<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
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 ss. 240.14a-11(c) or ss. 240.14a-12
SBL FUND
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
<PAGE>
NOTICE TO CONTRACTHOLDERS OF SBL VARIABLE ANNUITY ACCOUNTS III, IV, VIII,
VARIFLEX, AND PARKSTONE AND SBL VARIABLE LIFE INSURANCE ACCOUNT VARILIFE
AND VARILIFE SEPARATE ACCOUNT
OF THE SPECIAL MEETING OF STOCKHOLDERS OF
SBL FUND, SERIES K AND SERIES M TO BE HELD MAY 14, 1999
700 SW HARRISON ST., TOPEKA, KANSAS 66636-0001
TELEPHONE 1-800-888-2461
TO THE STOCKHOLDERS OF
- SBL FUND
* SERIES K (GLOBAL AGGRESSIVE BOND SERIES)
* SERIES M (SPECIALIZED ASSET ALLOCATION SERIES)
Notice is hereby given that a special meeting of the stockholders of Series K
(Global Aggressive Bond Series) and Series M (Specialized Asset Allocation
Series) (the "Series") of SBL Fund (the "Fund"), a Kansas corporation, will be
held at the offices of the Fund, Security Benefit Group Building, 700 SW
Harrison Street, Topeka, Kansas 66636-0001, on May 14, 1999 at 9:30 a.m. local
time ("Meeting"), for the following purposes:
1. a. To approve a Sub-Advisory Contract for Series K, as exhibited in the
attached proxy statement, between the Fund's investment manager,
Security Management Company, LLC, and Wellington Management Company,
LLP.
b. To approve a Sub-Advisory Contract for Series M, as exhibited in the
attached proxy statement, between the Fund's investment manager,
Security Management Company, LLC and Wellington Management Company,
LLP
2. To transact such other business as may properly come before the Meeting
or any adjournments thereof, and to adjourn the Meeting from time to
time.
The Board of Directors of the Fund has fixed the close of business on March
29, 1999, as the record date for the determination of stockholders of the Series
entitled to notice of and to vote at the Meeting.
THERE IS ENCLOSED A PROXY FORM SOLICITED BY THE BOARD OF DIRECTORS OF SBL
FUND. ANY FORM OF PROXY WHICH IS EXECUTED AND RETURNED, NEVERTHELESS MAY BE
REVOKED PRIOR TO ITS USE. ALL SUCH PROXIES PROPERLY EXECUTED AND RECEIVED IN
TIME WILL BE VOTED AT THE MEETING.
By order of the Board of Directors of
SBL Fund,
Topeka, Kansas AMY J. LEE
Secretary
- --------------------------------------------------------------------------------
IMPORTANT: STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT IN PERSON AT THE MEETING
ARE REQUESTED TO MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) TO THE
FUND AS EARLY AS POSSIBLE.
<PAGE>
SBL FUND
* SERIES K (GLOBAL AGGRESSIVE BOND SERIES)
* SERIES M (SPECIALIZED ASSET ALLOCATION SERIES)
MEMBER OF THE SECURITY BENEFIT GROUP OF COMPANIES
700 SW HARRISON STREET, TOPEKA, KANSAS 66636-0001
SPECIAL MEETING OF STOCKHOLDERS, MAY 14, 1999
PROXY STATEMENT
BENEFICIAL OWNERSHIP OF FUND SHARES
Investments made through SBL Variable Annuity Accounts III, IV, VIII,
Variflex and Parkstone and through SBL Variable Life Insurance Account Varilife
and Security Varilife Separate Account do not constitute direct ownership of
Fund shares. Rather, a variable annuity contract or a variable life policy
represents an interest in one of seven Security Benefit Life Insurance Company
("SBL") separate accounts. SBL has record ownership of all Fund shares. Such
contractowners and policyowners (herein referred to as "stockholders") have a
beneficial interest in the underlying Fund shares, and retain certain voting
rights with respect to the beneficially owned shares. SBL, or its appointee,
will vote the shares beneficially owned by each stockholder in accordance with
each stockholder's instructions. The enclosed voting instruction form is
provided for this purpose. All shares for which the stockholders do not provide
voting instructions, and any shares which SBL holds for its own account, will be
voted in the same proportion as those shares for which voting instructions have
been received.
SOLICITATION AND REVOCATION OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors of
SBL Fund (the "Fund") and is revocable by submitting to the Secretary of the
Fund prior to the Meeting date another proxy, sending written notice of
revocation signed by the Owner, or voting the shares in person at the Meeting. A
second proxy form may be obtained from the Secretary of the Fund. The cost of
soliciting proxies will be borne by Security Management Company, LLC, 700 SW
Harrison Street, Topeka, Kansas 66636-0001 ("SMC" or the "Investment Manager"),
which will be reimbursed by the Fund. SMC is the investment adviser and
administrator of the Fund. In addition to solicitations by mail, some of the
Investment Manager's officers and employees, without extra remuneration, may
conduct additional solicitation by telephone, telegraph and personal interviews.
Proxies are expected to be mailed on or about April 14, 1999.
- --------------------------------------------------------------------------------
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF THE ANNUAL REPORT CONTAINING
AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, TO A
STOCKHOLDER UPON REQUEST. SUCH REQUESTS SHOULD BE DIRECTED TO AMY LEE, SECRETARY
OF THE FUND, BY WRITING THE FUND AT 700 SW HARRISON ST., TOPEKA, KANSAS
66636-0001, OR BY CALLING THE FUND'S TOLL-FREE TELEPHONE NUMBER 1-800-888-2461,
EXTENSION 3127.
<PAGE>
VOTING SECURITIES
Only stockholders of record of Series K and Series M (the "Series") of the
Fund at the close of business on March 29, 1999 are entitled to vote at the
special Meeting. On that date, the outstanding number of voting securities of
the Series was as follows: 1,324,900 shares of common stock of Series K of the
par value of $1.00 per share and 3,700,494 shares of common stock of Series M of
the par value of $1.00 per share. Each share is entitled to one vote.
Approval of Proposal No. 1a requires the affirmative majority vote of the
outstanding shares of the common stock of Series K. Approval of Proposal No. 1b
requires the affirmatice majority vote of the outstnading shares of the common
stock of Series M.
A "majority vote" is defined as the vote of either 67% or more of voting
securities of the applicable Series present at the meeting in person or by
proxy, or more than 50% of such outstanding voting securities, whichever is
less.
The presence, in person or by proxy, of more than 50% of the outstanding
shares of a Series will be sufficient to establish a quorum for the conduct of
business of that Series at the Meeting. Shares held by stockholders present in
person or represented by proxy at the Meeting will be counted both for the
purpose of determining the presence of a quorum and for calculating the votes
cast on the proposal before the Meeting. Shares represented by timely and
properly executed proxies will be voted as specified. Executed proxies that are
unmarked will be voted in favor of the proposals presented at the Meeting. An
abstention on any proposal, either by proxy or by vote in person at the Meeting,
will be counted for purposes of establishing a quorum, but has the same effect
as a negative vote.
In the event that a sufficient number of votes to approve a proposal is not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of voting instructions, or for any
other purpose. A vote may be taken on any proposal prior to an adjournment if
sufficient votes have been received for approval. Any adjournment will require
the affirmative vote of a majority of those shares represented at the Meeting in
person or by proxy. Unless otherwise instructed, proxies will be voted in favor
of any adjournment. At any subsequent reconvening of the Meeting, proxies
(unless previously revoked) will be voted in the same manner as they would have
been voted at the Meeting.
VOTING OF PROXIES
SBL or its appointee will vote in accordance with all instructions received
prior to the Meeting. It is the present intention that unless otherwise
directed, SBL, or its appointee, will vote for Proposal No. 1a and Proposal No.
1b, approval of a new sub-advisory contract between SMC and Wellington
Management Company, LLP and, in the discretion of the persons designated as
proxies, upon such other matters not now known or determined which may properly
come before the Meeting.
