<PAGE> 1
SECURITY
FUNDS
===============================================================================
ANNUAL
REPORT
DECEMBER 31, 1999
- SECURITY INCOME
FUND
- CORPORATE BOND
SERIES
- U.S. GOVERNMENT
SERIES
- LIMITED MATURITY
BOND SERIES
- HIGH YIELD SERIES
- SECURITY
MUNICIPAL BOND
FUND
- SECURITY CASH
FUND
SECURITY DISTRIBUTORS, INC.
A Member of The Security Benefit
Group of Companies
<PAGE> 2
PRESIDENT'S LETTER
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FEBRUARY 15, 2000
SECURITY
FUNDS
[PHOTO]
John Cleland
TO OUR SHAREHOLDERS:
A steady rise in interest rates throughout 1999 was a result of the Federal
Reserve Bank's tightening bias representing their concerns about the
rapidly-growing strength in the U.S. economy. The members of the Federal
Reserve's policy-making Open Market Committee expressed worries about inflation
pressures which in their view are likely to arise because of tightness in the
labor markets resulting from the economic strength. This rise in rates generated
the worst performance year on record for the thirty-year Treasury bond, and the
returns of the portfolios that make up Security Income Fund reflected this
unfavorable experience.
HIGH YIELD OUTPERFORMED HIGH QUALITY
Total returns in the various portfolios ranged from -3.68% in the
longer-maturity Corporate Bond Series to +4.40% in the short-maturity Security
Cash Fund.(1) Contrary to what might be expected, the High Yield Income Series
outperformed the higher-quality portfolios, reflecting the close connection
between high yield bonds and the equity markets.
ONE OR TWO MORE RATE INCREASES ARE LIKELY
We believe, however, that we can see the light at the end of the tunnel. While
it is entirely possible that the Federal Open Market Committee is still
operating in a tightening mode, we believe long-term rates are approaching a
peak. If inflation remains dormant throughout 2000, one or two more rounds of
interest rate increases by the FOMC may mark the end of a period of rising
rates, setting the stage for a market rally across the yield curve later in the
year. Our approach continues to be one of following a risk-averse investment
strategy, emphasizing credit selection by the portfolio managers, with no major
bets being made on the future direction of interest rates.
On the following pages our portfolio managers report on their individual
portfolios' results and their strategies for the coming year. As always, we
thank you for the continued confidence you have expressed in us as represented
by your investment in Security Income Fund. We invite your questions and
comments at any time.
Sincerely,
/s/ John Cleland
- ---------------------------
John Cleland, President
The Security Funds
(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.
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1
<PAGE> 3
MANAGER'S COMMENTARY
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FEBRUARY 15, 2000
SECURITY
FUNDS
[PHOTO]
Steven M. Bowser
Portfolio Manager
CORPORATE BOND SERIES
In the year just completed the Corporate Bond Series of Security Income Fund
generated a total return of -3.68%, compared with its Lipper peer group average
return of -2.61%.(1) The benchmark Lehman Brothers Corporate Bond Index
returned -1.96% for the year.
A DIFFICULT YEAR FOR FIXED INCOME
The year just completed was the worst year on record for fixed income
investments. The total return on the thirty-year U.S. Treasury bond was -14.9%,
while the total return on the ten-year Treasury note didn't fare much better,
falling 8.4%. The yield on the thirty-year bond rose from 5.09% at the close of
1998 to 6.48% on December 31, 1999. The fear of inflation is a bond investor's
worst enemy, and although inflation has been benign for the past three years the
Federal Reserve's policy making Open Market Committee (FOMC) has kept bond
markets nervous with its series of interest rate increases designed to forestall
inflation's emergence.
SOME FIXED INCOME MARKET SEGMENTS EXPERIENCED LESS DAMAGE
The high yield sector of the bond market experienced the least damage. At the
end of the year the Corporate Bond Series held 13% of its assets in this sector.
Since high yield bonds tend to follow the stock markets more closely than they
follow interest rate movements, they were a positive factor in the portfolio in
1999.
Mortgage-backed securities are also defensive instruments when interest rates
are rising. If rates are declining, mortgageholders are inclined to refinance
their mortgages to take advantage of lower interest rates. This causes more
rapid paydowns of principal in the mortgage-backed securities, decreasing their
attractiveness to investors. But as interest rates rise this refinancing
activity slows, and the securities will generally increase in value as
prepayments diminish. Nearly 20% of the assets of the Series were invested in
mortgage-backed securities issued primarily by Fannie Mae and Freddie Mac home
lending agencies.
In the corporate sector financial company bonds also performed well. We owned
several names in this area, including Countrywide Capital, General Electric
Capital Corporation, Merrill Lynch & Company, Inc. and Morgan Stanley, Dean
Witter, Discover, & Company among others. However, we held a smaller weight in
the financial sector than is represented in the benchmark index.
THE DETRACTORS FROM TOTAL RETURN
Our longer-maturity Federal agency debentures were the weakest performers in the
portfolio when the long end of the fixed income maturity structure suffered
sharp losses. A good deal of damage was done in the ten-year portion of the
maturity curve as well, as issuance of new securities was concentrated heavily
in this area throughout the year.
Certain portions of the corporate bond market performed poorly as well.
Companies in the consumer noncyclical sector of the market tend to do well when
the economy slows, but may underperform in periods of economic strength such as
we have seen recently in the U.S. Bonds which we own that are issued by
companies included in this sector, for example, are food and beverage-related
companies such as Anheuser-Busch Companies, Inc., The Pepsi Bottling Group,
Inc., Archer-Daniels-Midland Company, and ConAgra, Inc. We added some of these
names when we felt economic growth would slow in response to actions taken by
the Federal Reserve. That slowdown has yet to materialize.
OUTLOOK FOR THE COMING YEAR
We expect the Federal Reserve's Open Market Committee to increase its target
interest rates one or two more times in the first half of 2000. These rate hikes
should finally have the desired effect of bringing about a moderate slowdown in
economic growth in the U.S. While fixed income instruments will continue to
experience difficulties as rates rise, we believe these pressures will ease in
the second half of the year, allowing bonds to once again be attractive
investments.
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.
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2
<PAGE> 4
MANAGER'S COMMENTARY
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FEBRUARY 15, 2000
SECURITY
FUNDS
LEHMAN BROTHERS
DATE CORPORATE BOND SERIES CORPORATE BOND INDEX
12/31/1989 $10,000 $10,000
12/31/1990 10,152 10,706
12/31/1991 11,790 12,688
12/31/1992 12,845 13,791
12/31/1993 14,606 15,468
12/31/1994 13,399 14,861
12/31/1995 15,840 18,166
12/31/1996 15,757 18,762
12/31/1997 17,277 20,682
12/31/1998 18,584 22,458
12/31/1999 17,900 22,023
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CORPORATE BOND SERIES
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1999
CLASS A SHARES CLASS B SHARES
1 Year -8.30% 1 Year -9.30%
5 Years 4.95% 5 Years 4.78%
10 Years 6.00% Since Inception 2.11%
(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.
- -------------------------------------------------------------------------------
$10,000 OVER TEN YEARS
This chart assumes a $10,000 investment in Class A shares of Corporate Bond
Series on December 31, 1989, and reflects deduction of the 4.75% sales load. On
December 31, 1999, the value of your investment in the Series' Class A shares
(with dividends reinvested) would have grown to $17,900. By comparison, the
same $10,000 investment would have grown to $22,023 based on the performance of
the Lehman Brothers Corporate Bond Index.
The performance illustrated above is based on the performance of Class A shares.
The performance of Class B shares will be greater or less than the performance
shown for Class A shares as a result of the different loads and fees associated
with an investment in Class B shares.
The performance data illustrated above reflects past performance which is not
predictive of future results. Investments cannot be made directly in an index.
The Lehman Brothers Corporate Bond Index includes all corporate debt securities
rated A or higher.
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3
<PAGE> 5
MANAGER'S COMMENTARY
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FEBRUARY 15, 2000
SECURITY
FUNDS
[PHOTO]
Steven M. Bowser
Portfolio Manager
U.S. GOVERNMENT SERIES
The U.S. government bond markets experienced their worst year on record in 1999.
The thirty-year Treasury bond began the year yielding 5.09% and closed it
yielding 6.48%, experiencing a -14.9% total return for the year as a whole. The
U.S. Government Series of Security Income Fund returned -3.60% in 1999, compared
with its Lipper peer group average of -3.02% and the benchmark Lehman Brothers
Government Bond Index's return of -2.23%.(1)
THE LONG END OF THE TREASURY MARKET FARED THE WORST
As noted above, the thirty-year Treasury bond was the poorest performer among
U.S. Treasury securities. The ten-year Treasury note suffered as well, losing
8.4% for the year. As various governors of the Federal Reserve Bank, along with
Chairman Alan Greenspan, kept indicating their fears that the strong U.S.
economy would lead to the reemergence of inflation, bond market investors took
them seriously and began abandoning longer-maturity securities in favor of the
short end of the yield curve.
While we held only one thirty-year Treasury issue in the Government Series
portfolio, we also had thirty-year issues of various federal agencies including
Federal National Mortgage Association and the Tennessee Valley Authority. These
agency issues weren't exempt from the slide in value, and damaged the
portfolio's total return as well.
MORTGAGE-BACKED SECURITIES WERE THE BEST PERFORMERS
The Series held 43% of its assets at year end in mortgage-backed securities.
These bonds act as defensive issues when interest rates are rising. If rates are
declining, mortgageholders are inclined to refinance their mortgages to take
advantage of lower interest rates. This causes more rapid paydowns of principal
in the mortgage-backed bonds, decreasing their attractiveness to investors. But
as interest rates rise this refinancing activity slows, and the securities will
generally increase in value as prepayments diminish.
We also held some shorter-maturity issues in the portfolio, which helped
stabilize the return. These shorter securities included federal agency bonds
such as Federal National Mortgage Association (Fannie Mae) and Federal Home Loan
Mortgage Association (Freddie Mac) bonds maturing in two to four years.
OUTLOOK FOR 2000
We expect the Federal Reserve's Open Market Committee to increase its target
interest rates one or two more times in the first half of 2000. These rate hikes
should finally have the desired effect of bringing about a moderate slowdown in
economic growth in the U.S. While fixed income instruments will continue to
experience difficulties as rates rise, we believe these pressures will ease in
the second half of the year, allowing bonds to once again be attractive
investments.
Sincerely,
/s/ Steven M. Bowser
- ------------------------
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.
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4
<PAGE> 6
MANAGER'S COMMENTARY
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FEBRUARY 15, 2000
SECURITY
FUNDS
LEHMAN BROTHERS
DATE U.S. GOVERNMENT SERIES GOVERNMENT BOND INDEX
12/31/1989 $10,000 $10,000
12/31/1990 10,466 10,872
12/31/1991 11,910 12,539
12/31/1992 12,498 13,445
12/31/1993 13,964 14,878
12/31/1994 13,051 14,376
12/31/1995 15,903 17,012
12/31/1996 16,104 17,483
12/31/1997 17,586 19,158
12/31/1998 19,185 21,045
12/31/1999 18,494 20,572
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U.S. GOVERNMENT SERIES
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1999
CLASS A SHARES CLASS B SHARES
1 Year -8.23% 1 Year -9.36%
5 Years 6.17% 5 Year 5.79%
10 Years 6.35% Since Inception 3.20%
(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.
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$10,000 OVER TEN YEARS
This chart assumes a $10,000 investment in Class A shares of U.S. Government
Series on December 31, 1989, and reflects deduction of the 4.75% sales load. On
December 31, 1999, the value of your investment in the Series' Class A shares
(with dividends reinvested) would have grown to $18,494. By comparison, the
same $10,000 investment would have grown to $20,572 based on the performance of
the Lehman Brothers Government Bond Index.
The performance illustrated above is based on the performance of Class A shares.
The performance of Class B shares will be greater or less than the performance
shown for Class A shares as a result of the different loads and fees associated
with an investment in Class B shares.
The performance data illustrated above reflects past performance which is not
predictive of future results.
The Lehman Brothers Government Bond Index is made up of all public obligations
of the U.S. Treasury, excluding flower bonds and foreign-targeted issues, all
publicly issued debt of U.S. Government agencies and quasi-federal corporations,
and corporate debt guaranteed by the U.S. Government. Investments cannot be made
directly in an index.
