PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
SECURITY FUNDS
August 15, 1999
[PICTURE OF JOHN CLELAND]
John Cleland
TO OUR SHAREHOLDERS:
The six months ended June 30, 1999, were characterized by a period of generally
rising interest rates. The benchmark thirty-year Treasury bond climbed from a
low of 4.72% in early October of 1998 to 5.09% at the end of 1998 and on to a
high of 6.16% on June 24 of this year.
INVESTORS WORRY ABOUT INFLATION POTENTIAL
The rise in interest rates was a result of investors' concerns about potential
inflationary pressures stemming from continued strength in the U.S. economy. The
expectation during this period that the Federal Reserve Bank's policy-setting
Federal Open Market Committee (FOMC) would have to raise short-term interest
rates to slow economic growth contributed to the negative market psychology.
Fears were confirmed when the Committee took action at its meeting on June 30 to
raise the Federal Funds interest rate target by 25 basis points.
This rate hike was accompanied by an announcement that the FOMC was at the same
time moving from a bias toward raising interest rates to a neutral position on
further rate hikes. We believe this action has for the time being improved the
psychological climate in the fixed income markets. Absent further action by the
FOMC or an unexpected exogenous shock to the financial system, we believe the
markets have settled in a range of 5.50% and 6% for the thirty-year Treasury
bond for the remainder of the year.
THE INCREASE IN TREASURY BOND RATES AFFECTS OTHER FIXED INCOME SECTORS
Since interest rates on other sectors of the fixed income markets, including
Federal agency securities and corporate bonds, trade at a spread above Treasury
securities of similar maturities, all of our fixed income portfolios have
reflected similar experiences in price movements of their holdings. On the
following pages the portfolio manager for each of our fixed income funds
discusses the results of his particular fund and his approach to management of
the portfolio during this period of rising interest rates.
We expect that volatility will continue to play a major role in fixed income
performance as rapidly changing global economic, political, and monetary factors
affect investor psychology. We remind our shareholders that a long-term
investment horizon helps even out the effects of security price swings generated
by changing day-to-day economic conditions.
As always, we appreciate your continuing investments in the Security Funds. We
invite your comments and questions at any time.
Sincerely,
/s/JOHN CLELAND
John Cleland, President
The Security Funds
1
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MANAGER'S COMMENTARY
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SECURITY FUNDS
August 15, 1999
[PICTURE OF STEVEN M. BOWSER]
Steven M. Bowser,
Portfolio Manager
CORPORATE BOND SERIES
The first six months of 1999 have been difficult for fixed income investors. The
Corporate Bond Series of Security Income Fund returned -2.97% over the period,
underperforming its Lipper peer group average return of -2.43%.(1) The benchmark
Lehman Brothers Corporate Bond Index lost 2.26% in the same time period.
FEBRUARY THE WORST MONTH
February of 1999 was the worst single month for the bond markets since 1990. The
bellwether thirty-year Treasury bond fell 7.2% in that month alone. The
continuing strength in the U.S. economy, combined with signs of recovery in the
global economies and higher prices in commodities such as oil, copper, and
aluminum, kept bond investors speculating that the Federal Reserve's
policy-making Open Market Committee would be forced to raise interest rates.
Investors believed such a rate hike would be necessary to keep inflation from
reemerging.
Other sectors of the fixed income markets have suffered along with Treasury
issues, but to a lesser extent. While the thirty-year Treasury bond fell 10.5%
over the six months, the Lehman Brothers Corporate Bond Index as noted above
only dropped 2.26% and the corresponding Federal agency index lost 1.29%.
MORTGAGE-BACKED BONDS AND HIGH YIELD ISSUES HAVE DONE WELL DESPITE RISING RATES
Our mortgage-backed securities, primarily issued by home-lending agencies Fannie
Mae and Freddie Mac, have served us well in this negative interest rate
environment. Rising rates generally favor these securities, as homeowners are
less likely to refinance their mortgages (and thus cause these securities to be
prematurely repaid) if rates are going up.
Our high yield bonds have also helped minimize the negative market impact on
overall portfolio return. Telecommunications issues such as Century
Communications Corporation and Comcast Corporation have gained because of the
potential for mergers and acquisitions in the sector as a whole. Gaming issues
such as MGM Grand, Inc. and Mirage Resorts, Inc. have been the exception, still
suffering from weaker revenues as a result of global economic crises, which keep
players away from the tables.
HEAVY SUPPLY ALSO HURTS PRICES
An abundance of new bond issues coming to market has swelled supply, which also
keeps prices from rising. Ford Motor Company's record-setting $8.6 billion
issue, as well as mega-sized deals from AT&T Corporation and MCI WorldCom, Inc.
have joined others in taking advantage of historically low corporate bond
yields. Although these issues have been well received, they nonetheless put
supply pressure on the markets.
2
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MANAGER'S COMMENTARY
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SECURITY FUNDS
August 15, 1999
WHAT'S AHEAD FOR BONDS
Although the Federal Reserve's Open Market Committee raised its short-term
interest rate target by twenty-five basis points at the June 30 meeting, the
fear of still-higher rates has not left bond investors. Chairman Alan Greenspan
has stated his wishes for economic growth to slow to about 3%, which hasn't
happened yet. We expect volatility to stay in the fixed income markets through
the summer, although we believe interest rates won't move far in either
direction from their current levels for the next few months.
We plan to make use of instruments such as mortgage-backed securities, Federal
agency issues, and corporate bonds which trade at a spread over Treasury bond
rates to attempt to stabilize portfolio performance. We will continue to monitor
economic conditions and adjust portfolio duration as necessary if the
environment changes.
Steven M. Bowser
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect deduction
of the sales charge.
CORPORATE BOND SERIES
6/30/99
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
Credit Quality Rating
AAA AA A BBB BB B
----- ----- ----- ----- ----- ----
24.0% 13.8% 30.1% 13.9% 15.2% 3.0%
CORPORATE BOND SERIES
AVERAGE ANNUAL TOTAL RETURN
AS OF JUNE 30, 1999
CLASS A SHARES CLASS B SHARES
1 Year -3.97% 1 Year -4.86%
5 Years 5.13% 5 Years 5.05%
10 Years 6.36% Since Inception 2.53%
(10-19-93)
The performance data above represents past performance which is not predictive
of future results. For Class A shares these figures reflect deduction of the
maximum sales charge of 4.75%. For Class B shares the figures reflect deduction
of the maximum contingent deferred sales charge, ranging from 5% in the first
year to 0% in the sixth and following years. The investment return and principal
amount value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
3
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MANAGER'S COMMENTARY
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SECURITY FUNDS
August 15, 1999
[PICTURE OF STEVEN M. BOWSER]
Steven M. Bowser,
Portfolio Manager
U.S. GOVERNMENT SERIES
The first six months of 1999 have been difficult for fixed income investors, and
especially so for those who invest in U.S. government securities. The U.S.
Government Series of Security Income Fund fell 3.16% during the first half,
compared with a 2.67% decline in the average of its Lipper peer group of
funds.(1) The benchmark Lehman Brothers U.S. Government Bond Index lost 2.27%
during the period, led by a 10.5% fall in the value of the thirty-year Treasury
bond.
THE PROBLEMS IN THE TEN-YEAR MATURITY SECTOR
Our maturity structure in the U.S. Government Series was predominantly in the
ten-year maturity range. This particular area of the yield curve was hurt during
the six months by the issuance of multibillion dollar Federal agency benchmark
issues. Additionally, the supply of new issues with ten-year maturities has been
unusually large, which also had a dampening effect on prices.
MORTGAGE-BACKED BONDS PERFORMED WELL
About 30% of the portfolio is invested in mortgage-backed securities issued
by the Federal home mortgage lending agency Government National Mortgage
Association (GNMA). These securities perform well in periods of rising interest
rates, because mortgageholders tend not to refinance their mortgages if rates
are going up. This reduces prepayments on mortgage-backed bonds, making them
more attractive to investors. Additionally, the yields on these issues are
higher than those of comparable-maturity Treasury securities, giving total
return an extra boost.
PORTFOLIO COMPOSITION DURING THE PERIOD
The composition of portfolio assets has remained fairly consistent throughout
the first half of 1999. In addition to the 30% invested in mortgage-backed
bonds, we have kept approximately 50% in other Federal agency securities and the
remaining 20% in Treasury issues. We plan to keep the balance close to these
percentages, with primary adjustments in the portfolio being made when necessary
in the maturity structure rather than in the asset mix.
OUTLOOK FOR THE MONTHS AHEAD
The U.S. Treasury market is especially vulnerable to interest rate activity
undertaken by the Federal Reserve Bank's policy-making arm, the Federal Open
Market Committee. At its June 30 meeting the Committee elected to raise its
short-term interest rate target by 25 basis points in an effort to forestall any
uptick in inflation. Still this rate hike did not calm the fears of fixed income
investors, many of whom believe this is only the first of a series of rate
increases.
4
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MANAGER'S COMMENTARY
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SECURITY FUNDS
August 15, 1999
Although we expect volatility to continue in the fixed income
markets, we believe interest rates will not move far in either direction from
their current levels. The Federal Reserve has over the past years exhibited its
skills in keeping inflation from escalating beyond reason. We expect steps they
take in coming months to have the desired effect, keeping inflation and interest
rates within reasonable bounds.
Steven M. Bowser
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect deduction
of the sales charge. Fee waivers reduced Fund expenses and in the absence of
such waivers, the performance quoted would be reduced.
Although the securities purchased by the U.S. Government Series are guaranteed
as to the timely payment of principal and interest by the U.S. Government, its
agencies or instrumentalities, the shares of the series itself are not so
guaranteed.
U.S. GOVERNMENT SERIES
6/30/99
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
Sectors Represented
MORTGAGE CASH &
TREASURIES AGENCIES BACKED EQUIVALENTS
---------- -------- -------- -----------
20.5% 46.1% 29.3% 4.1%
U.S. GOVERNMENT SERIES
AVERAGE ANNUAL TOTAL RETURN
AS OF JUNE 30, 1999
CLASS A SHARES CLASS B SHARES
1 Year -3.23% 1 Year -4.23%
5 Years 6.19% 5 Year 5.85%
10 Years 6.88% Since Inception 3.69%
(10-19-93)
The performance data above represents past performance which is not predictive
of future results. For Class A shares these figures reflect deduction of the
maximum sales charge of 4.75%. For Class B shares the figures reflect deduction
of the maximum contingent deferred sales charge, ranging from 5% in the first
year to 0% in the sixth and following years. Fee waivers reduced expenses of the
Fund and in the absence of such waiver, the performance quoted would be reduced.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
5
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MANAGER'S COMMENTARY
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SECURITY FUNDS
August 15, 1999
[PICTURE OF STEVEN M. BOWSER]
Steven M. Bowser,
Portfolio Manager
LIMITED MATURITY BOND SERIES
The Limited Maturity Series of Security Income Fund struggled, along with the
ailing bond markets, in the first six months of 1999. The Series returned
- -1.70%, close to the -1.60% average return of its Lipper peer group, but below
the -0.81% posted by the benchmark Lehman Brothers Intermediate Corporate Bond
Index.(1)
A DIFFICULT SIX MONTHS FOR FIXED INCOME
Fixed income instruments across the maturity spectrum suffered as a strong
economy brought about fears of pending inflation and rising interest rates. The
Federal Reserve Bank's policy-making arm, the Federal Open Market Committee,
elected to raise its short-term interest rate target by 25 basis points at its
June 30 meeting in a move to prevent a return of inflation.
MORTGAGE-BACKED SECURITIES AND HIGH YIELD BONDS BETTER PERFORMERS
The mortgage-backed securities portion of the portfolio, making up about 11% of
the total, has been a stabilizing factor in this period of rising interest
rates. These bonds, primarily issued by home-lending agencies Fannie Mae and
Freddie Mac, generally outperform in a rising rate environment because
homeowners are less likely to refinance their mortgages (and thus cause these
securities to be prematurely repaid) if rates are going up.
Our high yield bonds, about 20% of total portfolio assets, have also
outperformed other asset classes. The Lehman Brothers BB-Rated Corporate Bond
Index rose 0.40% over the six months, unlike higher quality corporate and
government bonds which lost value. Telecommunications issues in the high yield
universe have done quite well because of the merger and acquisition activity in
the sector. Two of our positions were affected by this activity: Comcast
Cellular Holdings, Inc. was acquired by SBC Communications, Inc., and Centennial
Cellular Corporation was purchased by Welsh, Carson, Anderson & Stowe during the
period.
OUTLOOK FOR THE COMING SIX MONTHS
We expect volatility to continue to be present in the fixed income markets,
although we do not expect interest rates to move far in either direction from
their present levels. Despite the Federal Open Market Committee's actions to
raise interest rates at its June 30 meeting, we believe investors still fear
further interest rate hikes. The Limited Maturity Bond Series has a shorter
average duration than other portfolios in the Series, a characteristic which may
help keep its price fluctuations smaller in periods of interest rate swings.
6
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MANAGER'S COMMENTARY
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SECURITY FUNDS
August 15, 1999
We will continue to make use of fixed income instruments such as mortgage-backed
securities and high yield bonds when we believe they will add value to the
portfolio. As always, we will watch economic conditions closely and make
portfolio adjustments as necessary to accommodate any changes.
Steven M. Bowser
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect deduction
of the sales charge. Fee waivers reduced Fund expenses and in the absence of
such waivers, the performance quoted would be reduced.
LIMITED MATURITY SERIES
6/30/99
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
Credit Quality Rating
AAA AA A BBB BB B
----- ----- ----- ----- ----- ----
14.8% 12.8% 34.4% 15.7% 18.5% 3.8%
LIMITED MATURITY BOND SERIES
AVERAGE ANNUAL TOTAL RETURN
AS OF JUNE 30, 1999
CLASS A SHARES CLASS B SHARES
1 Year -2.64% 1 Year -4.15%
Since Inception 5.43% Since Inception 5.10%
(1-17-95) (1-17-95)
The performance data above represents past performance which is not predictive
of future results. For Class A shares these figures reflect deduction of the
maximum sales charge of 4.75%. For Class B shares the figures reflect deduction
of the maximum contingent deferred sales charge, ranging from 5% in the first
year to 0% in the sixth and following years. Fee waivers reduced expenses of the
Fund and in the absence of such waiver, the performance quoted would be reduced.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
7
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MANAGER'S COMMENTARY
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SECURITY FUNDS
August 15, 1999
[PICTURE OF DAVID ESHNAUR]
David Eshnaur,
Portfolio Manager
HIGH YIELD SERIES
The first half of 1999 proved difficult for the fixed income markets. High yield
securities were the best performers in the bond universe, generating positive
returns in a period when most fixed income sectors lost ground. The High Yield
Series of Security Income Fund returned 0.66% over the six months, lagging its
Lipper peer group average of 3.57% but outperforming the benchmark Lehman
Brothers BB Bond Index return of 0.40%.(1)
POSITIVE PERFORMANCE FROM SEVERAL SECTORS
We experienced strong performance from a number of our bonds in the cable,
gaming, financial sectors of the market, and from our REIT common stock
positions. The cable industry is going through a period of consolidation, when
companies such as AT&T Corporation and Charter Communications are buying others
in order to expand their businesses and improve their profit margins. The
speculation surrounding which companies might be candidates for takeovers tends
to boost prices of many securities in the industry. Issues in our portfolio
which benefited from this upward price movement include Rogers Communications,
Inc., Cablevision Systems Corporation, and Diamond Holdings PLC.