- --------------------------------------------------------------------------------
SHAREHOLDERS
PROPOSAL SOLICITED
- --------------------------------------------------------------------------------
1. a. To approve a Sub-Advisory Contract for Series K, as Series K
exhibited in the attached proxy statement, between the
Fund's investment manager, Security Management Company,
LLC, and Wellington Management Company, LLP.
- --------------------------------------------------------------------------------
b. To approve a Sub-Advisory Contract for Series M, as Series M
exhibited in the attached proxy statement, between the
Fund's investment manager, Security Management Company,
LLC, and Wellington Management Company, LLP.
- --------------------------------------------------------------------------------
PROPOSAL NO. 1A
APPROVAL OF A SUB-ADVISORY CONTRACT FOR SERIES K
BETWEEN SMC AND WELLINGTON MANAGEMENT COMPANY, LLP
Series K stockholders are asked to approve a sub-advisory contract between
SMC and Wellington Management Company, LLP ("Wellington Management" or the
"Sub-Adviser"). If this Proposal No. 1a is approved by the stockholders of
Series K, Wellington Management will provide sub-advisory services to the Series
pursuant to a sub-advisory contract between SMC and Wellington Management (the
"Sub-Advisory Contract"). The Fund's Board of Directors, including a majority of
the disinterested Directors, approved the form of the Sub-Advisory Contract at a
meeting held on March 29, 1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SERIES K STOCKHOLDERS VOTE FOR
APPROVAL OF THE SUB-ADVISORY CONTRACT.
PROPOSAL NO. 1B
APPROVAL OF A SUB-ADVISORY CONTRACT FOR SERIES M
BETWEEN SMC AND WELLINGTON MANAGEMENT COMPANY, LLP
Series M stockholders are asked to approve the Sub-Advisory contract between
SMC and Wellington Management. If this Proposal No. 1b is approved by the
stockholders of Series M, Wellington Management will provide sub-advisory
services to the Series pursuant to the Sub-Advisory Contract. The Fund's Board
of Directors, including a majority of the disinterested Directors, approved the
form of the Sub-Advisory Contract at a meeting held on March 29, 1999.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SERIES M STOCKHOLDERS VOTE FOR
APPROVAL OF THE SUB-ADVISORY CONTRACT.
EXISTING INVESTMENT ADVISORY CONTRACT
The Investment Manager has served as investment adviser of the Series since
their inception in 1995 in accordance with the terms of an Investment Advisory
Contract dated June 20, 1977, as amended (the "Advisory Contract"). The Board of
Directors of the Fund authorized the Fund to offer Series K and Series M on
February 3, 1995, and April 3, 1995, respectively. On April 18, 1995, the sole
initial shareholder of Series K and M approved an amendment to the Advisory
Contract to provide that the Investment Manager would provide investment
advisory and business management services to Series K and M. The Advisory
Contract with respect to Series K and M has not been submitted to stockholders
for approval since that date. The Advisory Contract was renewed by directors of
the Fund (including a majority of directors who are not parties to the contract
or interested persons of any such party) on February 10, 1999. The Advisory
Contract will continue in effect until May 1, 2000, and from year to year
thereafter providing such continuance is specifically approved by the vote of a
majority of the Board of Directors of the Fund (including a majority of such
directors who are not parties to the contract or interested persons of any such
party) cast in person at a meeting specifically called for voting on such
renewal.
Under the Advisory Contract, the Investment Manager furnishes the Series with
investment research and advice and an investment program. In addition, the
Investment Manager provides for the compilation and maintenance of records
relating to its duties as required by the rules and regulations of the
Securities and Exchange Commission ("SEC"). The Advisory Contract provides that
the Investment Manager may delegate its investment advisory duties to another
investment adviser. No brokerage commissions were paid by the Fund to an
affiliated broker for the year ended December 31, 1998.
For its services, the Investment Manager receives from the Fund, on an annual
basis, an amount equal to 0.75% of the average net assets of Series K and an
amount equal to 1.0% of the average net assets of Series M, computed daily and
payable monthly. The Investment Manager received from the Fund advisory fees of
$460,844 for Series M during the fiscal year ended December 31, 1998. The
Investment Manager waived its entire advisory fee for Series K in the amount of
$103,019 for the fiscal year ended December 31, 1998.
The Advisory Contract may be terminated without penalty at any time upon
sixty days' notice by the Board of Directors of the Fund, by vote of the holders
of a majority of the outstanding voting securities of a Series, or by the
Investment Manager. The Contract is terminated automatically in the event of its
assignment (as such term is defined in the Investment Company Act of 1940).
The Investment Manager also serves as the Fund's administrative and
transfer agent. For administrative services, the Investment Manager received
$66,507 from Series K and $80,738 from Series M during the year ended December
31, 1998. For transfer services, the Investment Manager received $3,931 from
Series K and $3,315 from Series M during the year ended December 31, 1998.
EXISTING SUB-ADVISORY CONTRACTS
The Investment Manager entered into a sub-advisory contract with Lexington
Management Corporation ("Lexington") dated May 1, 1995 with respect to Series K
(the "Lexington Contract"). The Lexington Contract was approved by the sole
initial stockholder of Series K on April 18, 1995, and has not been submitted to
stockholders since that date.
Under the Lexington Contract, Lexington provided, subject to the Investment
Manager's supervision, investment research and advice and an investment program,
including decisions regarding which securities to purchase and sell and what
portion of assets to hold uninvested. In addition, Lexington arranged for the
purchase and sale of securities and other investments held by Series K. For
these sub-advisory services, Lexington received from the Investment Manager an
amount equal to 0.35% on an annual basis of the average daily net assets of
Series K, calculated daily and payable monthly. During the fiscal year ended
December 31, 1998, Lexington earned $50,613 in sub-advisory fees. However, it
waived $17,873 of this fee. The balance of its sub-advisory fee, $32,740, was
paid to Lexington by the Investment Manager.
On February 6, 1998, the Board of Directors of the Fund approved
continuance of the Lexington Contract until May 1, 1999. Lexington has since
resigned its position as sub-adviser to Series K. In light of Lexington's
resignation, the Board of Directors of the Fund determined that it was in the
best interests of Series K and its stockholders to terminate the Lexington
Contract. Accordingly, at its March 29, 1999 meeting the Board voted to
terminate the Lexington Contract.
The Investment Manager entered into a sub-advisory contract with Meridian
Investment Management Corporation ("Meridian") dated August 1, 1997 with respect
to Series M (the "Meridian Contract"). The Meridian Contract was approved by the
stockholders of Series M on August 1, 1997, and has not been submitted to
stockholders since that date.
Under the Meridian Contract, Meridian provided, subject to the Investment
Manager's supervision, investment research and advice and an investment program,
including decisions regarding which securities to purchase and sell and what
portion of assets to hold uninvested. In addition, Meridian arranged for the
purchase and sale of securities and other investments held by Series M. For
these sub-advisory services, Meridian received from the Investment Manager an
annual fee equal to a percentage of the average net assets of Series M,
calculated daily and payable monthly, computed according to the following
schedule:
--------------------------------------------------------
AVERAGE DAILY NET ASSETS OF SERIES M ANNUAL FEE
--------------------------------------------------------
Less than $100 million .................... .40%, plus
$100 million but less than $200 million ... .35%, plus
$200 million but less than $400 million ... .30%, plus
$400 million or more ...................... .25%
--------------------------------------------------------
During the fiscal year ended December 31, 1998, the Investment Manger paid
Meridian $184,337 for sub-advisory services.
The Board of Directors of the Fund approved continuance of the Meridian
Contract at the meeting of the Board held on February 10, 1999. At the Board of
Directors meeting held on March 29, 1999, the Board of Directors considered the
recommendation of the management of SMC that the Meridian Contract be terminated
and considered the approval of a proposed sub-advisory agreement with Wellington
Management with respect to Series M, as discussed below. The Board of Directors
voted to terminate the Meridian Contract, effective at the close of business on
April 30, 1999.
In light of Lexington's resignation as sub-adviser to Series K and the
subsequent Board action to terminate the Lexington Contract, and in light of the
termination of the Meridian Contract, the Board of Directors of the Fund
determined it was in the best interests of Series K and Series M and their
respective shareholders to approve an interim sub-advisory contract between SMC
and Wellington Management (the "Interim Contract") with respect to those Series.