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5
<PAGE> 7
MANAGER'S COMMENTARY
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FEBRUARY 15, 2000
SECURITY
FUNDS
[PHOTO]
Steven M. Bowser
Portfolio Manager
LIMITED MATURITY
BOND SERIES
In a very difficult year for fixed income investments, the Limited Maturity
Series, while producing a negative total return for the year, lost less than its
longer-maturity counterparts in the fixed income family in a volatile market
period. The total return of the Series was -1.77%, and the average return of its
Lipper peer group of funds was -1.31%.(1) The benchmark Lehman Brothers
Corporate Intermediate Bond Index returned +0.15 for the year.
THE FIXED INCOME MARKETS IN 1999
1999 turned out to be the worst year on record for bonds. The long end of the
U.S. Treasury market felt the most pain, with the thirty-year Treasury bond
losing 14.9%. The intermediate part of the market suffered also, however, as the
ten-year Treasury bond fell 8.4%. The yield on the ten-year bond began the year
at 4.65% and rose throughout 1999 to end December at 6.38%.
COMPOSITION OF THE PORTFOLIO AT YEAR END
At the end of the year the Limited Maturity Series' portfolio assets consisted
of 13.3% Federal agency issues, 7.6% mortgage-backed securities, 54.5%
investment grade corporate bonds, 5.7% Yankee bonds (dollar-denominated bonds
issued by foreign corporations for U.S. investors), and 18.9% high yield
corporate issues. The average rating of portfolio holdings is single-A, while
the average effective duration is about 4.5 years.
PERFORMANCE OF VARIOUS MARKET SECTORS
The high yield portion of the portfolio was the best-performing sector. High
yield bonds tend to follow the stock markets as well as the bond markets, and
often outperform in a period of strong economic growth. Investors believe such
growth will bolster the earnings of these companies, and are willing to pay a
higher price to own them.
The Yankee bond market also outperformed as global economies began recovering
from their difficult times of the previous year. The return of the Yankee bond
index was boosted sharply when Korean sovereign debt was upgraded from BB to
BBB. Although we didn't own Korean bonds, some of our Yankee holdings, including
Quebecor Printing Capital, Inc., ABN AMRO Bank N.V., and Panamerican Beverages,
Inc. were good performers during the year.
Mortgage-backed securities were favorable as well. These bonds tend to gain
value when interest rates are rising, because fewer homeowners are refinancing
their mortgages and prepayments of principal on the securities slow, making the
bonds more attractive to investors.
THE WEAKER SECTORS
Companies in the consumer noncyclical sector of the market tend to underperform
in periods of economic strength such as we have experienced recently. For
example, our holdings in the food-related companies in this sector did not
perform as well as other corporate bonds. These include securities issued by
such companies as Archer-Daniels-Midland Company, Anheuser-Busch Companies,
Inc., Pepsi Bottling Holdings, Inc., and ConAgra, Inc. We added some of these
names when we believed the economy would begin slowing in response to actions by
the Federal Reserve Bank to raise interest rates, but to date this slowdown has
failed to materialize.
OUTLOOK FOR 2000
We expect the Federal Reserve's policy-making Open Market Committee (FOMC) to
increase its target interest rates again in the coming months in the continuing
effort to slow the economy to a pace at which they believe inflation will remain
benign. While this will be detrimental to bond prices in the short run, we look
for fixed income markets to improve once the economy responds in the manner in
which the FOMC desires.
Sincerely,
/s/ Steven M. Bowser
- ----------------------------
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.
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6
<PAGE> 8
MANAGER'S COMMENTARY
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FEBRUARY 15, 2000
SECURITY
FUNDS
LEHMAN BROTHERS INTERMEDIATE TERM
DATE LIMITED MATURITY BOND SERIES CORPORATE BOND INDEX
12/31/94 $10,000 $10,000
6/31/95 10,280 11,194
12/31/95 10,868 11,901
6/31/96 10,741 11,793
12/31/96 10,978 12,375
6/31/97 11,583 12,754
12/31/97 12,101 13,412
6/31/98 12,399 13,911
12/31/98 12,921 14,525
6/31/99 12,597 14,408
12/31/99 12,610 14,549
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LIMITED MATURITY BOND SERIES
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1999
CLASS A SHARES CLASS B SHARES
1 Year -6.45% 1 Year -7.74%
Since Inception 4.85% Since Inception 4.46%
(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.
- -------------------------------------------------------------------------------
$10,000 SINCE INCEPTION
This chart assumes a $10,000 investment in Class A shares of Limited Maturity
Bond Series on January 17, 1995 (date of inception), and reflects deduction of
the 4.75% sales load. On December 31, 1999, the value of your investment in the
Series' Class A shares (with dividends reinvested) would have grown to $12,610.
By comparison, the same $10,000 investment would have grown to $14,549 based on
the performance of the Lehman Brothers Intermediate Term Corporate Bond Index.
The performance illustrated above is based on the performance of Class A shares.
The performance of Class B shares will be greater or less than the performance
shown for Class A shares as a result of the different loads and fees associated
with an investment in Class B shares.
The performance data illustrated above reflects past performance which is not
predictive of future results.
The Lehman Brothers Intermediate Term Corporate Bond Index includes all
corporate debt securities rated A or higher. Investments cannot be made directly
in an index.
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7
<PAGE> 9
MANAGER'S COMMENTARY
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FEBRUARY 15, 2000
SECURITY
FUNDS
[PHOTO]
David Eshnaur
Portfolio Manager
HIGH YIELD SERIES
The year just completed was difficult for fixed income securities, and a
particularly difficult year for the High Yield Series of Security Income Fund.
The Series generated a total return of -0.51%, compared with the Lipper peer
group average of +4.53%.(1) The benchmark Lehman Brothers High Yield Index
gained 2.39% for the year.
1999's TRENDS REVERSED MANY OF 1998's
Many of the things that worked well for us in 1998 hurt in 1999. In 1998, for
example, high yield bonds rated BB by the major rating agencies, the sector of
the market where we prefer to be, outperformed the lower-rated B issues. In 1999
this trend reversed and the lower-rated issues were the stronger performers. Our
portfolio also held a 10% position in investment-grade BBB-rated issues.
Unfortunately one of these issues, home security monitoring company Protection
One Alarm, which is 80.1% owned by electric utility provider Western Resources,
Inc., was downgraded after the company advised that is was not likely to meet
covenant terms on its borrowing facility. A second BBB-rated issue, manufactured
housing producer Oakwood Homes Corporation, was downgraded when the rating
agencies saw deterioration of the company's financial condition.
A year ago nonrated high yield bonds, which generally have a very small presence
in our portfolios, fell over 7%. In 1999 nonrated issues reversed direction and
gained 6.5%. The telecommunications sector has many issues that are nonrated,
and this sector was a strong performer in 1999. The High Yield Series was
underweighted in telecommunications, ending the year with an 11.5% weighting
compared with a 21% presence in the benchmark Lehman High Yield Index.
TWO BANKRUPTCIES DAMAGED RETURNS
Oil exploration and production company Coho Energy, Inc., filed for Chapter 11
bankruptcy protection in August after failing to reach agreement with creditors
on restructuring payments on its $240 million in debt. Coho saw its cash flows
diminish sharply in 1998 when oil prices plunged to about $10 per barrel. They
were hurt further when a limited partnership formed by private equity firm
Hicks, Muse, Tate & Furst, Inc. backed out of a contract to inject $250 million
of equity capital into the company. We are still holding these bonds, since oil
has moved rapidly upward to over $26 per barrel. We expect the company to be
able to solve its problems and reward its debtholders accordingly.
The Loewen Group, Inc., North America's second largest operator of funeral homes
and cemeteries, filed its Chapter 11 bankruptcy petition in early June. The
cemetery business is cash-intensive, selling prepaid burial plans with seven- to
ten-year payment plans but with commissions that must be paid to sales staff at
the time of sale. Loewen Group had made a number of expensive acquisitions, and
was overly aggressive in selling these prepaid plans. The combination of these
two elements created a negative cash flow situation from which the company was
unable to recover.
STILL, SOME POSITIVES DURING THE YEAR
Some sectors within the portfolio performed very well in 1999. An overweighted
position in the gaming industry produced favorable results. Companies such as
International Game Technology, which manufactures computerized casino gaming
systems, and Boyd Gaming Corporation, owner and operator of casino entertainment
facilities, fared well in a period of economic strength. This sector had
underperformed in 1998 because of fears that new capacity in the industry would
make it difficult to generate good results. Those fears didn't become
actualities, however, as visitations to casino properties increased in 1999.
Another sector benefiting from economic strength, particularly in global
economic recovery, was the steel industry. Our holdings in AmeriSteel
Corporation and California Steel Industries gained not only because of increased
demand for steel, but in the wake of favorable settlements of antidumping suits
which reduced foreign imports of competing products.
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8
<PAGE> 10
MANAGER'S COMMENTARY
- -------------------------------------------------------------------------------
FEBRUARY 15, 2000
SECURITY
FUNDS
OUTLOOK FOR THE COMING MONTHS
We expect interest rates to continue their upward move for a few more months as
the Federal Reserve works to slow the rate of economic growth and keep inflation
at its current low levels. During this period of rising rates we believe our
strategy of investing in the upper tiers of the high yield bond spectrum will
serve us well. We will monitor economic conditions and interest rate movements
closely so that we may be able to change from our defensive posturing if such a
step would be advantageous.
Sincerely,
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.
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HIGH YIELD SERIES
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1999
CLASS A SHARES CLASS B SHARES
1 Year -5.23% 1 Year -6.28%
Since Inception 4.93% Since Inception 4.77%
(8-05-96) (8-05-96)
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.
- -------------------------------------------------------------------------------
LEHMAN BROTHERS
DATE HIGH YIELD SERIES HIGH YIELD INDEX
8/31/1996 $10,000 $10,000
3/31/1997 10,184 10,833
6/30/1997 10,589 11,336
9/30/1997 10,992 11,852
12/31/1997 11,267 12,081
3/31/1998 11,630 12,488
6/30/1998 11,737 12,626
9/30/1998 11,538 12,317
12/31/1998 11,828 12,579
3/31/1999 11,945 12,812
6/30/1999 11,906 12,857
9/30/1999 11,774 12,675
12/31/1999 11,768 12,882
$10,000 SINCE INCEPTION
This chart assumes a $10,000 investment in Class A shares of High Yield Series
on August 15, 1996 (date of inception), and reflects deduction of the 4.75%
sales load. On December 31, 1999, the value of your investment in the Series'
Class A shares (with dividends reinvested) would have grown to $11,768. By
comparison, the same $10,000 investment would have grown to $12,882 based on the
performance of the Lehman Brothers High Yield Bond Index.
The performance illustrated above is based on the performance of Class A shares.
The performance of Class B shares will be greater or less than the performance
shown for Class A shares as a result of the different loads and fees associated
with an investment in Class B shares.
The performance data illustrated above reflects past performance which is not
predictive of future results.
The Lehman Brothers High Yield Bond Index covers the universe of fixed rate,
noninvestment grade debt. Investments cannot be made directly in an index.
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9
<PAGE> 11
MANAGER'S COMMENTARY
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FEBRUARY 15, 2000
SECURITY
FUNDS
[PHOTO]
Robert Amodeo
Portfolio Manager
SECURITY MUNICIPAL
BOND FUND
Fixed income markets encountered a wild swing in sentiment during the past year
as healthy optimism drove investor confidence at the onset, yet fears of rising
interest rates and reemerging inflationary pressures overshadowed bonds as the
year progressed. Despite their negative returns, municipal bonds outperformed
their U.S. Treasury counterparts. We believe decreased supply, generous yields
at the beginning of the year when compared on an after-tax basis with their
taxable counterparts, and improved fundamentals provided support for municipal
bonds. In the year just ended Security Municipal Bond Fund generated a total
return of -3.45%, outperforming the average -4.63% return of its Lipper peer
group of funds.(1)
CHARACTERISTICS OF THE PORTFOLIO
At December 31, 1999 the Fund's long-term holdings consisted of 30 issues
throughout seventeen different states. The credit quality of the portfolio
remains high with an average rating of AA as measured by the major credit rating
agencies. Industry weightings are well diversified, with the greatest emphasis
in general obligation, water and sewer revenue, and prerefunded securities. The
average maturity of the bonds in the portfolio was 13.4 years, with an effective
average duration of 8.0 years.
A LOOK AT THE MUNICIPAL MARKETS
State and local governments issued approximately $226 billion of debt during
1999, representing a 21% decline from 1998's pace of $286 billion. The reduction
in the supply of municipal bonds was attributable to a precipitous drop in
refunding activity on the part of governmental bodies as interest rates began to
rise. Refunding issues eased almost 55% year over year while new project funding
remained virtually unchanged.