The telecommunications industry is also undergoing consolidation, and is seeing
usage rising as cellular telephone popularity rises and as households and
businesses add additional lines for computer use. We have experienced favorable
price changes in our holdings of bonds issued by RCN Corporation, Pacific West
Telecommunications, Inc., MJD Communications, Inc., and Mexican
telecommunications company Satelites Mexicanos SA.
FINANCIALS AND REAL ESTATE INVESTMENT TRUSTS GAINED ON HIGHER RATES
The Real Estate Investment Trust (REIT) sector was one of 1998's poorest
performers when interest rates fell sharply. Dividend yields on these common
stocks were pushed up close to the 7% level as prices weakened, creating an
attractive buying opportunity. The REITs we hold in the portfolio are primarily
involved with business properties and have gained not only from rising interest
rates, which help cash flows, but from a slowdown in new industrial construction
activity in recent months.
Financial holdings have performed well also as higher interest rates boost their
income streams. Our bonds issued by California Federal Bank and CB Richard Ellis
Services, Inc., a real estate services and mortgage banking provider, were
beneficiaries of this favorable climate.
NEGATIVES INCLUDE SECTORS WE DIDN'T OWN
Commodity-based companies were strong performers in the first half.
Unfortunately, we were underweighted in industries such as chemical and paper
companies, which showed improvement in the second quarter of 1999 as global
economies began to improve. We also saw returns lower than some of our peers
because we maintain a primary emphasis on higher-quality BB and B rated high
yield bonds. During the past six months the lower quality issues in the CC and
CCC rating categories have experienced more price appreciation.
The total return of the portfolio was also hurt by nonpayment of coupon interest
on a bond issued by oil exploration and production company Coho Energy, Inc. We
continue to hold the bond because our analysis shows that since oil prices have
nearly doubled in recent months the assets of the company are more than
sufficient to repay debts.
8
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MANAGER'S COMMENTARY
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SECURITY FUNDS
August 15, 1999
A POSITIVE OUTLOOK FOR THE SECOND HALF
Our outlook remains positive for the high yield bond markets. Many companies
which issue high yield debt are reporting better than expected earnings results.
We believe interest rates will trade in a narrow range close to current levels
in the coming months, and in that sort of rate environment fixed income
investors often look to the high yield markets to find additional yield.
David Eshnaur
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect deduction
of the sales charge. Fee waivers reduced Fund expenses and in the absence of
such waivers, the performance quoted would be reduced.
HIGH YIELD SERIES
6/30/99
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
Credit Quality Rating
A BBB BB B C NR
----- ----- ----- ----- ----- ----
1.4% 10.2% 40.0% 43.1% 0.8% 4.5%
HIGH YIELD SERIES
AVERAGE ANNUAL TOTAL RETURN
AS OF JUNE 30, 1999
CLASS A SHARES CLASS B SHARES
1 Year -3.35% 1 Year -4.35%
Since Inception 6.23% Since Inception 6.20%
(8-15-96) (8-15-96)
The performance data above represents past performance which is not predictive
of future results. For Class A shares these figures reflect deduction of the
maximum sales charge of 4.75%. For Class B shares the figures reflect deduction
of the maximum contingent deferred sales charge, ranging from 5% in the first
year to 0% in the sixth and following years. Fee waivers reduced expenses of the
Fund and in the absence of such waiver, the performance quoted would be reduced.
The investment return and principal value of an investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.
9
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MANAGER'S COMMENTARY
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SECURITY FUNDS
August 15, 1999
[PICTURE OF ROBERT AMODEO],
Picture Of Robert Amodeo,
Portfolio Manager
SECURITY MUNICIPAL BOND FUND
Investors in the fixed income markets had a difficult first half of 1999. A
strong U.S. economy reawakened fears of returning inflation, driving bond prices
down and yields up. The Security Municipal Bond Fund returned -2.26% over the
six-month period, lagging the Lipper peer group average of -1.82%.(1) The
benchmark Lehman Brothers Municipal Bond Index fell 0.90% over the six months.
FIXED INCOME INVESTORS ARE CAUTIOUS
Caution prevailed among fixed income investors at the beginning of the year.
Those reservations proved well founded by mid-January, when Brazil devalued its
currency. Financial markets reacted to this event with indifference, however,
and the episode seemed to mark a bottom in investor sentiment. The "insurance"
value of U.S. Treasury securities became less attractive to fixed income
participants, and interest rates rose sharply in February as they sought better
yields in other markets.
Stronger than expected U.S. economic data added further weakness to domestic
fixed income markets. This data strengthened obstinate worries about the
prospect for higher inflation. The Federal Reserve tempered some of those
concerns when it increased its short-term lending rate target by 25 basis points
to 5% at the conclusion of its mid-year Federal Open Market Committee meeting.
MUNICIPAL BONDS FARED BETTER THAN OTHER FIXED INCOME SECTORS
Municipal bond performance, although negative during the first six months of the
year, outpaced most taxable fixed income asset classes. Positive fundamentals,
decreased supply and generous municipal yields compared to U.S. Treasuries on an
after-tax basis influenced the municipal market favorably. State and local
governments issued approximately $115 billion of debt during the first six
months of 1999, about 23% less than in the same period last year. Burgeoning tax
receipts are helping improve the standing of many municipal authorities.
Evidence for this improvement is seen in the soaring number of rating upgrades
for municipal authorities from both Moody's and Standard & Poor's rating
agencies.
COMPOSITION OF THE PORTFOLIO
At June 30, 1999, the portfolio consisted of twenty six issues spread across
sixteen different states. The average maturity was 12.6 years, with an average
duration of 7.4 years. The average credit quality of the bonds in the portfolio
remains a strong AA. The bonds are well diversified by industry, with the
greatest weightings in education, transportation and utilities.
10
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MANAGER'S COMMENTARY
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SECURITY FUNDS
August 15, 1999
LOOKING TO THE REMAINDER OF 1999
We believe the U.S. economy will remain steady for the balance of the year as
low unemployment and high consumer confidence should support demand for goods.
Additionally, the Federal Reserve has engineered a good balance of strong
economic growth, low inflation and favorable interest rates. A slower pace of
municipal issuance with steady demand augurs well for municipal performance
during the second half of the year.
Robert Amodeo
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect deduction
of the sales charge.
MUNICIPAL BOND FUND
6/30/99
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
Credit Quality Rating
AAA AA A BBB
----- ----- ----- -----
64.7% 32.0% 0.5% 2.8%
MUNICIPAL BOND FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF JUNE 30, 1999
CLASS A SHARES CLASS B SHARES
1 Year -3.18% 1 Year -4.31%
5 Years 4.43% 5 Years 3.92%
10 Years 6.54% Since Inception 2.35%
(10-19-93)
The performance data above represents past performance which is not predictive
of future results. For Class A shares these figures reflect deduction of the
maximum sales charge of 4.75%. For Class B shares the figures reflect deduction
of the maximum contingent deferred sales charge, ranging from 5% in the first
year to 0% in the sixth and following years. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
11
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MANAGER'S COMMENTARY
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SECURITY FUNDS
August 15, 1999
SECURITY CASH FUND
Money market funds enjoyed the benefits of higher interest rates in the first
half of 1999, unlike most sectors of the fixed income markets. Security Cash
Fund gained 2.04% over the six-month period, slightly lagging the 2.09% average
return of its Lipper peer group.(1)
THE SPECTER OF HIGHER INTEREST RATES
The Federal Reserve Board's policy-making arm, the Federal Open Market Committee
(FOMC), elected to raise its short-term interest rate target twenty-five basis
points at its June 30 meeting. Fixed income and money market investors had been
expecting the increase for some time, however, and rates in short term
securities arenas such as the commercial paper markets had been rising for some
time in anticipation of the actual event.
After the rate adjustment by the FOMC, most major banks raised their prime
lending rates. This was followed immediately by a jump in rates on our holdings
such as those issued by the Small Business Administration which bear floating
interest rates based on the prime rate. Since the move was at the very end of
the first half of the year, the benefits of these increases will now be realized
in the months ahead.
INCREASING DIVERSIFICATION TO ADD YIELD
The portfolio holdings currently consist of nearly 26% in federal agency
discount securities, 8.5% in funding agreements, and over 6% in SBA issues.
Commercial paper still makes up the greatest portion of assets at 55%, but has
been reduced from prior months' size in order to gain the higher yields the
other sectors offer. U.S. government issues make up just under 8% of assets. All
commercial paper and funding agreements bear the highest ratings issued by major
rating agencies.
The average maturity of portfolio holdings, at 65 days, is slightly longer than
the peer group average of 57 days. As interest rates began to rise in the early
months of 1999, rates on longer maturities-those in the six to nine month
range-were generally the most attractive. Over time, as shorter rates catch up
with the longer ones, the maturity structure will shorten correspondingly.
THE POSSIBILITY OF MORE RATE INCREASES AHEAD
Federal Reserve Chairman Alan Greenspan has indicated his preference for
economic growth to be in the 3% range, rather than the 4%-plus levels of the
past several quarters. If he and the Federal Open Market Committee believe
growth is continuing at levels that will prompt a return of inflation, they
could increase rates again in coming months. Although most sectors of the fixed
income markets would respond negatively to such a move, money market funds would
continue to benefit. We will watch market changes carefully, and adjust
portfolio holdings accordingly.
Fixed Income Team
(1) Performance figures are based on Class A shares and do not reflect deduction
of the sales charge.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
12
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SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY INCOME FUND
CORPORATE BOND SERIES
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS OF SHARES VALUE
- --------------------------------------------------------------------------------
AIRLINES - 4.2%
Southwest Airlines Company,
7.875% - 2007 $1,075,000 $1,135,469
United Air Lines,
11.21% - 2014 $950,000 1,192,250
----------
2,327,719
AUTOMOTIVE - 2.7%
Federal-Mogul Corporation,
7.875% - 2010 $250,000 234,375
General Motors Corporation,
7.70% - 2016 $1,000,000 1,031,250
Mark IV Industries, Inc.,
7.75% - 2006 $250,000 239,375
----------
1,505,000
BANKING - 1.8%
Washington Mutual Capital I,
8.375% - 2027(1) $1,000,000 1,003,750
BASIC INDUSTRY - OTHER - 1.3%
Pioneer Hi Bred International, Inc.,
5.75% - 2009 $800,000 745,000
BEVERAGE - 2.1%
Anheuser-Busch Companies, Inc.,
7.10% - 2007 $1,150,000 1,162,937
BROKERAGE - 2.2%
SI Financing Trust, Inc.,
9.50% - 2026(1) 48,910 1,280,831
BUILDING MATERIALS - 3.3%
LaFarge Corporation,
6.375% - 2005 $600,000 579,000
Martin Marietta Material,
5.875% - 2008 $850,000 786,250
Vulcan Materials Company,
5.75% - 2004 $500,000 488,125
----------
1,853,375
CONSTRUCTION MACHINERY - 0.9%
AGCO Corporation,
8.50% - 2006 $250,000 235,625
Titan Wheel International, Inc.,
8.75% - 2007 $250,000 239,062
----------
474,687
ENTERTAINMENT - 1.7%
Paramount Communications,
7.50% - 2023 $1,000,000 935,000
FINANCIAL COMPANIES - 10.1%
American RE Capital,
8.50% - 2025(1) 23,000 $ 585,063
Associates Corporation, N.A.,
7.55% - 2006 $875,000 907,812
CB Richard Ellis Service,
8.875% - 2006 $250,000 248,750
Countrywide Capital, Inc.,
8.00% - 2026(1) $1,000,000 956,250
General Electric Capital Corporation,
8.625% - 2008 $950,000 1,067,563
Merrill Lynch & Company, Inc.,
7.375% - 2006 $100,000 103,000
Morgan Stanley Dean Witter Discover
& Company, 6.875% - 2007 $1,050,000 1,046,062
PNC Funding Corporation,
7.75% - 2004 $700,000 725,375
---------
5,639,875
FOOD - 2.5%
Archer-Daniels-Midland Company,
8.875% - 2011 $1,000,000 1,152,500
Chiquita Brands International, Inc.,
10.25% - 2006 $250,000 253,750
---------
1,406,250
GAMING - 2.9%
Boyd Gaming Corporation,
9.25% - 2003 $250,000 254,375
MGM Grand, Inc.,
6.95% - 2005 $600,000 558,750
Mirage Resorts, Inc.,
6.625% - 2005 $600,000 570,750
Park Place Entertainment,
7.875% - 2005 $250,000 237,500
---------
1,621,375
HEALTHCARE - 0.2%
Rural/Metro Corporation,
7.875% - 2008 $125,000 113,125
HOME CONSTRUCTION - 0.9%
D.R. Horton, Inc.,
8.375% - 2004 $50,000 49,750
MDC Holdings,
8.375% - 2008 $125,000 121,250
Oakwood Homes Corporation,
8.125% - 2009 $250,000 239,688
Toll Corporation, 7.75% - 2007 $75,000 71,812
---------
482,500
INDEPENDENT ENERGY - 1.2%
Seagull Energy Corporation,
8.625% - 2005 $700,000 690,375
See accompanying notes.
