Purchaser. The Purchase Transaction is conditioned on the approval
of a corporate restructuring called a demutualization pursuant to which the
insurance policyholders who presently own SBHC are expected to receive cash
payments or policy credits in connection with the cancellation of their
ownership interests. In the event that the Contingent Asset Management Purchase
and Sale occurs following termination of the Purchase Transaction, SBC will
receive a senior unsecured note from the Purchaser and have certain debt
extinguished, and the Purchaser will receive all of the issued and outstanding
membership interests of each entity in SBC's asset management business, which
includes the Advisers and certain affiliates.
The Transaction should not result in material changes to the day-to-day
management and operations of the Funds. For example, the portfolio managers of
the Funds are expected to remain the same and your daily experience in dealing
with the Funds should remain unchanged. However, the Transaction will result in
a "change in control" of the Advisers within the meaning of the 1940 Act. This
will automatically
4
terminate each of the current investment management or advisory agreements
between the Investment Manager and the Funds (each, a "Current Investment
Management Agreement" and collectively, the "Current Investment Management
Agreements") and the current sub-advisory agreements between the Investment
Manager and the Sub-Adviser, with respect to the Sub-Advised Funds (each, a
"Current Sub-Advisory Agreement" and collectively, the "Current Sub-Advisory
Agreements") (together, the Current Investment Management and Current
Sub-Advisory Agreements are referred to as the "Current Agreements").
In addition, the Purchaser will acquire control of certain of the Funds'
other service providers ("Affiliated Service Providers") as a result of the
Transaction. The Affiliated Service Providers include Rydex Distributors, Inc.
and Security Distributors, Inc., which serve as the principal
underwriters/distributors to the Funds, as applicable. Under the 1940 Act,
shareholder approval is not required in order for such Affiliated Service
Providers to continue providing services to the Funds after the closing of the
Transaction. In addition, the Investment Manager, which also serves as each
Fund's administrator and transfer agent under separate agreements with the
Funds, will continue to serve in those roles without the need for shareholder
approval.
Completion of the Transaction will be subject to certain closing conditions,
including: (a) the receipt of approvals required for the assignment or
replacement of investment advisory contracts relating to 80% or more of the
total net assets under management by the Investment Manager and certain
affiliates that will be controlled by the Purchaser; and, (b) with respect to
the Purchase Transaction only, the approval of the members of SBHC to the extent
required by applicable law in order to effect the demutualization transaction
described above.
While the parties expect the Transaction to be completed by May 31, 2010, it
is subject to various conditions, and may be delayed or even terminated due to
unforeseen circumstances. If for some reason the Transaction does not occur, the
Current Agreements will not automatically terminate and will remain in effect,
and the New Agreements will not be entered into, even if they have been approved
by Fund shareholders. If Proposal 1 is not approved by shareholders of any Fund,
the Board will evaluate other short- and long-term options permitted by law,
which include interim investment management agreements with the Investment
Manager and reorganization or liquidation of the Fund(s).
SECTION 15(f) OF THE 1940 ACT
Section 15(f) of the 1940 Act provides that, when a change in control of an
investment adviser occurs, the investment adviser or any of its affiliated
persons may receive any amount or benefit in connection with the change in
control as long as two conditions are met. The first condition specifies that no
"unfair burden" may be imposed on the fund as a result of a transaction relating
to the change in control, or any express or implied terms, conditions or
understandings. The term "unfair burden," as defined in the 1940 Act, includes
any arrangement during the two-year
5
period after the change in control transaction whereby the investment adviser
(or predecessor or successor adviser), or any "interested person" (as defined in
the 1940 Act) of any such investment adviser, receives or is entitled to receive
any compensation, directly or indirectly, from the investment company or its
security holders (other than fees for bona fide investment advisory or other
services), or from any person in connection with the purchase or sale of
securities or other property to, from, or on behalf of the fund (other than fees
for bona fide principal underwriting services), which could limit the ability of
the Funds to engage in brokerage transactions with certain broker-dealers,
although such limits are not expected to cause the Funds to change their
brokerage relationships. The second condition specifies that, during the
three-year period immediately following consummation of the change in control
transaction, at least 75% of the fund's board of directors must not be
"interested persons" (as defined in the 1940 Act) of the investment adviser or
predecessor adviser.
Consistent with the conditions of Section 15(f), SecBen and the Purchaser
have agreed that they will not take any action that would have the effect,
directly or indirectly, of causing any requirement of the provisions of Section
15(f) to be violated with respect to the Transaction. The Advisers represented
to the Board that no unfair burden would be imposed on the Funds as a result of
the Transaction.
APPROVAL OF THE NEW AGREEMENTS BY THE BOARD
At a Special Meeting of the Board held on January 28, 2010 (the "January
2010 Meeting"), at which a majority of the members of the Board (the
"Directors"), including a majority of the Directors who are not "interested
persons" (as defined under the 1940 Act) of the Companies and who are not
interested persons of any party to the New Agreements (the "Independent
Directors"), were present, the Directors considered and voted in favor of the
New Agreements, pursuant to which, subject to their approval by each Fund's
shareholders, as applicable, the Investment Manager and Sub-Adviser will
continue to serve as investment manager and sub-adviser to each Fund, as
applicable, after the completion of the Transaction. Each Adviser's rate of fees
for its services to each Fund under a New Agreement, as applicable, will be the
same as its fees under the Current Agreement. The other terms of the New
Agreements will also be the same in all material respects to those of the
Current Agreements. As a result, in reviewing the New Agreements at the January
2010 Meeting, the Directors also considered their review of relevant materials
relating to the Current Agreements at the annual renewal meeting on November 10,
2009 (the "2009 Renewal Meeting").
BOARD CONSIDERATIONS IN APPROVING THE NEW AGREEMENTS
Prior to the January 2010 Meeting, representatives of SecBen informed the
Directors that it was in discussions with Guggenheim regarding a potential
arrangement pursuant to which an investor group led by Guggenheim would acquire
control of the Advisers and affiliates. With respect to the Transaction, the
Directors reviewed materials received from SecBen and Guggenheim, including
information
6
relating to the terms of the Transaction. The Directors also reviewed
information regarding Guggenheim, including, but not limited to: (a) certain
representations concerning Guggenheim's financial condition; (b) information
regarding Guggenheim's affiliated investment advisers; (c) information regarding
Guggenheim's litigation and regulatory matters, including representations that
there were no material matters; and (d) potential conflicts of interest. SecBen
and Guggenheim also provided the Directors with presentations that discussed the
Transaction and intentions for the business, operations and personnel of the
Investment Manager and Sub-Adviser after the closing of the Transaction.
In considering the New Agreements at the January 2010 Meeting, the Directors
determined that the New Agreements would enable shareholders of the Funds to
continue to obtain high quality services at a cost that is appropriate,
reasonable, and in the best interests of their shareholders. The Directors,
including the Independent Directors, unanimously approved the New Agreements. In
reaching their decision, the Directors carefully considered information that
they had received throughout the year as part of their regular oversight of the
Funds, including, in particular, information from the Investment Manager and
Sub-Adviser that was provided in connection with the 2009 Renewal Meeting. The
Directors noted that, at the 2009 Renewal Meeting, they had obtained and
reviewed a wide variety of information, including certain comparative
information regarding performance of the Funds relative to performance of other
comparable mutual funds.
The Directors, including the Independent Directors, evaluated a number of
considerations, including among others: (a) the nature, extent and quality of
the services to be provided by the Investment Manager and Sub-Adviser; (b) the
investment performance of the Funds, the Investment Manager and the Sub-Adviser;
(c) the costs of services provided by the Investment Manager and the profits
derived by the Investment Manager from its relationship with the Funds; (d) a
comparison of each Fund's expense ratios and those of similarly situated funds;
(e) benefits (such as soft dollars) to the Investment Manager, Sub-Adviser and
their affiliates from their relationship with the Funds; (f) the expense
limitation/fee waiver agreements between the Investment Manager and certain of
the Funds; and (g) other factors the Directors deemed to be relevant. The
Directors also took into account other considerations that they believed, in
light of the legal advice furnished to them by independent legal counsel and
their own business judgment, to be relevant. Overall, the Directors, including
the Independent Directors, based their decisions on the following
considerations, among others, although they did not identify any consideration
or particular information that was controlling of their decisions:
THE NATURE, EXTENT AND QUALITY OF THE ADVISORY SERVICES TO BE PROVIDED. The
Directors concluded that the Investment Manager and Sub-Adviser are capable of
providing high quality services to the Funds, as indicated by the nature and
quality of services provided in the past, their management capabilities, the
professional qualifications and experience of the Investment Manager's and
Sub-Adviser's
7
portfolio managers, and the Investment Manager's investment and management
oversight processes. At the January 2010 Meeting, the Directors noted that most
of the key investment and management personnel of the Investment Manager and
Sub-Adviser servicing the Funds are expected to remain with the Investment
Manager and Sub-Adviser following the Transaction and that the services provided
to the Funds by the Investment Manager and Sub-Adviser, as applicable, are not
expected to materially change. The Directors also considered SecBen's and
Guggenheim's representations to the Directors that the Investment Manager and
Sub-Adviser would continue to provide investment and related services that were
of materially the same quality and quantity as services provided to the Funds in
the past, and that these services are appropriate in scope and extent in light
of the Funds' operations, the competitive landscape of the investment company
business and investor needs. Based on this review, the Directors concluded that
the range and quality of services provided by the Advisers to the Funds, as
applicable, were expected to continue under the New Agreements at comparable
levels.
THE INVESTMENT PERFORMANCE OF THE FUNDS. The Directors concluded on the
basis of information supplied by Morningstar, Inc. ("Morningstar") at the 2009
Renewal Meeting that the Investment Manager and Sub-Adviser generally achieved
investment performance that was satisfactory relative to comparable funds over
trailing periods. Based on the representations made by SecBen and Guggenheim at
the January 2010 Meeting that the Advisers would continue to operate following
the closing of the Transaction in much the same manner as they operate today,
the Directors concluded that the investment performance of the Advisers was not
expected to be affected by the Transaction.
THE COST OF INVESTMENT MANAGEMENT AND SUB-ADVISORY SERVICES PROVIDED AND THE
LEVEL OF PROFITABILITY. At the 2009 Renewal Meeting, on the basis of the
Directors' review of the fees to be charged by the Advisers for their services
and the level of the profitability of the Advisers' relationship with each Fund
under the Current Agreements, the Directors concluded that the level of the
advisory fees and profitability under the Current Agreements are appropriate in
light of the fees and overall expense ratios of comparable investment companies
and the anticipated profitability of the relationship between each Fund and the
Advisers, as applicable. Also, at the 2009 Renewal Meeting, the Directors
determined that the fees and estimated overall expense ratio of the Funds under
the Current Agreements are consistent with, and often below, industry medians,
particularly with respect to mutual funds of comparable size based on
comparative information compiled by Morningstar.
At the January 2010 Meeting, the Directors considered the fact that the fee
rates payable to the Advisers would be the same under each Fund's New Agreement
as they are under such Fund's Current Agreement. The Directors also noted that
the Funds' applicable fee waiver/expense limitations agreements with the
Investment Manager would remain in effect, if the New Agreements are approved by
shareholders and the Transaction is completed. With respect to anticipated
profitability, the Directors
8
noted that it was too early to predict how the Transaction would affect the
Advisers' profitability with respect to the Funds, but noted that this matter
would be given further consideration on an ongoing basis. Overall, the Directors
concluded that the fees to be paid under the Current Agreements are reasonable.
WHETHER THE INVESTMENT MANAGEMENT FEES AND SUB-ADVISORY FEES REFLECT
ECONOMIES OF SCALE. The Directors concluded at the 2009 Renewal Meeting that the
fees paid under the Current Agreements appropriately reflect the current
economic environment for the Advisers and the competitive nature of the mutual
fund market.
THE EXTENT TO WHICH ECONOMIES OF SCALE WILL BE REALIZED AS THE FUNDS GROW.
While the Funds' fees under the Current Agreements do not reduce should Fund
assets grow meaningfully, the Directors determined at the 2009 Renewal Meeting
that the fees payable by the Funds reflect potential future economies of scale
to some extent by virtue of their competitive levels (determined with reference
to industry standards as reported by Morningstar). The Directors noted that the
fees would not change under the New Agreements and that they will have the
opportunity to again review the appropriateness of the fee payable to the
Advisers under the New Agreements when the next renewal of these Agreements
comes before the Board. The Directors further noted Guggenheim's statement that
economies of scale could not be predicted in advance of the closing of the
Transaction.
BENEFITS (SUCH AS SOFT DOLLARS) TO THE ADVISERS FROM THEIR RELATIONSHIP WITH
THE FUNDS. The Directors concluded at their 2009 Renewal Meeting that other
benefits described by the Advisers from their past or future relationship with
the Funds, including "soft dollar" benefits in connection with brokerage
transactions, are reasonable and fair, and consistent with industry practice and
the best interests of the Fund and its shareholders. In addition, the Directors
also determined at the 2009 Renewal Meeting that the administration, transfer
agency and fund accounting fees paid by the Funds to the Investment Manager are
reasonable, fair and in the best interests of shareholders in light of the
nature and quality of the services provided, the associated costs, and the
necessity of the services for the Funds' operations and would remain the same
under the proposed arrangements after the Transaction. The Directors also
considered the terms of the Transaction and the financial benefits that it
brings to the parent company of the Investment Manager and noted that those
financial benefits are available, in part, because of the involvement of the
Investment Manager in the Transaction. The Directors also noted that the
Transaction is expected to put the Investment Manager on strong financial
footing, enhancing its ability to provide continuous services to the Funds.
OTHER CONSIDERATIONS. In approving the Agreements, the Directors considered
information and representations made about the Guggenheim organization and its
personnel and the ongoing role that Guggenheim would play with the Purchaser and
its other non-managing members. The Directors also considered representations
that the Advisers, SecBen and Guggenheim would make a substantial commitment to
the recruitment and retention of high quality personnel, and maintain the
financial,
9
compliance and operational resources reasonably necessary to manage the Funds in
a professional manner that is consistent with the best interests of the Funds
and their shareholders. The Directors also noted that, although the Affiliated
Service Providers will also experience a change of control as a result of the
Transaction, SecBen and Guggenheim have assured the Directors that the there
will be no reduction in the nature and quality of the services provided by the
Affiliated Service Providers to each Fund, as applicable, as a result of the
change of control. The Directors considered these representations and the
financial stability the Transaction was expected to bring to the Advisers and
the Affiliated Service Providers in the context of the current financial
challenges facing certain SBHC affiliates. The Directors also considered
representations by Guggenheim regarding additional resources that could be made
available to the Advisers and the Affiliated Service Providers if beneficial to
their operations.
THE DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE "FOR"
THE APPROVAL OF THE NEW AGREEMENTS. UNMARKED, PROPERLY
SIGNED AND DATED PROXIES WILL BE SO VOTED.
10
PROPOSAL 1
THE APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENTS
WITH RESPECT TO ALL FUNDS
As discussed above, Proposal 1 relates to the approval by shareholders of
the New Investment Management Agreements between the Investment Manager and each
of the Funds. Each Company, on behalf of its underlying Funds, has executed a
Current Investment Management Agreement with the Investment Manager in
connection with advisory services to such Funds. Therefore, this Joint Proxy
Statement solicits proxies with respect to five separate investment management
agreements (i.e., one investment management agreement for each Company). You are
being asked to vote separately on Proposal 1 solely with respect to the Fund(s)
that you own. Forms of the New Investment Management Agreements are attached in
Appendix A.
The terms of each New Investment Management Agreement are identical to those
of the corresponding Current Investment Management Agreement, except with
respect to the date of execution. Consequently, upon shareholder approval, the
Investment Manager will continue to render substantially the same services to
the Funds under the New Investment Management Agreements that it currently
renders to the Funds under the Current Investment Management Agreements.
As discussed above, the Directors unanimously approved the New Investment
Management Agreements and recommend the approval of the New Investment
Management Agreements to shareholders. For information regarding the Board's
considerations in approving the New Investment Management Agreements, please see
the section above entitled "Board Considerations in Approving the New
Agreements."
The Current Investment Management Agreements will remain in place until the
completion of the Transaction, at which time, as a result of the change in the
control of the Investment Manager, the Current Investment Management Agreements
will terminate. However, completion of the Transaction will be subject to
certain closing conditions, including: (a) the receipt of approvals required for
the assignment or replacement of investment advisory contracts relating to 80%
or more of the total net assets under management by the Investment Manager and
certain affiliates that will be controlled by the Purchaser; and, (b) with
respect to the Purchase Transaction only, the approval of a corporate
restructuring called a demutualization by the insurance policyholders who
presently own SBHC, to the extent required by applicable law. If for some reason
the Transaction does not occur, the Current Investment Management Agreements
will not automatically terminate and will remain in effect, and the New
Investment Management Agreements will not be entered into, even if they have
been approved by Fund shareholders.
11
THE INVESTMENT MANAGER
Security Investors, LLC, located at One Security Benefit Place, Topeka,
Kansas 66636-0001, currently serves as investment manager to the Funds pursuant
to the Current Investment Management Agreements. Information regarding the
Current Investment Management Agreements, including (a) the date of the
agreement, (b) the date on which it was last approved by shareholders and (c)
the rate of compensation to the Investment Manager, is provided in Appendix B.
If the New Investment Management Agreements are approved by shareholders, they
will continue for an initial term of two years and for subsequent one-year terms
so long as they are renewed annually in accordance with their terms (see
discussion under "Term and Continuance" below).
Information regarding the name(s), address(es) and principal occupation(s)
of the principal executive officer(s) and managing member(s) of the Investment
Manager is set forth in Appendix C. A list of the Directors and officers of each
Company who hold positions with the Investment Manager also is set forth in
Appendix C. In addition, set forth in Appendix D-1 is a list of other registered
investment companies with similar investment objectives as each Fund, for which
the Investment Manager acts as investment manager, adviser or sub-adviser.
Currently, the Investment Manager is a wholly-owned subsidiary of SBC. SBC
is wholly owned by SBHC, One Security Benefit Place, Topeka, Kansas 66636-0001.
Upon completion of the Transaction, the Purchaser will either receive: (a) a
100% ownership stake in SBC, the parent company of the Advisers and affiliates;
or (b) a 100% ownership stake in SBC's asset management business, which includes
the Advisers and certain affiliates. For more information on the Transaction,
please see the section above entitled "Information Regarding the Change in
Control of the Advisers."
MATERIAL TERMS OF THE NEW INVESTMENT MANAGEMENT AGREEMENTS
The following summary of the New Investment Management Agreements summarizes
the material terms of the New Investment Management Agreements and is qualified
in its entirety by reference to the New Investment Management Agreements, forms
of which are attached in Appendix A.
DUTIES OF THE INVESTMENT MANAGER. Under the Current Investment Management
Agreements and the New Investment Management Agreements (each, a "Management
Agreement" and collectively, the "Management Agreements"), the Investment
Manager manages the investment operations of the Funds and supervises the
composition of the Funds' portfolios, including the purchase, retention and
disposition of portfolio securities, subject to supervision by the Board. It is
authorized to enter into sub-advisory agreements for investment advisory
services in connection with the management of the Funds. The Investment Manager
has responsibility for all investment advisory services furnished pursuant to
any sub-advisory agreement. The Investment Manager bears: (a) all expenses
incurred by the Investment Manager or by
12
the Funds in connection with managing the ordinary course of the business of the
Funds, other than those assumed by the Fund; and (b) the fees payable to a
sub-adviser pursuant to sub-advisory agreements between the Investment Manager
and any sub-advisers.
LIMITATION OF LIABILITY. Under each Management Agreement, so long as the
Investment Manager provides a Fund the benefit of its best judgment and effort
in rendering investment advisory services, the Investment Manager is not be
liable for any errors of judgment or mistake of law, or for any loss arising out
of any investment if the investment is made with due care and in good faith. The
Investment Manager is not protected for losses arising by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its investment advisory duties.
TERM AND CONTINUANCE. Each Management Agreement provides for an initial term
of two years from the date of implementation. Thereafter, consistent with the
applicable provision of the 1940 Act, if not terminated, each Management
Agreement continues in effect for successive 12-month periods thereafter, unless
terminated, provided each such continuance is specifically approved at least
annually by (a) the vote of a majority of the entire Board of a Company, or by
the vote of holders of a majority of the outstanding voting securities of a
Fund, and (b) the vote of a majority of the Independent Directors cast in person
at a meeting of such Directors called for the purpose of voting upon such
approval.
Each Management Agreement may be terminated with respect to a Fund at any
time without payment of any penalty, by a Fund upon the vote of either a
majority of the Board or by a majority of the outstanding voting securities of
the Fund, or by the Investment Manager, in each case on 60 days' written notice
to the other party. Each Management Agreement will terminate automatically in
the event of its "assignment" (as that term is defined under the 1940 Act).
BOARD RECOMMENDATION ON PROPOSAL 1
At the January 2010 Meeting, based on their deliberations on and evaluation
of the information described above, the Directors, including all of the
Independent Directors, unanimously: (a) concluded that the terms of the New
Investment Management Agreements are fair and reasonable; (b) concluded that the
Investment Manager's fees are reasonable in light of the services that the
Investment Manager will provide to the Funds; and (c) agreed to approve the New
Investment Management Agreements for an initial term of two years and to
recommend the approval of the New Investment Management Agreements to
shareholders.
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS OF THE FUNDS VOTE "FOR" PROPOSAL 1
13
PROPOSAL 2
THE APPROVAL OF NEW SUB-ADVISORY AGREEMENTS WITH
RESPECT TO:
RYDEX|SGI ALPHA OPPORTUNITY FUND
RYDEX|SGI GLOBAL FUND
RYDEX|SGI GLOBAL INSTITUTIONAL FUND
SERIES D (GLOBAL SERIES)
SERIES Z (ALPHA OPPORTUNITY SERIES)
As discussed above, Proposal 2 relates to the approval by shareholders of
the New Sub-Advisory Agreements between the Investment Manager and the
Sub-Adviser with respect to (a) Rydex|SGI Alpha Opportunity Fund; (b) Rydex|SGI
Global Fund; (c) Rydex|SGI Global Institutional Fund; (d) Series D (Global
Series); and (e) Series Z (Alpha Opportunity Series). This Joint Proxy Statement
solicits proxies with respect to two separate sub-advisory agreements. You are
being asked to vote separately on Proposal 2 solely with respect to the
Sub-Advised Fund(s) that you own. Forms of the New Sub-Advisory Agreements are
attached in Appendix E.
The terms of each New Sub-Advisory Agreement are identical to those of the
corresponding Current Sub-Advisory Agreement, except with respect to the date of
execution. Consequently, upon shareholder approval, the Sub-Adviser will
continue to render substantially the same services to the Sub-Advised Funds
under the New Sub-Advisory Agreements that it currently renders to the
Sub-Advised Funds under the Current Sub-Advisory Agreements.
As discussed above, the Directors unanimously approved the New Sub-Advisory
Agreements and recommend the approval of the New Sub-Advisory Agreements to
shareholders. For information regarding the Board's considerations in approving
the New Sub-Advisory Agreements, please see the section above entitled "Board
Considerations in Approving the New Agreements."
The Current Sub-Advisory Agreements will remain in place until the
completion of the Transaction, at which time, as a result of the change in the
control of the Sub-Adviser, the Current Sub-Advisory Agreements will terminate.
Thereafter, subject to shareholder approval, the New Sub-Advisory Agreements
will go into effect.
However, completion of the Transaction will be subject to certain closing
conditions, including: (a) the receipt of approvals required for the assignment
or replacement of investment advisory contracts relating to 80% or more of the
total net assets under management by the Investment Manager and certain
affiliates that will be controlled by the Purchaser; and, (b) with respect to
the Purchase Transaction only, the approval of a corporate restructuring called
a demutualization by the insurance policyholders who presently own SBHC, to the
extent required by applicable law. If for some reason the Transaction does not
occur, the Current Sub-Advisory Agreements will not automatically terminate and
will remain in effect, and the New
14
Sub-Advisory Agreements will not be entered into, even if they have been
approved by Fund shareholders.
The Investment Manager and the Funds have received an order from the SEC
that permits them to retain sub-advisers or amend the terms of an existing
sub-advisory agreement without shareholder approval, except when the sub-adviser
is affiliated with the Investment Manager. Since the Sub-Adviser is affiliated
with the Investment Manager, shareholder approval is required to approve the New
Sub-Advisory Agreements.
The effectiveness of Proposal 2 is also contingent on the approval of
Proposal 1 by shareholders of the corresponding Sub-Advised Funds.
INFORMATION ABOUT THE SUB-ADVISER
Security Global Investors, LLC, located at 801 Montgomery Street, 2nd Floor,
San Francisco, CA 94133-5164, currently serves as sub-adviser to the Sub-Advised
Funds pursuant to the Current Sub-Advisory Agreements. Information regarding the
Current Sub-Advisory Agreement, including (a) the date of the agreement, (b) the
date on which it was last approved by shareholders and (c) the rate of
compensation to the Sub-Adviser, is provided in Appendix F. If the New
Sub-Advisory Agreements are approved by shareholders, they will continue for an
initial term of two years and for subsequent one-year terms so long as they are
renewed annually in accordance with their terms (see discussion under "Term and
Continuance" below).
