SECURITY GROWTH & INCOME FUND/KS/
PRE 14A, 1999-12-01
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<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

                         SECURITY GROWTH AND INCOME 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 OF ANNUAL MEETING OF STOCKHOLDERS OF
                         SECURITY GROWTH AND INCOME FUND
                           TO BE HELD JANUARY 26, 2000
                 700 SW HARRISON ST., TOPEKA, KANSAS 66636-0001
                            TELEPHONE 1-800-888-2461


TO THE STOCKHOLDERS OF
   >  SECURITY GROWTH AND INCOME FUND

   Notice is hereby given that an annual meeting of the stockholders of Security
Growth and Income Fund (the "Fund"), a Kansas  corporation,  will be held at the
offices of Security Growth and Income Fund, Security Benefit Group Building, 700
SW Harrison Street, Topeka, Kansas 66636-0001,  on January 26, 2000 at 9:30 a.m.
local time ("Meeting"), for the following purposes:

   1.  To elect six  directors  to serve on the Board of  Directors  of the Fund
       until the next annual meeting or until their  successors  shall have been
       duly elected and qualified.

   2.  To  ratify or reject  the  selection  of the firm of Ernst & Young LLP as
       independent accountants for the Fund's fiscal year 2000.

   3.  a.  To amend the  Fund's  fundamental  investment  limitation  concerning
           diversification.

       b.  To amend the  Fund's  fundamental  investment  limitation  concerning
           share ownership of any one issuer.

       c.  To eliminate the Fund's fundamental  investment limitation concerning
           investing for control of portfolio companies.

       d.  To amend the  Fund's  fundamental  investment  limitation  concerning
           underwriting.

       e.  To amend the  Fund's  fundamental  investment  limitation  concerning
           borrowing.

       f.  To amend the  Fund's  fundamental  investment  limitation  concerning
           lending.

       g.  To eliminate the Fund's fundamental  investment limitation concerning
           short sales and margin purchases of securities.

       h.  To eliminate the Fund's fundamental  investment limitation concerning
           mortgaging, pledging or hypothecating its assets.

       i.  To eliminate the Fund's fundamental  investment limitation concerning
           purchasing  securities that are not traded on an exchange or actively
           traded over-the-counter.

       j.  To eliminate the Fund's fundamental  investment limitation concerning
           investment  in  companies  with  less  than  three  years'  operating
           history.

       k.  To eliminate the Fund's fundamental  investment limitation concerning
           purchasing  securities  of  an  issuer  in  which  the  officers  and
           directors of the Fund,  Investment  Manager or  Underwriter  own more
           than 5% of the outstanding securities of such issuer.

       l.  To eliminate the Fund's fundamental  investment limitation concerning
           investment in other investment companies.

       m.  To eliminate the Fund's fundamental  investment limitation concerning
           the officers or directors of the Fund, the  Underwriter or Investment
           Manager purchasing shares of the Fund, except at net asset value.

       n.  To amend the  Fund's  fundamental  investment  limitation  concerning
           buying or selling real estate and commodities or commodity contracts.

       o.  To eliminate the Fund's fundamental  investment limitation concerning
           investment in puts, calls, straddles or spreads.

       p.  To eliminate the Fund's fundamental  investment limitation concerning
           investment in limited  partnerships or similar interests in oil, gas,
           mineral leases or other mineral exploration development programs.

   4.  To approve or  disapprove  an  arrangement  and new  investment  advisory
       contract that would permit Security Management  Company,  LLC, the Fund's
       investment  adviser,   with  Board  approval,  to  enter  into  or  amend
       sub-advisory agreements without stockholder approval.

   5.  To approve or  disapprove a Brokerage  Enhancement  Plan pursuant to Rule
       12b-1  under the  Investment  Company Act of 1940,  and a new  investment
       advisory contract that would permit the implementation of the Plan.

   6.  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 Security Growth and Income Fund has fixed the close
of business on November 30, 1999,  as the record date for the  determination  of
stockholders of the Fund entitled to notice of and to vote at the Meeting.

   THERE IS  ENCLOSED  A PROXY  FORM  SOLICITED  BY THE  BOARD OF  DIRECTORS  OF
SECURITY  GROWTH  AND  INCOME  FUND.  ANY FORM OF  PROXY  THAT 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
                                                Security Growth and Income Fund,
Topeka, Kansas                                                        AMY J. LEE
December ____, 1999                                                    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, OR OTHERWISE VOTE THEIR SHARES, AS EARLY AS POSSIBLE.
<PAGE>
SECURITY GROWTH AND INCOME FUND
MEMBER OF THE SECURITY BENEFIT GROUP OF COMPANIES
700 SW HARRISON STREET, TOPEKA, KANSAS 66636-0001

                ANNUAL MEETING OF STOCKHOLDERS, JANUARY 26, 2000
                                 PROXY STATEMENT

                     SOLICITATION AND REVOCATION OF PROXIES

   The enclosed proxy is solicited by and on behalf of the Board of Directors of
Security  Growth and  Income  Fund (the  "Fund").  You may vote in person at the
Meeting, by telephone, by Internet, or by returning your completed proxy card in
the postage-paid  envelope provided.  Details can be found on the enclosed proxy
insert.  Do not  return  your  proxy  card if you are  voting  by  telephone  or
Internet.  You may revoke your proxy by submitting  another proxy or a notice of
revocation  of your proxy in proper  form to the  Secretary  of the Fund,  or by
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").  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.
To ensure that sufficient  shares of common stock are represented at the Meeting
to permit  approval of the proposals  set forth herein,  the Fund may retain the
services of a proxy  solicitor to assist in  soliciting  proxies for a fee, plus
reimbursement  of out-of-pocket  expenses.  Proxies are expected to be mailed to
the Fund's stockholders on or about December ______, 1999.

                                VOTING SECURITIES

   Only  stockholders  of record at the close of business on November  30, 1999,
are entitled to vote at the Meeting.  On that date,  the  outstanding  number of
voting securities of common stock of the Fund was ____ shares.

   As of the Record Date, the following persons owned  beneficially more than 5%
of the Fund.

- --------------------------------------------------------------------------------
                                                                     % OF FUND'S
                                                    NUMBER OF        OUTSTANDING
                     NAME                          SHARES OWNED         SHARES
- --------------------------------------------------------------------------------



- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
THE FUND WILL FURNISH,  WITHOUT CHARGE,  A COPY OF THE ANNUAL REPORT  CONTAINING
AUDITED  FINANCIAL  STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999 TO A
STOCKHOLDER  UPON  REQUEST.  SUCH  REQUESTS  SHOULD BE DIRECTED TO THE FUND,  BY
WRITING THE FUND AT 700 SW HARRISON STREET,  TOPEKA,  KANSAS  66636-0001,  OR BY
CALLING THE FUND'S TOLL-FREE TELEPHONE NUMBER 1-800-888-2461, EXTENSION 3127.
<PAGE>
   Each  share of the  Fund's  common  stock has a par value of $1.00 per share.
Each share is entitled to one vote and shares of the Fund will be voted together
with respect to Proposal Nos. 1 through 5.

   The  presence,  in person or by  proxy,  of more than 50% of the  outstanding
shares of the Fund will be  sufficient  to establish a quorum for the conduct of
business  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
proposals 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.

   If a proxy represents a broker  "non-vote" (that is, a proxy from a broker or
nominee  indicating  that such a person has not received  instructions  from the
beneficial  owner or  other  person  entitled  to vote  shares  of the Fund on a
particular  matter with respect to which the broker or nominee has discretionary
power) or is marked with an abstention (collectively "abstentions"),  the Fund's
shares  represented  thereby will be considered to be present at the meeting for
purposes  of  determining  the  existence  of a quorum  for the  transaction  of
business.  Abstentions,  however,  will  have the  effect of a "no" vote for the
purpose of obtaining  requisite approval for the proposals  described herein and
any other proposal that may come before the Meeting.

   In the event that a sufficient number of votes to approve a proposal were 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.

                                 PROPOSAL NO. 1
                              ELECTION OF DIRECTORS

   The Board of  Directors  has  proposed a slate of six persons for election as
directors  of the Fund,  each to hold office  until the next  annual  meeting or
until his or her  successor  is duly  elected  and  qualified.  Each  nominee is
currently a director of the Fund and has consented to his or her  nomination and
agreed to serve if elected.  Each director was elected by  stockholders,  except
James R. Schmank,  who was elected by the other  directors on December 10, 1997,
and Maynard F. Oliverius,  who was so elected on February 6, 1998. If any of the
nominees is not available  for election,  the persons named as proxies (or their
substitutes) may vote for other persons in their  discretion.  Management has no
reason to believe that any nominee will be unavailable  for election.

   The  names of the  nominees  to the  Fund's  Board  of  Directors  and  their
respective offices and principal occupations are set forth below.

                    NOMINEES TO THE FUND'S BOARD OF DIRECTORS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                      FUND SHARES BENEFICIALLY OWNED,      ALL OTHER SECURITY FUNDS'
                                                          DIRECTLY OR INDIRECTLY,            SHARES OWNED DIRECTLY
NAME, AGE, ADDRESS,                                          AS OF 11/30/99                      AS OF 11/30/99           DATE FIRST
POSITION ON FUND BOARD                                -------------------------------    -----------------------------     BECAME A
AND PRINCIPAL OCCUPATIONS                              FUND                    SHARES    FUND                   SHARES     DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                     <C>       <C>                    <C>          <C>
DONALD A. CHUBB, JR., 53,                              Growth & Income                   Ultra                               1994
2222 SW 29th Street,                                                                     Equity
Topeka, Kansas 66611,                                                                    Corporate Bond
POSITION ON FUND BOARD: Director of the Fund                                             Cash
PRINCIPAL OCCUPATIONS: Business broker, Griffith &                                       Global
Blair Realtors. Prior to 1997, President, Neon                                           Total Return
Tube Light Company, Inc.                                                                 Select 25
                                                                                         SBL Fund - Series A
                                                                                         SBL Fund - Series B
                                                                                         SBL Fund - Series S
- ------------------------------------------------------------------------------------------------------------------------------------
JOHN D. CLELAND*, 63,                                  Growth & Income                   Equity                              1991
700 SW Harrison Street,                                                                  Cash
Topeka, Kansas 66636-0001,                                                               Value
POSITION ON FUND BOARD: President and Director of                                        Small Company
the Fund                                                                                 Select 25
PRINCIPAL OCCUPATIONS: Senior Vice President and
Managing Member Representative, Security
Management Company, LLC; Senior Vice President,
Security Benefit Group, Inc. and Security Benefit
Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
PENNY A. LUMPKIN, 60,                                  Growth & Income                   Ultra                               1993
3616 Canterbury Town Road,                                                               Equity
Topeka, Kansas 66610,                                                                    Growth
POSITION ON FUND BOARD: Director of the Fund                                             Cash
PRINCIPAL OCCUPATIONS: President, Vivians                                                Municipal Bond
(Corporate Sales); Vice President, Palmer                                                Global
Companies (Wholesalers, Retailers and Developers);                                       Value
Vice President, Bellairre Shopping Center (Leasing                                       SBL Fund - Series B
and Shopping Center Management)                                                          U.S. Government
                                                                                         Corporate Bond
- ------------------------------------------------------------------------------------------------------------------------------------
MARK L. MORRIS, JR., DVM, 65,                          Growth & Income                   Equity                              1991
5500 SW 7th Street,                                                                      Corporate Bond
Topeka, Kansas 66606,
POSITION ON FUND BOARD: Director of the Fund
PRINCIPAL OCCUPATIONS: Retired. Independent
Investor, Morris Co. (Personal Investments)
- ------------------------------------------------------------------------------------------------------------------------------------
MAYNARD F. OLIVERIUS, 56,                              Growth & Income                   Equity                              1998
1500 SW 10th Avenue,                                                                     Cash
Topeka, Kansas 66604,                                                                    SBL Fund - Series A
POSITION ON FUND BOARD: Director of the Fund
PRINCIPAL OCCUPATIONS: President and Chief
Executive Officer, Stormont-Vail Health Care
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES R. SCHMANK*, 46,                                 Growth & Income                   Ultra                               1997
700 SW Harrison Street,                                                                  Equity
Topeka, Kansas 66636-0001,                                                               High Yield
POSITION ON FUND BOARD: Vice President and                                               Global
Director of the Fund                                                                     Select 25
PRINCIPAL OCCUPATIONS: President and Managing                                            Value
Member Representative of Security Management                                             Small Company
Company, LLC; Senior Vice President, Security                                            Cash
Benefit Group, Inc. and Security Benefit Life
Insurance Company
- ----------------------------------------------------------------------------------------------------------
<FN>
*Nominees who are considered  "interested  persons" of Security Management Company, LLC by reason of their respective positions with
 Security Management Company, LLC, the Fund's investment adviser, and Security Distributors, Inc., the Fund's principal underwriter.
</FN>
- ----------------------------------------------------------------------------------------------------------
</TABLE>

   The directors are  responsible  for general  oversight of the Fund's business
and for  assuring  that  the  Fund  is  managed  in the  best  interests  of its
stockholders.  The Board of Directors held six meetings during fiscal year 1999,
and each director standing for reelection attended all of those meetings, except
Mr.  Cleland and Ms.  Lumpkin who have attended  five of the six  meetings.  The
Board of Directors currently has one committee, the Joint Audit Committee, which
also serves as the Nominating Committee.

   The following directors are members of the Fund's Joint Audit Committee:  Ms.
Lumpkin, Chairperson; Dr. Morris; and Mr. Chubb. The Joint Audit Committee holds
at least one regular  meeting each year,  at which time it meets with the Fund's
independent  accountants to review: (1) the services provided;  (2) the findings
of the most recent audit; (3) management's  response to the findings of the most
recent  audit;  (4) the scope of the audit  performed;  and (5) any questions or
concerns  about the Fund's  operations.  The Joint Audit  Committee met twice in
fiscal year 1999. All members of the committee participated in the meetings.

   The Nominating  Committee meets on an as-needed  basis. The committee did not
meet in fiscal  year  1999.  The  purpose  of the  committee  is to  review  and
recommend to the full Board of Directors  candidates for election as independent
directors to fill vacancies on the Fund's Board.  The Nominating  Committee will
consider  written  recommendations  from  stockholders  for  possible  nominees.
Stockholders should submit their written recommendations to the Secretary of the
Fund.

   The Fund's directors,  except Mr. Cleland and Mr. Schmank who are "interested
persons" of the Investment Manager,  receive from the Fund an annual retainer of
$1,667 and a fee of $1,000 per meeting,  plus reasonable  travel costs, for each
meeting of the Board of Directors attended. In addition, those directors who are
members of the Fund's joint audit committee  receive a fee of $1,000 per meeting
and  reasonable  travel  costs for each  meeting of the Fund's  audit  committee
attended.  The meeting fee  (including the audit  committee  meeting) and travel
costs  are paid  proportionately  by each of the 35 funds to which  the  Adviser
provides  investment  advisory  services   (collectively,   the  "Security  Fund
Complex") based on each fund's relative net assets.

