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:
[X] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[ ] 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 to you on an important matter relating to the Rydex|SGI family
of funds (the "Funds"). On September 21, 2011, Security Investors, LLC (the
"Investment Manager"), an indirect wholly-owned subsidiary of an entity that is
managed by a subsidiary of Guggenheim Capital, LLC ("Guggenheim Capital"),
announced a transaction whereby Guggenheim Capital will acquire 100% of the
Investment Adviser and certain affiliated businesses. This transaction is
expected to be completed in late 2011 or early 2012.
This transaction will 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 will remain the same and your daily experience
in dealing with the Funds will remain unchanged. However, for legal reasons, the
transaction could be deemed to terminate the Funds' investment management
agreements with the Investment Manager unless you approve new, substantially
identical, agreements.
Accordingly, by this joint proxy statement, we are requesting that you vote
to approve investment management agreements to take the place of the current
agreements, so that the Investment Manager may continue to manage the Funds
after the transaction is completed in a manner that is substantially similar to
the current management of 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").
In addition, you will be asked to elect seven individuals to the Boards of
Directors of Security Equity Fund, Security Large Cap Value Fund, Security Mid
Cap Growth Fund, Security Income Fund and SBL Fund.
If you are an insurance product owner of SBL Fund--Series N (Managed Asset
Allocation Series) ("Series N"), we are requesting that you vote to approve a
change to Series N's "fundamental investment policy" on diversification of
investments.
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 November 22, 2011 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 October 3, 2011, you are entitled to vote at the Meeting and any
adjournment of the Meeting, even if you no longer own Fund shares or an
insurance product.
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 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 November 22, 2011.
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 and vote on
the 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 matters concerning the Rydex|SGI family of funds (the
"Funds").
Proposal 1 relates to actions that need to be taken in light of a
transaction (the "Transaction") involving a change in the corporate
ownership structure of Security Investors, LLC, the investment manager to
each of the Funds (the "Investment Manager"). Guggenheim Capital, LLC
("Guggenheim Capital"), through an indirect subsidiary manages the
Investment Manager and certain of its affiliates through an indirect
subsidiary. Pursuant to the Transaction, Guggenheim Capital has agreed to
acquire the Investment Manager and certain affiliated businesses. The
Transaction could be deemed to terminate the Funds' current investment
management agreements with the Investment Manager (the "Current Investment
Management Agreements") unless you approve new substantially identical
agreements (attached hereto as Appendix B).
Proposal 2 relates to the election of seven individuals to the Boards of
Directors (collectively, the "Board") of Security Equity Fund, Security
Large Cap Value Fund, Security Mid Cap Growth Fund, Security Income Fund
and SBL Fund (the "Companies"). The Board proposes the election of the
following nominees: Donald C. Cacciapaglia, Donald A. Chubb, Jr., Harry W.
Craig, Jr., Jerry B. Farley, Richard M. Goldman, Penny A. Lumpkin and
Maynard F. Oliverius. Each of the nominees, other than Mr. Cacciapaglia,
currently serves as a Director. In connection with the Transaction, the
Board believes that expanding the Board to include Mr. Cacciapaglia, who
is a member of senior management of Guggenheim's investment management
business, and who would serve on other boards in the Rydex|SGI family of
funds, would be beneficial to the Funds and their shareholders. For
regulatory and governance reasons (in order to maintain the balance on the
Board among Directors who are non-interested and those who have
affiliations with the Investment Manager so that at least 75% of Directors
are non-interested), the term of Mr. Cacciapaglia, an "interested person"
(as that term is defined for regulatory purposes) would not be effective
until an additional non-interested Director is appointed by the Board (or
the 75% balance is otherwise maintained). This search for an additional
non-interested Director is still underway. Shareholders will not be asked
to vote on the initial election of this additional non-interested Director.
Proposal 3 only concerns insurance product owners of SBL Fund--Series N
(Managed Asset Allocation Series) ("Series N"). Investors in other Funds
are not asked to vote on
the third proposal. The third proposal relates to a proposed change to the
"fundamental investment policy" on diversification of investments for
Series N to permit Series N to make changes to its investment program as
discussed in more detail below. Currently, Series N's diversification
policy is more prohibitive than necessary and than applicable law requires.
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, provides that a mutual fund's
investment management agreement terminates whenever there is a "change in
control" of the investment manager. The change in the corporate ownership
structure of the Investment Manager contemplated by the Transaction could
potentially be deemed to constitute a "change in control" (as this term is
used for regulatory purposes) of the Investment Manager. Before an
investment management agreement terminates, a new investment management
agreement must be in effect in order for the investment manager to
continue to manage the mutual fund's investments. For that reason, we are
seeking shareholder approval of new investment management agreements for
the Funds (the "New Investment Management Agreements").
The Transaction will not result in material changes to the day-to-day
management and operations of the Funds or any increase in fees. The
personnel, officers and managers of the Investment Manager will remain the
same. Upon completion of the Transaction, Guggenheim Capital will be the
parent company of the Investment Manager.
The Board considered the Transaction and voted in favor of the New
Investment Management Agreements, pursuant to which, subject to their
approval by each Fund's respective shareholders, the Investment Manager
will continue to serve as investment manager to the Funds after the
completion of the Transaction. The fees charged by the Investment Manager
for its services to the Funds under the New Investment Management
Agreements will be the same as its fees under the Current Investment
Management Agreements. The other terms of the New Investment Management
Agreements will also be the same in all material respects to those of the
Current Investment Management Agreements.
With respect to the second proposal, you are being asked to vote for the
election of board members ("Directors") because the Board believes it
would be appropriate, in light of the Transaction, to subject the current
Directors to a shareholder vote and to ask shareholders to vote to add a
new Director who is affiliated with Guggenheim Capital (if, as discussed
above, an additional non-interested Director is appointed to the Board in
the future). The Board believes that it is in shareholders' best interest,
to the extent practicable, to have a Board that is composed of elected
Directors.
With respect to the third proposal, the 1940 Act requires Series N's
shareholders to approve a change to Series N's "fundamental investment
policies," including Series N's policy with respect to diversification of
investments. Diversification relates in particular to the percentage of
assets that may be invested in a single issuer's securities. Series N
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currently has in place a fundamental investment policy on diversification
of investments that is more prohibitive than the 1940 Act requires, which
unnecessarily limits investment strategies, in particular, the ability of
Series N to invest in the securities of other mutual funds to the extent
permitted by law. Upon a request from management of Series N to make
changes to Series N's investment program and invest a larger portion of
the Fund's assets in other funds, the Board has reviewed Series N's
fundamental investment policy on diversification of investments and has
recommended a change intended to provide Series N with more flexibility to
make investments in other funds. The proposal to amend Series N's
fundamental investment policy on diversification of investments is
unrelated to the Transaction and only concerns insurance product owners of
Series N.
Q. WILL THE PROPOSED TRANSACTION AFFECT ME?
A. No. The operations of the Investment Manager, the fees payable to the
Investment Manager and the persons responsible for the day-to-day
investment management of the Funds will 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 Transaction.
Q. WILL THERE BE ANY CHANGES TO THE FUNDS' OTHER SERVICE PROVIDERS?
A. The Transaction could also be deemed to affect the control of the Funds'
principal underwriter/distributor (co-principal underwriter/distributor
with respect to SBL Fund), Rydex Distributors, LLC (the "Distributor"),
and transfer agent, Rydex Fund Services, LLC (the "Transfer Agent"),
affiliates of the Investment Manager because they are commonly held. The
Board was assured that there will be no material change in the nature or
quality of the services provided by the Distributor to each Fund, as
applicable, and Transfer Agent, due to the Transaction. The Board has
approved the continuation of services from the Distributor and Transfer
Agent. Under the 1940 Act, shareholder approval is not required in order
for the Distributor and Transfer Agent to continue providing services to
the Funds after the closing of the Transaction. The Transaction will not
affect the control of Security Distributors, Inc., the co-principal
underwriter for the series of SBL Fund. In addition, the Investment
Manager, which also serves as each Fund's administrator under separate
agreements with the Funds, will continue to serve in that role without the
need for shareholder approval.
Q. WILL MY FUND'S FEES FOR INVESTMENT MANAGEMENT AND SUB-ADVISORY SERVICES
INCREASE?
A. No. The fee rates under the New Investment Management Agreement are
identical to those under the Current Investment Management Agreement.
Services also will remain substantially the same.
Q. FOR INSURANCE PRODUCT OWNERS OF SERIES N ONLY. WHAT EFFECT WILL THE
PROPOSED CHANGE TO SERIES N'S FUNDAMENTAL INVESTMENT POLICY ON
DIVERSIFICATION HAVE ON SERIES N?
A. While this proposal is intended to provide Series N with greater
flexibility to invest in other funds, Series N would continue to be managed
subject to the diversification limitations imposed by the 1940 Act, as
interpreted or modified by regulatory authority
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having jurisdiction from time to time, as well as the investment
objectives, strategies, and policies expressed in Series N's registration
statement as may be changed by the Board from time to time.
If the proposal is approved by shareholders, Series N would be permitted to
invest a greater percentage of its total assets in the shares of other
investment companies. As a shareholder of another investment company,
Series N would bear, along with other shareholders, its pro rata portion of
the other investment company's expenses, including advisory fees and would
be exposed to the risks attributable to investing in the selected funds.
These expenses would be in addition to the advisory and other expenses that
Series N bears directly in connection with its own operations.
Notwithstanding the proposed change, at all times, Series N will comply
with the provisions of the 1940 Act that apply to investments in other
investment companies.
This third proposal is motivated by the decision to change Series N's
investment objective and strategies in order to use a different asset
allocation strategy that involves, among other things, investments in other
mutual funds and exchange traded funds ("ETFs"). Series N's current
diversification limitations restrict unnecessarily the Fund's ability to
invest in other investment companies (e.g., mutual funds and ETFs) so the
Investment Manager proposed, and the Board agreed, to change Series N's
diversification limitations in order to permit additional investments in
investment companies.
Should Series N's shareholders not approve the proposal to amend Series N's
fundamental investment policy on diversification of investments, the Fund's
current fundamental investment policy on diversification of investments
would continue to apply unchanged and the Board would decide whether to
make changes to Series N's investment program.
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 November 22, 2011
(the "Meeting"), and, if the Meeting is adjourned or postponed, at any
later meetings, for the purposes stated in the Notice of Special Joint
Meeting.
Q. HOW DOES THE BOARD SUGGEST THAT I VOTE?
A. After careful consideration, the Board unanimously recommends that you vote
"FOR" all of the proposals contained in the Joint Proxy Statement. Please
see the section entitled
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"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 concurrently for
all of the Funds. You will be asked to vote separately on the proposals
with respect to the Fund(s) that you own. Assuming that the requisite
levels of aggregate shareholder consent are attained, 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.
Q. WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
A. To be approved with respect to a particular Fund, the New Investment
Management Agreement must be approved by a vote of a majority of the
outstanding voting securities of that Fund. In addition, with respect to
Series N, the proposed change to Series N's fundamental investment policy
on diversification of investment also must be approved by a vote of a
majority of the outstanding voting securities of Series N. 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.
With respect to Proposal 2, each shareholder is entitled to vote that
number of shares owned as of the record date multiplied by the number of
Directors to be elected. A shareholder may cast all such votes for a single
director or distribute them among two or more directors. This method of
voting for the election of directors is commonly known as "cumulative
voting." A plurality of the combined votes cast at the Meeting by the
shareholders of a Company is sufficient to approve the election of a
Director.
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
Investment Management Agreements and generate unnecessary costs.
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Q. I'M A SBL FUND 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 SBL 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 SBL Fund 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.
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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
(800) 820-0888
NOTICE OF SPECIAL JOINT MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 22, 2011
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 November 22, 2011 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 THE ELECTION OF NOMINEES ALL FUNDS
TO THE BOARD OF DIRECTORS
3. THE APPROVAL OF A CHANGE TO THE SERIES N (MANAGED ASSET ALLOCATION
FUNDAMENTAL INVESTMENT POLICY ON SERIES)
DIVERSIFICATION OF INVESTMENTS
4. TO TRANSACT SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING
After careful consideration, the Board of Directors of each Company
unanimously recommends that shareholders vote "FOR" Proposals 1 and 3 and "FOR"
the election of all nominees.
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 October 3, 2011 are entitled to notice of, and to vote at,
the Meeting, even if you no longer own an
- vii -
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 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 NOVEMBER 22, 2011
SECURITY EQUITY FUND
Rydex|SGI All Cap Value Fund Rydex|SGI Large Cap Rydex|SGI Mid Cap Value Fund
Rydex|SGI Alpha Opportunity Fund Concentrated Growth Fund Rydex|SGI Mid Cap Value
Rydex|SGI MSCI EAFE Equal Weight Fund Rydex|SGI Large Cap Core Fund Institutional Fund
(formerly Rydex|SGI Global Fund) Rydex|SGI Small Cap Value Fund Rydex|SGI Small Cap Growth Fund
(formerly Rydex|SGI Global 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 (Large Cap Core Series) Series J (Mid Cap Growth Series) Series Q (Small Cap Value Series)
Series B (Large Cap Value Series) Series N (Managed Asset Allocation Series) Series V (Mid Cap Value Series)
Series C (Money Market Series) Series O (All Cap Value Series) Series X (Small Cap Growth Series)
Series D (MSCI EAFE Equal Series P (High Yield Series) Series Y (Large Cap
Weight Series) (formerly Series D Concentrated Growth Series)
(Global Series)) Series Z (Alpha Opportunity Series)
Series E (U.S. Intermediate Bond Series)
- ix -
TABLE OF CONTENTS
OVERVIEW OF THE PROPOSALS ............................................................ [ ]
PROPOSAL 1: Approval of the New Investment Management Agreements ................. [ ]
Information Regarding the Transaction ....................................... [ ]
Section 15(f) of the 1940 Act ............................................... [ ]
Approval of the New Investment Management Agreements by the Board ........... [ ]
Board Considerations in Approving the New Investment Management
Agreements ............................................................. [ ]
New Investment Management Agreements ........................................ [ ]
PROPOSAL 2: Approval of the Election of Directors ................................ [ ]
PROPOSAL 3: Series N only--Approval of a Change to Series N's Fundamental
Investment Policy on Diversification of Investments (Proposal 2) ............ [ ]
PROPOSAL 1 - THE APPROVAL OF NEW INVESTMENT MANAGEMENT
AGREEMENTS WITH RESPECT TO ALL FUNDS ............................................. [ ]
The Investment Manager ........................................................... [ ]
Material Terms of the New Investment Management Agreements........................ [ ]
Note Regarding Funds with Sub-advisory Agreements ................................ [ ]
BOARD RECOMMENDATION ON PROPOSAL 1 ................................................... [ ]
PROPOSAL 2--THE APPROVAL OF THE ELECTION OF DIRECTORS FOR THE COMPANIES .............. [ ]
Information Regarding the Nominees ............................................... [ ]
Board's Consideration of Each Nominee's Qualifications, Experience, Attributes
or Skills ................................................................... [ ]
Principal Officers of the Funds .................................................. [ ]
Nominee Ownership of Portfolio Shares ............................................ [ ]
Board Compensation ............................................................... [ ]
Committees and Meetings of the Board ............................................. [ ]
Independent Registered Public Accounting Firm .................................... [ ]
BOARD RECOMMENDATION ON PROPOSAL 2 ................................................... [ ]
PROPOSAL 3 - THE APPROVAL OF A CHANGE TO THE FUNDAMENTAL
INVESTMENT POLICY ON DIVERSIFICATION OF INVESTMENTS WITH RESPECT TO
SERIES N ............................................................................. [ ]
Proposed New Fundamental Investment Policy........................................ [ ]
Current Fundamental Investment Policy ............................................ [ ]
-x-
Discussion of Proposed Modification .............................................. [ ]
Note Regarding Related Change to Investment Program .............................. [ ]
BOARD RECOMMENDATION ON PROPOSAL 3 ................................................... [ ]
OTHER BUSINESS ....................................................................... [ ]
ADDITIONAL INFORMATION ............................................................... [ ]
Administrator, Principal Underwriter, Custodian and Transfer Agent ............... [ ]
Sub-Advisers for Certain Funds ................................................... [ ]
Affiliations and Affiliated Brokerage ............................................ [ ]
Other Information ................................................................ [ ]
Voting Information ............................................................... [ ]
Shareholder Proposals ............................................................ [ ]
- xi -
APPENDICES
Appendix A CORPORATE STRUCTURE OF THE INVESTMENT MANAGER ................................... A-1
Appendix B FORMS OF NEW INVESTMENT MANAGEMENT AGREEMENTS ................................... B-1
Appendix C INFORMATION REGARDING THE INVESTMENT
MANAGEMENT AGREEMENTS AND FEES PAID TO THE INVESTMENT MANAGER AND DISTRIBUTOR.... C-1
Appendix D DIRECTORS/MANAGERS AND OFFICERS OF THE INVESTMENT ADVISER ....................... D-1
Appendix E ADVISORY FEE RATES OF FUNDS WITH SIMILAR
INVESTMENT OBJECTIVES ADVISED BY SECURITY INVESTORS, LLC......................... E-1
Appendix F OUTSTANDING SHARES .............................................................. F-1
Appendix G BENEFICIAL OWNERS OF MORE THAN 5% OF A CLASS OF EACH FUND ....................... G-1
Appendix H MANAGEMENT OWNERSHIP ............................................................ H-1
Appendix I NOMINATING COMMITTEE CHARTER..................................................... I-1
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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
(800) 820-0888
JOINT PROXY STATEMENT SPECIAL JOINT MEETING OF
SHAREHOLDERS TO BE HELD ON NOVEMBER 22, 2011
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 November 22, 2011 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 ("PROPOSAL
1")
2. THE APPROVAL OF THE ELECTION OF NOMINEES ALL FUNDS
TO THE BOARD OF DIRECTORS ("PROPOSAL 2")
3. THE APPROVAL OF A CHANGE TO THE SBL FUND--SERIES N (MANAGED ASSET
FUNDAMENTAL INVESTMENT POLICY ON ALLOCATION SERIES)
DIVERSIFICATION OF INVESTMENTS
("PROPOSAL 3")
4. 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 October 13, 2011.