SEC rules permit the Board to approve, and a sub-adviser to act, pursuant to an
interim contract which has not been approved by stockholders. Accordingly, at
its March 29, 1999 meeting the Board of Directors of the Fund approved the
Interim Contract. Under the Interim Contract Wellington Management began
providing investment sub-advisory services to Series K on March 30, 1999 and
will begin providing investment sub-advisory services to Series M on May 1,
1999. Wellington Management's compensation from SMC under the Interim Contract
will be the same as was paid to Lexington with respect to Series K and was paid
to Meridian with respect to Series M. The respective investment objectives of
Series K and Series M will not change following Wellington Management's
assumption of sub-advisory duties for these Series. However, the Board of
Directors of the Fund has approved certain changes to the non-fundamental
investment policies of Series K and Series M. See the information under heading
"The Prospective Sub-Adviser" for information on some of the investment
techniques to be employed by Wellington Management.
PROPOSED SUB-ADVISORY CONTRACT
SMC proposes to enter into a sub-advisory contract (the "Sub-Advisory
Contract") with Wellington Management with respect to both Series K and Series
M. A form of the Sub-Advisory Contract is attached hereto as Exhibit "A." The
Sub-Advisory Contract was proposed by SMC and was approved by the Board of
Directors of the Fund (including a majority of such directors who are not
parties to such contract or interested persons of any such party) on March 29,
1999. SMC proposed the Sub-Advisory Contract because it believes that the
Sub-Adviser has expertise in managing the asset classes in which Series K and M
invests.
Under the Sub-Advisory Contract, the Sub-Adviser would furnish to Series K
and Series M those services currently provided by Lexington and Meridian
respectively. Those services include investment research and advice and
effecting purchases and sales of portfolio securities for each Series, subject
to the policies and control of the Board of Directors and the supervision of
SMC. For its services to Series K, the Sub-Adviser will receive from SMC an
annual fee equal to a percentage of the average daily closing value of the net
assets of the Series computed on a daily basis as follows:
--------------------------------------------------------
AVERAGE DAILY NET ASSETS OF SERIES K ANNUAL RATE
--------------------------------------------------------
$0 to $50 million ........................ .50%
Over $50 million ......................... .40%
--------------------------------------------------------
Provided, however, that the Sub-Adviser has agreed to cap its fees for the
first year at .40% of Series K's average net assets.
For its services to Series M, the Sub-Adviser will receive from SMC and
annual fee equal to a percentage of the average daily closing value of the net
assets of the Series computed on a daily basis as follows:
--------------------------------------------------------
AVERAGE DAILY NET ASSETS OF SERIES M ANNUAL RATE
--------------------------------------------------------
$0 to $50 million ........................ .50%
Over $50 million to $100 million ......... .40%
Over $100 million to $250 million ........ .35%
Over $250 million ........................ .30%
--------------------------------------------------------
Provided, however, that the Sub-Adviser has agreed to cap its fees for the first
year at .45% of Series M's average net assets.
Under the terms of the Sub-Advisory Contract, the Sub-Adviser is not
subject to any liability to the Fund, its stockholders or the Investment Manager
in connection with any services rendered under the Sub-Advisory Contract except
by reason of willful misfeasance, bad faith, or negligence in the performance of
its duties or by reason of a breach of its duties under the Sub-Advisory
Contract.
The Sub-Adviser has agreed to pay its expenses in connection with providing
the sub-advisory services, including expenses of travel by employees of the
Sub-Adviser in connection with making reports to the Board of Directors as well
as any expenses that it may incur in communicating with SMC.
Approval of the Sub-Advisory Contract will not increase or decrease any fee
or expense paid by the Fund or its stockholders because all fees under the
Sub-Advisory Contract are paid by SMC. The fees earned by SMC for providing
advisory services to the Fund will be decreased, however, because the fees of
the Sub-Adviser pursuant to the Sub-Advisory Contract are more than those paid
to Lexington and Meridian pursuant to their respective contracts.
During the fiscal year ended December 31, 1998, SMC waived its entire
advisory fee of $103,019 for services provided to Series K under the Advisory
Contract. For this same time period, the Fund paid SMC $460,844 for services
provided to Series M under the Advisory Contract. If the Sub-Advisory Contract
had been in effect during the 1998 fiscal year and no fee waivers had been in
place, SMC would have paid the Sub-Adviser $72,860 for services provided to
Series K compared to $50,613 it would have paid to Lexington during 1998 (had
Lexington not waived a portion of its fee), or 44% more, and would have paid the
Sub-Adviser $230,422 for services provided to Series M compared to $184,337 paid
to Meridian during 1998, or 25% more.
It is expected that the Sub-Advisory Contract will become effective on May
15, 1999, provided that on the Meeting date it is approved by a majority vote of
the holders of the outstanding voting securities of each Series. The contract
will continue in force until May 15, 2001, and from year to year thereafter,
provided such continuance is specifically approved by a majority of the Board of
Directors of the Fund (including a majority of such directors who are not
parties to the Sub-Advisory Contract or interested persons of any such party).
The Sub-Advisory Contract may be terminated without penalty upon sixty days'
written notice by SMC, 90 days' written notice by Wellington Management, or by
vote of the Board of Directors or by vote of a majority of the holders of the
outstanding voting securities of each Series. The Sub-Advisory Contract will
automatically terminate in the event of the termination of the Advisory Contract
between SMC and the Fund or in the event of its assignment.
In recommending the approval of the Sub-Advisory Contract to the stockholders
of Series K and Series M, the Board of Directors considered such factors as it
deemed reasonably necessary and appropriate, including (1) the nature, extent
and quality of the services to be provided to Series K and M by Wellington
Management; (2) the performance of certain accounts managed by the Sub-Adviser;
(3) the costs of services to be provided by the Sub-Adviser; (4) other sources
of revenue accruing to Wellington Management and its affiliates as a result of
its relationship with the Fund, including any intangible benefits that accrue to
Wellington Management and its affiliates; and (5) a comparison of the Fund's
actual and projected expense ratio and those of similarly situated mutual funds.
The Board gave equal weight to each of the above factors when considering
approval of the contract. Based on the considerations above, the Board
determined that the Sub-Advisory Contract is in the best interests of the Fund
and its shareholders.
The Board of Directors unanimously recommends that stockholders of Series K
and Series M vote to approve of the Sub-Advisory Contract by voting in favor of
Proposal No. 1a and Proposal No. 1b, respectively. In the event that the
proposed contract is not approved with respect to one or both Series, the Board
of Directors will meet to consider whether to present another sub-advisory
contract for approval.
THE PROSPECTIVE SUB-ADVISER
Wellington Management is a Massachusetts limited liability partnership with
principal offices at 75 State Street, Boston, Massachusetts 02109. Wellington
Management is a professional investment counseling firm which provides
investment services to investment companies, employee benefit plans, endowments,
foundations and other institutions and individuals. Wellington Management's
predecessor organizations have provided investment advisory services for over 70
years. As of February 28, 1999, Wellington Management had investment management
authority with respect to approximately $207 billion in assets.
Wellington Management is managed by its active partners. The managing
partners of Wellington Management as of February 28, 1999 were Robert W. Doran,
Duncan M. McFarland and John R. Ryan. Exhibit B sets forth a listing of the
general partners and Senior Vice Presidents of Wellington Management, each of
whom may be reached at the principal offices of the firm. Wellington Management
does not serve as investment sub-advisor to any other registered investment
company portfolios which have investment objectives similar to the Series.
No officer or director of the Fund is an officer, employee or director of the
Sub-Adviser. No officer or director of the Fund owns any securities of, or has
any other material direct or indirect interest in, the Sub-Adviser or any of its
affiliates. No director of the Fund has any direct or indirect material interest
in any material transactions since January 1, 1998, or in any material proposed
transactions, to which the Sub-Adviser, any parent or subsidiary of the
Sub-Adviser, or any subsidiary of the parent of such entities was or is to be a
party. There is no arrangement or understanding in connection with the
Sub-Advisory Contract with respect to the composition of the Board of Directors
of the Fund or of the Sub-Adviser, or with respect to the selection or
appointment of any person to any office of either such company.