Information regarding the name(s), address(es) and principal occupation(s)
of the principal executive officer(s) and managing member(s) of the Sub-Adviser
is set forth in Appendix C. A list of the Directors and officers of each Company
who hold positions with the Sub-Adviser also is set forth in Appendix C. In
addition, set forth in Appendix D-2 is a list of other registered investment
companies with similar investment objectives as each Sub-Advised Fund, for which
the Sub-Adviser acts as investment manager, adviser or sub-adviser.
Currently, the Sub-Adviser is a wholly-owned subsidiary of SBC. SBC is a
wholly-owned subsidiary of SBHC, located at One Security Benefit Place, Topeka,
Kansas 66636-0001. Upon completion of the Transaction, the Purchaser will either
receive: (a) a 100% ownership stake in SBC, the parent company of the Advisers
and affiliates; or (b) a 100% ownership stake in SBC's asset management
business, which includes the Advisers and certain affiliates. For more
information on the Transaction, please see the section above entitled
"Information Regarding the Change in Control of the Advisers."
MATERIAL TERMS OF THE NEW SUB-ADVISORY AGREEMENTS
The following summary of the New Sub-Advisory Agreements between the
Investment Manager and Sub-Adviser summarizes their material terms and is
qualified in its entirety by reference to such New Sub-Advisory Agreements,
forms of which are attached in Appendix F.
15
DUTIES OF THE SUB-ADVISER. Under the Current Sub-Advisory Agreements and the
New Sub-Advisory Agreements, each between the Investment Manager and Sub-Adviser
(collectively, the "Sub-Advisory Agreements"), the Sub-Adviser, subject to the
supervision of the Investment Manager and the Board, is responsible for managing
a Sub-Advised Fund's assets (or a portion thereof, as applicable), including
making investment decisions and placing orders to purchase and sell securities
for the Sub-Advised Fund, all in accordance with the investment objective and
policies of the Sub-Advised Fund as reflected in its current prospectus and
statement of additional information and as may be adopted from time to time by
the Board. In accordance with applicable requirements, the Sub-Adviser will also
maintain, and provide the Investment Manager with, all books and records
relating to the transactions it executes or that are otherwise required, and
render to a Sub-Advised Fund and the Investment Manager such periodic and
special reports at any time upon reasonable request.
LIMITATION OF LIABILITY. The Sub-Advisory Agreements provide that, in the
absence of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or breach of its duties thereunder, the Sub-Adviser
will not be liable for any act or omission in connection with its activities as
sub-adviser to the Sub-Advised Funds.
TERM AND CONTINUANCE. Under their terms, the Sub-Advisory Agreements will
remain in full force and effect for a period of up to two years from the date of
their execution, and, consistent with the applicable provision of the 1940 Act,
will continue thereafter as long as their continuance is approved at least
annually by the Board or by vote of a majority of the outstanding shares of a
Sub-Advised Fund, as well as by a majority of the Independent Directors by vote
cast in person at a meeting called for that purpose. However, the Sub-Advisory
Agreements may be terminated at any time upon 60 days' written notice without
the payment of any penalty, either by vote of a majority of the Board, by vote
of a majority of the outstanding shares of a Sub-Advised Fund, or by the
Investment Manager. The Investment Manager may terminate a Sub-Advisory
Agreement upon breach by the Sub-Adviser of its representations or warranties,
which shall not have been cured within 20 days of receipt of written notice of
such breach, or the Sub-Adviser becoming unable to discharge its duties and
obligations under such Sub-Advisory Agreement. Additionally, each New
Sub-Advisory Agreement will terminate immediately in the event of its assignment
or upon the termination of the corresponding Investment Management Agreement.
The Sub-Adviser may terminate a Sub-Advisory Agreement with respect to a
Sub-Advised Fund on 120 days' written notice to the Investment Manager and the
corresponding Fund.
BOARD RECOMMENDATION ON PROPOSAL 2
At the January 2010 Meeting, based on their deliberations on and evaluation
of the information described above, the Directors, including all of the
Independent Directors, unanimously: (a) concluded that the terms of the New
Sub-Advisory Agreements are fair and reasonable; (b) concluded that the
Sub-Adviser's fees are reasonable in light of the services that the Sub-Adviser
will provide to the Sub-Advised Funds; and (c) agreed
16
to approve the New Sub-Advisory Agreements for an initial term of two years and
to recommend the approval of the New Sub-Advisory Agreements to shareholders.
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS OF THE SUB-ADVISED FUNDS
VOTE "FOR" PROPOSAL 2
OTHER BUSINESS
The Directors do not know of any matters to be presented at the Meeting
other than those set forth in this Joint Proxy Statement. If other business
should properly come before the Meeting, proxies will be voted in accordance
with the judgment of the persons named in the accompanying proxy.
ADDITIONAL INFORMATION
ADMINISTRATOR, PRINCIPAL UNDERWRITERS AND TRANSFER AGENT
The Investment Manager also serves as each Fund's administrator and transfer
agent. The principal underwriter/distributor of each of Security Equity Fund,
Security Large Cap Value Fund, Security Mid Cap Growth Fund, Security Income
Fund and SBL Fund is Rydex Distributors, Inc. ("Rydex Distributors"), located at
9601 Blackwell Road, Suite 500, Rockville, Maryland 20850, an affiliate of the
Advisers. Another affiliate of the Advisers, Security Distributors, Inc.
("Security Distributors"), located at One Security Benefit Place, Topeka, Kansas
66636, also serves as principal underwriter/distributor of SBL Fund. Information
regarding the fees paid by each Fund to the Investment Manager for
administrative and transfer agent services during the previous fiscal year is
provided in Appendix B. Information regarding the fees paid by each Fund to
Rydex Distributors and/or Security Distributors (or any predecessor affiliated
distributor), as applicable, during the previous fiscal year also is provided in
Appendix B.
Although the Purchaser will acquire control of the Affiliated Service
Providers as a result of the Transaction, shareholder approval is not required
in order for the Affiliated Service Providers to continue providing services to
the Funds after the closing of the Transaction. In addition, the Investment
Manager, which also serves as each Fund's administrator and transfer agent under
separate agreements with the Funds, will continue to serve the Funds in those
roles without shareholder approval. The Directors have been assured that there
will be no material change in the nature or quality of the services provided by
the Affiliated Service Providers to each Fund, as applicable, due to the changes
in control.
OTHER SUB-ADVISERS FOR CERTAIN FUNDS
Mainstream Investment Advisers, LLC ("Mainstream"), 101 West Spring Street,
New Albany, Indiana 47150, is currently the sub-adviser to Rydex|SGI Alpha
Opportunity Fund and Series Z (Alpha Opportunity Series). Northern Trust
Investments, N.A. ("Northern Trust"), 50 South LaSalle Street, Chicago, Illinois
60603, is currently the sub-adviser to Series H (Enhanced Index Series). T. Rowe
17
Price Associates, Inc. ("T. Rowe Price"), 100 East Pratt Street, Baltimore,
Maryland 21202, is currently the sub-adviser to Series N (Managed Asset
Allocation Series).
The Investment Manager and the Funds have received an order from the SEC
that permits them to retain sub-advisers or amend the terms of an existing sub-
advisory agreement without shareholder approval, except when the sub-adviser is
affiliated with the Investment Manager. As a result, although the sub-advisory
agreements with Mainstream, Northern Trust and T. Rowe Price will be terminated
upon completion of the Transaction, shareholder approval of the new sub-advisory
agreements with Mainstream, Northern Trust and T. Rowe Price is not required
under the SEC exemptive order. At the January 2010 Meeting, the Directors have
unanimously approved the new sub-advisory agreements with Mainstream, Northern
Trust and T. Rowe Price.
AFFILIATIONS AND AFFILIATED BROKERAGE
During the Funds' most recent fiscal years, the Funds paid no commissions on
portfolio brokerage transactions to brokers who may be deemed to be affiliated
persons of the Funds, the Investment Manager or the Sub-Adviser, or affiliated
persons of such persons ("Affiliated Brokers").
OTHER INFORMATION
Proxy materials, reports and other information filed by the Funds can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
100 F Street, NE, Washington, DC 20549. The SEC maintains an Internet web site
(at http://www.sec.gov) which contains other information about the Funds.
VOTING INFORMATION
PROXY SOLICITATION. The principal solicitation of proxies will be by the
mailing of this Joint Proxy Statement on or about March 22, 2010, but proxies
may also be solicited by telephone and/or in person by representatives of the
Companies, regular employees of the Investment Manager or Sub-Adviser, their
affiliate(s), or The Altman Group, a private proxy services firm. If we have not
received your vote as the date of the Meeting approaches, you may receive a
telephone call from these parties to ask for your vote. Arrangements will be
made with brokerage houses and other custodians, nominees, and fiduciaries to
forward proxies and proxy materials to their principals.
COST OF THE MEETING. The cost of the Meeting, including the costs of
retaining The Altman Group, preparing and mailing of the notice, proxy statement
and proxy, and the solicitation of proxies, including reimbursement to
broker-dealers and others who forwarded proxy materials to their clients, will
be borne by SecBen. The estimated cost of retaining The Altman Group is
approximately $244,047.
SHAREHOLDER VOTING. Shareholders of the Funds who own shares at the close of
business on the Record Date will be entitled to notice of, and vote at, the
Meeting. Shareholders are entitled to one vote for each share held and
fractional votes for fractional shares held. With respect to SBL Fund, the
number of shares of each Fund
18
as to which voting instructions may be given to the Company is determined by
dividing the amount of the shareholder's insurance product account value
attributable to a Fund on the Record Date by the net asset value per share of
the Fund as of the same date. Fractional votes will be counted.
Information regarding the number of issued and outstanding shares of each
Fund as of the Record Date is provided in Appendix G, representing the same
number of votes for each of such Funds. The persons (or, with respect to SBL
Fund, the Insurance Companies) who are known to have owned beneficially 5% or
more of each Fund's outstanding shares as of the Record Date are listed in
Appendix H. As of the Record Date, the Directors and officers, as a group, owned
less than 1% of the outstanding shares of each Fund, except as listed in
Appendix I.
With respect to SBL Fund, Insurance Companies that use shares of a Fund as
funding media for their insurance products will vote shares of the Fund held by
their separate accounts in accordance with the instructions received from owners
of the insurance products. An Insurance Company also will vote shares of a Fund
held in such separate account for which it has not received timely instructions
in the same proportion as it votes shares held by that separate account for
which it has received instructions. An Insurance Company whose separate account
invests in a Fund will vote shares by its general account and its subsidiaries
in the same proportion as other votes cast by its separate account in the
aggregate. As a result, a small number of insurance product owners could
determine the outcome of the vote if other owners fail to vote.
More than 50% of a Fund's shares, represented in person or by proxy, will
constitute a quorum for the Meeting and must be present for the transaction of
business at the Meeting with respect to the Fund. Only proxies that are voted,
abstentions and "broker non-votes" will be counted toward establishing a quorum.
"Broker non-votes" are shares held by a broker or nominee as to which
instructions have not been received from the beneficial owners or persons
entitled to vote, and the broker or nominee does not have discretionary voting
power.
In the event that a quorum is not present at the Meeting, or a quorum is
present but sufficient votes to approve Proposal 1 and/or Proposal 2 are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of a Fund's shares represented at the
Meeting in person or by proxy (excluding abstentions and broker non-votes). The
persons named as proxies will vote those proxies that they are entitled to vote
"FOR" Proposal 1 and "FOR" Proposal 2 in favor of an adjournment of the Meeting,
and will vote those proxies required to be voted "AGAINST" Proposals 1 and 2
against such adjournment. A shareholder vote may be taken on any proposal prior
to any such adjournment if sufficient votes have been received and it is
otherwise appropriate.
The person(s) named as proxies on the enclosed proxy card will vote in
accordance with your directions, if your proxy is received properly executed. If
we receive your proxy, and it is executed properly, but you give no voting
instructions
19
with respect to any proposal, your shares will be voted "FOR" Proposal 1 and
"FOR" Proposal 2. The duly appointed proxies may, in their discretion, vote upon
such other matters as may properly come before the Meeting.
In order that your shares may be represented at the Meeting, you are
requested to vote your shares by mail, Internet or telephone by following the
enclosed instructions. IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT
RETURN YOUR PROXY CARD, UNLESS YOU LATER ELECT TO CHANGE YOUR VOTE. You may
revoke your proxy: (a) at any time prior to its exercise by written notice of
its revocation to the secretary of a Company prior to the Meeting; (b) by the
subsequent execution and timely return of another proxy prior to the Meeting
(following the methods noted above); or (c) by being present and voting in
person at the Meeting and giving oral notice of revocation to the chair of the
Meeting. However, attendance in-person at the Meeting, by itself, will not
revoke a previously-tendered proxy.
REQUIRED VOTE. Approval of Proposal 1 and Proposal 2 requires the vote of a
"majority of the outstanding voting securities" of a Fund, which means the vote
of 67% or more of the shares that are present at the Meeting, if the holders of
more than 50% of the outstanding shares are present or represented by proxy, or
the vote of more than 50% of the Fund's outstanding shares, whichever is less.
Accordingly, assuming the presence of a quorum, abstentions and broker non-votes
have the effect of a negative vote on Proposal 1 and Proposal 2.
The Current Agreements will remain in place until the completion of the
Transaction, at which time, as a result of the change in the control of the
Advisers, the Current Agreements will terminate and, subject to shareholder
approval, the New Agreements will go into effect. As discussed in the section
above entitled "Information Regarding the Change in Control of the Advisers,"
completion of the Transaction will be subject to certain closing conditions. As
a result, if for some reason the Transaction does not occur, the Current
Agreements will not automatically terminate and will remain in effect, and the
New Agreements will not be entered into, even if they have been approved by Fund
shareholders. If Proposal 1 and/or Proposal 2 are not approved by shareholders
of any Fund, the Board will evaluate other short- and long-term options.
In a separate Proxy Statement/Prospectus, shareholders of SBL Fund, Series H
are being asked to approve a Plan of Reorganization relating to the
reorganization of SBL Fund, Series H into SBL Fund, Series A (the
"Reorganization"). However, the consummation of the Reorganization is contingent
upon approval by shareholders of SBL Fund, Series H and SBL Fund, Series A of
Proposal 1 contained in this Joint Proxy Statement, if such shareholder vote on
Proposal 1 takes place. Thus, upon approval by shareholders of SBL Fund, Series
H of the Reorganization and if a vote on Proposal 1 contained in this Joint
Proxy Statement takes place, the Reorganization will be consummated only if
shareholders of both SBL Fund, Series H and SBL Fund, Series A approve
Proposal 1.
20
SHAREHOLDERS SHARING THE SAME ADDRESS. As permitted by law, only one copy of
this Joint Proxy Statement may be delivered to shareholders residing at the same
address, unless such shareholders have notified the Companies of their desire to
receive multiple copies of the shareholder reports and proxy statements that the
Companies send. If you would like to receive an additional copy, please contact
the Companies by writing to the Companies' address, or by calling the telephone
number shown on the front page of this Joint Proxy Statement. A Company will
then promptly deliver, upon request, a separate copy of this Joint Proxy
Statement to any shareholder residing at an address to which only one copy was
mailed. Shareholders wishing to receive separate copies of a Company's
shareholder reports and proxy statements in the future, and shareholders sharing
an address that wish to receive a single copy if they are receiving multiple
copies, should also send a request as indicated.
SHAREHOLDER PROPOSALS
As a general matter, each Company does not hold annual meetings of
shareholders. Shareholders wishing to submit proposals for inclusion in a proxy
statement for a subsequent shareholders' meeting should send their written
proposal to the secretary of a Company, One Security Benefit Place, Topeka,
Kansas 66636-0001.
Proposals must be received a reasonable time before the Companies begin to
print and set the proxy materials in order to be considered for inclusion in the
proxy materials for the meeting. Timely submission of a proposal does not,
however, necessarily mean that the proposal will be included. Persons named as
proxies for any subsequent shareholders' meeting will vote in their discretion
with respect to proposals submitted on an untimely basis.
TO ENSURE THE PRESENCE OF A QUORUM AT THE SPECIAL MEETING, PROMPT EXECUTION AND
RETURN OF THE ENCLOSED PROXY IS REQUESTED. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, ALONG WITH INSTRUCTIONS ON HOW TO
VOTE OVER THE INTERNET OR BY TELEPHONE SHOULD YOU PREFER TO VOTE BY ONE OF THOSE
METHODS.
By Order of the Boards of Directors,
Sincerely,
/s/ Richard M. Goldman
Richard M. Goldman
President, Chairman of the Boards of Directors
21
APPENDIX A
FORMS OF INVESTMENT MANAGEMENT AGREEMENTS
INVESTMENT MANAGEMENT AGREEMENT
This Agreement, made and entered into this [ ] day of [ ], 2010 by and
between SECURITY EQUITY FUND, a Kansas corporation (hereinafter referred to as
the "Fund"), and SECURITY INVESTORS, LLC, a Kansas limited liability company
(hereinafter referred to as the "Adviser").
W I T N E S S E T H
WHEREAS, the Fund is engaged in business as an open-end, management
investment company registered under the Investment Company Act of 1940 ("1940
Act"); and
WHEREAS, the Adviser is willing to provide investment research and advice to
the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties agree as follows:
1. EMPLOYMENT OF THE ADVISER. The Fund hereby employs the Adviser to act as
investment adviser to the Fund with respect to the investment of its assets and
to supervise and arrange for the purchase of securities of the Fund and the
sales of securities held in the portfolio of the Fund, subject always to the
supervision of the Board of Directors of the Fund (or a duly appointed committee
thereof), during the period and upon and subject to the terms and conditions
described herein. The Adviser agrees to maintain sufficient trained personnel
and equipment and supplies to perform its responsibilities under this Agreement
and in conformity with the current Prospectus(es) of the Fund and such other
reasonable standards of performance as the Fund may from time to time specify.
The Adviser hereby accepts such employment and agrees to perform the
services required by this Agreement for the compensation herein provided.
2. ALLOCATION OF EXPENSES AND CHARGES.
(a) Expenses of the Adviser. The Adviser shall pay all expenses in
connection with the performance of its services under this Agreement, except
as provided otherwise herein.
(b) Expenses of the Fund. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse the Adviser for the payment
of the following described expenses of the Fund whether or not billed to the
Fund, the Adviser or any related entity:
(i) brokerage fees and commissions;
(ii) taxes;
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(iii) interest expenses;
(iv) any extraordinary expenses approved by the Board of Directors
of the Fund; and
(v) distribution fees paid under the Fund's Class A, Class B and
Class C Distribution Plans;
and, in addition to those expenses set forth above, the Fund shall pay all
of its expenses whether or not billed to the Fund, the Adviser or any
related entity.
(c) Expense Cap. For each of the Fund's full fiscal years that this
Agreement remains in force, the Adviser agrees that if total annual
expenses of each Series of the Fund identified below, exclusive of
interest, taxes, extraordinary expenses (such as litigation), brokerage
fees and commissions, and 12b-1 fees paid under a Fund's Class A, Class B
or Class C Distribution Plans, but inclusive of the Adviser's compensation,
exceeds the amount set forth below (the "Expense Cap"), the Adviser shall
contribute to such Series such funds or waive such portion of its fee,
adjusted monthly, as may be required to insure that the total annual
expenses of the Series shall not exceed the Expense Cap. If this Agreement
shall be effective for only a portion of a Series' fiscal year, then the
maximum annual expenses shall be prorated for such portion.
EXPENSE CAP
Large Cap Concentrated Growth Series, Class A, B and C - 1.75%
3. COMPENSATION OF THE ADVISER.
(a) As compensation for the investment advisory services to be rendered
by the Adviser to Global Series, Global Institutional Fund and Small Cap
Value Series, for each of the years this Agreement is in effect, each of
the foregoing shall pay the Adviser an annual fee equal to 1.00% of its
respective average daily net assets. Such fee shall be calculated daily and
payable monthly. As compensation for the investment advisory services to be
rendered by the Adviser to Large Cap Core Series, All Cap Growth Series,
Large Cap Concentrated Growth Series and Mid Cap Value Institutional Fund,
for each of the years this Agreement is in effect, each of the foregoing
shall pay the Adviser an annual fee equal to 0.75% of its respective
average daily net assets. As compensation for the investment advisory
services to be rendered by the Adviser to Small Cap Growth Series, for each
of the years this Agreement is in effect, Small Cap Growth Series shall pay
the Adviser an annual fee equal to 0.85% of average daily net assets. Such
fee shall be calculated daily and payable monthly. As compensation for the
investment advisory services to be rendered by the Adviser to Mid Cap Value
Series for each of the years this Agreement is in effect, the Mid Cap Value
Series shall pay the Adviser an annual fee equal to 1.00% of its average
daily net assets of $200 million or less; plus an annual rate of 0.75% of
its average daily net
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assets of more than $200 million. Such fee shall be calculated daily and
payable monthly. As compensation for the investment advisory services to be
rendered by the Adviser to All Cap Value Series for each of the years this
Agreement is in effect, the All Cap Value Series shall pay the Adviser an
annual fee equal to 0.70% of its average daily net assets. Such fee shall
be calculated daily and payable monthly. As compensation for the investment
advisory services to be rendered by the Adviser to Alpha Opportunity Series
for each of the years this Agreement is in effect, the Alpha Opportunity
Series shall pay the Adviser an annual fee equal to 1.25% of its average
daily net assets. Such fee shall be calculated daily and payable monthly.
If this Agreement shall be effective for only a portion of a year, then the
Adviser's compensation for said year shall be prorated for such portion.
For purposes of this Section 3, the value of the net assets of each Series
shall be computed in the same manner at the end of the business day as the
value of such net assets is computed in connection with the determination
of the net asset value of the Fund's shares as described in the Fund's
prospectus(es).
(b) For each of the Fund's fiscal years this Agreement remains in
force, the Adviser agrees that if total annual expenses of any Series of the
Fund, exclusive of interest and taxes, extraordinary expenses (such as
litigation) and distribution fees paid under the Fund's Class A, Class B
and Class C Distribution Plans, but inclusive of the Adviser's
compensation, exceed any expense limitation imposed by state securities law
or regulation in any state in which shares of such Series of the Fund are
then qualified for sale, as such regulations may be amended from time to
time, the Adviser will contribute to such Series such funds or waive such
portion of its fee, adjusted monthly, as may be requisite to insure that
such annual expenses will not exceed any such limitation. If this Agreement
shall be effective for only a portion of any Series' fiscal year, then the
maximum annual expenses shall be prorated for such portion. Brokerage fees
and commissions incurred in connection with the purchase or sale of any
securities by a Series shall not be deemed to be expenses within the
meaning of this paragraph (b).
4. INVESTMENT ADVISORY DUTIES.
(a) Investment Advice. The Adviser shall regularly provide the Fund
with investment research, advice and supervision, continuously furnish an
investment program, recommend which securities shall be purchased and sold
and what portion of the assets of the Fund shall be held uninvested and
arrange for the purchase of securities and other investments for the Fund
and the sale of securities and other investments held in the portfolio of
the Fund. All investment advice furnished by the Adviser to the Fund under
this Section 4 shall at all times conform to any requirements imposed by
the provisions of the Fund's Articles of Incorporation and Bylaws, the 1940
Act, the Investment Advisors Act of 1940 and the rules and regulations
promulgated thereunder, and other applicable provisions of law, and the
terms of the registration statements of the Fund under the Securities Act
of 1933 ("1933 Act") and/or the 1940 Act, as may be
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applicable at the time, all as from time to time amended. The Adviser shall
advise and assist the officers or other agents of the Fund in taking such
steps as are necessary or appropriate to carry out the decisions of the
Board of Directors of the Fund (and any duly appointed committee thereof)
with regard to the foregoing matters and the general account of the Fund's
business.
(b) Subadvisers. Subject to the provisions of the 1940 Act and any
applicable exemptions thereto, the Adviser is authorized, but is under no
obligation, to enter into sub-advisory agreements (the "Sub-Advisory
Agreements") with one or more subadvisers (each a "Subadviser") to provide
investment advisory services to any series of the Fund. Each Subadviser
shall have investment discretion with respect to the assets of the series
assigned to that Subadviser by the Adviser. Consistent with the provisions
of the 1940 Act and any applicable exemption thereto, the Adviser may enter
into Sub-Advisory Agreements or amend Sub-Advisory Agreements without the
approval of the shareholders of the affected series.
(c) Portfolio Transactions and Brokerage.
(i) Transactions in portfolio securities shall be effected by the
Adviser, through brokers or otherwise (including affiliated brokers),
in the manner permitted in this Section 4 and in such manner as the
Adviser shall deem to be in the best interests of the Fund after
consideration is given to all relevant factors.