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.
You are entitled to vote at the Meeting of each Fund of which you are a
shareholder as of the close of business on October 3, 2011 (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, Nationwide Life Insurance Company and Jefferson
National 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 NOVEMBER 22, 2011
This Joint Proxy Statement is available at www.proxyonline.us/rydexsgi.
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, 2010, including financial reports for the fiscal year ended
December 31, 2010, 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,
2010, including financial reports for the fiscal year ended September 30, 2010,
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, by
calling the telephone number shown on the front page of this Joint Proxy
Statement or at www.rydex-sgi.com.
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OVERVIEW OF THE PROPOSALS
PROPOSAL 1
APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENTS
Proposal 1 relates to actions that need to be taken in response to an
impending transaction (the "Transaction") involving Securities Investors, LLC,
the investment manager to each of the Funds (the "Investment Manager").
The Investment Company Act of 1940 (the "1940 Act"), the law that
regulates mutual funds, such as the Funds, provides that a mutual fund's
investment advisory agreement terminates whenever there is 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.) Pursuant to the
Transaction it is possible that there could be a deemed "change in control" of
the Investment Manager. In that case, in order for the Investment Manager to
continue to advise the Funds and manage their investments, a new investment
advisory agreement must be in effect upon the consummation of the Transaction.
For that reason, we are seeking shareholder approval of new investment advisory
agreements (the "New Investment Management Agreements") for the Funds.
FOR THE REASONS DISCUSSED BELOW, THE BOARD RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE NEW
INVESTMENT MANAGEMENT AGREEMENTS.
INFORMATION REGARDING THE TRANSACTION
Summary Discussion--Currently, the Investment Manager is a part of a
large group of companies that also includes businesses such as Security Benefit
Life Insurance Company. The Investment Manager is managed by an indirect
wholly-owned subsidiary of Guggenheim Capital, LLC ("Guggenheim Capital").
Guggenheim Capital wishes to purchase the Investment Manager and certain
affiliated businesses. This Transaction will be effected by Guggenheim Capital
buying 100% of the equity of the holding company that owns the Investment
Manager. After the Transaction, Guggenheim Capital will control the Investment
Manager (through one or more of its subsidiaries), and it is expected that the
services rendered to the Funds by the Investment Manager will not change.
Detailed Discussion--On September 20, 2011, Guggenheim Capital agreed
to purchase Security Benefit Asset Management Holdings, LLC, the indirect
holding company of the Investment Manager. Guggenheim Capital's subsidiary,
Guggenheim Partners, LLC ("Guggenheim") is a global, independent,
privately-held, diversified financial services firm with more than 1,500
dedicated professionals. Headquartered in Chicago
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and New York, the firm operates through offices in 25 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, 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. Its merchant banking
activities include a portfolio of investments in funds managed by it, joint
venture business investments and new business launch activities not integrated
into other primary operating businesses. Detailed information on the effect of
the Transaction on the ownership structure of the Investment Manager is set
forth in Appendix A to this Joint Proxy Statement.
The Transaction will not result in material changes to the day-to-day
management and operations of the Funds. The personnel, officers and managers of
the Investment Adviser will remain the same. Guggenheim Capital will be the
parent company of the Investment Adviser.
In addition, as a result of the Transaction, Guggenheim Capital
will acquire control of the Funds' principal underwriter/distributor, Rydex
Distributors, LLC (the "Distributor") and transfer agent, Rydex Funds
Services, LLC (the "Transfer Agent"), affiliates of the Investment Manager.
The Board has approved the continuation of services from the Distributor
and Transfer Agent. Under the 1940 Act, shareholder approval is not required
in order for the Distributor and Transfer Agent 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
under separate agreements with the Funds, will continue to serve in that
role without the need for shareholder approval. Security Distributors,
Inc., the co-principal underwriter for the series of SBL Fund, will
continue to be held by SBC following the Transaction and thus will not be
deemed to have gone through a "change in control."
While the parties expect the Transaction to be completed in late 2011
or early 2012, it is subject to various conditions (including a condition that
80% or more of the Funds' assets managed by the Investment Manager approve the
New Investment Management Agreements), and may be delayed or even terminated due
to unforeseen circumstances. If for some reason the Transaction does not occur,
the current investment management agreements between the Investment Manager and
the Funds (the "Current Investment Management Agreements") will not 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. 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 could include interim
investment management agreements with the Investment Manager, or maintaining the
current ownership structure pending further discussions.
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, including any express or implied terms, conditions
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or understandings. The term "unfair burden," as defined in the 1940 Act,
includes any arrangement during the two-year 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 fund to
engage in brokerage transactions with certain broker-dealers, although such
limits are not expected to cause any fund to change its 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), Guggenheim Capital has
agreed that it 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 Investment Manager has represented
to the Board that no unfair burden would be imposed on the Funds as a result of
the Transaction.
APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENTS BY THE BOARD
At a Special Meeting of the Board held on August 16, 2011 (the "Special
Board 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
non-interested persons of any party to the New Investment Management Agreements
(the "Independent Directors"), were present, the Directors considered and voted
in favor of the New Investment Management 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. The Investment Manager's rate of fees for its services to each Fund
under each applicable New Investment Management Agreement, as applicable, will
be the same as its fees under the corresponding Current Investment Management
Agreement. The other terms of each New Investment Management Agreement will also
be the same in all material respects to those of the corresponding Current
Investment Management Agreement.
BOARD CONSIDERATIONS IN APPROVING THE NEW INVESTMENT MANAGEMENT AGREEMENTS
Prior to the Special Board Meeting, representatives of Guggenheim
Capital informed the Board of the Transaction. With respect to the Transaction,
the Board reviewed materials received from Guggenheim Capital, including
information relating to the terms of the Transaction. The Board also reviewed
information regarding Guggenheim Capital, including, but not limited to: (a)
certain representations concerning Guggenheim Capital's financial condition, (b)
information regarding the new proposed ownership structure and its possible
effect on shareholders, (c) information regarding the consideration to be paid
by Guggenheim Capital, and (d) potential conflicts of interest.
-5-
In considering the New Investment Management Agreements, the Directors
determined that the New Investment Management 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 Investment Management 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 that the Board had received
relating to the Current Investment Management Agreements at the Board's contract
review meeting on August 15, 2011 (the "2011 Renewal Meeting"). The Directors
noted that, at the 2011 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. They also considered the evolution of the Rydex|SGI family of funds and
the Investment Manager since the change in control of the Investment Manager in
2010 and Guggenheim Capital's commitment to the success of the Investment
Manager and the Funds.
In addition, as a part of their required consideration of the
renewal of the Current Investment Management Agreements at the 2011 Renewal
Meeting, the Directors, including the Independent Directors, had evaluated
a number of considerations, including among others: (a) the quality of the
Investment Manager's investment advisory and other services; (b) the
Investment Manager's investment management personnel; (c) the Investment
Manager's operations and financial condition; (d) the Investment Manager's
brokerage practices (including any soft dollar arrangements) and investment
strategies; (e) the level of the fees that the Investment Manager charges
compared with the fees charged to comparable mutual funds or accounts; (f)
each Fund's overall fees and operating expenses compared with similar
mutual funds; (g) the level of the Investment Manager's profitability from
its Fund-related operations; (h) revenue sharing arrangements entered into
by the Investment Manager; (i) the Investment Manager's compliance systems;
(j) the Investment Manager's policies on and compliance procedures for
personal securities transactions; (k) the Investment Manager's reputation,
expertise and resources in the financial markets; and (l) Fund performance
compared with similar mutual funds. Based on the Board's deliberations at
the 2011 Renewal Meeting, and its evaluation of the information regarding
the Transaction and the fact that the Transaction is not expected to change
the level and quality of services rendered by the Investment Manager to any
of the Funds, the Board, including all of the Independent Directors,
unanimously: (a) concluded that terms of the New Investment Management
Agreements are fair and reasonable; (b) concluded that the Investment
Manager's fees were reasonable in light of the services that it provides to
the Funds; and (c) agreed to approve the New Investment Management
Agreements, subject to shareholder approval.
NEW INVESTMENT MANAGEMENT AGREEMENTS
NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY THE INVESTMENT
MANAGER. At the 2011 Renewal Meeting, the Board reviewed the scope of services
to be provided by the Investment Manager under the Current Investment Management
Agreements, and, at the Special Board Meeting, noted that there would be no
significant differences between the scope of services required to be provided by
the Investment Manager under the Current Investment Management Agreements (which
had been recently approved by shareholders and renewed by the Board at the 2011
Renewal Meeting) and the scope of services required to be provided by the
-6-
Investment Manager under the New Investment Management Agreements. The Board
noted that the key investment and management personnel of the Investment Manager
servicing the Funds are expected to remain with the Investment Manager following
the Transaction. The Directors also considered Guggenheim Capital's
representations to the Board that the Investment Manager would continue to
provide investment and related services that were 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.
THE INVESTMENT PERFORMANCE OF THE FUNDS. At the 2011 Renewal Meeting,
the Board had reviewed statistical information prepared by the Investment
Manager regarding the expense ratio components and performance of each Fund.
Based on the representations made by Guggenheim Capital at the Special Board
Meeting that the Investment Manager would continue to operate following the
closing of the Transaction in much the same manner as it currently operates, the
Board concluded that the investment performance of the Investment Manager 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 2011 Renewal Meeting, the Board had
reviewed information about the profitability of the Funds to the Investment
Manager based on the advisory fees payable under the Current Investment
Management Agreements. At that meeting, the Board had also analyzed the Funds'
expenses, including the investment advisory fees paid to the Investment Manager.
At the Special Board Meeting, the Board considered the fact that the fee rates
payable to the Investment Manager would be the same under each Fund's New
Investment Management Agreement as they are under such Fund's Current Investment
Management Agreement. With respect to anticipated profitability, the Board noted
that it was too early to predict how the Transaction would affect the Investment
Manager's profitability with respect to the Funds, but noted that this matter
would be given further consideration on an ongoing basis.
WHETHER THE INVESTMENT MANAGEMENT FEES REFLECT ECONOMIES OF SCALE. In
connection with its review of the Funds' profitability analysis at the 2011
Renewal Meeting, the Board reviewed information regarding economies of scale or
other efficiencies that may result from increases in the Funds' asset levels.
The Directors noted that the fees would not change under the New Investment
Management Agreements, and that they will have the opportunity to again review
the appropriateness of the fee payable to the Investment Manager under the
Agreements when the next renewal of the Agreements comes before the Board.
BENEFITS (SUCH AS SOFT DOLLARS) TO THE INVESTMENT MANAGER FROM ITS
RELATIONSHIP WITH THE FUNDS. In addition to evaluating the services provided by
the Investment Manager, the Board had considered the nature, extent, quality and
cost of the distribution services performed by the Distributor under a separate
agreement at the 2011 Renewal Meeting. The Board also considered the terms of
the Transaction and the changes to the corporate ownership structure of the
Investment Manager, noting that the Investment Manager would no longer be a
subsidiary of SBC. In this regard, the Board noted that, under the corporate
structure after the Transaction, the Investment Manager would be more closely
controlled by Guggenheim Capital, which could benefit Guggenheim Capital. The
Board also noted that the costs associated with the Transaction would be borne
by Guggenheim Capital (or its affiliates) and not the Funds.
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PROPOSAL 2
APPROVAL OF THE ELECTION OF DIRECTORS
Proposal 2 relates to the election of the following seven individuals
to the Board: Donald C. Cacciapaglia, Donald A. Chubb, Jr., Harry W. Craig, Jr.,
Jerry B. Farley, Richard M. Goldman, Penny A. Lumpkin and Maynard F. Oliverius.
All of the nominees, except for Mr. Cacciapaglia, currently serve on the Board.
If elected, the terms of the nominees, other than Mr. Cacciapaglia, will begin
shortly after the shareholder vote. Until that time, the current Directors will
continue their terms.
The Board believes that it is in the best interests of the Funds to
expand the size of the Board, given the anticipated Transaction, the creation of
new funds within the complex and the need to prepare for future retirements from
the Board.
In connection with the Transaction, the Board believes adding that
expanding the Board to include Mr. Cacciapaglia, who is the head of Guggenheim's
investment management business, and who would serve on other boards in the
Rydex|SGI family of funds, would be beneficial to the Funds and their
shareholders. However, for regulatory and governance reasons (in order to
maintain the balance on the Board among Directors who are non-interested and
those who have affiliations with the Investment Manager so that at least 75% of
Directors are non-interested), however, the term of Mr. Cacciapaglia, an
"interested person" (as that term is defined for regulatory purposes) would not
be effective until an additional non-interested Director is appointed (or the
balance is otherwise maintained). This search for an additional non-interested
Director is still underway. The shareholders will not be asked to vote on the
initial election of the additional non-interested Director.
The Board further believes that it is in shareholders' best interest to
have a Board that is, to the extent possible, composed of elected Directors (and
to comply with certain legal requirements regarding the proportion of board
members that need to have been elected by shareholders). Because a shareholder
vote is required to approve the New Investment Management Agreements, the Board
has proposed that shareholders elect all of the nominees during the same
shareholder meeting, which would avoid the expense of preparing and mailing
another proxy statement solely for the election of Directors.
PROPOSAL 3
SERIES N ONLY--APPROVAL OF A CHANGE TO SERIES N'S FUNDAMENTAL INVESTMENT POLICY
ON DIVERSIFICATION OF INVESTMENTS
In addition to considering the New Investment Management Agreements in
Proposal 1, shareholders of SBL Fund--Series N (Managed Allocation Series)
("Series N") also are being asked to consider the approval of a change to Series
N's current fundamental investment policy on diversification of investments. The
1940 Act requires that a fund adopt a fundamental investment policy on
diversification of investments. Diversification relates to the percentage of
assets that may be invested in a single issuer's securities and the percentage
of voting securities of such issuer that may be owned. Under the 1940 Act, any
change to a fundamental investment policy must be approved by shareholders of
the fund. Series N's current fundamental investment policy on diversification of
investments is more prohibitive than the 1940 Act requires, unnecessarily
limiting investment strategies, notably with regard to investments in other
funds. This second proposal is motivated by the decision to change Series N's
investment objective and strategies in order to use a different asset allocation
strategy that involves, among other things, investments in other mutual funds
and exchange traded funds ("ETFs"). Series N's current diversification
limitations restrict unnecessarily the Fund's ability to invest in other
investment
-8-
companies (e.g., mutual funds and ETFs) so the Investment Manager proposed, and
the Board agreed, to change Series N's diversification limitations in order to
permit additional investments in investment companies. Accordingly, Proposal 3
seeks approval of a change to Series N's fundamental investment policy on
diversification of investments in order to permit Series N to invest in a
diversified manner to the maximum extent permitted by law. Proposal 3 is
unrelated to Proposal 1.