A strong national economy improved the fundamental quality of many municipal
debt issuers in 1999. Credit upgrades outpaced weakening issues by approximately
four to one, according to credit rating agency Standard & Poor's. Impressive
participation by secondary bond insurance providers supported relatively narrow
municipal quality spreads. Insured securities represented almost 50% of new
supply during the past two years. In response to the relatively tight risk
premium levels of lower quality bonds, we will continue to invest in the higher
quality spectrum of the municipal market.
THE INTERNET MAY HURT STATE SALES TAX RECEIPTS
Some municipalities are concerned about a possible reduction in sales tax
receipts due to the explosive growth of Internet e-commerce. Most state and
local governments rely on sales tax revenue to help pay for essential services
including public safety, fire, health, education, roads and bridges. Consumers
are supposed to pay sales taxes voluntarily on items purchased from out-of-state
merchants via the Internet, but few do. Early estimates of sales tax shortfalls
from e-commerce are wide ranging. As a comparison, state officials believe that
$5 billion in taxes goes uncollected annually from mail order catalogue sales.
We do not believe that Internet commerce poses an immediate threat to either
state or local revenue bases. In the near term, surging income tax receipts
generated by a vibrant domestic economy should take the edge off any sales tax
shortfalls. Moreover, some municipal authorities used recent surplus tax
receipts to fund reserve accounts. Capital deposited into these accounts can
help mitigate future revenue shortfalls. We will, however, monitor the situation
carefully to assess its effect on the budgets of municipalities and the bonds
they issue.
OUTLOOK FOR THE COMING YEAR
In the near term the U.S. economy should remain stable as low unemployment and
strong consumer confidence will likely support demand for goods. Additionally,
the Federal Reserve has engineered a good balance of strong economic growth and
acceptable inflation. Looking ahead, demands of a growing economy will call for
a steady supply of municipal debt. We expect the supply of new municipal bonds
to range between $200 billion and $250 billion during the calendar year 2000.
Robert Amodeo
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.
- -------------------------------------------------------------------------------
10
<PAGE> 12
MANAGER'S COMMENTARY
- -------------------------------------------------------------------------------
FEBRUARY 15, 2000
SECURITY
FUNDS
LEHMAN BROTHERS
DATE MUNICIPAL BOND FUND MUNICIPAL BOND INDEX
12/31/1989 $10,000 $10,000
12/31/1990 10,114 10,729
12/31/1991 11,300 12,032
12/31/1992 12,124 13,093
12/31/1993 13,619 14,700
12/31/1994 12,491 13,940
12/31/1995 14,424 16,374
12/31/1996 14,786 17,101
12/31/1997 16,009 18,676
12/31/1998 16,978 18,768
12/31/1999 16,392 19,359
$10,000 OVER TEN YEARS
This chart assumes a $10,000 investment in Class A shares of Municipal Bond Fund
on December 31, 1989, and reflects deduction of the 4.75% sales load. On
December 31, 1999, the value of your investment in the Series' Class A shares
(with dividends reinvested) would have grown to $16,392. By comparison, the
same $10,000 investment would have grown to $19,359 based on the performance of
the Lehman Brothers Municipal Bond Index.
The performance illustrated above is based on the performance of Class A shares.
The performance of Class B shares will be greater or less than the performance
shown for Class A shares as a result of the different loads and fees associated
with an investment in Class B shares.
The performance data illustrated above reflects past performance which is not
predictive of future results.
The Lehman Brothers Municipal Bond Index is a total return performance benchmark
for the long-term, investment-grade tax-exempt bond market. Returns and
attributes are calculated semi-monthly using approximately 15,000 municipal
bonds. Investments cannot be made directly in an index.
- -------------------------------------------------------------------------------
MUNICIPAL BOND FUND
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1999
CLASS A SHARES CLASS B SHARES
1 Year -8.03% 1 Year -8.96%
5 Years 4.57% 5 Years 4.11%
10 Years 5.07% Since Inception 1.89%
(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
<PAGE> 13
MANAGERS' COMMENTARY
- -------------------------------------------------------------------------------
FEBRUARY 15, 2000
SECURITY
FUNDS
SECURITY CASH FUND
A market climate in which the Federal Reserve Bank's policy-making Open Market
Committee elects to raise short-term interest rates is a climate in which money
market funds can excel. Security Cash Fund's positive return of 4.40% for the
year is close to its Lipper peer group average of 4.49% and led the performance
of the fixed income funds in the Security fund family.(1)
SHORTER AVERAGE MATURITY IS A BENEFIT
In periods of rising interest rates we try to maintain a shorter-than-average
maturity structure. At the end of the year, for example, the average maturity of
Security Cash Fund was 29 days, compared with 48 days for the benchmark IBC
Financial Data, Inc. money market fund average. The maturities of our holdings
are "laddered," with securities maturing almost daily. Thus, when rates are
rising we can quickly adjust the average maturity of the portfolio by
reinvesting the proceeds of maturing securities each day at the new higher
rates. Should interest rates begin to fall we would reinvest the proceeds in
securities with slightly longer maturities in order to hold the current rates as
long as possible.
ADJUSTABLE RATE SECURITIES ALSO BENEFIT
Some of our portfolio holdings have adjustable interest rates that reset
periodically--typically monthly--to reflect current levels. These securities
also help keep the overall portfolio return competitive by reacting quickly to
changes in market levels of rates. Our funding agreements as well as some of the
Federal agency securities in the portfolio have this type of adjustable rate
mechanism.
ASSET MIX AT YEAR END
The commercial paper in the portfolio has been reduced in favor of broader
diversification and increased amounts of the floating rate issues described
above. Commercial paper at year end made up 60.2% of portfolio holdings, with
Federal agency discount notes adding 13.4%, other Federal Agency securities 11%,
SBA issues 6%, and funding agreements 9.4%. This asset mix is more broadly
diversified than in previous years, giving us more flexibility to adjust in
periods such as the current environment of rising interest rates.
OUTLOOK FOR THE YEAR AHEAD
We expect the Federal Open Market Committee to continue increasing interest
rates in the first quarter of 2000, and possibly into the second quarter if
economic growth fails to slow to their desired 3% to 3.5% level. We believe Fed
Chairman Alan Greenspan has done an excellent job of keeping inflation under
control, and as global economies recover and put upward pressure on prices of
basic commodities and of goods imported into the United States, Dr. Greenspan
will surely continue his vigilance and adjust rates as conditions dictate. If
rates continue to rise we will manage portfolio holdings to capitalize on more
attractive investment opportunities as they become available.
Sincerely,
Fixed Income Team
(1) An investment in the Security Cash 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
<PAGE> 14
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------------------
DECEMBER 31, 1999
- -----------------------------------------------
Security Income Fund
Corporate Bond Series
- -----------------------------------------------
PRINCIPAL
AMOUNT OR
NUMBER OF MARKET
CORPORATE BONDS SHARES VALUE
- -------------------------------------------------------------------------------
AIRLINES - 3.8%
Southwest Airlines Company,
7.875% - 2007................................ $1,075,000 $1,088,437
United Air Lines,
11.21% - 2014................................ $ 950,000 1,126,938
----------
2,215,375
AUTOMOTIVE - 2.5%
Federal-Mogul Corporation,
7.875% - 2010................................ $ 250,000 228,437
General Motors Corporation,
7.70% - 2016................................. $1,000,000 998,750
Mark IV Industries,
7.75% - 2006................................. $ 250,000 240,000
----------
1,467,187
BANKING - 1.6%
Washington Mutual Capital I,
8.375% - 2027(1)............................. $1,000,000 936,250
BASIC INDUSTRY - OTHER - 1.2%
Pioneer Hi Bred International, Inc.,
5.75% - 2009................................. $ 800,000 713,000
BEVERAGE - 1.9%
Anheuser-Busch Companies, Inc.,
7.10% - 2007................................. $1,150,000 1,115,500
BROKERAGE - 2.1%
SI Financing, Inc.,
9.50% - 2026(1).............................. 48,910 1,247,205
BUILDING MATERIALS - 3.1%
LaFarge Corporation,
6.375% - 2005................................ $ 600,000 562,500
Martin Marietta Material,
5.875% - 2008................................ $ 850,000 758,625
Vulcan Materials Company,
5.75% - 2004................................. $ 500,000 476,250
----------
1,797,375
CONSTRUCTION MACHINERY - 1.0%
AGCO Corporation,
8.50% - 2006................................. $ 250,000 232,812
Sequa Corporation,
9.00% - 2009................................. $ 150,000 145,688
Titan Wheel International,
8.75% - 2007................................. $ 250,000 210,313
----------
588,813
ENTERTAINMENT - 1.5%
Paramount Communications,
7.50% - 2023................................. $1,000,000 882,500
FINANCIAL COMPANIES - 7.4%
American RE Capital,
8.50% - 2025(1).............................. 23,000 552,000
Associates Corporation, N.A.,
7.55% - 2006................................. $ 875,000 873,906
CB Richard Ellis Service,
8.875% - 2006................................ $ 250,000 225,625
Countrywide Capital,
8.00% - 2026(1).............................. $1,000,000 891,250
Merrill Lynch & Company, Inc.,
7.375% - 2006................................ $ 100,000 99,250
Morgan Stanley Dean Witter
Discover & Company,
6.875% - 2007................................ $1,050,000 1,014,563
PNC Funding Corporation,
7.75% - 2004................................. $ 700,000 706,125
----------
4,362,719
FOOD - 2.2%
Archer-Daniels-Midland Company,
8.875% - 2011................................ $1,000,000 1,092,500
Chiquita Brands International, Inc.,
10.25% - 2006................................ $ 250,000 180,625
----------
1,273,125
GAMING - 2.7%
Boyd Gaming Corporation,
9.25% - 2003................................. $ 250,000 251,875
MGM Grand Inc.,
6.95% - 2005................................. $ 600,000 552,750
Mirage Resorts Inc.,
6.625% - 2005................................ $ 600,000 550,500
Park Place Entertainment,
7.875% - 2005................................ $ 250,000 239,375
----------
1,594,500
HEALTHCARE - 0.2%
Rural/Metro Corporation,
7.875% - 2008................................ $ 125,000 98,125
HOME CONSTRUCTION - 0.6%
D.R. Horton, Inc.,
8.375% - 2004................................ $ 50,000 48,875
MDC Holdings, 8.375% - 2008.................... $ 125,000 113,906
Oakwood Homes Corporation,
8.125% - 2009................................ $ 250,000 128,750
Toll Corporation, 7.75% - 2007................. $ 75,000 70,313
----------
361,844
INDEPENDENT ENERGY - 1.2%
Seagull Energy Corporation,
8.625% - 2005................................ $ 700,000 700,875
See accompanying notes.