(ii) In reaching a judgment relative to the qualification of a
broker to obtain the best execution of a particular transaction, the
Adviser may take into account all relevant factors and circumstances,
including the size of any contemporaneous market in such securities;
the importance to the Fund of speed and efficiency of execution;
whether the particular transaction is part of a larger intended change
of portfolio position in the same securities; the execution
capabilities required by the circumstances of the particular
transaction; the capital required by the transaction; the overall
capital strength of the broker; the broker's apparent knowledge of or
familiarity with sources from or to whom such securities may be
purchased or sold; as well as the efficiency, reliability and
confidentiality with which the broker has handled the execution of
prior similar transactions.
(iii) Subject to any statements concerning the allocation of
brokerage contained in the Fund's Prospectus(es) or Statement(s) of
Additional Information, the Adviser is authorized to direct the
execution of portfolio transactions for the Fund to brokers who
furnish investment information or research service to the Adviser.
Such allocations shall be in such amounts and proportions as the
Adviser may determine. If the transaction is directed to a broker
providing brokerage and research services to the Adviser, the
commission paid for such transaction may be in excess of the
commission another broker would have charged for effecting that
transaction, if the
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Adviser shall have determined in good faith that the commission is
reasonable in relation to the value of the brokerage and research
services provided, viewed in terms of either that particular
transaction or the overall responsibilities of the Adviser with
respect to all accounts as to which it now or hereafter exercises
investment discretion For purposes of the immediately preceding
sentence, "providing brokerage and research services" shall have the
meaning generally given such terms or similar terms under Section
28(e)(3) of the Securities Exchange Act of 1934, as amended.
(iv) In the selection of a broker for the execution of any
transaction not subject to fixed commission rates, the Adviser shall
have no duty or obligation to seek advance competitive bidding for the
most favorable negotiated commission rate to be applicable to such
transaction, or to select any broker solely on the basis of its
purported or "posted" commission rates.
(v) In connection with transactions on markets other than
national or regional securities exchanges, the Fund will deal directly
with the selling principal or market maker without incurring charges
for the services of a broker on its behalf unless, in the best
judgment of the Adviser, better price or execution can be obtained by
utilizing the services of a broker.
(d) Limitation of Liability of the Adviser with Respect to Rendering
Investment Advisory Services. So long as the Adviser shall give the Fund
the benefit of its best judgment and effort in rendering investment
advisory services hereunder, the Adviser shall not be liable for any errors
of judgment or mistake of law, or for any loss sustained by reason of the
adoption of any investment policy or the purchase, sale or retention of any
security on its recommendation shall have been based upon its own
investigation and research or upon investigation and research made by any
other individual, firm or corporation, if such recommendation shall have
been made and such other individual, firm or corporation shall have been
selected with due care and in good faith. Nothing herein contained shall,
however, be construed to protect the Adviser against any liability to the
Fund or its shareholders by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Section 4. As
used in this Section 4, the "Adviser" shall include directors, officers and
employees of the Adviser, as well as the Adviser itself.
5. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent
the Adviser or any officer thereof from acting as investment adviser for any
other person, firm or corporation, nor shall it in any way limit or restrict the
Adviser or any of its directors, officers, stockholders or employees from
buying, selling, or trading any securities for their own accounts or for the
accounts of others for whom they may be acting; provided, however, that the
Adviser expressly represents that it will undertake no activities which, in its
judgment, will conflict with the performance of its obligations to the Fund
under this Agreement. The Fund acknowledges that the
A-5
Adviser acts as investment adviser to other investment companies, and it
expressly consents to the Adviser acting as such; provided, however, that if in
the opinion of the Adviser, particular securities are consistent with the
investment objectives of, and desirable purchases or sales for the portfolios of
one or more of such other investment companies or series of such companies at
approximately the same time, such purchases or sales will be made on a
proportionate basis if feasible, and if not feasible, then on a rotating or
other equitable basis.
6. AMENDMENT. This Agreement may be amended at any time, without shareholder
approval to the extent permitted by applicable law, by a writing signed by each
of the parties hereto. Any change in the Fund's registration statements or other
documents of compliance or in the forms relating to any plan, program or service
offered by its current Prospectus(es) which would require a change in the
Adviser's obligations hereunder shall be subject to the Adviser's approval,
which shall not be unreasonably withheld.
7. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall continue in
force with respect to a Series for an initial term of up to two years, and then
for successive 12-month periods thereafter, unless terminated, provided each
such continuance is specifically approved at least annually by (a) the vote of a
majority of the entire Board of Directors of the Fund, or by the vote of the
holders of a majority of the outstanding voting securities of each series of the
Fund (as defined in the 1940 Act), and (b) the vote of a majority of the
directors of the Fund who are not parties to this Agreement or interested
persons (as such terms are defined in the Investment Company Act of 1940) of any
such party cast in person at a meeting of such directors called for the purpose
of voting upon such approval. In the event a majority of the outstanding shares
of one series vote for continuance of the Agreement, it will be continued for
that series even though the Agreement is not approved by either a majority of
the outstanding shares of any other series or by a majority of outstanding
shares of the Fund.
Upon this Agreement becoming effective, any previous Agreement between the
Fund and the Adviser providing for investment advisory services shall
concurrently terminate, except that such termination shall not affect any fees
accrued and guarantees of expenses with respect to any period prior to
termination.
This Agreement may be terminated at any time as to any series of the Fund
without payment of any penalty, by the Fund upon the vote of a majority of the
Fund's Board of Directors or, by a majority of the outstanding voting securities
of the applicable series of the Fund, or by the Adviser, in each case on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment (as such term is defined in the 1940
Act).
8. SEVERABILITY. If any clause or provision of this Agreement is determined
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, then such clause or provision shall be considered
severed herefrom and the remainder of this Agreement shall continue in full
force and effect.
A-6
9. APPLICABLE LAW. This Agreement shall be subject to and construed in
accordance with the laws of the State of Kansas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereto duly authorized on the day, month
and year first above written.
SECURITY EQUITY FUND
By: ______________________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By: ______________________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
A-7
INVESTMENT MANAGEMENT AGREEMENT
This Agreement, made and entered into as of [ ], by and between SECURITY
LARGE CAP VALUE FUND, a Kansas corporation (hereinafter referred to as the
"Fund"), and SECURITY INVESTORS, LLC, a limited liability company (hereinafter
referred to as the "Adviser").
W I T N E S S E T H
WHEREAS, the Fund is engaged in business as an open-end management
investment company registered under the Investment Company Act of 1940 ("1940
Act"); and
WHEREAS, the Fund is authorized to issue shares of capital stock in separate
Series, with each such Series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund currently offers shares in two separate series, including
the Large Cap Value Series and the Large Cap Value Institutional Series, such
series together with all other series subsequently established by the Fund with
respect to which the Fund desires to retain the Adviser to render investment
advisory services hereunder and with respect to which the Adviser is willing so
to do, being herein collectively referred to as the "Series"; and
WHEREAS, the Adviser is willing to provide investment research and advice to
the Fund on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties agree as follows:
1. EMPLOYMENT OF THE ADVISER. The Fund hereby employs the Adviser to act as
investment adviser to the Fund with respect to the investment of its assets and
to supervise and arrange for the purchase of securities of the Fund and the
sales of securities held in the portfolio of the Fund, subject always to the
supervision of the Board of Directors of the Fund (or a duly appointed committee
thereof), during the period and upon and subject to the terms and conditions
described herein. The Adviser agrees to maintain sufficient trained personnel
and equipment and supplies to perform its responsibilities under this Agreement
and in conformity with the current Prospectus(es) of the Fund and such other
reasonable standards of performance as the Fund may from time to time specify.
The Adviser hereby accepts such employment and agrees to perform the
services required by this Agreement for the compensation herein provided.
2. ALLOCATION OF EXPENSES AND CHARGES.
(a) Expenses of the Adviser. The Adviser shall pay all expenses in
connection with the performance of its services under this Agreement, except
as provided otherwise herein.
A-8
(b) Expenses of the Fund. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse the Adviser for the payment
of the following described expenses of the Fund whether or not billed to the
Fund, the Adviser or any related entity;
(i) brokerage fees and commissions;
(ii) taxes;
(iii) interest expenses;
(iv) any extraordinary expenses approved by the Board of Directors of
the Fund; and
(v) distribution fees paid under the Fund's Class A, Class B and
Class C Distribution Plans;
and, in addition to those expenses set forth above, the Fund shall pay all
of its expenses whether or not billed to the Fund, the Adviser or any
related entity.
3. COMPENSATION OF THE ADVISER.
(a) As compensation for the investment advisory services to be rendered
by the Adviser to the Fund for each of the years this Agreement is in
effect, the Fund shall pay the Adviser an annual fee equal to 0.65% of the
Fund's average daily net assets. Such fee shall be calculated daily and
payable monthly. If this Agreement shall be effective for only a portion of
a year, then the Adviser's compensation for said year shall be prorated for
such portion. For purposes of this Section 3, the value of the net assets of
the Fund shall be computed in the same manner at the end of the business day
as the value of such net assets is computed in connection with the
determination of the net asset value of the Fund's shares as described in
the Fund's Prospectus(es).
(b) For each of the Fund's fiscal years that this Agreement remains in
force, the Adviser agrees that if total annual expenses of any Series of
the Fund, exclusive of interest and taxes, extraordinary expenses (such as
litigation), distribution fees paid by the Fund under the Fund's Class A,
Class B and Class C Distribution Plans, but inclusive of the Adviser's
compensation, exceed any expense limitation imposed by state securities law
or regulation in any state in which shares of such Series of the Fund are
then qualified for sale, as such regulations may be amended from time to
time, the Adviser will contribute to such Series such funds or waive such
portion of its fee, adjusted monthly, as may be requisite to insure that
such annual expenses will not exceed any such limitation. If this Agreement
shall be effective for only a portion of any fiscal year, then the maximum
annual expenses shall be prorated for such portion. Brokerage fees and
commissions incurred in connection with the purchase or sale of any
securities by the Fund shall not be deemed to be expenses within the
meaning of this paragraph (b).
A-9
4. INVESTMENT ADVISORY DUTIES.
(a) Investment Advice. The Adviser shall regularly provide the Fund
with investment research, advice and supervision, continuously furnish an
investment program, recommend which securities shall be purchased and sold
and what portion of the assets of the Fund shall be held uninvested and
arrange for the purchase of securities and other investments for the Fund
and the sale of securities and other investments held in the portfolio of
the Fund. All investment advice furnished by the Adviser to the Fund under
this Section 4 shall at all times conform to any requirements imposed by
the provisions of the Fund's Articles of Incorporation and Bylaws, the 1940
Act, the Investment Advisors Act of 1940 and the rules and regulations
promulgated thereunder, and other applicable provisions of law, and the
terms of the registration statement of the Fund under the Securities Act of
1933 ("1933 Act") and/or the 1940 Act, as may be applicable at the time,
all as from time to time amended The Adviser shall advise and assist the
officers or other agents of the Fund in taking such steps as are necessary
or appropriate to carry out the decisions of the Board of Directors of the
Fund (and any duly appointed committee thereof) with regard to the
foregoing matters and the general account of the Fund's business.
(b) Subadvisers. Subject to the provisions of the 1940 Act and any
applicable exemptions thereto, the Adviser is authorized, but is under no
obligation, to enter into sub-advisory agreements (the "Sub-Advisory
Agreements") with one or more subadvisers (each a "Subadviser") to provide
investment advisory services to any series of the Fund. Each Subadviser
shall have investment discretion with respect to the assets assigned to
that Subadviser by the Adviser. Consistent with the provisions of the 1940
Act and any applicable exemption thereto, the Adviser may enter into
Sub-Advisory Agreements or amend Sub-Advisory Agreements without the
approval of the shareholders of the affected series.
(c) Portfolio Transactions and Brokerage.
(i) Transactions in portfolio securities shall be effected by
the Adviser, through brokers or otherwise (including affiliated
brokers), in the manner permitted in this Section 4 and in such manner
as the Adviser shall deem to be in the best interests of the Fund
after consideration is given to all relevant factors.
(ii) In reaching a judgment relative to the qualification of a
broker to obtain the best execution of a particular transaction, the
Adviser may take into account all relevant factors and circumstances,
including the size of any contemporaneous market in such securities;
the importance to the Fund of speed and efficiency of execution;
whether the particular transaction is part of a larger intended change
of portfolio position in the same securities; the
A-10
execution capabilities required by the circumstances of the
particular transaction; the capital required by the transaction; the
overall capital strength of the broker; the broker's apparent
knowledge of or familiarity with sources from or to whom such
securities may be purchased or sold; as well as the efficiency,
reliability and confidentiality with which the broker has handled the
execution of prior similar transactions.
(iii) Subject to any statements concerning the allocation of
brokerage contained in the Fund's Prospectus(es) or Statement(s) of
Additional Information, the Adviser is authorized to direct the
execution of portfolio transactions for the Fund to brokers who
furnish investment information or research service to the Adviser.
Such allocations shall be in such amounts and proportions as the
Adviser may determine. If the transaction is directed to a broker
providing brokerage and research services to the Adviser, the
commission paid for such transaction may be in excess of the
commission another broker would have charged for effecting that
transaction, if the Adviser shall have determined in good faith that
the commission is reasonable in relation to the value of the brokerage
and research services provided, viewed in terms of either that
particular transaction or the overall responsibilities of the Adviser
with respect to all accounts as to which it now or hereafter exercises
investment discretion. For purposes of the immediately preceding
sentence, "providing brokerage and research services" shall have the
meaning generally given such terms or similar terms under Section
28(e)(3) of the Securities Exchange Act of 1934, as amended.
(iv) In the selection of a broker for the execution of any
transaction not subject to fixed commission rates, the Adviser shall
have no duty or obligation to seek advance competitive bidding for the
most favorable negotiated commission rate to be applicable to such
transaction, or to select any broker solely on the basis of its
purported or "posted" commission rates.
(v) In connection with transactions on markets other than
national or regional securities exchanges, the Fund will deal directly
with the selling principal or market maker without incurring charges
for the services of a broker on its behalf unless, in the best
judgment of the Adviser, better price or execution can be obtained by
utilizing the services of a broker.
(d) Limitation of Liability of the Adviser with Respect to Rendering
Investment Advisory Services. So long as the Adviser shall give the Fund
the benefit of its best judgment and effort in rendering investment
advisory services hereunder, the Adviser shall not be liable for any errors
of judgment or mistake of law, or for any loss sustained by reason of the
adoption of any investment policy or the purchase, sale or retention of
any security on its recommendation, whether or not such recommendation
shall have been based upon its own investigation and research or upon
investigation and research made by any other
A-11
individual, firm or corporation, if such recommendation shall have been made
and such other individual, firm or corporation shall have been selected with
due care and in good faith. Nothing herein contained, however, shall be
construed to protect the Adviser against any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties or by reason of its reckless disregard of
its obligations and duties under this Section 4. As used in this Section 4,
"the Adviser" shall include directors, officers and employees of the
Adviser, as well as the Adviser itself.
5. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent
the Adviser or any officer thereof from acting as investment adviser for any
other person, firm or corporation, nor shall it in any way limit or restrict the
Adviser or any of its directors, officers, stockholders or employees from
buying, selling, or trading any securities for its own accounts or for the
accounts of others for whom it may be acting; provided, however, that the
Adviser expressly represents that it will undertake no activities which, in its
judgment, will conflict with the performance of its obligations to the Fund
under this Agreement. The Fund acknowledges that the Adviser acts as investment
adviser to other investment companies, and it expressly consents to the Adviser
acting as such; provided, however, that if in the opinion of the Adviser,
particular securities are consistent with the investment objectives of, and
desirable purchases or sales for the portfolios of one or more of such other
investment companies or series of such companies at approximately the same time,
such purchases or sales will be made on a proportionate basis if feasible, and
if not feasible, then on a rotating or other equitable basis.
6. AMENDMENT. This Agreement may be amended at any time, without shareholder
approval to the extent permitted by applicable law, by a writing signed by each
of the parties hereto. Any change in the Fund's registration statements or other
documents of compliance or in the forms relating to any plan, program or service
offered by its current Prospectus which would require a change in the Adviser's
obligations hereunder shall be subject to the Adviser's approval, which shall
not be unreasonably withheld.
7. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall continue in
force with respect to a Series for an initial term of up to two years, and then
for successive 12-month periods thereafter, unless terminated, provided each
such continuance is specifically approved at least annually by (a) the vote of
the majority of the entire Board of Directors of the Fund, and the vote of the
majority of those directors who are not parties to this Agreement or interested
persons (as such terms are defined in the 1940 Act) of any such party cast in
person at a meeting called for the purpose of voting on such approval, or (b) by
the vote of a majority of those directors who are not parties to this Agreement
or interested persons (as such terms are defined in the 1940 Act) of any such
party cast in person at a meeting called for the purpose of voting on such
approval.
A-12
Upon this Agreement becoming effective, any previous Agreement between the
Fund and the Adviser providing for investment advisory services shall
concurrently terminate, except that such termination shall not affect any fees
accrued and guarantees of expenses with respect to any period prior to
termination.
This Agreement may be terminated at any time without payment of any penalty,
by the Fund upon the vote of a majority of the Fund's Board of Directors or, by
a majority of the outstanding voting securities of the Fund, or by the Adviser,
in each case on sixty (60) days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment (as such
term is defined in the 1940 Act).
8. SEVERABILITY. If any clause or provision of this Agreement is determined
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, then such clause or provision shall be considered
severed herefrom and the remainder of this Agreement shall continue in full
force and effect.
9. APPLICABLE LAW. This Agreement shall be subject to and construed in
accordance with the laws of the State of Kansas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereto duly authorized on this [ ] day of
[ ], 2010.
SECURITY LARGE CAP VALUE FUND
By: ____________________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By: ____________________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
A-13
INVESTMENT MANAGEMENT AGREEMENT
This Agreement, made and entered into as of this [ ] day of [ ], 2010, by
and between SECURITY MID CAP GROWTH FUND, a Kansas corporation (hereinafter
referred to as the "Fund"), and SECURITY INVESTORS, LLC, a limited liability
company (hereinafter referred to as "SI").
W I T N E S S E T H
WHEREAS, the Fund is engaged in business as an open-end management
investment company registered under the Investment Company Act of 1940 ("1940
Act"); and
WHEREAS, SI is willing to provide investment research and advice to the Fund
on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties agree as follows:
1. EMPLOYMENT OF SI. The Fund hereby employs SI to act as investment adviser
to the Fund with respect to the investment of its assets and to supervise and
arrange for the purchase of securities for the Fund and the sale of securities
held in the portfolio of the Fund, subject always to the supervision of the
Board of Directors of the Fund (or a duly appointed committee thereof), during
the period and upon and subject to the terms and conditions described herein. SI
agrees to maintain sufficient trained personnel and equipment and supplies to
perform its responsibilities under this Agreement and in conformity with the
current Prospectus of the Fund and such other reasonable standards of
performance as the Fund may from time to time specify.
SI hereby accepts such employment and agrees to perform the services
required by this Agreement for the compensation herein provided.
2. ALLOCATION OF EXPENSES AND CHARGES.
(a) Expenses of SI. SI shall pay all expenses in connection with the
performance of its services under this Agreement, except as provided
otherwise herein.
(b) Expenses of the Fund. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse SI for the payment of the
following described expenses of the Fund whether or not billed to the Fund,
SI or any related entity;
(i) brokerage fees and commissions;
(ii) taxes;
(iii) interest expenses;
(iv) any extraordinary expenses approved by the Board of Directors
of the Fund; and
A-14
(v) distribution fees paid under the Fund's Class A, Class B and
Class C Distribution Plans;
and, in addition to those expenses set forth above, the Fund shall pay all
of its expenses whether or not billed to the Fund, SI or any related entity.
3. COMPENSATION OF SI.
(a) As compensation for the investment advisory services to be rendered
by SI to the Fund for each of the years this Agreement is in effect, the
Fund shall pay SI an annual fee equal to 0.75% of the Fund's average daily
net assets. Such fee shall be calculated daily and payable monthly. If this
Agreement shall be effective for only a portion of a year, then SI's
compensation for said year shall be prorated for such portion. For purposes
of this Section 3, the value of the net assets of the Fund shall be
computed in the same manner at the end of the business day as the value of
such net assets is computed in connection with the determination of the net
asset value of the Fund's shares as described in the Fund's prospectus.
(b) For each of the Fund's fiscal years that this Agreement remains in
force, SI agrees that if total annual expenses of the Fund, exclusive of
interest and taxes, extraordinary expenses (such as litigation),
distribution fees paid under the Fund's Class A, Class B and Class C
Distribution Plans, but inclusive of SI's compensation, exceed any expense
limitation imposed by state securities law or regulation in any state in
which shares of the Fund are then qualified for sale, as such regulations
may be amended from time to time, SI will contribute to the Fund such funds
or waive such portion of its fee, adjusted monthly, as may be requisite to
insure that such annual expenses will not exceed any such limitation. If
this Agreement shall be effective for only a portion of any fiscal year,
then the maximum annual expenses shall be prorated for such portion.
Brokerage fees and commissions incurred in connection with the purchase or
sale of any securities by the Fund shall not be deemed to be expenses
within the meaning of this paragraph (b).
4. INVESTMENT ADVISORY DUTIES.
(a) Investment Advice. SI shall regularly provide the Fund with
investment research, advice and supervision, continuously furnish an
investment program, recommend which securities shall be purchased and sold
and what portion of the assets of the Fund shall be held uninvested and
arrange for the purchase of securities and other investments for the Fund
and the sale of securities and other investments held in the portfolio of
the Fund. All investment advice furnished by SI to the Fund under this
Section 4 shall at all times conform to any requirements imposed by the
provisions of the Fund's Articles of Incorporation and Bylaws, the 1940
Act, the Investment Advisors Act of 1940 and the rules and regulations
promulgated thereunder, and other applicable provisions of law, and the
terms of the
A-15
registration statement of the Fund under the Securities Act of 1933 ("1933
Act") and/or the 1940 Act, as may be applicable at the time, all as from
time to time amended SI shall advise and assist the officers or other agents
of the Fund in taking such steps as are necessary or appropriate to carry
out the decisions of the Board of Directors of the Fund (and any duly
appointed committee thereof) with regard to the foregoing matters and the
general account of the Fund's business.
(b) Subadvisers. Subject to the provisions of the 1940 Act and any
applicable exemptions thereto, SI is authorized, but is under no
obligation, to enter into sub-advisory agreements (the "Sub-Advisory
Agreements") with one or more subadvisers (each a "Subadviser") to provide
investment advisory services to the Fund, or any series thereof. Each
Subadviser shall have investment discretion with respect to the assets
assigned to that Subadviser by SI. Consistent with the provisions of the
1940 Act and any applicable exemption thereto, SI may enter into
Sub-Advisory Agreements or amend Sub-Advisory Agreements without the
approval of the shareholders of the Fund, or series thereof as applicable.
(c) Portfolio Transactions and Brokerage.
(i) Transactions in portfolio securities shall be effected by
SI, through brokers or otherwise (including affiliated brokers), in
the manner permitted in this Section 4 and in such manner as SI shall
deem to be in the best interests of the Fund after consideration is
given to all relevant factors.
(ii) In reaching a judgment relative to the qualification of a
broker to obtain the best execution of a particular transaction, SI
may take into account all relevant factors and circumstances,
including the size of any contemporaneous market in such securities;
the importance to the Fund of speed and efficiency of execution;
whether the particular transaction is part of a larger intended change
of portfolio position in the same securities; the execution
capabilities required by the circumstances of the particular
transaction; the capital required by the transaction; the overall
capital strength of the broker; the broker's apparent knowledge of or
familiarity with sources from or to whom such securities may be
purchased or sold; as well as the efficiency, reliability and
confidentiality with which the broker has handled the execution of
prior similar transactions.
(iii) Subject to any statements concerning the allocation of
brokerage contained in the Fund's Prospectus or Statement of
Additional Information, SI is authorized to direct the execution of
portfolio transactions for the Fund to brokers who furnish investment
information or research service to SI. Such allocations shall be in
such amounts and proportions as SI may determine. If the transaction
is directed to a broker providing brokerage and research services to
SI, the commission paid for such transaction may be in excess of
A-16
the commission another broker would have charged for effecting that
transaction, if SI shall have determined in good faith that the
commission is reasonable in relation to the value of the brokerage and
research services provided, viewed in terms of either that particular
transaction or the overall responsibilities of SI with respect to all
accounts as to which it now or hereafter exercises investment
discretion. For purposes of the immediately preceding sentence,
"providing brokerage and research services" shall have the meaning
generally given such terms or similar terms under Section 28(e)(3) of
the Securities Exchange Act of 1934, as amended.
(iv) In the selection of a broker for the execution of any
transaction not subject to fixed commission rates, SI shall have no
duty or obligation to seek advance competitive bidding for the most
favorable negotiated commission rate to be applicable to such
transaction, or to select any broker solely on the basis of its
purported or "posted" commission rates.