THE BOARD, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE APPROVAL OF THE NEW AGREEMENTS, "FOR" THE ELECTION OF EACH
NOMINEE AND "FOR" THE CHANGE TO THE FUNDAMENTAL INVESTMENT
POLICY ON DIVERSIFICATION OF INVESTMENTS FOR SERIES N. UNMARKED,
PROPERLY SIGNED AND DATED PROXIES WILL BE SO VOTED.
-9-
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 management services to such Funds, which were recently approved
by shareholders. 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 B.
The terms of each New Investment Management Agreement are substantially
identical to those of the corresponding Current Investment Management Agreement,
which were recently approved by shareholders, 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.
The Current Investment Management Agreements will remain in place until
the completion of the Transaction, at which time, as a result of the deemed
change in the control of the Investment Manager, the Current Investment
Management Agreements will terminate. If for any reason the Transaction does not
occur, the Current Investment Management Agreements will not 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.
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
agreements, (b) the date on which they were last approved by shareholders and
(c) the rate of compensation to the Investment Manager, is provided in Appendix
C. 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 D. A list of the Directors and
officers of each Company who hold positions with the Investment Manager also is
set forth in Appendix D. In addition, set forth in Appendix E is a list of other
registered investment companies with similar investment objectives as each Fund,
for
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which the Investment Manager acts as investment manager, adviser or sub-adviser.
(As previously noted, the ownership structure of the Investment Manager is set
forth in Appendix A.)
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 B.
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 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).
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NOTE REGARDING FUNDS WITH SUB-ADVISORY AGREEMENTS
Certain of the Funds have retained third-party investment sub-advisers
to manage their assets. The agreements currently in place between the Investment
Manager and the applicable sub-advisers will also terminate as a result of the
Transaction. Their renewal, however, does not require shareholder approval
(pursuant to an order issued by the SEC and commonly referred to as a "manager
of managers exemptive order"). Accordingly, after consummation of the
Transaction, the sub-advisory agreements simply will be renewed with identical
terms. Consequently, services rendered by the sub-advisers will not change.
BOARD RECOMMENDATION ON PROPOSAL 1
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS OF THE FUNDS VOTE "FOR" PROPOSAL 1
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PROPOSAL 2--THE APPROVAL OF THE ELECTION OF DIRECTORS FOR ALL FUNDS
Proposal 2 relates to the election of Directors for the Board. The
Board proposes the election of the following nominees: Donald C. Cacciapaglia,
Donald A. Chubb, Jr., Harry W. Craig, Jr., Jerry B. Farley, Richard M. Goldman,
Penny A. Lumpkin, Maynard F. Oliverius. Each nominee has indicated a
willingness to serve if elected. If elected, each nominee will serve
indefinitely until their successors are duly elected and qualified (however, as
noted above and below, Mr. Cacciapaglia's term would not start until certain
board composition requirements are met).
The Board believes that it is in the best interests of the Funds to
expand the size of the Board. In connection with the Transaction, the Board
believes that expanding the Board to include Mr. Cacciapaglia, who is a senior
member of management of Guggenheim's investment management business, and who
would serve on other boards in the Rydex|SGI family of funds, would be
beneficial to the Funds and their shareholders. If elected, Mr. Cacciapaglia
would be an Interested Director due to the position he holds with Guggenheim
Capital. In addition, the Board considered the increased number of funds under
its oversight and the future need for additional board members to fill vacancies
from scheduled retirements.
The Board believes that it is in shareholders' best interest to have a
Board that is, to the extent possible, composed entirely of elected directors.
The Board also believes that good governance practices involve having a majority
of its members be Independent Directors. If all of the nominees are elected, the
Board will consist of five Directors who are not considered to be "interested
persons" of the Funds as defined in the 1940 Act and two Directors who are
considered to be "interested persons" of the Funds as defined in the 1940 Act.
If elected, Mr. Cacciapaglia would not immediately begin his term as a Director.
For regulatory and governance reasons (in order to maintain the balance on the
Board among Directors who are non-interested and those who have affiliations
with the Investment Manager so that at least 75% of Directors are
non-interested), however, the term of Mr. Cacciapaglia, would not be effective
until an additional Independent Director is appointed by the Board (or the
balance is otherwise maintained). This search for an additional Independent
Director is still underway. It is currently anticipated, however, that an
additional Independent Director would be appointed (without a shareholder vote,
as authorized by law) once he or she is selected.
The Companies' Nominating Committee, which is responsible for
considering and presenting to the Board candidates it proposes for nomination as
Directors of the Companies, recommended that the Board expand in size to eight
members, and include a Director who is affiliated with the Investment Manager's
parent company, Guggenheim Capital as well as an additional Independent Director
when selected. The Board considered the long-term ability of the Rydex|SGI
family of funds to operate in an efficient and cohesive manner and determined
that expanding the size of the Board to include a representative of the parent
of the Investment Manager would benefit the Funds and that creating an eighth
position on the Board to add an Independent Director also would benefit the
Funds and would be necessary to maintain the current balance of interested and
non-interested Directors. The Nominating Committee also considered Mr.
Cacciapaglia's skills and background, and noted that his past and current
experience in various aspects of banking and finance would make him a strong
addition to the Board. At a meeting held on September 19, 2011, the Board
approved the Nominating Committee's recommendation that the seven nominees stand
for election.
- 13 -
INFORMATION REGARDING THE NOMINEES
The following table lists the nominees for Director, including the
current Directors, their ages, current position(s) held with the Companies,
length of time served, principal occupations during the past five years,
number of funds overseen within the fund complex and other
directorships/directorships held outside of the fund complex. For the new
Director nominee, the table shows the number of funds the nominee will
oversee if elected. The fund complex consists of Rydex ETF Trust, Rydex
Variable Trust, Rydex Series Funds, Rydex Dynamic Funds, Security Equity
Fund, Security Income Fund, Security Large Cap Value Fund, Security Mid Cap
Growth Fund and SBL Fund. The mailing address of each nominee is One
Security Benefit Place, Topeka, KS 66636.
---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF OFFICE COMPLEX OTHER
POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE WITH THE FUNDS TIME SERVED(1) DURING THE PAST 5 YEARS BY DIRECTOR HELD BY DIRECTOR
---------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
---------------------------------------------------------------------------------------------------------------------------------
Donald A. Chubb, Jr. Lead Director Current: Business broker [] None
One Security Benefit Place Independent since 1994 and manager of commercial real
Topeka, KS 66636-0001 Director, estate, Griffith & Blair, Inc.
(DOB 12/14/46) Chair of
Nominating
Committee
---------------------------------------------------------------------------------------------------------------------------------
Harry W. Craig, Jr. Director, Since 2004 Current: Chairman, CEO, & [] None
One Security Benefit Place Chair of Director, The Craig Group,
Topeka, KS 66636-0001 Contract Inc.; Managing Member of Craig
(DOB 5/11/39) Renewal Family Investments, LLC. Prior
Committee to November 1, 2009, Chairman,
CEO, Secretary & Director, The
Martin Tractor Company, Inc.
---------------------------------------------------------------------------------------------------------------------------------
Penny A. Lumpkin Director, Since 1993 Current: Partner, Vivian's Gift [] None
One Security Benefit Place Chair of Shop (Corporate Retail); Vice
Topeka, KS 66636-0001 Audit President, Palmer Companies, Inc.
(DOB 8/20/39) Committee (Small Business and Shopping
Center Development); PLB
(Real Estate Equipment Leasing).
---------------------------------------------------------------------------------------------------------------------------------
Maynard F. Oliverius Director Since 1998 Current: President and Chief [] None
One Security Benefit Place Executive Officer, Stormont-Vail
Topeka, KS 66636-0001 HealthCare.
(DOB 12/18/43)
---------------------------------------------------------------------------------------------------------------------------------
Jerry B. Farley Director Since 2005 Current: President, Washburn [] Westar Energy;
One Security Benefit Place University. CoreFirst
Topeka, KS 66636-0001 Bank & Trust
(DOB 9/20/46)
---------------------------------------------------------------------------------------------------------------------------------
- 14 -
---------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN FUND
TERM OF OFFICE COMPLEX OTHER
POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN DIRECTORSHIPS
NAME, ADDRESS AND AGE WITH THE FUNDS TIME SERVED(1) DURING THE PAST 5 YEARS BY DIRECTOR HELD BY DIRECTOR
---------------------------------------------------------------------------------------------------------------------------------
DIRECTORS WHO ARE "INTERESTED PERSONS"
---------------------------------------------------------------------------------------------------------------------------------
Richard M. Goldman Director, Since 2008 Current: Senior Vice President, [] Rydex Series
Six Landmark Square President, Security Benefit Corporation; Funds (60);
Stamford, CT 06901 and CEO, Security Benefit Asset Rydex ETF
(DOB 3/4/61)(2) Chairman of Management Holdings, LLC; CEO, Trust (25);
the Board President & Manager Representative, Rydex Dynamic
Security Investors, LLC; CEO & Funds (8);
Manager, Rydex Holdings, LLC; CEO, Rydex Variable
President, & Manager, Rydex Trust (58)
Distributors, LLC; Manager, Rydex
Fund Services, LLC; and President
& Director, Rydex Series Funds,
Rydex ETF Trust, Rydex Dynamic
Funds and Rydex Variable Trust
Director, First Security Benefit
Life Insurance Company (2007-2010);
President & Director, Security
Global Investors (2010-2011);
CEO & Director, Rydex Advisors,
LLC & Rydex Advisor II, LLC
(2010); and Director, Security
Distributors, Inc. (2007-2009).
Managing Member, RM Goldman
Partners, LLC (2006-2007).
President and CEO, ForstmannLeff
(2003-2005).
---------------------------------------------------------------------------------------------------------------------------------
Donald C. Cacciapaglia Nominee N/A Guggenheim Investments: President [ ] None
(60)(2) and Chief Administrative Officer
from February 2010 to present
Channel Capital Group Inc.:
Chairman and CEO from April
2002 to February 2010
---------------------------------------------------------------------------------------------------------------------------------
1 Directors serve until the next annual meeting or their successors are duly elected and qualified.
2 This director is deemed to be an "interested person" of the Funds under the 1940 Act by reason of his position with the
Funds' Investment Manager and/or the parent of the Investment Manager.
---------------------------------------------------------------------------------------------------------------------------------
The Chairman of the Board of Directors, Richard M. Goldman, is an
"interested person," as that term is defined by the 1940 Act, of the Funds.
Donald A. Chubb, Jr., who is not an interested person of the Fund, serves as its
Lead Independent Director. The Board has determined that the leadership
structure of the Funds is appropriate given its specific characteristics and
circumstances; in particular, the Board has considered that the Independent
Directors will constitute a substantial majority of the Board and are advised by
independent counsel experienced in 1940 Act matters, and the role of the Lead
Independent Director is to act as a liaison between the Independent Directors
and management and promote the open flow of information and views between Fund
management and the Independent Directors. In addition, the Board considered the
benefits of having the Board meetings run by a member of management who is
immersed in the Funds' business on a day-to-day basis and is a mutual fund
industry participant.
- 15 -
The Board also considered that the current structure and processes for
developing Board meeting agendas and conducting Board meetings results in full
and constructive discussions of Fund business that focus the Directors on
important issues facing the Funds.
BOARD'S CONSIDERATION OF EACH NOMINEE'S QUALIFICATIONS, EXPERIENCE, ATTRIBUTES
OR SKILLS
The Board has concluded that each of the nominees should serve on the
Board because of his or her ability to review and understand information about
the Companies and the Funds provided to him or her by management; to identify
and request other information he or she may deem relevant to the performance of
their duties; to question management and other service providers regarding
material factors bearing on the management and administration of the Funds; and
to exercise his or her business judgment in a manner that serves the best
interests of the Funds' shareholders. The Board has concluded that each of the
nominees should serve as a Director based on his or her own experience,
qualifications, attributes and skills as described below.
Donald C. Cacciapaglia is President and Chief Administrative Officer of
Guggenheim's investment management business. Most recently he was chairman and
CEO of Channel Capital Group Inc. and its subsidiary broker-dealer, Channel
Capital Group LLC, an affiliate of Guggenheim Capital, from 2002 through 2010.
From 1996 until 2002 when he joined Channel Capital Group, Mr. Cacciapaglia held
the position of Managing Director and Chief Operating Officer of the Investment
Banking Group at PaineWebber. Additionally, in 1998, he started PaineWebber's
Private Equity Group and assumed responsibility for the coverage of Leveraged
Buyout firms and the Investment Bank's Business Development Group. Before that,
Mr. Cacciapaglia was Chief Operating Officer of the Short and Intermediate
Trading Group at CS First Boston (1995-1996). However, based on the requirement
that applies to the Funds that 75% of the Board be composed of "independent"
Directors, Mr. Cacciapaglia's term will only begin when an additional
Independent Director is appointed (or the balance is otherwise maintained).
Donald A. Chubb, Jr. has served as a Director since 1994 and has served
as Chair of the Nominating Committee since 2005 and as Lead Independent Director
since 2010. Mr. Chubb has worked in the business brokerage and commercial real
estate market for over 13 years. Prior he owned and operated electric sign
companies and was a director of Fidelity Bank and Trust.
Harry W. Craig, Jr. has served as a Director since 2004 and as Chair of
the Contract Renewal Committee since 2005. Mr. Craig is the retired Chairman and
Chief Executive Officer of Martin Tractor Company, Inc., a Caterpillar
Dealership. Mr. Craig is currently the Chairman, Chief Executive Officer, and
Director of The Craig Group, Inc. He is also the Managing Member of Craig Family
Investments, LLC. Mr. Craig was Director and Treasurer of Sunflower Foundation:
Health Care for Kansans for eight years. Mr. Craig is a director, finance
committee member, and past Chairman on the board of Stormont-Vail HealthCare.
Mr. Craig practiced as a lawyer prior to his business career.
Richard M. Goldman has served as Chairman and a Director of Security
Income Fund Board since 2008. Mr. Goldman has over 17 years experience in the
asset management business. Currently, he is the Chief Executive Officer of the
Investment Manager. Prior to joining the
- 16 -
Investment Manager in 2007, Mr. Goldman was the President, Chief Executive
Officer, and Chairman of Forstmann-Leff Associates from 2003 until 2005, and he
was the Managing Director and Head of Americas Institutional Business at
Deutsche Asset Management from 1999 until 2003. Before 1999, Mr. Goldman was
Head of Institutional Sales and Multinational Organizations at State Street
Global Advisors from 1993 until 1999, and the Director of New Business
Development at Loyalty Management Group from 1992 until 1993. Mr. Goldman also
was a sales representative at Proctor & Gamble from 1983 until 1984, when he
joined IBM as a Unit Manager until 1992.
Penny A. Lumpkin has served as a Director since 1993 and as Chair of
the Audit Committee since 1995. Ms. Lumpkin has experience with various business
and real estate ventures, currently as Partner of Vivian's Gift Shop (corporate
retail), Vice President, Palmer Companies, Inc. (small business and shopping
center development) and Senior Vice President, PLB (real estate equipment
leasing).
Maynard F. Oliverius has served as a Director since 1998. Mr. Oliverius
is President and Chief Executive Officer of Stormont-Vail HealthCare. From 2005
through 2008 Mr. Oliverius was on the Board of Directors of the American
Hospital Association. Mr. Oliverius has a masters degree in Health Care
Administration.
Dr. Jerry B. Farley has served as a Director since 2005. Dr. Farley has
over 38 years of experience in the administration of the academic, business and
fiscal operations of educational institutions. Dr. Farley has served as
President of Washburn University since 1997. Prior to 1997, Dr. Farley worked in
various executive positions for the University of Oklahoma and Oklahoma State
University, including Vice President of Community Relations and Economic
Development, Vice President of Administration and Chief Financial Officer. Dr.
Farley holds an MBA and a Ph.D. in Higher Education Administration and is a
C.P.A. Dr. Farley serves on the board of Westar Energy, Inc., a NYSE listed
company, and CoreFirst Bank and Trust.
If the nominees are elected, Mr. Goldman would remain the Chairman of
the Board of Directors and Mr. Chubb would remain the Lead Independent Director.
PRINCIPAL OFFICERS OF THE FUNDS
Officers of the Funds are appointed by the Board and serve at the
pleasure of the Board. The following table shows information about the
principal officers, including their ages, their positions with the Companies and
their principal occupations during the past five years. The mailing address of
each officer is One Security Benefit Place, Topeka, KS 66636. Each officer will
hold office until his or her successor has been duly elected or appointed or
until his or her earlier death, resignation or removal.