- -------------------------------------------------------------------------------
13
<PAGE> 15
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------------------
DECEMBER 31, 1999
- -----------------------------------------------
Security Income Fund
Corporate Bond Series (continued)
- -----------------------------------------------
PRINCIPAL MARKET
CORPORATE BOND (continued) AMOUNT VALUE
- -------------------------------------------------------------------------------
INSURANCE - LIFE - 1.9%
Chubb Corporation,
6.15% - 2005................................. $ 100,000 $ 94,500
Hartford Life, Inc.,
7.10% - 2007................................. 950,000 914,375
Transamerica Capital II,
7.65% - 2026................................. 100,000 91,250
----------
1,100,125
LODGING - 0.8%
HMH Properties,
7.875% - 2008................................ 250,000 223,125
Prime Hospitality Corporation,
9.25% - 2006................................. 250,000 249,375
----------
472,500
MEDIA - CABLE - 2.5%
Century Communications,
8.375% - 2007................................ 250,000 236,875
Comcast Corporation,
9.125% - 2006................................ 100,000 104,125
Jones Intercable, Inc.,
7.625% - 2008................................ 250,000 248,125
Lenfest Communications, Inc.,
10.50% - 2006................................ 250,000 280,625
Rogers Cablesystems, Ltd.,
9.625% - 2002................................ 250,000 259,375
Rogers Communications, Inc.,
9.125% - 2006................................ 250,000 250,625
Time Warner Entertainment,
10.15% - 2012................................ 60,000 70,350
----------
1,450,100
MEDIA - NON-CABLE - 0.6%
K-III Communications Corporation,
10.25% - 2004................................ 300,000 296,625
News American Holdings,
8.625% - 2003................................ 75,000 77,437
----------
374,062
OIL FIELD SERVICES - 1.7%
Transocean Offshore, Inc.,
8.00% - 2027................................. 1,000,000 981,250
RETAILERS - 3.0%
Lowe's Companies, Inc.,
6.70% - 2007................................. 850,000 811,750
Mattel, Inc., 6.125% - 2005.................... 300,000 274,125
Tandy Corporation,
6.95% - 2007................................. 450,000 430,875
Zale Corporation, 8.50% - 2007................. 250,000 247,813
----------
1,764,563
SERVICES - 0.9%
Loewen Group International, Inc.,
8.25% - 2003*................................ 550,000 288,750
Unisys Corporation,
7.875% - 2008................................ 250,000 240,625
----------
529,375
TECHNOLOGY - 0.8%
Electronic Data Systems,
7.125% - 2009................................ 500,000 488,125
TELECOMMUNICATIONS - 3.9%
AT&T Corporation,
7.00% - 2005................................. 100,000 98,125
Cable & Wireless Communication,
6.75% - 2008................................. 250,000 247,500
GTE Corporation,
7.51% - 2009................................. 1,000,000 998,750
Mastec, Inc., 7.75% - 2008..................... 250,000 243,125
New Jersey Bell Telephone,
6.625% - 2008................................ 50,000 46,687
SBC Communications Capital
Corporation, 6.625% - 2007................... 675,000 648,000
----------
2,282,187
TRANSPORTATION - OTHER - 0.4%
Allied Holdings, Inc.,
8.625% - 2007................................ 250,000 221,875
UTILITIES - ELECTRIC - 0.9%
AES Corporation,
10.25% - 2006................................ 500,000 505,000
UTILITIES - NATURAL GAS - 1.7%
MCN Investment Corporation,
6.32% - 2003................................. 75,000 72,281
National Fuel Gas Company,
6.303% - 2008................................ 1,000,000 901,250
----------
973,531
YANKEE - CANADIAN - 1.7%
Quebecor Printing Capital,
7.25% - 2007................................. 1,100,000 1,027,125
YANKEE - CORPORATE - 7.2%
Abbey National PLC,
6.69% - 2005................................. 1,150,000 1,102,563
ABN AMRO Bank N.V.,
7.55% - 2006................................. 1,000,000 995,000
BCH Cayman Islands, Ltd.,
7.70% - 2006................................. 1,000,000 996,250
Panamerican Beverages, Inc.,
8.125% - 2003................................ 1,200,000 1,146,000
----------
4,239,813
----------
Total corporate bonds - 61.0%............................... 35,764,024
See accompanying notes.
- -------------------------------------------------------------------------------
14
<PAGE> 16
SCHEDULE OF INVESTMENTS
- -------------------------------------------------------------------------------
DECEMBER 31, 1999
- -----------------------------------------------
Security Income Fund
Corporate Bond Series (continued)
- -----------------------------------------------
PRINCIPAL MARKET
MORTGAGE BACK SECURITIES AMOUNT VALUE
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES - 11.9%
Federal Home Loan Bank, 6.375% - 2006 ....... $ 800,000 $ 773,792
Federal Home Loan Mortgage Corporation,
FHR #1311 J,
7.50% - 2021 CMO ...................... 1,050,000 1,037,085
FHR #1930 AB, 7.50% - 2023 CMO ........... 235,958 237,270
FHLMC, 6.25% - 2004 ...................... 1,000,000 977,500
Federal National Mortgage Association,
FNR 1990-108 G,
7.00% - 2020 CMO ...................... 543,254 525,403
FNMA, 6.50% - 2004 ....................... 1,000,000 987,790
FNMA, 6.375% - 2009 ...................... 1,500,000 1,431,915
FNMA, 6.625% - 2009 ...................... 1,000,000 972,500
----------
6,943,255
U.S. GOVERNMENT SECURITIES - 13.0%
Government National Mortgage Association,
GNMA #313107
7.00% - 2022 .......................... 736,096 721,204
GNMA #352022,
7.00% - 2023 .......................... 679,459 656,099
GNMA #369303,
7.00% - 2023 .......................... 652,089 638,115
GNMA #462680
7.00% - 2028 .......................... 866,352 839,218
GNMA #482668,
7.00% - 2028 .......................... 1,057,200 1,023,739
GNMA #518436
7.25% - 2029 .......................... 997,508 974,784
GNMA #494109,
7.50% - 2029 .......................... 1,545,686 1,528,328
GNMA #510704
7.50% - 2029 .......................... 997,758 986,544
GNMA II #2445
8.00% - 2027 .......................... 257,588 258,194
GNR 1997-10B,
7.50% - 2019 CMO ...................... 21,744 21,696
---------
7,647,921
NON-AGENCY SECURITIES - 2.9%
Chase Capital Mortgage Securities
Company, 1997-1 B,
7.37% - 2007 CMO ................. 1,500,000 1,473,945
Chase Capital Mortgage Securities
Company, 1998-1 B,
6.56% - 2008 CMO ................. 225,000 210,892
----------
1,684,837
----------
Total mortgage backed securities - 27.8%.................. 16,276,013
PRINCIPAL MARKET
GOVERNMENT SECURITIES AMOUNT VALUE
- -------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES - 9.9%
U.S. Treasury Bond,
6.25% - 2023 ............................ $ 1,000,000 $ 942,890
6.625% - 2027 ........................... 1,000,000 991,180
U.S. Treasury Notes,
5.75% - 2003 ............................ 1,700,000 1,668,686
6.50% - 2005 ............................ 1,000,000 1,000,160
U.S. Department of Housing and
Urban Development
6.93% - 2013 ............................ 1,290,000 1,215,893
-----------
5,818,809
-----------
Total investments - 98.7% ................................ 57,858,846
Cash and other assets,
less liabilities - 1.3% ............................... 755,585
-----------
Total net assets - 100.0% ................................ $58,614,431
===========
- ------------------------------------------------
Security Income Fund
U.S. Government Series
- ------------------------------------------------
U.S. GOVERNMENT & GOVERNMENT AGENCY SECURITIES
- --------------------------------------------------------------------------------
FEDERAL HOME LOAN BANKS - 1.1%
8.29% - 2015 ............................. $ 150,000 $ 165,001
FEDERAL HOME LOAN MORTGAGE CORPORATION - 9.0%
6.25% - 2004 ............................. 400,000 391,000
6.625% - 2009 ............................ 1,000,000 971,250
-----------
1,362,250
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 23.1%
6.50% - 2004 ............................. 1,000,000 987,790
7.40% - 2004 ............................. 600,000 613,272
7.49% - 2005 ............................. 285,000 292,649
7.65% - 2005 ............................. 250,000 258,452
7.875% - 2005 ............................ 500,000 521,590
6.00% - 2008 ............................. 400,000 374,468
6.16% - 2028 ............................. 500,000 437,830
-----------
3,486,051
FINANCING CORPORATION - 4.1%
9.65% - 2018 ............................. 500,000 615,000
See accompanying notes.
- --------------------------------------------------------------------------------
15
<PAGE> 17
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- ------------------------------------------------
Security Income Fund
U.S. Government Series (continued)
- ------------------------------------------------
U.S. GOVERNMENT AND
GOVERNMENT AGENCY PRINCIPAL MARKET
SECURITIES (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 43.0%
GNMA #328618, 7.00% - 2022 $ 213,217 $ 208,169
GNMA II #1260, 7.00% - 2023 151,159 147,249
GNMA #347017, 7.00% - 2024 373,299 363,858
GNMA #371006, 7.00% - 2024 205,649 200,897
GNMA #371012, 7.00% - 2024 371,619 362,488
GNMA II #1849, 8.50% - 2024 158,892 163,076
GNMA #411643, 7.75% - 2025 242,884 242,797
GNMA #780454, 7.00% - 2026 681,941 658,925
GNMA #2320, 7.00% - 2026 328,171 318,365
GNMA II #2270, 8.00% - 2026 267,345 267,968
GNMA II #9365, 8.25% - 2026 149,549 152,410
GNMA #2689, 6.50% - 2028 380,246 356,153
GNMA #464356, 6.50% - 2028 754,216 708,647
GNMA #462680, 7.00% - 2028 86,635 83,922
GNMA #2616, 7.00% - 2028 476,820 460,465
GNMA #491492, 7.50% - 2029 989,755 978,689
GNMA #510704, 7.50% - 2029 299,328 295,963
GNMA #365608, 7.50% - 2034 515,070 509,842
-----------
6,479,883
PRIVATE EXPORT FUNDING CORPORATION - 3.0%
6.31% - 2004 ..................................... 100,000 97,250
7.01% - 2004 ..................................... 350,000 350,000
-----------
447,250
STUDENT LOAN MARKETING ASSOCIATION - 3.0%
9.25% - 2004 ..................................... 420,000 457,729
TENNESSEE VALLEY AUTHORITY - 6.1%
6.00% - 2013 ..................................... 500,000 448,750
6.75% - 2025 ..................................... 500,000 470,000
-----------
918,750
U.S. TREASURY NOTES - 4.3%
8.75% - 2008 ..................................... 600,000 642,036
-----------
Total investments - 96.7% ........................................ 14,573,950
Cash and other investments,
less liabilities - 3.3% ....................................... 504,236
-----------
Total net assets - 100.0% ........................................ $15,078,186
===========
- ------------------------------------------------
Security Income Fund
Limited Maturity Bond Series
- ------------------------------------------------
PRINCIPAL
AMOUNT OR
NUMBER OF MARKET
CORPORATE BONDS SHARES VALUE
- --------------------------------------------------------------------------------
AUTOMOTIVE - 2.1%
Federal-Mogul Corporation,
7.875% - 2010 .................................... $ 25,000 $ 22,844
General Motors, 7.70% - 2016 ........................ 100,000 99,875
Mark IV Industries, 7.50% - 2007 .................... 25,000 22,688
-----------
145,407
BANKING - 3.5%
B.F Saul REIT,9.75% - 2008 .......................... $ 13,000 12,269
Bank of New York, Inc., 6.50% - 2003 ................ $ 100,000 97,500
First Union Corporation, 8.125% - 2002 .............. $ 110,000 112,063
Golden State Holdings, 7.125% - 2005 ................ $ 25,000 22,656
-----------
244,488
BASIC INDUSTRY - OTHER - 1.6%
Pioneer Hi Bred International, Inc.,
5.75% - 2009 ..................................... $ 125,000 111,406
BEVERAGE - 2.7%
Anheuser-Busch Companies, Inc.,
7.10% - 2007 ..................................... $ 100,000 97,000
Pepsi Bottling Holdings, Inc.,
5.625% - 2009 .................................... $ 100,000 88,250
-----------
185,250
BROKERAGE - 1.7%
S.I. Financing Trust I,
9.50% - 2026(1) .................................. 4,560 116,280
BUILDING MATERIALS - 2.4%
LaFarge Corporation,
6.375% - 2005 .................................... $ 50,000 46,875
Nortek, Inc.,
8.875% - 2008 .................................... $ 25,000 23,750
Vulcan Materials Company,
5.75% - 2004 ..................................... $ 100,000 95,250
-----------
165,875
CONSTRUCTION MACHINERY - 1.0%
AGCO Corporation,
8.5% - 2006 ...................................... $ 25,000 23,281
Columbus McKinnon Corporation,
8.5% - 2008 ...................................... $ 25,000 21,563
SEQUA Corporation,
9.0% - 2009 ...................................... $ 25,000 24,281
-----------
69,125
CONSUMER CYCLICAL - OTHER - 0.2%
American ECO Corporation
9.625% - 2008 .................................... $ 25,000 12,938
ENERGY - OTHER - 0.3%
P&L Coal Holdings Corporation,
8.875% - 2008 .................................... $ 25,000 24,438
ENERGY - REFINING - 2.3%
Vastar Resources, Inc.,
8.75% - 2005 ..................................... $ 150,000 156,750
See accompanying notes.