(v) In connection with transactions on markets other than
national or regional securities exchanges, the Fund will deal directly
with the selling principal or market maker without incurring charges
for the services of a broker on its behalf unless, in the best
judgment of SI, better price or execution can be obtained by utilizing
the services of a broker.
(d) Limitation of Liability of SI with Respect to Rendering Investment
Advisory Services. So long as SI shall give the Fund the benefit of its
best judgment and effort in rendering investment advisory services
hereunder, SI shall not be liable for any errors of judgment or mistake of
law, or for any loss sustained by reason of the adoption of any investment
policy or the purchase, sale or retention of any security on its
recommendation, whether or not such recommendation shall have been based
upon its own investigation and research or upon investigation and research
made by any other individual, firm or corporation, if such recommendation
shall have been made and such other individual, firm or corporation shall
have been selected with due care and in good faith. Nothing herein
contained, however, shall be construed to protect SI against any liability
to the Fund or its shareholders by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Section 4. As
used in this Section 4, "SI" shall include directors, officers and
employees of SI, as well as SI itself.
5. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent
SI or any officer thereof from acting as investment adviser for any other
person, firm or corporation, nor shall it in any way limit or restrict SI or any
of its directors, officers, stockholders or employees from buying, selling, or
trading any securities for its own accounts or for the accounts of others for
whom it may be acting; provided, however, that SI expressly represents that it
will undertake no activities which, in its judgment,
A-17
will conflict with the performance of its obligations to the Fund under this
Agreement. The Fund acknowledges that SI acts as investment adviser to other
investment companies, and it expressly consents to SI acting as such; provided,
however, that if in the opinion of SI, particular securities are consistent with
the investment objectives of, and desirable purchases or sales for the
portfolios of one or more of such other investment companies or series of such
companies at approximately the same time, such purchases or sales will be made
on a proportionate basis if feasible, and if not feasible, then on a rotating or
other equitable basis.
6. AMENDMENT. This Agreement may be amended at any time, without shareholder
approval to the extent permitted by applicable law, by a writing signed by each
of the parties hereto Any change in the Fund's registration statements or other
documents of compliance or in the forms relating to any plan, program or service
offered by its current Prospectus which would require a change in SI's
obligations hereunder shall be subject to SI's approval, which shall not be
unreasonably withheld.
7. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall continue in
force with respect to the Fund for an initial term of up to two years, and then
for successive 12-month periods thereafter, unless terminated, provided each
such continuance is specifically approved at least annually by (a) the vote of
the majority of the entire Board of Directors of the Fund, and the vote of the
majority of those directors who are not parties to this Agreement or interested
persons (as such terms are defined in the 1940 Act) of any such party cast in
person at a meeting called for the purpose of voting on such approval, or (b) by
the vote of a majority of the outstanding voting securities of the Fund (as
defined in the 1940 Act).
Upon this Agreement becoming effective, any previous Agreement between the
Fund and SI providing for investment advisory services shall concurrently
terminate, except that such termination shall not affect any fees accrued and
guarantees of expenses with respect to any period prior to termination.
This Agreement may be terminated at any time without payment of any penalty,
by the Fund upon the vote of a majority of the Fund's Board of Directors or, by
a majority of the outstanding voting securities of the Fund, or by SI, in each
case on sixty (60) days' written notice to the other party This Agreement shall
automatically terminate in the event of its assignment (as such term is defined
in the 1940 Act).
8. SEVERABILITY. If any clause or provision of this Agreement is determined
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, then such clause or provision shall be considered
severed herefrom and the remainder of this Agreement shall continue in full
force and effect.
9. APPLICABLE LAW. This Agreement shall be subject to and construed in
accordance with the laws of the State of Kansas.
A-18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereto duly authorized on the day, month
and year first above written.
SECURITY MID CAP GROWTH FUND
By: ___________________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By: ___________________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
A-19
INVESTMENT ADVISORY CONTRACT
THIS AGREEMENT, made and entered into this [ ] day of [ ] 2010, between
SECURITY INCOME FUND, a Kansas corporation (hereinafter referred to as the
"Fund"), and SECURITY INVESTORS, LLC, a Kansas limited liability company
(hereinafter referred to as the "Management Company").
W I T N E S S E T H
WHEREAS, the Fund is engaged in business as an open-end management
investment company registered under the Federal Investment Company Act of 1940;
and
WHEREAS, the Fund is authorized to issue shares of capital stock in separate
Series, with each such Series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund currently offers shares in two separate series, the
Intermediate Bond Series and the High Yield Series, such series together with
all other series subsequently established by the Fund with respect to which the
Fund desires to retain the Management Company to render investment advisory
services hereunder and with respect to which the Management Company is willing
so to do, being herein collectively referred to as the "Series"; and
WHEREAS, the Management Company is willing to provide investment research
and advice to the Fund on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties hereto agree as follows:
1. EMPLOYMENT OF MANAGEMENT COMPANY. The Fund hereby employs the Management
Company to act as investment adviser to each Series of the Fund with respect to
the investment of its assets, and to supervise and arrange the purchase of
securities for and the sale of securities held in the portfolios of the Series
of the Fund, subject always to the supervision of the Board of Directors of the
Fund, during the period and upon and subject to the terms and conditions herein
set forth. The Management Company hereby accepts such employment and agrees to
perform the services required by this Agreement for the compensation herein
provided.
In the event the Fund establishes additional series with respect to which it
desires to retain the Management Company to render investment advisory services
hereunder, it shall notify the Management Company in writing. If the Management
Company is willing to render such services it shall notify the Fund in writing,
whereupon such series shall become a Series subject to the terms and conditions
hereunder, and to such amended or additional provisions as shall be specifically
agreed to by the Fund and the Management Company in accordance with applicable
law.
A-20
2. INVESTMENT ADVISORY DUTIES.
(a) The Management Company shall regularly provide each Series of the
Fund with investment research, advice and supervision, continuously furnish
an investment program and recommend that securities shall be purchased and
sold and what portion of the assets of each Series shall be held uninvested
and shall arrange for the purchase of securities and other investments for
and the sale of securities and other investments held in the portfolio of
each Series. All investment advice furnished by the Management Company to
each Series under this Section 2 shall at all times conform to any
requirements imposed by the provisions of the Fund's Articles of
Incorporation and Bylaws, the Investment Company Act of 1940 and the rules
and regulations promulgated thereunder, any other applicable provisions of
law, and the terms of the registration statements of the Fund under the
Securities Act of 1933 and the Investment Company Act of 1940, all as from
time to time amended. The Management Company shall advise and assist the
officers or other agents of the Fund in taking such steps as are necessary
or appropriate to carry out the decisions of the Fund's Board of Directors
(and any duly appointed committee thereof) with regard to the foregoing
matters and the general conduct of the Fund's business.
(b) Subject to the provisions of the Investment Company Act of 1940
(the "1940 Act") and any applicable exemptions thereto, the Management
Company is authorized, but is under no obligation, to enter into
sub-advisory agreements (the "Sub-Advisory Agreements") with one or more
sub-advisers (each a "Sub-adviser") to provide investment advisory services
to any Series of the Fund. Each Sub-adviser shall have investment discretion
with respect to the assets of the Series assigned to that Sub-adviser by the
Management Company. The Management Company shall not be responsible or
liable with respect to any investment decision made by a Sub-adviser,
whether such decision be to purchase, sell or hold such investment.
Consistent with the provisions of the 1940 Act and any applicable exemption
thereto, the Investment Manager may enter into Sub-Advisory Agreements or
amend Sub-Advisory Agreements without the approval of the shareholders of
the affected Series.
3. PORTFOLIO TRANSACTIONS AND BROKERAGE.
(a) Transactions in portfolio securities shall be effected by the
Management Company, through brokers or otherwise, in the manner permitted
in this Section 3 and in such manner as the Management Company shall deem
to be in the best interests of the Fund after consideration is given to all
relevant factors.
(b) In reaching a judgment relative to the qualification of a broker to
obtain the best execution of a particular transaction, the Management
Company may take into account all relevant factors and circumstances,
including the size of any contemporaneous market in such securities; the
importance to the Fund of speed and efficiency of execution; whether the
particular transaction is part of a larger intended change in portfolio
position in the same securities; the execution
A-21
capabilities required by the circumstances of the particular transaction;
the capital required by the transaction; the overall capital strength of
the broker; the broker's apparent knowledge of or familiarity with sources
from or to whom such securities may be purchased or sold; as well as the
efficiency, reliability and confidentiality with which the broker has
handled the execution of prior similar transactions.
(c) Subject to any statements concerning the allocation of brokerage
contained in the Fund's prospectus or statement of additional information,
the Management Company is authorized to direct the execution of portfolio
transactions for the Fund to brokers who furnish investment information or
research service to the Management Company. Such allocation shall be in
such amounts and proportions as the Management Company may determine. If
the transaction is directed to a broker providing brokerage and research
services to the Management Company, the commission paid for such
transaction may be in excess of the commission another broker would have
charged for effecting that transaction, if the Management Company shall
have determined in good faith that the commission is reasonable in relation
to the value of the brokerage and research services provided, viewed in
terms of either that particular transaction or the overall responsibilities
of the Management Company with respect to all accounts as to which it now
or hereafter exercises investment discretion. For purposes of the
immediately preceding sentence, "providing brokerage and research services"
shall have the meaning generally given such terms or similar terms under
Section 28(e)(3) of the Securities Exchange Act of 1934, as amended.
(d) In the selection of a broker for the execution of any transaction
not subject to fixed commission rates, the Management Company shall have no
duty or obligation to seek advance competitive bidding for the most
favorable negotiated commission rate to be applicable to such transaction,
or to select any broker solely on the basis of its purported or "posted"
commission rates.
(e) In connection with transactions on markets other than national or
regional securities exchanges, the Fund will deal directly with the selling
principal or market maker without incurring charges for the services of a
broker on its behalf unless, in the best judgment of the Management
Company, better price or execution can be obtained in utilizing the
services of a broker.
4. ALLOCATION OF EXPENSES AND CHARGES. The Management Company shall provide
investment advisory, statistical and research facilities and all clerical
services relating to research, statistical and investment work, and shall
provide for the compilation and maintenance of such records relating to these
functions as shall be required under applicable law and the rules and
regulations of the Securities and Exchange Commission. The Management Company
will also provide the Fund with a president, a chief financial officer, and a
secretary, subject to the approval of the
A-22
Board of Directors, and will pay the salaries and expenses of such officers of
the Fund who are also directors, officer or employees of the Management Company.
Other than as specifically indicated in the preceding sentences, the
Management Company shall not be required to pay any expenses of the Fund, and in
particular, but without limiting the generality of the foregoing, the Management
Company shall not be required to pay office rental or general administrative
expenses; Board of Directors' fees; legal, auditing and accounting expenses;
insurance premiums; broker's commissions; taxes and governmental fees and any
membership dues; fees of custodian, transfer agent, registrar and dividend
disbursing agent (if any); expenses of obtaining quotations on the Fund's
portfolio securities and pricing of the Fund's shares; cost of stock
certificates and any other expenses (including clerical expenses) of issue,
sale, repurchase or redemption of shares of the Fund's capital stock; costs and
expenses in connection with the registration of the Fund's capital stock under
the Securities Act of 1933 and qualification of the Fund's capital stock under
the Blue Sky laws of the states where such stock is offered; costs and expenses
in connection with the registration of the Fund under the Investment Company Act
of 1940 and all periodic and other reports required thereunder; expenses of
preparing, printing and distributing reports, proxy statements, prospectuses,
statements or additional information, notices and distributions to stockholders;
costs of stationery; costs of stockholder and other meetings; expenses of
maintaining the Fund's corporate existence; and such nonrecurring expenses as
may arise including litigation affecting the Fund and the legal obligations the
Fund may have to indemnify its officers and directors.
5. COMPENSATION OF MANAGEMENT COMPANY.
(a) As compensation for the services to be rendered by the Management
Company as provided for herein, for each of the years this Agreement is in
effect, the Fund shall pay the Management Company an annual fee equal to
0.60 percent of the average daily net assets of High Yield Series and 0.50
percent of the average daily net assets of Intermediate Bond Series. Such
fee shall be adjusted and payable monthly. If this Agreement shall be
effective for only a portion of a year, then the Management Company's
compensation for said year shall be prorated for such portion. For purposes
of this Section 5, the value of the net assets of each such Series shall be
computed in the same manner at the end of the business day as the value of
such net assets is computed in connection with the determination of the net
asset value of the Fund's shares as described in the Fund's prospectus.
(b) For each of the Fund's full fiscal years this Agreement remains in
force, the Management Company agrees that if the total annual expenses of
each Series of the Fund, exclusive of interest and taxes, extraordinary
expenses (such as litigation), and distribution fees paid under the Fund's
Class B and Class C Distribution Plans, but inclusive of the Management
Company's compensation, exceed any expense limitation imposed by state
securities law or regulation in
A-23
any state in which shares of the Fund are then qualified for sale, as such
regulations may be amended from time to time, the Management Company will
contribute to such Series such funds or waive such portion of its fee,
adjusted monthly as may be requisite to insure that such annual expenses
will not exceed any such limitation. If this Contract shall be effective for
only a portion of one of the Series' fiscal years, then the maximum annual
expenses shall be prorated for such portion. Brokerage fees and commissions
incurred in connection with the purchase or sale of any securities by a
Series shall not be deemed to be expenses with the meaning of this
paragraph (b).
6. MANAGEMENT COMPANY NOT TO RECEIVE COMMISSIONS. In connection with the
purchase or sale of portfolio securities for the account of the Fund, neither
the Management Company nor any officer or director of the Management Company
shall act as principal or receive any compensation from the Fund other than its
compensation as provided for in Section 5 above. If the Management Company, or
any "affiliated person" (as defined in the Investment Company Act of 1940)
receives any cash, credits, commissions or tender fees from any person in
connection with transactions in the Fund's portfolio securities (including but
not limited to the tender or delivery of any securities held in the Fund's
portfolio), the Management company shall immediately pay such amount to the Fund
in cash or as a credit against any then earned but unpaid management fees due by
the Fund to the Management Company.
7. LIMITATION OF LIABILITY OF MANAGEMENT COMPANY. So long as the Management
Company shall give the Fund the benefit of its best judgment and effort in
rendering services hereunder, the Management Company shall not be liable for any
errors of judgment or mistake of law, or for any loss sustained by reason of the
adoption of any investment policy or the purchase, sale or retention of any
security on its recommendation, whether or not such recommendation shall have
been based upon its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if such
recommendation shall have been made and such other individual, firm or
corporation shall have been selected with due care and in good faith. Nothing
herein contained shall, however, be construed to protect the Management Company
against any liability to the Fund or its security holders by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under this
Agreement. As used in this Section 7, "Management Company" shall include
directors, officers and employees of the Management Company, as well as the
Management Company itself.
8. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent
the Management Company or any officer thereof from acting as investment adviser
for any other person, firm, or corporation, nor shall it in any way limit or
restrict the Management Company or any of its directors, officers, stockholders
or employees from buying, selling, or trading any securities for its own
accounts or for the accounts of others for whom it may be acting; provided,
however, that the Management
A-24
Company expressly represents that it will undertake no activities which, in its
judgment, will conflict with the performance of its obligations to the Fund
under this Agreement. The Fund acknowledges that the Management Company acts as
investment adviser to other investment companies, and it expressly consents to
the Management Company acting as such; provided, however, that if in the opinion
of the Management Company, particular securities are consistent with the
investment objectives of and are desirable purchases or sales for the portfolios
of one or more Series and one or more of such other investment companies or
series of such companies at approximately the same time, such purchases or sales
will be made on a proportionate basis if feasible, and if not feasible, then on
a rotating or other equitable basis.
9. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall continue in
force with respect to a Series for an initial term of up to two years, and then
for successive 12-month periods thereafter, unless terminated, provided each
such continuance is specifically approved at least annually by (a) the vote of a
majority of the entire Board of Directors of the Fund, or by the vote of the
holders of a majority of the outstanding voting securities of each series of the
Fund (as defined in the 1940 Act), and (b) the vote of a majority of the
directors of the Fund who are not parties to this Agreement or interested
persons (as such terms are defined in the Investment Company Act of 1940) of any
such party cast in person at a meeting of such directors called for the purpose
of voting upon such approval. In the event a majority of the outstanding shares
of one series vote for continuance of the Advisory Contract, it will be
continued for that series even though the Advisory Contract is not approved by
either a majority of the outstanding shares of any other series or by a majority
of outstanding shares of the Fund. Upon this Agreement becoming effective, any
previous agreement between the Fund and the Management Company providing for
investment advisory and management services shall concurrently terminate, except
that such termination shall not affect fees accrued and guarantees of expenses
with respect to any period prior to termination.
This Agreement may be terminated at any time as to any series of the Fund,
without payment of any penalty, by vote of the Board of Directors of the Fund or
by vote of the holders of a majority of the outstanding voting securities of
that series of the Fund, or by the Management Company, upon 60 days' written
notice to the other party.
This Agreement shall automatically terminate in the event of its
"assignment" (as defined in the Investment Company Act of 1940).
A-25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective corporate officers thereto duly authorized on the
day, month and year first above written.
SECURITY EQUITY FUND
By: ___________________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By: ___________________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
A-26
INVESTMENT ADVISORY CONTRACT
THIS AGREEMENT, made and entered into this [ ] day of [ ], 2010, by and
between SBL FUND, a Kansas corporation (hereinafter referred to as the "Fund"),
and SECURITY INVESTORS, LLC, a Kansas limited liability company (hereinafter
referred to as the "Management Company").
W I T N E S S E T H
WHEREAS, the Fund is engaged in business as an open-end, management
investment company registered under the Federal Investment Company Act of 1940;
and
WHEREAS, the Management Company is willing to provide investment research
and advice to the Fund on the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties hereto agree as follows:
1. EMPLOYMENT OF MANAGEMENT COMPANY. The Fund hereby employs the Management
Company to act as investment adviser to the Fund with respect to the investment
of its assets and to supervise and arrange the purchase of securities for the
Fund and the sale of securities held in the portfolio of the Fund, subject
always to the supervision of the board of directors of the Fund (or a duly
appointed committee thereof), during the period and upon and subject to the
terms and conditions herein set forth. The Management Company hereby accepts
such employment and agrees to perform the services required by this Agreement
for the compensation herein provided.
2. INVESTMENT ADVISORY DUTIES.
(a) The Management Company shall regularly provide the Fund with
investment research, advice and supervision, continuously furnish an
investment program and recommend what securities shall be purchased and sold
and what portion of the assets of the Fund shall be held uninvested and
shall arrange for the purchase of securities and other investments for the
Fund and the sale of securities and other investments held in the portfolio
of the Fund. All investment advice furnished by the Management Company to
the Fund under this Section 2 shall at all times conform to any requirements
imposed by the provisions of the Fund's Articles of Incorporation and
Bylaws, the Investment Company Act of 1940, the Investment Advisors Act of
1940 and the rules and regulations promulgated thereunder, any other
applicable provisions of law, and the terms of the registration statements
of the Fund under the Securities Act of 1933 and the Investment Company Act
of 1940, all as from time to time amended. The Management Company shall
advise and assist the officers or other agents of the Fund in taking such
steps as are necessary or appropriate to carry out the decisions of the
board of directors of the Fund (and any duly appointed committee thereof) in
regard to the foregoing matters and the general conduct of the Fund's
business.
A-27
(b) Subject to the provisions of the Investment Company Act of 1940 and
any applicable exemptions thereto, the Management Company is authorized, but
is under no obligation, to enter into sub-advisory agreements (the "Sub-
Advisory Agreements") with one or more subadvisers (each a "Subadviser") to
provide investment advisory services to any series of the Fund. Each
Subadviser shall have investment discretion with respect to the assets of
the series assigned to that Subadviser by the Management Company. Consistent
with the provisions of the Investment Company Act of 1940 and any applicable
exemption thereto, the Management Company may enter into Sub-Advisory
Agreements or amend Sub- Advisory Agreements without the approval of the
shareholders of the effected series.
3. PORTFOLIO TRANSACTIONS AND BROKERAGE.
(a) Transactions in portfolio securities shall be effected by the
Management Company, through brokers or otherwise (including affiliated
brokers), in the manner permitted in this Section 3 and in such manner as
the Management Company shall deem to be in the best interests of the Fund
after consideration is given to all relevant factors.
(b) In reaching a judgment relative to the qualification of a broker to
obtain the best execution of a particular transaction, the Management
Company may take into account all relevant factors and circumstances,
including the size of any contemporaneous market in such securities; the
importance to the Fund of speed and efficiency of execution; whether the
particular transaction is part of a larger intended change of portfolio
position in the same securities; the execution capabilities required by the
circumstances of the particular transaction; the capital to be required by
the transaction; the overall capital strength of the broker; the broker's
apparent knowledge of or familiarity with sources from or to whom such
securities may be purchased or sold; as well as the efficiency, reliability
and confidentiality with which the broker has handled the execution of prior
similar transactions.
(c) Subject to any statements concerning the allocation of brokerage
contained in the Fund's prospectus, the Management Company is authorized to
direct the execution of the portfolio transactions of the Fund to brokers
who furnish investment information or research services to the Management
Company. Such allocation shall be in such amounts and proportions as the
Management Company may determine. If a transaction is directed to a broker
supplying brokerage and research services to the Management Company, the
commission paid for such transaction may be in excess of the commission
another broker would have charged for effecting that transaction, provided
that the Management Company shall have determined in good faith that the
commission is reasonable in relation to the value of the brokerage and
research services provided, viewed in terms of either that particular
transaction or the overall responsibilities of the Management Company with
respect to all accounts
A-28
as to which it now or hereafter exercises investment discretion. For
purposes of the immediately preceding sentence, "providing brokerage and
research services" shall have the meaning generally given such terms or
similar terms under Section 28 (e)(3) of the Securities Exchange Act of
1934, as amended.
(d) In the selection of a broker for the execution of any transaction
not subject to fixed commission rates, the Management Company shall have no
duty or obligation to seek advance competitive bidding for the most
favorable negotiated commission rate to be applicable to such transaction,
or to select any broker solely on the basis of its purported or "posted"
commission rates.
(e) In connection with transactions on markets other than national or
regional securities exchanges, the Fund will deal directly with the selling
principal or market maker without incurring charges for the services of a
broker on its behalf unless, in the best judgment of the Management Company,
better price or execution can be obtained by utilizing the services of a
broker.
4. ALLOCATION OF EXPENSES AND CHARGES. The Management Company shall provide
investment advisory, statistical and research facilities and all clerical
services relating to research, statistical and investment work, and shall
provide for the compilation and maintenance of such records relating to these
functions as shall be required under applicable law and the rules and
regulations of the Securities and Exchange Commission. Other than as
specifically indicated in the preceding sentence, the Management Company shall
not be required to pay any expenses of the Fund, and in particular, but without
limiting the generality of the foregoing, the Management Company shall not be
required to pay office rental or general administrative expenses; board of
directors' fees; legal, auditing and accounting expenses; broker's commissions;
taxes and governmental fees; membership dues; fees of custodian, transfer agent,
registrar and dividend disbursing agent (if any); expenses (including clerical
expenses) of issue, sale or redemption of shares of the Fund's capital stock;
costs and expenses in connection with the registration of such capital stock
under the Securities Act of 1933 and qualification of the Fund's capital stock
under the "Blue Sky" laws of the states where such stock is offered; costs and
expenses in connection with the registration of the Fund under the Investment
Company Act of 1940 and all periodic and other reports required thereunder;
expenses of preparing and distributing reports, proxy statements, notices and
distributions to stockholders; costs of stationery; expenses of printing
prospectuses; costs of stockholder and other meetings; and such nonrecurring
expenses as may arise including litigation affecting the Fund and the legal
obligations the Fund may have to indemnify its officers and the members of its
board of directors.
5. COMPENSATION OF MANAGEMENT COMPANY.
(a) As compensation for the services to be rendered by the Management
Company as provided for herein, for each of the years this Agreement is in
effect, the Series shall pay the Management Company an annual fee computed
on a daily basis equal to 0.50 percent of the average daily closing value of
the net
A-29
assets of Series C of the Fund, 0.65 percent of the average daily closing
value of the net assets of Series B of the Fund, 0.70 percent of the average
daily closing value of the net assets of Series O, 0.75 percent of the
average daily closing value of the net assets of Series A, Series E, Series
H, Series J, Series P, Series V, and Series Y of the Fund, 0.85 percent of
the average daily closing value of the net assets of Series X, 0.95 percent
of the average daily closing value of the net assets of Series Q, 1.00
percent of the average daily closing value of the net assets of Series D,
and Series N, and 1.25 percent of the average daily closing value of the net
assets of Series Z of the Fund. Such fee shall be adjusted and payable
monthly. If this Agreement shall be effective for only a portion of a year,
then the Management Company's compensation for said year shall be prorated
for such portion. For purposes of this Section 5, the value of the net
assets of each such Series shall be computed in the same manner at the end
of the business day as the value of such net assets is computed in
connection with the determination of the net asset value of the Fund's
shares as described in the Fund's prospectus.