   The Fund does not pay any fees to, or reimburse  expenses  of, its  directors
who are considered "interested persons" of the Investment Manager. The aggregate
compensation  paid by the Fund to each of the  directors  during the fiscal year
ended  September  30,1999,  and the aggregate  compensation  paid to each of the
directors during fiscal year 1999 by the Security Fund Complex, are set forth in
the accompanying chart. Each of the directors is a director of each of the other
registered investment companies in the Security Fund Complex.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
                                          PENSION OR RETIREMENT
                          AGGREGATE        BENEFITS ACCRUED AS
                         COMPENSATION     PART OF FUND EXPENSES       ESTIMATED       TOTAL COMPENSATION
                         ------------     ---------------------        ANNUAL         FROM THE SECURITY
NAME OF DIRECTOR         GROWTH AND            GROWTH AND           BENEFITS UPON       FUND COMPLEX,
OF THE FUND              INCOME FUND           INCOME FUND           RETIREMENT        INCLUDING THE FUND
- ---------------------------------------------------------------------------------------------------------
<S>                          <C>                    <C>                  <C>                <C>
Donald A. Chubb, Jr.         $2,249                 $0                   $0                 $27,000
John D. Cleland                   0                  0                    0                       0
Penny A. Lumpkin              2,166                  0                    0                  26,000
Mark L. Morris, Jr.           2,249                  0                    0                  27,000
Maynard Oliverius             2,166                  0                    0                  26,000
James R. Schmank                  0                  0                    0                       0
- ---------------------------------------------------------------------------------------------------------
</TABLE>

                                  REQUIRED VOTE

   In the  election  of  directors,  each  stockholder  is entitled to vote that
number  of  shares  owned as of the  record  date  multiplied  by the  number of
directors  to be  elected.  A  stockholder  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  stockholders of
the Fund is  sufficient  to approve the  election  of a  director.  THE BOARD OF
DIRECTORS  RECOMMENDS  THAT  STOCKHOLDERS  VOTE FOR ALL OF THE  NOMINEES  TO THE
FUND'S BOARD OF DIRECTORS.

                                 PROPOSAL NO. 2
                      SELECTION OF INDEPENDENT ACCOUNTANTS

   The  selection  by the Fund's Board of Directors of the firm of Ernst & Young
LLP as the  independent  accountants for the Fund for the fiscal year 2000 is to
be  submitted  for  ratification  or  rejection  by  stockholders  at the annual
meeting.  The firm of Ernst & Young LLP,  including a predecessor  firm,  Arthur
Young and  Company,  has served the Fund as  independent  accountants  since its
inception.  The  independent  accountants  have no direct or  material  indirect
financial interest in the Fund. Representatives of the firm of Ernst & Young LLP
are not expected to be present at the annual meeting.  Approval of this Proposal
No. 2 requires the affirmative vote of a majority of those shares represented at
the  Meeting  in person or by proxy.  THE  BOARD OF  DIRECTORS  RECOMMENDS  THAT
STOCKHOLDERS VOTE FOR THIS PROPOSAL.

                                 PROPOSAL NO. 3
    TO APPROVE CHANGES TO THE FUNDAMENTAL INVESTMENT LIMITATIONS OF THE FUND

   Certain investment  limitations of the Fund are matters of fundamental policy
and may not be changed  without  the  approval of the Fund's  stockholders.  The
Investment  Manager  has  recommended  to the Board of  Directors  that  certain
fundamental  investment  limitations of the Fund be amended or eliminated as set
forth below.  The Investment  Manager believes that the proposed changes reflect
more modern  investment  practices and will more closely  conform the investment
policies of the Fund to those of other  mutual funds  managed by the  Investment
Manager.  The  changes  will allow the  Investment  Manager to manage the Fund's
investments in a more streamlined and efficient manner.  The Investment  Manager
plans to make  conforming  changes to the  fundamental  investment  policies and
limitations  of the other funds under its  management to further  streamline its
investment and compliance  processes.  The Board of Directors  believes that the
proposal is in the best interests of the Fund's stockholders.

   The Investment Manager believes that increased standardization of fundamental
investment  policies and limitations will promote  operational  efficiencies and
facilitate monitoring of compliance with fundamental  policies.  Adoption of the
revised  limitations,  in some cases, also will give the Fund the flexibility to
change its investment methods in the future without a stockholder vote, provided
that the Board of Directors approves any such change. Set forth below is each of
the proposed changes.  Stockholders have the option to approve all, some or none
of the proposed changes.

                                PROPOSAL NO. 3(A)
    TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING DIVERSIFICATION

   The Fund is currently  subject to a  fundamental  limitation  concerning  the
diversification  of  its  assets  among  issuers,  and  the  Investment  Manager
recommends  a change in the  fundamental  limitation.  The current and  proposed
fundamental investment limitations are set forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                      PROPOSED
- --------------------------------------    --------------------------------------
Not  to  invest  more  than  5% of its    Not  to  invest  more  than  5% of its
total assets in the  securities of any    total assets in the  securities of any
one issuer.                               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.
- --------------------------------------    --------------------------------------

   The  proposed  fundamental  investment  limitation  would  conform the Fund's
investment  limitation to Section 5(b)(1) of the Investment  Company Act of 1940
and  would  allow the Fund to invest a  greater  percentage  of its  assets in a
single issuer.  If the proposed  investment  limitation  were adopted,  the Fund
would be limited,  with respect to 75% of its total assets, to investing no more
than  5% of its  total  assets  in the  securities  of any one  issuer.  No such
limitation  would  apply,  however,  to the  remaining  25% of the Fund's  total
assets.  The  proposed  fundamental  investment  limitation,  if adopted,  could
increase the risk to the Fund by permitting it to invest a greater percentage of
its assets in a single issuer and  correspondingly  to have greater  exposure in
the event of adverse developments with respect to such an issuer.

   The Fund interprets this proposed limitation to require that any positions in
a single  issuer in excess of 5%, in total  must not exceed  25%,  of the Fund's
total assets. For example,  the Fund would not invest 30% of its total assets in
the  securities  of a single  issuer on the basis that 25% was  allocated to the
non-diversified  25% of total assets and 5% was allocated to the diversified 75%
of total assets.

   The Board of Directors believes that adoption of the amended limitation is in
the best interests of stockholders because a standardized fundamental investment
limitation would facilitate  investment compliance efforts and give the Fund the
flexibility  to take a larger  position in the  securities of a single issuer if
the Investment Manager believes that such a position is advisable and consistent
with the  investment  objective and policies of the Fund.  While the Fund has no
present  intention  of taking  large  positions  in the  securities  of a single
issuer, the flexibility to do so may be beneficial to the Fund at a future date.
THE BOARD OF DIRECTORS THEREFORE  UNANIMOUSLY  RECOMMENDS THAT STOCKHOLDERS VOTE
FOR PROPOSAL NO. 3(A).

                                PROPOSAL NO. 3(B)
                 TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION
                  CONCERNING SHARE OWNERSHIP OF ANY ONE ISSUER

   The  Fund  currently  is  subject  to  a  fundamental  investment  limitation
concerning limits on investment in the outstanding  voting securities of any one
issuer,  and the  Investment  Manager  recommends  a change  in the  fundamental
limitation.  The current and proposed fundamental investment limitations are set
forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not to  purchase  more than 10% of the    Not to  purchase a  security  if, as a
outstanding  voting  securities of any    result,  with  respect  to  75% of the
one issuer.                               value of the Fund's total assets, more
                                          than  10%  of the  outstanding  voting
                                          securities of any issuer would be held
                                          by the Fund  (other  than  obligations
                                          issued  or   guaranteed  by  the  U.S.
                                          Government,     its     agencies    or
                                          instrumentalities).
- --------------------------------------    --------------------------------------

   The  proposed  fundamental  investment  limitation  would  conform the Fund's
investment  limitation to Section 5(b)(1) of the Investment  Company Act of 1940
and  would  allow the Fund to invest a  greater  percentage  of its  assets in a
single issuer.  If the proposed  investment  limitation  were adopted,  the Fund
would be limited, with respect to 75% of its total assets, to purchasing no more
than  10% of the  outstanding  voting  securities  of any  one  issuer.  No such
limitation  would  apply,  however,  to the  remaining  25% of the Fund's  total
assets.  The  proposed  fundamental  investment  limitation,  if adopted,  could
increase the risk to the Fund by permitting it to invest a greater percentage of
its assets in a single issuer and  correspondingly  to have greater  exposure in
the event of adverse developments with respect to such an issuer. While the Fund
has no present intention of investing  greater  percentages of its assets in any
single  issuer,  the  flexibility  to do so may be  beneficial  to the Fund at a
future date.

   The Board of Directors believes that adoption of the amended limitation is in
the best interests of stockholders because a standardized fundamental investment
limitation would facilitate  investment compliance efforts and give the Fund the
flexibility  to take a larger  position in the  securities of a single issuer if
the Investment Manager believes that such a position is advisable and consistent
with the  investment  objective and policies of the Fund. THE BOARD OF DIRECTORS
THEREFORE UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL NO. 3(B).

                                PROPOSAL NO. 3(C)
               TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION
             CONCERNING INVESTING FOR CONTROL OF PORTFOLIO COMPANIES

   The  Fund  currently  is  subject  to  a  fundamental  investment  limitation
concerning investing for control of portfolio companies.  The Investment Manager
recommends  eliminating  the  fundamental  limitation  and  replacing it with an
operating  policy  that  could be  changed  by the  directors  without a vote of
stockholders.  The current fundamental  limitation and proposed operating policy
are set forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not to  purchase  securities  for  the    As an operating  policy,  the Fund may
purpose of exercising control over the    not  invest  in   companies   for  the
issuers thereof.                          purpose of  exercising  management  or
                                          control.
- --------------------------------------    --------------------------------------

   Elimination of this fundamental  investment  limitation is unlikely to affect
the Fund's investment techniques as it has no present intention of investing for
control of portfolio companies. The Board of Directors believes that eliminating
this fundamental  limitation and replacing it with an operating policy is in the
best interests of stockholders,  because a standardized  fundamental  investment
limitation  would  facilitate   investment  compliance  efforts.  THE  BOARD  OF
DIRECTORS THEREFORE  UNANIMOUSLY  RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL
NO. 3(C).

                                PROPOSAL NO. 3(D)
     TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING UNDERWRITING

   The  Fund  currently  is  subject  to  a  fundamental  investment  limitation
concerning  underwriting,  and the Investment Manager recommends a change in the
fundamental   limitation.   The  current  and  proposed  fundamental  investment
limitations are set forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not to act as an  underwriter,  either    Not   to   act   as   underwriter   of
directly or indirectly.                   securities issued by others, except to
                                          the  extent   that  the  Fund  may  be
                                          considered an  underwriter  within the
                                          meaning of the  Securities Act of 1933
                                          in  the   disposition   of  restricted
                                          securities.
- --------------------------------------    --------------------------------------

   The primary purpose of the proposed change is to clarify that the Fund is not
prohibited from selling restricted  securities if, as a result of such sale, the
Fund is considered an underwriter  under federal  securities  laws.  Approval of
this  Proposal  may subject the Fund to  additional  risk of  liability  in that
underwriters have heightened  obligations to purchasers in connection with sales
of securities.  The Fund does not intend to invest in restricted securities in a
manner  that would  cause a Fund to be deemed an  underwriter  and, as a result,
consider  the risk to be remote.  A  secondary  purpose of this  Proposal  is to
revise the Fund's fundamental  limitation on underwriting so that it conforms to
a limitation  that is expected to become  standard for all funds  managed by the
Investment Manager. While the proposed change will have no current impact on the
Fund, adoption of the proposed  standardized  fundamental  investment limitation
would  advance  the  goals of  standardization  discussed  above.  THE  BOARD OF
DIRECTORS THEREFORE  UNANIMOUSLY  RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL
NO. 3(D).

                                PROPOSAL NO. 3(E)
       TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING BORROWING

   The  Fund  currently  is  subject  to  a  fundamental  investment  limitation
concerning  borrowing,  and the  Investment  Manager  recommends a change in the
fundamental  investment  limitation and adoption of an operating policy that may
be changed without a vote of stockholders.  The current and proposed fundamental
investment limitations and proposed operating policy are set forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not to borrow money or securities  for    Not to  borrow in excess of 33 1/3% of
any purpose  except to the extent that    the Fund's total assets.
borrowing up to 5% of the Fund's total
assets  is  permitted   for  emergency    As an operating  policy,  the Fund may
purposes,  provided such  borrowing is    not borrow money or securities for any
made  on  a   temporary   basis   from    purposes  except that  borrowing up to
commercial  banks  and is not used for    10% of the Fund's  total  assets  from
investment purposes.                      commercial   banks  is  permitted  for
                                          emergency or temporary purposes.
- --------------------------------------    --------------------------------------

   The primary  purpose of the  proposed  change to the  fundamental  investment
limitation  concerning  borrowing  is to  conform  it to a  limitation  that  is
expected to become standard for all funds managed by the Investment  Manager. If
the proposal is approved, the amended fundamental borrowing limitation could not
be changed without a future vote of stockholders.  The operating policy could be
changed upon the vote of the Board of Directors.

   Adoption of the proposed amendment is not expected to affect the way the Fund
is  managed,  the  investment  performance  of the Fund,  or the  securities  or
instruments in which the Fund invests.

   The increase in the  permissible  level of borrowing would allow the Board of
Directors  to amend  the  operating  policy  in the  future to allow the Fund to
engage in  leveraging.  Leveraging is a speculative  investment  technique  that
consists  of  purchasing   securities  with  borrowed  funds.  There  are  risks
associated  with  purchasing   securities   while  borrowings  are  outstanding,
including a possible reduction of income and increased  fluctuation of net asset
value per share.  Interest  on money  borrowed  is an expense the Fund would not
otherwise  incur, so that it may have little or no net investment  income during
periods of substantial borrowings.  Borrowing for investment therefore increases
both investment opportunity and risk. While the Fund has no current intention of
purchasing  securities  while  borrowings  equal to 5% of its total  assets  are
outstanding,  the flexibility to do so may be beneficial to the Fund at a future
date.

   The  proposed  change  will have no  current  impact  on the  Fund.  However,
adoption  of  a  standardized  fundamental  investment  policy  will  facilitate
investment  compliance efforts and will enable the Fund to respond more promptly
if  circumstances  suggest  such a change in the future.  THE BOARD OF DIRECTORS
THEREFORE UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL NO. 3(E).

                                PROPOSAL NO. 3(F)
        TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING LENDING

   The  Fund  is  currently  subject  to  a  fundamental  investment  limitation
concerning  lending,  and the  Investment  Manager  recommends  a change  in the
fundamental  investment  limitation and adoption of an operating policy that may
be changed without a vote of stockholders.  The current and proposed fundamental
investment limitations and proposed operating policy are set forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not to lend money or securities to any    Not to lend any  security  or make any
person,    corporation,     securities    other loan if, as a result,  more than
dealer,   or  bank,   other  than  the    33 1/3%  of the  Fund's  total  assets
purchase of publicly  distributed debt    would be lent to other parties, except
securities  which  are not  considered    (i) through the  purchase of a portion
loans,  or by  entry  into  repurchase    of an  issue  of  debt  securities  in
agreements.                               accordance    with   its    investment
                                          objective  and  policies,  or  (ii) by
                                          engaging in repurchase agreements with
                                          respect to portfolio securities.

                                          As an operating policy,  the Fund does
                                          not  currently  intend to lend  assets
                                          other   than   securities   to   other
                                          parties.  (This  limitation  does  not
                                          apply to purchases of debt  securities
                                          or to repurchase agreements.)
- --------------------------------------    --------------------------------------

   This proposal if adopted would affect the way in which the Fund is managed in
that it would allow the Fund to engage in securities  lending.  Securities loans
are made to broker-dealers or institutional investors or other persons, pursuant
to agreements  requiring that the loans be continuously secured by collateral at
least equal at all times to the value of the securities lent marked to market on
a daily basis.  The collateral  received would consist of cash, U.S.  government
securities, letters of credit or such other collateral as may be permitted under
the Fund's investment program.  While the securities loans are outstanding,  the
Fund would  continue to receive the equivalent of the interest or dividends paid
by the issuer of the  securities,  as well as interest on the  investment of the
collateral or a fee from the borrower.  The Fund would have a right to call each
loan and obtain the securities within the period of time that coincides with the
normal  settlement  time period for  purchases  and sales of such  securities in
their respective  markets.  The Fund would not have the right to vote securities
while  they are being  lent,  but it would  call a loan in  anticipation  of any
important vote.