13
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY INCOME FUND
CORPORATE BOND SERIES (continued)
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
INSURANCE - LIFE - 2.1%
Chubb Corporation,
6.15% - 2005 $100,000 $ 96,625
Hartford Life, Inc.,
7.10% - 2007 950,000 955,937
Transamerica Capital II,
7.65% - 2026 100,000 98,750
---------
1,151,312
LODGING - 0.9%
HMH Properties,
7.875% - 2008 250,000 229,375
Prime Hospitality Corporation,
9.25% - 2006 250,000 251,875
---------
481,250
MEDIA - CABLE - 3.1%
Century Communications
Corporation, 8.375% - 2007 250,000 244,375
Comcast Corporation,
9.125% - 2006 100,000 106,875
Jones Intercable, Inc.,
7.625% - 2008 250,000 259,375
Lenfest Communications, Inc.,
10.50% - 2006 250,000 286,875
Rogers Cablesystems, Ltd.,
9.625% - 2002 500,000 528,750
Rogers Communications, Inc.,
9.125% - 2006 250,000 254,375
Time Warner Entertainment,
10.15% - 2012 60,000 73,950
---------
1,754,575
MEDIA - NON-CABLE - 1.1%
Big Flower Press Holdings, Inc.,
8.875% - 2007 250,000 236,875
K-III Communications Corporation,
10.25% - 2004 300,000 300,750
News American Holdings,
8.625% - 2003 75,000 78,750
----------
616,375
OIL FIELD SERVICES - 1.9%
Transocean Offshore, Inc.,
8.00% - 2027 1,000,000 1,045,000
RETAILERS - 3.3%
Lowe's Companies, Inc.,
6.70% - 2007 850,000 844,688
Mattel, Inc.,
6.125% - 2005 300,000 289,125
Tandy Corporation,
6.95% - 2007 450,000 448,312
Zale Corporation,
8.50% - 2007 250,000 255,313
----------
1,837,438
SERVICES - 0.6%
Loewen Group International, Inc.,
8.25% - 2003* $550,000 $ 350,625
TECHNOLOGY - 0.9%
Dell Computer Corporation,
6.55% - 2008 500,000 485,000
TELECOMMUNICATIONS - 5.4%
AT&T Corporation,
7.00% - 2005 100,000 100,875
Cable & Wireless Communication,
PLC, 6.75% - 2008 250,000 240,938
Comcast Cellular Holdings, Inc.,
9.50% - 2007 75,000 84,281
GTE Corporation,
7.51% - 2009 1,000,000 1,037,500
Mastec, Inc.,
7.75% - 2008 250,000 244,687
MCI WorldCom, Inc.,
6.40% - 2005 600,000 585,750
New Jersey Bell Telephone,
6.625% - 2008 50,000 49,062
SBC Communications Capital
Corporation, 6.625% - 2007 675,000 669,094
----------
3,012,187
TRANSPORTATION - OTHER - 0.4%
Allied Holdings, Inc.,
8.625% - 2007 250,000 243,438
UTILITIES - ELECTRIC - 0.9%
AES Corporation,
10.25% - 2006 500,000 511,250
UTILITIES - NATURAL GAS - 1.9%
MCN Investment Corporation,
6.32% - 2003 75,000 73,969
National Fuel Gas Company,
6.303% - 2008 1,000,000 965,000
----------
1,038,969
YANKEE - CANADIAN - 1.9%
Quebecor Printing Capital,
7.25% - 2007 1,100,000 1,076,625
See accompanying notes.
14
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY INCOME FUND
CORPORATE BOND SERIES (continued)
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
YANKEE - CORPORATE - 9.4%
Abbey National PLC,
6.69% - 2005 $1,150,000 $ 1,134,187
ABN AMRO Bank NV,
7.55% - 2006 1,000,000 1,021,250
BCH Cayman Islands, Ltd.,
7.70% - 2006 1,000,000 1,016,250
Panamerican Beverages, Inc.,
8.125% - 2003 1,200,000 1,162,500
Santander Financial Issuances, Ltd.,
7.00% - 2006 900,000 892,125
----------
5,226,312
----------
Total corporate bonds - 71.8% 40,072,155
MORTGAGE BACKED SECURITIES
- --------------------------
U.S. GOVERNMENT AGENCIES - 3.7%
Federal Home Loan Mortgage Corporation,
FHR #1311 J, 7.50% - 2021 CMO 1,050,000 1,048,708
FHR #1930 AB, 7.50% - 2023 CMO 352,998 358,480
Federal National Mortgage Association,
FNR #1990-108 G,
7.00% - 2020 CMO 646,268 640,265
----------
2,047,453
U.S. GOVERNMENT SECURITIES - 6.3%
Government National Mortgage Association,
GNMA #313107,
7.00% - 2022 798,602 793,618
GNMA #352022,
7.00% - 2023 732,690 726,030
GNMA #369303,
7.00% - 2023 687,709 682,077
GNMA #462680,
7.00% - 2028 907,480 896,563
GNMA II #2445,
8.00% - 2027 295,738 301,558
GNR 1997-10 B,
7.50% - 2019 CMO 146,884 147,416
----------
3,547,262
NON-AGENCY SECURITIES - 4.0%
Chase Capital Mortgage Securities
Company, 1997-1B,
7.37% - 2007 CMO 1,500,000 1,553,205
Chase Capital Mortgage Securities
Company, 1998-1B,
6.56% - 2008 CMO 700,000 691,789
----------
2,244,994
----------
Total mortgage backed securities -14.0% 7,839,709
PRINCIPAL MARKET
GOVERNMENT SECURITIES AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES - 11.4%
U.S. Treasury Bond,
6.625% - 2027 $1,000,000 $1,055,130
U.S. Treasury Notes
5.75% - 2003 3,000,000 2,995,650
6.50% - 2005 1,000,000 1,028,190
U.S. Department of Housing &
Urban Development,
6.93% - 2013 1,290,000 1,286,024
----------
Total government securities - 11.4% 6,364,994
-----------
Total investments - 97.2% 54,276,858
Cash and other assets,
less liabilities - 2.8% 1,553,004
-----------
Total net assets - 100.0% $55,829,862
===========
SECURITY INCOME FUND
U.S. GOVERNMENT SERIES
U.S. GOVERNMENT & GOVERNMENT AGENCY SECURITIES
- ----------------------------------------------
FEDERAL HOME LOAN BANKS - 2.5%
5.19% - 2003 $500,000 $ 482,955
FEDERAL HOME LOAN MORTGAGE CORPORATION - 10.6%
5.50% - 2002 1,000,000 989,750
5.125% - 2008 1,000,000 910,340
8.29% - 2015 150,000 174,715
-----------
2,074,805
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 19.9%
5.45% - 2003 1,000,000 975,750
7.40% - 2004 600,000 632,916
7.49% - 2005 285,000 300,367
7.65% - 2005 250,000 265,408
7.875% - 2005 500,000 536,140
6.00% - 2008 750,000 729,855
6.16% - 2028 500,000 466,785
-----------
3,907,221
FINANCING CORPORATION - 3.4%
9.65% - 2018 500,000 661,250
See accompanying notes.
15
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY INCOME FUND
U.S. GOVERNMENT SERIES (continued)
U.S. GOVERNMENT & GOVERNMENT PRINCIPAL MARKET
AGENCY SECURITIES (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 29.3%
GNMA #328618, 7.00% - 2022 $215,791 $ 213,874
GNMA II #1260, 7.00% - 2023 164,596 162,623
GNMA #347017, 7.00% - 2024 400,191 396,269
GNMA #371006, 7.00% - 2024 220,505 218,525
GNMA #371012, 7.00% - 2024 410,626 406,656
GNMA II #1849, 8.50% - 2024 193,981 202,284
GNMA #411643, 7.75% - 2025 291,139 296,190
GNMA #780454, 7.00% - 2026 738,135 729,138
GNMA #2320, 7.00% - 2026 349,826 345,016
GNMA II #2270, 8.00% - 2026 311,264 317,010
GNMA II #9365, 8.25% - 2026 201,139 208,504
GNMA #2689, 6.50% - 2028 392,089 375,915
GNMA #464356, 6.50% - 2028 765,054 736,487
GNMA #462680, 7.00% - 2028 90,748 89,656
GNMA #2616, 7.00% - 2028 503,879 495,943
GNMA #365608, 7.50% - 2034 516,509 543,084
---------
5,737,174
Private Export Funding Corporation - 2.3%
6.31% - 2004 100,000 100,500
7.01% - 2004 350,000 363,563
---------
464,063
Student Loan Marketing
Association - 2.4%
9.25% - 2004 420,000 474,298
Tennessee Valley Authority - 5.0%
6.00% - 2013 500,000 505,625
6.75% - 2025 500,000 472,500
----------
978,125
U.S. TREASURY NOTES - 14.8%
5.50% - 2003 650,000 643,220
5.875% - 2004 1,000,000 1,003,090
6.50% - 2006 100,000 103,199
5.625% - 2008 500,000 489,575
8.75% - 2008 600,000 662,670
----------
2,901,754
U.S. TREASURY BONDS - 5.7%
6.00% - 2026 1,150,000 1,120,836
----------
Total investments - 95.9% 18,802,481
Cash and other assets,
less liabilities - 4.1% 797,247
----------
Total net assets - 100.0% $19,599,728
==========
SECURITY INCOME FUND
LIMITED MATURITY BOND SERIES
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS OF SHARES VALUE
- --------------------------------------------------------------------------------
AIRLINES - 2.9%
Southwest Airlines Company,
7.875% - 2007 $100,000 $105,625
United Air Lines,
11.21% - 2014 $75,000 94,125
---------
199,750
AUTOMOTIVE - 2.2%
Federal-Mogul Corporation,
7.875% - 2010 $25,000 23,437
General Motors Corporation,
7.70% - 2016 $100,000 103,125
Mark IV Industries, Inc.,
7.505% - 2007 $25,000 23,063
--------
149,625
BANKING - 3.7%
BF Saul REIT,
9.75% - 2008 $13,000 12,334
Bank of New York, Inc.,
6.50% - 2003 $100,000 99,250
First Union Corporation,
8.125% - 2002 $110,000 114,675
Golden State Holdings,
7.125% - 2005 $25,000 24,125
--------
250,384
BASIC INDUSTRY - OTHER - 1.7%
Pioneer Hi Bred International, Inc.,
5.75% - 2009 $125,000 116,406
BEVERAGE - 2.8%
Anheuser-Busch Companies, Inc.,
7.10% - 2007 $100,000 101,125
Pepsi Bottling Holdings, Inc.,
5.625% - 2009 $100,000 91,375
--------
192,500
BROKERAGE - 1.8%
SI Financing Trust, Inc.,
9.50% - 2026(1) 4,560 119,415
BUILDING MATERIALS - 2.5%
LaFarge Corporation,
6.375% - 2005 $50,000 48,250
Nortek, Inc., 8.875% - 2008 $25,000 25,625
Vulcan Materials Company,
5.75% - 2004 $100,000 97,625
---------
171,500
CONSTRUCTION MACHINERY - 0.7%
AGCO Corporation,
8.50% - 2006 $25,000 23,562
Columbus McKinnon Corporation,
8.50% - 2008 $25,000 24,313
---------
47,875
See accompanying notes.
16
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY INCOME FUND
LIMITED MATURITY BOND SERIES (continued)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL - OTHER - 0.2%
American ECO Corporation,
9.625% - 2008 $25,000 $ 14,437
CONSUMER NONCYCLICAL - OTHER - 0.7%
AK Steel Corporation,
7.875% - 2009 $25,000 24,188
California Steel Industries,
8.50% -2009 $25,000 24,438
--------
48,626
ENERGY - OTHER - 0.4%
P&L Coal Holdings Corporation,
8.875% - 2008 $25,000 25,062
ENERGY - REFINING - 2.4%
Vastar Resources, Inc.,
8.75% - 2005 $150,000 162,750
FINANCIAL COMPANIES - 12.5%
American RE Capital,
8.50% - 2025(1) 3,900 99,206
Associates Corporation, N.A.,
7.55% - 2006 $100,000 103,750
CB Richard Ellis Service,
8.875% - 2006 $25,000 24,875
General Electric Capital Corporation,
8.625% - 2008 $100,000 112,375
Household Financial Corporation,
8.00% - 2004 $150,000 158,063
International Lease Finance Corporation,
8.25% - 2000 $150,000 152,219
Merill Lynch & Company
7.375% - 2006 $100,000 103,000
Morgan Stanley Dean Witter Discover
& Company, 6.875% - 2007 $100,000 99,625
---------
853,113
FINANCE - OTHER - 1.4%
EOP Operating Limited Partnership, REIT,
6.625% - 2005 $100,000 96,250
FOOD - 2.8%
Archer-Daniels-Midland Company,
8.875% - 2011 $100,000 115,250
Cargill Corporation,
6.15% - 2008 $75,000 72,094
--------
187,344
PRINCIPAL MARKET
CORPORATE BONDS (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
GAMING - 3.4%
Boyd Gaming Corporation,
9.25% - 2003 $25,000 $ 25,438
Circus Circus Enterprise,
9.25% - 2005 25,000 25,375
Harrah's Operating, Inc.,
7.875% - 2005 25,000 24,187
MGM Grand, Inc.,
6.95% - 2005 75,000 69,844
Mirage Resorts, Inc.,
6.625% - 2005 65,000 61,831
Park Place Entertainment,
7.875% - 2005 25,000 23,750
--------
230,425
HEALTH CARE - 0.4%
Tenet Healthcare,
8.125% - 2008 25,000 24,062
HOME CONSTRUCTION - 0.4%
MDC Holdings,
8.375% - 2008 12,000 11,640
Toll Corporation,
7.75% - 2007 13,000 12,447
--------
24,087
INDEPENDENT ENERGY - 0.7%
Seagull Energy Corporation,
8.625% - 2005 50,000 49,312
INSURANCE - 1.5%
Hartford Life, Inc.,
7.10% - 2007 100,000 100,625
INSURANCE - LIFE - 1.4%
Chubb Corporation,
6.15% - 2005 100,000 96,625
LODGING - 0.3%
HMH Properties,
7.875% - 2008 25,000 22,937
MEDIA - CABLE - 2.4%
Adelphia Communications,
8.375% - 2008 25,000 24,750
Century Communications,
8.375% - 2007 25,000 24,437
Jones Intercable, Inc.,
7.625% - 2008 25,000 25,937
Rogers Communications, Inc.,
9.125% - 2006 25,000 25,438
Time Warner Entertainment
Corporation, 10.15% - 2012 50,000 61,625
--------
162,187
See accompanying notes.