(b) For each of the Fund's full fiscal years this Agreement remains in
force, the Management Company agrees that if total annual expenses of each
Series of the Fund, exclusive of interest and taxes and extraordinary
expenses (such as litigation), but inclusive of the Management Company's
compensation, exceed any expense limitation imposed by state securities law
or regulation in any state in which shares of the Fund are then qualified
for sale, as such regulations may be amended from time to time, the
Management Company will contribute to such Series such funds or to waive
such portion of its fee, adjusted monthly, as may be requisite to insure
that such annual expenses will not exceed any such limitation. If this
contract shall be effective for only a portion of one of the Series' fiscal
years, then the maximum annual expenses shall be prorated for such portion.
Brokerage fees and commissions incurred in connection with the purchase or
sale of any securities by a Series shall not be deemed to be expenses within
the meaning of this paragraph (b).
(c) For each of the Fund's full fiscal years this Agreement remains
in force, the Management Company agrees that if total annual expenses of
each Series of the Fund identified below, exclusive of interest, taxes,
extraordinary expenses (such as litigation), and brokerage fees and
commissions, but inclusive of the Management Company's compensation, exceeds
the amount set forth below (the "Expense Cap"), the Management Company will
contribute to such Series such funds or waive such portion of its fee,
adjusted monthly, as may be required to insure that the total annual
expenses of the Series will not exceed the Expense Cap. If this Agreement
shall be effective for only a portion of a Series' fiscal year, then the
maximum annual expenses shall be prorated for such portion.
A-30
EXPENSE CAP
Series H -- 1.75%
Series Y -- 1.75%
6. LIMITATION OF LIABILITY OF MANAGEMENT COMPANY. So long as the Management
Company shall give the Fund the benefit of its best judgment and effort in
rendering services hereunder, the Management Company shall not be liable for any
errors of judgment or mistake of law, or for any loss sustained by reason of the
adoption of any investment policy or the purchase, sale or retention of any
security on its recommendation, whether or not such recommendation shall have
been based upon its own investigation and research or upon investigation and
research made by any other individual, firm or corporation, if such
recommendation shall have been made and such other individual firm or
corporation shall have been selected with due care and in good faith. Nothing
herein contained shall, however, be construed to protect the Management Company
against any liability to the Fund or its shareholders by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations and duties under the
Agreement. As used in this Section 6, "Management Company" shall include
directors, officers and employees of the Management Company, as well as the
Management Company itself.
7. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent
the Management Company or any officer thereof from acting as investment adviser
for any other person, firm or corporation, nor shall it in any way limit or
restrict the Management Company or any of its directors, officers, stockholders
or employees from buying, selling, or trading any securities for its own
accounts or for the accounts of others for whom it may be acting; provided,
however, that the Management Company expressly represents that it will undertake
no activities which, in its judgment, will conflict with the performance of its
obligations to the Fund under this Agreement. The Fund acknowledges that the
Management Company acts as investment adviser to other investment companies, and
it expressly consents to the Management Company acting as such; provided,
however, that if securities of one issuer are purchased or sold, the purchase or
sale of such securities is consistent with the investment objectives of, and, in
the opinion of the Management Company, such securities are desirable purchases
or sales for the portfolios of the Fund and one or more of such other investment
companies at approximately the same time, such purchases or sales will be made
on a proportionate basis if feasible, and if not feasible, then on a rotating or
other equitable basis.
8. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall continue in
force with respect to a Series for an initial term of up to two years, and then
for successive 12-month periods thereafter, unless terminated, provided each
such continuance is specifically approved at least annually by (a) the vote of a
majority of the entire Board of Directors of the Fund, or by the vote of the
holders of a majority
A-31
of the outstanding voting securities of each Series of the Fund (as defined in
the 1940 Act) and (b) the vote of a majority of the directors of the Fund who
are not parties to this Agreement or interested persons (as such terms are
defined in the Investment Company Act of 1940) of any such party cast in person
at a meeting of such directors called for the purpose of voting upon such
approval. In the event a majority of the outstanding shares of one series vote
for continuance of the Agreement, it will be continued for that series even
though the Agreement is not approved by either a majority of the outstanding
shares of any other series or by a majority of outstanding shares of the Fund.
Upon this Agreement becoming effective, any previous agreement between the Fund
and the Management Company providing for investment advisory and management
services shall concurrently terminate, except that such termination shall not
affect fees accrued and guarantees of expenses with respect to any period prior
to termination.
This Agreement may be terminated at any time as to any series of the Fund,
without payment of any penalty, by vote of the Board of Directors of the Fund or
by vote of the holders of a majority of the outstanding voting securities of
that series of the Fund, or by the Management Company, in each case upon 60
days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
"assignment" (as defined in the Investment Company Act of 1940).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers thereto duly authorized on the day, month
and year first above written.
SBL FUND
By: __________________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
_____________________________________
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By: __________________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
_____________________________________
Name: Amy J. Lee
Title: Secretary
A-32
APPENDIX B
INFORMATION REGARDING THE INVESTMENT MANAGEMENT
AGREEMENTS AND FEES PAID TO THE INVESTMENT MANAGER AND
DISTRIBUTOR
Security Investors, LLC (the "Investment Manager") currently serves as
investment manager to all series (collectively, the "Funds") of Security Equity
Fund, Security Large Cap Value Fund, Security Mid Cap Growth Fund, Security
Income Fund and SBL Fund (collectively, the "Companies") pursuant to investment
management agreements between each of the Companies, on behalf of its series,
and the Investment Manager. The Investment Manager also serves as the
administrator and transfer agent for the Funds. Rydex Distributors, Inc. ("RDI")
and Security Distributors, Inc. ("SDI" and, together with RDI, the
"Distributors") serve as principal underwriters to the Funds, as applicable. The
table below and its accompanying footnotes provide the following information:
(i) the date of each investment management agreement;
(ii) the date on which each Fund's shareholders last approved the Fund's
investment management agreement;
(iii) the annual rate of management fees paid by each Fund to the Investment
Manager, stated as a percentage of that Fund's average daily net
assets;
(iv) the Investment Manager's expense limits for certain Funds (determined
as a percentage of each Fund's average daily net assets and including
distribution fees but not brokerage costs, dividends on securities sold
short, acquired fund fees and expenses, interest, taxes, litigation,
indemnification, or extraordinary expenses) effective until (a) January
31, 2011 for certain series of Security Equity Fund and Security Large
Cap Value Fund and (b) April 30, 2011 for certain series of Security
Income Fund and SBL Fund.
(v) the aggregate amount of management fees paid by each Fund to the
Investment Manager, as well as fee waivers/reimbursements from the
Investment Manager, for the Fund's fiscal year ended September 30, 2009
for series of Security Equity Fund, Security Large Cap Value Fund and
Security Mid Cap Growth Fund, and December 31, 2009 for series of
Security Income Fund and SBL Fund;
(vi) the amount of administrative service fees paid by each Fund to the
Investment Manager for the Investment Manager's services as the
administrative agent for the Fund during the Fund's fiscal year ended
September 30, 2009 for series of Security Equity Fund, Security Large
Cap Value Fund and Security Mid Cap Growth Fund, and December 31, 2009
for series of Security Income Fund and SBL Fund;
(vii) the amount of transfer agency service fees paid by each Fund to the
Investment Manager for the Investment Manager's services as the
transfer
B-1
agent for the Fund during the Fund's fiscal year ended September 30,
2009 for series of Security Equity Fund, Security Large Cap Value Fund
and Security Mid Cap Growth Fund, and December 31, 2009 for series of
Security Income Fund and SBL Fund; and
(viii) the amount of distribution fees, as applicable, paid by each Fund to
RDI and SDI, each an affiliate of the Investment Manager, for each
Distributor's services as principal underwriter to the Fund pursuant to
the Fund's distribution agreement with each Distributor during the
Fund's fiscal year ended September 30, 2009 for series of Security
Equity Fund, Security Large Cap Value Fund and Security Mid Cap Growth
Fund, and December 31, 2009 for series of Security Income Fund and SBL
Fund. Prior to March 16, 2009, SDI served as the sole principal
underwriter for series of Security Equity Fund, Security Large Cap
Value Fund, Security Mid Cap Growth Fund and Security Income Fund.
Effective March 16, 2009, SDI and RDI served as co-principal
underwriters for those Funds and, effective October 16, 2009, RDI began
serving as the sole principal underwriter for those Funds. Effective
January 1, 2010, SDI and RDI serve as co-principal underwriters for
series of SBL Fund.
B-2
APPENDIX B
-----------------------------------------------------------------------------------------------------------------------------------
TRANSFER
MANAGEMENT FEES ADMINISTRATIVE AGENCY
MANAGEMENT WAIVED BY AND SERVICE FEES SERVICE FEES
DATE OF LAST FEES PAID TO REIMBURSEMENTS PAID TO PAID TO DISTRIBUTION
COMPANIES AND SHAREHOLDER MANAGEMENT EXPENSE INVESTMENT FROM INVESTMENT INVESTMENT INVESTMENT FEES PAID TO
FUND APPROVAL FEES LIMITS MANAGER MANAGER MANAGER MANAGER RDI/SDI
-----------------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY FUND(1)
Rydex|SGI All 10/3/2008 0.70% Class A: 1.27% $ 6,241 $ 56,488 $ 1,553 $ 977 $ 3,624
Cap Value Fund Class C: 2.02%
Institutional
Class: 1.02%
Rydex|SGI Alpha 7/7/2003 1.25% Class A: 2.11% $ 239,679 $360,351 $ 44,418 $ 103,234 $ 76,113
Opportunity Fund Class B: 2.86%
Class C: 2.86%
Institutional
Class: 1.86%
Rydex|SGI Global 4/17/2002 1.00% None $ 950,941 None $146,768 $ 279,019 $ 247,813
Fund
Rydex|SGI Global 11/7/2008 1.00% 1.00% $ 54,932 $ 88,806 $ 12,913 $ 350 None
Institutional
Fund
Rydex|SGI Large 1/26/2000 0.75% Class A: 1.35% $ 227,777 $208,564 $ 29,040 $ 210,211 $ 148,659
Cap Concentrated
Growth Fund Class B: 2.10%
(formerly
Rydex|SGI Class C: 2.10%
Select 25 Fund)
Rydex|SGI Large 4/17/2002 0.75% None $1,232,832 None $156,586 $ 460,788 $ 482,294
Cap Core Fund
(formerly
Rydex|SGI
Equity Fund)
Rydex|SGI Mid 1/26/2000 1.00% for None $6,087,439 None $708,652 $1,795,195 $2,929,464
Cap Value Fund the first
$200
million and
0.75%
thereafter
B-3
-----------------------------------------------------------------------------------------------------------------------------------
TRANSFER
MANAGEMENT FEES ADMINISTRATIVE AGENCY
MANAGEMENT WAIVED BY AND SERVICE FEES SERVICE FEES
DATE OF LAST FEES PAID TO REIMBURSEMENTS PAID TO PAID TO DISTRIBUTION
COMPANIES AND SHAREHOLDER MANAGEMENT EXPENSE INVESTMENT FROM INVESTMENT INVESTMENT INVESTMENT FEES PAID TO
FUND APPROVAL FEES LIMITS MANAGER MANAGER MANAGER MANAGER RDI/SDI
-----------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI Mid 7/11/2008 0.75% 0.90% $661,755 $ 56,387 $ 84,343 $ 39,724 None
Cap Value
Institutional Fund
Rydex|SGI Small 1/26/2000 0.85% None $104,632 $ 8,423 $ 25,000 $ 92,540 $ 54,502
Cap Growth Fund
Rydex|SGI Small 7/11/2008 1.00% Class A: 1.30% $ 18,673 $ 68,867 $ 2,573 $ 2,723 $ 6,965
Cap Value Fund Class C: 2.05%
Institutional
Class: 1.05%
-----------------------------------------------------------------------------------------------------------------------------------
SECURITY LARGE CAP VALUE FUND(2)
-----------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI 4/17/2002 0.65% Class A: 1.15% $312,763 $216,463 $ 45,884 $221,025 $130,999
Large Cap Class B: 1.90%
Value Fund Class C: 1.90%
Rydex|SGI Large 7/11/2008 0.65% 0.96% $ 17,758 $ 38,034 $ 2,476 $ 377 None
Cap Value
Institutional
Fund
-----------------------------------------------------------------------------------------------------------------------------------
SECURITY MID CAP GROWTH FUND(3)
-----------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI Mid Cap 4/17/2002 0.75% None $508,100 None $ 64,752 $334,742 $250,109
Growth Fund
-----------------------------------------------------------------------------------------------------------------------------------
SECURITY INCOME FUND(4)
-----------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI High 10/29/1999 0.60% Class A: 1.16% $634,224 $328,117 $126,456 $302,346 $295,983
Yield Fund Class B: 1.91%
Class C: 1.91%
Institutional
Class: 0.91%(5)
Rydex|SGI U.S. 10/10/2008 0.50% Class A: 1.00% $637,421 $459,405 $138,121 $381,201 $579,426
Intermediate Class B: 1.75%
Bond Fund Class C: 1.75%(6)
B-4
-----------------------------------------------------------------------------------------------------------------------------------
TRANSFER
MANAGEMENT FEES ADMINISTRATIVE AGENCY
MANAGEMENT WAIVED BY AND SERVICE FEES SERVICE FEES
DATE OF LAST FEES PAID TO REIMBURSEMENTS PAID TO PAID TO DISTRIBUTION
COMPANIES AND SHAREHOLDER MANAGEMENT EXPENSE INVESTMENT FROM INVESTMENT INVESTMENT INVESTMENT FEES PAID TO
FUND APPROVAL FEES LIMITS MANAGER MANAGER MANAGER MANAGER RDI/SDI
-----------------------------------------------------------------------------------------------------------------------------------
SBL FUND(7)
Series A 2/26/2000 0.75% None $1,253,402 None $159,095 $25,315 None
(Equity Series)
Series B 2/26/2000 0.65% None $1,647,391 None $241,019 $25,352 None
(Large Cap
Value Series)
Series C (Money 2/26/2000 0.50% None $1,043,540 None $213,547 $25,381 None
Market Series)
Series D 2/26/2000 1.00% None $2,566,995 None $390,656 $25,352 None
(Global Series)
Series E (U.S. 2/26/2000 0.75% 0.81%(8) $ 850,765 $172,461 $115,030 $25,321 None
Intermediate
Bond Series)
Series H 2/26/2000 0.75% 1.00%(9) $ 313,871 $155,686 $ 45,484 $25,185 None
(Enhanced
Index Series)
Series J (Mid Cap 2/26/2000 0.75% None $1,023,840 None $130,109 $25,280 None
Growth Series)
Series N (Managed 2/26/2000 1.00% None $ 743,569 None $277,883 $25,291 None
Asset Allocation
Series)
Series O (All Cap 2/26/2000 0.70% 1.00%(10) $1,033,934 $ 42,237 $140,772 $25,304 None
Value Series)
Series P (High 2/26/2000 0.75% None $ 828,232 None $121,099 $25,225 None
Yield Series)
Series Q 5/1/2000 0.95% None $ 954,269 None $ 95,267 $25,205 None
(Small Cap
Value Series)
Series V (Mid Cap 2/26/2000 0.75% None $1,955,255 None $248,238 $25,234 None
Value Series)
B-5
-----------------------------------------------------------------------------------------------------------------------------------
TRANSFER
MANAGEMENT FEES ADMINISTRATIVE AGENCY
MANAGEMENT WAIVED BY AND SERVICE FEES SERVICE FEES
DATE OF LAST FEES PAID TO REIMBURSEMENTS PAID TO PAID TO DISTRIBUTION
COMPANIES AND SHAREHOLDER MANAGEMENT EXPENSE INVESTMENT FROM INVESTMENT INVESTMENT INVESTMENT FEES PAID TO
FUND APPROVAL FEES LIMITS MANAGER MANAGER MANAGER MANAGER RDI/SDI
-----------------------------------------------------------------------------------------------------------------------------------
Series X 2/26/2000 0.85% None $ 262,642 None $30,259 $25,216 None
(Small Cap
Growth Series)
Series Y 2/26/2000 0.75% None $ 254,806 None $32,440 $25,215 None
(Select 25 Series)
Series Z 7/7/2003 1.25% 2.35%(11) $ 276,548 None $49,334 $25,131 None
(Alpha Opportunity
Series)
----------------------
1 The invest ment management agreement between Security Equity Fund, on behalf
of its series, and Security Investors, LLC was made and entered into on
January 27, 2000, amended and restated effective as of November 18, 2005,
amended and restated as of February 8, 2008, amended and restated as of May
9, 2008, and amended as of August 15, 2008, November 24, 2008 and February
2, 2009.
2 The investment management agreement between Security Large Cap Value Fund,
on behalf of its series, and Security Investors, LLC was made and entered
into on May 1, 2002, amended and restated effective as of February 1, 2004,
amended and restated effective as of June 30, 2005, and amended and restated
effective as of October 14, 2008.
3 The investment management agreement between Security Mid Cap Growth Fund, on
behalf of its series, and Security Investors, LLC was made and entered into
on May 1, 2002 and amended and restated effective as of February 1, 2004.
4 The investment management agreement between Security Income Fund, on behalf
of its series, and Security Investors, LLC was made on November 1, 1999 and
amended and restated effective as of October 13, 2008.
5 Effective May 1, 2010. The Rydex|SGI High Yield Fund currently has in place
expense limits of 1.10%, 1.85%, 1.85% and 0.85% for Class A, Class B, Class
C, and Institutional Class, respectively. These expense limits will expire
April 30, 2010.
6 Effective May 1, 2010. The Rydex|SGI U.S. Intermediate Bond Fund currently
has in place expense limits of 0.95%, 1.70% and 1.70% for Class A, Class B
and Class C, respectively. These expense limits will expire April 30, 2010.
7 The investment management agreement between SBL Fund, on behalf of its
series, and Security Investors, LLC was made and entered into on January 27,
2000, amended and restated effective August 15, 2008, and amended as of
November 24, 2008.
8 Effective May 1, 2010. Series E (U.S. Intermediate Bond Series) currently
has in place a fee waiver of 0.15% (reflecting the Investment Manager's
waiver of a portion of its management fees under the Fund's investment
management agreement). This fee waiver will expire April 30, 2010.
9 Effective May 1, 2010. Series H (Enhanced Index Series) currently has in
place a fee waiver of 0.25% (reflecting the Investment Manager's waiver of a
portion of its management fees under the Fund's investment management
agreement). This fee waiver will expire April 30, 2010.
10 Effective May 1, 2010. Series O (All Cap Value Series) currently has in
place an expense limit of 0.85%. This expense limit will expire April 30,
2010.
11 Effective May 1, 2010. Series Z (Alpha Opportunity Series) currently has in
place an expense limit of 1.70%. This expense limit will expire April 30,
2010.
B-6
APPENDIX C
DIRECTORS/MANAGERS AND OFFICERS
MANAGER REPRESENTATIVE AND PRINCIPAL EXECUTIVE OFFICER OF SECURITY
INVESTORS, LLC. The business address of the manager representative and principal
executive officer is One Security Benefit Place, Topeka, Kansas 66636-0001.
POSITION HELD WITH
NAME SECURITY INVESTORS, LLC OTHER PRINCIPAL OCCUPATION/POSITION
-----------------------------------------------------------------------------------------------------
Richard M. Goldman President and Manager Senior Vice President, Security Benefit
Representative Corporation; Director, First Security Benefit
Life Insurance and Annuity Company of New
York; President & Manager, Security Global
Investors, LLC; CEO, President, & Director,
Rydex Distributors, Inc.; President & CEO,
Rydex Holdings, LLC; CEO & Director,
PADCO Advisors, Inc.; CEO & Director,
PADCO Advisors II, Inc.; Director, Rydex
Fund Services, Inc.
MANAGERS AND PRINCIPAL EXECUTIVE OFFICERS OF SECURITY GLOBAL INVESTORS,
LLC. The business address of the managers and principal executive officers is
801 Montgomery Street, 2nd Floor, San Francisco, California 94133.
POSITION HELD WITH
SECURITY GLOBAL
NAME INVESTORS, LLC OTHER PRINCIPAL OCCUPATION/POSITION
-----------------------------------------------------------------------------------------------------
Richard M. Goldman President and Manager Senior Vice President, Security Benefit
Corporation; Director, First Security Benefit
Life Insurance and Annuity Company of New
York; President and Manager Representative,
Security Investors, LLC; CEO, President, &
Director, Rydex Distributors, Inc.; President
& CEO, Rydex Holdings, LLC; CEO & Director,
PADCO Advisors, Inc.; CEO & Director,
PADCO Advisors II, Inc.; Director, Rydex
Fund Services, Inc.
DIRECTORS/OFFICERS OF THE FUNDS WHO HOLD POSITION(S)WITH SECURITY
INVESTORS, LLC AND SECURITY GLOBAL INVESTORS, LLC. The business address of each
of the following persons is One Security Benefit Place, Topeka, Kansas
66636-0001.
POSITION HELD WITH POSITION HELD WITH SECURITY INVESTORS, LLC
NAME THE FUNDS AND SECURITY GLOBAL INVESTORS, LLC
-----------------------------------------------------------------------------------------------------
Richard M. Goldman Director, President and President and Manager Representative,
Chairman of the Board of Security Investors, LLC; President &
each Company Manager, Security Global Investors, LLC
Brenda M. Harwood Treasurer and Chief Vice President and Chief Compliance Officer,
Compliance Officer Security Investors, LLC; Chief Compliance
Officer, Security Global Investors, LLC
C-1
POSITION HELD WITH POSITION HELD WITH SECURITY INVESTORS, LLC
NAME THE FUNDS AND SECURITY GLOBAL INVESTORS, LLC
-----------------------------------------------------------------------------------------------------
Amy J. Lee Secretary and Vice President Secretary, Security Investors, LLC; Secretary,
Security Global Investors, LLC
Christopher L. Phalen Vice President Vice President, Security Investors, LLC; Vice
President, Security Global Investors, LLC
Christopher D. Swickard Assistant Secretary Assistant Secretary, Security Investors, LLC
C-2
APPENDIX D-1
ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT
OBJECTIVES ADVISED BY SECURITY INVESTORS, LLC
Each of the tables below lists the names of other mutual funds advised by
Security Investors, LLC (the "Investment Manager") with a similar investment
objective as the Funds, and information concerning the Funds' and such other
funds' net assets as of December 31, 2009 and the rate of compensation for the
Investment Manager for its services to the Funds and such other funds. The
Investment Manager has agreed to reduce or waive its investment advisory fees
for certain Funds as provided below.