   The risks in  lending  portfolio  securities,  as with  other  extensions  of
secured credit,  consist of possible delay in receiving additional collateral or
in the recovery of the  securities or possible loss of rights in the  collateral
should the borrower fail  financially.  Loans would be made only to firms deemed
by the  Investment  Manager to be of good standing and would not be made unless,
in the judgment of the Investment  Manager,  the consideration to be earned from
such loans would justify the risk.

   In addition to the potential benefits of securities lending,  the adoption of
standardized   investment  policies  as  proposed  will  advance  the  goals  of
investment  limitation   standardization.   THE  BOARD  OF  DIRECTORS  THEREFORE
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL NO. 3(F).

                                PROPOSAL NO. 3(G)
          TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
                 SHORT SALES AND MARGIN PURCHASES OF SECURITIES

   The  Fund  currently  is  subject  to  a  fundamental  investment  limitation
concerning  margin  purchases of securities and short sales of  securities.  The
Investment Manager recommends that stockholders  approve the elimination of this
fundamental  investment  limitation.  If the proposal is approved, the Directors
intend  to  replace  the  current  fundamental  investment  limitation  with  an
operating  policy  that could be  changed  without a vote of  stockholders.  The
current fundamental  investment limitation and proposed operating policy are set
forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not to buy  securities  on  margin  or    As an operating policy,  the Fund does
effect short sales of securities.         not    currently    intend   to   sell
                                          securities short, unless the Fund owns
                                          or has the right to obtain  securities
                                          equivalent  in kind and  amount to the
                                          securities  sold short,  and  provided
                                          that transactions in futures contracts
                                          and   options   are  not   deemed   to
                                          constitute  selling  securities short.
                                          In   addition,   the  Fund   does  not
                                          currently     intend    to    purchase
                                          securities on margin,  except that the
                                          Fund  may   obtain   such   short-term
                                          credits  as  are   necessary  for  the
                                          clearance   of    transactions,    and
                                          provided   that  margin   payments  in
                                          connection with futures  contracts and
                                          options on futures contracts shall not
                                          constitute  purchasing  securities  on
                                          margin.
- --------------------------------------    --------------------------------------

   In  a  short  sale,  an  investor  sells  a  borrowed   security  and  has  a
corresponding  obligation to the lender to return the identical security.  In an
investment  technique known as a short sale "against the box," an investor sells
short while owning the same  securities in the same amount,  or having the right
to obtain  equivalent  securities.  The investor  could have the right to obtain
equivalent securities, for example, through its ownership of warrants,  options,
or convertible bonds.

   Margin purchases  involve the purchase of securities with money borrowed from
a broker.  "Margin" is the cash or eligible  securities that the borrower places
with a broker as collateral  against the loan.  The Fund's  current  fundamental
investment  limitation prohibits the Fund from purchasing  securities on margin,
except to obtain such  short-term  credits as may be necessary for the clearance
of transactions.  Policies of the Securities and Exchange  Commission (SEC) also
allow mutual funds to purchase  securities  on margin for initial and  variation
margin  payments  made in  connection  with the  purchase  and  sale of  futures
contracts and options on futures contracts. With these exceptions,  mutual funds
are prohibited  from entering into most types of margin  purchases by applicable
policies of the SEC.  The proposed  non-fundamental  operating  policy  includes
these exceptions.

   Elimination  of  the  Fund's  fundamental  investment  limitation  on  margin
purchases and short sales is unlikely to affect the Fund's investment techniques
at this time. If the proposal is approved, however, the Board of Directors would
be able to change the proposed operating policy in the future, without a vote of
stockholders.  In  the  event  of  a  change  in  state  or  federal  regulatory
requirements,  the Fund may change its investment  practices in the future.  The
Board of Directors believes that efforts to standardize  operating policies will
facilitate the Investment  Manager's  investment  compliance and are in the best
interest  of  stockholders.   THE  BOARD  OF  DIRECTORS  THEREFORE   UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL NO. 3(G).

                                PROPOSAL NO. 3(H)
          TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
             MORTGAGING, PLEDGING OR HYPOTHECATING THE FUND'S ASSETS

   The  Fund  currently  is  subject  to  a  fundamental  investment  limitation
concerning mortgaging,  pledging or hypothecating its assets, and the Investment
Manager recommends that stockholders approve the elimination of this fundamental
investment  limitation.  The current  fundamental  investment  limitation  is as
follows: "Not to mortgage,  pledge or hypothecate any securities or funds of the
Fund other  than as might  become  necessary  to  furnish  bond to  governmental
agencies required for the conduct of the business of the Fund."

   The Investment  Manager  recommends  eliminating this fundamental  limitation
primarily in the interests of making it conform to limitations that are expected
to  become  standard  for all  funds  managed  by the  Investment  Manager.  The
Investment  Manager further  believes that this limitation is inconsistent  with
the  purposes of amending  the  fundamental  investment  limitations  concerning
borrowing and senior securities.  Those proposed limitations,  if adopted, would
enable  the Fund to respond  more  promptly  if  circumstances  with  respect to
borrowing  and  pledging of assets in the future  suggest a change in the Fund's
policies.

   Elimination of this fundamental  investment  limitation is unlikely to affect
the Fund's investment techniques at this time. In the event of a change in state
or federal regulatory requirements,  the Fund may alter its investment practices
in the future.  The Board of  Directors  believes  that  efforts to  standardize
operating   policies  will  facilitate  the  Investment   Manager's   investment
compliance and are in the best interests of stockholders. THE BOARD OF DIRECTORS
THEREFORE UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL NO. 3(H).

                                PROPOSAL NO. 3(I)
               TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION
                  CONCERNING PURCHASING SECURITIES THAT ARE NOT
               TRADED ON AN EXCHANGE OR ACTIVELY OVER-THE-COUNTER

   The  Fund  currently  is  subject  to  a  fundamental  investment  limitation
concerning  purchasing securities that are not traded on an exchange or actively
traded  over-the-counter.  The Investment  Manager  recommends that stockholders
approve  the  elimination  of this  fundamental  investment  limitation.  If the
proposal is approved,  the Directors  intend to replace the current  fundamental
investment  limitation with an operating  policy that could be changed without a
vote of stockholders. The current fundamental investment limitation and proposed
operating policy are set forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not to  purchase  any  security  other    As an operating  policy,  the Fund may
than  securities  listed on a national    not invest  more than 15% of its total
securities  exchange  registered under    assets in illiquid  securities and the
the  Securities  Exchange Act of 1934,    Fund may not  invest  more than 10% of
or actively traded over-the-counter.      its total assets in  securities  which
                                          are restricted as to disposition under
                                          the federal securities laws;  provided
                                          that  the Fund  may  purchase  without
                                          regard to this  limitation  restricted
                                          securities   which  are  eligible  for
                                          resale pursuant to Rule 144A under the
                                          Securities  Act  of  1933  (the  "1933
                                          Act").
- --------------------------------------    --------------------------------------

   The Fund's  current  fundamental  investment  limitation  prohibits or limits
investment  in  securities  that are not  actively  traded.  In the  interest of
conforming the Fund's investment policies to those of other mutual funds managed
by the Investment Manager,  the Board of Directors  recommends  eliminating this
fundamental  investment  limitation  and  replacing it with an operating  policy
concerning  illiquid  and  restricted  securities.  The  purpose of the  current
fundamental  investment  limitation appears to be to limit the Fund's investment
in illiquid  securities.  An illiquid  security is generally  any security  that
cannot be disposed of within  seven days in the  ordinary  course of business at
approximately the amount at which the fund has valued the instrument. Restricted
securities, particularly those that are not eligible for resale pursuant to Rule
144A, are often illiquid.

   Restricted  securities may be sold only in privately negotiated  transactions
or in a public  offering  with respect to which a  registration  statement is in
effect  under the 1933 Act.  Where  registration  is  required,  the Fund may be
obligated to pay all or part of the  registration  expenses,  and a considerable
period of time may elapse  between the time of the decision to sell and the time
the Fund may be  permitted to sell a security  under an  effective  registration
statement.  If, during such a period, adverse market conditions were to develop,
the Fund might obtain a less  favorable  price than prevailed when it decided to
sell.

   The Board of Directors  believes that the proposed operating policy is in the
best  interests  of  stockholders   because  of  the  benefits  of  standardized
limitations and the flexibility to respond more promptly if increased investment
in illiquid or  restricted  securities  would be  beneficial  to the Fund in the
future.  The SEC currently limits a fund's investment in illiquid  securities to
15% of its total assets.

   The Board of Directors proposes to limit investment in restricted  securities
to 10% of its total assets,  provided that there would be no limit on investment
in  securities  that are  eligible for resale  pursuant to Rule 144A.  This rule
permits certain qualified  institutional  buyers,  such as the Fund, to trade in
privately placed securities even though such securities are not registered under
the 1933  Act.  The  Investment  Manager  under  the  direction  of the Board of
Directors  would  determine  whether  securities  purchased  under Rule 144A are
illiquid and therefore  subject to the Fund's  restriction  of investing no more
than 15% of its net  assets in  illiquid  securities.  Increased  investment  in
restricted  securities  could  have the effect of  increasing  the amount of the
Fund's  assets  invested  in  illiquid   securities.   THE  BOARD  OF  DIRECTORS
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL NO. 3(I).

                                PROPOSAL NO. 3(J)
          TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
      INVESTMENT IN COMPANIES WITH LESS THAN THREE YEARS' OPERATING HISTORY

   The  Fund  is  currently  subject  to  a  fundamental  investment  limitation
concerning  investment  in  companies  having a record of less than three years'
continuous  operation,  and the Investment  Manager recommends that stockholders
approve  the  elimination  of this  fundamental  investment  limitation.  If the
proposal is approved,  the Directors  intend to replace the current  fundamental
investment  limitation with an operating  policy that could be changed without a
vote of stockholders. The current fundamental investment limitation and proposed
operating policy are set forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not to  invest in  companies  having a    As an operating  policy,  the Fund may
record  of  less  than  three   years'    not invest in  securities of an issuer
continuous   operation,    which   may    that,  together with any  predecessor,
include the  operations of predecessor    has been in  operation  for less  than
companies.                                three years if, as a result, more than
                                          5% of the  total  assets  of the  Fund
                                          would   then  be   invested   in  such
                                          securities.
- --------------------------------------    --------------------------------------

   Adoption of the proposed  standardized  operating policy would facilitate the
Investment  Manager's  compliance  program and would  enable the Fund to respond
more promptly if purchase of the securities of unseasoned  issuers  becomes more
desirable in the future. THE BOARD OF DIRECTORS THEREFORE UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE FOR PROPOSAL NO. 3(J).

                                PROPOSAL NO. 3(K)
          TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
     PURCHASING SECURITIES OF AN ISSUER IN WHICH THE OFFICERS AND DIRECTORS
          OWN MORE THAN 5% OF THE OUTSTANDING SECURITIES OF SUCH ISSUER

   The  Fund  is  currently  subject  to  a  fundamental  investment  limitation
concerning  purchasing the securities of an issuer if the officers and directors
of the Fund, Underwriter,  or Investment Manager own more than 1/2 of 1% of such
securities, or if all such persons together own more than 5% of such securities.
The Investment Manager  recommends that stockholders  approve the elimination of
this fundamental investment limitation.

   This  limitation  was  originally  adopted  to  address  state or "Blue  Sky"
requirements in connection with the registration of shares of the Fund for sale.
The Fund is no longer  subject  to such  requirements.  The  Investment  Manager
recommends that this fundamental  investment  limitation be eliminated  because,
while it has not  precluded  investments  in the  past,  its  elimination  could
increase the Fund's  flexibility  when choosing  investments in the future.  THE
BOARD OF DIRECTORS THEREFORE  UNANIMOUSLY  RECOMMENDS THAT STOCKHOLDERS VOTE FOR
PROPOSAL NO. 3(K).

                                PROPOSAL NO. 3(L)
               TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION
               CONCERNING INVESTMENT IN OTHER INVESTMENT COMPANIES

   The  Fund  currently  is  subject  to  a  fundamental  investment  limitation
concerning  investment  in  securities of other  investment  companies,  and the
Investment Manager recommends that stockholders  approve the elimination of this
fundamental  investment  limitation.  If the proposal is approved, the Directors
intend  to  replace  the  current  fundamental  investment  limitation  with  an
operating  policy  that could be  changed  without a vote of  stockholders.  The
current fundamental  investment limitation and proposed operating policy are set
forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not to  invest  in the  securities  of    As an operating  policy,  the Fund may
other  investment  companies except in    not,   except  in  connection  with  a
the open market at  ordinary  broker's    merger, consolidation, acquisition, or
commissions.                              reorganization,    invest    in    the
                                          securities    of   other    investment
                                          companies,  except in compliance  with
                                          the Investment Company Act of 1940.
- --------------------------------------    --------------------------------------

   Elimination of the above fundamental limitation is not expected to affect the
Fund's investment practices,  because the Fund's current fundamental  investment
limitation  permits it to invest in shares of other  investment  companies.  The
proposed change, however, would further the efforts of the Board or Directors to
standardize  the  Fund's  fundamental  investment  limitations.   THE  BOARD  OF
DIRECTORS THEREFORE  UNANIMOUSLY  RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL
NO. 3(L).

                                PROPOSAL NO. 3(M)
            TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION
                CONCERNING THE OFFICERS OR DIRECTORS OF THE FUND,
                THE UNDERWRITER OR INVESTMENT MANAGER PURCHASING
                  SHARES OF THE FUND, EXCEPT AT NET ASSET VALUE

   The  Fund  currently  is  subject  to  a  fundamental  investment  limitation
prohibiting  officers and directors of the Fund,  the  Underwriter or Investment
Manager from purchasing  shares of the Fund,  except at current net asset value.
The current  fundamental  investment  limitation  is as  follows:  "Not to allow
officers or directors of the Fund,  Underwriter or Manager to purchase shares of
the Fund except for investment at current net asset value."

   The Investment  Manager  recommends  eliminating this fundamental  limitation
primarily in the interests of making it conform to limitations that are expected
to  become  standard  for all  funds  managed  by the  Investment  Manager.  The
Investment  Manager  further  believes that this  limitation is not necessary as
purchases of the Fund at other than the current net asset value,  next  computed
after receipt of an order to purchase,  are not permitted  under the  Investment
Company  Act of 1940.  As a  result,  eliminating  this  fundamental  investment
limitation is unlikely to affect the Fund's  operations.  The Board of Directors
believes that efforts to  standardize  operating  policies will  facilitate  the
Investment  Manager's  investment  compliance  and are in the best  interests of
stockholders.  THE BOARD OF  DIRECTORS  THEREFORE  UNANIMOUSLY  RECOMMENDS  THAT
STOCKHOLDERS VOTE FOR PROPOSAL NO. 3(M).

                                PROPOSAL NO. 3(N)
                 TO AMEND THE FUNDAMENTAL INVESTMENT LIMITATION
                    CONCERNING BUYING OR SELLING REAL ESTATE,
                       COMMODITIES OR COMMODITY CONTRACTS

   The  Fund  currently  is  subject  to  a  fundamental  investment  limitation
concerning investment in real estate,  commodities and commodity contracts,  and
the  Investment  Manager  recommends  a  change  in the  fundamental  investment
limitation.  The current and proposed fundamental investment limitations are set
forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not to own,  buy or sell real  estate,    Not to  purchase  or sell real  estate
commodities  or  commodity  contracts.    unless   acquired   as  a  result   of
(This  policy  shall not  prevent  the    ownership  of   securities   or  other
Fund from  investing in  securities or    instruments   (but   this   shall  not
other   instruments   backed  by  real    prevent  the Fund from  investment  in
estate or in  securities  of companies    securities or other instruments backed
engaged in the real estate business.)     by  real  estate  or   securities   of
                                          companies  engaged in the real  estate
                                          business).