17
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY INCOME FUND
LIMITED MATURITY BOND SERIES (continued)
PRINCIPAL MARKET
CORPORATE BONDS (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
MEDIA - NON-CABLE - 3.4%
Big Flower Press Holdings, Inc.,
8.875% - 2007 $25,000 $ 23,688
Heritage Media Corporation,
8.75% - 2006 100,000 107,000
K-III Communications Corporation,
10.25% - 2004 75,000 75,187
USA Networks,
6.75% - 2005 25,000 24,156
--------
230,031
METALS - 0.7%
Ameristeel Corporation,
8.75% - 2008 25,000 24,875
WHX Corporation,
10.50% - 2005 25,000 23,687
--------
48,562
PACKAGING - 0.4%
Ball Corporation,
7.75% - 2006 25,000 24,812
RETAILERS - 5.2%
Lowe's Companies, Inc.,
6.70% - 2007 100,000 99,375
Sears & Roebuck Company,
6.41% - 2001 150,000 150,375
Zale Corporation,
8.50% - 2007 100,000 102,125
---------
351,875
SERVICES - 0.8%
Loewen Group International, Inc.,
8.25% - 2003* 50,000 31,875
Protection One Alarm,
7.375% - 2005 25,000 23,750
---------
55,625
SUPERMARKETS - 1.4%
Safeway, Inc.,
6.50% - 2008 100,000 96,625
TELECOMMUNICATIONS - 7.6%
AT&T Corporation,
7.00% - 2005 100,000 100,875
Alestra SA,
12.625% - 2009 25,000 23,688
Cable & Wireless Communication PLC,
6.75% - 2008 50,000 48,187
Comcast Cellular Holdings, Inc.,
9.50% - 2007 25,000 28,094
Mastec, Inc.,
7.75% - 2008 25,000 24,469
MCI WorldCom, Inc.,
6.40% - 2005 100,000 97,625
New Jersey Bell,
6.625% - 2008 100,000 98,125
SBC Communications Capital
Corporation, 6.625% - 2007 100,000 99,125
---------
520,188
TEXTILES - 0.3%
Westpoint Stevens, Inc.,
7.875% - 2008 $25,000 $ 24,188
TOBACCO- 1.3%
Dimon, Inc.,
8.875% - 2006 50,000 45,688
Standard Commercial Tobacco
Corporation, 8.875% - 2005 50,000 41,000
---------
86,688
TRANSPORTATION - OTHER - 0.4%
Allied Holdings, Inc.,
8.625% - 2007 25,000 24,344
UTILITIES - ELECTRIC - 4.3%
CMS Energy Corporation,
6.75% - 2004 25,000 23,781
Calpine Corporation,
8.75% - 2007 25,000 25,125
Cinergy Global Resources,
6.20% - 2008 100,000 94,750
Consolidated Edison Company,
6.625% - 2002 150,000 151,125
---------
294,781
UTILITIES - NATURAL GAS - 2.2%
MCN Investment Corporation,
6.32% - 2003 150,000 147,938
YANKEE - CANADIAN - 1.4%
Quebecor Printing Capital,
7.25% - 2007 100,000 97,875
YANKEE - CORPORATE - 4.4%
ABN AMRO Bank NV,
7.55% - 2006 100,000 102,125
Den Danske Bank,
7.40% - 2010 100,000 101,625
Panamerican Beverages, Inc.,
8.125% - 2003 100,000 96,875
---------
300,625
---------
Total corporate bonds - 83.0% 5,649,454
See accompanying notes.
18
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY INCOME FUND
LIMITED MATURITY BOND SERIES (continued)
PRINCIPAL MARKET
MORTGAGE BACKED SECURITIES AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES - 7.2%
Federal Home Loan Banks
FHLB, 5.19% - 2003 $150,000 $ 144,887
Federal Home Loan Mortgage Corporation,
FHG #42 K,
8.00% - 2024 CMO 114,271 117,901
FHR #1311 J,
7.50% - 2021 CMO 100,000 99,877
FHR #1930 AB,
7.50% - 2023 CMO 25,956 26,359
Federal National Mortgage Association,
FNR #1992-143 J,
7.00% - 2020 CMO 896 892
FNMA, 5.45% - 2003 100,000 97,575
---------
487,491
U.S. GOVERNMENT SECURITIES - 3.4%
Government National Mortgage Association,
GNMA #369303,
7.00% - 2023 68,771 68,208
GNMA I #780454
7.00% - 2026 92,267 91,142
GNMA II #2445,
8.00% - 2027 70,977 72,374
---------
231,724
NON-AGENCY SECURITIES - 0.4%
Global Rated Eligible Asset Trust,
7.45% - 2006 44,440 28,886
----------
Total mortgage backed securities - 11.0% 748,101
GOVERNMENT SECURITIES
- ---------------------
U.S. GOVERNMENT SECURITIES - 0.8%
U.S. Department of Housing and
Urban Development,
6.93% - 2013 50,000 49,846
CANADIAN GOVERNMENT SECURITIES - 2.4%
Province of Quebec,
8.625% - 2005 150,000 164,063
----------
Total government securities - 3.2% 213,909
----------
Total investments - 97.2% 6,611,464
Cash and other assets, less liabilities - 2.8% 192,665
----------
Total net assets - 100.0% $6,804,129
==========
SECURITY INCOME FUND
HIGH YIELD SERIES
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS OF SHARES VALUE
- --------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 1.2%
Burke Industries, Inc.,
10.00% - 2007 $175,000 $ 132,563
AUTOMOTIVE - 1.5%
Federal-Mogul Corporation,
7.50% - 2009 $75,000 69,281
7.875% - 2010 $100,000 93,750
--------
163,031
BANKING - 2.4%
BF Saul REIT,
9.75% - 2008 $75,000 71,156
FCB/NC Capital Trust,
8.05% - 2028 $50,000 47,375
Homeside, Inc.,
11.25% - 2003 $125,000 143,437
--------
261,968
BEVERAGES - 1.0%
Delta Beverage Group,
9.75% - 2003 $100,000 103,000
BROKERAGE - 1.0%
SI Financing Trust, Inc.,
9.50% - 2026(1) 4,000 104,750
BUILDING MATERIALS - 4.0%
American Plumbing & Mechanical,
Inc., 11.625% - 2008 $200,000 192,500
Knoll, Inc.,
10.875% - 2006 $100,000 110,125
Nortek, Inc.,
8.875% - 2008 $125,000 128,125
--------
430,750
CONSTRUCTION MACHINERY - 3.6%
AGCO Corporation,
8.50% - 2006 $100,000 94,250
Columbus McKinnon Corporation,
8.50% - 2008 $125,000 121,562
Navistar International,
8.00% - 2008 $75,000 77,625
Titan Wheel International, Inc.,
8.75% - 2007 $100,000 95,625
--------
389,062
CONSUMER CYCLICAL - OTHER - 2.5%
American ECO Corporation,
9.625% - 2008 $125,000 72,188
Musicland Group,
9.00% - 2003 $200,000 199,250
--------
271,438
CONSUMER NONCYCLICAL - OTHER - 2.3%
AK Steel Corporation,
7.875% - 2009 $75,000 72,563
California Steel Industries,
8.50% - 2009 $175,000 171,062
--------
243,625
See accompanying notes.
19
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY INCOME FUND
HIGH YIELD SERIES (continued)
PRINCIPAL MARKET
CORPORATE BONDS AMOUNT VALUE
- --------------------------------------------------------------------------------
ENERGY - INDEPENDENT - 1.4%
COHO Energy, Inc.,
8.875% - 2007* $150,000 $ 79,125
Seagull Energy Corporation,
8.625% - 2005 75,000 73,969
--------
153,094
ENERGY - OTHER - 0.7%
P & L Coal Holdings Corporation,
8.875% - 2008 75,000 75,188
ENERGY - REFINING - 2.2%
Crown Central Petroleum,
10.875% - 2005 140,000 127,050
Giant Industries, Inc.,
9.00% - 2007 125,000 114,063
--------
241,113
ENTERTAINMENT - 0.7%
Premier Parks,
9.75% - 2007 75,000 78,188
FINANCIAL COMPANIES - 1.6%
CB Richard Ellis Service,
8.875% - 2006 75,000 74,625
Dollar Financial Group, Inc.,
10.875% - 2006 100,000 102,375
--------
177,000
FOOD - 1.8%
Chiquita Brands International, Inc.,
10.25% - 2006 100,000 101,500
Nash Finch Company,
8.50% - 2008 100,000 90,000
--------
191,500
GAMING - 8.5%
Circus Circus Enterprise,
6.75% - 2003 100,000 93,750
9.25% - 2005 75,000 76,125
Harrahs Operating, Inc.,
7.875% - 2005 150,000 145,125
Hollywood Park, Inc.,
9.25% - 2007 100,000 98,750
Isle of Capri Casinos,
8.75% - 2009 100,000 93,750
MGM Grand, Inc.,
6.95% - 2005 125,000 116,406
Mirage Resorts, Inc.,
6.625% - 2005 125,000 118,906
Park Place Entertainment,
7.875% - 2005 175,000 166,250
--------
909,062
HEALTH CARE - 4.3%
Genesis Health Ventures,
9.875% - 2009 $100,000 $ 82,750
Multicare Companies, Inc.,
9.00% - 2007 75,000 50,812
Packard Bioscience Company,
9.375% - 2007 80,000 75,400
Prime Medical Services,
8.75% - 2008 75,000 73,313
Rural/Metro,
7.875% - 2008 100,000 90,500
Tenet Healthcare Corporation,
8.125% - 2008 100,000 96,250
--------
469,025
HOME CONSTRUCTION - 4.3%
D.R. Horton, Inc.,
8.375% - 2004 75,000 74,625
Oakwood Homes Corporation,
8.125% - 2009 200,000 191,750
Standard Pacific Corporation,
8.50% - 2009 150,000 147,750
Toll Corporation,
7.75% - 2007 50,000 47,875
--------
462,000
INSURANCE - 0.7%
GENAMERICA Capital, Inc.,
8.525% - 2027 75,000 71,250
LODGING - 3.3%
HMH Properties,
7.875% - 2008 175,000 160,563
Vail Resorts Inc.,
8.75% - 2009 200,000 195,500
-------
356,063
MEDIA - CABLE - 4.6%
Adelphia Communications Corporation,
9.50% - 2004 17,356 18,158
8.375% - 2008 100,000 99,000
Century Communications,
9.50% - 2005 100,000 103,500
8.375% - 2007 75,000 73,313
Diamond Holdings, PLC
9.125% - 2008 100,000 100,250
Rogers Cablesystems, Ltd.
9.625% - 2002 100,000 105,750
--------
499,971
See accompanying notes.
20
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY INCOME FUND
HIGH YIELD SERIES (continued)
PRINCIPAL MARKET
CORPORATE BONDS (CONTINUED) AMOUNT VALUE
- --------------------------------------------------------------------------------
MEDIA - NONCABLE - 4.1%
Allbritton Communications Company,
9.75% - 2007 $75,000 $ 75,750
Big Flower Press Holdings, Inc.,
8.875% - 2007 75,000 71,063
Golden Books Publishing, Inc.,
7.65% - 2002* 100,000 40,750
Heritage Media Corporation,
8.75% - 2006 100,000 107,000
Hollinger International Publishing, Inc.,
8.625% - 2005 25,000 25,312
K-III Communications Corporation,
10.25% - 2004 50,000 50,125
USA Networks,
6.75% - 2005 75,000 72,468
--------
442,468
METALS - 3.5%
Ameristeel Corporation,
8.75% - 2008 100,000 99,500
Bulong Operations,
12.50% - 2008 75,000 75,563
Simcala, Inc.,
9.625% - 2006 75,000 54,937
Wheeling-Pittsburgh Corporation,
9.25% - 2007 100,000 96,250
WHX Corporation,
10.50% - 2005 50,000 47,375
--------
373,625
PACKAGING & CONTAINERS - 3.4%
Huntsman Packaging Corporation,
9.125% - 2007 125,000 123,437
Indesco International, Inc.,
9.75% - 2008 150,000 98,625
Plastic Containers, Inc.,
10.0% - 2006 125,000 140,937
--------
362,999
RETAILERS - 3.7%
Ames Department Stores,
10.0% - 2006 200,000 195,500
Jo-Ann Stores,
10.375% - 2007 100,000 98,000
Zale Corporation,
8.50% - 2007 100,000 102,125
--------
395,625
SERVICES - 2.4%
Loewen Group, Inc.,
6.70% - 1999* 100,000 64,750
Protection One Alarm,
7.375% - 2005 200,000 190,000
--------
254,750
TECHNOLOGY - 1.8%
AMKOR Technologies, Inc.,
9.25 - 2006 200,000 194,250
TELECOMMUNICATIONS - 11.7%
ALESTRA SA,
12.625% - 2009 $200,000 $ 189,500
Call-Net Enterprises, Inc.,
9.375% - 2009 100,000 95,250
Loral Space & Communications,
9.5% - 2006 200,000 174,500
Mcleodusa, Inc.,
8.375% - 2008 150,000 140,250
MJD Communications, Inc.,
9.50% - 2008 150,000 149,625
Pacific West Telecommunications, Inc.,
13.5% - 2009 200,000 198,000
RCN Corporation,
10.0% - 2007 225,000 226,688
Satelites Mexicanos, Inc., S.A.
10.125% - 2004 100,000 79,750
----------
1,253,563
TEXTILES - 0.7%
Westpoint Stevens, Inc.,
7.875% - 2008 75,000 72,563
TOBACCO - 1.0%
Dimon, Inc.,
8.875% - 2006 50,000 45,688
Standard Commerical Tobacco
Corporation, 8.875% - 2005 75,000 61,500
----------
107,188
TRANSPORTATION - OTHER - 2.9%
Allied Holdings, Inc.,
8.625% - 2007 75,000 73,031
Pegasus Aviation Lease Securitizations,
5.878% - 2029 200,000 112,484
Teekay Shipping Corporation,
8.32% - 2008 135,000 127,744
----------
313,259
UTILITIES - ELECTRIC - 4.6%
AES Corporation,
10.25% - 2006 100,000 102,250
Calpine Corporation,
8.75% - 2007 125,000 125,625
East Coast Power LLC
6.737% - 2008 100,000 97,125
7.066% - 2012 100,000 94,625
Niagara Mohawk Power,
7.75% - 2008 75,000 77,156
----------
496,781
----------
Total corporate bonds - 93.4% 10,050,712
See accompanying notes.
21
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY INCOME FUND
HIGH YIELD SERIES (continued)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
PREFERRED STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
BANKS AND CREDIT - 1.0%
California Federal Bank,
9.125% 4,000 $ 104,500
MEDIA - CABLE - 0.6%
CSC Holdings, Inc., 11.125% 635 70,506
MEDIA - NONCABLE - 0.7%
Primedia, Inc., 10.00% - 2008 700 71,750
----------
Total preferred stocks - 2.3% 246,756
COMMON STOCKS
- -------------
BROADCAST MEDIA - 0.4%
Infinity Broadcasting Corporation 1,500 44,625
REAL ESTATE INVESTMENT TRUST - 1.7%
Bedford Property Investors, Inc., 1,200 21,450
Centerpoint Properties Corporation 575 21,059
Duke-Weeks Realty Corporation 850 19,178
First Industrial Realty Trust, Inc. 805 22,087
KIMCO Realty Corporation 500 19,563
Prentiss Properties Trust 1,400 32,900
Prologis Trust 925 18,731
Reckson Associates Realty Corporation 930 21,855
----------
176,823
----------
Total common stocks - 2.1% 221,448
----------
Total investments - 97.8% 10,518,916
Cash and other assets, less liabilities - 2.2% 237,864
----------
Total net assets - 100.0% $10,756,780
==========
SECURITY MUNICIPAL BOND FUND
PRINCIPAL MARKET
MUNICIPAL BONDS AMOUNT VALUE
- --------------------------------------------------------------------------------
CALIFORNIA - 11.2%
Los Angeles, California Wastewater
System Revenue, 6.00% - 2014 $1,100,000 $1,166,275
Los Angeles County, California Metro
Authority, 5.625% - 2018 $1,000,000 1,017,040
----------
2,183,315
FLORIDA - 3.0%
Florida State Board of Education
Capital Outlay, 5.00% - 2015 $600,000 584,844
ILLINOIS - 10.8%
DuPage County, Illinois Stormwater
Project Refunding, 5.60% - 2021 $1,000,000 $1,029,120
Joliet, Illinois Regional Port District,
Marine Terminal Revenue Exxon
Project, 3.90% - 2024(2) 100,000 100,000
Winnebago County, Illinois School
District No. 122, 0% - 2014(3) 2,155,000 978,327
----------
2,107,447
MISSISSIPPI - 0.5%
Mississippi Power Company Project,
3.55% - 20252 100,000 100,000
MISSOURI - 2.7%
Kansas City, Missouri Port Authority
Riverfront Park, 5.75% - 2005 500,000 521,790
NEVADA - 5.2%
Clark County, Nevada School District,
Series A, 5.50% - 2016 1,000,000 1,006,860
NEW JERSEY - 5.6%
North Brunswick Township, New Jersey
Board of Education, 6.30% - 2013 1,000,000 1,084,910
NEW YORK - 10.5%
Long Island Power Authority,
New York Electric System, 5.125% - 2012 250,000 247,787
New York State Dorm Authority Revenue
North Shore, 5.50% - 2012 1,000,000 1,030,460
New York State Thruway Authority
Highway & Bridge Trust Fund,
Series B, 5.375% - 2011 750,000 766,005
----------
2,044,252
NORTH CAROLINA - 3.0%
Halifax County, North Carolina
Industrial Facilities & Pollution
Control Financing Authority, 3.70% - 2021(2) 575,000 575,000
OHIO - 3.2%
Ohio State Turnpike - Community
Turnpike Revenue, Series A, 5.50% - 2016 600,000 619,158
PENNSYLVANIA - 5.3%
Delaware Valley, Pennsylvania
Regional Financial Authority, 5.50% - 2028 1,000,000 1,023,440
RHODE ISLAND - 5.4%
Rhode Island State - General
Obligation, 5.30% - 2008 1,030,000 1,057,594
See accompanying notes.