MANAGEMENT FEES
ANNUAL COMPENSATION TO WAIVED BY AND
NAME(S) OF FUND(S) THE INVESTMENT MANAGER REIMBURSEMENTS
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS FROM INVESTMENT
STATEMENT DAILY NET ASSETS) (IN MILLIONS) MANAGER
Name(s) of Other Fund(s)
with Similar Objectives
-----------------------------------------------------------------------------------------------------
RYDEX|SGI LARGE CAP CORE 0.75% $ 197.03 None
FUND (FORMERLY RYDEX|SGI
EQUITY FUND), A SERIES OF
SECURITY EQUITY FUND
SERIES A (EQUITY SERIES), 0.75% $ 186.01 None
A SERIES OF SBL FUND
-----------------------------------------------------------------------------------------------------
RYDEX|SGI ALPHA 1.25% $ 14.65 $360,351
OPPORTUNITY FUND, A SERIES
OF SECURITY EQUITY FUND
SERIES Z (ALPHA OPPORTUNITY 1.25% $ 22.63 $276,548
SERIES), A SERIES OF SBL FUND
-----------------------------------------------------------------------------------------------------
RYDEX|SGI GLOBAL FUND, 1.00% $ 112.39 None
A SERIES OF SECURITY EQUITY
FUND
RYDEX|SGI GLOBAL 1.00% $ 4.54 $ 88,806
INSTITUTIONAL FUND, A SERIES
OF SECURITY EQUITY FUND
SERIES D (GLOBAL SERIES), 1.00% $ 270.19 None
A SERIES OF SBL FUND
-----------------------------------------------------------------------------------------------------
RYDEX|SGI MID CAP VALUE 1.00% for the first $1,108.51 None
FUND, A SERIES OF SECURITY $200 million and
EQUITY FUND 0.75% thereafter
RYDEX|SGI MID CAP VALUE 0.75% $ 353.92 $ 56,387
INSTITUTIONAL FUND, A SERIES
OF SECURITY EQUITY FUND
SERIES V (MID CAP VALUE 0.75% $ 304.49 None
SERIES), A SERIES OF SBL FUND
-----------------------------------------------------------------------------------------------------
D-1-1
MANAGEMENT FEES
ANNUAL COMPENSATION TO WAIVED BY AND
NAME(S) OF FUND(S) THE INVESTMENT MANAGER REIMBURSEMENTS
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS FROM INVESTMENT
STATEMENT DAILY NET ASSETS) (IN MILLIONS) MANAGER
Name(s) of Other Fund(s)
with Similar Objectives
-----------------------------------------------------------------------------------------------------
RYDEX|SGI SMALL CAP 0.85% $ 14.60 $ 8,423
GROWTH FUND, A SERIES OF
SECURITY EQUITY FUND
SERIES X (SMALL CAP GROWTH 0.85% $ 35.31 None
SERIES), A SERIES OF SBL FUND
-----------------------------------------------------------------------------------------------------
RYDEX|SGI SMALL CAP VALUE 1.00% $ 6.95 $ 68,867
FUND, A SERIES OF SECURITY
EQUITY FUND
SERIES Q (SMALL CAP VALUE 0.95% $125.25 None
SERIES), A SERIES OF SBL FUND
-----------------------------------------------------------------------------------------------------
RYDEX|SGI LARGE CAP 0.75% $ 42.05 $208,564
CONCENTRATED GROWTH
FUND (FORMERLY RYDEX|SGI
SELECT 25 FUND), A SERIES
OF SECURITY EQUITY FUND
SERIES Y (SELECT 25 SERIES), 0.75% $ 41.05 None
A SERIES OF SBL FUND
-----------------------------------------------------------------------------------------------------
RYDEX|SGI ALL CAP VALUE 0.70% $ 2.22 $ 56,488
FUND, A SERIES OF SECURITY
EQUITY FUND
SERIES O (ALL CAP VALUE 0.70% $161.79 $ 42,237
SERIES), A SERIES OF SBL FUND
-----------------------------------------------------------------------------------------------------
RYDEX|SGI LARGE CAP VALUE 0.65% $ 53.18 $216,463
FUND, A SERIES OF SECURITY
LARGE CAP VALUE FUND
RYDEX|SGI LARGE CAP VALUE 0.65% $ 2.74 $ 38,034
INSTITUTIONAL FUND, A SERIES
OF SECURITY LARGE CAP VALUE FUND
SERIES B (LARGE CAP VALUE 0.65% $280.40 None
SERIES), A SERIES OF SBL FUND
-----------------------------------------------------------------------------------------------------
RYDEX|SGI MID CAP 0.75% $ 80.90 None
GROWTH FUND, A SERIES OF
SECURITY MID CAP GROWTH FUND
SERIES J (MID CAP GROWTH 0.75% $153.74 None
SERIES), A SERIES OF SBL FUND
-----------------------------------------------------------------------------------------------------
D-1-2
MANAGEMENT FEES
ANNUAL COMPENSATION TO WAIVED BY AND
NAME(S) OF FUND(S) THE INVESTMENT MANAGER REIMBURSEMENTS
SUBJECT TO THIS PROXY (AS A PERCENTAGE OF AVERAGE NET ASSETS FROM INVESTMENT
STATEMENT DAILY NET ASSETS) (IN MILLIONS) MANAGER
Name(s) of Other Fund(s)
with Similar Objectives
-----------------------------------------------------------------------------------------------------
RYDEX|SGI HIGH YIELD FUND, 0.60% $173.90 $328,117
A SERIES OF SECURITY INCOME FUND
SERIES P (HIGH YIELD SERIES), 0.75% $139.16 None
A SERIES OF SBL FUND
-----------------------------------------------------------------------------------------------------
RYDEX|SGI U.S. INTERMEDIATE 0.50% $142.34 $459,405
BOND FUND, A SERIES OF
SECURITY INCOME FUND
SERIES E (U.S. INTERMEDIATE 0.75% $130.23 $172,461
BOND SERIES), A SERIES OF
SBL FUND
-----------------------------------------------------------------------------------------------------
SERIES C (MONEY MARKET 0.50% $153.26 None
SERIES), A SERIES OF SBL FUND
None N/A N/A N/A
-----------------------------------------------------------------------------------------------------
SERIES H (ENHANCED INDEX 0.75% $ 47.62 $155,686
SERIES), A SERIES OF SBL FUND
None N/A N/A N/A
-----------------------------------------------------------------------------------------------------
SERIES N (MANAGED ASSET 1.00% $ 79.43 None
ALLOCATION SERIES), A SERIES
OF SBL FUND
None N/A N/A N/A
-----------------------------------------------------------------------------------------------------
D-1-3
APPENDIX D-2
ADVISORY FEE RATES OF FUNDS WITH SIMILAR INVESTMENT
OBJECTIVES SUB-ADVISED BY SECURITY GLOBAL INVESTORS, LLC
Each of the tables below lists the names of other mutual funds advised or
sub-advised by Security Global Investors, LLC (the "Sub-Adviser") with a similar
investment objective as the Sub-Advised Funds, and information concerning the
Sub-Advised Funds' and such other funds' net assets as of December 31, 2009 and
the rate of compensation for the Sub-Adviser for its services to the Funds and
such other funds.
ANNUAL COMPENSATION TO THE
NAME(S) OF FUND(S) SUBJECT TO THIS SUB-ADVISER (AS A PERCENTAGE NET ASSETS
PROXY STATEMENT OF AVERAGE DAILY NET ASSETS) (IN MILLIONS)
Name(s) of Other Fund(s) with
Similar Objectives
-------------------------------------------------------------------------------------------------
RYDEX|SGI ALPHA OPPORTUNITY FUND, 1.45%(1) $ 14.65
A SERIES OF SECURITY EQUITY FUND
SERIES Z (ALPHA OPPORTUNITY SERIES), 1.45%(1) $ 22.63
A SERIES OF SBL FUND
-------------------------------------------------------------------------------------------------
RYDEX|SGI GLOBAL FUND, A SERIES OF 0.35% on the first $300 million; $ 112.39
SECURITY EQUITY FUND 0.30% on the next $450 million;
and 0.25% thereafter(2)
RYDEX|SGI GLOBAL INSTITUTIONAL FUND, 0.35% on the first $300 million; $ 4.54
A SERIES OF SECURITY EQUITY FUND 0.30% on the next $450 million;
and 0.25% thereafter(2)
SERIES D (GLOBAL SERIES), A SERIES OF 0.35% on the first $300 million; $270.193
SBL FUND 0.30% on the next $450 million;
and 0.25% thereafter(2)
International Equity Fund, a series of 0.40% $ 96.75*
American Independence Funds Trust
Rydex|SGI Global 130/30 Strategy Fund, 0.65% $ 14.06
a series of Rydex Series Funds
Rydex|SGI Global Market Neutral Fund, 0.80% $ 18.75
a series of Rydex Series Funds
-------------------------------------------------------------------------------------------------
The Sub-Adviser does not have any arrangement to reduce or waive its
sub-advisory fees for the Funds.
(1) These annual fees are stated as a percentage of a portion of the Fund's net
assets managed by the Sub-Adviser. Another portion of the Fund's assets is
managed by Mainstream Investment Advisers, LLC, which is not affiliated with
the Fund.
(2) These annual fees are stated as a percentage of the combined average daily
net assets of the portion of Rydex|SGI Global Fund, Rydex|SGI Global
Institutional Fund and Series D (Global Series) managed by the Sub-Adviser.
* As of October 31, 2009.
D-2-1
APPENDIX E
FORM OF SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into as of the [ ] day of [ ] 2010
between Security Investors, LLC (the "Adviser"), a Kansas limited liability
company, registered under the Investment Advisers Act of 1940, as amended (the
"Investment Advisers Act"), and Security Global Investors, LLC (the
"Subadviser"), a Kansas limited liability company registered under the
Investment Advisers Act.
W I T N E S S E T H
WHEREAS, SBL Fund and Security Equity Fund, Kansas corporations, are each
registered with the Securities and Exchange Commission (the "Commission") as
open-end management investment companies under the Investment Company Act of
1940, as amended (the "Investment Company Act");
WHEREAS, SBL Fund is authorized to issue shares of Series D ("Series D"), a
separate series of SBL Fund and Security Equity Fund is authorized to issue
shares of the Global Series ("Global Series") and Global Institutional Series
("Global Institutional Series"), each a separate series of Security Equity Fund
(Series D, Global Series and Global Institutional Series are referred to herein
individually as a "Fund" and collectively as the "Funds");
WHEREAS, each of the Funds has, pursuant to an Advisory Agreement with the
Adviser (the "Advisory Agreement"), retained the Adviser to act as investment
adviser for and to manage its assets;
WHEREAS, the Advisory Agreements permit the Adviser to delegate certain of
its duties under the Advisory Agreement to other investment advisers, subject to
the requirements of the Investment Company Act; and
WHEREAS, the Adviser desires to retain the Subadviser as subadviser to act
as investment adviser for and to manage the Funds' respective Investments (as
defined below) and the Subadviser desires to render such services.
NOW, THEREFORE, the Adviser and Subadviser do mutually agree and promise as
follows:
1. APPOINTMENT AS SUBADVISER. The Adviser hereby retains the Subadviser to
act as investment adviser for and to manage the assets of the Funds, in each
case subject to the supervision of the Adviser and the Board of Directors of
such Fund and subject to the terms of this Agreement. The Subadviser hereby
accepts such employment. In such capacity, the Subadviser shall be responsible
for each Fund's Investments (as defined below).
E-1
2. DUTIES OF SUBADVISER.
(a) Investments. The Subadviser is hereby authorized and directed
and hereby agrees, subject to the stated investment policies and
restrictions of each Fund as set forth in such Fund's prospectus and
statement of additional information as currently in effect and as
supplemented or amended from time to time (collectively referred to
hereinafter as the "Prospectus") and subject to the directions of the
Adviser and the Fund's Board of Directors to purchase, hold and sell
investments for the account of the Funds (hereinafter "Investments") and to
monitor on a continuous basis the performance of such Investments. The
Subadviser shall give the Funds the benefit of its best efforts in
rendering its services as Subadviser. The Subadviser may contract with or
consult with such banks, other securities firms, brokers or other parties,
without additional expense to the Funds, as it may deem appropriate
regarding investment advice, research and statistical data, clerical
assistance or otherwise.
(b) Brokerage. The Subadviser is authorized, subject to the supervision
of the Adviser and the respective Fund's Board to establish and maintain
accounts on behalf of each Fund with, and place orders for the purchase and
sale of each Fund's Investments with or through, such persons, brokers or
dealers as Subadviser may select which may include, to the extent permitted
by the Adviser and the respective Fund's Board, brokers or dealers
affiliated with the Subadviser or Adviser, and negotiate commissions to be
paid on such transactions. The Subadviser agrees that in placing such
orders for a Fund it shall attempt to obtain best execution, provided that,
the Subadviser may, on behalf of such Fund, pay brokerage commissions to a
broker which provides brokerage and research services to the Subadviser in
excess of the amount another broker would have charged for effecting the
transaction, provided (i) the Subadviser determines in good faith that the
amount is reasonable in relation to the value of the brokerage and research
services provided by the executing broker in terms of the particular
transaction or in terms of the Subadviser's overall responsibilities with
respect to such Fund and the accounts as to which the Subadviser exercises
investment discretion, (ii) such payment is made in compliance with Section
28(e) of the Securities Exchange Act of 1934, as amended, and any other
applicable laws and regulations, and (iii)in the opinion of the Subadviser,
the total commissions paid by such Fund will be reasonable in relation to
the benefits to the Fund over the long term. In reaching such
determination, the Subadviser will not be required to place or attempt to
place a specific dollar value on the brokerage and/or research services
provided or being provided by such broker. It is recognized that the
services provided by such brokers may be useful to the Subadviser in
connection with the Subadviser's services to other clients. On occasions
when the Subadviser deems the purchase or sale of a security to be in the
best interests of the Fund as well as other clients of the Subadviser, the
Subadviser, to the extent permitted by applicable laws and regulations,
may, but shall be under no obligation to, aggregate the securities to be
sold or purchased in order to obtain
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the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of securities so sold or purchased, as
well as the expenses incurred in the transaction, will be made by the
Subadviser in the manner the Subadviser considers to be the most equitable
and consistent with its fiduciary obligations to the Fund or Funds involved
and to such other clients. The Subadviser will report on such allocations
at the request of the Adviser, or the respective Fund's Board, providing
such information as the number of aggregated trades to which a Fund was a
party, the broker(s)to whom such trades were directed and the basis of the
allocation for the aggregated trades.
(c) Securities Transactions. The Subadviser and any affiliated person
of the Subadviser will not purchase securities or other instruments from or
sell securities or other instruments to a Fund ("Principal Transactions");
provided, however, the Subadviser or an affiliated person of the Subadviser
may enter into a Principal Transaction with a Fund if (i) the transaction
is permissible under applicable laws and regulations, including, without
limitation, the Investment Company Act and the Investment Advisers Act and
the rules and regulations promulgated thereunder, and (ii) the transaction
or category of transactions receives the express written approval of the
Adviser.
The Subadviser agrees to observe and comply with Rule 17j-1 under the
Investment Company Act and its Code of Ethics, as the same may be amended
from time to time. The Subadviser agrees to provide the Adviser and the
Funds with a copy of such Code of Ethics.
(d) Books and Records. The Subadviser will maintain all books and
records required to be maintained pursuant to the Investment Company Act
and the rules and regulations promulgated thereunder solely with respect to
transactions made by it on behalf of the Funds including, without
limitation, the books and records required by Subsections (b)(1), (5), (6),
(7), (9), (10) and (11) and Subsection (f) of Rule 31a-1 under the
Investment Company Act and shall timely furnish to the Adviser all
information relating to the Subadviser's services hereunder needed by the
Adviser to keep such other books and records of the Funds required by
Rule 31a-1 under the Investment Company Act. The Subadviser will also
preserve all such books and records for the periods prescribed in part (e)
of Rule 31a-2 under the Investment Company Act, and agrees that such books
and records shall remain the sole property of the respective Fund and shall
be immediately surrendered to the appropriate Fund upon request. The
Subadviser further agrees that all books and records maintained hereunder
shall be made available to the respective Fund or the Adviser at any time
upon reasonable request and notice, including telecopy, during any business
day.
(e) Information Concerning Investments and Subadviser. From time to
time as the Adviser or a Fund may request, the Subadviser will furnish the
requesting party reports on portfolio transactions and reports on
Investments held in the portfolios, all in such detail as the Adviser or
the applicable Fund may
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reasonably request. The Subadviser will make available its officers and
employees to meet with the Board of Directors of a Fund at the Fund's
principal place of business on due notice to review the Investments of the
Fund.
The Subadviser will also provide such information as is customarily
provided by a subadviser and may be required for each Fund or the Adviser
to comply with their respective obligations under applicable laws,
including, without limitation, the Internal Revenue Code of 1986, as
amended (the "Code"), the Investment Company Act, the Investment Advisers
Act, the Securities Act of 1933, as amended (the "Securities Act") and any
state securities laws, and any rule or regulation thereunder.
During the term of this Agreement, the Adviser agrees to furnish the
Subadviser at its principal office all registration statements, proxy
statements, reports to stockholders, sales literature or other materials
prepared for distribution to stockholders of each Fund, or the public that
refer to the Subadviser for Subadviser's review and approval. The
Subadviser shall be deemed to have approved all such materials unless the
Subadviser reasonably objects by giving notice to the Adviser in writing
within five business days (or such other period as may be mutually agreed)
after receipt thereof. The Subadviser's right to object to such materials
is limited to the portions of such materials that expressly relate to the
Subadviser, its services and its clients. The Adviser agrees to use its
best efforts to ensure that materials prepared by its employees or agents
or its affiliates that refer to the Subadviser or its clients in any way
are consistent with those materials previously approved by the Subadviser
as referenced in this paragraph. Sales literature may be furnished to the
Sub-Adviser by first class or overnight mail, facsimile transmission
equipment or hand delivery.
(f) Custody Arrangements. The Subadviser shall provide each Fund's
custodian, on each business day with information relating to all
transactions concerning the Fund's assets.
(g) Compliance with Applicable Laws and Governing Documents. In all
matters relating to the performance of this Agreement, the Subadviser and
its directors, officers, partners, employees and interested persons shall
act in conformity with each Fund's Articles of Incorporation, By-Laws, and
currently effective registration statement and with the written
instructions and directions of each Fund's Board and the Adviser, after
receipt of such documents, from the relevant Fund, and shall comply with
the requirements of the Investment Company Act, the Investment Advisers
Act, the Commodity Exchange Act (the "CEA"), the rules thereunder, and all
other applicable federal and state laws and regulations.
In carrying out its obligations under this Agreement, the Subadviser
shall ensure that the Funds comply with all applicable statutes and
regulations necessary to qualify each Fund as a Regulated Investment
Company under Subchapter M of the Code (or any successor provision), and
shall notify the
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Adviser immediately upon having a reasonable basis for believing that a
Fund has ceased to so qualify or that it might not so qualify in the
future.
In carrying out its obligations under this Agreement, the Subadviser
shall invest the assets of Series D in such a manner as to ensure that such
investments comply with the diversification provisions of Section 817(h)of
the Code (or any successor provision) and the regulations issued thereunder
relating to the diversification requirements for variable insurance
contracts and any prospective amendments or other enacted modifications to
Section 817 or regulations thereunder. Subadviser shall notify the Adviser
immediately upon having a reasonable basis for believing that Series D has
ceased to comply and will take all reasonable steps to adequately diversify
the assets of Series D, so as to achieve compliance within the grace period
afforded by Regulation 1.817-5.
The Adviser has furnished the Subadviser with copies of each of the
following documents and will furnish the Subadviser at its principal office
all future amendments and supplements to such documents, if any, as soon as
practicable after such documents become available: (i) the Articles of
Incorporation of each Fund, (ii) the By-Laws of each Fund, (iii) each
Fund's registration statement under the Investment Company Act and the
Securities Act of 1933, as amended, as filed with the Commission, and (iv)
any written instructions of the respective Fund's Board and the Adviser.
(h) Voting of Proxies. The Subadviser shall direct the custodian as to
how to vote such proxies as may be necessary or advisable in connection
with any matters submitted to a vote of shareholders of Investments held by
a Fund.
3. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder, the
Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Funds or the Adviser in any way or
otherwise be deemed an agent of the Funds or the Adviser.
4. COMPENSATION. The Adviser shall pay to the Subadviser, for the services
rendered hereunder, the fees set forth in Exhibit A to this Agreement.
5. EXPENSES. The Subadviser shall bear all expenses incurred by it in
connection with its services under this Agreement and will, from time to time,
at its sole expense employ or associate itself with such persons as it believes
to be particularly fitted to assist it in the execution of its duties hereunder.
However, the Subadviser shall not assign or delegate any of its investment
management duties under this Agreement without the approval of the Adviser and
the appropriate Fund's Board.
6. REPRESENTATIONS AND WARRANTIES OF SUBADVISER. The Subadviser represents
and warrants to the Adviser and the Funds as follows:
(a) The Subadviser is registered as an investment adviser under the
Investment Advisers Act;
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(b) The Subadviser will immediately notify the Adviser of the
occurrence of any event that would disqualify the Subadviser from serving
as an investment adviser of an investment company pursuant to Section 9(a)
of the Investment Company Act;
(c) The Subadviser has filed a notice of exemption pursuant to Rule
4.14 under the CEA with the Commodity Futures Trading Commission (the
"CFTC") and the National Futures Association;
(d) The Subadviser is fully authorized under all applicable law to
serve as Subadviser to the Funds and to perform the services described
under this Agreement;
(e) The Subadviser is a limited liability company duly organized and
validly existing under the laws of the state of Kansas with the power to
own and possess its assets and carry on its business as it is now being
conducted;
(f) The execution, delivery and performance by the Subadviser of this
Agreement are within the Subadviser's powers and have been duly authorized
by all necessary action on the part of its members, and no action by or in
respect of, or filing with, any governmental body, agency or official is
required on the part of the Subadviser for the execution, delivery and
performance by the Subadviser of this Agreement, and the execution,
delivery and performance by the Subadviser of this Agreement do not
contravene or constitute a default under (i) any provision of applicable
law, rule or regulation, (ii) the Subadviser's governing instruments, or
(iii) any agreement, judgment, injunction, order, decree or other
instrument binding upon the Subadviser;
(g) This Agreement is a valid and binding agreement of the Subadviser;
(h) The Form ADV of the Subadviser previously provided to the Adviser
is a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date, and does not omit to state any material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
7. NON-EXCLUSIVITY. The services of the Subadviser with respect to the
Funds are not deemed to be exclusive, and the Subadviser and its officers shall
be free to render investment advisory and administrative or other services to
others (including other investment companies) and to engage in other activities
so long as its duties hereunder are not impaired thereby.
8. REPRESENTATIONS AND WARRANTIES OF ADVISER. The Adviser represents and
warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under the
Investment Advisers Act;
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(b) The Adviser has filed a notice of exemption pursuant to Rule 4.14
under the CEA with the Commodity Futures Trading Commission (the "CFTC")
and the National Futures Association;
(c) The Adviser is a limited liability company duly organized and
validly existing under the laws of the State of Kansas with the power to
own and possess its assets and carry on its business as it is now being
conducted;
(d) The execution, delivery and performance by the Adviser of this
Agreement and the Advisory Agreement are within the Adviser's powers and
have been duly authorized by all necessary action on the part of its
members, and no action by or in respect of, or filing with, any
governmental body, agency or official is required on the part of the
Adviser for the execution, delivery and performance by the Adviser of this
Agreement, and the execution, delivery and performance by the Adviser of
this Agreement do not contravene or constitute a default under (i) any
provision of applicable law, rule or regulation, (ii) the Adviser's
governing instruments, or (iii) any agreement, judgment, injunction, order,
decree or other instrument binding upon the Adviser;
(e) This Agreement and the Advisory Agreement are valid and binding
agreements of the Adviser;
(f) The Form ADV of the Adviser previously provided to the Subadviser
is a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
(g) The Adviser acknowledges that it received a copy of the
Subadviser's Form ADV at least 48 hours prior to the execution of this
Agreement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE INFORMATION.
All representations and warranties made by the Subadviser and the Adviser
pursuant to Sections 6 and 8 hereof shall survive for the duration of this
Agreement and the parties hereto shall promptly notify each other in writing
upon becoming aware that any of the foregoing representations and warranties are
no longer true.
10. LIABILITY AND INDEMNIFICATION.
(a) Liability. In the absence of willful misfeasance, bad faith or
gross negligence on the part of the Subadviser or a breach of its duties
hereunder, the Subadviser shall not be subject to any liability to the
Adviser, to either Fund, or any of either Fund's shareholders, and, in the
absence of willful misfeasance, bad faith or gross negligence on the part
of the Adviser or a breach of its duties hereunder, the Adviser shall not
be subject to any liability to the Subadviser, for any act or omission in
the case of, or connected with, rendering services
E-7
hereunder or for any losses that may be sustained in the purchase, holding
or sale of Investments; provided, however, that nothing herein shall
relieve the Adviser and the Subadviser from any of their respective
obligations under applicable law, including, without limitation, the
federal and state securities laws and the CEA.
(b) Indemnification. The Subadviser shall indemnify the Adviser and the
Funds, and their respective officers and directors, for any liability and
expenses, including attorneys' fees, which may be sustained by the Adviser,
or the Funds, as a result of the Subadviser's willful misfeasance, bad
faith, or gross negligence, breach of its duties hereunder or violation of
applicable law, including, without limitation, the federal and state
securities laws or the CEA. The Adviser shall indemnify the Subadviser and
its officers and partners, for any liability and expenses, including
attorneys' fees, which may be sustained as a result of the Adviser's, or
the Funds' willful misfeasance, bad faith, or gross negligence, breach of
its duties hereunder or violation of applicable law, including, without
limitation, the federal and state securities laws or the CEA.
11. DURATION AND TERMINATION.
(a) Duration. This Agreement shall become effective upon the date first
above written, provided that this Agreement shall not take effect with
respect to a Fund unless it has first been approved by a vote of a majority
of those directors of SBL Fund and Security Equity Fund, as applicable, who
are not parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such
approval. This Agreement shall continue in effect for a period of two years
from the date hereof, subject thereafter to being continued in force and
effect from year to year with respect to each Fund if specifically approved
each year by the Board of Directors of the applicable Fund. In addition to
the foregoing, each renewal of this Agreement with respect to each Fund
must be approved by the vote of a majority of the applicable Fund's
directors who are not parties to this Agreement or interested persons of
any such party, cast in person at a meeting called for the purpose of
voting on such approval. Prior to voting on the renewal of this Agreement,
the Board of Directors of the applicable Fund may request and evaluate, and
the Subadviser shall furnish, such information as may reasonably be
necessary to enable the Fund's Board of Directors to evaluate the terms of
this Agreement.