- 17 -
---------------------------------------------------------------------------------------------------------------------------------
TERM OF OFFICE
POSITION(S) HELD AND LENGTH OF
NAME, ADDRESS AND AGE WITH THE FUNDS TIME SERVED PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
---------------------------------------------------------------------------------------------------------------------------------
OFFICERS
---------------------------------------------------------------------------------------------------------------------------------
Mark P. Bronzo Vice President Since Current: Portfolio Manager, Security Investors, LLC.
One Security Benefit Place 2008 Managing Director and Chief Compliance Officer, Nationwide
Topeka, KS 66636-0001 Separate Accounts LLC. (2003-2008)
(DOB 11/1/60)
---------------------------------------------------------------------------------------------------------------------------------
Keith A. Fletcher Vice President Since Current: Senior Vice President, Security Investors, LLC;
One Security Benefit Place 2010 Vice President, Rydex Holdings, LLC; Vice President, Rydex
Topeka, KS 66636-0001 Specialized Products, LLC; Vice President, Rydex
(DOB 02/18/58) Distributors, LLC; Vice President, Rydex Fund Services,
LLC; Vice President and Director, Advisor Research Center,
Inc.; and Vice President, Rydex Series Funds, Rydex ETF
Trust, Rydex Dynamic Funds and Rydex Variable Trust
Vice President, Security Global Investors, LLC
(2010-2011); Vice President, Rydex Advisors, LLC (2010);
and Vice President, Rydex Advisors II, LLC (2010)
---------------------------------------------------------------------------------------------------------------------------------
Joanna M. Haigney Catalucci Chief Since Current: Chief Compliance Officer & Secretary, Rydex
One Security Benefit Place Compliance 2010 Series Funds, Rydex ETF Trust, Rydex Dynamic Funds, and
Topeka, KS 66636-0001 Officer Rydex Variable Trust; Vice President, Rydex Holdings, LLC;
(DOB 10/10/1966) Vice President, Security Benefit Asset Management
Holdings, LLC; and Senior Vice President & Chief
Compliance Officer, Security Investors, LLC
Senior Vice President, Security Global Investors, LLC
(2010-2011); Chief Compliance Officer and Senior Vice
President, Rydex Advisors, LLC & Rydex Advisors II, LLC
(2010)
---------------------------------------------------------------------------------------------------------------------------------
Nikolaos Bonos Treasurer Since Current: Senior Vice President, Security Investors, LLC;
One Security Benefit Place 2010 Chief Executive Officer & Manager, Rydex Specialized
Topeka, KS 66636-0001 Products, LLC; Chief Executive Officer & President, Rydex
(DOB 05/30/1963) Fund Services, LLC; Vice President, Rydex Holdings, LLC;
Vice President & Treasurer, Rydex Series Funds; Rydex ETF
Trust; Rydex Dynamic Funds; and Rydex Variable Trust; and
Vice President, Security Benefit Asset Management
Holdings, LLC
Senior Vice President, Security Global Investors, LLC
(2010-2011); and Senior Vice President, Rydex Advisors,
LLC and Rydex Advisors II, LLC
---------------------------------------------------------------------------------------------------------------------------------
Joseph M. Arruda Assistant Since Current: Vice President, Security Investors, LLC; Chief
One Security Benefit Place Treasurer 2010 Financial Officer & Manager, Rydex Specialized Products,
Topeka, KS 66636-0001 LLC; and Assistant Treasurer, Rydex Series Funds; Rydex
(DOB 09/05/1966) Dynamic Funds; Rydex ETF Trust; and Rydex Variable Trust
Vice President, Security Global Investors, LLC
(2010-2011); and Vice President, Rydex Advisors, LLC and
Rydex Advisors II, LLC (2010)
---------------------------------------------------------------------------------------------------------------------------------
Amy J. Lee Secretary and Since Current: Senior Vice President & Secretary, Security
One Security Benefit Place Vice President 1987 Investors, LLC; Secretary & Chief Compliance Officer,
Topeka, KS 66636-0001 (Secretary) Security Distributors, Inc.; Vice President, Associate
(DOB 6/5/61) Since General Counsel & Assistant Secretary, Security Benefit
2007 Life Insurance Company and Security Benefit Corporation;
(Vice Associate General Counsel, First Security Benefit Life
President) Insurance and Annuity of New York; Vice President &
Assistant Secretary, Rydex Series Funds, Rydex ETF Trust,
Rydex Dynamic Funds, and Rydex Variable Trust; Vice
President & Secretary, Rydex Holdings, LLC Secretary,
Advisor Research Center, Inc., Rydex Specialized Products,
LLC, Rydex Distributors, LLC and Rydex Fund Services, LLC;
and Assistant Secretary, Security Benefit Clinic and
Hospital Senior Vice President & Secretary, Security
Global Investors, LLC (2007-2011); Senior Vice President
& Secretary, Rydex Advisors, LLC and Rydex Advisors II,
LLC (2010); and Director, Brecek & Young Advisors, Inc.
(2004-2008)
---------------------------------------------------------------------------------------------------------------------------------
- 18 -
---------------------------------------------------------------------------------------------------------------------------------
TERM OF OFFICE
POSITION(S) HELD AND LENGTH OF
NAME, ADDRESS AND AGE WITH THE FUNDS TIME SERVED PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS
---------------------------------------------------------------------------------------------------------------------------------
Mark A. Mitchell Vice President Since Current: Portfolio Manager, Security Investors, LLC
One Security Benefit Place 2003 Vice President and Portfolio Manager, Security Benefit Life
Topeka, KS 66636-0001 Insurance Company (2003-2010)
(DOB 8/24/64)
---------------------------------------------------------------------------------------------------------------------------------
Joseph C. O'Connor Vice President Since Current: Portfolio Manager, Security Investors, LLC.
One Security Benefit Place 2008 Managing Director, Nationwide Separate Accounts LLC.
Topeka, KS 66636-0001 (2003-2008)
(DOB 7/15/60)
---------------------------------------------------------------------------------------------------------------------------------
Daniel W. Portanova Vice President Since Current: Portfolio Manager, Security Investors, LLC.
One Security Benefit Place 2008 Managing Director, Nationwide Separate Accounts LLC.
Topeka, KS 66636-0001 (2003-2008)
(DOB 10/2/60)
---------------------------------------------------------------------------------------------------------------------------------
James P. Schier Vice President Since Current: Senior Portfolio Manager, Security Investors, LLC
One Security Benefit Place 1998 Vice President & Senior Portfolio Manager, Security Benefit
Topeka, KS 66636-0001 Life Insurance Company (1998-2010)
(DOB 12/28/57)
---------------------------------------------------------------------------------------------------------------------------------
David G. Toussaint Vice President Since Current: Portfolio Manager, Security Investors, LLC.
One Security Benefit Place 2005 Assistant Vice President and Portfolio Manager, Security
Topeka, KS 66636-0001 Benefit Life Insurance Company. (2005-2009)
(DOB 10/10/66)
---------------------------------------------------------------------------------------------------------------------------------
NOMINEE OWNERSHIP OF PORTFOLIO SHARES
As of December 31, 2010, the Nominees beneficially owned shares of the
Funds in the dollar ranges set forth below and also beneficially owned shares of
other mutual funds in the family of mutual funds that would be overseen by the
Nominees in the dollar ranges set forth below.
---------------------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
DOLLAR COMPANIES OVERSEEN
NAME OF INDEPENDENT RANGE OF EQUITY BY DIRECTOR IN FAMILY OF
DIRECTOR NAME OF FUND SECURITIES IN FUND INVESTMENT COMPANIES
---------------------------------------------------------------------------------------------------------------------------------
Security Income Fund-U.S. Intermediate Bond Fund $1-$10,000
--------------------------------------------------------------------------
Security Equity Fund-Mid Cap Value Institutional Fund $10,001-$50,000
Donald A. Chubb, Jr. -------------------------------------------------------------------------- Over $100,000
Security Equity Fund-Small Cap Growth Fund $1-$10,000
--------------------------------------------------------------------------
Security Mid Cap Growth Fund $10,001-$50,000
---------------------------------------------------------------------------------------------------------------------------------
Harry A. Craig Security Equity Fund-Mid Cap Value Fund Over $100,000 Over $100,000
---------------------------------------------------------------------------------------------------------------------------------
- 19 -
---------------------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
DOLLAR COMPANIES OVERSEEN
NAME OF INDEPENDENT RANGE OF EQUITY BY DIRECTOR IN FAMILY OF
DIRECTOR NAME OF FUND SECURITIES IN FUND INVESTMENT COMPANIES
---------------------------------------------------------------------------------------------------------------------------------
Security Equity Fund-Small Cap Value Fund Over $100,000
---------------------------------------------------------------------------------------------------------------------------------
Security Income Fund-U.S. Intermediate Bond Fund $50,001-$100,000
--------------------------------------------------------------------------
Security Large Cap Value Fund $1-$10,000
--------------------------------------------------------------------------
Security Equity Fund-Large Cap Core Fund $10,001-$50,000
--------------------------------------------------------------------------
Security Equity Fund-Mid Cap Value Fund $10,001-$50,000
Penny A. Lumpkin -------------------------------------------------------------------------- Over $100,000
Security Equity Fund-Large Cap Concentrated Growth Fund $1-$10,000
--------------------------------------------------------------------------
Security Mid Cap Growth Fund $1-$10,000
--------------------------------------------------------------------------
Security Equity Fund-MSCI EAFE Equal Weight Fund $10,001-$50,000
---------------------------------------------------------------------------------------------------------------------------------
Security Income Fund-U.S. Intermediate Bond Fund $50,001-$100,000
--------------------------------------------------------------------------
Security Income Fund-High Yield Fund Over $100,000
--------------------------------------------------------------------------
Maynard F. Oliverius Security Equity Fund-Mid Cap Value Fund Over $100,000 Over $100,000
--------------------------------------------------------------------------
Security Equity Fund-Small Cap Value Fund Over $100,000
--------------------------------------------------------------------------
Security Income Fund, High Yield Fund $0
---------------------------------------------------------------------------------------------------------------------------------
Security Equity Fund-Alpha Opportunity Fund $50,001-$100,000
--------------------------------------------------------------------------
Jerry B. Farley Security Equity Fund-Small Cap Value Fund Over $100,000 Over $100,000
--------------------------------------------------------------------------
Security Equity Fund-MSCI EAFE Equal Weight Fund $10,001-$50,000
---------------------------------------------------------------------------------------------------------------------------------
As of December 31, 2010, the Nominees who would be considered
"interested persons" of the Funds beneficially owned shares of the Funds in the
dollar ranges set forth below and also beneficially owned shares of other mutual
funds in the family of mutual funds that would be overseen by the Nominees in
the dollar ranges set forth below.
---------------------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
DOLLAR COMPANIES OVERSEEN
NAME OF "INTERESTED" RANGE OF EQUITY BY DIRECTOR IN FAMILY OF
DIRECTOR NAME OF FUND SECURITIES IN FUND INVESTMENT COMPANIES
---------------------------------------------------------------------------------------------------------------------------------
None None
Donald C. Cacciapaglia None
---------------------------------------------------------------------------------------------------------------------------------
Richard M. Goldman Security Equity Fund-Mid Cap Value Institutional Fund $10,001-$50,000 $10,001-$50,000
---------------------------------------------------------------------------------------------------------------------------------
None of the nominees for Independent Director or their immediate family
members had any interest in the Investment Manager or Distributor, or any person
controlling, controlled by or under common control with such persons. For this
purpose, "immediate family member" includes the Nominee's spouse, children
residing the in the Nominee's household and dependents of the Nominee.
As of October 3, 2011, the Directors and officers as a group owned less
than 1% of the outstanding shares of each Fund. [Please confirm.]
- 20 -
BOARD COMPENSATION
The Funds' Directors, except those directors who are "interested
persons" of the Funds, receive from all of the registered investment companies
to which the Investment Manager provides investment advisory services an annual
retainer of $32,000 and a fee of $6,000 per meeting, plus reasonable travel
costs, for each meeting of the board attended. In addition, certain directors
who are members of the Funds' joint audit committee receive a fee of $3,500 per
meeting and reasonable travel costs for each meeting of the Funds' audit
committee attended and $2,500 per any telephone board meeting for which there is
an agenda, minutes and a duration of one hour or more. Each Fund pays
proportionately its respective share of Independent Directors' fees, audit
committee fees and travel costs based on relative net assets. The Investment
Manager compensates its officers and directors who may also serve as officers or
directors of the Funds. The Funds do not pay any fees to, or reimburse expenses
of, directors who are considered "interested persons" of the Funds.
The aggregate compensation paid by Security Equity Fund to each of the
Directors during the fiscal year ended September 30, 2010, and the aggregate
compensation paid to each of the Independent Directors during calendar year 2010
by the Rydex | SGI Funds, are set forth below.
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
PENSION OR RETIREMENT ESTIMATED ANNUAL THE RYDEX | SGI FUNDS
NAMES OF INDEPENDENT AGGREGATE BENEFITS ACCRUED AS PART OF BENEFITS UPON COMPLEX, INCLUDING THE
DIRECTORS OF THE FUND COMPENSATION FUND EXPENSES RETIREMENT FUNDS
----------------------------------------------------------------------------------------------------------------------------
Donald A. Chubb, Jr. $38,486 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
Harry W. Craig, Jr. $38,486 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
Penny A. Lumpkin $38,486 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
Jerry B. Farley $37,064 $0 $0 $88,500
----------------------------------------------------------------------------------------------------------------------------
Maynard F. Oliverius $38,486 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
NAMES OF DIRECTORS WHO ARE PENSION OR RETIREMENT ESTIMATED ANNUAL THE RYDEX | SGI FUNDS
"INTERESTED PERSONS" OF THE AGGREGATE BENEFITS ACCRUED AS PART OF BENEFITS UPON COMPLEX, INCLUDING THE
FUND COMPENSATION FUND EXPENSES RETIREMENT FUNDS
----------------------------------------------------------------------------------------------------------------------------
Richard M. Goldman $0 $0 $0 $0
----------------------------------------------------------------------------------------------------------------------------
The aggregate compensation paid by Security Large Cap Value Fund to
each of the directors during the fiscal year ended September 30, 2010, and the
aggregate compensation paid to each of the Independent Directors during calendar
year 2010 by the Rydex | SGI Funds, are set forth below.
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
PENSION OR RETIREMENT ESTIMATED ANNUAL THE RYDEX | SGI FUNDS
NAMES OF INDEPENDENT AGGREGATE BENEFITS ACCRUED AS PART OF BENEFITS UPON COMPLEX, INCLUDING THE
DIRECTORS OF THE FUND COMPENSATION FUND EXPENSES RETIREMENT FUNDS
----------------------------------------------------------------------------------------------------------------------------
Donald A. Chubb, Jr. $1,131 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
Harry W. Craig, Jr. $1,131 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
Penny A. Lumpkin $1,131 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
Jerry B. Farley $1,087 $0 $0 $88,500
----------------------------------------------------------------------------------------------------------------------------
Maynard F. Oliverius $1,131 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
- 21 -
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
NAMES OF DIRECTORS WHO ARE PENSION OR RETIREMENT ESTIMATED ANNUAL THE RYDEX | SGI FUNDS
"INTERESTED PERSONS" OF THE AGGREGATE BENEFITS ACCRUED AS PART OF BENEFITS UPON COMPLEX, INCLUDING THE
FUND COMPENSATION FUND EXPENSES RETIREMENT FUNDS
----------------------------------------------------------------------------------------------------------------------------
Richard M. Goldman $0 $0 $0 $0
----------------------------------------------------------------------------------------------------------------------------
The aggregate compensation paid by Security Mid Cap Growth Fund to each
of the directors during the fiscal year ended September 30, 2010, and the
aggregate compensation paid to each of the Independent Directors during calendar
year 2010 by the Rydex | SGI Funds, are set forth below.
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
PENSION OR RETIREMENT ESTIMATED ANNUAL THE RYDEX | SGI FUNDS
NAMES OF INDEPENDENT AGGREGATE BENEFITS ACCRUED AS PART OF BENEFITS UPON COMPLEX, INCLUDING THE
DIRECTORS OF THE FUND COMPENSATION FUND EXPENSES RETIREMENT FUNDS
----------------------------------------------------------------------------------------------------------------------------
Donald A. Chubb, Jr. $1,718 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
Harry W. Craig, Jr. $1,718 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
Penny A. Lumpkin $1,718 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
Jerry B. Farley $1,648 $0 $0 $88,500
----------------------------------------------------------------------------------------------------------------------------
Maynard F. Oliverius $1,718 $0 $0 $92,000
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
NAMES OF DIRECTORS WHO ARE PENSION OR RETIREMENT ESTIMATED ANNUAL THE RYDEX | SGI FUNDS
"INTERESTED PERSONS" OF THE AGGREGATE BENEFITS ACCRUED AS PART OF BENEFITS UPON COMPLEX, INCLUDING THE
FUND COMPENSATION FUND EXPENSES RETIREMENT FUNDS
----------------------------------------------------------------------------------------------------------------------------
Richard M. Goldman $0 $0 $0 $0
----------------------------------------------------------------------------------------------------------------------------
The aggregate compensation paid by Security Income Fund to each of the
directors during the fiscal year ended December 31, 2010, and the aggregate
compensation paid to each of the Independent Directors during calendar year 2010
by the Rydex | SGI Funds, are set forth below.