                                          Not  to  purchase  or  sell   physical
                                          commodities,  except that the Fund may
                                          enter  into  futures   contracts   and
                                          options thereon.
- --------------------------------------    --------------------------------------

   The Fund has interpreted this fundamental  investment limitation to allow the
purchase of securities or other instruments  backed by real estate or securities
of  companies  engaged in the real  estate  business.  The  proposed  investment
limitation makes explicit this interpretation and also specifically  permits the
Fund to sell real estate  acquired as a result of  ownership  of  securities  or
other  instruments.  The Investment  Manager  considers direct ownership of real
estate as a result of  ownership  of  securities  or other  instruments  to be a
remote possibility.

   The  Fund  has  interpreted  the  fundamental  policy  limitation  concerning
commodities  to allow  investment  in financial  futures  contracts  and options
thereon. The proposed amendment of this fundamental policy limitation modernizes
the  language  to  reflect  this  interpretation  but does not change the Fund's
approach to investing in commodities.  The Fund does not intend to engage in the
buying or selling of physical  commodities  such as pork, corn and wheat futures
or related commodity  contracts other than financial  instruments.  THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL NO. 3(N).

                                PROPOSAL NO. 3(O)
               TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION
           CONCERNING INVESTMENT IN PUTS, CALLS, STRADDLES OR SPREADS

   The  Fund  is  currently  subject  to  a  fundamental  investment  limitation
concerning  investment  in puts,  calls,  straddles,  spreads  or a  combination
thereof,  and the Investment  Manager  recommends that stockholders  approve the
elimination  of this  fundamental  investment  limitation.  If the  proposal  is
approved,  the directors  intend to replace the current  fundamental  investment
limitation  with an  operating  policy  that could be changed  without a vote of
stockholders.   The  current  fundamental  investment  limitation  and  proposed
operating policy are set forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not  to   invest   in   puts,   calls,    As an operating  policy,  the Fund may
straddles, spreads, or any combination    buy  and  sell   exchange-traded   and
thereof.                                  over-the-counter put and call options,
                                          including  index  options,  securities
                                          options,  currency options and options
                                          on  futures,  provided  that a call or
                                          put may be  purchased  only  if  after
                                          such  purchase,  the value of all call
                                          and put options  held by the Fund will
                                          not  exceed  5% of  the  Fund's  total
                                          assets.   The  Fund  may  write   only
                                          covered put and call options. The Fund
                                          does not currently intend to engage in
                                          spread or straddle transactions.
- --------------------------------------    --------------------------------------

   A call option on a security gives the purchaser of the option,  in return for
a premium paid to the writer (seller),  the right to buy the underlying security
at the exercise price at any time during the option period. Upon exercise by the
purchaser,  the writer  (seller) of a call option has the obligation to sell the
underlying  security  at the  exercise  price.  When the Fund  purchases  a call
option,  it will pay a premium to the party  writing the option and a commission
to the broker  selling the option.  If the option is exercised by the Fund,  the
amount of the premium and the commission  paid may be greater than the amount of
the  brokerage  commission  that  would be charged  if the  security  were to be
purchased directly.  By writing a call option, the Fund assumes the risk that it
may be required to deliver the  security  having a market  value higher than its
market  value at the time the  option  was  written.  The Fund will  write  call
options  in  order  to  obtain a return  on its  investments  from the  premiums
received and will retain the premiums  whether or not the options are exercised.
Any  decline in the  market  value of the Fund's  portfolio  securities  will be
offset to the extent of the premiums received (net of transaction  costs). If an
option is  exercised,  the  premium  received  on the  option  will  effectively
increase the exercise price.

   The Fund will write only covered call options.  This means that the Fund will
own the security or currency  subject to the option or an option to purchase the
same underlying security or currency,  having an exercise price equal to or less
than the exercise price of the "covered"  option, or will establish and maintain
with its custodian for the term of the option, an account  consisting of cash or
liquid  securities  having a value equal to the fluctuating  market value of the
optioned  securities or currencies.  During the option  period,  the writer of a
call  option has given up the  opportunity  for capital  appreciation  above the
exercise price should the market price of the underlying security increase,  but
has  retained  the risk of loss  should  the  price of the  underlying  security
decline.  Writing  call options  also  involves the risk  relating to the Fund's
ability to close out options it has written.

   A put option on a security  gives the purchaser of the option,  in return for
premium paid to the writer (seller),  the right to sell the underlying  security
at the exercise price at any time during the option period. Upon exercise by the
purchaser,  the  writer of a put  option  has the  obligation  to  purchase  the
underlying  security at the exercise price. The Fund will write only covered put
options,  which means that theFund will maintain in a segregated account cash or
liquid securities in an amount not less than the exercise price or the Fund will
own an option to sell the underlying  security or currency subject to the option
having an exercise  price  equal to or greater  than the  exercise  price of the
"covered" option at all times in which the put option is outstanding. By writing
a put option,  the Fund will assume the risk that it may be required to purchase
the underlying security at a price in excess of its current market value.

   Options can be highly  volatile  and could  result in reduction of the Fund's
total  return,  and the  Fund's  attempt  to use such  investments  for  hedging
purposes may not be successful.  Losses from options could be significant if the
Fund were unable to close out its position due to  distortions  in the market or
lack of liquidity.

   The use of options involves  investment risks and transaction  costs to which
the Fund  would not be  subject  absent the use of  options.  If the  Investment
Manager  seeks to protect the Fund against  potential  adverse  movements in the
securities, currency or interest rate markets using options, and such markets do
not move in a  direction  adverse to the Fund,  the Fund could be left in a less
favorable  position than if such strategies had not been used. Risks inherent in
the use of options include: (a) the risk that interest rates,  securities prices
and currency markets will not move in the directions anticipated;  (b) imperfect
correlation  between  the price of options  and  movements  in the prices of the
securities  or currencies  being hedged;  (c) the fact that skills needed to use
options   strategies  are  different  from  those  needed  to  select  portfolio
securities;  (d) the  possible  absence  of a liquid  secondary  market  for any
particular  instrument  at any time;  and (e) the possible need to defer closing
out certain  hedged  positions  to avoid  adverse tax  consequences.  The Fund's
ability to terminate option positions established in the over-the-counter market
may be more  limited  than in the case of  exchange-traded  options and may also
involve the risk that  securities  dealers  participating  in such  transactions
would fail to meet their obligations to the Fund.

   The Board of Directors has considered the risks associated with investment in
options and believes that the use of options may be beneficial to the Fund under
certain circumstances.  The Board of Directors further believes that adoption of
standardized  operating  policies will  contribute to the overall  objectives of
standardization.  THE BOARD OF DIRECTORS THEREFORE  UNANIMOUSLY  RECOMMENDS THAT
STOCKHOLDERS VOTE FOR PROPOSAL NO. 3(O).

                                PROPOSAL NO. 3(P)
               TO ELIMINATE THE FUNDAMENTAL INVESTMENT LIMITATION
              CONCERNING INVESTMENT IN OIL, GAS, MINERAL LEASES OR
                 OTHER MINERAL EXPLORATION DEVELOPMENT PROGRAMS

   The  Fund  currently  is  subject  to  a  fundamental  investment  limitation
concerning  investment in limited partnerships or similar interests in oil, gas,
mineral  leases  or  mineral  exploration  or  development  programs,   and  the
Investment Manager recommends that stockholders  approve the elimination of this
fundamental  investment  limitation.  If the proposal is approved, the directors
intend  to  replace  the  current  fundamental  investment  limitation  with  an
operating  policy  that could be  changed  without a vote of  stockholders.  The
current fundamental  investment limitation and proposed operating policy are set
forth below.

- --------------------------------------    --------------------------------------
                CURRENT                                  PROPOSED
- --------------------------------------    --------------------------------------
Not to invest in limited  partnerships    As an operating policy,  the Fund does
or  similar  interests  in  oil,  gas,    not currently intend to invest in oil,
mineral   lease,   and  other  mineral    gas,  mineral  leases or other mineral
exploration    development   programs;    exploration or development programs.
provided,  however,  that the Fund may
invest  in  the  securities  of  other
corporations  whose activities include
such exploration and development.
- --------------------------------------    --------------------------------------

   The  proposed  change  would not  currently  affect the Fund.  Adoption  of a
standardized   operating  policy  would,  however,   facilitate  the  Investment
Manager's  compliance efforts and would enable the Fund to respond more promptly
in the future.  THE BOARD OF DIRECTORS  THEREFORE  UNANIMOUSLY  RECOMMENDS  THAT
STOCKHOLDERS VOTE FOR PROPOSAL NO. 3(P).

                                  REQUIRED VOTE

   Each of Proposal  Nos.  3(a) through 3(p) will be adopted with respect to the
Fund if it is approved by the vote of a majority  of  outstanding  shares of the
Fund, as defined in the 1940 Act. A "majority  vote" is defined as the lesser of
(a) a vote of 67% or more of the  Fund  shares  whose  holders  are  present  or
represented  by proxy at the  meeting  if the  holders  of more  than 50% of all
outstanding shares are present in person or represented by proxy at the meeting,
or (b) a vote of more than 50% of all outstanding shares.

   Each change that is approved by stockholders  will become  effective upon the
conclusion of the Meeting and the  investment  limitations  will be as described
above and set forth in  Exhibit  A. For any  change  that is not  approved  by a
majority vote of the Fund shares, the Fund's current investment  limitation,  as
set forth in the applicable  sub-portion of Proposal 3, would remain  unchanged.
The  Board  of  Directors  believes  that  all of the  proposed  changes  to the
fundamental  investment limitations of the Fund, as set forth in Proposal No. 3,
are in the best interests of  stockholders.  THE BOARD OF DIRECTORS  UNANIMOUSLY
RECOMMENDS VOTING FOR ALL OF THE CHANGES SET FORTH IN PROPOSAL NO. 3.

                                 PROPOSAL NO. 4
             APPROVAL OF AN ARRANGEMENT AND NEW INVESTMENT ADVISORY
          CONTRACT THAT WOULD PERMIT SECURITY MANAGEMENT COMPANY, LLC,
            WITH BOARD APPROVAL, TO ENTER INTO OR AMEND SUB-ADVISORY
                     AGREEMENTS WITHOUT STOCKHOLDER APPROVAL

   The Board of Directors of the Fund recommends the approval of an arrangement,
along with a new Investment  Advisory Contract,  that together would permit SMC,
subject to Board approval,  to enter into and/or amend  sub-advisory  agreements
without obtaining the approval of Fund stockholders.

   At this  time,  the Fund does not  utilize  the  services  of a  sub-adviser.
However,  SMC may in the future wish to use one or more  sub-advisers  to manage
all or part of the Fund's assets.  If the proposal were approved,  SMC on behalf
of the Fund,  would be  provided  with  greater  flexibility  in  retaining  the
services  of one or more  sub-advisers,  replacing  sub-advisers  or  materially
amending the terms of a sub-advisory contract.

   Section 15(a) of the 1940 Act requires  that all contracts  pursuant to which
persons  serve as  investment  advisers to  investment  companies be approved by
stockholders. As interpreted, this requirement would apply to the appointment of
sub-advisers  to the Fund,  should SMC and the Board determine to appoint one or
more  sub-advisers  in the future.  In order to obtain  stockholder  approval in
accordance  with  Section  15(a) of the 1940 Act, the Fund would have to prepare
and  distribute  proxy  materials  and hold a special  meeting of  stockholders,
causing  it  to  incur  costs  and  delays  in   implementing   contracts   with
sub-advisers.  The United States Securities and Exchange Commission (the "SEC"),
however,  has  granted  conditional  exemptions  from the  stockholder  approval
requirements.  SMC and the  Fund  have  applied  for such an  exemption.  If the
exemption is granted and the proposal is approved,  any  sub-advisory  agreement
entered into would  continue to require the approval of a majority of the Board,
including a majority of the  Directors who are not  "interested  persons" of the
Fund or SMC  (as  defined  in the  1940  Act).  Thus,  the  Board  could,  if it
determined  it to be in the  best  interests  of the  Fund  and  its  investors,
authorize SMC to hire or replace one or more  sub-advisers,  or change the terms
of sub-advisory agreements without the approval of stockholders.

   The Board has approved the  submission  of an  application  to the SEC for an
order exempting the Fund from the requirement of the 1940 Act that  stockholders
approve sub-advisory agreements or amendments thereto. On November 30, 1999, the
Board met to consider  placing this  proposal on the agenda for the  stockholder
meeting. After consideration of information about the proposal that was provided
by SMC (including the information contained in the exemptive  application),  the
Board concluded that the proposal is reasonable,  fair, and in the best interest
of the Fund and its stockholders.  Accordingly,  the Board unanimously  approved
the  proposal  and voted to recommend  its  approval by  stockholders.  As noted
above,  this  proposal  also  involves  the  consideration  of a new  Investment
Advisory  Contract  between  the Fund and SMC.  Proposal  No.  5, the  Brokerage
Enhanced  Plan,  if  approved  would  also  necessitate  certain  changes to the
existing  Investment  Advisory  Contract.  Refer to Proposal  No. 5 for specific
changes which would be made to the  Investment  Advisory  Contract in connection
with the Brokerage  Enhancement Plan. The new contract  recognizes the fact that
SMC may, with Board approval,  retain the services of one or more  sub-advisers,
replace  sub-advisers  or amend  sub-advisory  contracts as contemplated in this
proposal. The new Investment Advisory Contract does NOT provide for any increase
in the  investment  advisory fee paid to SMC.  The  existing and new  Investment
Advisory  Contracts  are  described  in more  detail  below  under the  headings
"Existing  Investment Advisory Contract" and "New Investment Advisory Contract,"
respectively.

   The Board now  seeks the  approval  of Fund  stockholders  which  would:  (i)
authorize  SMC on behalf of the Fund to enter into  sub-advisory  agreements  or
amend such agreements without obtaining stockholder  approval;  and (ii) approve
the new Investment Advisory Contract between the Fund and SMC. The Fund's use of
the  authority  that would be granted by this  proposal is  contingent  upon the
SEC's issuance of an order permitting the Fund to do so.

                      BOARD CONSIDERATION OF PROPOSAL NO. 4

   At its November 30, 1999 meeting,  the Board considered  various  information
provided  by  SMC,   including  the  information   contained  in  the  exemptive
application submitted to the SEC. Based on this information, the Board concluded
that  approval  of the  proposal  is in the best  interests  of the Fund and its
investors.  Among the things considered by the Board in reaching this conclusion
was that (i) the  proposal  would  permit  the Fund to avoid the  administrative
burdens and delays that would be incurred if the Fund was compelled to conduct a
proxy  solicitation  each time SMC and the Board determine to hire a sub-adviser
or amend a  sub-advisory  agreement;  (ii) to the extent  that SMC  retains  the
services of a sub-adviser  on behalf of the Fund, the  sub-adviser  plays a role
analogous to that of an individual  portfolio  manager,  thus making approval of
the sub-advisory  agreement less important to Fund  stockholders;  and (iii) the
proposal  would  maintain   important   safeguards  and   protections  for  Fund
stockholders.  The  information  considered by the Board is discussed in greater
detail below.

   Currently,  in order to  approve  a  sub-advisory  agreement  (including  the
requirement to re-approve a sub-advisory agreement that has been terminated as a
result of an  "assignment"),  to substitute one sub-adviser  for another,  or to
amend  a  sub-advisory   agreement,   the  Fund  must  obtain  the  approval  of
stockholders.  Seeking this approval imposes administrative burdens on the Fund,
such as calling and holding a stockholder meeting and soliciting stockholders in
order to obtain a quorum  Accordingly,  the Board  considered  that the proposal
would  permit  the Fund to  minimize  these  administrative  burdens  if, in the
future, a sub-adviser was retained.