(b) Termination. Notwithstanding whatever may be provided herein to the
contrary, this Agreement may be terminated at any time, without payment of
any penalty:
(i) By vote of a majority of the Board of Directors of the
applicable Fund, or by vote of a majority of the outstanding
voting securities of the applicable Fund, or by the Adviser,
in each case, upon sixty (60) days' written notice to the
Subadviser;
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(ii) By the Adviser upon breach by the Subadviser of any
representation or warranty contained in Section 6 hereof,
which shall not have been cured within twenty (20) days of
the Subadviser's receipt of written notice of such breach;
(iii) By the Adviser immediately upon written notice to the
Subadviser if the Subadviser becomes unable to discharge its
duties and obligations under this Agreement; or
(iv) By the Subadviser upon 120 days written notice to the Adviser
and the applicable Fund.
This Agreement shall not be assigned (as such term is defined in the
Investment Company Act) without the prior written consent of the parties
hereto. This Agreement shall terminate automatically in the event of its
assignment without such consent or upon the termination of the Advisory
Agreement.
12. DUTIES OF THE ADVISER. The Adviser shall continue to have
responsibility for all services to be provided to the Funds pursuant to the
Advisory Agreement and shall oversee and review the Subadviser's performance of
its duties under this Agreement.
13. AMENDMENT. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment with respect to a Fund
shall be approved by the Board of Directors of the applicable Fund or by a vote
of a majority of the outstanding voting securities of the applicable Fund.
14. NOTICE. Any notice that is required to be given by the parties to each
other (or to the Fund) under the terms of this Agreement shall be in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Security Global Investors, LLC
2 Embarcadero Center, Suite 2350
San Francisco, CA 94111
Attention: John Boich, Vice President and Head of Global Equity
Facsimile: (415) 274-7702
With a copy to:
Security Benefit Corporation
One Security Benefit Place
Topeka, KS 66636
Attention: General Counsel
Facsimile: (785) 438-3080
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(b) If to the Adviser:
Security Investors, LLC
One Security Benefit Place
Topeka, KS 66636-0001
Attention: Richard Goldman, President
Facsimile: (785) 438-3080
(c) If to SBL Fund:
SBL Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 438-3080
(d) If to Security Equity Fund:
Security Equity Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 438-3080
15. GOVERNING LAW; JURISDICTION. Except as indicated in Section 19(b) of
this Agreement, this Agreement shall be governed by and construed in accordance
with the laws of the State of Kansas, without regard to its conflicts of law
provisions.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the same
instrument.
17. CAPTIONS. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
18. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and effect.
19. CERTAIN DEFINITIONS.
(a) "Business day." As used herein, business day means any customary
business day in the United States on which the New York Stock Exchange is
open.
(b) Miscellaneous. As used herein, "investment company," "affiliated
person," "interested person," "assignment," "broker," "dealer" and
"affirmative vote of the majority of the Fund's outstanding voting
securities" shall all have such meaning as such terms have in the
Investment Company Act. The term "investment adviser" shall have such
meaning as such term has in the Investment Advisers Act and the Investment
Company Act, and in the event of a conflict
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between such Acts, the most expansive definition shall control. In
addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is relaxed by a rule,
regulation or order of the Commission, whether of special or general
application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
SECURITY INVESTORS, LLC
By:______________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
SECURITY GLOBAL INVESTORS, LLC
By:______________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
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EXHIBIT A
Compensation
For all services rendered by the Subadviser hereunder, Adviser shall pay to
Subadviser a fee (the "Subadvisory Fee") as follows:
An annual rate of 0.35% of the combined average daily net assets of the
Funds of $300 million or less; and
An annual rate of 0.30% of the combined average daily net assets of the
Funds of more than $300 million but less than $750 million; and
An annual rate of 0.25% of the combined average daily net assets of the
Funds of more than $750 million.
For purposes of calculating the compensation to be paid hereunder, the
value of the net assets of a Fund shall be computed in the same manner at the
end of the business day as the value of such net assets is computed in
connection with the determination of the net asset value of the Fund's shares as
described in the then current prospectus for the applicable Fund.
The Subadvisory Fee shall be accrued for each calendar day the Subadviser
renders subadvisory services hereunder and the sum of the daily fee accruals
shall be paid monthly to the Subadviser as soon as practicable following the
last day of each month, by wire transfer if so requested by the Subadviser, but
no later than ten (10) calendar days thereafter. If this Agreement shall be
effective for only a portion of a year, then the Subadviser's fee for said year
shall be prorated for such portion.
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SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into as of the [ ] day of [ ], 2010
between Security Investors, LLC (the "Adviser"), a Kansas limited liability
company, registered under the Investment Advisers Act of 1940, as amended (the
"Investment Advisers Act"), and Security Global Investors, LLC (the
"Subadviser"), a Kansas limited liability company registered under the
Investment Advisers Act.
W I T N E S S E T H
WHEREAS, SBL Fund and Security Equity Fund, Kansas corporations, are each
registered with the Securities and Exchange Commission (the "Commission") as
open-end management investment companies under the Investment Company Act of
1940, as amended (the "Investment Company Act");
WHEREAS, SBL Fund is authorized to issue shares of Series Z ("Series Z"), a
separate series of SBL Fund and Security Equity Fund is authorized to issue
shares of the Alpha Opportunity Series ("Alpha Opportunity Series"), a separate
series of Security Equity Fund (Series Z, and the Alpha Opportunity Series are
referred to herein individually as a "Fund" and collectively as the "Funds");
WHEREAS, each of the Funds has, pursuant to an Advisory Agreement with the
Adviser (the "Advisory Agreement"), retained the Adviser to act as investment
adviser for and to manage its assets;
WHEREAS, the Advisory Agreements permit the Adviser to delegate certain of
its duties under the Advisory Agreement to other investment advisers, subject to
the requirements of the Investment Company Act; and
WHEREAS, the Adviser desires to retain the Subadviser as subadviser to act
as investment adviser for and to manage a portion of each Fund's respective
Investments (as defined below) and the Subadviser desires to render such
services.
NOW, THEREFORE, the Adviser and Subadviser do mutually agree and promise as
follows:
1. APPOINTMENT AS SUBADVISER. The Adviser hereby retains the Subadviser to
act as investment adviser for and to manage the portion of the assets of the
Funds as determined by the Adviser from time to time, in each case subject to
the supervision of the Adviser and the Board of Directors of such Fund and
subject to the terms of this Agreement. The Subadviser hereby accepts such
employment. In such capacity, the Subadviser shall be responsible for the
portion of each Fund's Investments (as defined below) allocated to it by the
Adviser.
2. DUTIES OF SUBADVISER.
(a) Investments. The Subadviser is hereby authorized and directed and
hereby agrees, subject to the stated investment policies and restrictions
of each Fund as set forth in such Fund's prospectus and statement of
additional information as currently in effect and as supplemented or
amended from time to
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time (collectively referred to hereinafter as the "Prospectus") and subject
to the directions of the Adviser and the Fund's Board of Directors to
purchase, hold and sell investments for the portion of the assets of the
Funds allocated to the Subadviser by the Adviser (hereinafter
"Investments") and to monitor on a continuous basis the performance of such
Investments. The Subadviser shall give the Funds the benefit of its best
efforts in rendering its services as Subadviser. The Subadviser may
contract with or consult with such banks, other securities firms, brokers
or other parties, without additional expense to the Funds, as it may deem
appropriate regarding investment advice, research and statistical data,
clerical assistance or otherwise.
The Subadviser acknowledges that each Fund may engage in certain
transactions in reliance on exemptions under Rule 10f-3, Rule 12d3-1, Rule
17a-10 and Rule 17e-1 under the Investment Company Act. Accordingly, the
Subadviser hereby agrees that it will not consult with any other subadviser
of a Fund, or an affiliated person of such other subadviser, concerning
transactions for such Fund in securities or other fund assets. The
Subadviser shall be limited to providing investment advice with respect to
only the discrete portion of each Fund's portfolio as may be determined
from time-to-time by the Adviser, and shall not consult with any other
subadviser as to any other portion of such Fund's portfolio concerning
transactions for the Fund in securities or other assets.
(b) Brokerage. The Subadviser is authorized, subject to the supervision
of the Adviser and the respective Fund's Board to establish and maintain
accounts on behalf of each Fund with, and place orders for the purchase and
sale of each Fund's Investments with or through, such persons, brokers or
dealers as Subadviser may select which may include, to the extent permitted
by the Adviser and the respective Fund's Board, brokers or dealers
affiliated with the Subadviser or Adviser, and negotiate commissions to be
paid on such transactions. The Subadviser agrees that in placing such
orders for a Fund it shall attempt to obtain best execution, provided that,
the Subadviser may, on behalf of such Fund, pay brokerage commissions to a
broker which provides brokerage and research services to the Subadviser in
excess of the amount another broker would have charged for effecting the
transaction, provided (i) the Subadviser determines in good faith that the
amount is reasonable in relation to the value of the brokerage and research
services provided by the executing broker in terms of the particular
transaction or in terms of the Subadviser's overall responsibilities with
respect to such Fund and the accounts as to which the Subadviser exercises
investment discretion, (ii) such payment is made in compliance with Section
28(e) of the Securities Exchange Act of 1934, as amended, and any other
applicable laws and regulations, and (iii)in the opinion of the Subadviser,
the total commissions paid by such Fund will be reasonable in relation to
the benefits to the Fund over the long term. In reaching such
determination, the Subadviser will not be required to place or attempt to
place a specific dollar value on the brokerage and/or research services
provided or being provided by such broker. It is recognized that the
services provided by such brokers may be useful to the Subadviser in
E-14
connection with the Subadviser's services to other clients. On occasions
when the Subadviser deems the purchase or sale of a security to be in the
best interests of the Fund as well as other clients of the Subadviser, the
Subadviser, to the extent permitted by applicable laws and regulations,
may, but shall be under no obligation to, aggregate the securities to be
sold or purchased in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of
securities so sold or purchased, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
considers to be the most equitable and consistent with its fiduciary
obligations to the Fund or Funds involved and to such other clients. The
Subadviser will report on such allocations at the request of the Adviser,
or the respective Fund's Board, providing such information as the number of
aggregated trades to which a Fund was a party, the broker(s)to whom such
trades were directed and the basis of the allocation for the aggregated
trades.
(c) Securities Transactions. The Subadviser and any affiliated person
of the Subadviser will not purchase securities or other instruments from or
sell securities or other instruments to a Fund ("Principal Transactions");
provided, however, the Subadviser or an affiliated person of the Subadviser
may enter into a Principal Transaction with a Fund if (i) the transaction
is permissible under applicable laws and regulations, including, without
limitation, the Investment Company Act and the Investment Advisers Act and
the rules and regulations promulgated thereunder, and (ii) the transaction
or category of transactions receives the express written approval of the
Adviser.
The Subadviser agrees to observe and comply with Rule 17j-1 under the
Investment Company Act and its Code of Ethics, as the same may be amended
from time to time. The Subadviser agrees to provide the Adviser and the
Funds with a copy of such Code of Ethics.
(d) Books and Records. The Subadviser will maintain all books and
records required to be maintained pursuant to the Investment Company Act
and the rules and regulations promulgated thereunder solely with respect to
transactions made by it on behalf of the Funds including, without
limitation, the books and records required by Subsections (b)(1), (5), (6),
(7), (9), (10) and (11) and Subsection (f) of Rule 31a-1 under the
Investment Company Act and shall timely furnish to the Adviser all
information relating to the Subadviser's services hereunder needed by the
Adviser to keep such other books and records of the Funds required by Rule
31a-1 under the Investment Company Act. The Subadviser will also preserve
all such books and records for the periods prescribed in part (e) of Rule
31a-2 under the Investment Company Act, and agrees that such books and
records shall remain the sole property of the respective Fund and shall be
immediately surrendered to the appropriate Fund upon request. The
Subadviser further agrees that all books and records maintained hereunder
shall be made available to the respective Fund or the Adviser at any time
upon reasonable request and notice, including telecopy, during any business
day.
E-15
(e) Information Concerning Investments and Subadviser. From time to
time as the Adviser or a Fund may request, the Subadviser will furnish the
requesting party reports on portfolio transactions and reports on
Investments held in the portfolios, all in such detail as the Adviser or
the applicable Fund may reasonably request. The Subadviser will make
available its officers and employees to meet with the Board of Directors of
a Fund at the Fund's principal place of business on due notice to review
the Investments of the Fund.
The Subadviser will also provide such information as is customarily
provided by a subadviser and may be required for each Fund or the Adviser
to comply with their respective obligations under applicable laws,
including, without limitation, the Internal Revenue Code of 1986, as
amended (the "Code"), the Investment Company Act, the Investment Advisers
Act, the Securities Act of 1933, as amended (the "Securities Act") and any
state securities laws, and any rule or regulation thereunder.
During the term of this Agreement, the Adviser agrees to furnish the
Subadviser at its principal office all registration statements, proxy
statements, reports to stockholders, sales literature or other materials
prepared for distribution to stockholders of each Fund, or the public that
refer to the Subadviser for Subadviser's review and approval. The
Subadviser shall be deemed to have approved all such materials unless the
Subadviser reasonably objects by giving notice to the Adviser in writing
within five business days (or such other period as may be mutually agreed)
after receipt thereof. The Subadviser's right to object to such materials
is limited to the portions of such materials that expressly relate to the
Subadviser, its services and its clients. The Adviser agrees to use its
best efforts to ensure that materials prepared by its employees or agents
or its affiliates that refer to the Subadviser or its clients in any way
are consistent with those materials previously approved by the Subadviser
as referenced in this paragraph. Sales literature may be furnished to the
Sub-Adviser by first class or overnight mail, facsimile transmission
equipment or hand delivery.
(f) Custody Arrangements. The Subadviser shall provide each Fund's
custodian, on each business day with information relating to all
transactions concerning the Fund's assets.
(g) Compliance with Applicable Laws and Governing Documents. In all
matters relating to the performance of this Agreement, the Subadviser and
its directors, officers, partners, employees and interested persons shall
act in conformity with each Fund's Articles of Incorporation, By-Laws, and
currently effective registration statement and with the written
instructions and directions of each Fund's Board and the Adviser, after
receipt of such documents, from the relevant Fund, and shall comply with
the requirements of the Investment Company Act, the Investment Advisers
Act, the Commodity Exchange Act (the "CEA"), the rules thereunder, and all
other applicable federal and state laws and regulations.
E-16
In carrying out its obligations under this Agreement, the Subadviser
shall ensure that the portion of the Funds allocated to it complies with
all applicable statutes and regulations necessary to qualify such portion
of each Fund as a Regulated Investment Company under Subchapter M of the
Code (or any successor provision), and shall notify the Adviser immediately
upon having a reasonable basis for believing that such portion of a Fund
has ceased to so qualify or that it might not so qualify in the future.
In carrying out its obligations under this Agreement, the Subadviser
shall invest the portion of the assets of Series Z allocated to it by the
Adviser in such a manner as to ensure that such portion complies with the
diversification provisions of Section 817(h) of the Code (or any successor
provision) and the regulations issued thereunder relating to the
diversification requirements for variable insurance contracts and any
prospective amendments or other enacted modifications to Section 817 or
regulations thereunder Subadviser shall notify the Adviser immediately upon
having a reasonable basis for believing that the portion of Series Z
allocated to the Subadviser has ceased to comply and will take all
reasonable steps to adequately diversify the assets of Series Z allocated
to the Subadviser, so as to achieve compliance within the grace period
afforded by Regulation 1.817-5.
(h) Information Concerning the Funds. The Adviser has furnished the
Subadviser with copies of each of the following documents and will furnish
the Subadviser at its principal office all future amendments and
supplements to such documents, if any, as soon as practicable after such
documents become available: (i) the Articles of Incorporation of each Fund,
(ii) the By-Laws of each Fund, (iii) each Fund's registration statement
under the Investment Company Act and the Securities Act of 1933, as
amended, as filed with the Commission, and (iv) any written instructions of
the respective Fund's Board and the Adviser.
(i) Voting of Proxies. The Subadviser shall direct the custodian as to
how to vote such proxies as may be necessary or advisable in connection
with any matters submitted to a vote of shareholders of Investments held by
a Fund.
3. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder, the
Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Funds or the Adviser in any way or
otherwise be deemed an agent of the Funds or the Adviser.
4. COMPENSATION. The Adviser shall pay to the Subadviser, for the services
rendered hereunder, the fee set forth in Exhibit A to this Agreement.
5. EXPENSES. The Subadviser shall bear all expenses incurred by it in
connection with its services under this Agreement and will, from time to time,
at its sole expense employ or associate itself with such persons as it believes
to be particularly fitted to assist it in the execution of its duties hereunder.
However, the Subadviser shall not assign or delegate any of its investment
management duties under this Agreement without the approval of the Adviser and
the appropriate Fund's Board.
E-17
6. REPRESENTATIONS AND WARRANTIES OF SUBADVISER. The Subadviser represents
and warrants to the Adviser and the Funds as follows:
(a) The Subadviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Subadviser will immediately notify the Adviser of the
occurrence of any event that would disqualify the Subadviser from serving
as an investment adviser of an investment company pursuant to Section 9(a)
of the Investment Company Act;
(c) The Subadviser has filed a notice of exemption pursuant to Rule
4.14 under the CEA with the Commodity Futures Trading Commission (the
"CFTC") and the National Futures Association;
(d) The Subadviser is fully authorized under all applicable law to
serve as Subadviser to the Funds and to perform the services described
under this Agreement;
(e) The Subadviser is a limited liability company duly organized and
validly existing under the laws of the state of Kansas with the power to
own and possess its assets and carry on its business as it is now being
conducted;
(f) The execution, delivery and performance by the Subadviser of this
Agreement are within the Subadviser's powers and have been duly authorized
by all necessary action on the part of its members, and no action by or in
respect of or filing with, any governmental body, agency or official is
required on the part of the Subadviser for the execution, delivery and
performance by the Subadviser of this Agreement, and the execution,
delivery and performance by the Subadviser of this Agreement do not
contravene or constitute a default under (i) any provision of applicable
law, rule or regulation, (ii) the Subadviser's governing instruments, or
(iii) any agreement, judgment, injunction, order, decree or other
instrument binding upon the Subadviser;
(g) This Agreement is a valid and binding agreement of the Subadviser;
(h) The Form ADV of the Subadviser previously provided to the Adviser
is a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date, and does not omit to state any material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
(i) The Subadviser has adopted compliance policies and procedures
reasonably designed to prevent violations of the Investment Advisers Act
and the rules thereunder, has provided the Adviser with a copy of such
compliance policies and procedures (and will provide them with any
amendments thereto), and agrees to assist the Funds in complying with the
Funds' compliance program adopted pursuant to Rule 38a-1 under the
Investment Company Act, to the extent
E-18
applicable. The Subadviser understands that the Boards of Directors of the
Funds are required to approve the Subadviser's compliance policies and
procedures and acknowledges that this Agreement is conditioned upon such
Board approval; and
(j) The Subadviser shall not divert any Fund's portfolio securities
transactions to a broker or dealer in consideration of such broker or
dealer's promotion or sales of shares of the Fund, any other series of
Security Equity Fund or SBL Fund, or any other registered investment
company.
7. NON-EXCLUSIVITY. The services of the Subadviser with respect to the
Funds are not deemed to be exclusive, and the Subadviser and its officers shall
be free to render investment advisory and administrative or other services to
others (including other investment companies) and to engage in other activities
so long as its duties hereunder are not impaired thereby.
8. REPRESENTATIONS AND WARRANTIES OF ADVISER. The Adviser represents and
warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Adviser has filed a notice of exemption pursuant to Rule 4.14
under the CEA with the Commodity Futures Trading Commission (the "CFTC")
and the National Futures Association;
(c) The Adviser is a limited liability company duly organized and
validly existing under the laws of the State of Kansas with the power to
own and possess its assets and carry on its business as it is now being
conducted;
(d) The execution, delivery and performance by the Adviser of this
Agreement and the Advisory Agreement are within the Adviser's powers and
have been duly authorized by all necessary action on the part of its
members, and no action by or in respect of or filing with, any governmental
body, agency or official is required on the part of the Adviser for the
execution, delivery and performance by the Adviser of this Agreement, and
the execution, delivery and performance by the Adviser of this Agreement do
not contravene or constitute a default under (i) any provision of
applicable law, rule or regulation, (ii) the Adviser's governing
instruments, or (iii) any agreement, judgment, injunction, order, decree or
other instrument binding upon the Adviser;
(e) This Agreement and the Advisory Agreement are valid and binding
agreements of the Adviser;
(f) The Form ADV of the Adviser previously provided to the Subadviser
is a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
E-19
(g) The Adviser acknowledges that it received a copy of the
Subadviser's Form ADV at least 48 hours prior to the execution of this
Agreement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE INFORMATION.
All representations and warranties made by the Subadviser and the Adviser
pursuant to Sections 6 and 8 hereof shall survive for the duration of this
Agreement and the parties hereto shall promptly notify each other in writing
upon becoming aware that any of the foregoing representations and warranties are
no longer true.
10. LIABILITY AND INDEMNIFICATION.
(a) Liability. In the absence of willful misfeasance, bad faith or
gross negligence on the part of the Subadviser or a breach of its duties
hereunder, the Subadviser shall not be subject to any liability to the
Adviser, to either Fund, or any of either Fund's shareholders, and, in the
absence of willful misfeasance, bad faith or gross negligence on the part
of the Adviser or a breach of its duties hereunder, the Adviser shall not
be subject to any liability to the Subadviser, for any act or omission in
the case of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of
Investments; provided, however, that nothing herein shall relieve the
Adviser and the Subadviser from any of their respective obligations under
applicable law, including, without limitation, the federal and state
securities laws and the CEA.
(b) Indemnification. The Subadviser shall indemnify the Adviser and the
Funds, and their respective officers and directors, for any liability and
expenses, including attorneys' fees, which may be sustained by the Adviser,
or the Funds, as a result of the Subadviser's willful misfeasance, bad
faith, or gross negligence, breach of its duties hereunder or violation of
applicable law, including, without limitation, the federal and state
securities laws or the CEA. The Adviser shall indemnify the Subadviser and
its officers and partners, for any liability and expenses, including
attorneys' fees, which may be sustained as a result of the Adviser's, or
the Funds' willful misfeasance, bad faith, or gross negligence, breach of
its duties hereunder or violation of applicable law, including, without
limitation, the federal and state securities laws or the CEA.
11. DURATION AND TERMINATION.
(a) Duration. This Agreement shall become effective upon the date first
above written, provided that this Agreement shall not take effect with
respect to a Fund unless it has first been approved by a vote of a majority
of those directors of SBL Fund and Security Equity Fund, as applicable, who
are not parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such
approval. This Agreement shall continue in effect for a period of two years
from the date hereof, subject thereafter to being continued in force and
effect from year to year with respect to each Fund if specifically approved
each year by the Board of Directors of the applicable Fund or by the vote
of a
E-20
majority of the Fund's outstanding voting securities. In addition to the
foregoing, each renewal of this Agreement with respect to each Fund must be
approved by the vote of a majority of the applicable Fund's directors who
are not parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such
approval. Prior to voting on the renewal of this Agreement, the Board of
Directors of the applicable Fund may request and evaluate, and the
Subadviser shall furnish, such information as may reasonably be necessary
to enable the Fund's Board of Directors to evaluate the terms of this
Agreement.
(b) Termination. Notwithstanding whatever may be provided herein to the
contrary, this Agreement may be terminated at any time, without payment of
any penalty:
(i) By vote of a majority of the Board of Directors of the
applicable Fund, or by vote of a majority of the outstanding
voting securities of the applicable Fund, or by the Adviser,
in each case, upon sixty (60) days' written notice to the
Subadviser;
(ii) By the Adviser upon breach by the Subadviser of any
representation or warranty contained in Section 6 hereof,
which shall not have been cured within twenty (20) days of
the Subadviser's receipt of written notice of such breach;
(iii) By the Adviser immediately upon written notice to the
Subadviser if the Subadviser becomes unable to discharge its
duties and obligations under this Agreement; or
(iv) By the Subadviser upon 120 days written notice to the Adviser
and the applicable Fund.
This Agreement shall not be assigned (as such term is defined in the
Investment Company Act) without the prior written consent of the parties
hereto. This Agreement shall terminate automatically in the event of its
assignment without such consent or upon the termination of the Advisory
Agreement.
12. DUTIES OF THE ADVISER. The Adviser shall continue to have
responsibility for all services to be provided to the Funds pursuant to the
Advisory Agreement and shall oversee and review the Subadviser's performance of
its duties under this Agreement.
13. AMENDMENT. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment with respect to a Fund
shall be approved by the Board of Directors of the applicable Fund or by a vote
of a majority of the outstanding voting securities of the applicable Fund.