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
PENSION OR RETIREMENT ESTIMATED ANNUAL THE RYDEX | SGI FUNDS
NAMES OF INDEPENDENT AGGREGATE BENEFITS ACCRUED AS PART OF BENEFITS UPON COMPLEX, INCLUDING THE
DIRECTORS OF THE FUND COMPENSATION FUND EXPENSES RETIREMENT FUNDS
----------------------------------------------------------------------------------------------------------------------------
Donald A. Chubb, Jr. $5,697 $0 $0 $77,500
----------------------------------------------------------------------------------------------------------------------------
Harry W. Craig, Jr. 5,697 0 0 77,500
----------------------------------------------------------------------------------------------------------------------------
Penny A. Lumpkin 5,697 0 0 77,500
----------------------------------------------------------------------------------------------------------------------------
Jerry B. Farley 5,697 0 0 77,500
----------------------------------------------------------------------------------------------------------------------------
Maynard F. Oliverius 5,697 0 0 77,500
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
NAMES OF DIRECTORS WHO ARE PENSION OR RETIREMENT ESTIMATED ANNUAL THE RYDEX | SGI FUNDS
"INTERESTED PERSONS" OF THE AGGREGATE BENEFITS ACCRUED AS PART OF BENEFITS UPON COMPLEX, INCLUDING THE
FUND COMPENSATION FUND EXPENSES RETIREMENT FUNDS
----------------------------------------------------------------------------------------------------------------------------
Richard M. Goldman $0 $0 $0 $0
----------------------------------------------------------------------------------------------------------------------------
- 22 -
The aggregate compensation paid by SBL Fund to each of the directors
during the fiscal year ended December 31, 2010, and the aggregate compensation
paid to each of the Independent Directors during calendar year 2010 by the
Rydex | SGI Funds, are set forth below.
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
PENSION OR RETIREMENT ESTIMATED ANNUAL THE RYDEX | SGI FUNDS
NAMES OF INDEPENDENT AGGREGATE BENEFITS ACCRUED AS PART OF BENEFITS UPON COMPLEX, INCLUDING THE
DIRECTORS OF THE FUND COMPENSATION FUND EXPENSES RETIREMENT FUNDS
----------------------------------------------------------------------------------------------------------------------------
Donald A. Chubb, Jr. $35,877 $0 $0 $77,500
----------------------------------------------------------------------------------------------------------------------------
Harry W. Craig, Jr. $35,877 0 0 77,500
----------------------------------------------------------------------------------------------------------------------------
Penny A. Lumpkin $35,877 0 0 77,500
----------------------------------------------------------------------------------------------------------------------------
Jerry B. Farley $35,877 0 0 77,500
----------------------------------------------------------------------------------------------------------------------------
Maynard F. Oliverius $35,877 0 0 77,500
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION FROM
NAMES OF DIRECTORS WHO ARE PENSION OR RETIREMENT ESTIMATED ANNUAL THE RYDEX | SGI FUNDS
"INTERESTED PERSONS" OF THE AGGREGATE BENEFITS ACCRUED AS PART OF BENEFITS UPON COMPLEX, INCLUDING THE
FUND COMPENSATION FUND EXPENSES RETIREMENT FUNDS
----------------------------------------------------------------------------------------------------------------------------
Richard M. Goldman $0 $0 $0 $0
----------------------------------------------------------------------------------------------------------------------------
COMMITTEES AND MEETINGS OF THE BOARD
The Board is responsible for overseeing the management and affairs of
the Funds. The Board held 4 regular meetings, during each Company's most recent
fiscal year. The Board of each company (other than Security Income Fund) held 3
special meetings during the respective company's most recent fiscal year. The
Board of Security Income Fund held 4 special meetings during Security Income
Fund's most recent fiscal year. Each Director then in office attended at least
75% of the aggregate of the total number of meetings of the Board and the total
number of meetings held by all committees of the Board on which the Director
served. The Companies currently do not have a policy with respect to Directors'
attendance at shareholder meetings. Shareholders wishing to communicate with the
Board or individual directors should send such correspondence to the Board at
the Companies' offices. Shareholder communications will be sent directly to the
applicable Board member(s). The Board has established the following standing
committees:
AUDIT COMMITTEE -- The Board of Directors has an Audit Committee, the
purpose of which is to meet with the independent registered public accountants,
to review the work of the auditors, and to oversee the handling by the
Investment Manager of the accounting functions for the Funds. The Audit
Committee consists of the following Independent Directors: Messrs. Craig, Chubb,
Farley and Oliverius and Ms. Lumpkin. The Audit Committee held two meetings
during the fiscal year ended December 31, 2010.
CONTRACT RENEWAL COMMITTEE -- The Board of Directors has a Contract
Renewal Committee, the purpose of which is to meet in advance of the annual
contract renewal meeting and review relevant information before voting on
whether to renew the Funds' investment advisory agreements. The Committee also
considers whether additional information should be requested from management in
connection with the annual review of the Funds' advisory agreements. The
Contract Renewal Committee consists of the following Independent Directors:
Messrs. Craig, Chubb, Farley and Oliverius and Ms. Lumpkin. The Contract Renewal
Committee held no meetings during the calendar year ended December 31, 2010.
- 23 -
NOMINATING COMMITTEE -- The Board of Directors has established a Nominating
Committee for the purpose of considering and presenting to the Board candidates
it proposes for nomination to fill Independent Director vacancies on the Board.
Specific qualifications of candidates for Board membership will be based on the
needs of the Board at the time of nomination. The Nominating Committee is
willing to consider nominations received from shareholders and shall assess
shareholder nominees in the same manner as it reviews its own nominees. A
shareholder nominee for director should be submitted in writing to the Funds'
Secretary. Any such shareholder nomination should include, at a minimum, the
following information as to each individual proposed for nominations as
director: such individual's written consent to be named in the proxy statement
as a nominee (if nominated) and to serve as a director (if elected) and all
information relating to such individual that is required to be disclosed in the
solicitation of proxies for election of directors, or is otherwise required, in
each case under applicable federal securities laws, rules and regulations. The
Nominating Committee consists of Messrs. Chubb, Farley, Craig, and Oliverius and
Ms. Lumpkin. The Nominating Committee held no meetings during the calendar year
ended December 31, 2010.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The firm of Ernst & Young LLP ("Ernst & Young") has been selected as
independent auditors of the Companies for the current fiscal year. Ernst & Young
has confirmed to the Audit Committee that they are independent auditors with
respect to the Companies. Representatives of Ernst & Young are not expected to
be present at the Meeting, but will have the opportunity to make a statement if
they wish, and will be available should any matter arise requiring their
presence.
Certain information concerning the fees and services provided by Ernst
& Young to the Companies and to the Investment Manager and its affiliates for
the two most recently completed fiscal years of the Companies is provided below.
The Audit Committee is responsible for the engagement, compensation, and
oversight of Ernst & Young. The Audit Committee is required to pre-approve all
audit and permitted non-audit services performed by Ernst & Young for the Funds
in accordance with the Audit Committee Charter and the 1940 Act and makes a
determination with respect to Ernst & Young's independence each year. For the
two most recent fiscal years for each if the Funds, none of the services
provided to the Companies or described under "Audit-Related Fees," "Tax Fees,"
and "All Other Fees" were approved by the Audit Committee pursuant to the de
minimis exception to the pre-approval requirements.
The following table sets forth the aggregate fees billed by Ernst &
Young for professional services rendered to the Companies during the two most
recent fiscal years.
----------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY SECURITY LARGE SECURITY MID CAP SECURITY INCOME SBL FUND
FUND CAP VALUE FUND GROWTH FUND FUND
----------------------------------------------------------------------------------------------------------------------------
AUDIT FEES 9/30/10: $162,500 9/30/10: $13,000 9/30/10: $13,000 9/30/10: $26,000 12/31/10: $287,500
9/30/09: $271,000 9/30/09: $13,000 9/30/09: $13,000 9/30/09: $26,000 12/31/09: $188,500
----------------------------------------------------------------------------------------------------------------------------
AUDIT- 9/30/10: $7,673 9/30/10: $4,135 9/30/10: $3,692 12/31/10: $6,200 12/31/10: $11,020
RELATED 9/30/09: $7,673 9/30/09: $4,135 9/30/09: $3,692 12/31/09: $6,200 12/31/09: $11,020
FEES
----------------------------------------------------------------------------------------------------------------------------
TAX FEES 9/30/10: $32,075 9/30/10: $6,415 9/30/10: $3,208 12/31/10: $6,415 12/31/10: $48,113
9/30/09: $33,633 9/30/09: $6,727 9/30/09: $3,363 12/31/09: $6,727 12/31/09: $50,450
----------------------------------------------------------------------------------------------------------------------------
ALL OTHER 9/30/10: $7,667 9/30/10: $1,533 9/30/10: $767 12/31/10: $1,533 12/31/10: $11,500
FEES 9/30/09: $7,667 9/30/09: $1,533 9/30/09: $767 12/31/09: $1,533 12/31/09: $11,500
----------------------------------------------------------------------------------------------------------------------------
AGGREGATE 9/30/10: $0 9/30/10: $0 9/30/10: $0 12/31/10: $0 12/31/10: $0
NON-AUDIT 9/30/09: $0 9/30/09: $0 9/30/09: $0 12/31/09: $0 12/31/09: $0
FEES
----------------------------------------------------------------------------------------------------------------------------
- 24 -
AUDIT FEES. The aggregate fees billed by Ernst & Young for audit of the
annual financial statements in connection with statutory and regulatory filings.
AUDIT-RELATED FEES. The aggregate fees billed by Ernst & Young for
assurance and related services reasonably related to the performance of the
annual audit or review of the Company's financial statements (and not reported
above).
TAX FEES. The aggregate tax fees billed by Ernst & Young for
professional services rendered for tax compliance, tax advice, and tax planning,
including preparation of tax returns and distribution assistance.
ALL OTHER FEES. The aggregate fees billed by Ernst & Young for products
and services provided by Ernst & Young to the Funds, other than the services
reported above.
AGGREGATE NON-AUDIT FEES. The aggregate non-audit fees were for tax
fees billed by Ernst & Young for professional services rendered for tax
compliance, tax advice, and tax planning, including preparation of tax returns
and distribution assistance. All non-audit services rendered were pre-approved
by the Audit Committee. As such, the Audit Committee has considered these
services in maintaining Ernst & Young's independence.
BOARD RECOMMENDATION ON PROPOSAL 2
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS OF THE FUNDS VOTE "FOR" THE
ELECTION OF EACH NOMINEE
- 25 -
PROPOSAL 3--THE APPROVAL OF A CHANGE TO THE FUNDAMENTAL
INVESTMENT POLICY ON DIVERSIFICATION OF INVESTMENTS WITH
RESPECT TO SERIES N
Proposal 3 relates to a change to the "fundamental investment policy"
on diversification of investments for Series N. The 1940 Act requires that each
Fund adopt a "fundamental" investment policy with respect to several types of
activities, including diversification of investments. Diversification relates to
the percentage of assets that may be invested in a single issuer's securities
and the percentage of voting securities of such issuer that may be owned. Under
the 1940 Act, an investment policy that is "fundamental" may only be modified
with the approval of shareholders. Series N currently has in place a fundamental
investment policy on diversification of investments that is more prohibitive
than the 1940 Act requires, unnecessarily limiting the Series' investment
strategies. Proposal 3 is thus intended to provide Series N with greater
flexibility to invest in issuers, particularly investment companies, to the
maximum extent permitted as a diversified fund, consistent with current
applicable law and with Series N's investment strategies and objectives. If this
change is approved by shareholders of Series N, the investment program of Series
N will change as discussed below.
PROPOSED NEW FUNDAMENTAL INVESTMENT POLICY
If Proposal 3 is approved by shareholders, the fundamental investment
policy on diversification of investments for Series N would read:
The fundamental policies of the Series are:
1. Series N shall be a "diversified company" as that term is
defined under the Investment Company Act of 1940, and as
interpreted, modified or applied by government or
regulatory authorities having jurisdiction from time to
time.
CURRENT FUNDAMENTAL INVESTMENT POLICY
The current fundamental investment policy on diversification of
investments for Series N reads:
The fundamental policies of the Series are:
1. PERCENT LIMIT ON ASSETS INVESTED IN ANY ONE ISSUER Not to
invest more than 5% of its total assets in the securities
of any one issuer (other than obligations of, or guaranteed
by, the U.S. government, its agencies or instrumentalities),
provided, that this limitation applies only with respect to
75% of the Fund's total assets.
2. PERCENT LIMIT ON SHARE OWNERSHIP OF ANY ONE ISSUER Not to
purchase a security if, as a result, with respect to 75% of
the value of the Series' total assets, more than 10% of the
outstanding voting securities of any one issuer would be
held by the Series (other than obligations issued or
guaranteed by the U.S. government, its agencies or
instrumentalities).
- 26 -
DISCUSSION OF PROPOSED MODIFICATION
The proposed modification to Series N's fundamental investment policy
on diversification of investments would allow the Funds to invest in securities
of any one issuer of securities to the extent permitted by the 1940 Act. The
1940 Act requires each series of an investment company to state whether it is
"diversified" or "non-diversified," as those terms are defined in the 1940 Act.
The term "diversified" is defined in the 1940 Act as follows: "a management
company which meets the following requirements: at least 75 per centum of the
value of its total assets is represented by cash and cash items (including
receivables), Government securities, securities of other investment companies,
and other securities for the purposes of this calculation limited in respect of
any one issuer to an amount not greater in value than five per centum of the
value of the total assets of such management company and to not more than 10 per
centum of the outstanding voting securities of such issuer" ("75% test"). Under
the 1940 Act, a "non-diversified" mutual fund generally is any mutual fund that
is not considered diversified and is not, therefore, constrained by the 75%
test.
Under the 75% test, a fund, such as Series N, may not invest more than
5% of its assets in a single issuer (e.g., a company) of securities. This
provision is intended in part to limit the amount of investment exposure (and
thus risk) that a "diversified" fund, such as Series N, can incur with regard to
individual issuers. The 1940 Act provision carves out from the prohibition
investments in cash and government securities as well as securities of other
investment companies (as these investments can generally be deemed less risky).
The two current fundamental diversification policies of Series N that are shown
above largely restate the 1940 Act provisions but fail to explicitly carve-out
shares of investment companies, which could potentially prevent Series N from
investing its assets in funds. The two current policies also unnecessarily limit
the percentage of outstanding shares of another fund in which Series N may
invest. If approved, the change would permit Series N to invest in other
investment companies to the extent permitted by the 1940 Act.
As a shareholder of another investment company, Series N would bear,
along with other shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees. These expenses would be in addition
to the advisory and other expenses that Series N bears directly in connection
with its own operations.
Notwithstanding this greater freedom to invest in other investment
companies, Series N would continue to comply with other provisions of the 1940
Act relating to investments in other investment companies.
No change is being proposed to Series N's designation as a diversified
fund. Rather, Proposal 3 would permit Series N to invest in other issuers to the
extent permitted under the 1940 Act as a diversified fund. The proposed
modification would also allow Series N to conform to future changes in the 1940
Act--and interpretations thereunder--without further Board or shareholder
action. The modification would therefore ensure that Series N maintains the
maximum amount of flexibility to invest in securities while maintaining its
status as a diversified investment company, without incurring the additional
expenses necessary to further amend the fundamental investment policies.
- 27 -
NOTE REGARDING RELATED CHANGE TO INVESTMENT PROGRAM
This third proposal is motivated by the Investment Manager's
recommendation, which was approved by the SBL Fund Board to modify Series N's
investment objective and strategies in order to use a new asset allocation
strategy which involve the investment of a predominant portion of the Fund's
assets in exchange traded funds ("ETFs"), including ETFs within the Rydex|SGI
family of funds in order to provide exposure to equity, fixed income and money
market assets. Series N's assets would be compared to a diversified portfolio of
ETFs seeking to track the investment performance of major equity and fixed
income indexes. Series N also could invest in futures contracts in order to get
exposure to such indexes. This asset allocation strategy would be dynamic, which
means that it could rapidly change in order to adapt to market conditions. In
addition, Series N would no longer be managed by its current sub-adviser. It is
not believed that these investments in other investment companies will
materially increase risks.