The investment techniques and policies employed by Wellington Management for
Series K under the Interim Contract, and if approved by Series K stockholders,
under the Sub-Advisory Contract, will include the purchase of bonds, notes,
debentures, preferred stock and high yield securities (also referred to as "junk
bonds"). Wellington Management may select debt securities issued by any private
or governmental entity. Investments may be made, without limitation, in any
region of the world, including investments in developed foreign countries and
emerging market foreign countries. The quality of Series K's investments will
range from investment grade to high yield securities or junk bonds.
Under normal circumstances, Wellington Management may direct the Series'
investments without limitation in:
* fixed income securities issued or guaranteed by governments, governmental
entities or supranational entities
* fixed income securities and commercial paper issued by corporations
* bank obligations such as certificates of deposit or bankers' acceptances
* mortgage-backed and asset-backed securities, which are securities
representing an interest in a pool of mortgages or assets such as credit card
receivables
* collateralized mortgage obligations, including interest-only bonds and
principal-only bonds, residual interest bonds, inverse floating obligations,
and other structured or derivative fixed income securities
* convertible bonds, which are debt securities that may be converted into
common stocks or other equity interests
* preferred stock
* privately issued securities deemed by Wellington Management to be liquid
The investment decision-making process used for Series K is highly
interactive, relying on frequent, direct communication between portfolio
managers and research analysts. Broad strategy is set by portfolio managers and
includes interest rate and sector allocation strategies, country and currency
selection and quality emphasis. Individual securities are purchased and sold on
the basis of relative value to implement the portfolio's broad strategy.
Purchase and sale decisions are made by the portfolio manager with strong
reliance on Wellington Management's in-house research professionals.
Investment may be made in securities denominated in any currency. Wellington
Management will seek to protect Series K against currency exchange rate changes
that are adverse to the Series' foreign currency positions by hedging selected
investments to the U.S. dollar. Series K will also seek exposure to foreign
currencies on an opportunistic basis to take advantage of currency exchange rate
movements.
A portion of Series K's assets may be invested in options, futures and
forward currency contracts. Generally, these derivative instruments involve the
obligation, in the case of futures and forwards, or the right, in the case of
options, to purchase or sell financial instruments in the present or at a future
date. The Series may also enter into short sales of securities and currencies.
These derivatives strategies will be used:
* To adjust the portfolio's exposure to a particular currency
* To manage risk or enhance income
* As a substitute for purchasing or selling securities.
The investment techniques and policies employed by Wellington Management for
Series M under the Interim Contract, and if approved by Series M stockholders,
under the Sub-Advisory Contract, include the use of an asset allocation strategy
resulting in the purchase of a diversified portfolio of global equity and bond
securities. Wellington Management will seek to allocate on average about 80% of
total assets to equity securities and about 20% of total assets to fixed income
securities. The Series is not required to allocate any particular percentage of
its assets to these asset classes. Allocations will vary as a result of the
Sub-Adviser's judgment of the relative attractiveness of industries, sectors,
countries, currencies, and asset classes. The portfolio will be rebalanced to
the desired asset allocation and currency exposure on a regular basis primarily
through the use of exchange-listed futures contracts and currency forwards.
Asset allocation across asset classes (specifically stocks, bonds, cash or
currency) or across countries within an asset class is based on the
Sub-Adviser's assessment of the relative attractiveness of an asset class or
country. Attractiveness is evaluated based on a quantitative analysis of
multiple fundamental factors such as market valuation, economic conditions,
interest rates, and other relevant measures. The Sub-Adviser decides how much to
invest in an asset class or country by assessing its expected contribution to
the Series' desired risk and return characteristics.
Investments in global equity securities are selected using proprietary
quantitative analysis techniques to affirm the fundamental evaluation of equity
securities. Equity investments are evaluated based on quantitative valuation and
timeliness measures combined with fundamental analysis of a company's
management, cash flow, earnings, dividends, and business environment. A
disciplined analytical process is used to evaluate the relative expected return
and control portfolio risk. Series M's assets will be invested in equity
securities and other securities with equity characteristics issued in the United
States and abroad, including common stocks, preferred stocks, convertible
securities, warrants and rights, as well as ADRs and other depositary receipts.
Under normal circumstances, equity investments will be broadly diversified by
country, industry and company.
Investments in global debt securities will be selected based on extensive
in-house credit research, currency assessment, and focused fixed income
analysis. Such investments may include any of the fixed income investments
permitted for Series M. These debt securities may be issued in the United States
or abroad, and may include investment grade as well as high yield debt
obligations (also referred to as "junk bonds"). Many of these investments will
be denominated in foreign currencies.
Wellington Management will typically sell a security held by Series M when
the company or issuer begins to show deteriorating relative fundamentals, or
when alternative investments become sufficiently more attractive. Wellington
Management's portfolio management team meets regularly in order to coordinate
the decision-making between the asset allocation, equity and fixed income
elements of the portfolio.
Investments in derivatives will include principally futures and options
contracts on securities, financial indices and currencies, as well as options on
futures contracts and currency forwards. Generally, these derivative instruments
involve the obligation, in the case of futures and forwards, or the right, in
the case of options, to purchase or sell financial instruments in the present or
at a future date. Derivative contracts may be less expensive to trade and may
provide greater liquidity, making them easier to buy or sell than the underlying
financial instrument. Use of derivatives is the preferred method to reallocate
exposure to asset classes and currencies, although reallocation may also be
accomplished by direct purchase and sale of financial instruments. Wellington
Management will not use derivatives to leverage the portfolio. Derivative
strategies also may be used to:
* adjust exposure to a particular currency
* manage risk
* enhance income
MORE INFORMATION ABOUT THE INVESTMENT MANAGER AND UNDERWRITER
SBL Fund, or certain Series thereof, serves as the underlying investment
vehicle for the following variable insurance products currently issued by
Security Benefit Life Insurance Company ("SBL"): Variflex, Variflex ES, Variflex
LS, Variflex Signature, Parkstone and Security Elite Benefit. Security
Distributors, Inc., 700 SW Harrison Street, Topeka, Kansas 66636-0001, is the
principal underwriter of the foregoing variable insurance products. Security
Distributors, Inc. is a wholly-owned subsidiary of Security Benefit Group, Inc.,
a holding company wholly-owned by SBL. The Investment Manager is a limited
liability company owned by its members, SBL and Security Benefit Group, Inc. SBL
and Security Benefit Group, Inc. are both ultimately owned and controlled by
Security Benefit Mutual Holding Company.