14. NOTICE. Any notice that is required to be given by the parties to each
other (or to the Fund) under the terms of this Agreement shall be in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment
E-21
of receipt, to the parties at the following addresses or facsimile numbers,
which may from time to time be changed by the parties by notice to the other
party:
(a) If to the Subadviser:
Security Global Investors, LLC
2 Embarcadero Center, Suite 2350
San Francisco, CA 94111
Attention: John Boich, Vice President and Head of Global Equity
Facsimile: (415) 274-7702
With a copy to:
Security Benefit Corporation
One Security Benefit Place
Topeka, KS 66636
Attention: General Counsel
Facsimile: (785) 438-3080
(b) If to the Adviser:
Security Investors, LLC
One Security Benefit Place
Topeka, KS 66636-0001
Attention: Richard Goldman, President
Facsimile: (785) 438-3080
(c) If to SBL Fund:
SBL Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 438-3080
(d) If to Security Equity Fund:
Security Equity Fund
One Security Benefit Place
Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 438-3080
15. GOVERNING LAW; JURISDICTION. Except as indicated in Section 19(b) of
this Agreement, this Agreement shall be governed by and construed in accordance
with the laws of the State of Kansas, without regard to its conflicts of law
provisions.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the same
instrument.
E-22
17. CAPTIONS. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
18. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and effect.
19. CERTAIN DEFINITIONS.
(a) "Business day." As used herein, business day means any customary
business day in the United States on which the New York Stock Exchange is
open.
(b) Miscellaneous. As used herein, "investment company," "affiliated
person," "interested person," "assignment," "broker," "dealer" and
"affirmative vote of the majority of the Fund's outstanding voting
securities" shall all have such meaning as such terms have in the
Investment Company Act. The term "investment adviser" shall have such
meaning as such term has in the Investment Advisers Act and the Investment
Company Act, and in the event of a conflict between such Acts, the most
expansive definition shall control. In addition, where the effect of a
requirement of the Investment Company Act reflected in any provision of
this Agreement is relaxed by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
SECURITY INVESTORS, LLC
By:_____________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
SECURITY GLOBAL INVESTORS, LLC
By:_____________________________________
Name: Richard M. Goldman
Title: President
ATTEST:
____________________________________
Name: Amy J. Lee
Title: Secretary
E-23
EXHIBIT A
Compensation
For all services rendered by the Subadviser hereunder, Adviser shall pay to
Subadviser a fee (the "Subadvisory Fee") at an annual rate of 1.45% of that
portion of each Fund's net assets that the Adviser has allocated to Subadviser
for management ("Subadviser Assets").
For purposes of calculating the compensation to be paid hereunder, the
Subadviser Assets shall be computed in the same manner at the end of the
business day as the value of such net assets is computed in connection with the
determination of the net asset value of each Fund's shares as described in the
then current prospectus for the applicable Fund.
The Subadvisory Fee shall be accrued for each calendar day the Subadviser
renders subadvisory services hereunder and the sum of the daily fee accruals
shall be paid monthly to the Subadviser as soon as practicable following the
last day of each month, by wire transfer if so requested by the Subadviser, but
no later than ten (10) business days thereafter. If this Agreement shall be
effective for only a portion of a year, then the Subadviser's fee for said year
shall be prorated for such portion.
E-24
APPENDIX F
INFORMATION REGARDING THE SUB-ADVISORY AGREEMENTS AND
FEES PAID TO THE SUB-ADVISER
Security Global Investors, LLC (the "Sub-Adviser") currently serves as
sub-adviser to Rydex|SGI Alpha Opportunity Fund, Rydex|SGI Global Fund and
Rydex|SGI Global Institutional Fund, each a series of Security Equity Fund, and
Series D (Global Series) and Series Z (Alpha Opportunity Series), each a series
of SBL Fund (collectively, the "Funds"), pursuant to the investment sub-advisory
agreements (collectively, the "Sub-Advisory Agreements") between Security
Investors, LLC, the Funds' investment manager (the "Investment Manager"), and
the Sub-Adviser. The table and its accompanying footnotes below provide the
following information:
(i) the date of each Sub-Advisory Agreement;
(ii) the date on which a Fund's shareholders last approved the Fund's
Sub-Advisory Agreement;
(iii) the annual rate of sub-advisory fees paid by the Investment Manager
to the Sub-Adviser for the Sub-Adviser's sub-advisory services to a
Fund; and
(iv) the aggregate amount of advisory fees paid by the Investment Manager
to the Sub-Adviser for the Sub-Adviser's sub-advisory services to a
Fund during the Fund's fiscal year ended September 30, 2009 for
series of Security Equity Fund and December 31, 2009 for series of
SBL Fund.
F-1
DATE OF DATE OF LAST
SUB-ADVISORY SHAREHOLDER SUB-ADVISORY FEES
COMPANIES AND FUNDS AGREEMENT APPROVAL SUB-ADVISORY FEES PAID TO SUB-ADVISER
-----------------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY FUND
-----------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI Alpha Opportunity Fund August 15, 2008 August 5, 2008 1.45%(1) $ 224,704
Rydex|SGI Global Fund February 8, 2008 July 27, 2007 0.35% on the first $300 million; $ 325,729
0.30% on the next $450 million;
and 0.25% thereafter(2)
Rydex|SGI Global Institutional Fund February 8, 2008 February 8, 2008 0.35% on the first $300 million; $ 19,912
0.30% on the next $450 million;
and 0.25% thereafter(2)
SBL FUND
-----------------------------------------------------------------------------------------------------------------------------------
Series D (Global Series) February 8, 2008 July 27, 2007 0.35% on the first $300 million; $ 878,016
0.30% on the next $450 million;
and 0.25% thereafter(2)
Series Z (Alpha Opportunity Series) August 15, 2008 August 5, 2008 1.45%(1) $ 131,302
(1) These annual fees are stated as a percentage of a portion of the Fund's net
assets managed by the Sub-Adviser. Another portion of the Fund's assets is
managed by Mainstream Investment Advisers, LLC, which is not affiliated with
the Fund.
(2) These annual fees are stated as a percentage of the combined average daily
net assets of Rydex|SGI Global Fund, Rydex|SGI Global Institutional Fund and
Series D (Global Series) managed by the Sub-Adviser.
F-2
APPENDIX G
OUTSTANDING SHARES
As of February 24, 2010, the total number of shares outstanding for each
Fund and for each class of each Fund is set forth in the table below:
SECURITY EQUITY FUND
-------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
---------------------------------------------------------------------------------------------------
INSTITUTIONAL
FUNDS CLASS A CLASS B CLASS C CLASS TOTAL
-------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI All Cap 150,551.8740 N/A 51,905.4570 28,629.1170 231,086.4480
Value Fund
Rydex|SGI Alpha 1,022,911.2150 157,968.6590 183,376.4950 132,905.8990 1,497,162.2680
Opportunity Fund
Rydex|SGI Global Fund 8,202,652.5510 1,054,390.0990 533,638.3890 N/A 9,790,681.0390
Rydex|SGI Global N/A N/A N/A 526,107.5490 526,107.5490
Institutional Fund
Rydex|SGI Large Cap 4,278,459.5390 948,008.4430 510,108.4560 N/A 5,736,576.4380
Concentrated Growth Fund
(formerly Rydex|SGI
Select 25 Fund)
Rydex|SGI Large Cap 43,055,137.9920 2,564,523.9090 597,032.0750 N/A 46,216,693.9760
Core Fund (formerly
Rydex|SGI Equity Fund)
Rydex|SGI Mid Cap 32,069,144.2940 2,216,297.1680 6,697,870.1200 N/A 40,983,311.5820
Value Fund
Rydex|SGI Mid Cap N/A N/A N/A 317,250.2240 317,250.2240
Value Institutional
Fund
Rydex|SGI Small Cap 921,724.3760 160,826.3990 150,878.5190 N/A 1,233,429.2940
Growth Fund
Rydex|SGI Small Cap 444,550.4700 N/A 68,912.8610 59,254.2710 572,717.6020
Value Fund
G-1
SECURITY LARGE CAP VALUE FUND
-------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
---------------------------------------------------------------------------------------------------
INSTITUTIONAL
FUNDS CLASS A CLASS B CLASS C CLASS TOTAL
-------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI Large Cap 7,114,996.5720 661,542.1530 442,692.7730 N/A 8,219,231.4980
Value Fund
Rydex|SGI Large Cap N/A N/A N/A 317,250.2240 317,250.2240
Value Institutional Fund
SECURITY MID CAP GROWTH FUND
-------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
---------------------------------------------------------------------------------------------------
FUNDS CLASS A CLASS B CLASS C TOTAL
-------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI Mid Cap 10,195,994.2350 1,033,882.0690 918,873.5100 12,148,749.8140
Growth Fund
SECURITY INCOME FUND
-------------------------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
---------------------------------------------------------------------------------------------------
INSTITUTIONAL
FUNDS CLASS A CLASS B CLASS C CLASS TOTAL
-------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI High Yield Fund 11,724,879.6660 550,824.2410 656,196.3030 488,542.2980 13,420,442.5080
Rydex|SGI U.S. 26,102,169.1640 3,809,424.7210 5,047,395.5160 N/A 34,958,989.4010
Intermediate Bond Fund
SBL FUND
---------------------------------------------------------------------
SHARES OUTSTANDING
------------------
FUNDS TOTAL
---------------------------------------------------------------------
Series A (Equity Series) 9,163,252.6420
Series B (Large Cap Value Series) 12,425,049.1190
Series C (Money Market Series) 11,081,556.7610
Series D (Global Series) 29,638,552.4610
Series E (U.S. Intermediate Bond Series) 10,539,948.9450
Series H (Enhanced Index Series) 5,221,653.6250
Series J (Mid Cap Growth Series) 6,270,236.1160
Series N (Managed Asset Allocation Series) 4,483,917.7380
Series O (All Cap Value Series) 8,278,335.3740
Series P (High Yield Series) 5,322,843.1720
G-2
SBL FUND
---------------------------------------------------------------------
SHARES OUTSTANDING
------------------
FUNDS TOTAL
---------------------------------------------------------------------
Series Q (Small Cap Value Series) 4,379,892.3540
Series V (Mid Cap Value Series) 6,126,013.7160
Series X (Small Cap Growth Series) 2,372,138.0380
Series Y (Select 25 Series) 4,755,562.3980
Series Z (Alpha Opportunity Series) 1,528,994.5830
G-3
APPENDIX H
BENEFICIAL OWNERS OF MORE THAN 5% OF A CLASS OF EACH FUND
As of February 24, 2010, the following persons owned, of record and
beneficially (unless otherwise indicated), 5% or more* of a class of each Fund's
outstanding securities:
RYDEX|SGI ALL CAP VALUE FUND
---------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
---------------------------------------------------------------------------------------------------
Class A Security Benefit Corp. 28,512.8930 19%
c/o One Security Benefit Pl.
Topeka, KS 66636-1000
Class C Security Benefit Corp. 28,463.7560 55%
One Security Benefit Pl.
Topeka, KS 66636-1000
Pershing LLC 5,358.4520 10%
P.O. Box 2052
Jersey City, NJ 07303-2052
Institutional Class Security Benefit Corp. 28,629.1170 100%
One Security Benefit Pl.
Topeka, KS 66636-1000
RYDEX|SGI ALPHA OPPORTUNITY FUND
---------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
---------------------------------------------------------------------------------------------------
Class A Security Benefit Life Insurance 646,744.8609 63%
Company One Security Benefit Pl.
Topeka, KS 66636-1000
Institutional Class Garvin, Gregory J. 8,716.3180 7%
8623 Stowe Creek Lane
Missouri City, TX 77459-6175
Huffman, John G. 6,704.7960 5%
2239 Belle
Topeka, KS 66614
Lee, Amy J. 10,735.0308 8%
c/o One Security Benefit Pl.
Topeka, KS 66636-1000
Dandy, Linda L. 12,864.9390 10%
4731 NW 46th St.
Topeka, KS 666148
RYDEX|SGI GLOBAL FUND
---------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
---------------------------------------------------------------------------------------------------
Class A Security Benefit Life Insurance 4,867,742.03 59%
One Security Benefit Pl.
Topeka, KS 66636-1000
H-1
RYDEX|SGI GLOBAL INSTITUTIONAL FUND (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Rydex|SGI Global Lee, Amy J. 31,221.2564 6%
Institutional Fund c/o One Security Benefit Pl.
Topeka, KS 66636-1000
RYDEX|SGI LARGE CAP CONCENTRATED GROWTH FUND (FORMERLY RYDEX|SGI SELECT 25 FUND)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Class A Rydex EPT Moderate 355,188.8610 8%
9601 Blackwell Rd, Suite 500
Rockville, MD 20850-6478
Security Benefit Life Insurance Company 803,769.5241 19%
One Security Benefit Pl.
Topeka, KS 66636-1000
Rydex EPT Aggressive 218,866.3670 5%
9601 Blackwell Rd, Suite 500
Rockville, MD 20850-6478
RYDEX|SGI LARGE CAP CORE FUND (FORMERLY RYDEX|SGI EQUITY FUND)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Class A Security Benefit Life Insurance Company 6,975,402.3062 16%
One Security Benefit Pl.
Topeka, KS 66636-1000
RYDEX|SGI MID CAP VALUE FUND
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
----------------------------------------------------------------------------------------------------
Class A Prudential Investment 5,413,186.6050 17%
Management Service
Gateway Center 3, 11th Floor
100 Mulberry St.
Newark, NJ 07102-4056
Security Benefit Life Insurance Company 4,576,442.008 14%
One Security Benefit Pl.
Topeka, KS 66636-1000
Class C Merrill Lynch, Pierce, 1,404,196.2670 21%
Fenner & Smith, Inc.
4800 E. Deer Lake Dr.
Jacksonville, FL 32246-6484
RYDEX|SGI MID CAP VALUE INSTITUTIONAL FUND (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Rydex|SGI Mid Charles Schwab & Co. Inc. 13,151,893.8800 38%
Cap Value 101 Montgomery St.
Institutional Fund San Francisco, CA 94104-4151
Equitable Trust Company 2,666,331.7740 8%
4400 Harding Road, Suite 310
Nashville, TN 37205-2314
H-2
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
---------------------------------------------------------------------------------------------------
Rydex|SGI Mid Merrill Lynch, Pierce, 13,749,816.2600 40%
Cap Value Fenner & Smith, Inc.
Institutional Fund 4800 E. Deer Lake Dr.
Jacksonville, FL 32246-6484
RYDEX|SGI SMALL CAP GROWTH FUND
---------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
---------------------------------------------------------------------------------------------------
Class A Security Benefit Life Insurance Company 493,337.0893 54%
One Security Benefit Pl.
Topeka, KS 66636-1000
RYDEX|SGI SMALL CAP VALUE FUND
---------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
---------------------------------------------------------------------------------------------------
Class A Security Benefit Corp. 36,921.3890 8%
One Security Benefit Pl.
Topeka, KS 66636-1000
Oliverius, Maynard F. 52,168.1190 12%
c/o One Security Benefit Pl.
Topeka, KS 66636-1000
Craig, Harry W. 30,553.5590 7%
c/o One Security Benefit Pl.
Topeka, KS 66636-1000
Class C Security Benefit Corp. 36,939.8560 54%
One Security Benefit Pl.
Topeka, KS 66636-1000
Merrill Lynch, Pierce, 6,671.7670 10%
Fenner & Smith, Inc.
4800 E. Deer Lake Dr.
Jacksonville, FL 32246-6484
Institutional Class Security Benefit Corp. 36,914.2420 62%
One Security Benefit Pl.
Topeka, KS 66636-1000
Merrill Lynch, Pierce, 22,340.0290 38%
Fenner & Smith, Inc.
4800 E. Deer Lake Dr.
Jacksonville, FL 32246-6484
RYDEX|SGI LARGE CAP VALUE FUND
---------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
---------------------------------------------------------------------------------------------------
Class A Rydex EPT Moderate 408,744.4670 6%
9601 Blackwell Rd, Suite 500
Rockville, MD 20850-6478
Security Benefit Life Insurance Company 3,194,515.375 45%
One Security Benefit Pl.
Topeka, KS 66636-1000
Class C Mantony, Jesse J. 22,307.9140 5%
7200 E. 130th St.
Grandview, MO 64030-2702
H-3
RYDEX|SGI MID CAP GROWTH FUND
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Class A Security Benefit Life Insurance Company 2,650,340.7437 26%
One Security Benefit Pl.
Topeka, KS 66636-1000
RYDEX|SGI HIGH YIELD FUND
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Class A Charles Schwab & Co. Inc. 2,751,065.3340 23%
9601 E. Panorama Cir.
Englewood, CO 80112-3441
Security Benefit Life Insurance Company 2,576,666.982 22%
One Security Benefit Pl.
Topeka, KS 66636-1000
Institutional Class UMBSC & Co. 113,005.6030 23%
P.O. Box 419260
Kansas City, MO 64141-6260
Merrill Lynch, Pierce, 257,652.7770 53%
Fenner & Smith, Inc.
4800 E. Deer Lake Dr.
Jacksonville, FL 32246-6484
RYDEX|SGI U.S. INTERMEDIATE BOND FUNDS
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Class A Rydex EPT Moderate 1,673,938.9010 6%
9601 Blackwell Rd., Suite 500
Rockville, MD 20850-6478
Security Benefit Life Insurance Company 13,009,136.352 50%
One Security Benefit Pl.
Topeka, KS 66636-1000
UMBSC & Co. 1,326,218.5110 5%
P.O. Box 419260
Kansas City, MO 64141-6260
SERIES B (LARGE CAP VALUE SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series B Security Benefit Life Insurance Company 12,267,763.8154 99%
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES C (MONEY MARKET SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series C Security Benefit Life Insurance Company 10,664,396.7248 96%
One Security Benefit Pl.
Topeka, KS 66636-1000
H-4
SERIES D (GLOBAL SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
-------------------------------------------------------------------------------------------------
Series D Security Benefit Life Insurance Company 29,246,983.8329 99%
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES E (U.S. INTERMEDIATE BOND SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series E Security Benefit Life Insurance Company 9,961,258.3551 95%
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES H (ENHANCED INDEX SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series H Security Benefit Life Insurance Company 5,149,011.7511 99%
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES J (MID CAP GROWTH SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series J Security Benefit Life Insurance Company 6,191,610.7595 99%
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES N (MANAGED ASSET ALLOCATION SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series N Security Benefit Life Insurance Company 4,411,328.8113 98%
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES O (ALL CAP VALUE SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series O Security Benefit Life Insurance Company 8,084,418.7656 98%
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES P (HIGH YIELD SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series P Security Benefit Life Insurance Company 5,031,255.632 95%
One Security Benefit Pl.
Topeka, KS 66636-1000
H-5
SERIES Q (SMALL CAP VALUE SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series Q Security Benefit Life Insurance Company 4,222,691.734 96%
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES V (MID CAP VALUE SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series V Security Benefit Life Insurance Company 5,925,924.9569 97%
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES X (SMALL CAP GROWTH SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series X Security Benefit Life Insurance Company 2,319,268.5039 98%
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES Y (SELECT 25 SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series Y Security Benefit Life Insurance Company 4,356,157.9937 92%
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES Z (ALPHA OPPORTUNITY SERIES) (A single-class fund)
----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED THE FUND
----------------------------------------------------------------------------------------------------
Series Z Security Benefit Life Insurance Company 1,495,156.5353 98%
One Security Benefit Pl.
Topeka, KS 66636-1000
* A party holding in excess of 25% of the outstanding voting securities of a
Fund is presumed to be a "control person" (as defined in the 1940 Act) of such
Fund, based on the substantial ownership interest held and the party's
resultant ability to influence voting on certain matters submitted for
shareholder consideration.
H-6
APPENDIX I
MANAGEMENT OWNERSHIP
As of February 24, 2010, the Directors and officers owned, of record and
beneficially (unless otherwise indicated), as a group, the following of each
Fund's outstanding securities:
RYDEX|SGI ALPHA OPPORTUNITY FUND
------------------------------------------------------------------------------------------------
TITLE OF THE CLASS AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
------------------------------------------------------------------------------------------------
Institutional Class 16,356.62 12.31%
RYDEX|SGI GLOBAL INSTITUTIONAL FUND (A single-class fund)
------------------------------------------------------------------------------------------------
NAME OF THE FUND AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
------------------------------------------------------------------------------------------------
Rydex|SGI Global 56,727.5189 10.78%
Institutional Fund
RYDEX|SGI SMALL CAP VALUE FUND
------------------------------------------------------------------------------------------------
TITLE OF THE CLASS AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
------------------------------------------------------------------------------------------------
Class A 96,649.1530 21.70%
RYDEX|SGI LARGE CAP VALUE INSTITUTIONAL FUND (A single-class fund)
------------------------------------------------------------------------------------------------
NAME OF THE FUND AMOUNT OF SHARES OWNED PERCENTAGE OF THE FUND
------------------------------------------------------------------------------------------------
Rydex|SGI Large Cap Value 17,172.2489 5.41%
Institutional Fund
RYDEX|SGI HIGH YIELD FUND
------------------------------------------------------------------------------------------------
TITLE OF THE CLASS AMOUNT OF SHARES OWNED PERCENTAGE OF THE CLASS
------------------------------------------------------------------------------------------------
Institutional Class 12,766.8973 2.61%
I-1
[FORM OF PROXY CARD]
[FUND NAME PRINTS HERE]
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS - APRIL 23, 2010
The undersigned hereby appoint(s) Donald A. Chubb Jr., Amy J. Lee and Brenda M.
Harwood, or any one of them, proxies, each of them with full power of
substitution, to vote and act with respect to all shares of the above referenced
fund (the "Fund") which the undersigned is entitled to vote at the Special
Meeting of shareholders of the Fund to be held at the executive offices of
Security Investors, LLC at One Security Benefit Place, Topeka, Kansas 66636 on
April 23, 2010 at 1:00 p.m. Central Time, and at any adjournment(s) or
postponements thereof.
QUESTIONS ABOUT THIS PROXY? Should you have any questions about the proxy
materials or regarding how to vote your shares, please contact our proxy
information line toll-free at 1-877-864-5058. Representatives are available
Monday through Friday 9:00 a.m. to 11:00 p.m. Eastern Time. We have retained
The Altman Group to assist our shareholders in the voting process. If we have
not received your proxy card or vote as the date of the special meeting
approaches, representatives from The Altman Group may call you to remind you to
exercise your vote.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THIS SPECIAL
MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 2010
THE PROXY STATEMENT FOR THIS MEETING IS AVAILABLE AT:
WWW.PROXYONLINE.COM/DOCS/RYDEXSGI3.PDF.
--------------------------------------------------------------------------------
PLEASE FOLD HERE AND RETURN THE ENTIRE BALLOT - DO NOT DETACH
PLEASE SEE THE INSTRUCTIONS BELOW IF YOU WISH TO VOTE BY PHONE (live proxy
representative or touch-tone phone), BY MAIL OR VIA THE INTERNET. Please 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. Please vote today!
PHONE: To cast your vote by phone with a proxy voting representative, call
toll-free 1-877-864-5058 and provide the representative with the
control number found on the reverse side of this proxy card.
Representatives are available to take your voting instructions Monday
through Friday 9:00 a.m. to 10:00 p.m. Eastern Time.
MAIL: To vote your proxy by mail, check the appropriate voting box on the
reverse side of this proxy card, sign and date the card and return it
in the enclosed postage-paid envelope.
Options below are available 24 hours a day / 7 days a week
PHONE: To cast your vote via a touch-tone voting line, call toll-free
1-877-864-5058 and enter the control number found on the reverse side
of this proxy card.
INTERNET: To vote via the Internet, go to WWW.PROXYONLINE.COM and enter the
control number found on the reverse side of this proxy card.
NOTE: This proxy must be signed exactly as your name(s) appears hereon. If as
an attorney, executor, guardian or in some representative capacity or as an
officer of a corporation, please add titles as such. Joint owners must each
sign. By signing this proxy card, you acknowledge that you have received the
proxy statement that the proxy card accompanies.
Shareholder sign here Date Joint owner sign here Date
IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. EVERY SHAREHOLDER'S VOTE IS
IMPORTANT.
IF YOU RECEIVED MORE THAN ONE BALLOT BECAUSE YOU HAVE MULTIPLE INVESTMENTS IN
THE FUNDS, PLEASE REMEMBER TO VOTE ALL OF YOUR BALLOTS!
Remember to SIGN AND DATE THE REVERSE SIDE before mailing in your vote. This
proxy card is valid only when signed and dated.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY CARD
WILL BE VOTED AS INSTRUCTED. IF NO SPECIFICATION IS MADE, THE PROXY CARD WILL
BE VOTED "FOR" THE PROPOSALS. THE PROXIES ARE AUTHORIZED, IN THEIR DISCRETION,
TO VOTE UPON SUCH MATTERS AS MAY COME BEFORE THE SPECIAL MEETING OR ANY
ADJOURNMENTS.
PLEASE FOLD HERE AND RETURN THE ENTIRE BALLOT - DO NOT DETACH
--------------------------------------------------------------------------------
TO VOTE, MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. Example: []
1. To approve a new investment management agreement between the Fund and
Security Investors, LLC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve a new investment sub-advisory agreement between Security
Investors, LLC and Security Global Investors, LLC for Rydex|SGI Alpha
Opportunity Fund, Rydex|SGI Global Fund, Rydex|SGI Global Institutional
Fund, Series D (Global Series) and Series Z (Alpha Opportunity Series).
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THANK YOU FOR VOTING