   In addition, under the current arrangement,  once SMC and the Board determine
that using the services of one or more sub-advisers (or replacing or eliminating
a  sub-adviser,  or amending a  sub-advisory  agreement  once a  sub-adviser  is
retained) is in the best interest of  stockholders,  a delay may occur until the
Fund can obtain the necessary approval of stockholders.  Typically,  it requires
approximately  three  months  to  prepare  a  proxy  solicitation,  send  it  to
stockholders, receive and tabulate the result, and hold the meeting. During this
period,  the Fund  loses the  benefit  of the  addition  or  replacement  of the
sub-adviser,  or the amendment to the  sub-advisory  agreement.  Approval of the
proposal would permit the Board and SMC to reduce or eliminate this delay.

   The second factor  considered by the Board was the fact that, to the extent a
Fund uses the services of one or more sub-advisers, the sub-adviser plays a role
analogous  to that of an  individual  portfolio  manager  employed  by a typical
mutual fund's  investment  adviser,  making approval of sub-advisory  agreements
less  important.  In the case of a mutual fund that does not use a  sub-adviser,
the fund's investment adviser provides  corporate  management and administrative
services,  along with portfolio management services.  Typically,  the investment
adviser  chooses an individual or individuals on its staff to perform the actual
day-to-day  management  of  the  portfolio.   Although  the  investment  adviser
discloses to stockholders the individual's identity, the company is not required
to,  and  does  not,  submit  approval  of  the  choice  of  individual  to  the
stockholders.  Rather,  accountability  lies with the investment adviser itself,
which  has  the   responsibility  of  monitoring  the  individual's   investment
performance  and replacing the individual if doing so is in the best interest of
stockholders.

   Under a structure  where  sub-advisers  are used, the  sub-adviser  takes the
place of the individual  portfolio manager.  The investment adviser has ultimate
accountability for the performance of the sub-advisers. The Board believes that,
should the Fund use the services of a sub-adviser,  stockholders will expect SMC
to select and retain  sub-advisers who successfully  meet the Fund's  objectives
and policies and replace those who do not. The Board further  believes  that, in
such cases,  stockholders  will  determine  to rely on SMC's  ability to select,
monitor, and terminate  sub-advisers just as stockholders have currently elected
to rely upon SMC to select  individual  portfolio  managers  and analysts on its
staff and supervise them accordingly.

   The third  factor  considered  by the Board was that the  proposal  preserves
certain  protections  and  safeguards  for the  Fund and its  stockholders.  For
example,  although the  proposal  would  authorize  SMC on behalf of the Fund to
enter  into or amend  sub-advisory  agreements,  any  change  in the  investment
advisory  contract  between the Fund and SMC, or the  replacement of SMC itself,
would  continue  to  require  approval  of  Fund   stockholders.   In  addition,
stockholders  would  receive the same  information  about  sub-advisers  as they
currently would. In the event SMC, with the approval of the Board, determines to
use the services of a sub-adviser or replace a sub-adviser,  stockholders  would
receive,  within  ninety  days of the  change,  the same  information  about the
sub-adviser and  sub-advisory  agreement they would receive in a proxy statement
if their approval were required.

                                 APPROVAL BY SEC

   As noted above,  the Board has approved the  submission of an  application to
the SEC for an order of exemption from certain  requirements  of the 1940 Act in
order  to  permit  the  Fund  to use  the  authority  to  enter  into  or  amend
sub-advisory  agreements  as  contemplated  by  this  proposal.  Any use of that
authority is contingent  upon  obtaining  the requested  order from the SEC. The
application  for  exemption  contains  conditions  to which the  order  would be
subject.  The conditions are set forth in Exhibit B. It is possible that the SEC
may require certain changes to the application or impose  additional  conditions
prior to granting  the order.  The Fund will agree to such  changes if the Board
and  SMC  determine  that  it is in the  best  interests  of the  Fund  and  its
stockholders  to do so. It is also possible that the SEC may refuse to grant the
order entirely,  although the SEC has granted similar exemptions to other mutual
fund companies under similar  circumstances in the past. In that case, the Board
will take what further  actions it deems to be in the best interests of the Fund
and its stockholders.

                                  REQUIRED VOTE

   The  proposal  will be adopted  with respect to the Fund if it is approved by
the vote of a majority of outstanding  shares, as defined in the 1940 Act, which
is the  lesser  of (a) a vote of 67% or more of the  shares  whose  holders  are
present or  represented  by proxy at the meeting if the holders of more than 50%
of all  outstanding  shares are present in person or represented by proxy at the
meeting,  or (b) a vote of more than 50% of all outstanding shares. THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL NO. 4.

                      EXISTING INVESTMENT ADVISORY CONTRACT

   SMC currently  serves as the  investment  adviser to the Fund pursuant to the
terms of an Investment  Advisory  Contract dated March 31, 1989, as amended (the
"Existing  Contract").  The Existing  Contract was last approved by the Board of
Directors  of the  Fund on  November  30,  1999 and was  last  approved  by Fund
stockholders on March 29, 1989. The Existing  Contract has not been submitted to
stockholders for approval since that date. Unless superseded by the proposed new
Investment  Advisory  Contract,  in  connection  with  either  this  Proposal or
Proposal No. 5, the Existing  Contract  will continue in effect until January 1,
2001,  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 Existing Contract,  SMC furnishes the Fund with investment research
and  advice  and an  investment  program.  In  addition,  SMC  provides  for the
compilation and maintenance of records relating to its duties as required by the
rules and  regulations  of the SEC.  SMC also  provides  the Fund  with  general
administrative,   fund  accounting,  transfer  agency  and  dividend  disbursing
services,  as well as most other  services the Fund may require such as services
of  independent  accountants,  legal counsel,  custodial  services and printing.
Under the terms of the Existing  Contract,  SMC is not subject to any  liability
for any errors of judgment or mistake of law or for any loss sustained by reason
of the adoption of any investment  policy so long as such  recommendation  shall
have  been  made  with due  care  and in good  faith.  Nothing  in the  Existing
Contract,  however,  shall  protect SMC against any liability to the Fund or its
stockholders 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.

   SMC pays its  expenses  in  connection  with  providing  investment  advisory
services to the Fund under the Existing  Contract.  SMC has also agreed that, if
the  total  annual  expenses  of  the  Fund,   exclusive  of  interest,   taxes,
distribution fees paid under the Fund's Class B and Class C distribution  plans,
brokerage fees and extraordinary  expenses,  but inclusive of its own investment
advisory fee, exceeds any expense  limitation imposed by state securities law or
regulation in any state in which shares are offered,  SMC will contribute to the
Fund such funds or waive such  portion of its fee as may be  necessary to insure
that the annual expenses of the Fund will not exceed any such limitation.

   For its services under the Existing Contract,  SMC receives from the Fund, on
an annual  basis,  a fee equal to 2% of the first $10 million of the average net
assets,  1.5% of the next $20  million of the  average  net assets and 1% of the
remaining average net assets of the Fund,  determined daily and payable monthly.
Under  the  Existing  Contract,  SMC  received  from the Fund  advisory  fees of
$1,101,276.

   The Existing  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 the Fund, or by SMC. The
Existing Contract is terminated automatically in the event of its assignment (as
such term is defined in the Investment Company Act of 1940).

                      PROPOSED INVESTMENT ADVISORY CONTRACT

   SMC  proposes  to enter into a new  Investment  Advisory  Contract  (the "New
Contract")  with the Fund.  The form of the New  Contract is attached  hereto as
Exhibit C. The form of the New  Contract was proposed by SMC and was approved on
November 30, 1999,  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). Other than the provision relating to sub-advisory arrangements,
and the  provision  relating to the ability of SMC to place the Fund's  purchase
and sale of portfolio securities with SMC's broker/dealer affiliate as discussed
in connection with Proposal No. 5, there are no material differences between the
Existing Contract and the New Contract. In particular, the New Contract does NOT
provide  for any  increase  in the  investment  advisory  fee paid to SMC. It is
expected  that the New  Contract  will become  effective  on January  27,  2000,
provided  that on the  Meeting  date it is  approved  by a majority  vote of the
holders of the outstanding  voting  securities of the Fund. If Proposal No. 4 is
approved by stockholders,  but Proposal No. 5 is not approved,  the New Contract
will be  implemented  without the provision  allowing SMC to place  purchase and
sale transactions of portfolio securities with its affiliated broker-dealer.  If
Proposal No. 4 is not approved, but Proposal No. 5 is approved, the New Contract
without the provision relating to sub-advisers,  but with the provision allowing
SMC to place securities  transactions with its affiliated  broker-dealer will be
implemented. If neither Proposal is adopted, the Existing Contract will continue
in effect in accordance with its terms.

   In approving the New Contract,  and in recommending that stockholders approve
the New  Contract,  the Board  considered  such factors as it deemed  reasonably
necessary and appropriate,  including (1) the nature,  extent and quality of the
services  expected to be provided to the Fund by SMC; (2) SMC's past  investment
performance  with respect to the Fund;  (3) the costs of services to be provided
by SMC;  (4) the fact that the  compensation  payable  to SMC by the Fund is the
same under the New  Contract  as it is under the  Existing  Contract;  (5) other
sources  of  revenue  accruing  to SMC and its  affiliates  as a  result  of its
relationship with the Fund, including any intangible benefits that accrue to SMC
and its  affiliates;  (6) the Fund's expenses  compared to other funds;  and (7)
such other factors as the Board deemed relevant.  The Board gave equal weight to
each of the above factors when considering  approval of the New Contract.  Based
on the  considerations  above,  the Board determined that the New Contract is in
the best interests of the Fund and its stockholders.

          MORE INFORMATION ABOUT THE INVESTMENT MANAGER AND DISTRIBUTOR

   Security Distributors, Inc. ("SDI") is principal underwriter of the Fund. SDI
is a wholly-owned  subsidiary of Security Benefit Group, Inc. ("SBG"), a holding
company wholly owned by Security Benefit Life Insurance Company ("SBL").  SMC is
a limited  liability  company  owned by its members,  SBL and SBG. SBL is wholly
owned by Security Benefit Corp.  (except for shares held by the Directors of SBL
as  required  by Kansas  law) and  Security  Benefit  Corp.  is wholly  owned by
Security  Benefit Mutual Holding  Company.  The address of each of the foregoing
companies is 700 SW Harrison Street,  Topeka, Kansas 66636-0001.  For the fiscal
year  ended  September  30,  1999,  the Fund paid  $__________  in Class A sales
commissions to SDI.

   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:

                         EXECUTIVE OFFICERS OF THE FUND

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, AGE AND ADDRESS*          PRINCIPAL OCCUPATION                                  POSITION WITH SMC          POSITION WITH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                                                   <C>                        <C>
James R. Schmank, 46**          President and Managing Member Representative,         President and Managing     Vice President
                                SMC; Senior Vice President, Security Benefit          Member Representative      and Director
                                Group, Inc. and Security Benefit Life Insurance
                                Company
- ------------------------------------------------------------------------------------------------------------------------------------
John D. Cleland, 63             Senior Vice President and Managing Member             Senior Vice President      President and
                                Representative, SMC; Senior Vice President,           and Managing Member        Director
                                Security Benefit Group, Inc. and Security Benefit     Representative
                                Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas A. Swank, 39             Senior Vice President and Portfolio Manager, SMC;     Senior Vice President      Vice President
                                Senior Vice President, Security Benefit Group,        and Portfolio Manager
                                Inc. and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Amy J. Lee, 38                  Secretary, SMC; Vice President, Associate General     Secretary                  Secretary
                                Counsel and Assistant Secretary, Security Benefit
                                Group, Inc. and Security Benefit Life Insurance
                                Company
- ------------------------------------------------------------------------------------------------------------------------------------
Steven M. Bowser, 39            Second Vice President and Portfolio Manager, SMC;     Second Vice President      Vice President
                                Second Vice President, Security Benefit Group,        and Portfolio Manager
                                Inc. and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
David Eshnaur, 38               Assistant Vice President and Portfolio Manager,       Assistant Vice             Vice President
                                SMC; Assistant Vice President, Security Benefit       President and
                                Group, Inc. and Security Benefit Life Insurance       Portfolio Manager
                                Company
- ------------------------------------------------------------------------------------------------------------------------------------
Brenda M. Harwood, 35           Assistant Vice President and Treasurer, SMC;          Assistant Vice             Treasurer
                                Assistant Vice President, Security Benefit Group,     President and Treasurer
                                Inc. and Security Benefit Life Insurance Company
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher D.                  Assistant Secretary, SMC; Assistant Vice              Assistant Secretary        Assistant Secretary
Swickard, 34                    President and Assistant Counsel, Security Benefit
                                Group, Inc. and Security Benefit Life Insurance
                                Company
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
 *All located at 700 SW Harrison Street, Topeka, KS 66636-0001 unless otherwise noted.
**Principal executive officer
</FN>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

   SMC acts as  investment  adviser  for  another  mutual  fund with  investment
objectives similar to the investment  objectives of the Fund. Set forth below is
the name of the similar  mutual fund  information  concerning the similar funds'
net assets as of November  30, 1999 the fees paid to SMC for its services to the
similar  mutual fund and  information  concerning  certain  expense caps for the
similar mutual fund.

        ---------------------------------------------------------------
        NAME OF FUND SIMILAR                          ANNUAL RATE OF
         TO SECURITY GROWTH      NET ASSETS OF       COMPENSATION FOR
          AND INCOME FUND        SIMILAR FUND          SIMILAR FUND
        ---------------------------------------------------------------
        SBL Fund, Series E         $________       0.___% of net assets
        ---------------------------------------------------------------

   For the mutual  fund that is  similar to the  Security  Ultra  Fund,  SMC has
agreed  that if the total  annual  expenses of the similar  fund,  exclusive  of
interest,  taxes,  brokerage fees and extraordinary  expenses,  but inclusive of
SMC's own investment  advisory fee,  exceeds any expense  limitation  imposed by
state  securities  law or  regulation  in any state in which the similar fund is
offered,  SMC will  contribute  to the similar fund or waive such portion of its
fee as may be necessary  to insure that the annual  expenses of the similar fund
will not exceed any such limitation.

                 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

   The following  chart shows the shares of common stock of Security  Growth and
Income Fund beneficially owned by directors and executive officers of the Fund.

         --------------------------------------------------------------
         NUMBER OF SHARES BENEFICIALLY OWNED AS
         OF NOVEMBER 30, 1999 BY ALL DIRECTORS
           AND EXECUTIVE OFFICERS AS A GROUP        PERCENTAGE OF CLASS
         --------------------------------------------------------------
                CLASS A          CLASS B            CLASS A     CLASS B
                _______          _______            ______%     ______%
                _______          _______            ______%     ______%
         --------------------------------------------------------------
         *No  director  or  "named  executive   officer"  of  the  Fund
          beneficially  owned any shares of common stock of the Fund as
          of November 30, 1999, except as shown in the above chart.
         --------------------------------------------------------------

                                 PROPOSAL NO. 5
              TO APPROVE OR DISAPPROVE A BROKERAGE ENHANCEMENT PLAN
             PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT
                 OF 1940, AND A NEW INVESTMENT ADVISORY CONTRACT
                THAT WOULD PERMIT THE IMPLEMENTATION OF THE PLAN.

            INTRODUCTION AND RECOMMENDATION OF THE BOARD OF DIRECTORS

   At a meeting  of the Board of  Directors  of the Fund (the  "Board")  held on
November 30, 1999,  the Board,  including the Directors who are not  "interested
persons"  of the Fund (as  defined in the  Investment  Company Act of 1940) (the
"Independent  Directors") and who have no direct or indirect  financial interest
in the operation of the Plan, unanimously voted to the Plan and a new investment
advisory contract that would permit the implementation of the Plan. The Plan, is
intended to assist in promoting  the sales of the Fund's shares by providing the
Fund's distributor, Security Distributors, Inc. (the "Distributor") with further
resources.  The Board  recommends that the  stockholders of the Fund approve the
Plan. A copy of the Plan may be found in Exhibit D.