Should Series N shareholders not approve the proposal to amend Series
N's fundamental investment policy on diversification of investments, Series N's
current fundamental investment policy on diversification of investments would
continue to apply unchanged and the Board would decide whether to make changes
to Series N's investment program.
BOARD RECOMMENDATION ON PROPOSAL 3
Based on their deliberations on and evaluation of the information
described above and such other information deemed relevant, the Board, including
all of the Independent Directors, unanimously agreed to approve the proposed new
fundamental investment policy on diversification of investments and to recommend
the approval of the proposed new fundamental investment policy on
diversification of investments to shareholders of Series N.
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS OF SERIES N VOTE "FOR" PROPOSAL 3
- 28 -
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
until February 21, 2011 served as each Fund's transfer agent. Effective February
21, 2011, Rydex Fund Services, LLC (the "Transfer Agent"), located at 805 King
Farm Boulevard, Suite 600, Rockville, Maryland 20850 has served as transfer
agent of the Funds. The principal underwriter/distributor of the Funds
(co-principal underwriter/distributor with respect to SBL Fund) is Rydex
Distributors, LLC (the "Distributor"), located at 805 King Farm Boulevard, Suite
600, Rockville, Maryland 20850. The Transfer Agent and the Distributor are
affiliates of the Investment Manager because they are commonly held with the
Investment Manager (and will remain under common control after the Transaction).
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 the
Distributor (or any predecessor affiliated distributor), as applicable, during
the previous fiscal year also is provided in Appendix C.
The Transaction could also be deemed to affect the control of the
Distributor and Transfer Agent because they are commonly held with the
Investment Manager. However, shareholder approval is not required in order for
the Distributor and Transfer Agent to continue providing services to the Funds
after the closing of the Transaction. The Transaction will not affect the
control of Security Distributors, Inc., the co-principal underwriter for the
series of SBL Fund, as it is not under the common control of the immediate
parent of the Investment Manager. The Board has been assured that there will be
no material change in the nature or quality of the services provided by the
Distributor and Transfer Agent to each Fund due to the change in control.
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). T. Rowe Price
Associates, Inc. ("T. Rowe Price"), 100 East Pratt Street, Baltimore, Maryland
2102, is currently the sub-adviser to Series N.
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 and T. Rowe Price will be terminated
upon completion of the Transaction, shareholder approval of the new sub-advisory
- 29 -
agreements with Mainstream and T. Rowe Price is not required under the SEC
exemptive order. At the Special Board Meeting, the Directors unanimously
approved the new sub-advisory agreements with Mainstream and T. Rowe Price.
AFFILIATIONS AND AFFILIATED BROKERAGE
During the Funds' most recent fiscal year, 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 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 October 13, 2011, but
proxies may also be solicited by telephone and/or in person by representatives
of the Companies, regular employees of the Investment Manager or its
affiliate(s), or The Altman Group, a private proxy services firm. If we have not
received your vote as the date of the 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 Guggenheim Capital or its affiliates, and not the Funds. The
estimated cost of retaining The Altman Group is approximately $434,496.
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 to 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 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 E, 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 G.
- 30 -
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 a Proposal 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"
Proposals 1, 2 and 3 in favor of an adjournment of the Meeting, and will vote
those proxies required to be voted "AGAINST" Proposals 1, 2 and 3 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 with respect to any proposal, your shares will be voted "FOR"
Proposals 1, 2 and 3. 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.
- 31 -
REQUIRED VOTE. Approval of Proposal 1 and Proposal 3 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, provided that
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 3.
With respect to Proposal 2, each shareholder is entitled to vote that
number of shares owned as of the record date multiplied by the number of
Directors to be elected. A shareholder may cast all such votes for a single
director or distribute them among two or more directors. This method of voting
for the election of directors is commonly known as "cumulative voting." A
plurality of the combined votes cast at the Meeting by the shareholders of a
Company is sufficient to approve the election of a Director. Abstentions and
broker non-votes will have no effect on Proposal 2.
The Current Investment Management Agreements will remain in place until
the completion of the Transaction, at which time, the Current Investment
Management Agreements will terminate and, subject to shareholder approval, the
New Investment Management Agreements will go into effect. As a result, 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.
If Proposal 1 is not approved by shareholders of any Fund, the Board
will evaluate other short-and long-term options, as previously discussed. If the
nominees are not elected, the current Directors will continue their current
terms. New Directors could be appointed in compliance with applicable law. With
respect to Proposal 3, should Series N's shareholders not approve the proposal
to amend Series N's fundamental policy on diversification of investments, Series
N's fundamental investment policy on diversification would continue to apply
unchanged.
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
- 32 -
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
- 33 -
APPENDIX A
CORPORATE STRUCTURE OF THE INVESTMENT MANAGER
The following sets forth the name and business address of each parent company of
the Investment Manager, and the basis of each parent company's control of the
Investment Manager as of September [ ], 2011.
The Investment Adviser is an indirect wholly-owned subsidiary of an entity
that is managed by Guggenheim Partners, LLC ("Guggenheim Partners").
Guggenheim Partners is a wholly-owned subsidiary of Guggenheim Capital, LLC
("Guggenheim Capital"), 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 Partners as a result of its equity ownership in excess of 25%
(but less than 50%) of Guggenheim Capital. Following the Transaction, the
Investment Adviser will be an indirect wholly-owned subsidiary of
Guggenheim Capital.
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APPENDIX B
FORMS OF NEW INVESTMENT MANAGEMENT AGREEMENTS
INVESTMENT MANAGEMENT AGREEMENT
This Agreement, made and entered into this [ ] day of [ ], 2011 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:
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(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.
(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 the MSCI EAFE Equal Weight Series, for each of the
years this Agreement is in effect, the MSCI EAFE Equal Weight 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 Small Cap Value
Series, for each of the years this Agreement is in effect, Small Cap Value
Series shall pay the Adviser an annual fee equal to 1.00% 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 Large Cap Core 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
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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 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 applicable at the time, all as from time to time amended. The Adviser
shall advise and
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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 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
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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 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.
B-5
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.
9. APPLICABLE LAW. This Agreement shall be subject to and construed
in accordance with the laws of the State of Kansas.
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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: /s/ Richard M. Goldman
----------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
/s/ Amy J. Lee
----------------------------------
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By: /s/ Richard M. Goldman
----------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
/s/ Amy J. Lee
----------------------------------
Name: Amy J. Lee
Title: Secretary
B-7
INVESTMENT MANAGEMENT AGREEMENT
This Agreement, made and entered into as of this [ ] day of [ ], 2011
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.
B-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).
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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 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
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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 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.
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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.
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.
B-12
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 [ ], 2011.
SECURITY LARGE CAP VALUE FUND
By: /s/ Richard M. Goldman
----------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
/s/ Amy J. Lee
----------------------------------
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By: /s/ Richard M. Goldman
----------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
/s/ Amy J. Lee
----------------------------------
Name: Amy J. Lee
Title: Secretary
B-13
INVESTMENT MANAGEMENT AGREEMENT
This Agreement, made and entered into as of this [ ] day of [ ], 2011,
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;
B-14
(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, 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 registration statement of the Fund under
the Securities Act of 1933 ("1933 Act") and/or the 1940 Act, as may be
applicable at the
B-15
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 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
B-16
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, 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
B-17
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.
B-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: /s/ Richard M. Goldman
----------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
/s/ Amy J. Lee
----------------------------------
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By: /s/ Richard M. Goldman
----------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
/s/ Amy J. Lee
----------------------------------
Name: Amy J. Lee
Title: Secretary
B-19
INVESTMENT ADVISORY CONTRACT
THIS AGREEMENT, made and entered into this [ ] day of [ ] 2011, 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.
B-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 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
B-21
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 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
B-22
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 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
B-23
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 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
B-24
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).
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
B-25
INVESTMENT ADVISORY CONTRACT
THIS AGREEMENT, made and entered into this [ ] day of [ ], 2011, 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.
B-26
(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 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.
B-27
(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 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
B-28
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.
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
B-29
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 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).
B-30
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: /s/ Richard M. Goldman
----------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
/s/ Amy J. Lee
----------------------------------
Name: Amy J. Lee
Title: Secretary
SECURITY INVESTORS, LLC
By: /s/ Richard M. Goldman
----------------------------------
Name: Richard M. Goldman
Title: President
ATTEST:
/s/ Amy J. Lee
----------------------------------
Name: Amy J. Lee
Title: Secretary
B-31
APPENDIX C
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 for the Funds. Rydex Fund Services, LLC ("RFS") serves as the
transfer agent of the Funds. Rydex Distributors, LLC ("RDL") and Security
Distributors, Inc. ("SDI" and, together with RDL, the "Distributors") serve as
principal underwriters to the Funds, as applicable. The tables below and the
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) November
30, 2012 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, 2010
for series of Security Equity Fund, Security Large Cap Value Fund and
Security Mid Cap Growth Fund, and December 31, 2010 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, 2010 for series of Security Equity Fund, Security Large
Cap Value Fund and Security Mid Cap Growth Fund, and December 31, 2010
for series of Security Income Fund and SBL Fund; and
(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
agent for the Fund during the Fund's fiscal year ended September 30,
2010 for series of Security Equity Fund, Security
C-1
Large Cap Value Fund and Security Mid Cap Growth Fund, and December 31,
2010 for series of Security Income Fund and SBL Fund.
(viii) The amount of distribution fees, as applicable, paid by each Fund to RDL
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, 2010 for series of Security
Equity Fund, Security Large Cap Value Fund and Security Mid Cap Growth
Fund, and December 31, 2010 for series of Security Income Fund and SBL
Fund. Effective March 16, 2009, SDI and RDL served as co-principal
underwriters for series of Security Equity Fund, Security Large Cap
Value Fund, Security Mid Cap Growth Fund and Security Income Fund and,
effective October 16, 2009, RDI began serving as the sole principal
underwriter for those Funds. Effective January 1, 2010, SDI and RDL
serve as co-principal underwriters for series of SBL Fund.
C-2
APPENDIX C
-----------------------------------------------------------------------------------------------------------------------------------
TRANSFER
MANAGEMENT FEES ADMINISTRATIVE AGENCY
MANAGEMENT WAIVED BY AND SERVICE FEES SERVICE FEES
DATE OF LAST FEES PAID TO REIMBURSEMENTS PAID TO PAID TO
SHAREHOLDER MANAGEMENT EXPENSE INVESTMENT FROM INVESTMENT INVESTMENT INVESTMENT
COMPANIES AND FUND APPROVAL FEES LIMITS MANAGER MANAGER MANAGER MANAGER
-----------------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY FUND(1)
Rydex|SGI All Cap 5/21/2010 0.70% Class A: 1.27% $ 17,156 $ 59,326 $ 2,726 $ 15,366
Value Fund Class C: 2.02%
Institutional
Class: 1.02%
Rydex|SGI Alpha 5/21/2010 1.25% Class A: 2.11% $ 169,597 $176,815 $ 31,659 $ 47,661
Opportunity Fund Class B: 2.86
Class C: 2.86%
Institutional
Class: 1.86%
Rydex|SGI MSCI EAFE 5/21/2010 0.70% Class A: 1.61% $ 986,496 None $ 151, 213 $ 252,325
Equal Weight Fund Class B: 2.36%
(formerly Rydex|SGI Class C: 2.36%
Global Fund) Institutional
Class: 1.36%
Rydex|SGI Large Cap 5/21/2010 0.75% Class A: 1.35% $ 297,673 $150,104 $ 37,857 $ 198,581
Concentrated Class B: 2.10%
Growth Fund Class C: 2.10%
Rydex|SGI Large 5/21/2010 0.75% None $1,426,137 None $ 180,964 $ 471,179
Cap Core Fund
Rydex|SGI Mid Cap 5/21/2010 1.00% for the None $8,950,803 None $1,071,380 $1,939,114
Value Fund first $200
million and
0.75% thereafter
Rydex|SGI Mid 5/21/2010 0.75% 0.90% $2,914,159 $209,979 $ 369,590 $ 283,742
Cap Value
Institutional Fund
Rydex|SGI Small 5/21/2010 0.85% None $ 122,319 None $ 25,866 $ 87,581
Cap Growth Fund
Rydex|SGI Small 5/21/2010 1.00% Class A: 1.30% $ 78,268 $ 90,347 $ 19,331 $ 21,303
Class C: 2.05%
-----------------------------------------------------------------------------------------------------------------------------------
C-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
SHAREHOLDER MANAGEMENT EXPENSE INVESTMENT FROM INVESTMENT INVESTMENT INVESTMENT
COMPANIES AND FUND APPROVAL FEES LIMITS MANAGER MANAGER MANAGER MANAGER
-----------------------------------------------------------------------------------------------------------------------------------
Cap Value Fund Institutional
Class: 1.05%
-----------------------------------------------------------------------------------------------------------------------------------
SECURITY LARGE CAP
VALUE FUND(3)
-----------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI Large Cap 5/21/2010 0.65% Class A: 1.15% $ 330,582 $204,444 $ 48,490 $189,244
Value Fund Class B: 1.90%
Class C: 1.90%
Rydex|SGI Large 5/21/2010 0.65% 0.96% $ 18,163 $ 61,962 $ 17,610 $ 19,008
Cap Value
Institutional Fund
-----------------------------------------------------------------------------------------------------------------------------------
SECURITY MID CAP
GROWTH FUND(3)
-----------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI MidCap 5/21/2010 0.75% None $ 610,509 None $ 77,511 $293,786
Growth Fund
-----------------------------------------------------------------------------------------------------------------------------------
SECURITY INCOME FUND(4)
-----------------------------------------------------------------------------------------------------------------------------------
Rydex|SGI High 5/21/2010 0.60% Class A: 1.16% $1,083,328 $256,698 $198,269 $374,561
Yield Fund Class B: 1.91%
Class C: 1.91%
Institutional
Class: 0.91%
Rydex|SGI U.S. 5/21/2010 0.50% Class A: 1.00% $ 721,219 $319,988 $146,592 $334,052
Intermediate Bond Fund Class B: 1.75%
Class C: 1.75%
Series A (Large Cap 5/21/2010 0.75% None $1,619,630 None $206,915 $ 27,519
Core Series)
Series B (Large Cap 5/21/2010 0.65% None $1,829,913 None $267,699 $ 25,529
Value Series)
Series C (Money 5/21/2010 0.50% None $ 681,428 None $135,127 $ 25,519
Market Series)
Series D (MSCI EAFE 5/21/2010 0.70% None $2,556,930 None $386,862 $ 25,519
Equal Weight
Series (formerly
Global Series))
Series E (U.S. 5/21/2010 0.75% 0.81% $ 988,459 $162,543 $129,915 $ 25,448
Intermediate Bond
Series)
Series J (Mid Cap 5/21/2010 0.75% None $1,150,158 None $145,992 $ 25,427
Growth Series)
Series N (Managed Asset 5/21/2010 1.00% None $ 772,349 None $115,852 $ 25,383
Allocation Series)
C-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
SHAREHOLDER MANAGEMENT EXPENSE INVESTMENT FROM INVESTMENT INVESTMENT INVESTMENT
COMPANIES AND FUND APPROVAL FEES LIMITS MANAGER MANAGER MANAGER MANAGER
-----------------------------------------------------------------------------------------------------------------------------------
Series O (All Cap 5/21/2010 0.70% 1.00% $1,116,412 None $152,007 $25,412
Value Series)
Series P (High 5/21/2010 0.75% None $ 985,177 None $133,174 $25,245
Yield Series)
Series Q (Small Cap 5/21/2010 0.95% None $1,136,876 None $114,219 $25,345
Value Series)
Series V (Mid Cap 5/21/2010 0.75% None $2,280,944 None $ 36,265 $25,411
Value Series)
Series X (Small Cap 5/21/2010 0.85% None $ 316,525 None $289,313 $25,340
Growth Series)
Series Y (Large 5/21/2010 0.75% None $ 307,319 None $ 39,061 $25,343
Cap Concentrated
Growth Series)
Series Z (Alpha 5/21/2010 1.25% 2.35% $ 258,694 $41,595 $ 31,043 $25,167
Opportunity Series)
1. The investment management agreement between Security Equity Fund, on behalf
of its series, and Security Investors, LLC was made and entered into on
August 1, 2010, amended and restated effective as of April 29, 2011.