The principal occupations, and positions with SMC and the Fund, of the
principal executive officer and each officer and director of SMC are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS* PRINCIPAL OCCUPATION POSITION WITH SMC POSITION WITH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
James R. Schmank** President and Managing Member Representative of SMC; President and Managing Vice President
Senior Vice President, Security Benefit Group, Inc. Member Representative and Director
and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
John D. Cleland Senior Vice President and Managing Member Senior Vice President President and
Representative of SMC; Senior Vice President, and Managing Member Director
Security Benefit Group, Inc. and Security Benefit Representative
Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Donald A. Chubb, Jr. Business broker, Griffith & Blair Realtors None Director
2222 SW 29th Street
Topeka, KS 66611
- ------------------------------------------------------------------------------------------------------------------------------------
Penny A. Lumpkin Vice President, Palmer Companies (Wholesalers, None Director
3616 Canterbury Town Road Retailers and Developers) and Bellairre Shopping
Topeka, KS 66610 Center (Leasing and Shopping Center Management);
Secretary-Treasurer, Palmer News, Inc. (Wholesale
Distributors)
- ------------------------------------------------------------------------------------------------------------------------------------
Mark L. Morris, Jr. Retired; Former General Partner, Mark Morris None Director
5500 SW 7th Street Associates (Veterinary Research and Education)
Topeka, KS 66606
- ------------------------------------------------------------------------------------------------------------------------------------
Maynard F. Oliverius President and Chief Executive Officer, None Director
1500 SW 10th Avenue Stormont-Vail Health Care
Topeka, KS 66604
- ------------------------------------------------------------------------------------------------------------------------------------
Mark E. Young Vice President, SMC; Second Vice President, Security Vice President Vice President
Benefit Group, Inc. and Security Benefit Life
Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Jane A. Tedder Vice President and Senior Economist, SMC; Vice Vice President and Vice President
President, Security Benefit Group, Inc. and Group, Senior Economist
Inc. and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Amy J. Lee Secretary, SMC; Vice President, Associate General Secretary Secretary
Counsel and Assistant Secretary, Security Benefit
Group, Inc. and Security Benefit Life Insurance
Company
- ------------------------------------------------------------------------------------------------------------------------------------
Terry A. Milberger Senior Vice President and Senior Portfolio Manager, Senior Vice President Vice President
SMC; Senior Vice President, Security Benefit Group, and Senior Portfolio
Inc. and Security Benefit Life Insurance Company Manager
- ------------------------------------------------------------------------------------------------------------------------------------
Cindy L. Shields Vice President and Portfolio Manager, SMC; Assistant Vice President and Vice President
Vice President, Security Benefit Group, Inc. and Portfolio Manager
Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
James P. Schier Assistant Vice President and Portfolio Manager, SMC; Assistant Vice President Vice President
Assistant Vice President, Security Benefit Group, and Portfolio Manager
Inc. and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Steven M. Bowser Second Vice President and Portfolio Manager, SMC; Second Vice President Vice President
Second Vice President, Security Benefit Group, Inc. and Portfolio Manager
and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas A. Swank Vice President and Portfolio Manager, SMC; Vice Vice President and Vice President
President, Security Benefit Group, Inc. and Portfolio Manager
Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Michael A. Petersen Vice President and Senior Portfolio Manager, SMC; Vice President and Vice President
Vice President, Security Benefit Group, Inc. and Senior Portfolio Manager
Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
David Eshnaur Assistant Vice President and Portfolio Manager, SMC; Assistant Vice President Vice President
Assistant Vice President, Security Benefit Group, and Portfolio Manager
Inc. and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Brenda M. Harwood Assistant Vice President and Treasurer, SMC; Assistant Vice President Treasurer
Assistant Vice President, Security Benefit Group, and Treasurer
Inc. and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher D. Swickard Assistant Secretary, SMC; Assistant Vice President Assistant Secretary Assistant Secretary
and Assistant Counsel, Security Benefit Group, Inc.
and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
*All located at 700 Harrison, Topeka, KS 66636 unless otherwise noted.
**Principal executive officer
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
No director or "named executive officer" of the Fund beneficially owned any
shares of common stock of the Fund as of June 30, 1999.
STOCKHOLDER PROPOSALS
Unless otherwise required under the Investment Company Act of 1940,
ordinarily it will not be necessary for the Fund to hold annual meetings of
stockholders. Stockholder proposals must be received at least 120 days prior to
the next meeting of stockholders, whenever held, for inclusion in the Fund's
proxy statement and form of proxy relating to the meeting.
OTHER MATTERS
The Board of Directors of the Fund is not aware of any other matters to come
before the Meeting or any adjournments thereof other than those specified
herein. If any other matters should come before the Meeting, it is intended that
the persons named as proxies in the enclosed form(s) of proxy, or their
substitutes, will vote the proxy in accordance with their best judgment on such
matters.
By order of the Board of Directors of
SBL Fund,
AMY J. LEE
Secretary
<PAGE>
EXHIBIT A
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into on this ___ day of _________, 1999
between SECURITY MANAGEMENT COMPANY, LLC (the "Adviser"), a Kansas limited
liability company, registered under the Investment Advisers Act of 1940, as
amended (the "Investment Advisers Act"), and Wellington Management Company, LLP
(the "Subadviser"), a Massachusetts limited liability partnership registered
under the Investment Advisers Act.
WITNESSETH:
WHEREAS, SBL Fund, a Kansas corporation, is registered with the Securities
and Exchange Commission (the "Commission") as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "Investment
Company Act");
WHEREAS, SBL Fund has, pursuant to an Advisory Agreement with the Adviser
(the "Advisory Agreement"), retained the Adviser to act as investment adviser
for and to manage its assets;
WHEREAS, the Advisory Agreement permits the Adviser to delegate certain of
its duties under the Advisory Agreement to other investment advisers, subject to
the requirements of the Investment Company Act; and
WHEREAS, the Adviser desires to retain the Subadviser as subadviser for
Series K and Series M (the "Fund" or collectively, the "Funds") of SBL Fund to
act as investment adviser for and to manage each Fund's Investments (as defined
below) and the Subadviser desires to render such services.
NOW, THEREFORE, the Adviser and Subadviser do mutually agree and promise as
follows:
1. APPOINTMENT AS SUBADVISER. The Adviser hereby retains the Subadviser to
act as investment adviser for and to manage the assets of the Funds subject to
the supervision of the Adviser and the Board of Directors of SBL Fund and
subject to the terms of this Agreement; and the Subadviser hereby accepts such
employment. In such capacity, the Subadviser shall be responsible for each
Fund's Investments.
2. DUTIES OF SUBADVISER.
(a) INVESTMENTS. The Subadviser is hereby authorized and directed and
hereby agrees, subject to the stated investment policies and restrictions of
the Funds as set forth in its prospectus and statement of additional
information as currently in effect and as supplemented or amended from time
to time (collectively referred to hereinafter as the "Prospectus") and
subject to the directions of the Adviser and SBL Fund's Board to purchase,
hold and sell investments for the account of the Funds (hereinafter
"Investments") and to monitor on a continuous basis the performance of such
Investments. The Subadviser shall give the Funds the benefit of its best
efforts in rendering its services as Subadviser. The Subadviser may contract
with or consult with such banks, other securities firms, brokers or other
parties, without additional expense to the Funds, as it may deem appropriate
regarding investment advice, research and statistical data, clerical
assistance or otherwise.
(b) BROKERAGE. The Subadviser is authorized, subject to the supervision
of the Adviser and SBL Fund's Board to establish and maintain accounts on
behalf of the Funds with, and place orders for the purchase and sale of the
Funds' Investments with or through, such persons, brokers or dealers as
Subadviser may select which may include, to the extent permitted by the
Adviser and SBL Fund, brokers or dealers affiliated with the Subadviser, and
negotiate commissions to be paid on such transactions. The Subadviser agrees
that in placing such orders it shall attempt to obtain best execution,
provided that, the Subadviser may, on behalf of the Funds, pay brokerage
commissions to a broker which provides brokerage and research services to the
Subadviser in excess of the amount another broker would have charged for
effecting the transaction, provided (i) the Subadviser determines in good
faith that the amount is reasonable in relation to the value of the brokerage
and research services provided by the executing broker in terms of the
particular transaction or in terms of the Subadviser's overall
responsibilities with respect to the Funds and the accounts as to which the
Subadviser exercises investment discretion, (ii) such payment is made in
compliance with Section 28(e) of the Securities Exchange Act of 1934, as
amended, and any other applicable laws and regulations, and (iii) in the
opinion of the Subadviser, the total commissions paid by the Funds will be
reasonable in relation to the benefits to the Funds over the long term. In
reaching such determination, the Subadviser will not be required to place or
attempt to place a specific dollar value on the brokerage and/or research
services provided or being provided by such broker. It is recognized that the
services provided by such brokers may be useful to the Subadviser in
connection with the Subadviser's services to other clients. On occasions when
the Subadviser deems the purchase or sale of a security to be in the best
interests of the Funds as well as other clients of the Subadviser, the
Subadviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be sold or
purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of securities
so sold or purchased, as well as the expenses incurred in the transaction,
will be made by the Subadviser in the manner the Subadviser considers to be
the most equitable and consistent with its fiduciary obligations to the Funds
and to such other clients. The Subadviser will report on such allocations at
the request of the Adviser, SBL Fund or SBL Fund's Board providing such
information as the number of aggregated trades to which the Fund was a party,
the broker(s) to whom such trades were directed and the basis of the
allocation for the aggregated trades. Subject to the foregoing provisions of
this subsection 2(b) and at the direction of the Adviser or the Funds, the
Subadviser may also consider sales of fund shares as a factor in the
selection of brokers or dealers for the Fund's portfolio transactions.