                             DESCRIPTION OF THE PLAN

   Under the Plan, the Fund would not incur any new fees or charges. In summary,
the Plan would  authorize  the Fund to place  orders for the purchase or sale of
portfolio  securities or other assets with: (i) broker-dealers  that have agreed
to direct a portion of their brokerage commissions to the Distributor,  or other
introducing brokers ("Brokerage Payments") to be used to finance activities that
are  primarily  intended  to  result  in the  sale  of  Fund  shares;  and  (ii)
broker-dealers  that, in addition to executing the trade, will provide brokerage
credits,  benefits or other services ("Brokerage Credits") to be used to promote
the  distribution  of Fund shares.  Under the Plan, the Fund would not incur any
new fees or charges.  The  Distributor,  an affiliate  of SMC, is the  principal
underwriter of the Fund.

   Under  the Plan,  the  Distributor  would be  authorized  to direct  that the
Investment Manager or a Sub-Adviser,  if any, subject to the requirement to seek
best price and execution,  effect brokerage transactions in portfolio securities
through broker-dealers in a manner that will help promote the sale of the Fund's
shares.  It is  anticipated  that  activities or services which will be procured
through the  expenditure  of  Brokerage  Payments  and  Brokerage  Credits  will
include:

*  Developing,  preparing,  printing,  and  mailing  of  advertisements,   sales
   literature and other promotional  material  describing and/or relating to the
   Fund.

*  Printing  and  mailing  of  Fund   prospectuses,   statements  of  additional
   information, any supplements thereto and shareholder reports for existing and
   prospective stockholders.

*  Holding or participating  in seminars and sales meetings  designed to promote
   the distribution of shares of the Fund,  including  materials intended either
   for broker-dealer only use or for retail use.

*  Providing  information  about  the  Fund,  or  mutual  funds in  general,  to
   registered representatives of broker-dealers.

*  Providing  assistance to broker-dealers  that are conducting due diligence on
   the Fund.

*  Payment of Marketing Fees requested by broker-dealers  who sell shares of the
   Fund.

*  Obtaining  information and providing  explanations to stockholders  regarding
   the Fund's  investments  and policies and other  information  about the Fund,
   including the performance of the Fund.

*  Training sales personnel regarding sales of the Fund.

*  Personal service and/or maintenance of stockholder accounts.

*  Payment of commissions to broker-dealers who sell shares of the Fund.

*  Financing  any other  activity that is intended to result in the sale of Fund
   shares.

   The  Distributor  will be obligated to use all of the Brokerage  Payments and
Brokerage Credits generated under the Plan for distribution expenses, except for
a  small  amount  which  may  be  used  to  defray  the  costs  associated  with
implementing  the  Plan,  including  the  Distributor's  costs  associated  with
becoming and acting as an introducing broker-dealer under the Plan. Accordingly,
the  Distributor  will not make any  profit  from  the  operation  of the  Plan.
However,  the  Distributor  could  indirectly  benefit  from  the  Plan  in that
Brokerage  Payments  and  Brokerage  Credits  generated  under the Plan may help
defray, in whole or in part,  distribution  expenses that may otherwise be borne
by the Distributor in distributing the Fund.

   The  Distributor,  on behalf of the Fund,  may take  appropriate  actions  to
effect the purposes of the Plan,  including,  but not limited to,  directing the
Investment  Manager or a Sub-Adviser,  if any, to allocate  transactions for the
purchase or sale of portfolio securities to particular broker-dealers, including
the Distributor or other affiliated  broker-dealers,  in the manner described in
the Plan. The Distributor does not currently provide brokerage services,  but in
connection  with the  implementation  of the Plan is  taking  steps to become an
introducing  broker.  When directing the Investment Manager to allocate purchase
or sale transactions to broker-dealers under the Plan, the Fund will continue to
be subject to those  standards of best price and best execution set forth in the
Fund's registration statement.

   The Plan requires that it be approved by a vote of at least a majority of the
outstanding  voting  securities  of the Fund.  The Plan also provides that it is
subject to an annual renewal by the Board,  including the Independent  Directors
who do not have any direct or indirect  financial  interest in the  operation of
the Plan (the "Plan  Directors").  The Plan also provides  that the  Distributor
provide  the Board with a written  report of  securities  transactions  directed
under the Plan,  currently on a quarterly  basis.  The Plan may be terminated at
any time by a vote of the Board, by the vote of a majority of the Plan Directors
or, by a vote of a majority of the  outstanding  voting  securities of the Fund.
All material Plan  amendments  must be approved by a majority vote of the Board,
including a majority of the Plan Directors.

                         BOARD CONSIDERATION OF THE PLAN

   The Board,  including  all of the Plan  Directors,  have voted to approve the
Plan and to recommend to  stockholders  that they vote to approve the Plan.  The
Board has  determined  that adoption of the Plan is in the best interests of the
Fund and its  stockholders  and that there is a reasonable  likelihood  that the
Plan will benefit the Fund and its stockholders. In making these determinations,
the Board  considered  a number of factors.  The Board noted that the Plan would
help promote the sale of the Fund's  shares  without the Fund bearing any direct
additional  expenses of the type normally associated with distribution plans for
mutual  funds.  Moreover,  the Board  considered  that the Fund will continue to
incur expenses for securities transactions, including commissions, regardless of
whether the Plan is adopted. In general,  apart from the execution provided, the
brokerage  expenses  incurred by the Fund currently do not directly  benefit the
Fund,  except to the extent that executing  brokers provide research services to
the  Investment  Manager.  Under  the  Plan,  the Fund  could  benefit  from its
brokerage if it helps generate increased assets.

   The  Board  also  considered  that the Plan  could  help the  Distributor  to
maintain or enhance  the  distribution  system in place for the Fund.  The Board
considered a report from the Investment Manager that  implementation of the Plan
is not likely to increase the  brokerage  expenses of the Fund.  The Board noted
that  further  promotion  of the Fund could  result in an increase in the Fund's
assets,  thereby  promoting greater economies of scale and decreasing the Fund's
per-share operating expenses.

   The Board also considered the benefits of the Plan to the Investment  Manager
and the Distributor. In particular, the Board considered that an increase in the
Fund's assets would increase the advisory fees paid to the  Investment  Manager,
and that payment of distribution  expenses with Brokerage Payments and Brokerage
Credits  could reduce the need for the  Distributor  to pay such expenses out of
its own resources.

                        THE INVESTMENT ADVISORY CONTRACT

   The  successful  implementation  of the Plan as recommended by the Board also
necessitates certain changes to the Fund's Investment Advisory Contract with the
Investment  Manager.  Moreover,  as noted in connection  with the  discussion of
Proposal No. 4, that Proposal also requires that certain  changes be made to the
Investment Advisory Contract. For a discussion of the Existing Contract, the New
Contract,  the Investment  Manager and  Distributor,  refer to Proposal No. 4. A
form of the New Contract is attached hereto as Exhibit C.

   The  Existing  Contract  contains a provision  which  provides  that,  if the
Investment  Manager or any  affiliate  (which  would  include  the  Distributor)
receives  any cash  credits,  commissions  or  tender  fees in  connection  with
transactions  in portfolio  securities of the Fund, the Investment  Manager must
immediately  pay such  amounts  to the Fund in cash or as a credit  against  the
Investment  Manager's  fee.  As noted  above,  under the terms of the Plan,  the
Distributor  may  receive  brokerage  commissions  as an  introducing  broker in
connection  with the Fund's  portfolio  transactions.  Accordingly,  in order to
permit  the Plan to operate in the manner  contemplated,  the  provision  of the
Existing  Contract  stating that commissions must be paid to the Fund or used to
reduce the  advisory  fee,  must be removed.  If  Proposal  No. 5 is approved by
stockholders,  the New Contract with this provision omitted will be adopted.  If
Proposal No. 5 is not approved by stockholders,  but Proposal No. 4 is approved,
the New Contract will be adopted, but the above-referenced provision will remain
a part of the New Contract. If neither Proposal is approved by stockholders, the
Existing  Contract will continue in effect  according to its terms. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR PROPOSAL NO. 5.

                                  REQUIRED VOTE

   Approval  of the Plan  requires  the vote of a  majority  of the  outstanding
shares of the Fund that are  eligible to vote at the  meeting.  For  purposes of
this proposal, majority means the lesser of (a) 67% or more of the shares of the
Fund  present  at the  meeting,  if 50% or more of the  shares  of the  Fund are
represented in person or by proxy; or (b) 50% or more of the shares of the Fund.

                              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.

                                  OTHER MATTERS

   The audited  financial  statements of the Fund are found in the Annual Report
for the fiscal year ended September 30, 1999.

   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
                                                Security Growth and Income Fund,
                                                                      AMY J. LEE
                                                                       Secretary
<PAGE>
                                    EXHIBIT A

            PROPOSED FUNDAMENTAL INVESTMENT LIMITATIONS FOR SECURITY
                             GROWTH AND INCOME FUND

1.  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.  Not to purchase a security if, as a result, with respect to 75% of the value
    of the  Fund's  total  assets,  more  than  10% of  the  outstanding  voting
    securities  of any issuer would be held by the Fund (other than  obligations
    issued   or   guaranteed   by  the  U.S.   Government,   its   agencies   or
    instrumentalities).

3.  Not to act as  underwriter  of  securities  issued by others,  except to the
    extent that the Fund may be considered an underwriter  within the meaning of
    the Securities Act of 1933 in the disposition of restricted securities.

4.  Not to borrow in excess of 33 1/3% of the Fund's total assets.

5.  Not to lend any  security or make any other loan if, as a result,  more than
    33 1/3% of the Fund's total assets  would be lent to other  parties,  except
    (i) through  the  purchase  of a portion of an issue of debt  securities  in
    accordance with its investment  objective and policies,  or (ii) by engaging
    in repurchase agreements with respect to portfolio securities.

6.  Not to purchase or sell real estate unless acquired as a result of ownership
    of securities or other instruments (but this shall not prevent the Fund from
    investment  in  securities  or other  instruments  backed by real  estate or
    securities of companies engaged in the real estate business).

    Not to purchase or sell physical commodities, except that the Fund may enter
    into futures contracts and options thereon.
<PAGE>
                                    EXHIBIT B

               CONDITIONS PROPOSED BY THE FUND AND SMC TO THE SEC
                AS PART OF THEIR APPLICATION FOR EXEMPTIVE RELIEF

1.  No  Fund  will  enter  into  a  subadvisory  agreement  with  an  Affiliated
    Subadviser  without such  agreement,  including the  compensation to be paid
    thereunder,  being approved by the shareholders of the Fund (or, if the Fund
    serves as a funding  medium for any  sub-account  of a  registered  separate
    account,  then pursuant to voting  instructions  by the  unitholders  of the
    sub-account).

2.  At all  times,  a majority  of each  Funds'  Board  will be persons  who are
    Independent  Directors,  and the nomination of new or additional Independent
    Directors  will  be at  the  discretion  of  the  then-existing  Independent
    Directors.

3.  When a change  of  Subadviser  is  proposed  for a Fund  with an  Affiliated
    Subadviser,  the  Fund's  Board,  including  a majority  of the  Independent
    Directors,  will make a separate  finding,  reflected  in the  Fund's  Board
    minutes, that such change of Subadviser is in the best interests of the Fund
    and its  shareholders  (or, if the Fund  serves as a funding  medium for any
    sub-account of a registered  separate account,  in the best interests of the
    Fund and the  unitholders of any  sub-account)  and that the change does not
    involve a conflict of interest from which SMC or the  Affiliated  Subadviser
    derives an inappropriate advantage.

4.  SMC  will  provide  management  services  to the  Funds,  including  overall
    supervisory responsibility for the general management and investment of each
    Fund,  and,  subject to review and approval by the  applicable  Fund's Board
    will (a) set each Fund's overall investment strategies; (b) evaluate, select
    and recommend  Subadvisers to manage all or a part of a Fund's  assets;  (c)
    when  appropriate,  allocate and  reallocate a Fund's assets among  multiple
    Subadvisers;   (d)  monitor  and  evaluate  the  investment  performance  of
    Subadvisers; and (e) implement procedures reasonably designed to ensure that
    the  Subadvisers  comply with the  relevant  Fund's  investment  objectives,
    policies, and restrictions.

5.  Within  90 days  of the  hiring  of any new  Subadviser,  SMC  will  furnish
    shareholders (or, if the Fund serves as a funding medium for any sub-account
    of a registered  separate account,  SMC will furnish the unit holders of the
    sub-account) with respect to the appropriate Fund with all information about
    the new  Subadviser  that  would  be  included  in a proxy  statement.  Such
    information  will  include  any  changes  caused  by the  addition  of a new
    Subadviser.  To meet this condition,  SMC will provide  shareholders (or, if
    the Fund  serves as a funding  medium for any  sub-account  of a  registered
    separate account,  then by providing unitholders of the sub-account) with an
    information  statement  meeting the requirements of Regulation 14C, Schedule
    14C, and Item 22 of Schedule 14A under the Securities Exchange Act of 1934.

6.  Any Fund relying on the requested relief will disclose in its prospectus the
    existence,  substance  and  effect of any  order  granted  pursuant  to this
    application.  In  addition,  any such Fund will hold itself out as employing
    the management  structure described in the application.  The prospectus will
    prominently  disclose  that SMC has ultimate  responsibility  to oversee the
    Subadvisers and recommend their hiring, termination, and replacement.

7.  Before a Fund may rely on the order, the operation of the Fund in the manner
    described  in the  application  will be approved by a majority of the Fund's
    outstanding  voting  securities  (or, if the Fund serves as a funding medium
    for any  sub-account of a registered  separate  account,  pursuant to voting
    instructions provided by the unitholders of the sub-account),  as defined in
    the 1940 Act,  or in the case of a new Fund whose  public  shareholders  (or
    variable  contract owners through a separate account) purchase shares on the
    basis  of  a  prospectus(es)   containing  the  disclosure  contemplated  by
    Condition 6 above, by the sole initial  shareholder(s)  before the shares of
    such Fund are offered to the public (or the variable contract owners through
    a separate account).
<PAGE>
                                    EXHIBIT C

                  INVESTMENT MANAGEMENT AND SERVICES AGREEMENT

   This Agreement,  made and entered into this 27th day of January, 2000, by and
between  SECURITY  GROWTH AND INCOME  FUND,  a Kansas  corporation  (hereinafter
referred to as the  "Fund"),  and  SECURITY  MANAGEMENT  COMPANY,  LLC, a Kansas
limited liability company (hereinafter referred to as "SMC").

   WITNESSETH:

   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,  SMC is willing to provide investment  research and advice,  general
administrative,  fund  accounting,  transfer  agency,  and  dividend  disbursing
services to the Fund on the terms and  conditions  hereinafter  set forth and to
arrange for the  provision  of all other  services  (except  for those  services
specifically  excluded  in  this  Agreement)  required  by the  Fund,  including
custodial, legal, auditing and printing;

   NOW THEREFORE,  in consideration  of the premises and mutual  agreements made
herein, the parties agree as follows:

   1.  EMPLOYMENT  OF SMC. The Fund hereby  employs SMC to (a) 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  described
herein;  (b) to provide the Fund with general  administrative,  fund accounting,
transfer agency,  and dividend  disbursing  services  described and set forth in
Schedule A attached  hereto and made a part of this Agreement by reference;  and
(c) to arrange for, monitor,  and bear the expense of, the provision to the Fund
of all  other  services  required  by the Fund,  including  but not  limited  to
services of  independent  accountants,  legal  counsel,  custodial  services and
printing. SMC may, in accordance with all applicable legal requirements,  engage
the services of other persons or entities,  regardless of any  affiliation  with
SMC,  to  provide  services  to the Fund  under  this  Agreement.  SMC 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 and shall use  reasonable  care in selecting
and monitoring the  performance of third parties,  who perform  services for the
Fund. SMC shall not guarantee the performance of such persons.