22
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY MUNICIPAL BOND FUND (continued)
PRINCIPAL MARKET
MUNICIPAL BONDS (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
TEXAS - 13.3%
Houston, Texas - General Obligation,
5.25% - 2011 $500,000 $ 504,110
Houston, Texas Water & Sewer
System Revenue, Series A,
6.20% - 2020 1,000,000 1,090,920
University of Texas, University
Financing System, Series B,
4.80% - 2009 1,000,000 987,490
----------
2,582,520
VIRGINIA - 1.0%
King George County, Virginia
Industrial Development Authority
Revenue, 3.70% - 2024(2) 100,000 100,000
Waynesboro, Virginia Industrial
Development Authority Revenue,
3.60% - 2028(2) 100,000 100,000
----------
200,000
WASHINGTON - 17.1%
Island County, Washington School
District South Whidbey, 6.75% - 2007 1,000,000 1,129,270
King County, Washington Sewer
Revenue, Series A, 6.25% - 2034 1,000,000 1,088,260
Washington Public Power Supply
System Revenue Nuclear Project #2,
6.30% - 2012 1,000,000 1,097,060
----------
3,314,590
WYOMING - 0.5%
Sublette County, Wyoming Pollution
Control Revenue, 3.50% - 2017(2) 100,000 100,000
----------
Total investments - 98.3% 19,105,720
Cash and other assets, less liabilities - 1.7% 330,371
----------
Total net assets - 100.0% $19,436,091
==========
SECURITY CASH FUND
COMMERCIAL PAPER
- ----------------
BEVERAGES - 2.8%
Coca Cola Company,
5.15%, 1-20-00 300,000 $ 291,288
5.25%, 2-7-00 1,400,000 1,354,879
----------
1,646,167
BEVERAGES - ALCOHOLIC - 1.5%
Anheuser-Busch Companies, Inc.,
4.90%, 7-22-99 $ 900,000 $ 897,428
BROKERAGE - 2.8%
Merrill Lynch & Company, Inc.,
4.93%, 2-4-00 200,000 194,029
5.00%, 2-8-00 1,500,000 1,453,750
----------
1,647,779
BUSINESS SERVICES - 3.5%
General Electric Capital Corporation,
4.80%, 7-2-99 1,000,000 999,867
4.80%, 10-12-99 1,100,000 1,084,893
----------
2,084,760
COMBINATION GAS & ELECTRIC - 5.7%
Baltimore Gas & Electric Company,
5.20%, 7-22-99 500,000 498,483
Dayton Power & Light Company,
4.90%, 7-6-99 1,700,000 1,698,843
Madison Gas & Electric Company
4.90%, 7-12-99 1,200,000 1,198,203
----------
3,395,529
ELECTRIC UTILITIES - 14.4%
Alabama Power Company,
5.13%, 7-15-99 1,000,000 998,005
Allegheny Energy Inc.,
4.82%, 8-3-99 450,000 442,032
4.84%, 8-3-99 1,400,000 1,399,768
CLECO Corporation,
4.88%, 7-7-99 500,000 499,593
4.75%, 7-9-99 600,000 599,367
4.81%, 8-3-99 1,200,000 1,194,709
Duke Energy Corporation,
4.93%, 7-23-99 1,800,000 1,794,577
Georgia Power Company,
4.86%, 7-16-99 1,700,000 1,696,558
----------
8,624,609
ELECTRONICS - 1.0%
AVNET, Inc.,
4.93%, 8-2-99 600,000 597,371
ENTERTAINMENT - 3.0%
Walt Disney Company,
4.80%, 10-14-99 100,000 98,600
4.75%, 11-16-99 1,700,000 1,669,046
-----------
1,767,646
FINANCIAL SERVICES - 2.2%
Toyota Motor Credit Corporation,
5.055%, 7-26-99 600,000 597,933
4.92%, 8-6-99 700,000 696,556
-----------
1,294,489
See accompanying notes.
23
<PAGE>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
SECURITY CASH FUND (continued)
PRINCIPAL MARKET
COMMERCIAL PAPER (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
Food Processing - 4.1%
General Mills,
4.90%, 11-19-99 $1,300,000 $1,275,051
McCormick & Company, Inc.,
5.05%, 11-9-99 1,200,000 1,177,948
-----------
2,452,999
LEASING - 2.0%
International Lease Finance
Corporation,
4.79%, 7-21-99 600,000 598,403
4.77%, 7-28-99 600,000 597,854
-----------
1,196,257
NUCLEAR- 2.9%
Bayshore Fuel Company,
4.86%, 7-29-99 1,741,000 1,734,419
PHOTOGRAPH/IMAGING - 2.9%
Eastman Kodak Company,
4.80%, 7-13-99 1,250,000 1,248,000
4.84%, 9-24-99 480,000 474,515
-----------
1,722,515
PUBLISHING - 1.2%
McGraw-Hill Company, Inc.,
4.92%, 9-9-99 752,000 744,806
TELECOMMUNICATIONS - 2.8%
Bell Atlantic Network Funding
Corporation, 4.83%, 7-8-99 1,700,000 1,698,403
TOYS & SPORTING GOODS - 2.5%
Hasbro, Inc,.
4.81%, 8-3-99 196,000 195,136
4.86%, 8-9-99 170,000 169,105
4.93%, 9-7-99 300,000 296,211
4.94%, 9-7-99 850,000 843,064
-----------
1,503,516
-----------
Total commercial paper - 55.3% 33,008,693
U.S. GOVERNMENT & AGENCIES
- --------------------------
Federal Mortgage Corporation - 5.8%
4.64%, 8-10-99 2,000,000 1,989,689
5.05%, 10-27-99 1,500,000 1,475,171
-----------
3,464,860
Federal National Mortgage Association - 14.0%
4.00%, 7-1-99 1,820,000 1,820,000
4.74%, 9-17-99 3,700,000 3,662,001
4.66%, 12-13-99 1,000,000 978,642
4.86%, 4-12-00 2,000,000 1,922,780
-----------
8,383,423
Student Loan Mortgage Associations - 9.4%
4.92%, 10-25-05(2) $1,808,704 $ 1,800,226
5.15%, 10-28-06(2) 1,000,000 1,000,000
5.21%, 1-25-072 1,809,640 1,805,964
5.33%, 4-25-082 1,000,000 1,000,000
-----------
5,606,190
Small Business Association Pools - 6.1%
#501927, 6.00%, 2017(2) 1,178,917 1,190,042
#502398, 5.375%, 2018(2) 363,071 364,432
#503152, 5.375%, 2020(2) 594,182 594,182
#503265, 5.25%, 2021(2) 499,242 497,994
#503295, 5.25%, 2021(2) 487,679 487,983
#503303, 5.25%, 2021(2) 523,341 523,668
-----------
3,658,301
-----------
Total U.S. government & agencies - 35.3% 21,112,774
MISCELLANEOUS ASSETS
- --------------------
Funding Agreements - 8.4%
Security Life of Denver Insurance
Company, 4.96%, 10-31-2001 2,000,000 2,000,000
Travelers Insurance Company,
4.95%, 8-21-2001 3,000,000 3,000,000
-----------
Total miscellaneous assets - 8.4% 5,000,000
-----------
Total investments - 99.0% 59,121,467
Cash and other assets, less liabilities - 1.0 625,699
-----------
Total net assets - 100.0% $59,747,166
===========
The identified cost of investments owned at June 30, 1999, was the same for
federal income tax and book purposes.
*Non-income producing.
(1)Trust Preferred Securities - Securities issued by financial institutions to
augment their Tier 1 capital base. Issued on a subordinate basis relative to
senior notes or debentures. Institutions may defer cash payments for up to 10
pay periods.
(2)Variable rate security.
(3)Original issue discount bond, under terms of initial offering.
See accompanying notes.
24
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
SECURITY INCOME FUND
--------------------------------------------------------
U.S. LIMITED HIGH SECURITY SECURITY
CORPORATE GOVERNMENT MATURITY YIELD MUNICIPAL BOND CASH
BOND SERIES SERIES BOND SERIES SERIES FUND FUND
------------ ------------ ----------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (identified cost
$55,648,721, $19,370,615, $6,798,137,
$11,086,914, $18,802,322, and
$59,121,467, respectively) ................ $ 54,276,858 $ 18,802,481 $ 6,611,464 $ 10,518,916 $ 19,105,720 $59,121,467
Cash ....................................... 933,278 571,702 84,416 -- 48,626 296,394
Receivables:
Fund shares sold .......................... 513 537 132 100 2,000 749,794
Securities sold ........................... -- -- -- 205,061 -- 94,674
Interest .................................. 840,336 245,220 117,007 232,547 293,091 105,916
Security Management Company ............... 6,986 240 67 -- 1,640 --
Prepaid expenses ........................... 16,413 14,278 12,168 9,384 13,439 29,052
------------ ------------ ----------- ------------ -------------- -----------
Total assets ............................ 56,074,384 19,634,458 6,825,254 10,966,008 19,464,516 60,397,297
------------ ------------ ----------- ------------ -------------- -----------
LIABILITIES
Payable for:
Fund shares redeemed .................... $ 63,630 $ 12,524 $ -- $ 463 $ 284 $ 359,976
Dividends payable to shareholders ....... -- -- -- -- -- 231,716
Cash overdraft .......................... -- -- -- 166,789 -- --
Other Liabilities:
Management fees ......................... 26,549 -- -- -- 8,927 27,344
Custodian fees .......................... 7,254 929 821 533 -- 1,198
Transfer and administration fees ........ 12,655 6,865 2,293 2,055 2,521 13,173
Professional fees ....................... 430 1,226 1,990 3,765 1,817 2,407
12b-1 distribution plan fees ............ 122,237 8,046 15,535 34,171 5,678 --
Miscellaneous fees ...................... 11,767 5,140 486 1,452 9,198 14,317
------------ ------------ ----------- ------------ -------------- -----------
Total liabilities ..................... 244,522 34,730 21,125 209,228 28,425 650,133
------------ ------------ ----------- ------------ -------------- -----------
NET ASSETS ................................. $ 55,829,862 $ 19,599,728 $ 6,804,129 $ 10,756,780 $ 19,436,091 $59,747,166
============ ============ =========== ============ ============== ===========
NET ASSETS CONSIST OF:
Paid in capital ........................... $ 69,489,183 $ 21,060,008 $ 6,992,824 $ 11,240,261 $ 20,093,289 $59,747,166
Undistributed net investment income ....... 48,837 11,806 3,900 1,844 6,151 --
Accumulated undistributed net realized
gain (loss) on sale of investments ....... (12,336,295) (903,952) (5,922) 82,673 (966,747) --
Net unrealized appreciation (depreciation)
in value of investments .................. (1,371,863) (568,134) (186,673) (567,998) 303,398 --
------------ ------------ ----------- ------------ -------------- -----------
Total net assets ....................... $ 55,829,862 $ 19,599,728 $ 6,804,129 $ 10,756,780 $ 19,436,091 $59,747,166
============ ============ =========== ============ ============== ===========
CLASS "A" SHARES
Capital shares outstanding ............... 6,871,986 2,969,313 550,666 440,593 1,798,563 59,747,166
Net assets ............................... $ 46,268,529 $ 13,892,832 $ 5,454,900 $ 6,418,224 $ 17,651,798 $59,747,166
Net asset value per share ................ $ 6.73 $ 4.68 $ 9.91 $ 14.57 $ 9.81 $ 1.00
============ ============ =========== ============ ============== ===========
Offering price per share (net asset
value divided by 95.25%) ............... $ 7.07 $ 4.91 $ 10.40 $ 15.30 $ 10.30 --
============ ============ =========== ============ ============== ===========
CLASS "B" SHARES
Capital shares outstanding ............... 1,410,888 1,223,169 136,635 298,596 181,545 --
Net assets ............................... $ 9,561,333 $ 5,706,896 $ 1,349,229 $ 4,338,556 $ 1,784,293 --
Net asset value per share ................ $ 6.78 $ 4.67 $ 9.87 $ 14.53 $ 9.83 --
============ ============ =========== ============ ============== ===========
</TABLE>
See accompanying notes.