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 August 1, 2010.
3 The investment management agreement between Security Mid Cap Growth Fund,
on behalf of its series, and Security Investors, LLC was made and entered
August 1, 2010.
4 The investment management agreement between Security Income Fund, on behalf
of its series, and Security Investors, LLC was made and entered into on
August 1, 2010.
5 The investment management agreement between SBL Fund, on behalf of its
series, and Security Investors, LLC was made and entered into on August 1,
2010.
DISTRIBUTION FEES PAID TO RDL/SDI
-----------------------------------------------------------------------------------------
FUND NAME CLASS A CLASS B CLASS C
-----------------------------------------------------------------------------------------
All Cap Value Fund $3,835 $0 $6,072
-----------------------------------------------------------------------------------------
Alpha Opportunity Fund 22,431 13,399 16,246
-----------------------------------------------------------------------------------------
MSCI EAFE Equal Weight Fund (formerly Global Fund) 213,352 0 45,079
-----------------------------------------------------------------------------------------
Large Cap Concentrated Growth Fund 75,860 58,853 34,604
-----------------------------------------------------------------------------------------
C-5
-----------------------------------------------------------------------------------------
FUND NAME CLASS A CLASS B CLASS C
-----------------------------------------------------------------------------------------
Large Cap Core Fund 449,349 81,823 22,298
-----------------------------------------------------------------------------------------
Mid Cap Value Fund 2,270,523 506,522 1,679,124
-----------------------------------------------------------------------------------------
Mid Cap Value Institutional Fund 0 0 0
-----------------------------------------------------------------------------------------
Small Cap Growth Fund 28,244 15,943 14,986
-----------------------------------------------------------------------------------------
Small Cap Value Fund 15,132 0 10,109
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Large Cap Value Fund 110,912 0 26,224
-----------------------------------------------------------------------------------------
Large Cap Value Institutional Fund 0 0 0
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Mid Cap Growth Fund 176,186 54,800 54,470
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
High Yield Fund 401,316 0 94,848
-----------------------------------------------------------------------------------------
U.S. Intermediate Bond Fund 273,214 144,386 205,199
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Series A (Large Cap Core Series) 0 0 0
-----------------------------------------------------------------------------------------
Series B (Large Cap Value Series) 0 0 0
-----------------------------------------------------------------------------------------
Series C (Money Market Series) 0 0 0
-----------------------------------------------------------------------------------------
Series D (MSCI EAFE Equal Weight Series (formerly
Series D Global Series)) 0 0 0
-----------------------------------------------------------------------------------------
Series E (U.S. Intermediate Bond Series) 0 0 0
-----------------------------------------------------------------------------------------
Series J (Mid Cap Growth Series) 0 0 0
-----------------------------------------------------------------------------------------
Series N (Managed Asset Allocation Series) 0 0 0
-----------------------------------------------------------------------------------------
Series O (All Cap Value Series) 0 0 0
-----------------------------------------------------------------------------------------
Series P (High Yield Series) 0 0 0
-----------------------------------------------------------------------------------------
Series Q ( Small Cap Value Series) 0 0 0
-----------------------------------------------------------------------------------------
Series V (Mid Cap Value Series) 0 0 0
-----------------------------------------------------------------------------------------
Series X (Small Cap Growth Series) 0 0 0
-----------------------------------------------------------------------------------------
Series Y (Large Cap Concentrated Growth Series) 0 0 0
-----------------------------------------------------------------------------------------
Series Z (Alpha Opportunity Series) 0 0 0
-----------------------------------------------------------------------------------------
C-6
APPENDIX D
DIRECTORS/MANAGERS AND OFFICERS OF THE INVESTMENT ADVISER
MEMBER REPRESENTATIVE AND PRINCIPAL EXECUTIVE OFFICER OF SECURITY
INVESTORS, LLC. The business address of the member representative and principal
executive officer is One Security Benefit Place, Topeka, Kansas 66636-0001.
NAME POSITION HELD WITH OTHER PRINCIPAL
SECURITY INVESTORS, OCCUPATION/POSITION
LLC
--------------------------------------------------------------------------------------------------------
Richard M. Goldman President, Chief Senior Vice President, Security Benefit Corporation;
Executive Officer and CEO, Security Benefit Asset Management Holdings, LLC;
Member Representative CEO, President and Manager Representative, Security
Investors, LLC; CEO and Manager, Rydex Holdings, LLC;
CEO, President, and Manager, Rydex Distributors, LLC;
Manager, Rydex Fund Services, LLC; President and
Trustee, Rydex Series Funds, Rydex ETF Trust, Rydex
Dynamic Funds and Rydex Variable Trust; and President,
Director and Chairman of the Board, Security Equity
Fund, Security Income Fund, Security Large Cap Value
Fund, Security Mid Cap Growth Fund and SBL Fund
DIRECTORS/OFFICERS OF THE FUNDS WHO HOLD POSITION(S) WITH SECURITY INVESTORS,
LLC. The business address of each of the following persons is 805 King Farm
Boulevard, Suite 600, Rockville, Maryland 20850.
NAME POSITION HELD WITH THE FUNDS POSITION HELD WITH SECURITY INVESTORS,
LLC
--------------------------------------------------------------------------------------------------------
Richard M. Goldman Director, President and President, Chief Executive Officer and
Chairman of the Board of each Member Representative
Company
Nick Bonos Treasurer Senior Vice President
Joanna M. Haigney Chief Compliance Officer Senior Vice President and Chief
Compliance Officer
Joseph Arrunda Assistant Treasurer Vice President
Keith Fletcher Vice President Senior Vice President
Amy Lee Vice President and Secretary Senior Vice President and Secretary
D-1
APPENDIX E
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 April 30, 2011 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.
NAME(S) OF FUND(S) ANNUAL COMPENSATION TO NET ASSETS MANAGEMENT FEES
SUBJECT TO THIS PROXY THE INVESTMENT MANAGER (IN MILLIONS) WAIVED BY AND
STATEMENT (AS A PERCENTAGE OF AVERAGE REIMBURSEMENTS
DAILY NET ASSETS) FROM INVESTMENT
Name(s) of Other Fund(s) with MANAGER
Similar Objectives
---------------------------------------------------------------------------------------------------
RYDEX|SGI LARGE CAP CORE 0.75% $ 212.24 None
FUND, A SERIES OF SECURITY EQUITY
FUND
SERIES A (LARGE CAP CORE SERIES), 0.75% $ 250.61 None
A SERIES OF SBL FUND
---------------------------------------------------------------------------------------------------
RYDEX|SGI ALPHA OPPORTUNITY 1.25% $ 14.17 $176,815
FUND, A SERIES OF SECURITY EQUITY
FUND
SERIES Z (ALPHA OPPORTUNITY 1.25% $ 21.68 $41,595
SERIES), A SERIES OF SBL FUND
---------------------------------------------------------------------------------------------------
RYDEX|SGI MSCI EAFE EQUAL 0.70% $ 97.83 None
WEIGHT FUND (FORMERLY
RYDEX|SGI GLOBAL FUND), A SERIES
OF SECURITY EQUITY FUND
SERIES D (MSCI EAFE EQUAL 0.70% $ 271.90 None
WEIGHT SERIES) (FORMERLY SERIES D
(GLOBAL SERIES)), A SERIES OF SBL
FUND
---------------------------------------------------------------------------------------------------
RYDEX|SGI MID CAP VALUE FUND, 1.00% for the first $1646.84 None
A SERIES OF SECURITY EQUITY FUND $200 million and
0.75% thereafter
RYDEX|SGI MID CAP VALUE 0.75% $ 681.81 $209,976
INSTITUTIONAL FUND, A SERIES OF
SECURITY EQUITY FUND
SERIES V (MID CAP VALUE SERIES), 0.75% $ 340.77 None
A SERIES OF SBL FUND
---------------------------------------------------------------------------------------------------
E-1
NAME(S) OF FUND(S) ANNUAL COMPENSATION TO NET ASSETS MANAGEMENT FEES
SUBJECT TO THIS PROXY THE INVESTMENT MANAGER (IN MILLIONS) WAIVED BY AND
STATEMENT (AS A PERCENTAGE OF AVERAGE REIMBURSEMENTS
DAILY NET ASSETS) FROM INVESTMENT
Name(s) of Other Fund(s) with MANAGER
Similar Objectives
---------------------------------------------------------------------------------------------------
RYDEX|SGI SMALL CAP 0.85% $ 20.84 None
GROWTH FUND, A SERIES OF
SECURITY EQUITY FUND
SERIES X (SMALL CAP GROWTH 0.85% $ 51.02 None
SERIES), A SERIES OF SBL FUND
---------------------------------------------------------------------------------------------------
RYDEX|SGI SMALL CAP VALUE 1.00% $ 12.75 $ 90,347
FUND, A SERIES OF SECURITY
EQUITY FUND
SERIES Q (SMALL CAP VALUE 0.95% $143.87 None
SERIES), A SERIES OF SBL FUND
---------------------------------------------------------------------------------------------------
RYDEX|SGI LARGE CAP 0.75% $ 44.22 $150,104
CONCENTRATED GROWTH
FUND, A SERIES OF SECURITY
EQUITY FUND
SERIES Y (LARGE CAP 0.75% $ 44.15 None
CONCENTRATED GROWTH SERIES), A
SERIES OF SBL FUND
---------------------------------------------------------------------------------------------------
RYDEX|SGI ALL CAP VALUE 0.70% $ 3.58 $ 59,326
FUND, A SERIES OF SECURITY
EQUITY FUND
SERIES O (ALL CAP VALUE 0.70% $176.22 None
SERIES), A SERIES OF SBL FUND
---------------------------------------------------------------------------------------------------
RYDEX|SGI LARGE CAP VALUE 0.65% $ 57.25 $204,444
FUND, A SERIES OF SECURITY
LARGE CAP VALUE FUND
RYDEX|SGI LARGE CAP VALUE 0.65% $ 3.29 $ 61,962
INSTITUTIONAL FUND, A SERIES OF
SECURITY LARGE CAP VALUE
FUND
SERIES B (LARGE CAP VALUE 0.65% $312.36 None
SERIES), A SERIES OF SBL FUND
---------------------------------------------------------------------------------------------------
RYDEX|SGI MID CAP GROWTH 0.75% $ 95.46 None
FUND, A SERIES OF SECURITY MID
CAP GROWTH FUND
SERIES J (MID CAP GROWTH 0.75% $174.24 None
SERIES), A SERIES OF SBL FUND
---------------------------------------------------------------------------------------------------
E-2
NAME(S) OF FUND(S) ANNUAL COMPENSATION TO NET ASSETS MANAGEMENT FEES
SUBJECT TO THIS PROXY THE INVESTMENT MANAGER (IN MILLIONS) WAIVED BY AND
STATEMENT (AS A PERCENTAGE OF AVERAGE REIMBURSEMENTS
DAILY NET ASSETS) FROM INVESTMENT
Name(s) of Other Fund(s) with MANAGER
Similar Objectives
---------------------------------------------------------------------------------------------------
RYDEX|SGI HIGH YIELD FUND, A 0.60% $180.95 $256,698
SERIES OF SECURITY INCOME FUND
SERIES P (HIGH YIELD SERIES), A 0.75% $141.57 None
SERIES OF SBL FUND
---------------------------------------------------------------------------------------------------
RYDEX|SGI U.S. INTERMEDIATE 0.50% $131.59 $319,988
BOND FUND, A SERIES OF
SECURITY INCOME FUND
SERIES E (U.S. INTERMEDIATE 0.75% $136.63 $162,543
BOND SERIES), A SERIES OF
SBL FUND
---------------------------------------------------------------------------------------------------
SERIES C (MONEY MARKET 0.50% $ 98.93 None
SERIES), A SERIES OF SBL FUND
None N/A N/A N/A
---------------------------------------------------------------------------------------------------
SERIES N (MANAGED ASSET 1.00% $ 78.62 None
ALLOCATION SERIES), A SERIES OF SBL
FUND
None N/A N/A N/A
---------------------------------------------------------------------------------------------------
E-3
APPENDIX F
OUTSTANDING SHARES
As of the Record Date, 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 [ ] N/A [ ] [ ] [ ]
All Cap
Value Fund
Rydex|SGI [ ] [ ] [ ] [ ] [ ]
Alpha
Opportunity
Fund
Rydex|SGI [ ] [ ] [ ] N/A [ ]
MCSI EAFE
Equal Weight
Fund
Rydex|SGI [ ] [ ] [ ] N/A [ ]
Large Cap
Concentrated
Growth Fund
Rydex|SGI [ ] [ ] [ ] N/A [ ]
Large Cap
Core Fund
Rydex|SGI [ ] [ ] [ ] N/A [ ]
Mid Cap
Value Fund
Rydex|SGI N/A N/A N/A [ ] [ ]
Mid Cap
Value
Institutional
Fund
Rydex|SGI [ ] [ ] [ ] N/A [ ]
Small Cap
Growth Fund
Rydex|SGI [ ] N/A [ ] [ ] [ ]
Small Cap
Value Fund
F-1
SECURITY LARGE CAP VALUE FUND
----------------------------------------------------------------------------------------------
SHARES OUTSTANDING
---------------------------------------------------------------------------
INSTITUTIONAL
FUNDS CLASS A CLASS B CLASS C CLASS TOTAL
----------------------------------------------------------------------------------------------
Rydex|SGI [ ] [ ] [ ] N/A [ ]
Large Cap
Value Fund
Rydex|SGI N/A N/A N/A [ ] [ ]
Large Cap
Value
Institutional
Fund
SECURITY MID CAP GROWTH FUND
----------------------------------------------------------------------------------------------
SHARES OUTSTANDING
---------------------------------------------------------------------------
FUNDS CLASS A CLASS B CLASS C TOTAL
----------------------------------------------------------------------------------------------
Rydex|SGI [ ] [ ] [ ] [ ]
Mid Cap
Growth Fund
SECURITY INCOME FUND
----------------------------------------------------------------------------------------------
SHARES OUTSTANDING
---------------------------------------------------------------------------
INSTITUTIONAL
FUNDS CLASS A CLASS B CLASS C CLASS TOTAL
----------------------------------------------------------------------------------------------
Rydex|SGI [ ] [ ] [ ] [ ] [ ]
High Yield
Fund
Rydex|SGI [ ] [ ] [ ] N/A [ ]
U.S. Intermediate
Bond Fund
SBL FUND
SHARES OUTSTANDING
------------------
FUNDS TOTAL
----------------------------------------------------------------------------------------------
Series A (Large Cap Core Series) [ ]
Series B (Large Cap Value Series) [ ]
Series C (Money Market Series) [ ]
Series D (MCSI EAFE Equal Weight Series) [ ]
Series E (U.S. Intermediate Bond Series) [ ]
Series J (Mid Cap Growth Series) [ ]
Series N (Managed Asset Allocation Series) [ ]
F-2
Series O (All Cap Value Series) [ ]
Series P (High Yield Series) [ ]
Series Q (Small Cap Value Series) [ ]
Series V (Mid Cap Value Series) [ ]
Series X (Small Cap Growth Series) [ ]
Series Y (Large Cap Growth Series) [ ]
Series Z (Alpha Opportunity Series) [ ]
F-3
APPENDIX G
BENEFICIAL OWNERS OF MORE THAN 5% OF A
CLASS OF EACH FUND
As of the Record Date, 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 [ ] [ ] [ ]%
Class C [ ] [ ] [ ]%
Institutional Class [ ] [ ] [ ]%
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 [ ] [ ] [ ]%
Class B [ ] [ ] [ ]%
Class C [ ] [ ] [ ]%
Institutional Class [ ] [ ] [ ]%
RYDEX|SGI MSCI EAFE EQUAL WEIGHT FUND
--------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
--------------------------------------------------------------------------------------------
Class A [ ] [ ] [ ]%
RYDEX|SGI LARGE CAP CONCENTRATED GROWTH FUND
--------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
--------------------------------------------------------------------------------------------
Class A [ ] [ ] [ ]%
RYDEX|SGI LARGE CAP CORE FUND
--------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
--------------------------------------------------------------------------------------------
Class A [ ] [ ] [ ]%
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 [ ] [ ] [ ]%
G-1
RYDEX|SGI MID CAP VALUE INSTITUTIONAL FUND (A single-class fund)
--------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
--------------------------------------------------------------------------------------------
Rydex|SGI Mid Cap [ ] [ ] [ ]%
Value Institutional Fund
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 [ ] [ ] [ ]%
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 [ ] [ ] [ ]%
Class C [ ] [ ] [ ]%
Institutional Class [ ] [ ] [ ]%
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 [ ] [ ] [ ]%
Class B [ ] [ ] [ ]%
Class C [ ] [ ] [ ]%
RYDEX|SGI LARGE CAP VALUE INSTITUTIONAL FUND (A single-class fund)
--------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
--------------------------------------------------------------------------------------------
Rydex|SGI Large Cap [ ] [ ] [ ]%
Value Institutional Fund
RYDEX|SGI MID CAP GROWTH FUND
--------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
--------------------------------------------------------------------------------------------
Class A [ ] [ ] [ ]%
RYDEX|SGI HIGH YIELD FUND
--------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
--------------------------------------------------------------------------------------------
Class A [ ] [ ] [ ]%
Institutional Class [ ] [ ] [ ]%
G-2
RYDEX|SGI U.S. INTERMEDIATE BOND FUND
--------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF
TITLE OF THE CLASS BENEFICIAL OWNER SHARES OWNED THE CLASS
--------------------------------------------------------------------------------------------
Class A [ ] [ ] [ ]%
SERIES A (LARGE CAP CORE SERIES) (A single-class fund)
-------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series A Security Benefit Life Insurance [ ] [ ]%
Company
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES B (LARGE CAP VALUE SERIES) (A single-class fund)
-------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series B Security Benefit Life Insurance [ ] [ ]%
Company
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 THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series C Security Benefit Life Insurance [ ] [ ]%
Company
One Security Benefit Pl.