(c) SECURITIES TRANSACTIONS. The Subadviser and any affiliated person of
the Subadviser will not purchase securities or other instruments from or sell
securities or other instruments to the Funds ("Principal Transactions");
PROVIDED, HOWEVER, the Subadviser may enter into a Principal Transaction with
a Fund if (i) the transaction is permissible under applicable laws and
regulations, including, without limitation, the Investment Company Act and
the Investment Advisers Act and the rules and regulations promulgated
thereunder, and (ii) the transaction or category of transactions receives the
express written approval of the Adviser.
The Subadviser agrees to observe and comply with Rule 17j-1 under the
Investment Company Act and its Code of Ethics, as the same may be amended
from time to time. The Subadviser agrees to provide the Adviser and SBL Fund
with a copy of such Code of Ethics.
(d) BOOKS AND RECORDS. The Subadviser will maintain all books and records
required to be maintained pursuant to the Investment Company Act and the
rules and regulations promulgated thereunder solely with respect to
transactions made by it on behalf of the Funds including, without limitation,
the books and records required by Subsections (b)(1), (5), (6), (7), (9),
(10) and (11) and Subsection (f) of Rule 31a-1 under the Investment Company
Act and shall timely furnish to the Adviser all information relating to the
Subadviser's services hereunder needed by the Adviser to keep such other
books and records of the Funds required by Rule 31a-1 under the Investment
Company Act. The Subadviser will also preserve all such books and records for
the periods prescribed in part (e) of Rule 31a-2 under the Investment Company
Act, and agrees that such books and records shall remain the sole property of
the Funds and shall be immediately surrendered to the Funds upon request. The
Subadviser further agrees that all books and records maintained hereunder
shall be made available to the Funds or the Adviser at any time upon
reasonable request and notice, including telecopy, during any business day.
(e) INFORMATION CONCERNING INVESTMENTS AND SUBADVISER. From time to time
as the Adviser or the Funds may request, the Subadviser will furnish the
requesting party reports on portfolio transactions and reports on Investments
held in the portfolios, all in such detail as the Adviser or SBL Fund may
reasonably request. The Subadviser will make available its officers and
employees to meet with SBL Fund's Board of Directors at SBL Fund's principal
place of business on due notice to review the Investments of the Funds.
The Subadviser will also provide such information as is customarily
provided by a subadviser and may be required for the Funds or the Adviser to
comply with their respective obligations under applicable laws, including,
without limitation, the Internal Revenue Code of 1986, as amended (the
"Code"), the Investment Company Act, the Investment Advisers Act, the
Securities Act of 1933, as amended (the "Securities Act") and any state
securities laws, and any rule or regulation thereunder.
During the term of this Agreement, the Adviser agrees to furnish the
Subadviser at its principal office all registration statements, proxy
statements, reports to stockholders, sales literature or other materials
prepared for distribution to stockholders of the Funds, the SBL Fund or the
public that refer to the Subadviser for Subadviser's review and approval. The
Subadviser shall be deemed to have approved all such materials unless the
Subadviser reasonably objects by giving notice to the Adviser in writing
within five business days (or such other period as may be mutually agreed)
after receipt thereof. The Subadviser's right to object to such materials is
limited to the portions of such materials that expressly relate to the
Subadviser, its services and its clients. The Adviser agrees to use its
reasonable best efforts to ensure that materials prepared by its employees or
agents or its affiliates that refer to the Subadviser or its clients in any
way are consistent with those materials previously approved by the Subadviser
as referenced in this paragraph. Sales literature may be furnished to the
Sub-Adviser by first class or overnight mail, facsimile transmission
equipment or hand delivery
(f) CUSTODY ARRANGEMENTS. The Subadviser shall provide the Funds'
custodian, on each business day with information relating to all transactions
concerning the Funds' assets.
(g) COMPLIANCE WITH APPLICABLE LAWS AND GOVERNING DOCUMENTS. In all
matters relating to the performance of this Agreement, the Subadviser and its
directors, officers, partners, employees and interested persons shall act in
conformity with SBL Fund's Articles of Incorporation, By-Laws, and currently
effective registration statement and with the written instructions and
directions of SBL Fund's Board and the Adviser, and shall comply with the
requirements of the Investment Company Act, the Investment Advisers Act, the
Commodity Exchange Act, the rules thereunder, and all other applicable
federal and state laws and regulations.
In carrying out its obligations under this Agreement, the Subadviser
shall ensure that, based on the information available to the Subadviser, each
Fund complies with all applicable statutes and regulations necessary to
qualify the Fund as a Regulated Investment Company under Subchapter M of the
Code (or any successor provision), and shall notify the Adviser immediately
upon having a reasonable basis for believing that the Fund has ceased to so
qualify or that it might not so qualify in the future.
In carrying out its obligations under this Agreement, the Subadviser
shall invest the assets of the Funds in such a manner as to ensure that,
based on the information available to the Subadviser, each Fund complies with
the diversification provisions of Section 817(h) of the Code (or any
successor provision) and the regulations issued thereunder relating to the
diversification requirements for variable insurance contracts and any
prospective amendments or other modifications to Section 817 or regulations
thereunder. Subadviser shall notify the Adviser immediately upon having a
reasonable basis for believing that a Fund has ceased to comply and will take
all reasonable steps to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Regulation 1.817-5.
The Adviser has furnished the Subadviser with copies of each of the
following documents and will furnish the Subadviser at its principal office
all future amendments and supplements to such documents, if any, as soon as
practicable after such documents become available: (i) the Articles of
Incorporation of SBL Fund, (ii) the By-Laws of SBL Fund, (iii) SBL Fund's
registration statement under the Investment Company Act and the Securities
Act of 1933, as amended, as filed with the Commission, and (iv) any written
instructions of the SBL Fund Board and the Adviser.
(h) VOTING OF PROXIES. The Subadviser shall direct the custodian as to
how to vote such proxies as may be necessary or advisable in connection with
any matters submitted to a vote of shareholders of securities held by the
Funds.
3. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder, the
Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent SBL Fund or the Adviser in any way or
otherwise be deemed an agent of SBL Fund or the Adviser.
4. COMPENSATION. The Adviser shall pay to the Subadviser, for the services
rendered hereunder, the fees set forth in Exhibit A to this Agreement.
5. EXPENSES. The Subadviser shall bear all expenses incurred by it in
connection with its services under this Agreement and will, from time to time,
at its sole expense employ or associate itself with such persons as it believes
to be particularly fitted to assist it in the execution of its duties hereunder.
However, the Subadviser shall not assign or delegate any of its investment
management duties under this Agreement without the approval of the Adviser and
SBL Fund's Board.
6. REPRESENTATIONS AND WARRANTIES OF SUBADVISER. The Subadviser represents
and warrants to the Adviser and the Funds as follows:
(a) The Subadviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Subadviser will immediately notify the Adviser of the occurrence
of any event that would disqualify the Subadviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the
Investment Company Act;
(c) The Subadviser is fully authorized to serve as Subadviser to the
Funds and to perform the services described under this Agreement.;
(d) The Subadviser is a limited liability partnership duly organized and
validly existing under the laws of the Commonwealth of Massachusetts with the
power to own and possess its assets and carry on its business as it is now
being conducted;
(e) The execution, delivery and performance by the Subadviser of this
Agreement are within the Subadviser's powers and have been duly authorized by
all necessary action on the part of its shareholders, and no action by or in
respect of, or filing with, any governmental body, agency or official is
required on the part of the Subadviser for the execution, delivery and
performance by the Subadviser of this Agreement, and the execution, delivery
and performance by the Subadviser of this Agreement do not contravene or
constitute a default under (i) any provision of applicable law, rule or
regulation, (ii) the Subadviser's governing instruments, or (iii) any
agreement, judgment, injunction, order, decree or other instrument binding
upon the Subadviser;
(f) This Agreement is a valid and binding agreement of the Subadviser;
(g) The Form ADV of the Subadviser previously provided to the Adviser is
a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date, and does not omit to state any material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading;
7. NON-EXCLUSIVITY. The services of the Subadviser with respect to the Fund
are not deemed to be exclusive, and the Subadviser and its officers shall be
free to render investment advisory and administrative or other services to
others (including other investment companies) and to engage in other activities
so long as its duties hereunder are not impaired thereby.