25
<PAGE>
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
SECURITY INCOME FUND
----------------------------------------------------
U.S. LIMITED HIGH SECURITY SECURITY
CORPORATE GOVERNMENT MATURITY YIELD MUNICIPAL BOND CASH
BOND SERIES SERIES BOND SERIES SERIES FUND FUND
----------- ----------- ----------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ..................................... $ 24,437 $ -- $ -- $ 10,647 $ -- $ --
Interest ...................................... 1,962,366 607,345 256,985 454,084 514,213 1,691,130
----------- ----------- ----------- --------- -------------- ----------
Total investment income ..................... 1,986,803 607,345 256,985 464,731 514,213 1,691,130
EXPENSES:
Management fees ............................... 141,994 48,249 18,482 32,385 50,452 170,747
Custodian fees ................................ 10,069 1,893 1,796 1,168 1,762 4,083
Transfer/maintenance fees ..................... 59,217 31,669 3,433 7,023 5,627 65,232
Administration fees ........................... 25,559 8,685 3,327 4,858 9,081 15,367
Directors' fees ............................... 2,545 1,588 179 781 5,868 7,575
Professional fees ............................. 2,704 2,705 2,713 2,174 3,095 2,486
Reports to shareholders ....................... 4,763 2,885 132 1,303 701 11,568
Registration fees ............................. 13,292 10,935 9,540 9,246 12,338 21,529
Other expenses ................................ 1,508 39 157 217 744 1,191
12b-1 distribution plan fees .................. 98,539 43,704 14,363 30,155 31,504 --
----------- ----------- ----------- --------- -------------- ----------
360,190 152,352 54,122 89,310 121,172 299,778
Less: Earnings credits applied ................. -- -- -- -- (1,762) --
Reimbursement of expenses ..................... (22,451) (48,489) (19,053) (32,385) (11,769) --
----------- ----------- ----------- --------- -------------- ----------
Total expenses ................................ 337,739 103,863 35,069 56,925 107,641 299,778
----------- ----------- ----------- --------- -------------- ----------
Net investment income ....................... 1,649,064 503,482 221,916 407,806 406,572 1,391,352
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss during the period on
investments ................................. (263,292) (128,209) 1,870 82,446 7,834 --
Net change in unrealized appreciation
(depreciation) during the period on
investments ................................. (3,204,202) (1,046,231) (352,887) (447,913) (872,250) --
----------- ----------- ----------- --------- -------------- ----------
Net loss .................................. (3,467,494) (1,174,440) (351,017) (365,467) (864,416) --
----------- ----------- ----------- --------- -------------- ----------
Net increase (decrease) in
net assets resulting from
operations ............................ ($1,818,430) ($ 670,958) ($ 129,101) $ 42,339 ($ 457,844) $1,391,352
=========== =========== =========== ========= ============== ==========
</TABLE>
See accompanying notes.
26
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Six Months Ended
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
SECURITY INCOME FUND
---------------------------------------------------------
U.S. LIMITED HIGH SECURITY SECURITY
CORPORATE GOVERNMENT MATURITY YIELD MUNICIPAL BOND CASH
BOND SERIES SERIES BOND SERIES SERIES FUND FUND
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
from operations:
Net investment income ............... $ 1,649,064 $ 503,482 $ 221,916 $ 407,806 $ 406,572 $ 1,391,352
Net realized gain (loss) ............ (263,292) (128,209) 1,870 82,446 7,834 --
Unrealized depreciation
during the period ................. (3,204,202) (1,046,231) (352,887) (447,913) (872,250) --
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from
operations ...................... (1,818,430) (670,958) (129,101) 42,339 (457,844) 1,391,352
Distributions to shareholders from:
Net investment income
Class A ........................ (1,422,794) (372,982) (187,516) (250,306) (373,251) (1,391,352)
Class B ........................ (190,982) (121,301) (34,702) (157,766) (27,460) --
Net realized gain
Class A ........................ -- -- -- 74 -- --
Class B ........................ -- -- -- (78) -- --
------------ ------------ ------------ ------------ ------------ ------------
Total distributions to
shareholders ............... (1,613,776) (494,283) (222,218) (408,076) (400,711) (1,391,352)
Net increase (decrease) from
capital share transactions ............. (1,774,247) 4,433,601 (563,890) 1,105,609 (84,476) (2,080,417)
------------ ------------ ------------ ------------ ------------ ------------
Total increase (decrease)
in net assets .............. (5,206,453) 3,268,360 (915,209) 739,872 (943,031) (2,080,417)
Net assets:
Beginning of period .................... 61,036,315 16,331,368 7,719,338 10,016,908 20,379,122 61,827,583
------------ ------------ ------------ ------------ ------------ ------------
End of period .......................... $ 55,829,862 $ 19,599,728 $ 6,804,129 $ 10,756,780 $ 19,436,091 $ 59,747,166
============ ============ ============ ============ ============ ============
Undistributed net investment income
at end of period ....................... $ 48,837 $ 11,806 $ 3,900 $ 1,844 $ 6,151 $ --
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
27
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For The Year Ended
December 31, 1998
<TABLE>
<CAPTION>
SECURITY INCOME FUND
---------------------------------------------------------
U.S. LIMITED HIGH SECURITY SECURITY
CORPORATE GOVERNMENT MATURITY YIELD MUNICIPAL BOND CASH
BOND SERIES SERIES BOND SERIES SERIES FUND FUND
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase in net assets from
operations:
Net investment income ................ $ 3,695,117 $ 658,917 $ 429,269 $ 708,111 $ 942,113 $ 3,076,998
Net realized gain .................... 1,119,315 184,827 54,799 120,648 272,376 --
Unrealized appreciation
(depreciation) during the period ... (339,170) 166,956 13,121 (394,063) 131,309 --
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations ........ 4,475,262 1,010,700 497,189 434,696 1,345,798 3,076,998
Distributions to shareholders from:
Net investment income
Class A ............................ (3,295,442) (558,165) (369,492) (421,676) (895,549) (3,076,998)
Class B ............................ (392,086) (101,909) (59,672) (284,325) (49,226) --
Net realized gain
Class A ............................ -- -- -- (69,754) -- --
Class B ............................ -- -- -- (50,663) -- --
------------ ------------ ------------ ------------ ------------ ------------
Total distributions to
shareholders ................... (3,687,528) (660,074) (429,164) (826,418) (944,775) (3,076,998)
Net increase (decrease) from
capital share transactions ............. (2,731,349) 7,238,155 1,107,139 797,165 (4,319,213) 4,386,798
------------ ------------ ------------ ------------ ------------ ------------
Total increase (decrease)
in net assets .................. (1,943,615) 7,588,781 1,175,164 405,443 (3,918,190) 4,386,798
Net assets:
Beginning of year ...................... 62,979,930 8,742,587 6,544,174 9,611,465 24,297,312 57,440,785
------------ ------------ ------------ ------------ ------------ ------------
End of year ............................ $ 61,036,315 $ 16,331,368 $ 7,719,338 $ 10,016,908 $ 20,379,122 $ 61,827,583
============ ============ ============ ============ ============ ============
Undistributed net investment
income at end of year .................. $ 13,549 $ 2,607 $ 4,202 $ 2,110 $ 290 $ --
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
See accompanying notes.
28
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CORPORATE BOND SERIES (CLASS A)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
-------------------------------------------------------------------------------------
1999 (C)(G) 1998 (C) 1997(C) 1996(C)(E) 1995(C)(E) 1994
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value Beginning of Period ...... $ 7.14 $ 7.05 $ 6.87 $ 7.39 $ 6.68 $ 7.81
Income from Investment Operations:
Net Investment Income .................... 0.20 0.43 0.45 0.47 0.47 0.49
Net Gain (Loss) on Securities
(realized & unrealized) ................ (0.41) 0.09 0.19 (0.52) 0.71 (1.13)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations ......... (0.21) 0.52 0.64 (0.05) 1.18 (0.64)
Less Distributions
Dividends (from Net Investment Income) ... (0.20) (0.43) (0.46) (0.47) (0.47) (0.49)
Distributions (from Capital Gains) ....... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions .................... (0.20) (0.43) (0.46) (0.47) (0.47) (0.49)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value End of Period ............ $ 6.73 $ 7.14 $ 7.05 $ 6.87 $ 7.39 $ 6.68
========== ========== ========== ========== ========== ==========
Total Return (a) ......................... (3.0%) 7.6% 9.7% (0.5%) 18.2% (8.3%)
Ratios/Supplemental Data
Net Assets End of Period (thousands) ..... $ 46,269 $ 53,055 $ 56,487 $ 73,360 $ 93,701 $ 90,593
Ratio of Expenses to Average Net Assets .. 1.10% 1.06% 1.07% 1.01% 1.02% 1.01%
Ratio of Net Investment Income (Loss)
to Average Net Assets .................. 5.89% 6.01% 6.50% 6.54% 6.62% 6.91%
Portfolio Turnover Rate .................. 41% 64% 120% 292% 200% 204%
</TABLE>
CORPORATE BOND SERIES (CLASS B)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
---------------------------------------------------------------------------------------
1999 (b)(c)(g) 1998 (b)(c) 1997(b)(c) 1996(b)(c)(e) 1995(b)(c)(e) 1994(b)
------------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value Beginning of Period ...... $ 7.19 $ 7.09 $ 6.90 $ 7.43 $ 6.71 $ 7.84
Income from Investment Operations:
Net Investment Income .................... 0.17 0.37 0.40 0.40 0.40 0.43
Net Gain (Loss) on Securities
(realized & unrealized) ................ (0.40) 0.10 0.19 (0.52) 0.73 (1.13)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations ......... (0.23) 0.47 0.59 (0.12) 1.13 (0.70)
Less Distributions
Dividends (from Net Investment Income) ... (0.18) (0.37) (0.40) (0.41) (0.41) (0.43)
Distributions (from Capital Gains) ....... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions .................... (0.18) (0.37) (0.40) (0.41) (0.41) (0.43)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value End of Period ............ $ 6.78 $ 7.19 $ 7.09 $ 6.90 $ 7.43 $ 6.71
========== ========== ========== ========== ========== ==========
Total Return(a) .......................... (3.3%) 6.9% 8.7% (1.4%) 17.3% (9.0%)
Ratios/Supplemental Data
Net Assets End of Period (thousands) ..... $ 9,561 $ 7,982 $ 6,493 $ 7,303 $ 5,743 $ 3,878
Ratio of Expenses to Average Net Assets .. 1.80% 1.85% 1.85% 1.85% 1.85% 1.85%
Ratio of Net Investment Income (Loss)
to Average Net Assets .................. 5.22% 5.18% 5.72% 5.70% 5.80% 6.08%
Portfolio Turnover Rate .................. 41% 64% 120% 292% 200% 204%
</TABLE>
See accompanying notes.
29
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
U.S. GOVERNMENT SERIES (CLASS A)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
-----------------------------------------------------------------------------------
1999 (b)(c)(g) 1998 (b)(c) 1997(b)(c) 1996(b)(c)(e) 1995(b)(c)(e) 1994(b)
------------- ----------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value Beginning of Period ........ $ 4.96 $ 4.81 $ 4.71 $ 4.97 $ 4.35 $ 4.97
Income from Investment Operations:
Net Investment Income ...................... 0.13 0.27 0.32 0.31 0.30 0.30
Net Gain (Loss) on Securities
(realized & unrealized) .................. (0.29) 0.16 0.10 (0.26) 0.62 (0.62)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations ........... (0.16) 0.43 0.42 0.05 0.92 (0.32)
Less Distributions
Dividends (from Net Investment Income) ..... (0.12) (0.28) (0.32) (0.31) (0.30) (0.30)
Distributions (from Capital Gains) ......... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions ...................... (0.12) (0.28) (0.32) (0.31) (0.30) (0.30)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value End of Period .............. $ 4.68 $ 4.96 $ 4.81 $ 4.71 $ 4.97 $ 4.35
========== ========== ========== ========== ========== ==========
Total Return (a) ........................... (3.2%) 9.1% 9.2% 1.3% 21.9% (6.5%)
Ratios/Supplemental Data
Net Assets End of Period (thousands) ....... $ 13,893 $ 12,664 $ 7,652 $ 8,036 $ 10,080 $ 8,309
Ratio of Expenses to Average Net Assets .... 0.80% 0.93% 0.60% 0.65% 1.11% 1.10%
Ratio of Net Investment Income (Loss)
to Average Net Assets .................... 5.49% 5.62% 6.10% 6.44% 6.41% 6.47%
Portfolio Turnover Rate .................... 38% 78% 39% 75% 81% 220%
</TABLE>
U.S. GOVERNMENT SERIES (CLASS B)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
-----------------------------------------------------------------------------------
1999 (b)(c)(g) 1998 (b)(c) 1997(b)(c) 1996(b)(c)(e) 1995(b)(c)(e) 1994(b)
------------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value Beginning of Period ........ $ 4.95 $ 4.80 $ 4.71 $ 4.97 $ 4.35 $ 4.97
Income from Investment Operations:
Net Investment Income ...................... 0.10 0.22 0.26 0.25 0.26 0.26
Net Gain (Loss) on Securities
(realized & unrealized) .................. (0.27) 0.16 0.10 (0.25) 0.63 (0.62)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations ........... (0.17) 0.38 0.36 (0.00) 0.89 (0.36)
Less Distributions
Dividends (from Net Investment Income) ..... (0.11) (0.23) (0.27) (0.26) (0.27) (0.26)
Distributions (from Capital Gains) ......... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions ...................... (0.11) (0.23) (0.27) (0.26) (0.27) (0.26)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value End of Period .............. $ 4.67 $ 4.95 $ 4.80 $ 4.71 $ 4.97 $ 4.35
========== ========== ========== ========== ========== ==========
Total Return (a) ........................... (3.6%) 8.0% 7.9% (0.02%) 20.9% (7.4%)
Ratios/Supplemental Data
Net Assets End of Period (thousands) ....... $ 5,707 $ 3,668 $ 1,091 $ 661 $ 582 $ 321
Ratio of Expenses to Average Net Assets .... 1.82% 1.85% 1.68% 1.86% 1.87% 1.85%
Ratio of Net Investment Income (Loss)
to Average Net Assets .................... 4.48% 4.66% 5.02% 5.23% 5.69% 5.76%
Portfolio Turnover Rate .................... 38% 78% 39% 75% 81% 220%
</TABLE>
See accompanying notes.