- --------------------------------------------------------------------------------
16
<PAGE> 18
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- ------------------------------------------------
Security Income Fund
Limited Maturity Bond Series (continued)
- ------------------------------------------------
PRINCIPAL
AMOUNT OR
NUMBER OF MARKET
CORPORATE BONDS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIAL COMPANIES - 10.4%
American RE Capital,
8.5% - 2025(1) ...................... 3,900 $ 93,600
Associates Corporation, N.A.,
7.55% - 2006 ........................ $100,000 99,875
CB Richard Ellis Service,
8.875% - 2006 ....................... $ 25,000 22,562
Household Financial Corporation,
8.0% - 2004 ......................... $150,000 152,438
International Lease Finance
Corporation, 8.25% - 2000 ........... $150,000 150,080
Merrill Lynch & Company,
7.375% - 2006 ....................... $100,000 99,250
Morgan Stanley Dean Witter Discover
& Company, 6.875% - 2007 ............ $100,000 96,625
--------
714,430
FINANCE - OTHER - 1.4%
EOP Operating Limited
Partnership, REIT,
6.625% - 2005 ....................... $100,000 94,875
FOOD - 2.6%
Archer-Daniels-Midland Company,
8.875% - 2011 ....................... $100,000 109,250
Cargill Corporation,
6.15% - 2008 ........................ $ 75,000 68,250
--------
177,500
GAMING - 3.3%
Boyd Gaming Corporation,
9.25% - 2003 ........................ $ 25,000 25,187
Circus Circus Enterprise,
9.25% - 2005 ........................ $ 25,000 25,375
Harrahs Operating, Inc.,
7.875% - 2005 ....................... $ 25,000 24,063
MGM Grand, Inc.,
6.95% - 2005 ........................ $ 75,000 69,094
Mirage Resorts, Inc.,
6.625% - 2005 ....................... $ 65,000 59,638
Park Place Entertainment,
7.875% - 2005 ....................... $ 25,000 23,937
--------
227,294
HEALTHCARE - 0.3%
Tenet Healthcare, 8.125% - 2008 ........ $ 25,000 23,344
HOME CONSTRUCTION - 0.3%
MDC Holdings, 8.375% - 2008 ............ $ 12,000 10,935
Toll Corporation, 7.75% - 2007 ........ $ 13,000 12,187
--------
23,122
INDEPENDENT ENERGY - 0.7%
Seagull Energy Corporation,
8.625% - 2005 ....................... $ 50,000 $ 50,062
INSURANCE - 1.4%
Hartford Life, Inc.,
7.10% - 2007 ........................ 100,000 96,250
INSURANCE - LIFE - 1.4%
Chubb Corporation,
6.15% - 2005 ........................ 100,000 94,500
LODGING - 0.3%
HMH Properties,
7.875% - 2008 ....................... 25,000 22,312
MEDIA - CABLE - 2.3%
Adelphia Communications,
8.375% - 2008 ....................... 25,000 23,250
Century Communications,
8.375% - 2007 ....................... 25,000 23,688
Jones Intercable, Inc.,
7.625% - 2008 ....................... 25,000 24,812
Rogers Communication, Inc.,
9.125% - 2006 ....................... 25,000 25,062
Time Warner Entertainment,
10.15% - 2012 ....................... 50,000 58,625
--------
155,437
MEDIA - NON-CABLE - 2.9%
Heritage Media Corporation,
8.75% - 2006 ........................ 100,000 101,875
K-III Communications Corporation
10.25% - 2004 ....................... 75,000 74,156
USA Networks, 6.75% - 2005 ............. 25,000 23,844
--------
199,875
METALS - 1.0%
AK Steel Corporation,
7.875% - 2009 ....................... 25,000 23,750
California Steel Industries,
8.50% - 2009 ........................ 25,000 24,188
WHX Corporation, 10.5% - 2005 .......... 25,000 24,437
--------
72,375
PACKAGING - 0.4%
Ball Corporation,
7.75% - 2006 ........................ 25,000 24,437
See accompanying notes.
- --------------------------------------------------------------------------------
17
<PAGE> 19
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- ------------------------------------------------
Security Income Fund
Limited Maturity Bond Series (continued)
- ------------------------------------------------
PRINCIPAL MARKET
CORPORATE BONDS (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
RETAILERS - 6.4%
Lowe's Companies, Inc.,
6.70% - 2007 .......................... $ 100,000 $ 95,500
Sears & Roebuck Company,
6.41% - 2001 .......................... 150,000 148,125
Tandy Corporation,
6.95% - 2007 .......................... 100,000 95,750
Zale Corporation,
8.50% - 2007 ......................... 100,000 99,125
----------
438,500
SERVICES - 0.7%
Loewen Group International, Inc.,
8.25% - 2003* ......................... 50,000 26,250
Protection One Alarm,
7.375% - 2005 ......................... 25,000 19,875
----------
46,125
SUPERMARKETS - 1.3%
Safeway, Inc., 6.50% - 2008 .............. 100,000 92,125
TELECOMMUNICATIONS - 5.6%
AT&T Corporation,
7.00% - 2005 ......................... 100,000 98,125
ALESTRA S.A., 12.625% - 2009 ............. 25,000 25,094
Cable & Wireless Communications,
6.75% - 2008 .......................... 50,000 49,500
Mastec, Inc., 7.75% - 2008 ............... 25,000 24,312
New Jersey Bell, 6.625% - 2008 ........... 100,000 93,375
Southwestern Bell,
6.625% - 2007 ......................... 100,000 96,000
----------
386,406
TEXTILES - 0.3%
Westpoint Stevens, Inc.,
7.875% - 2008 ......................... 25,000 22,437
TOBACCO - 1.2%
Dimon, Inc., 8.875% - 2006 ............... 50,000 44,625
Standard Commercial Tobacco
Corporation, 8.875% - 2005 ............ 50,000 40,625
----------
85,250
TRANSPORTATION - AIRLINES - 2.8%
Southwest Airlines Company,
7.875% - 2007 ......................... 100,000 101,250
United Airlines, 11.21% - 2014 ........... 75,000 88,969
----------
190,219
TRANSPORTATION - OTHER - 0.3%
Allied Holdings, Inc.,
8.625% - 2007 ......................... 25,000 22,187
UTILITIES - ELECTRIC - 2.9%
CMS Energy Corporation,
6.75% - 2004 ......................... $ 25,000 $ 23,187
Calpine Corporation,
8.75% - 2007 ......................... 25,000 25,094
Consolidated Edison Company,
6.625% - 2002 150,000 148,500
----------
196,781
UTILITIES - NATURAL GAS - 2.1%
MCN Investment Corporation,
6.32% - 2003 .......................... 150,000 144,563
YANKEE CANADIAN - 1.4%
Quebecor Printing Capital,
7.25% - 2007 .......................... 100,000 93,375
YANKEE CORPORATE - 4.2%
ABN AMRO Bank NV,
7.55% - 2006 ......................... 100,000 99,500
Den Danske Bank,
7.40% - 2010 .......................... 100,000 96,250
Panamerican Beverages, Inc.,
8.125% - 2003 ......................... 100,000 95,500
----------
291,250
----------
Total corporate bonds - 75.7% ......................... 5,216,988
MORTGAGE BACKED SECURITIES
- --------------------------
U.S. GOVERNMENT AGENCIES - 13.1%
Federal Home Loan Mortgage Corporation,
FHG #42 K,
8.00% - 2024 CMO ................... 57,524 57,955
FHR #1311 J,
7.50% - 2021 CMO ................... 100,000 98,770
FHR #1930 AB,
7.50% - 2023 CMO ................... 17,350 17,446
Freddie Mac,
5.75% - 2003 ....................... 150,000 145,304
Federal Home Loan Mortgage
6.25% - 2004 ....................... 250,000 244,375
----------
563,850
Federal National Mortgage Association,
FNMA, 6.50% - 2004 .................... 250,000 246,948
FNMA, 5.45% - 2003 .................... 100,000 95,571
----------
342,519
See accompanying notes.
- --------------------------------------------------------------------------------
18
<PAGE> 20
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- ------------------------------------------------
Security Income Fund
Limited Maturity Bond Series (continued)
- ------------------------------------------------
MORTGAGE PRINCIPAL MARKET
BACKED SECURITIES (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES - 6.6%
Government National Mortgage Association,
GNMA #369303,
7.00% - 2023 .......................... $ 65,209 $ 63,811
GNMA I #780454
7.00% - 2026 .......................... 85,243 82,366
GNMA II #2445,
8.00% - 2027 .......................... 61,821 61,967
GNMA #482668,
7.00% - 2028 .......................... 154,175 149,295
GNMA #510704,
7.50% - 2029 .......................... 99,776 98,654
----------
456,093
NON-AGENCY SECURITIES - 0.1%
Global Rated Eligible Asset Trust,
7.33% - 2006 .......................... 44,343 9,755
----------
Total mortgage backed securities - 19.8% ................. 1,372,217
GOVERNMENT SECURITIES
- ---------------------
U.S. GOVERNMENT SECURITIES - 0.7%
U.S. Department of Housing and
Urban Development,
6.93% - 2013 ............................. 50,000 47,128
CANADIAN GOVERNMENT SECURITIES - 2.3%
Province of Quebec,
8.625% - 2005 ............................ 150,000 158,250
----------
Total government securities - 3.0% ...................... 205,378
----------
Total investments - 98.5% ............................... 6,794,583
Cash and other assets,
less liabilities - 1.5% .............................. 100,729
----------
Total net assets - 100% ................................. $6,895,312
==========
- ------------------------------------------------
Security Income Fund
High Yield Series
- ------------------------------------------------
CORPORATE BONDS
- ---------------
AEROSPACE/DEFENSE - 0.8%
Burke Industries, Inc.,
10.00% - 2007 ............................ $ 175,000 $ 83,563
AUTOMOTIVE - 1.5%
Federal Mogul Corporation,
7.50% - 2009 ............................. 75,000 67,781
7.875% - 2010 ............................ 100,000 91,375
----------
159,156
BANKING - 2.4%
BF SAUL REIT, 9.75% - 2008 .................. 75,000 70,781
FCB/NC Capital, 8.05% - 2028 ................ 50,000 44,500
Homeside, Inc., 11.25% - 2003 ............... 125,000 142,813
----------
258,094
BEVERAGES - 1.8%
Canandaigua Brands,
8.625% - 2006 ............................ $ 100,000 $ 99,500
Delta Beverage Group,
9.75% - 2003 ............................. $ 100,000 98,750
----------
198,250
BROKERAGE - 1.0%
SI Financing Trust, Inc.,
9.50% - 2026(1)........................... 4,000 102,000
BUILDING MATERIALS - 3.8%
American Plumbing & Mechanical, Inc.,
11.625% - 2008 ........................... $ 200,000 189,500
Knoll, Inc., 10.875% - 2006 ................. $ 100,000 100,500
Nortek, Inc., 8.875% - 2008 ................. $ 125,000 118,750
----------
408,750
CONSTRUCTION MACHINERY - 4.4%
AGCO Corporation,
8.50% - 2006 ............................ $ 100,000 93,125
Columbus McKinnon Corporation,
8.50% - 2008 ............................. $ 125,000 107,813
Navistar International,
8.00% - 2008 ............................. $ 75,000 72,000
SEQUA Corporation,
9.00% - 2009 ............................. $ 125,000 121,406
Titan Wheel International, Inc.,
8.75% - 2007 ............................. $ 100,000 84,125
----------
478,469
CONSUMER CYCLICAL - OTHER - 0.6%
American ECO Corporation,
9.625% - 2008 ............................ $ 125,000 64,688
ELECTRIC UTILITY - 3.7%
AES Corporation,
10.25% - 2006 ........................... $ 100,000 101,000
Calpine Corporation,
8.75% - 2007 ............................. $ 125,000 125,469
East Coast Power LLC,
6.737% - 2008 ............................ $ 94,574 88,781
7.066% - 2012 ............................ $ 100,000 88,875
----------
404,125
ENERGY - INDEPENDENT - 1.5%
COHO Energy, Inc.,
8.875% - 2007* ........................... $ 150,000 82,125
Seagull Energy Corporation,
8.625% - 2005 ............................ $ 75,000 75,094
----------
157,219
ENERGY - OTHER - 0.7%
P & L Coal Holdings Corporation,
8.875% - 2008 ............................ $ 75,000 73,313
See accompanying notes.