8. REPRESENTATIONS AND WARRANTIES OF ADVISER. The Adviser represents and
warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Adviser has filed a notice of exemption pursuant to Rule 4.14
under the CEA with the Commodity Futures Trading Commission (the "CFTC") and
the National Futures Association;
(c) The Adviser is a limited liability company duly organized and validly
existing under the laws of the State of Kansas with the power to own and
possess its assets and carry on its business as it is now being conducted;
(d) The execution, delivery and performance by the Adviser of this
Agreement and the Advisory Agreement are within the Adviser's powers and have
been duly authorized by all necessary action on the part of its members, and
no action by or in respect of, or filing with, any governmental body, agency
or official is required on the part of the Adviser for the execution,
delivery and performance by the Adviser of this Agreement, and the execution,
delivery and performance by the Adviser of this Agreement do not contravene
or constitute a default under (i) any provision of applicable law, rule or
regulation, (ii) the Adviser's governing instruments, or (iii) any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Adviser;
(e) This Agreement and the Advisory Agreement are valid and binding
agreements of the Adviser;
(f) The Form ADV of the Adviser previously provided to the Subadviser is
a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date and does not omit to state any material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading;
(g) The Adviser acknowledges that it received a copy of the Subadviser's
Form ADV at least 48 hours prior to the execution of this Agreement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE INFORMATION.
All representations and warranties made by the Subadviser and the Adviser
pursuant to Sections 6 and 8 hereof shall survive for the duration of this
Agreement and the parties hereto shall promptly notify each other in writing
upon becoming aware that any of the foregoing representations and warranties are
no longer true.
10. LIABILITY AND INDEMNIFICATION.
(a) LIABILITY. In the absence of willful misfeasance, bad faith or
negligence on the part of the Subadviser or a breach of its duties hereunder,
the Subadviser shall not be subject to any liability to the Adviser, SBL
Fund, or the Funds or any of the Funds' shareholders, and, in the absence of
willful misfeasance, bad faith or negligence on the part of the Adviser or a
breach of its duties hereunder, the Adviser shall not be subject to any
liability to the Subadviser, for any act or omission in the case of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of Investments; PROVIDED, HOWEVER,
that nothing herein shall relieve the Adviser and the Subadviser from any of
their respective obligations under applicable law, including, without
limitation, the federal and state securities laws and the CEA. The Subadviser
shall not be liable to the Adviser, SBL Fund or the Funds for any losses that
may be sustained as a result of delays in or inaccuracy of information about
the Funds provided to the Subadviser by or on behalf of the Adviser or the
Funds' Custodian.
(b) INDEMNIFICATION. The Subadviser shall indemnify the Adviser, SBL Fund
and the Funds, and their respective officers and directors, for any liability
and expenses, including attorneys' fees, which may be sustained by the
Adviser, SBL Fund or the Funds, as a result of the Subadviser's willful
misfeasance, bad faith, negligence, breach of its duties hereunder or
violation of applicable law, including, without limitation, the federal and
state securities laws or the CEA. The Adviser shall indemnify the Subadviser
and its officers and partners, for any liability and expenses, including
attorneys' fees, which may be sustained as a result of the Adviser's, SBL
Fund's or the Funds' willful misfeasance, bad faith, negligence, breach of
its duties hereunder or violation of applicable law, including, without
limitation, the federal and state securities laws or the CEA.
11. DURATION AND TERMINATION.
(a) DURATION. This Agreement shall become effective upon the date first
above written, provided that this Agreement shall not take effect with
respect to SBL Fund unless it has first been approved (i) by a vote of a
majority of those directors of SBL Fund who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by vote of a majority of
SBL Fund's outstanding voting securities. This Agreement shall continue in
effect for a period of two years from the date hereof, subject thereafter to
being continued in force and effect from year to year with respect to each
Fund if specifically approved each year by either (i) the Board of Directors
of SBL Fund, or (ii) by the affirmative vote of a majority of each Fund's
outstanding voting securities. In addition to the foregoing, each renewal of
this Agreement with respect to each Fund must be approved by the vote of a
majority of SBL Fund's directors who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. Prior to voting on the renewal of
this Agreement, the Board of Directors of each Fund may request and evaluate,
and the Subadviser shall furnish, such information as may reasonably be
necessary to enable the Fund's Board of Directors to evaluate the terms of
this Agreement.
(b) TERMINATION. Notwithstanding whatever may be provided herein to the
contrary, this Agreement may be terminated at any time, without payment of
any penalty:
(i) By vote of a majority of the Board of Directors of SBL Fund, or
by vote of a majority of the outstanding voting securities of eachFund,
or by the Adviser, in each case, upon sixty (60) days' written notice to
the Subadviser;
(ii) By the Adviser upon breach by the Subadviser of any
representation or warranty contained in Section 6 hereof, which shall not
have been cured during the notice period, upon twenty (20) days written
notice;
(iii) By the Adviser immediately upon written notice to the
Subadviser if the Subadviser becomes unable to discharge its duties and
obligations under this Agreement; or
(iv) By the Subadviser upon 90 days written notice to the Adviser and
the Fund.
This Agreement shall not be assigned (as such term is defined in the
Investment Company Act) without the prior written consent of the parties hereto.
This Agreement shall terminate automatically in the event of its assignment
without such consent or upon the termination of the Advisory Agreement.
12. DUTIES OF THE ADVISER. The Adviser shall continue to have responsibility
for all services to be provided to the Funds pursuant to the Advisory Agreement
and shall oversee and review the Subadviser's performance of its duties under
this Agreement.
13. AMENDMENT. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment with respect to the
Funds shall be approved by the Board of Directors of the Funds or by a vote of a
majority of the outstanding voting securities of the Funds.
14. NOTICE. Any notice that is required to be given by the parties to each
other (or to the Fund) under the terms of this Agreement shall be in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Wellington Management Company, LLP
75 State Street
Boston, Massachusetts 02109
Attention: Regulatory Affairs Department
Facsimile: 617-790-7760
(b) Copy to: Duncan M. McFarland, President & CEO
(c) If to the Adviser:
Security Management Company, LLC
700 SW Harrison
Topeka, Kansas 66636-0001
Attention: James R. Schmank, President
Facsimile: (785) 431-3080
(d) If to SBL Fund:
SBL Fund
700 SW Harrison
Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 431-3080
15. GOVERNING LAW; JURISDICTION. Except as indicated in Section 19(b) of this
Agreement, this Agreement shall be governed by and construed in accordance with
the internal laws of the State of Kansas.
16. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which shall together constitute one and the same instrument.
17. CAPTIONS. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
18. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and effect.
19. CERTAIN DEFINITIONS.
(a) "BUSINESS DAY." As used herein, business day means any customary
business day in the United States on which the New York Stock Exchange is
open.
(b) MISCELLANEOUS. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the Investment Company Act shall be resolved by
reference to such term or provision of the Investment Company Act and to
interpretations thereof, if any, by the U.S. courts or, in the absence of any
controlling decisions of any such court, by rules, regulation or order of the
Commission validly issued pursuant to the Investment Company Act.