30
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
LIMITED MATURITY BOND SERIES (CLASS A)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
-------------------------------------------------------------------------------
1999 (b)(c)(g) 1998 (b)(c)(e) 1997(b)(c)(e) 1996(b)(c)(e) 1995(b)(c)(d)(e)
------------- ------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value Beginning of Period ............ $ 10.40 $ 10.30 $ 10.14 $ 10.66 $ 10.00
Income from Investment Operations:
Net Investment Income .......................... 0.32 0.65 0.72 0.72 0.62
Net Gain (Loss) on Securities
(realized & unrealized) ...................... (0.49) 0.10 0.16 (0.51) 0.65
--------- --------- --------- --------- ---------
Total from Investment Operations ............... (0.17) 0.75 0.88 0.21 1.27
Less Distributions
Dividends (from Net Investment Income) ......... (0.32) (0.65) (0.72) (0.72) (0.61)
Distributions (from Capital Gains) ............. -- -- -- -- --
Return of Capital .............................. -- -- -- (0.01) --
--------- --------- --------- --------- ---------
Total Distributions .......................... (0.32) (0.65) (0.72) (0.73) (0.61)
--------- --------- --------- --------- ---------
Net Asset Value End of Period .................. $ 9.91 $ 10.40 $ 10.30 $ 10.14 $ 10.66
========= ========= ========= ========= =========
Total Return (a) ............................... (1.7%) 7.5% 9.0% 2.1% 13.0%
Ratios/Supplemental Data
Net Assets End of Period (thousands) ........... $ 5,455 $ 6,365 $ 5,490 $ 4,938 $ 3,322
Ratio of Expenses to Average Net Assets ........ 0.74% 0.87% 0.55% 0.90% 0.84%
Ratio of Net Investment Income (Loss)
to Average Net Assets ........................ 6.21% 6.30% 7.10% 6.97% 5.97%
Portfolio Turnover Rate ........................ 27% 58% 76% 105% 4%
</TABLE>
LIMITED MATURITY BOND SERIES (CLASS B)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
-------------------------------------------------------------------------------
1999 (b)(c)(g) 1998 (b)(c)(e) 1997(b)(c)(e) 1996(b)(c)(e) 1995(b)(c)(d)(e)
------------- ------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value Beginning of Period ............ $ 10.37 $ 10.27 $ 10.14 $ 10.67 $ 10.00
Income from Investment Operations:
Net Investment Income ........................ 0.26 0.53 0.61 0.63 0.53
Net Gain (Loss) on Securities
(realized & unrealized) .................... (0.50) 0.11 0.14 (0.52) 0.66
--------- --------- --------- --------- ---------
Total from Investment Operations ............. (0.24) 0.64 0.75 0.11 1.19
Less Distributions
Dividends (from Net Investment Income) ......... (0.26) (0.54) (0.62) (0.63) (0.52)
Distributions (from Capital Gains) ............. -- -- -- -- --
Return of Capital .............................. -- -- -- (0.01) --
--------- --------- --------- --------- ---------
Total Distributions ............................ (0.26) (0.54) (0.62) (0.64) (0.52)
--------- --------- --------- --------- ---------
Net Asset Value End of Period .................. $ 9.87 $ 10.37 $ 10.27 $ 10.14 $ 10.67
========= ========= ========= ========= =========
Total Return (a) ............................... (2.4%) 6.4% 7.7% 1.1% 12.2%
Ratios/Supplemental Data
Net Assets End of Period (thousands) ........... $ 1,349 $ 1,354 $ 1,054 $ 761 $ 752
Ratio of Expenses to Average Net Assets ........ 1.85% 1.89% 1.50% 1.88% 1.71%
Ratio of Net Investment Income (Loss)
to Average Net Assets ........................ 5.11% 5.18% 6.15% 5.99% 5.12%
Portfolio Turnover Rate ........................ 27% 58% 76% 105% 4%
</TABLE>
See accompanying notes.
31
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
HIGH YIELD SERIES (CLASS A)
<TABLE>
<CAPTION>
FISCAL PERIOD ENDED DECEMBER 31
------------------------------------------------------------------
1999 (B)(C)(G) 1998 (B)(C) 1997(B)(C) 1996(B)(C)(F)
------------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Per Share Data
Net Asset Value Beginning of Period .............. $ 15.05 $ 15.71 $ 15.32 $ 15.00
Income from Investment Operations:
Net Investment Income ............................ 1.16 1.22 1.25 0.45
Net Gain (Loss) on Securities
(realized & unrealized) ........................ (1.06) (0.47) 0.60 0.32
--------- --------- --------- ---------
Total from Investment Operations ............ 0.10 0.75 1.85 0.77
Less Distributions
Dividends (from Net Investment Income) ........... (0.58) (1.22) (1.25) (0.45)
Distributions (from Capital Gains) ............... -- (0.19) (0.21)
--------- --------- --------- ---------
Total Distributions ............................ (0.58) (1.41) (1.46) (0.45)
--------- --------- --------- ---------
Net Asset Value End of Period .................... $ 14.57 $ 15.05 $ 15.71 $ 15.32
========= ========= ========= =========
Total Return (a) ................................. 0.7% 5.0% 12.6% 5.2%
Ratios/Supplemental Data
Net Assets End of Period (thousands) ............. $ 6,418 $ 5,781 $ 5,179 $ 2,780
Ratio of Expenses to Average Net Assets .......... 0.71% 0.76% 0.87% 1.54%
Ratio of Net Investment Income (Loss)
to Average Net Assets .......................... 7.90% 7.96% 8.14% 7.47%
Portfolio Turnover Rate .......................... 56% 103% 87% 168%
</TABLE>
HIGH YIELD SERIES (CLASS B)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
------------------------------------------------------------------
1999 (b)(c)(g) 1998 (b)(c) 1997(b)(c) 1996(b)(c)(f)
------------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Per Share Data
Net Asset Value Beginning of Period .............. $ 15.02 $ 15.68 $ 15.32 $ 15.00
Income from Investment Operations:
Net Investment Income ............................ 1.04 1.10 1.10 0.41
Net Gain (Loss) on Securities
(realized & unrealized) ........................ (1.00) (0.47) 0.59 0.32
--------- --------- --------- ---------
Total from Investment Operations ................. 0.04 0.63 1.69 0.73
Less Distributions
Dividends (from Net Investment Income) ........... (0.53) (1.10) (1.12) (0.41)
Distributions (from Capital Gains) ............... -- (0.19) (0.21) --
--------- --------- --------- ---------
Total Distributions ............................ (0.53) (1.29) (1.33) (0.41)
--------- --------- --------- ---------
Net Asset Value End of Period .................... $ 14.53 $ 15.02 $ 15.68 $ 15.32
========= ========= ========= =========
Total Return (a) ................................. 0.2% 4.2% 11.5% 4.9%
Ratios/Supplemental Data
Net Assets End of Period (thousands) ............. $ 4,339 $ 4,236 $ 4,432 $ 2,719
Ratio of Expenses to Average Net Assets .......... 1.54% 1.53% 1.80% 2.26%
Ratio of Net Investment Income (Loss)
to Average Net Assets .......................... 7.06% 7.17% 7.21% 6.74%
Portfolio Turnover Rate .......................... 56% 103% 87% 168%
</TABLE>
See accompanying notes.
32
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
SECURITY MUNICIPAL BOND FUND (CLASS A)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
--------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
(b)(c)(e)(g) (b)(c)(e) (b)(c)(e) (b)(c)(e) (b)(c)(e)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value Beginning of Period ... $ 10.24 $ 10.08 $ 9.72 $ 9.94 $ 9.05 $ 10.37
Income from Investment Operations:
Net Investment Income ................. 0.21 0.43 0.42 0.45 0.48 0.47
Net Gain (Loss) on Securities
(realized & unrealized) ............. (0.44) 0.17 0.36 (0.21) 0.89 (1.32)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations ...... (0.23) 0.60 0.78 0.24 1.37 (0.85)
Less Distributions
Dividends (from Net Investment Income) (0.20) (0.44) (0.42) (0.46) (0.48) (0.47)
Distributions (from Capital Gains) .... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions ................. (0.20) (0.44) (0.42) (0.46) (0.48) (0.47)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value End of Period ......... $ 9.81 $ 10.24 $ 10.08 $ 9.72 $ 9.94 $ 9.05
========== ========== ========== ========== ========== ==========
Total Return (a) ...................... (2.3%) 6.1% 8.3% 2.5% 15.5% (8.3%)
Ratios/Supplemental Data
Net Assets End of Period (thousands) .. $ 17,652 $ 19,012 $ 21,953 $ 23,304 $ 25,026 $ 24,092
Ratio of Expenses to Average Net Assets 1.02% 0.82% 0.82% 0.78% 0.86% 0.82%
Ratio of Net Investment Income (Loss)
to Average Net Assets ............... 4.09% 4.23% 4.29% 4.67% 5.02% 4.74%
Portfolio Turnover Rate ............... 109% 94% 48% 54% 103% 88%
</TABLE>
SECURITY MUNICIPAL BOND FUND (CLASS B)
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
-------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
(b)(c)(e)(g) (b)(c)(e) (b)(c)(e) (b)(c)(e) (b)(c)(e) (b)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value Beginning of Period ... $ 10.26 $ 10.08 $ 9.73 $ 9.95 $ 9.05 $ 10.37
Income from Investment Operations:
Net Investment Income ................. 0.17 0.31 0.29 0.33 0.37 0.35
Net Gain (Loss) on Securities
(realized & unrealized) ............. (0.43) 0.17 0.37 (0.21) 0.90 (1.32)
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations ...... (0.26) 0.48 0.66 0.12 1.27 (0.97)
Less Distributions
Dividends (from Net Investment Income) (0.17) (0.30) (0.31) (0.34) (0.37) (0.35)
Distributions (from Capital Gains) .... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions ................. (0.17) (0.30) (0.31) (0.34) (0.37) (0.35)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value End of Period ......... $ 9.83 $ 10.26 $ 10.08 $ 9.73 $ 9.95 $ 9.05
========== ========== ========== ========== ========== ==========
Total Return (a) ...................... (2.6%) 4.8% 6.9% 1.2% 14.3% (9.5%)
Ratios/Supplemental Data
Net Assets End of Period (thousands) .. $ 1,784 $ 1,367 $ 2,344 $ 1,510 $ 1,190 $ 760
Ratio of Expenses to Average Net Assets 1.78% 2.01% 2.00% 2.01% 2.00% 2.00%
Ratio of Net Investment Income (Loss)
to Average Net Assets ............... 3.34% 3.04% 3.11% 3.44% 3.90% 3.50%
Portfolio Turnover Rate ............... 109% 94% 48% 54% 103% 88%
</TABLE>
See accompanying notes.
33
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
SECURITY CASH FUND
<TABLE>
<CAPTION>
Fiscal Period Ended December 31
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
(c)(e)(g) (e) (c) (b)(c)(e) (b)(c)(e)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data
Net Asset Value Beginning of Period ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net Investment Income ................. 0.02 0.05 0.05 0.05 0.05 0.03
Net Gain (Loss) on Securities
(realized & unrealized) ............. -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment Operations ...... 0.02 0.05 0.05 0.05 0.05 0.03
Less Distributions
Dividends (from Net Investment Income) (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
Distributions (from Capital Gains) .... -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions ................. (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value End of Period ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ==========
Total Return (a) ...................... 2.0% 4.7% 4.9% 4.6% 5.0% 3.4%
Ratios/Supplemental Data
Net Assets End of Period (thousands) .. $ 59,747 $ 61,828 $ 57,441 $ 45,331 $ 38,158 $ 58,102
Ratio of Expenses to Average Net Assets 0.88% 0.89% 0.90% 1.01% 1.00% 0.96%
Ratio of Net Investment Income (Loss)
to Average Net Assets ............... 4.10% 4.60% 4.80% 4.47% 5.00% 3.24%
</TABLE>
(a) Total return information does not take into account any charges paid at time
of purchase or contingent deferred sales charges paid at time of
redemption.
(b) Fund expenses were reduced by the Investment Manager and expense ratios
absent such reimbursement would have been as follows:
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Corporate Bond Series .......... Class B 2.00% 2.19% 2.05% 2.10% 2.32% 2.38%
U.S. Government Series ......... Class A 1.20% 1.22% 1.17% 1.06% 1.43% 1.30%
Class B 2.91% 3.70% 3.26% 2.14% 3.03% 2.33%
Limited Maturity ............... Class A -- 1.04% 1.40% 1.04% 1.38% 1.24%
Bond Series .................. Class B -- 2.12% 2.60% 1.99% 2.70% 2.43%
High Yield Series .............. Class A -- -- 2.11% 1.44% 1.36% 1.31%
Class B -- -- 2.83% 2.37% 2.13% 2.14%
Municipal Bond Fund ............ Class A -- 0.86% 0.78% 0.83% 0.82% 1.11%
Class B 2.32% 2.45% 2.19% 2.00% 2.18% 2.22%
Cash Fund ...................... -- 1.04% 1.01% -- -- --
</TABLE>
(c) Net investment income was computed using the average month-end shares
outstanding throughout the period.
(d) Security Limited Maturity Bond Series was initially capitalized on
January 17, 1995, with a net asset value of $10 per share. Percentage
amounts for period have been annualized, except for total return.
(e) Expense ratios, including reimbursements, were calculated without the
reduction for custodian fees earnings credits beginning February 1,
1995. Expense ratios with such reductions would have been as follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Corporate Bond Series .......... Class A 1.02% 1.01% -- -- --
Class B 1.85% 1.85% -- -- --
U.S. Government Series ......... Class A 1.10% 0.64% -- -- --
Class B 1.85% 1.85% -- -- --
Limited Maturity ............... Class A 0.81% 0.87% 0.51% 0.83% --
Bond Series .................. Class B 1.65% 1.85% 1.46% 1.85% --
Municipal Bond Fund ............ Class A 0.85% 0.77% 0.83% 0.82% 1.01%
Class B 2.00% 2.00% 2.00% 2.00% 1.76%
Cash Fund ...................... 1.00% 1.00% 1.00% 0.89% 0.88%
</TABLE>
(f) Security High Yield Series was initially capitalized on August 15, 1996,
with a net asset value of $15 per share. Percentage amounts for the period
have been annualized, except for total return.
(g) Unaudited figures for the six months ended June 30, 1999. Percentage amounts
for the period, except total return, have been annualized.
See accompanying notes.
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
JUNE 30, 1999
1. Significant accounting policies
Security Income Fund, Security Municipal Bond Fund and Security Cash Fund (the
Funds) are registered under the Investment Company Act of 1940, as amended, as
diversified open-end management investment companies. The shares of Security
Income Fund are currently issued in multiple series, with each series, in
effect, representing a separate Fund. The Income Fund is required to account for
each series separately and to allocate general expenses to each series based on
the net asset value of each series. Class A shares are sold with a sales charge
at the time of purchase. Class A shares are not subject to a sales charge when
they are redeemed, except that purchases of Class A shares of $1 million or more
sold without a front-end sales charge are subject to a contingent deferred sales
charge if redeemed within one year of purchase. The Funds began offering an
additional class of shares ("B" shares) on October 19, 1993. The shares are
offered without a front-end sales charge but incur additional class-specific
expenses. Redemptions of the shares within five years of acquisition incur a
contingent deferred sales charge. The following is a summary of the significant
accounting policies followed by the Funds in the preparation of their financial
statements. These policies are in conformity with generally accepted accounting
principles.
A. Security valuation - Valuations of Income Funds' and Municipal Bond Fund's
securities are supplied by pricing services approved by the Board of Directors.
Securities listed or traded on a national securities exchange are valued on the
basis of the last sales price. If there are no sales on a particular day, then
the securities are valued at the last bid price. Securities for which market
quotations are not readily available are valued by a pricing service considering
securities with similar yields, quality, type of issue, coupon, duration and
rating. If there is no bid price or if the bid price is deemed to be
unsatisfactory by the Board of Directors or by the Funds' investment manager,
then the securities are valued in good faith by such method as the Board of
Directors determines will reflect the fair value. The Funds' officers, under the
general supervision of the Board of Directors, regularly review procedures used
by, and valuations provided by, the pricing service.
Cash Fund, by approval of the Board of Directors, utilizes the amortized cost
method for valuing portfolio securities, whereby all investments are valued by
reference to their acquisition cost as adjusted for amortization of premium or
accretion of discount.
B. Options - The High Yield Series may purchase put and call options and write
such options on a covered basis on securities that are traded on recognized
securities exchanges and over-the-counter markets. Call and put options on
securities give the holder the right to purchase or sell, respectively (and the
writer the obligation to sell or purchase), a security at a specified price,
until a certain date. The primary risks associated with the use of options are
an imperfect correlation between the change in market value of the securities
held by the Series and the price of the option, the possibility of an illiquid
market, and the inability of the counter-party to meet the terms of the
contract.