   SMC  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 SMC. SMC shall pay all expenses in  connection  with the
   performance  of its services  under this  Agreement,  including  all fees and
   charges of third parties providing  services to the Fund, whether or not such
   expenses are billed to SMC or the Fund, except as otherwise provided herein.

       (b)  EXPENSES OF THE FUND.  Anything in this  Agreement  to the  contrary
   notwithstanding,  the Fund shall pay or reimburse SMC for the payment of, the
   following  described  expenses of the Fund whether or not billed to the Fund,
   SMC 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;

              (v)  distribution  fees paid under the Fund's Class B Distribution
       Plan; and

             (vi)  distribution  fees paid under the Fund's Class C Distribution
       Plan.

   3. COMPENSATION OF SMC.

       (a)  In consideration  of the  services to be rendered by SMC pursuant to
   this Agreement, the Fund shall pay SMC an annual fee equal to 2% of the first
   $10 million of the average net assets of the Fund, and 1 1/2% of the next $20
   million of the average net assets, and 1% of the remaining average net assets
   of the Fund for any fiscal  year,  determined  and payable  monthly.  If this
   Agreement  shall be effective  for only a portion of a year in which a fee is
   owed,  then  SMC's  compensation  for the  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 as the value of such net assets is
   computed in connection with the  determination  of the net asset value of the
   shares of the Fund as described  in the Fund's  Prospectus  and  Statement of
   Additional Information.

       (b)  For each of the Fund's fiscal years this Agreement remains in force,
   SMC 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 B and Class C  Distribution  Plans,  but  inclusive of
   SMC'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,  SMC 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.  SMC  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 SMC to the Fund under this paragraph
   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. SMC 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 Investment Company Act
   of 1940 and any applicable  exemptions  thereto,  SMC 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 SMC.  Consistent  with the  provisions of the
   1940  Act  and  any  applicable   exemption  thereto,   SMC  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 SMC,
       through  brokers or  otherwise  (including  affiliated  brokers),  in the
       manner permitted in this paragraph 4 and in such manner as SMC 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,  SMC 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,  SMC is  authorized  to direct the  execution  of  portfolio
       transactions for the Fund to brokers who furnish  investment  information
       or research service to the SMC. Such allocations shall be in such amounts
       and proportions as SMC may determine. If the transaction is directed to a
       broker providing  brokerage and research  services to SMC, the commission
       paid for such  transaction  may be in  excess of the  commission  another
       broker would have charged for effecting  that  transaction,  if SMC 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 SMC 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, SMC 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 SMC,
       better price or execution  can be obtained by utilizing the services of a
       broker.

       (d)  LIMITATION OF LIABILITY OF SMC WITH RESPECT TO RENDERING  INVESTMENT
   ADVISORY SERVICES. So long as SMC shall give the Fund the benefit of its best
   judgment and effort in rendering investment advisory services hereunder,  SMC
   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 SMC 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  paragraph  4. As used in this  paragraph  4, "SMC"  shall
   include directors, officers and employees of SMC, as well as SMC itself.

   5. ADMINISTRATIVE AND TRANSFER AGENCY SERVICES.

       (a)  RESPONSIBILITIES  OF SMC.  SMC will  provide  the Fund with  general
   administrative,  fund accounting,  transfer agency,  and dividend  disbursing
   services  described  and set forth in  Schedule A attached  hereto and made a
   part of this  Agreement  by  reference.  SMC  agrees to  maintain  sufficient
   trained  personnel  and  equipment  and supplies to perform such  services 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,  and
   otherwise perform such services in an accurate, timely, and efficient manner.

       (b) INSURANCE. The Fund and SMC agree to procure and maintain, separately
   or as joint insureds with themselves, their directors,  employees, agents and
   others,  and other  investment  companies  for  which SMC acts as  investment
   adviser and transfer  agent,  a policy or policies of insurance  against loss
   arising from  breaches of trust,  errors and  omissions,  and a fidelity bond
   meeting  the  requirements  of the 1940  Act,  in the  amounts  and with such
   deductibles  as may be agreed  upon  from  time to time.  SMC shall be solely
   responsible for the payment of premiums due for such policies.

       (c)  REGISTRATION AND COMPLIANCE.

             (i)  SMC represents  that as of the  date of this  Agreement  it is
       registered  as  a  transfer   agent  with  the  Securities  and  Exchange
       Commission  ("SEC")  pursuant to  Subsection  17A of the  Securities  and
       Exchange Act of 1934 and the rules and regulations thereunder, and agrees
       to maintain said  registration and comply with all of the requirements of
       said Act,  rules and  regulations  so long as this  Agreement  remains in
       force.

            (ii)  The  Fund  represents  that  it  is a  diversified  management
       investment  company  registered  with the SEC in accordance with the 1940
       Act and the rules and regulations thereunder,  and authorized to sell its
       shares  pursuant to said Act, the 1933 Act and the rules and  regulations
       thereunder.

       (d)   LIABILITY   AND   INDEMNIFICATION   WITH   RESPECT   TO   RENDERING
   ADMINISTRATIVE  AND  TRANSFER  AGENCY  SERVICES.  SMC shall be liable for any
   actual losses,  claims, damages or expenses (including any reasonable counsel
   fees and  expenses)  resulting  from  SMC's bad faith,  willful  misfeasance,
   reckless  disregard of its obligations  and duties,  negligence or failure to
   properly perform any of its  responsibilities  or duties under this Paragraph
   5. SMC shall not be liable and shall be indemnified  and held harmless by the
   Fund, for any claim,  demand or action brought  against it arising out of, or
   in connection with:

             (i) The bad faith, willful  misfeasance,  reckless disregard of its
       duties or  negligence  by the Board of  Directors  of the Fund,  or SMC's
       acting upon any  instructions  properly  executed and  authorized  by the
       Board of Directors of the Fund;

            (ii) SMC acting in reliance upon advice given by independent counsel
       retained by the Board of Directors of the Fund.

       In the event that SMC  requests the Fund to indemnify or hold it harmless
   hereunder,  SMC shall use its best efforts to inform the Fund of the relevant
   facts  concerning the matter in question.  SMC shall use  reasonable  care to
   identify and promptly  notify the Fund  concerning any matter which presents,
   or appears likely to present, a claim for indemnification against the Fund.

       The Fund shall have the election of defending SMC against any claim which
   may be the  subject of  indemnification  hereunder.  In the event the Fund so
   elects, it will so notify SMC and thereupon the Fund shall take over defenses
   of the claim,  and if so  requested  by the Fund,  SMC shall incur no further
   legal or other  claims  related  thereto  for which it would be  entitled  to
   indemnity  hereunder provided,  however,  that nothing herein contained shall
   prevent SMC from retaining, at its own expense,  counsel to defend any claim.
   Except with the Fund's prior consent, SMC shall in no event confess any claim
   or make any  compromise  in any  matter  in which  the Fund  will be asked to
   indemnify or hold SMC harmless hereunder.

       PUNITIVE  DAMAGES.  SMC shall  not be  liable  to the Fund,  or any third
   party, for punitive,  exemplary,  indirect,  special or consequential damages
   (even if SMC has been advised of the possibility of such damage) arising from
   its obligations  and the services  provided under this paragraph 5, including
   but not limited to loss of profits, loss of use of the shareholder accounting
   system,  cost of capital and expenses of substitute  facilities,  programs or
   services.

       FORCE   MAJEURE.   Anything  in  this   paragraph   5  to  the   contrary
   notwithstanding,  SMC shall not be liable for delays or errors  occurring  by
   reason of circumstances beyond its control, including but not limited to acts
   of civil or military authority,  national emergencies,  work stoppages, fire,
   flood, catastrophe, earthquake, acts of God, insurrection, war, riot, failure
   of communication or interruption.

       (e) DELEGATION OF DUTIES. SMC may, at its discretion,  delegate,  assign,
   or subcontract any of the duties,  responsibilities  and services governed by
   this paragraph 5, to an affiliated company,  whether or not by formal written
   agreement.  SMC shall, however,  retain ultimate  responsibility to the Fund,
   and shall  implement  such  reasonable  procedures as may be  necessary,  for
   assuring  that  any  duties,   responsibilities   or  services  so  assigned,
   subcontracted  or delegated are  performed in  conformity  with the terms and
   conditions of this Agreement.

   6. OTHER  ACTIVITIES NOT RESTRICTED.  Nothing in this Agreement shall prevent
SMC or any officer thereof from acting as investment  adviser,  administrator or
transfer agent for any other person,  firm or  corporation,  nor shall it in any
way limit or restrict SMC 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
SMC 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 SMC acts as investment adviser,
administrator and transfer agent to other investment companies, and it expressly
consents  to SMC acting as such;  provided,  however,  that if in the opinion of
SMC, 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.

   7. AMENDMENT.  This Agreement and the schedules  forming a part hereof 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 SMC's obligations  hereunder shall be subject to
SMC's approval, which shall not be unreasonably withheld.

   8.  DURATION  AND  TERMINATION  OF  AGREEMENT.  This  Agreement  shall become
effective on January 27, 2000, provided that on January 26, 2000, it is approved
by a majority of the holders of the outstanding  voting  securities of the Fund.
This  Agreement  shall  continue  in effect  until  January  27,  2002,  and for
successive  12-month periods thereafter,  unless terminated,  provided that 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 SMC  providing  for  investment  advisory,  administrative  or transfer
agency 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 SMC, 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).

   9.  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.

   10.  APPLICABLE  LAW.  This  Agreement  shall be subject to and  construed in
accordance with the laws of the State of Kansas.

   IN WITNESS WHEREOF,  the parties hereto have caused this Agreement to be duly
executed by their respective  officers thereto duly authorized on the day, month
and year first above written.

                                              SECURITY GROWTH AND INCOME FUND

                                              By:
                                                    ----------------------------
                                              Title:

ATTEST:

- ----------------------------------
Secretary

                                              SECURITY MANAGEMENT COMPANY, LLC

                                              By:
                                                    ----------------------------
                                              Title:

ATTEST:

- ----------------------------------
Secretary
<PAGE>
                                   SCHEDULE A
                  INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES
                          AND TRANSFER AGENCY AGREEMENT

     SCHEDULE OF ADMINISTRATIVE AND FUND ACCOUNTING FACILITIES AND SERVICES

   Security  Management  Company,  LLC agrees to provide the Fund the  following
administrative facilities and services.

 1.  FUND AND PORTFOLIO ACCOUNTING

     a.  Maintenance of Fund General Ledger and Journal.

     b.  Preparing and recording disbursements for direct Fund expenses.

     c.  Preparing daily money transfers.

     d.  Reconciliation of all Fund bank and custodian accounts.

     e.  Assisting Fund independent auditors as appropriate.

     f.  Prepare daily projection of available cash balances.

     g.  Record trading  activity for purposes of  determining  net asset values
         and daily dividend.

     h.  Prepare daily portfolio evaluation report to value portfolio securities
         and determine daily accrued income.

     i.  Determine the daily net asset value per share.

     j.  Determine the daily, monthly, quarterly,  semiannual or annual dividend
         per share.

     k.  Prepare monthly, quarterly, semiannual and annual financial statements.

     l.  Provide  financial  information  for  reports  to  the  Securities  and
         Exchange Commission in compliance with the provisions of the Investment
         Company  Act of 1940  and the  Securities  Act of  1933,  the  Internal
         Revenue Service and any other regulatory agencies as required.

     m.  Provide financial, yield, net asset value, etc. information to NASD and
         other survey and statistical agencies as instructed by the Fund.

     n.  Reports  to  the  Audit  Committee  of  the  Board  of  Directors,   if
         applicable.

 2.  LEGAL

     a.  Provide  registration and other  administrative  services  necessary to
         qualify  the  shares  of the  Fund  for  sale  in  those  jurisdictions
         determined from time to time by the Fund's Board of Directors (commonly
         known as "Blue Sky Registration").

     b.  Provide  registration  with and reports to the  Securities and Exchange
         Commission in compliance with the provisions of the Investment  Company
         Act of 1940 and the Securities Act of 1933.

     c.  Prepare  and  review  Fund   Prospectus  and  Statement  of  Additional
         Information.

     d.  Prepare  proxy  statements  and  oversee  proxy  tabulation  for annual
         meetings.

     e.  Prepare Board materials and maintain minutes of the Board meetings.

     f.  Draft,  review and  maintain  contractual  agreements  between Fund and
         Investment Adviser, Custodian, Distributor and Transfer Agent.

     g.  Oversee   printing   of  proxy   statements,   financial   reports   to
         shareholders, prospectuses and Statements of Additional Information.

     h.  Provide legal advice and oversight regarding shareholder  transactions,
         administrative services, compliance with contractual agreements and the
         provisions of the 1940 and 1933 Acts.

           SCHEDULE OF SHARE TRANSFER AND DIVIDEND DISBURSING SERVICES

   Security  Management  Company,  LLC agrees to provide the Fund the  following
transfer agency and dividend disbursing services.

 1.  Maintenance of shareholder accounts, including processing of new accounts.

 2.  Posting  address  changes  and  other  file   maintenance  for  shareholder
     accounts.

 3.  Posting all transactions to the shareholder file, including:

     a.  Direct purchases;

     b.  Wire order purchases;

     c.  Direct redemptions;

     d.  Wire order redemptions;

     e.  Draft redemptions;

     f.  Direct exchanges;

     g.  Transfers;

     h.  Certificate issuances; and

     i.  Certificate deposits.

 4.  Monitor fiduciary processing, insuring accuracy and deduction of fees.

 5.  Prepare daily  reconciliations of shareholder  processing to money movement
     instructions.

 6.  Handle bounced check  collections.  Immediately  liquidate shares purchased
     and  return  to  the  shareholder   the  check  and   confirmation  of  the
     transaction.

 7.  Issuing all checks and stopping and replacing lost checks.

 8.  Draft clearing services.

     a.  Maintenance of signature cards and appropriate corporate resolutions.

     b.  Comparison  of the  signature  on the  check to the  signatures  on the
         signature  card for the  purpose of paying the face amount of the check
         only.

     c.  Receiving  checks  presented for payment and  liquidating  shares after
         verifying account balance.

     d.  Ordering checks in quantity specified by the Fund for the shareholder.

 9.  Mailing   confirmations,   checks  and/or   certificates   resulting   from
     transaction requests to shareholders.

10.  Performing all of the Fund's other mailings, including:

     a.  Dividend and capital gain distributions;

     b.  Semiannual and annual reports;

     c.  1099/year-end shareholder reporting;

     d.  Systematic withdrawal plan payments; and

     e.  Daily confirmations.

11.  Answering all service related  telephone  inquiries from  shareholders  and
     others, including:

     a.  General and policy inquiries (research and resolve problems);

     b.  Fund yield inquiries;

     c.  Taking shareholder  processing requests and account maintenance changes
         by telephone as described above;

     d.  Submit pending requests to correspondence;

     e.  Monitor on-line statistical performance of unit; and

     f.  Develop reports on telephone activity.

12.  Respond to written inquiries (research and resolve problems), including:

     a.  Initiate   shareholder   account    reconciliation    proceeding   when
         appropriate;

     b.  Notify shareholder of bounced investment checks;

     c.  Respond to financial institutions regarding verification of deposit;

     d.  Initiate proceedings regarding lost certificates;

     e.  Respond to complaints and log activities; and

     f.  Correspondence control.

13.  Maintaining and retrieving all required past history for  shareholders  and
     provide research capabilities as follows:

     a.  Daily   monitoring  of  all  processing   activity  to  verify  back-up
         documentation;

     b.  Provide exception reports;

     c.  Microfilming; and

     d.  Storage, retrieval and archive.