Topeka, KS 66636-1000
Series D (MSCI EAFE EQUAL WEIGHT SERIES) (A single-class fund)
-------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series D Security Benefit Life Insurance [ ] [ ]%
Company
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 THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series E Security Benefit Life Insurance [ ] [ ]%
Company
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 THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series J Security Benefit Life Insurance [ ] [ ]%
Company
One Security Benefit Pl.
Topeka, KS 66636-1000
G-3
SERIES N (MANAGED ASSET ALLOCATION SERIES) (A single-class fund)
-------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series N Security Benefit Life Insurance [ ] [ ]%
Company
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 THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series O Security Benefit Life Insurance [ ] [ ]%
Company
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 THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series P Security Benefit Life Insurance [ ] [ ]%
Company
One Security Benefit Pl.
Topeka, KS 66636-1000
SERIES Q (SMALL CAP VALUE SERIES) (A single-class fund)
-------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series Q Security Benefit Life Insurance [ ] [ ]%
Company
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 THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series V Security Benefit Life Insurance [ ] [ ]%
Company
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 THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series X Security Benefit Life Insurance [ ] [ ]%
Company
One Security Benefit Pl.
Topeka, KS 66636-1000
G-4
SERIES Y (LARGE CAP GROWTH SERIES) (A single-class fund)
-------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF THE AMOUNT OF PERCENTAGE OF THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series Y Security Benefit Life Insurance [ ] [ ]%
Company
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 THE
NAME OF THE FUND BENEFICIAL OWNER SHARES OWNED FUND
-------------------------------------------------------------------------------------------------
Series Z Security Benefit Life Insurance [ ] [ ]%
Company
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.
G-5
APPENDIX H
MANAGEMENT OWNERSHIP
As of the Record Date, the Directors and officers owned, of record and
beneficially (unless otherwise indicated), as a group, the following of each
Fund's outstanding securities:
[To be completed.]
H-1
APPENDIX I
NOMINATING COMMITTEE CHARTER
SECURITY FUNDS
NOMINATING COMMITTEE CHARTER
A. COMMITTEE MEMBERSHIP
1. The Nominating Committee ("Committee") of the Security Funds shall be
composed solely of Directors who are not "interested persons" of the Funds
as defined in Section 2(a)(19) of the Investment Company Act of 1940, as
amended ("1940 Act") ("Independent Directors"). Other Board members, while
not serving as members of the Committee, may participate in the nominating
process by identifying and recommending potential candidates to the
Committee for its consideration, and by otherwise assisting the Committee
in the discharge of its responsibilities. In addition, the investment
advisers and other service providers of the Funds may suggest Director
candidates (including Independent Director candidates) for service on the
Boards, and may provide administrative assistance in the selection and
nomination process.
B. BOARD NOMINATIONS AND FUNCTIONS
1. In the event of any vacancies on a Board, the Committee shall oversee the
process for the identification, evaluation and nomination of potential
candidates to serve on the Board. The Committee may solicit suggestions
for nominations from any source it deems appropriate.
2. The Committee shall evaluate candidates' qualifications for Board
membership, and, with respect to nominees for Independent Director
membership, their independence from the Funds' investment advisers and
other principal service providers. The Committee shall consider the effect
of any relationships beyond those delineated in the 1940 Act that might
impair the independence of a prospective Independent Director.
3. In assessing the qualifications of a potential candidate for membership on
the Boards, the Committee may consider the candidate's potential
contribution to the operation of the Boards and their committees, and such
other factors as it may deem relevant. Specific desired qualities of
Independent Director candidates are set forth in Schedule A to this
Charter. All equally qualified nominees will be treated equally in
consideration by the Nominating Committee. No person shall be qualified to
be a Board member unless the Committee, in consultation with legal
counsel, has determined that such person, if elected as a Director, would
not cause the Funds to be in violation of or not in compliance with (a)
applicable law, regulation or regulatory interpretation, (b) their
organizational documents, or (c) any policy adopted by the Board regarding
either the retirement age of any Board member or the percentage of the
Board that would be composed of Independent Directors.
4. While the Committee is solely responsible for the selection and nomination
of potential candidates to serve on the Boards, the Committee may consider
nominations from
I-1
shareholders of the Funds. Shareholders may submit for the Committee's
consideration, recommendations regarding potential nominees for service on
the Boards. Each eligible shareholder or shareholder group may submit no
more than one nominee each calendar year.
(a) In order for the Committee to consider shareholder submissions, the
following requirements must be satisfied regarding the nominee:
(i) The nominee must satisfy all qualifications provided herein and
in the Funds' organizational documents, including qualification as a
possible Independent Director if the nominee is to serve in that
capacity.
(ii) The nominee may not be the nominating shareholder, a member of
the nominating shareholder group or a member of the immediate family
of the nominating shareholder or any member of the nominating
shareholder group.(1)
(iii) Neither the nominee nor any member of the nominee's immediate
family may be currently employed or employed within the year prior to
the nomination by any nominating shareholder entity or entity in a
nominating shareholder group.
(iv) Neither the nominee nor any immediate family member of the
nominee is permitted to have accepted directly or indirectly, during
the year of the election for which the nominee's name was submitted,
during the immediately preceding calendar year, or during the year
when the nominee's name was submitted, any consulting, advisory, or
other compensatory fee from the nominating shareholder or any member
of a nominating shareholder group.
(v) The nominee may not be an executive officer, director or person
fulfilling similar functions of the nominating shareholder or any
member of the nominating shareholder group, or of an affiliate of the
nominating shareholder or any such member of the nominating
shareholder group.
(vi) The nominee may not control the nominating shareholder or any
member of the nominating shareholder group (or, in the case of a
holder or member that is a fund, an interested person of such holder
or member as defined by Section 2(a)(19) of the 1940 Act).
(vii) A shareholder or shareholder group may not submit for
consideration a nominee which has previously been considered by the
Committee.
(b) In order for the Committee to consider shareholder submissions, the
following requirements must be satisfied regarding the shareholder or
shareholder group submitting the proposed nominee:
___________________
(1) Terms such as "immediate family member" and "control" shall be interpreted
in accordance with the federal securities laws.
I-2
(i) Any shareholder or shareholder group submitting a proposed
nominee must beneficially own, either individually or in the
aggregate, more than 5% of a Fund's (or a series thereof) securities
that are eligible to vote both at the time of submission of the
nominee and at the time of the Board member election. Each of the
securities used for purposes of calculating this ownership must have
been held continuously for at least two years as of the date of the
nomination. In addition, such securities must continue to be held
through the date of the meeting. The nominating shareholder or
shareholder group must also bear the economic risk of the investment.
(ii) The nominating shareholder or shareholder group must also
submit a certification which provides the number of shares which the
person or group has (a) sole power to vote or direct the vote; (b)
shared power to vote or direct the vote; (c) sole power to dispose
or direct the disposition of such shares; and (d) shared power to
dispose or direct the disposition of such shares. In addition the
certification shall provide that the shares have been held
continuously for at least two years.
(c) Shareholders or shareholder groups submitting proposed nominees must
substantiate compliance with the above requirements at the time of
submitting their proposed nominee as part of their written submission to
the attention of the Funds' Secretary, who will provide all submissions to
the Committee. This submission to the Funds must include:
(i) the shareholder's contact information;
(ii) the nominee's contact information and the number of applicable
Fund shares owned by the proposed nominee;
(iii) all information regarding the nominee that would be required to
be disclosed in solicitations of proxies for elections of directors
required by Regulation 14A under the Securities Exchange Act; and
(iv) a notarized letter executed by the nominee, stating his or her
intention to serve as a nominee and be named in a Fund's proxy
statement, if so designated by the Committee and the Fund's Board.
The Committee will consider all submissions meeting the applicable
requirements stated herein that are received not earlier than January 1 of
the most recently completed calendar year. It shall be in the Committee's
sole discretion whether to seek corrections of a deficient submission or to
exclude a nominee from consideration.
5. The Committee shall evaluate as necessary the operations and effectiveness
of the Board as a whole and shall evaluate the composition of the Board to
determine whether it may be appropriate to add individuals with different
backgrounds or skills from those already on the Board.
I-3
C. COMMITTEE NOMINATIONS
1. The Committee shall make nominations for membership on all committees and
shall review Board committee assignments as necessary.
2. The Committee shall review as necessary the responsibilities of any
committee of the Boards, whether there is a continuing need for each
committee, whether there is a need for additional committees, and whether
committees should be combined or reorganized. The Committee shall make
recommendations for any such action to the full Boards.
D. OTHER POWERS AND RESPONSIBILITIES
1. The Committee shall meet as necessary in connection with any vacancy on or
addition to a Board, and otherwise from time to time as it deems
appropriate to perform its responsibilities.
2. The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the ability to engage and
compensate from Fund assets third party consultants to assist with
identification and evaluation of potential Independent Directors.
3. The Committee shall recommend to the Boards any revisions or modifications
to this Charter that the Committee deems necessary or appropriate to the
effective exercise of its responsibilities.
I-4
SCHEDULE A
RESPONSIBILITIES AND DESIRED QUALITIES
OF INDEPENDENT DIRECTORS
PRIMARY RESPONSIBILITIES
The Independent Director's primary responsibility is management oversight
of the Funds on behalf of shareholders. Diverse responsibilities include review
and negotiation of contractual arrangements with management and other service
providers; and oversight and review of service provider performance, investment
performance, compliance, shareholder services and communication with
shareholders.
PERSONAL ATTRIBUTES
o Public or private sector stature sufficient to instill confidence.
o High personal and professional integrity.
o Good business sense.
o Able to commit the necessary time to prepare for and attend meetings.
o Not financially dependent on director retainer and meeting fees.
SKILLS, EXPERIENCE AND QUALIFICATIONS FOR DECISION MAKING
o General understanding of financial issues, investing, financial markets
and technology.
o General understanding of balance sheets and operating statements.
o First-hand knowledge of investing.
o Experience in working in highly regulated and complex legal framework.
o Demonstrated ability to maintain "independence" of management and other
service agents while maintaining a constructive working relationship.
o Ability to be critical, but not confrontational.
o Demonstrated ability to contribute to Board and committee process.
o Ability to consider diverse issues and make timely, well-informed
decisions.
o Familiarity with the securities industry.
o Qualification as an "Audit Committee Financial Expert" (desired but not
required).
I-5
[FORM OF PROXY CARD]
[LOGO OF RYDEX | SGI] PROXY CARD FOR
RYDEX | SGI [FUND NAME PRINTS HERE]
SECURITY GLOBAL INVESTORS(SM) PROXY FOR A SPECIAL JOINT MEETING OF
SHAREHOLDERS - NOVEMBER 22, 2011
The undersigned hereby appoint(s) Joanna Haigney, Amy Lee and Beth Miller, 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 November 22, 2011 at 1:00
p.m. Central Time, and at any adjournment(s) or postponements thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS PROXY CARD
WILL BE VOTED AS INSTRUCTED. IF NO SPECIFICATION IS MADE, THE PROXY CARD WILL BE
VOTED "FOR" THE PROPOSALS. THE PROXIES ARE AUTHORIZED, IN THEIR DISCRETION, TO
VOTE UPON SUCH MATTERS AS MAY COME BEFORE THE SPECIAL MEETING OR ANY
ADJOURNMENTS.
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| TAG ID: 123456 |
| |
| NA1 - RYDEX SGI - BALLOT ONE - SGI STATEMENT |
| NA2 - RYDEX SGI - BALLOT ONE - SGI STATEMENT |
| NA3 - RYDEX SGI - BALLOT ONE - SGI STATEMENT |
| NA4 - RYDEX SGI - BALLOT ONE - SGI STATEMENT |
| NA5 - RYDEX SGI - BALLOT ONE - SGI STATEMENT |
| NA6 - RYDEX SGI - BALLOT ONE - SGI STATEMENT |
| NA7 - RYDEX SGI - BALLOT ONE - SGI STATEMENT |
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NOTE: This proxy must be signed exactly as your name(s) appears here on. 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
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, please call toll-free 1-877-864-5058. | |
Representatives are available to take your voting instructions | CONTROL NUMBER: |
Monday through Friday 9:00 a.m. to 11:00 p.m. Eastern Time. | 123456789112 |
--------------------------------
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 IMPORTANT NOTICE REGARDING THE
and return it in the enclosed postage-paid envelope. AVAILABILITY OF PROXY MATERIALS FOR
THIS SPECIAL MEETING OF
Options below are available 24 hours a day / 7 days a week SHAREHOLDERS TO BE HELD ON
NOVEMBER 22, 2011
TOUCHTONE: To cast your vote via a touch-tone voting line, call toll-free THE PROXY STATEMENT FOR THIS
1-888-227-9349 and enter the control number to the right. MEETING IS AVAILABLE AT:
www.proxyonline.us/rydexsgi
INTERNET: To vote via the Internet, go to www.proxyonline.us and enter
the control number found to the right.
IT IS IMPORTANT THAT PROXIES BE VOTED PROMPTLY. EVERY SHAREHOLDER'S VOTE IS IMPORTANT.
[FUND NAME PRINTS HERE]
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.
TO VOTE, MARK BOXES BELOW IN BLUE OR BLACK INK AS FOLLOWS. Example: o
YOU MAY VOTE ON THE PROPOSED CHANGES ON THE PROPOSALS AS A GROUP OR
INDIVIDUALLY. PLEASE USE ONLY ONE METHOD.
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TO VOTE ALL OF THE PROPOSALS IN ACCORDANCE WITH MANAGEMENT'S RECOMMENDATIONS, PLEASE FOR ALL
CHECK THE BOX TO THE RIGHT.
IF THE FOR ALL BOX ON THIS BALLOT IS MARKED, THIS VOTE WILL OVERRIDE ANY INDIVIDUAL VOTES MADE BELOW. [ ]
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FOR AGAINST ABSTAIN
1. To approve a new investment management agreement between the
Fund and Securities Investors, LLC [ ] [ ] [ ]
2. To approve the following individuals as directors of the Company FOR WITHHOLD
(allocating your cumulative votes equally):
(1) Donald C. Cacciapaglia [ ] [ ]
(2) Donald A. Chubb, Jr. [ ] [ ]
(3) Harry W. Craig, Jr. [ ] [ ]
(4) Jerry B. Farley [ ] [ ]
(5) Richard M. Goldman [ ] [ ]
(6) Penny A. Lumpkin [ ] [ ]
(7) Maynard F. Oliverius [ ] [ ]
With respect to Proposal 2, each shareholder is entitled to vote that number of
shares owned as of the record date multiplied by the number of Directors to be
elected. A shareholder may cast all such votes for a single director or
distribute them among two or more directors. This method of voting for the
election of directors is commonly known as "cumulative voting." If you wish to
allocate your votes other than equally among nominees, write the nominee(s)
number and the percentage of your cumulative votes that you chose on the line
provided below.
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Registered shareowners wishing to exercise cumulative voting rights must specify
how their votes are to be cast by submitting a proxy card or, if voting in
person at the Special Meeting, by submitting a ballot that includes instructions
to cumulate votes and the manner in which votes are to be distributed among the
nominees.
YOU MAY HAVE RECEIVED MORE THAN ONE BALLOT DUE TO 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. Thank you for voting.