- --------------------------------------------------------------------------------
19
<PAGE> 21
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- ------------------------------------------------
Security Income Fund
High Yield Series (continued)
- ------------------------------------------------
PRINCIPAL MARKET
CORPORATE BONDS (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
ENERGY - REFINING - 2.1%
Crown Central Petroleum,
10.875% - 2005 .......................... $140,000 $110,250
Giant Industries, Inc.,
9.00% - 2007 ............................ 125,000 115,000
--------
225,250
ENTERTAINMENT - 0.7%
Premier Parks, 9.75% - 2007 ................ 75,000 76,687
FINANCIAL COMPANIES - 1.6%
CB Richard Ellis Service,
8.875% - 2006 ........................... 75,000 67,688
Dollar Financial Group, Inc.,
10.875% - 2006 .......................... 100,000 100,500
--------
168,188
FOOD - 2.2%
Chiquita Brands International, Inc.,
10.25% - 2006 ........................... 100,000 72,250
Nash Finch Company,
8.50% - 2008 ............................ 200,000 165,500
--------
237,750
GAMING - 8.3%
Circus Circus Enterprise,
6.75% - 2003 ............................ 100,000 90,625
9.25% - 2005 ............................ 75,000 76,125
Harrahs Operating, Inc.,
7.875% - 2005 ........................... 150,000 144,375
Hollywood Park, Inc.,
9.25% - 2007 ............................ 100,000 99,000
Isle of Capri Casinos,
8.75% - 2009 ............................ 100,000 92,250
Mirage Resorts, Inc.,
6.625% - 2005 ........................... 125,000 114,688
MGM Grand, Inc.,
6.95% - 2005 ............................ 125,000 115,156
Park Place Entertainment,
7.875% - 2005 ........................... 175,000 167,563
--------
899,782
HEALTHCARE - 3.4%
Genesis Health Ventures,
9.875% - 2009 ........................... 100,000 40,750
Multicare Companies, Inc.,
9.00% - 2007 ............................ 75,000 20,062
Packard Bioscience Company,
9.375% - 2007 ........................... 80,000 69,600
Prime Medical Services,
8.75% - 2008 ............................ 75,000 69,000
Rural/Metro,
7.875% - 2008 ........................... 100,000 78,500
Tenet Healthcare,
8.125% - 2008 ........................... 100,000 93,375
--------
371,287
HOME CONSTRUCTION - 3.4%
D.R. Horton, Inc.,
8.375% - 2004 ........................... $ 75,000 $ 73,312
Oakwood Homes Corporation,
8.125% - 2009 ........................... 200,000 103,000
Standard Pacific Corporation,
8.50% - 2009 ............................ 150,000 138,750
Toll Corporation,
7.75% - 2007 ............................ 50,000 46,875
--------
361,937
INSURANCE - 0.6%
GENAMERICA Capital, Inc.,
8.525% - 2027 ........................... 75,000 61,125
LODGING - 3.2%
HMH Properties,
7.875% - 2008 ........................... 175,000 156,187
Vail Resorts, Inc.,
8.75% - 2009 ............................ 200,000 187,000
--------
343,187
MEDIA - CABLE - 3.8%
Adelphia Communications,
9.50% - 2004 ............................ 17,356 17,052
8.375% - 2008 ........................... 100,000 93,000
Century Communications,
9.50% - 2005 ............................ 100,000 100,750
8.375% - 2007 ........................... 75,000 71,063
Diamond Holdings,
9.125% - 2008 ........................... 100,000 99,250
Rogers Cablesystems,
9.625% - 2002 ........................... 25,000 25,937
--------
407,052
MEDIA - NON-CABLE - 3.4%
Allbritton Communications,
9.75% - 2007 ............................ 75,000 75,750
Golden Books Publishing,
7.65% - 2002* ........................... 100,000 42,500
Heritage Media Corporation,
8.75% - 2006 ............................ 100,000 101,875
Hollinger International Publishing,
8.625% - 2005 ........................... 25,000 24,750
K-III Communications, Corporation,
10.25% - 2004 ........................... 50,000 49,438
USA Networks, 6.75% - 2005 ................. 75,000 71,531
--------
365,844
See accompanying notes.
- --------------------------------------------------------------------------------
20
<PAGE> 22
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- ------------------------------------------------
Security Income Fund
High Yield Series (continued)
- ------------------------------------------------
PRINCIPAL MARKET
CORPORATE BONDS (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
METALS - 4.5%
AK Steel Corporation,
7.875% - 2009 ..................................... $ 75,000 $ 71,250
Bulong Operation,
12.50% - 2008 ..................................... 75,000 61,312
California Steel Industries,
8.50% - 2009 ...................................... 175,000 169,313
Simcala, Inc.,
9.625% - 2006 ..................................... 75,000 43,313
Wheeling Pittsburgh Corporation,
9.25% - 2007 ...................................... 100,000 93,750
WHX Corporation,
10.50% - 2005 .................................... 50,000 48,875
----------
487,813
PACKAGING & CONTAINERS - 2.6%
Ball Corporation,
7.75% - 2006 ..................................... 100,000 97,750
Huntsman Packaging Corporation,
9.125% - 2007 ..................................... 125,000 120,937
Indesco International, Inc.,
9.75% - 2008 ...................................... 150,000 67,125
----------
285,812
RETAILERS - 4.5%
Ames Department Stores,
10.00% - 2006 ..................................... 200,000 197,500
Musicland Group,
9.00% - 2007 ...................................... 200,000 193,500
Zale Corporation,
8.50% - 2007 ...................................... 100,000 99,125
----------
490,125
SERVICES - 2.0%
Loewen Group, Inc.,
6.70% - 1999* ..................................... 100,000 52,500
Protection One Alarm,
7.375% - 2005 ..................................... 200,000 159,000
----------
211,500
TECHNOLOGY - 1.8%
AMKOR Technologies, Inc.,
9.25% - 2006 ...................................... 200,000 196,000
TELECOMMUNICATIONS - 11.5%
ALESTRA S.A.,
12.625% - 2009 .................................... $ 200,000 $ 200,750
Call-Net Enterprise, Inc.,
9.375% - 2009 ..................................... $ 100,000 82,750
Loral Space & Communications, Inc.,
9.50% - 2006 ...................................... $ 200,000 180,000
Mcleodusa, Inc.,
8.375% - 2008 ..................................... $ 150,000 138,187
MJD Communications, Inc.,
9.50% - 2008 ...................................... $ 150,000 141,188
Pac-West Telecom, Inc.,
13.50% - 2009 ..................................... $ 200,000 207,500
RCN Corporation,
10.00% - 2007 .................................... $ 225,000 223,875
Satelites Mexicanos, Inc.,
10.125% - 2004 .................................... $ 100,000 68,000
----------
1,242,250
TEXTILES - 0.6%
Westpoint Steven,
7.875% - 2008 ..................................... $ 75,000 67,312
TOBACCO - 1.0%
Dimon, Inc., 8.875% - 2006 ........................... $ 50,000 44,625
Standard Commercial Tobacco Corporation,
8.875% - 2005 ..................................... $ 75,000 60,937
----------
105,562
TRANSPORTATION - OTHER - 2.7%
Allied Holdings, Inc.,
8.625% - 2007 ..................................... $ 75,000 66,562
Pegasus Aviation Lease Securitization,
5.878% - 2029 ..................................... $ 200,000 106,312
Teekay Shipping Corporation,
8.32% - 2008 ...................................... $ 135,000 121,163
----------
294,037
----------
Total corporate bonds - 86.1% .................................. 9,286,127
PREFERRED STOCKS
- ----------------
BANKS AND CREDIT - 0.8%
California Federal Bank, 9.125% ..................... 4,000 90,250
BROADCAST MEDIA - 1.3%
CSC Holdings, Inc., 11.125% .......................... 670 72,710
PRIMEDIA, Inc., 10.0% ................................ 700 71,750
----------
144,460
----------
Total preferred stocks - 2.1% ................................. 234,710
COMMON STOCKS
- -------------
BROADCAST MEDIA - 0.3%
Infinity Broadcasting Corporation .................... 1,000 36,188
GAMING AND LOTTERY - 0.2%
MGM Grand, Inc. ...................................... 500 25,156
See accompanying notes.
- --------------------------------------------------------------------------------
21
<PAGE> 23
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- ------------------------------------------------
Security Income Fund
High Yield Series (continued)
- ------------------------------------------------
PRINCIPAL
AMOUNT OR
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 1.6%
Bedford Property Investors, Inc. .................... 1,200 $ 20,475
Centerpoint Properties Corporation .................. 575 20,628
Duke-Weeks Realty Corporation ....................... 1,050 20,475
First Industrial Realty Trust, Inc. ................. 805 22,087
KIMCO Realty Corporation ............................ 500 16,938
Prentiss Properties Trust ........................... 1,400 29,400
Prologis Trust ...................................... 925 17,806
Reckson Associates Realty Corporation ............... 930 19,065
-----------
166,874
-----------
Total common stocks - 2.1% ..................................... 228,218
-----------
Total investments - 90.3% ...................................... 9,749,055
Cash and other assets,
less liabilities - 9.7% ..................................... 1,048,263
-----------
Total net assets - 100.0% ...................................... $10,797,318
===========
- ------------------------------------------------
Security Municipal Bond Fund
- ------------------------------------------------
MUNICIPAL BONDS
- ---------------
ALASKA - 1.6%
Valdez Alaska Marine Terminal
Revenue, 4.75% - 2033(2) ......................... $ 300,000 $ 300,000
CALIFORNIA - 10.9%
Los Angeles County, California
Metro Authority,
5.625% - 2018 .................................... $1,000,000 973,670
Los Angeles, California
Wastewater System Revenue,
6.00% - 2014 ..................................... $1,100,000 1,125,927
----------
2,099,597
ILLINOIS - 11.1%
Chicago, Illinois Board of
Education - General Obligation,
5.75% - 2027 ..................................... $ 250,000 236,405
DuPage County, Illinois
Stormwater Project Refunding,
5.60% - 2021 ..................................... $1,000,000 955,350
Winnebago County, Illinois
School District No. 122,
0% - 2014(3) ..................................... $2,155,000 941,907
----------
2,133,662
KANSAS - 3.7%
Wyandotte County, Kansas City,
Kansas Government Utility System,
5.75% - 2024 ..................................... $ 750,000 722,220
PRINCIPAL MARKET
MUNICIPAL BONDS AMOUNT VALUE
- --------------------------------------------------------------------------------
LOUISIANA - 0.5%
Louisiana State Offshore Terminal
Authority Deepwater Port,
4.75% - 2008(2) .................................. $ 100,000 $ 100,000
MASSACHUSETTS - 1.7%
Massachusetts State Water
Pollution Abatement Trust,
5.75% - 2029 ..................................... 350,000 333,291
MISSOURI - 2.7%
Kansas City, Missouri Port
Authority Riverfront Park,
5.75% - 2005 ..................................... 500,000 510,980
NEVADA - 5.0%
Clark County, Nevada School
District, Series A,
5.50% - 2016 ..................................... 1,000,000 960,240
NEW JERSEY - 5.5%
North Brunswick Township,
New Jersey Board of Education,
6.30% - 2013 ..................................... 1,000,000 1,062,870
NEW YORK - 8.7%
New York State Dorm Authority
Revenue North Shore,
5.50% - 2012 ..................................... 1,000,000 1,004,490
New York State Dorm Authority,
5.50% - 2026 ..................................... 200,000 180,482
New York State Local Government
Assistance Corporation,
6.00% - 2016 ..................................... 250,000 251,723
Triborough Bridge and Tunnel
Authority, New York,
5.50% - 2017 ..................................... 250,000 243,012
----------
1,679,707
NORTH CAROLINA - 0.8%
Halifax County North Carolina
Industrial Facilities & Pollution
Control Financing Authority,
4.90% - 2021(2) .................................. 150,000 150,000
PENNSYLVANIA - 6.1%
Delaware Valley Pennsylvania
Regional Financial Authority,
5.50% - 2028 ..................................... 1,000,000 928,390
Philadelphia, Pennsylvania School
District - General Obligation,
5.625% - 2010 .................................... 250,000 256,657
----------
1,185,047
See accompanying notes.