14.  Prepare materials for annual meetings.

     a.  Address and mail annual proxy and related material.

     b.  Prepare and submit to Fund an affidavit of mailing.

     c.  Furnish  certified  list of  shareholders  (hard copy or microfilm) and
         inspectors of elections.

15.  Report and remit as necessary for state escheat requirements.

Approved:  Fund                                SMC
               ----------------------------         ----------------------------
<PAGE>
                                    EXHIBIT D

                         SECURITY GROWTH AND INCOME FUND
                           BROKERAGE ENHANCEMENT PLAN

WHEREAS,  Security Growth and Income Fund (the "Fund") engages in business as an
open-end  management  investment  company  and is  registered  as such under the
Investment Company Act of 1940, as amended (the "Act");

WHEREAS,  shares  of  common  stock of the Fund are  authorized  to be issued in
multiple series, but are currently issued in only a single series;

WHEREAS in the event the Fund issues its shares in more than a single  series in
the future (the "Series"), such Series can be added to this Plan by listing such
Series on a Schedule and attaching the same hereto;

WHEREAS, shares of common stock of the Fund are divided into multiple classes of
shares,  and this Plan applies to the Fund as a whole and the effect of the Plan
does not vary based upon a class of shares;

WHEREAS,  the Fund employs Security  Distributors,  Inc. (the  "Distributor") as
distributor of the securities of which the Fund is the issuer;

WHEREAS,  the Board of Directors of the Fund (the "Board") has determined  that,
subject to the  requirement to seek best price and execution,  it is appropriate
and desirable for the Fund to use certain brokerage commissions generated on the
purchase  and  sale of  portfolio  securities  to  finance  activities  that are
primarily  intended  to  result  in the  sale  of  its  shares  (the  "Brokerage
Enhancement Plan" or the "Plan");

WHEREAS, any benefits that may be obtained from brokerage commissions are assets
of the Fund,  and the Fund  wishes,  pursuant  to Rule 12b-1  under the Act,  to
utilize such assets in furtherance of the distribution of the Fund's shares; and

WHEREAS,  the Board has  determined  that,  to the extent  that the use of these
benefits   earned  by  a  Series  under  this  Plan  results  in  the  increased
distribution of the Fund's shares, a benefit in the form of potential  economies
of scale  should  inure to that  Series and to the other  Series  offered by the
Fund;

NOW, THEREFORE, this Brokerage Enhancement Plan is adopted by the Fund on behalf
of the  Series,  if any,  in  accordance  with Rule 12b-l  under the Act, on the
following terms and conditions:

 1.  The Fund is authorized to enter into agreements or arrangements pursuant to
     which the Fund may direct Security Management Company,  LLC ("SMC"), in its
     capacity as the Fund's investment adviser, and each of the sub-advisors, if
     any,  retained by SMC (and  approved by the Fund) to manage  certain of the
     Series (each a "Sub-Advisor"), acting as agents for the Fund or its Series:

     a.  To place orders for the purchase or sale of portfolio  securities  with
         the Distributor or other introducing  broker-dealers who will receive a
         portion of the brokerage commission paid by the Fund or its Series from
         broker-dealers executing such portfolio transactions for the benefit of
         the Fund or its Series ("Brokerage Payments") that can be used directly
         or indirectly to finance the distribution of the Fund's shares; or

     b.  To  allocate  transactions  for  the  purchase  or  sale  of  portfolio
         securities or other assets to broker-dealers,  and receive, in addition
         to execution of the brokerage transaction,  credits,  benefits or other
         services from the broker-dealer  ("Brokerage Credits") that can be used
         directly  or  indirectly  to  promote  the  distribution  of the Fund's
         shares;

     in each case,  provided that SMC or the Sub-Advisor must reasonably believe
     that the  Distributor or  broker-dealer  (or the clearing broker of either)
     will execute the transaction in a manner  consistent with standards of best
     execution,  as described in the  Registration  Statement  for the Fund,  as
     amended from time to time.

 2.  The Fund is authorized to expend Brokerage  Credits and Brokerage  Payments
     to compensate the  Distributor  and other  broker-dealers  for the cost and
     expense of certain  distribution-related  activities or to procure from, or
     otherwise  induce,  the  Distributor  and other  broker-dealers  to provide
     services,  where such  activities  or services  are intended to promote the
     sale of the Fund's shares.  Such  activities or services may be provided by
     the Distributor or  broker-dealer  to which a purchase or sale  transaction
     has been allocated (the directed broker-dealer) or by another broker-dealer
     or  other  party  at  the   direction  of  the   Distributor   or  directed
     broker-dealer.  The  activities  or  services  which may be  procured  with
     Brokerage Credits and Brokerage  Payments  include,  but are not limited to
     (i) developing,  preparing, printing, and mailing of advertisements,  sales
     literature and other promotional material describing and/or relating to the
     Fund or its  Series;  (ii)  printing  and  mailing  of  Fund  prospectuses,
     statements  of  additional   information,   any  supplements   thereto  and
     shareholder  reports  for  existing  and  prospective  shareholders;  (iii)
     holding or participating in seminars and sales meetings designed to promote
     the distribution of shares of the Fund or its Series,  including  materials
     intended  either  for  broker-dealer  only  use or  for  retail  use;  (iv)
     providing  information  about  the Fund,  its  Series,  or mutual  funds in
     general,  to registered  representatives of  broker-dealers;  (v) providing
     assistance to broker-dealers  that are conducting due diligence on the Fund
     or its Series;  (vi) payment or reimbursement  of legal and  administrative
     costs associated with implementing the Plan; (vii) marketing fees requested
     by broker-dealers who sell shares of the Fund; (viii) obtaining information
     and  providing  explanations  to  shareholders  regarding the Fund's or its
     Series'  investments and policies and other  information about the Fund and
     its Series,  including  the  performance  of the Fund or its  Series;  (ix)
     training sales personnel;  (x) personal  service and/or  maintenance of the
     shareholder  accounts;  (xi) payment of commissions to  broker-dealers  who
     sell  shares of the Fund and (xii)  financing  any other  activity  that is
     intended to result in the sale of Fund shares.

 3.  The Fund may direct the Distributor to take  appropriate  actions to effect
     the purposes of this Plan, including,  but not limited to, (a) directing on
     behalf  of the Fund or a Series  and  subject  to the  standards  described
     above,  SMC or a Sub-Advisor to allocate  transactions  for the purchase or
     sale of  portfolio  securities  in the manner  described  in the Plan;  (b)
     compensating  a   broker-dealer   for  the  cost  and  expense  of  certain
     distribution-related  activities  or  procuring  from  a  broker-dealer  or
     otherwise  inducing  a  broker-dealer  to  provide  services,   where  such
     activities  or services  are  intended to promote the sale of shares of the
     Fund or a Series,  all on behalf  of the Fund or a Series.  Subject  to the
     standards set forth in Section 1, and subject to applicable  law, SMC and a
     Sub-Advisor may also direct brokerage  transactions to a broker-dealer that
     is an affiliated person of the Distributor, SMC or a Sub-Advisor.  Provided
     that any  Brokerage  Credits or Brokerage  Payments  directly or indirectly
     inure to the  benefit  of  those  Series  which  generated  the  particular
     Brokerage  Credit or  Brokerage  Payment,  any such credits or payments may
     also inure to the benefit of other Series of the Fund.

 4.  This Plan shall not take effect with  respect to a Series until it has been
     approved by (a) a vote of a majority of the outstanding  voting  securities
     of that  Series;  and,  together  with  any  related  agreements,  has been
     approved by (a) the Fund's Board of Directors,  and (b) those  Directors of
     the Fund who are not  "interested  persons"  of the Fund (as defined in the
     Act) and who have no direct or indirect financial interest in the operation
     of this Plan or any agreements  related to it (the "Rule 12b-l Directors"),
     cast in person at a meeting (or meetings) called, at least in part, for the
     purpose of voting on this Plan and such related  agreements.  If additional
     Series of the Fund are  established,  this Plan shall not take  effect with
     respect  to  such  Series  until  the  Plan,   together  with  any  related
     agreements, has been approved by votes of a majority of both (a) the Fund's
     Board of  Directors  and (b) the Rule 12b-1  Directors  cast in person at a
     meeting  called,  at least in  part,  for the  purpose  of  voting  on such
     approval.

 5.  After  approval  as set  forth  in  paragraph  4, and any  other  approvals
     required  pursuant  to the Act and Rule 12b-1  thereunder,  this Plan shall
     take effect at the time specified by the Fund's Board of Directors,  or, if
     no such time is specified by the Directors,  at the time that all approvals
     necessary  have been  obtained.  The Plan shall  continue in full force and
     effect  as to a  Series  for so long as such  continuance  is  specifically
     approved at least  annually by votes of a majority of both (a) the Board of
     Directors and (b) the Rule 12b-1 Directors of the Fund, cast in person at a
     meeting called, at least in part, for the purpose of voting on this Plan.

 6.  The Distributor shall provide to the Directors of the Fund a written report
     of the amounts  expended or benefits  received  and the  purposes for which
     such expenditures were made at such frequency as may be required under Rule
     12b-1 of the Act.

 7.  This Plan may be terminated as to the Fund or a Series at any time, without
     payment of any penalty,  by vote of the Directors of the Fund, by vote of a
     majority  of the Rule 12b-l  Directors,  or by a vote of a majority  of the
     outstanding  voting  securities  of the  Series  on not more  than 30 days'
     written notice to any other party to the Plan. In addition,  all Agreements
     shall provide that such  Agreement  shall  terminate  automatically  in the
     event of its assignment.

 8.  This Plan may not be amended in any material  respect unless such amendment
     is  approved  by a vote of a  majority  of both  (a) the  Fund's  Board  of
     Directors  and (b) the Rule  12b-1  Directors  cast in  person at a meeting
     called,  at least in part, for the purpose of voting on such approval.  The
     Plan may not be amended to increase  materially  the amount to be spent for
     distribution  unless  such  amendment  is  approved  by a  majority  of the
     outstanding  voting securities of the pertinent Series and by a majority of
     both (a) the Fund's  Board of  Directors  and (b) the Rule 12b-1  Directors
     cast in person at a meeting  called,  at least in part,  for the purpose of
     voting on such approval;  PROVIDED HOWEVER, that increases in amounts spent
     for  distribution  by virtue of a greater  amount of  Brokerage  Credits or
     Brokerage  Payments generated by the Fund shall not be deemed to constitute
     a material increase in the amount to be spent for distribution.

 9.  While this Plan is in effect, the selection and nomination of Directors who
     are not  "interested  persons" (as defined in the Act) of the Fund shall be
     committed  to the  discretion  of the  Directors  who  are  not  interested
     persons.

10.  The Fund shall  preserve  copies of this Plan and related  agreements for a
     period of not less than six years from the date of  termination of the Plan
     or related  agreements,  the first two years in an easily accessible place;
     and shall  preserve all reports  made  pursuant to paragraph 6 hereof for a
     period of not less than  six,  the first two years in an easily  accessible
     place.

11.  The provisions of this Plan are severable as to each Series, and any action
     to be taken with  respect to this Plan shall be taken  separately  for each
     Series affected by the matter.

Date:  January __, 2000
<PAGE>
[SBG LOGO]
The Security Benefit
Group of Companies
700 SW Harrison St.
Topeka, Kansas 66636-0001

                         SECURITY GROWTH AND INCOME FUND
                         Annual Meeting of Stockholders
                                January 26, 2000

     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  annual meeting,  and at all  adjournments  thereof,  all
     shares of

                         SECURITY GROWTH AND INCOME FUND

     held by the  undersigned at the Annual Meeting of  Stockholders of the
     Fund to be held at 9:30 AM,  local  time,  on  January  26,  2000,  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:
- --------------------------------------------------------------------------------
SECURITY GROWTH AND INCOME 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.

              THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

VOTE ON DIRECTORS

1.   To elect six directors to    FOR  AGAINST  FOR ALL   To withhold  authority
     serve on the Board of        ALL    ALL    EXCEPT    to vote, mark "For All
     Directors of the Fund                                Except"  and write the
     until the next annual                                nominee's   number  on
     meeting, if any, or until                            the line below.
     their successors shall
     have been duly elected and
     qualified.

     01) Donald A. Chubb, Jr.,
     02) John D. Cleland,
     03) Penny A. Lumpkin,
     04) Mark L. Morris, Jr.,
     05) Maynard F. Oliverius
     and 06) James R. Schmank     |_|    |_|      |_|     ______________________

VOTE ON PROPOSALS                                        FOR   AGAINST   ABSTAIN

2.   To ratify or reject the selection of the firm of
     Ernst & Young LLP as independent accountants for
     the Fund's fiscal year 2000.                        |_|     |_|       |_|

3a.  To amend the Fund's fundamental investment
     limitation concerning diversification.              |_|     |_|       |_|

3b.  To amend the Fund's fundamental investment
     limitation concerning share ownership of any one
     issuer.                                             |_|     |_|       |_|

3c.  To eliminate the Fund's fundamental investment
     limitation concerning investing for control of
     portfolio companies.                                |_|     |_|       |_|

3d.  To amend the Fund's fundamental investment
     limitation concerning underwriting.                 |_|     |_|       |_|

3e.  To amend the Fund's fundamental investment
     limitation concerning borrowing.                    |_|     |_|       |_|

3f.  To amend the Fund's fundamental investment
     limitation concerning lending.                      |_|     |_|       |_|

3g.  To eliminate the Fund's fundamental investment
     limitation concerning short sales and margin
     purchases of securities.                            |_|     |_|       |_|

3h.  To eliminate the Fund's fundamental investment
     limitation concerning mortgaging, pledging or
     hypothecating its assets.                           |_|     |_|       |_|

3i.  To eliminate the Fund's fundamental investment
     limitation concerning purchasing securities that
     are not traded on an exchange or actively traded
     over-the-counter.                                   |_|     |_|       |_|

3j.  To eliminate the Fund's fundamental investment
     limitation concerning investment in companies with
     less than three years' operating history.           |_|     |_|       |_|

3k.  To eliminate the Fund's fundamental investment
     limitation concerning purchasing securities of an
     issuer in which the officers and directors of the
     Fund, Investment Manager or Underwriter own more
     than 5% of the outstanding securities of such
     issuer.                                             |_|     |_|       |_|

3l.  To eliminate the Fund's fundamental investment
     limitation concerning investment in other
     investment companies.                               |_|     |_|       |_|

3m.  To eliminate the Fund's fundamental investment
     limitation concerning the officers or directors of
     the Fund, the Underwriter or Investment Manager
     purchasing shares of the Fund, except at net
     value.                                              |_|     |_|       |_|

3n.  To amend the Fund's fundamental investment
     limitation concerning buying or selling real
     estate and commodities or commodity contracts.      |_|     |_|       |_|

3o.  To eliminate the Fund's fundamental investment
     limitation concerning investment in puts, calls,
     straddles or spreads.                               |_|     |_|       |_|

3p.  To eliminate the Fund's fundamental investment
     limitation concerning investment in oil, gas,
     mineral leases or other mineral exploration
     development programs.                               |_|     |_|       |_|

4.   To approve or disapprove an arrangement and new
     investment advisory contract that would permit
     Security Management Company, LLC, the Fund's
     investment adviser, with Board approval, to enter
     into or amend sub-advisory agreements without
     stockholder approval.                               |_|     |_|       |_|

5.   To approve or disapprove a Brokerage Enhancement
     Plan pursuant to Rule 12b-1 under the Investment
     Company Act of 1940, and a new investment advisory
     contract that would permit the implementation of
     the Plan.                                           |_|     |_|       |_|

   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.

- -------------------------------------------    ---------------------------------
Signature (PLEASE SIGN WITHIN BOX)     Date    Signature (Joint Owners)     Date

- --------------------------------------------------------------------------------


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