The premium received for a written option is recorded as an asset, with an
equal liability which is marked to market based on the option's quoted daily
settlement price. Fluctuation in the value of such instruments are recorded as
unrealized appreciation (depreciation) until terminated, at which time realized
gains and losses are recognized.
C. Security Transactions and Investment Income - Security transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses are reported on an identified cost basis. Interest income is
recognized on the accrual basis. Premiums and discounts (except original issue
discounts) on debt securities are not amortized, except Security Municipal Bond
Fund which amortizes premiums.
D. Distributions to Shareholders - Distributions to shareholders are recorded
on the ex-dividend date. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. These differences are
primarily due to the recharacterization of foreign currency gains and losses.
E. Taxes - The Funds complied with the requirements of the Internal Revenue
Code applicable to regulated investment companies and distributed all of their
taxable net income and net realized gains sufficient to relieve them from all,
or substantially all, federal income, excise and state income taxes. Therefore,
no provision for federal or state income tax is required.
F. Earnings Credits - Under the fee schedule with the custodian, the Funds
earn credits based on overnight custody cash balances. These credits are
utilized to reduce related custodial expenses. The custodian fees disclosed in
the statement of operations do not reflect the reduction in expense from the
related earnings credits.
G. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
2. Management fees and other transactions with affiliates
Management fees are payable to Security Management Company, LLC (SMC) under
investment advisory contracts at an annual rate of .50 of 1% of the average
daily net assets of each fund, except for the High Yield Series which fees are
.60 of 1% of the average daily net assets of the Series. The Investment
Manager pays Salomon Brothers Asset Management, Inc., an annual fee equal to
.22% of the average daily net assets of Security Municipal Bond Fund for
management services provided to the Fund. The investment advisory contract for
Security Income Fund provides that the total annual expenses of each Series of
the Fund (including management fees and custodian fees net of earnings
credits, but excluding interest, taxes, brokerage commissions, extraordinary
expenses and distribution fees paid under the Class B distribution plan) will
not exceed the level of expenses which Income Fund is permitted to bear under
the most restrictive expense limitation imposed by any state in which shares
of the Fund are then qualified for sale. For the six months ended June 30,
1999, SMC
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. Management fees and other transactions with affiliates
(continued)
agreed to limit the total expenses of Corporate Bond Series, U.S. Government
Series and Limited Maturity Bond Series to an annual rate of 1.1% of the average
daily net asset value of Class A shares and 1.85% of Class B shares of each
respective Series. SMC also agreed to limit the total expenses of the High Yield
Series to 2.0% for Class A Shares and 2.75% for Class B shares. In addition, SMC
agreed to waive all of the management fees for the U.S. Government Series,
Limited Maturity Bond Series and the High Yield Series until December 31, 1999.
The investment advisory contract for Municipal Bond Fund provides that the total
annual expenses of the Fund, exclusive of interest, taxes, Rule 12b-1 fees,
brokerage fees and commissions and extraordinary expenses, will not exceed an
amount equal to an annual rate of 1.0% of the average net assets of the Fund as
calculated on a daily basis. The investment advisory contract for Security Cash
Fund provides that the total annual expenses of the Fund, exclusive of interest,
taxes, brokerage fees and commissions and extraordinary expenses, will not
exceed an amount equal to an annual rate of 1% of the average net assets of the
Fund as calculated on a daily basis.
The Funds have entered into contracts with SMC for transfer agent services and
certain other administrative services which SMC provides to the Funds. SMC is
paid an annual fixed charge per account and shareholder and dividend transaction
fees.
As the administrative agent for the Funds, SMC performs administrative
functions, such as regulatory filings, bookkeeping, accounting and pricing
functions for the Funds. For this service SMC receives on an annual basis, a fee
of .09% of the average daily net assets of Corporate Bond Series, U.S.
Government Series, Limited Maturity Bond Series, High Yield Series, and
Municipal Bond Fund and .045% of the average daily net assets of Cash Fund
calculated daily and payable monthly.
Income and Municipal Bond Funds have adopted Distribution Plans related to the
offering of Class B shares pursuant to Rule 12b-1 of the Investment Company Act
of 1940. The Plans provide for payments at an annual rate of 1.0% of the average
daily net assets of Class B shares. Class A shares of Security Income Fund and
Security Municipal Bond Fund incur 12b-1 distribution fees at an annual rate of
.25% of the average daily net assets of each Series.
Security Distributors, Inc. (SDl), a wholly-owned subsidiary of Security
Benefit Group, Inc., a financial services holding company, is national
distributor for Security Income and Municipal Bond Funds. SDI received net
underwriting commissions on sales of Class A shares and contingent deferred
sales charges (CDSC) on redemptions occurring within 5 years of the date of
purchase of Class B shares, after allowances to brokers and dealers for the six
months ended June 30,1999, in the amounts presented below:
CORPORATE U.S. LIMITED HIGH MUNICIPAL
BOND GOVERNMENT MATURITY YIELD BOND
SERIES SERIES SERIES SERIES FUND
---------- ---------- ---------- --------- -----------
SDI underwriting
(Class A) $ 1,236 $ 1,226 $ 88 $ 1,282 $ 1,256
CDSC (Class B) $ 4,302 $ 5,243 $ 211 $ 1,686 $ ,720
Broker/Dealer
(Class A) $10,595 $ 6,561 $ 477 $ 5,535 $ 5,132
Broker/Dealer
(Class B) $ 6,979 $10,987 $ 4,069 $34,369 $ 856
Certain officers and directors of the Funds are also officers and/or directors
of Security Benefit Life Insurance Company and its subsidiaries, which include
SMC and SDI.
3. Federal income tax matters
The amounts of unrealized appreciation (depreciation) as of June 30, 1999,
were as follows:
<TABLE>
<CAPTION>
Corporate U.S. Limited High Municipal
Bond Government Maturity Yield Bond
Series Series Series Series Fund
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross unrealized
appreciation $ 265,101 $ 107,283 $ 52,044 $ 122,542 $ 525,035
Gross unrealized
depreciation (1,636,964) (675,417) (238,717) (690,540) (221,637)
----------- ----------- ----------- ----------- -----------
Net unrealized
appreciation ($1,371,863) ($ 568,134) ($ 186,673) ($ 567,998) $ 303,398
=========== =========== =========== =========== ===========
</TABLE>
4. Investment Transactions
Investment transactions for the six months ended June 30, 1999,
(excluding overnight investments and short-term debt securities)
were as follows:
<TABLE>
<CAPTION>
Corporate U.S. Limited High Municipal
Bond Government Maturity Yield Bond
Series Series Series Series Fund
----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Purchases $11,449,578 $8,052,210 $1,552,050 $4,463,870 $10,988,338
Proceeds from
sales $13,793,263 $3,521,775 $967,329 $2,911,714 $11,057,410
</TABLE>
36
<PAGE>
5. Capital Share Transactions
The Funds are authorized to issue unlimited number of shares in an unlimited
number of classes. Transactions in the capital shares of the Funds were as
follows:
<TABLE>
<CAPTION>
1999 1999
1999 1999 1999 1999 1999 1999 INCREASE INCREASE
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT (DECREASE) (DECREASE)
SOLD SOLD REINVESTED REINVESTED REDEEMED REDEEMED SHARES AMOUNT
---------- ------------ ---------- ------------ ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate Bond Series
Class A Shares 730,833 $ 5,085,233 160,883 $ 1,112,353 (1,446,821) ($10,007,457) (555,105) ($ 3,809,871)
Class B Shares 719,815 5,038,669 24,130 167,012 (443,809) (3,170,057) 300,136 2,035,624
---------- ------------ ---------- ------------ ----------- ------------ ---------- ------------
Total 1,450,648 $ 10,123,902 185,013 $ 1,279,365 (1,890,630) ($13,177,514) (254,969) ($ 1,774,247)
U.S. Government Series
Class A Shares 825,140 $ 4,043,354 71,426 $ 342,512 (481,370) ($ 2,321,617) 415,196 $ 2,064,249
Class B Shares 702,893 3,431,257 24,028 114,817 (224,967) (1,176,722) 481,954 2,369,352
---------- ------------ ---------- ------------ ----------- ------------ ---------- ------------
Total 1,528,033 $ 7,474,611 95,454 $ 457,329 (726,337) ($ 3,498,339) 897,150 $ 4,433,601
Limited Maturity Bond
Series
Class A Shares 57,236 $ 584,572 11,031 $ 111,448 (129,572) ($ 1,322,147) (61,305) ($ 626,127)
Class B Shares 25,531 261,321 3,434 34,649 (22,918) (233,733) 6,047 62,237
---------- ------------ ---------- ------------ ----------- ------------ ---------- ------------
Total 82,767 $ 845,893 14,465 $ 146,097 (152,490) ($ 1,555,880) (55,258) ($ 563,890)
High Yield Bond Series
Class A Shares 74,617 $ 1,119,658 16,109 $ 239,411 (34,182) ($ 506,411) 56,544 $ 852,658
Class B Shares 37,190 559,163 10,121 150,114 (30,719) (456,326) 16,592 252,951
---------- ------------ ---------- ------------ ----------- ------------ ---------- ------------
Total 111,807 $ 1,678,821 26,230 $ 389,525 (64,901) ($ 962,737) 73,136 $ 1,105,609
Municipal Bond Fund
Class A Shares 69,281 $ 706,344 24,230 $ 245,013 (150,781) ($ 1,528,036) (57,270) ($ 576,679)
Class B Shares 49,800 507,266 1,446 14,636 (2,887) (29,699) 48,359 492,203
---------- ------------ ---------- ------------ ----------- ------------ ---------- ------------
Total 119,081 $ 1,213,610 25,676 $ 259,649 (153,668) ($ 1,557,735) (8,911) ($ 84,476)
Cash Fund 80,576,180 $ 80,576,180 1,229,325 $ 1,229,325 (83,885,922) ($83,885,922) (2,080,417) ($ 2,080,417)
</TABLE>
<TABLE>
<CAPTION>
1998 1998
1998 1998 1998 1998 1998 1998 INCREASE INCREASE
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT (DECREASE) (DECREASE)
SOLD SOLD REINVESTED REINVESTED REDEEMED REDEEMED SHARES AMOUNT
----------- ------------- --------- ------------- ------------ ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate Bond
Series
Class A Shares 1,328,007 $ 9,456,996 346,774 $ 2,451,335 (2,260,991) ($ 16,052,921) (586,210) ($ 4,144,590)
Class B Shares 941,610 6,749,469 47,576 338,481 (794,135) (5,674,709) 195,051 1,413,241
----------- ------------- --------- ------------- ------------ ------------- --------- -------------
Total 2,269,617 $ 16,206,465 394,350 $ 2,789,816 (3,055,126) ($ 21,727,630) (391,159) ($ 2,731,349)
U.S. Government
Series
Class A Shares 2,375,565 $ 11,636,842 101,709 $ 496,431 (1,513,349) ($ 7,406,532) 963,925 $ 4,726,741
Class B Shares 1,218,421 5,947,155 19,745 96,301 (724,045) (3,532,042) 514,121 2,511,414
----------- ------------- --------- ------------- ------------ ------------- --------- -------------
Total 3,593,986 $ 17,583,997 121,454 $ 592,732 (2,237,394) ($ 10,938,574) 1,478,046 $ 7,238,155
Limited Maturity
Bond Series
Class A Shares 89,736 $ 930,954 31,739 $ 327,974 (42,567) ($ 441,561) 78,908 $ 817,367
Class B Shares 29,782 308,521 5,781 59,625 (7,583) (78,374) 27,980 289,772
----------- ------------- --------- ------------- ------------ ------------- --------- -------------
Total 119,518 $ 1,239,475 37,520 $ 387,599 (50,150) ($ 519,935) 106,888 $ 1,107,139
High Yield Bond
Series
Class A Shares 83,624 $ 1,305,154 31,457 $ 485,918 (60,714) ($ 958,823) 54,367 $ 832,249
Class B Shares 46,914 725,072 21,420 330,173 (68,989) (1,090,329) (655) (35,084)
----------- ------------- --------- ------------- ------------ ------------- --------- -------------
Total 130,538 $ 2,030,226 52,877 $ 816,091 (129,703) ($ 2,049,152) 53,712 $ 797,165
Municipal Bond
Fund
Class A Shares 119,141 $ 1,206,819 53,431 $ 541,785 (495,418) ($ 5,053,185) (322,846) ($ 3,304,581)
Class B Shares 22,491 228,767 2,480 25,166 (124,440) (1,268,565) (99,469) (1,014,632)
----------- ------------- --------- ------------- ------------ ------------- --------- -------------
Total 141,632 $ 1,435,586 55,911 $ 566,951 (619,858) ($ 6,321,750) (422,315) ($ 4,319,213)
Cash Fund 181,678,722 $ 181,678,722 2,862,953 $ 2,862,953 (180,154,877) ($180,154,877) 4,386,798 $ 4,386,798
</TABLE>
37
<PAGE>
THE SECURITY GROUP OF
MUTUAL FUNDS
Security Growth and Income Fund
Security Equity Fund
o Equity Series
o Global Series
o Total Return Series
o Social Awareness Series
o Value Series
o Small Company Series
o Enhanced Index Series
o International Series
o Select 25 Series
Security Ultra Fund
Security Income Fund
o Corporate Bond Series
o U.S. Government Series
o Limited Maturity Bond Series
o High Yield Series
Security Municipal Bond Fund
Security Cash Fund
This report is submitted for the general information of the shareholders of the
Funds. The report is not authorized for distribution to prospective investors in
the Funds unless preceded or accompanied by an effective prospectus which
contains details concerning the sales charges and other pertinent
information.
SECURITY DISTRIBUTORS, INC.
700 SW Harrison St.
Topeka, KS 66636-0001
SECURITY FUNDS
OFFICERS AND DIRECTORS
Directors
Donald A. Chubb, Jr.
John D. Cleland
Penny A. Lumpkin
Mark L. Morris, Jr., D.V.M.
Maynard F. Oliverius
James R. Schmank
Officers
John D. Cleland, President
James R. Schmank, Vice President
Steven M. Bowser, Vice President
Thomas A. Swank, Vice President
Amy J. Lee, Secretary
Christopher D. Swickard, Assistant Secretary
Brenda M. Harwood, Treasurer
<PAGE>
Security
Funds
SI
June 30, 1999
o Security Income
Fund
Corporate Bond
Series
U.S. Government
Series
Limited Maturity
Bond Series
High Yield Series
o Security
Municipal Bond
Fund
o Security Cash
Fund
[Security Distributors Inc. logo]
<PAGE>
SECURITY FUNDS
SEMI-ANNUAL
REPORT
June 30, 1999
o Security Income
Fund
- Corporate Bond
Series
- U.S. Government
Series
- Limited Maturity
Bond Series
- High Yield Series
o Security
Municipal Bond
Fund
o Security Cash
Fund
[Security Distributors Inc. logo]