Specifically, as used herein, "investment company," "affiliated person,"
"interested person," "assignment," "broker," "dealer" and "affirmative vote
of the majority of the Fund's outstanding voting securities" shall all have
such meaning as such terms have in the Investment Company Act. The term
"investment adviser" shall have such meaning as such term has in the
Investment Advisers Act and the Investment Company Act, and in the event of a
conflict between such Acts, the most expansive definition shall control. In
addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is relaxed by a rule, regulation
or order of the Commission, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule, regulation
or order.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
SECURITY MANAGEMENT COMPANY, LLC
By:
------------------------------
Name: James R. Schmank
Title: President
Attest:
------------------------------
Name: Amy J. Lee
Title: Secretary
Subadviser
By:
------------------------------
Name:
Title:
Attest:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
COMPENSATION
SERIES K OF SBL FUND -- As full compensation for the services provided by the
Subadviser to Series K hereunder, Adviser shall pay Subadviser an annual fee
equal to the percentage of the average daily closing value of the net assets of
Series K of SBL Fund, computed on a daily basis and payable monthly as follows:
--------------------------------------------------------
AVERAGE DAILY NET ASSETS OF SERIES K ANNUAL RATE
--------------------------------------------------------
$0 to $50 million ........................ .50%
Over $50 million ......................... .40%
--------------------------------------------------------
If this Agreement shall be effective for only a portion of a year, the
Subadviser's compensation for said year shall be prorated for such portion. For
purposes of calculating the compensation to be paid hereunder, the value of the
net assets of Series K 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 Series' shares as described in the
Prospectus for Series K. Payment for the Subadviser's compensation for the
preceding month shall be made as promptly as possible after the end of each
month. Notwithstanding anything in this Agreement to the contrary, the
Subadviser's fee hereunder shall not exceed .40% of Series K's average net
assets for the one-year period following the execution of this Agreement.
SERIES M OF SBL FUND -- As full compensation for the services provided by the
Subadviser to Series M hereunder, Adviser shall pay Subadviser an annual fee
equal to the percentage of the average daily closing value of the net assets of
Series M of SBL Fund, computed on a daily basis and payable monthly as follows:
--------------------------------------------------------
AVERAGE DAILY NET ASSETS OF SERIES M ANNUAL RATE
--------------------------------------------------------
$0 to $50 million ........................ .50%
Over $50 million to $100 million ......... .40%
Over $100 million to $250 million ........ .35%
Over $250 million ........................ .30%
--------------------------------------------------------
If this Agreement shall be effective for only a portion of a year, the
Subadviser's compensation for said year shall be prorated for such portion. For
purposes of calculating the compensation to be paid hereunder, the value of the
net assets of Series M 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 Series' shares as described in the
Prospectus for Series M. Payment for the Subadviser's compensation for the
preceding month shall be made as promptly as possible after the end of each
month. Notwithstanding anything in this Agreement to the contrary, the
Subadviser's fee hereunder shall not exceed .45% of Series M's average net
assets for the one-year period following the execution of this Agreement.
<PAGE>
EXHIBIT B
PARTNERS OF WELLINGTON MANAGEMENT COMPANY, LLP
Kenneth L. Abrams Paul D. Kaplan James A. Rullo
Nicholas C. Adams John C. Keogh John R. Ryan
Rand L. Alexander George C. Lodge, Jr. Joseph H. Schwartz
Deborah L. Allinson Nancy T. Lukitsh Theodore Shasta
James H. Averill Mark T. Lynch Binkley C. Shorts
Karl E. Bandtel Christine S. Manfredi Trond Skramstad
Marie-Claude Bernal Patrick J. McCloskey Catherine A. Smith
William N. Booth Earl E. McEvoy Stephen A. Soderberg
Paul Braverman Duncan M. McFarland Brendan J. Swords
Robert A. Bruno Paul M. Mecray III Harriett Tee Taggart
Maryann E. Carroll Matthew E. Megargel Perry M. Traquina
Pamela Dippel James N. Mordy Gene R. Tremblay
Robert W. Doran Diane C. Nordin Michael A. Tyler
Charles T. Freeman Stephen T. O'Brien Mary Ann Tynan
Laurie A. Gabriel Edward P. Owens Clare Villari
Frank J. Gilday Saul J. Pannell Ernst H. von Metzsch
John H. Gooch Thomas L. Pappas James L. Walters
Nicholas P. Greville Jonathan M. Payson Kim Williams
Paul Hamel Stephen M. Pazuk Francis V. Wisneski
William C. S. Hicks Robert D. Rands
Lucius T. Hill, III Eugene E. Record, Jr.
<PAGE>
[SBG LOGO]
The Security Benefit
Group of Companies
700 SW Harrison St.
Topeka, Kansas 66636-0001
SERIES K OF SBL FUND
Special Meeting of Shareholders
May 14, 1999
The undersigned hereby appoints John D. Cleland, Donald A. Chubb, Jr.,
and James R. Schmank, and each of them, with full power of
substitution, as proxies of the undersigned to vote at the
above-stated special meeting, and at all adjournments thereof, all
shares of
SERIES K OF SBL FUND
held by the undersigned at the Special Meeting of Shareholders of the
Fund to be held at 9:30 AM, local time, on May 14, 1999, at Security
Benefit Group Building, 700 Harrison Street, Topeka, Kansas
66636-0001, and at any adjournment thereof, in the manner directed
below with respect to the matters referred to in the proxy statement
for the meeting, receipt of which is hereby acknowledged, and in the
proxies' discretion, upon such other matters as may properly come
before the meeting or any adjournment thereof.
In order to avoid the additional expense of further solicitation to
your Fund, we strongly urge you to review, complete, and return your
ballot as soon as possible. Your vote is important regardless of the
number of shares you own. The Board of directors recommends a vote for
each of the following proposals. These voting instructions will be
voted as specified and in the absence of specification will be treated
as granting authority to vote "FOR" each proposal.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |X|
KEEP THIS PORTION FOR YOUR RECORDS
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
- --------------------------------------------------------------------------------
SERIES K OF SBL FUND
NOTE: Please sign exactly as the name appears on this card. EACH joint owner
must sign the proxy. When signing as executor, administrator, attorney, trustee
or guardian, or as custodian for a minor, please give the FULL title of such. If
a corporation, please give the FULL corporate name and indicate the signer's
office. If a partner, please sign in the partnership name.
PLEASE EXECUTE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
VOTE ON PROPOSALS
FOR AGAINST ABSTAIN
1. a. Approval of the Sub-Advisory Contract
between SMC and Wellington Management Company,
LLP with respect to Series K. |_| |_| |_|
- ------------------------------------------- ---------------------------------
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
- --------------------------------------------------------------------------------
<PAGE>
[SBG LOGO]
The Security Benefit
Group of Companies
700 SW Harrison St.
Topeka, Kansas 66636-0001
SERIES M OF SBL FUND
Special Meeting of Shareholders
May 14, 1999
The undersigned hereby appoints John D. Cleland, Donald A. Chubb, Jr.,
and James R. Schmank, and each of them, with full power of
substitution, as proxies of the undersigned to vote at the
above-stated special meeting, and at all adjournments thereof, all
shares of
SERIES M OF SBL FUND
held by the undersigned at the Special Meeting of Shareholders of the
Fund to be held at 9:30 AM, local time, on May 14, 1999, at Security
Benefit Group Building, 700 Harrison Street, Topeka, Kansas
66636-0001, and at any adjournment thereof, in the manner directed
below with respect to the matters referred to in the proxy statement
for the meeting, receipt of which is hereby acknowledged, and in the
proxies' discretion, upon such other matters as may properly come
before the meeting or any adjournment thereof.
In order to avoid the additional expense of further solicitation to
your Fund, we strongly urge you to review, complete, and return your
ballot as soon as possible. Your vote is important regardless of the
number of shares you own. The Board of directors recommends a vote for
each of the following proposals. These voting instructions will be
voted as specified and in the absence of specification will be treated
as granting authority to vote "FOR" each proposal.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |X|
KEEP THIS PORTION FOR YOUR RECORDS
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
- --------------------------------------------------------------------------------
SERIES M OF SBL FUND
NOTE: Please sign exactly as the name appears on this card. EACH joint owner
must sign the proxy. When signing as executor, administrator, attorney, trustee
or guardian, or as custodian for a minor, please give the FULL title of such. If
a corporation, please give the FULL corporate name and indicate the signer's
office. If a partner, please sign in the partnership name.
PLEASE EXECUTE, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
VOTE ON PROPOSALS
FOR AGAINST ABSTAIN
1. b. Approval of the Sub-Advisory Contract
between SMC and Wellington Management Company,
LLP with respect to Series M. |_| |_| |_|
- ------------------------------------------- ---------------------------------
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
- --------------------------------------------------------------------------------