- --------------------------------------------------------------------------------
22
<PAGE> 24
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- ------------------------------------------------
Security Municipal Bond Fund (continued)
- ------------------------------------------------
PRINCIPAL MARKET
MUNICIPAL BONDS (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
RHODE ISLAND - 5.4%
Rhode Island State, General
Obligation, 5.30% - 2008 .............. $ 1,030,000 $ 1,043,266
TENNESSEE - 1.5%
Memphis-Shelby County, Tennessee
Airport Authority,
6.00% - 2024 .......................... 300,000 292,140
TEXAS - 11.8%
University of Texas - University
Revenues Financing System,
Series B, 4.80% - 2009 ................ 1,000,000 955,230
Houston, Texas Water & Sewer
System Revenue, Series A,
6.20% - 2020 .......................... 1,000,000 1,067,080
Lower Colorado River Authority
Texas Revenue,
6.00% - 2013 .......................... 250,000 257,768
-----------
2,280,078
VIRGINIA - 3.1%
King George County, Virginia
Industrial Development Authority
Revenue Bond, 4.90% - 2024(2) ......... 300,000 300,000
Roanoke, Virginia Industrial
Development Authority Hospital
Revenue, 4.80% - 2027(2) .............. 300,000 300,000
-----------
600,000
WASHINGTON - 18.0%
Island County Washington School
School District South Whidbey,
6.75% - 2007 .......................... 1,000,000 1,106,450
King County, Washington Sewer
Revenue, Series A,
6.25% - 2034 .......................... 1,000,000 1,067,990
Seattle, Washington General
Obligation, 5.75% - 2028 .............. 250,000 237,193
Washington Public Power Supply
System Revenue Nuclear
Project #2, 6.30% - 2012 .............. 1,000,000 1,061,400
-----------
3,473,033
-----------
Total investments - 98.1% ................................ 18,926,131
Cash and other assets,
less liabilities - 1.9% ............................... 364,531
-----------
Total net assets - 100.0% ................................ $19,290,662
===========
- ------------------------------------------------
Security Cash Fund
- ------------------------------------------------
PRINCIPAL MARKET
COMMERCIAL PAPER AMOUNT VALUE
- --------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 3.7%
Rockwell International Corporation,
5.72% - 02-01-00 ...................... $ 2,000,000 $ 1,990,149
BEVERAGES - 3.2%
Coca Cola Company,
5.15% - 01-02-00 ...................... 300,000 299,184
5.25% - 02-07-00 ...................... 1,400,000 1,392,446
-----------
1,691,630
BROKERAGE - 3.2%
Merrill Lynch & Company, Inc.,
4.93% - 02-04-00 ...................... 200,000 199,069
5.00% - 02-08-00 ...................... 1,500,000 1,492,083
-----------
1,691,152
BUSINESS SERVICES - 2.7%
General Electric Capital Corporation,
5.94% - 01-28-00 ...................... 1,100,000 1,095,099
5.74% - 02-11-00 ...................... 195,000 193,725
5.74% - 02-25-00 ...................... 142,000 140,755
-----------
1,429,579
COMBINATION GAS & ELECTRIC - 7.3%
Baltimore Gas & Electric Company,
6.18% - 01-14-00 ...................... 1,500,000 1,496,652
Central Illinois Light Company,
6.35% - 01-21-00 ...................... 1,600,000 1,594,356
Madison Gas & Electric Company,
6.00% - 01-10-00 ...................... 800,000 798,800
-----------
3,889,808
ELECTRIC UTILITIES - 10.5%
Duke Energy Corporation,
5.33% - 01-21-00 ...................... 1,700,000 1,694,966
Georgia Power Company,
5.72% - 02-01-00 ...................... 1,600,000 1,592,119
Potomac Electric Power Company,
5.77% - 01-26-00 ...................... 600,000 597,596
5.77% - 01-27-00 ...................... 1,100,000 1,095,416
Southern California Edison
Company, 5.67% - 01-19-00 ............. 600,000 598,299
-----------
5,578,396
ELECTRONICS - 2.0%
Emerson Electric Company,
5.90% - 01-31-00 ...................... 1,100,000 1,094,592
FINANCIAL SERVICES - 3.0%
Toyota Motor Credit Corporation,
5.86% - 02-16-00 ...................... 1,100,000 1,091,763
5.86% - 02-17-00 ...................... 500,000 496,175
-----------
1,587,938
FOOD PROCESSING - 1.5%
McCormick & Company, Inc.,
6.25% - 01-12-00 ...................... 800,000 798,472
See accompanying notes.
- --------------------------------------------------------------------------------
23
<PAGE> 25
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1999
- ------------------------------------------------
Security Cash Fund (continued)
- ------------------------------------------------
PRINCIPAL MARKET
COMMERCIAL PAPER (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 1.9%
PPG Industries, Inc.,
5.87% - 01-28-00 ............................ $ 1,000,000 $ 995,598
NATURAL GAS - 6.7%
New Jersey Natural Gas Company,
5.88% - 01-18-00 ............................ 1,800,000 1,795,002
Nicor, Inc.,
5.90% - 01-18-00 ............................ 800,000 797,771
Northern Illinois Gas
Company (Nicor Gas), 5.95% - 01-24-00 ....... 1,000,000 996,199
------------
3,588,972
NUCLEAR - 3.0%
Bayshore Fuel Company,
5.90% - 02-11-00 ............................ 1,000,000 993,281
5.90% - 02-11-00 ............................ 600,000 595,968
------------
1,589,249
PHARMACEUTICALS - 0.4%
Schering Corporation,
6.05% - 01-11-00 ............................ 200,000 199,664
TELECOMMUNICATIONS - 9.2%
AT&T Corporation,
5.70% - 02-02-00 ............................ 1,400,000 1,392,907
Bell Atlantic Network Funding
Corporation,
5.80% - 01-19-00 ............................ 1,500,000 1,495,650
Bellsouth Telecommunications, Inc.,
5.58% - 01-19-00 ............................ 2,000,000 1,994,420
------------
4,882,977
TOYS & SPORTING GOODS - 1.9%
Hasbro, Inc., 5.05% - 01-07-00 ................. 1,000,000 999,158
------------
Total commercial paper - 60.2% ............................. 32,007,334
U.S. GOVERNMENT & AGENCIES
- --------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.6%
5.60% - 03-09-00 ............................ 1,400,000 1,385,191
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 10.8%
5.52% - 01-25-00 ............................ 3,800,000 3,786,016
4.86% - 04-12-00 ............................ 2,000,000 1,972,460
------------
5,758,476
SMALL BUSINESS ASSOCIATION POOLS - 6.0%
#501927, 6.75% - 2017(2) .................... 1,161,050 1,172,007
#502398, 5.875% - 2018(2) ................... 226,147 226,995
#503152, 5.875% - 2020(2) ................... 514,924 514,925
#503295, 5.75% - 2021(2) .................... 360,667 360,892
#503303, 5.75% - 2021(2) .................... 401,611 401,862
#503265, 6.00% - 2021(2) .................... 493,143 491,910
------------
3,168,591
STUDENT LOAN MORTGAGE ASSOCIATION - 11.0%
5.52% - 07-25-04 ............................ 820,213 820,213
4.92% - 10-25-05 ............................ 1,517,761 1,510,646
5.15% - 10-28-06 ............................ 1,000,000 1,000,000
5.21% - 01-25-07 ............................ 1,577,064 1,573,861
5.33% - 04-25-08 ............................ 925,437 925,437
------------
5,830,157
------------
Total U.S. government & agencies - 30.4% ................... 16,142,415
MISCELLANEOUS ASSETS
- --------------------
FUNDING AGREEMENTS - 9.4%
Security Life of Denver
Insurance Company, 6.50625% - 10-31-01(2) ... 2,000,000 2,000,000
Travelers Insurance Company,
6.49630% - 08-21-01(2) ...................... 3,000,000 3,000,000
------------
5,000,000
------------
Total investments - 100.0% - ................................ 53,149,749
Liabilities, less cash
and other assets - 0.0% .................................. (13,023)
------------
Total net assets - 100.0% ................................... $ 53,136,726
============
The identified cost of investments owned at December 31, 1999, was the same for
federal income tax and book purposes for High Yield Series and Security Cash
Fund. The identified cost of investments for Corporate Bond Series, U.S.
Government Series, Limited Maturity Series and Security Municipal Bond Fund was
$61,472,505, $15,566,302, $7,207,322 and $19,211,634, respectively.
*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> 26
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Security Income Fund
-------------------------------------------------------------
U.S. Limited High
Corporate Government Maturity Yield
Bond Series Series Bond Series Series
-------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (identified cost:
$61,341,582, $15,268,045, $7,189,528,
$10,936,185, $19,163,080, and $21,142,415,
respectively) ................................ $ 57,858,846 $ 14,573,950 $ 6,794,583 $ 9,749,055
Commercial paper at amortized cost which
approximates market value .................... -- -- -- --
Cash ........................................... -- 298,257 -- 844,203
Receivables:
Fund shares sold ............................. 1,304 93 1,097 9,284
Securities sold .............................. -- -- -- --
Interest ..................................... 945,396 214,446 133,564 237,585
Security Management Company .................. 3,605 138 -- --
Prepaid expenses ............................... 10,072 9,144 4,159 7,807
------------ ------------ ------------ ------------
Total assets .............................. $ 58,819,223 $ 15,096,028 $ 6,933,403 $ 10,847,934
------------ ------------ ------------ ------------
LIABILITIES
Cash overdraft ............................... $ 14,256 $ -- $ 13,035 $ --
Payable for:
Fund shares redeemed ...................... 27,530 1,284 -- 25,149
Dividends to shareholders ................. -- -- -- --
Management fees ........................... 25,309 -- -- --
Custodian fees ............................ 645 504 435 570
Transfer and administration fees .......... 12,971 6,649 1,113 2,027
Professional fees ......................... 4,000 4,000 4,000 4,000
12b-1 distribution plan fees .............. 105,534 3,504 18,668 17,803
Security Management Company ............... -- -- 217 --
Miscellaneous fees ........................ 14,547 1,901 623 1,067
------------ ------------ ------------ ------------
Total liabilities ......................... 204,792 17,842 38,091 50,616
------------ ------------ ------------ ------------
NET ASSETS ..................................... $ 58,614,431 $ 15,078,186 $ 6,895,312 $ 10,797,318
============ ============ ============ ============
NET ASSETS CONSIST OF:
Paid in capital .............................. $ 74,595,336 $ 17,126,033 $ 7,318,712 $ 11,982,586
Accumulated undistributed net investment
income (loss) ............................. 6,864 11,083 -- 1,862
Accumulated undistributed net realized
loss on sale of investments ............... (12,505,033) (1,364,835) (28,455) --
Net unrealized depreciation
in value of investments ................... (3,482,736) (694,095) (394,945) (1,187,130)
------------ ------------ ------------ ------------
Total net assets ....................... $ 58,614,431 $ 15,078,186 $ 6,895,312 $ 10,797,318
============ ============ ============ ============
CLASS "A" SHARES
Capital shares outstanding ................... 7,645,684 2,812,887 581,851 463,705
Net assets ................................... $ 49,476,637 $ 12,722,594 $ 5,570,226 $ 6,328,478
------------ ------------ ------------ ------------
Net asset value per share .................... $ 6.47 $ 4.52 $ 9.57 $ 13.65
============ ============ ============ ============
Offering price per share (net asset value
divided by 95.25%) ........................ $ 6.79 $ 4.75 $ 10.05 $ 14.33
============ ============ ============ ============
CLASS "B" SHARES
Capital shares outstanding ................... 1,404,036 522,448 138,869 328,132
Net assets ................................... $ 9,137,794 $ 2,355,592 $ 1,325,086 $ 4,468,840
------------ ------------ ------------ ------------
Net asset value per share .................... $ 6.51 $ 4.51 $ 9.54 $ 13.62
============ ============ ============ ============
<CAPTION>
Security Security
Municipal Bond Cash
Fund Fund
-------------- -------------
<S> <C> <C>
ASSETS
Investments, at value (identified cost:
$61,341,582, $15,268,045, $7,189,528,
$10,936,185, $19,163,080, and $21,142,415,
respectively) ................................ $ 18,926,131 $ 21,142,415
Commercial paper at amortized cost which
approximates market value .................... -- 32,007,334
Cash ........................................... 95,978 446,839
Receivables:
Fund shares sold ............................. -- 367,828
Securities sold .............................. -- 55,779
Interest ..................................... 286,925 126,879
Security Management Company .................. 9,075 --
Prepaid expenses ............................... 12,404 18,406
------------ ------------
Total assets .............................. $ 19,330,513 $ 54,165,480
============ ============
LIABILITIES
Cash overdraft ............................... $ -- $ --
Payable for:
Fund shares redeemed ...................... 10,823 748,702
Dividends to shareholders ................. -- 231,899
Management fees ........................... 8,262 23,175
Custodian fees ............................ -- 1,950
Transfer and administration fees .......... 2,468 11,694
Professional fees ......................... 4,000 4,000
12b-1 distribution plan fees .............. 4,227 --
Security Management Company ............... -- --
Miscellaneous fees ........................ 10,071 7,334
------------ ------------
Total liabilities ......................... 39,851 1,028,754
------------ ------------
NET ASSETS ..................................... $ 19,290,662 $ 53,136,726
============ ============
NET ASSETS CONSIST OF:
Paid in capital .............................. $ 20,607,422 $ 53,136,726
Accumulated undistributed net investment
income (loss) ............................. 1,489 --
Accumulated undistributed net realized
loss on sale of investments ............... (1,081,300) --
Net unrealized depreciation
in value of investments ................... (236,949) --
------------ ------------
Total net assets ....................... $ 19,290,662 $ 53,136,726
============ ============
CLASS "A" SHARES
Capital shares outstanding ................... 1,858,782 53,136,726
Net assets ................................... $ 17,630,052 $ 53,136,726
------------ ------------
Net asset value per share .................... $ 9.48 $ 1.00
============ ============
Offering price per share (net asset value
divided by 95.25%) ........................ $ 9.95 --
============ ============
CLASS "B" SHARES
Capital shares outstanding ................... 174,813 --
Net assets ................................... $ 1,660,610 --
Net asset value per share .................... $ 9.50 --
============ ============
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
25
<PAGE> 27
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Security Income Fund
------------------------------------------------------------
U.S. Limited High
Corporate Government Maturity Yield
Bond Series Series Bond Series Series
-----------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ........................................ $ -- $ -- $ 8,287 $ 9,125
Interest ......................................... 4,128,740 1,229,894 506,278 954,927
----------- ----------- ----------- -----------
Total investment income ....................... 4,128,740 1,229,894 514,565 964,052
EXPENSES:
Management fees .................................. 289,863 95,618 36,156 65,106
12b-1 distribution plan fees ..................... 206,771 83,250 28,376 60,633
Custodian fees ................................... 4,530 2,369 2,341 2,396
Transfer/maintenance fees ........................ 119,987 74,590 6,799 14,182
Administration fees .............................. 52,175 17,211 6,508 9,766
Directors' fees .................................. 5,434 1,804 668 1,059
Professional fees ................................ 9,959 7,595 6,643 4,399
Reports to shareholders .......................... 6,699 3,072 1,135 2,813
Registration fees ................................ 25,866 22,062 18,599 18,763
Other expenses ................................... 3,069 645 329 474
----------- ----------- ----------- -----------
724,353 308,216 107,554 179,591
Less: Earnings credits applied .................... -- -- -- --
Reimbursement of expenses ................... (30,967) (96,445) (37,027) (65,106)
----------- ----------- ----------- -----------
Total expenses .............................. 693,386 211,771 70,527 114,485
----------- ----------- ----------- -----------
Net investment income ...................... 3,435,354 1,018,123 444,038 849,567
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) during the period on
investments .................................... (415,756) (585,644) (19,107) 114,180
Net change in unrealized appreciation
(depreciation) during the period on
investments .................................... (5,315,075) (1,172,192) (561,159) (1,067,045)
----------- ----------- ----------- -----------
Net loss .................................... (5,730,831) (1,757,836) (580,266) (952,865)
----------- ----------- ----------- -----------
Net increase (decrease) in
net assets resulting from
operations ............................... $(2,295,477) $( 739,713) $( 136,228) $( 103,298)
=========== =========== =========== ===========
<CAPTION>
Security Security
Municipal Bond Cash
Fund Fund
-------------- ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends ........................................... $ -- $ --
Interest ............................................ 1,030,932 3,446,898
----------- -----------
Total investment income .......................... 1,030,932 3,446,898
EXPENSES:
Management fees ..................................... 99,435 334,020
12b-1 distribution plan fees ........................ 62,588 --
Custodian fees ...................................... 2,792 7,632
Transfer/maintenance fees ........................... 11,214 121,225
Administration fees ................................. 17,898 30,062
Directors' fees ..................................... 10,921 10,935
Professional fees ................................... 7,479 7,578
Reports to shareholders ............................. 6,785 17,302
Registration fees ................................... 23,445 43,170
Other expenses ...................................... 1,539 2,779
----------- -----------
244,096 574,703
Less: Earnings credits applied ....................... (2,792) --
Reimbursement of expenses ...................... (30,293) --
----------- -----------
Total expenses ................................. 211,011 574,703
----------- -----------
Net investment income ......................... 819,921 2,872,195
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) during the period on
investments ....................................... --
Net change in unrealized appreciation
(depreciation) during the period on
investments ....................................... (1,412,597) --
----------- -----------
Net loss ....................................... (1,519,316) --
----------- -----------
Net increase (decrease) in
net assets resulting from
operations .................................. $( 699,395) $ 2,872,195
=========== ===========
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
26
<PAGE> 28
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Security Income Fund
------------------------------------------------------------
U.S. Limited High
Corporate Government Maturity Yield
Bond Series Series Bond Series Series
------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ............................... $ 3,435,354 $ 1,018,123 $ 444,038 $ 849,567
Net realized gain (loss) ............................ (415,756) (585,644) (19,107) 114,180
Unrealized depreciation
during the period ................................. (5,315,075) (1,172,192) (561,159) (1,067,045)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ...................... (2,295,477) (739,713) (136,228) (103,298)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A .......................................... (3,012,984) (800,952) (376,447) (521,137)
Class B .......................................... (445,329) (212,143) (73,349) (327,688)
Net realized gain
Class A .......................................... -- -- -- (67,588)
Class B .......................................... -- -- -- (47,813)
Return of capital
Class A .......................................... -- -- (2,687) --
Class B .......................................... -- -- (524) --
------------ ------------ ------------ ------------
Total distributions to
shareholders ............................... (3,458,313) (1,013,095) (453,007) (964,226)
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS: (NOTE 5) ................ 3,331,906 499,626 (234,791) 1,847,934
------------ ------------ ------------ ------------
Total increase (decrease)
in net assets .............................. (2,421,884) (1,253,182) (824,026) 780,410
NET ASSETS:
Beginning of period ................................. 61,036,315 16,331,368 7,719,338 10,016,908
------------ ------------ ------------ ------------
End of period ....................................... $ 58,614,431 $ 15,078,186 $ 6,895,312 $ 10,797,318
============ ============ ============ ============
Accumulated undistributed net investment
income at end of period ............................. $ 6,864 $ 11,083 $ -- $ 1,862
============ ============ ============ ============
<CAPTION>
Security Security
Municipal Bond Cash
Fund Fund
-------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ............................... $ 819,921 $ 2,872,195
Net realized gain (loss) ............................ (106,719) --
Unrealized depreciation
during the period ................................. (1,412,597) --
------------ ------------
Net increase (decrease) in net assets
resulting from operations ...................... 699,395) 2,872,195
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A .......................................... (759,817) (2,872,195)
Class B .......................................... (58,905) --
Net realized gain
Class A .......................................... -- --
Class B .......................................... -- --
Return of capital
Class A .......................................... -- --
Class B .......................................... -- --
------------ ------------
Total distributions to
shareholders ............................... (818,722) (2,872,195)
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS: (NOTE 5) ................ 429,657 (8,690,857)
------------ ------------
Total increase (decrease)
in net assets .............................. (1,088,460) (8,690,857)
NET ASSETS:
Beginning of period ................................. 20,379,122 61,827,583
------------ ------------
End of period ....................................... $ 19,290,662 $ 53,136,726
============ ============
Accumulated undistributed net investment
income at end of period ............................. $ 1,489 $ --
============ ============
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
27
<PAGE> 29
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Security Income Fund
--------------------------------------------------------------
U.S. Limited High
Corporate Government Maturity Yield
Bond Series Series Bond Series Series
--------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income ............................... $ 3,695,117 $ 658,917 $ 429,269 $ 708,111
Net realized gain ................................... 1,119,315 184,827 54,799 120,648
Unrealized appreciation (depreciation)
during the period ................................. (339,170) 166,956 13,121 (394,063)
------------ ------------ ------------ ------------
Net increase in net assets
resulting from operations ....................... 4,475,262 1,010,700 497,189 434,696
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ........................................... (3,295,442) (558,165) (369,492) (421,676)
Class B ........................................... (392,086) (101,909) (59,672) (284,325)
Net realized gain
Class A ........................................... -- -- -- (69,754)
Class B ........................................... -- -- -- (50,663)
------------ ------------ ------------ ------------
Total distributions to
shareholders ............................... (3,687,528) (660,074) (429,164) (826,418)
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS: (NOTE 5) ................ (2,731,349) 7,238,155 1,107,139 797,165
------------ ------------ ------------ ------------
Total increase (decrease)
in net assets ................................. (1,943,615) 7,588,781 1,175,164 405,443
NET ASSETS:
Beginning of period ................................. 62,979,930 8,742,587 6,544,174 9,611,465
------------ ------------ ------------ ------------
End of period ....................................... $ 61,036,315 $ 16,331,368 $ 7,719,338 $ 10,016,908
============ ============ ============ ============
Accumulated undistributed net investment
income at end of period ............................. $ 13,549 $ 2,607 $ 4,202 $ 2,110
============ ============ ============ ============
<CAPTION>
Security Security
Municipal Bond Cash
Fund Fund
-------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income ............................... $ 942,113 $ 3,076,998
Net realized gain ................................... 272,376 --
Unrealized appreciation (depreciation)
during the period ................................. 131,309 --
------------ ------------
Net increase in net assets
resulting from operations ....................... 1,345,798 3,076,998
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ........................................... (895,549) (3,076,998)
Class B ........................................... (49,226) --
Net realized gain
Class A ........................................... -- --
Class B ........................................... -- --
------------ ------------
Total distributions to
shareholders ............................... (944,775) (3,076,998)
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS: (NOTE 5) ................ (4,319,213) 4,386,798
------------ ------------
Total increase (decrease)
in net assets ................................. (3,918,190) 4,386,798
NET ASSETS:
Beginning of period ................................. 24,297,312 57,440,785
------------ ------------
End of period ....................................... $ 20,379,122 $ 61,827,583
============ ============
Accumulated undistributed net investment
income at end of period ............................. $ 290 $ --
============ ============
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes.
28
<PAGE> 30
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CORPORATE BOND SERIES (CLASS A)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
------------------------------------------------------------------------
1999(b)(c) 1998(c) 1997(c) 1996(c)(e) 1995(c)(e)
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ..................... $ 7.14 $ 7.05 $ 6.87 $ 7.39 $ 6.68
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................................... 0.41 0.43 0.45 0.47 0.47
Net Gain (Loss) on Securities (realized & unrealized) ... (0.67) 0.09 0.19 (0.52) 0.71
---------- ---------- ---------- ---------- ----------
Total from Investment Operations ........................ (0.26) 0.52 0.64 (0.05) 1.18
LESS DISTRIBUTIONS:
Dividends (from Net Investment Income) .................. (0.41) (0.43) (0.46) (0.47) (0.47)
Distributions (from Realized Gains) ..................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Distributions ................................... (0.41) (0.43) (0.46) (0.47) (0.47)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE END OF PERIOD ........................... $ 6.47 $ 7.14 $ 7.05 $ 6.87 $ 7.39
========== ========== ========== ========== ==========
TOTAL RETURN (a) ........................................ (3.7%) 7.6% 9.7% (0.5%) 18.2%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) .................... $ 49,477 $ 53,055 $ 56,487 $ 73,360 $ 93,701
Ratio of Expenses to Average Net Assets ................. 1.09% 1.06% 1.07% 1.01% 1.02%
Ratio of Net Investment Income to Average Net Assets .... 6.03% 6.01% 6.50% 6.54% 6.62%
Portfolio Turnover Rate ................................. 36% 64% 120% 292% 200%
</TABLE>
CORPORATE BOND SERIES (CLASS B)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
----------------------------------------------------------------------
1999(b)(c) 1998(b)(c) 1997(b)(c) 1996(b)(c)(e) 1995(b)(c)(e)
---------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ..................... $ 7.19 $ 7.09 $ 6.90 $ 7.43 6.71
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................................... 0.36 0.37 0.40 0.40 0.40
Net Gain (Loss) on Securities
(realized & unrealized) ............................... (0.68) 0.10 0.19 (0.52) 0.73
--------- --------- --------- --------- ---------
Total from Investment Operations ........................ (0.32) 0.47 0.59 (0.12) 1.13
LESS DISTRIBUTIONS:
Dividends (from Net Investment Income) .................. (0.36) (0.37) (0.40) (0.41) (0.41)
Distributions (from Realized Gains) ..................... -- -- -- -- --
--------- --------- --------- --------- ---------
Total Distributions ................................... (0.36) (0.37) (0.40) (0.41) (0.41)
--------- --------- --------- --------- ---------
NET ASSET VALUE END OF PERIOD ........................... $ 6.51 $ 7.19 $ 7.09 $ 6.90 $ 7.43
========= ========= ========= ========= =========
TOTAL RETURN (A) ........................................ (4.5%) 6.9% 8.7% (1.4%) 17.3%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) .................... $ 9,138 $ 7,982 $ 6,493 $ 7,303 $ 5,743
Ratio of Expenses to Average Net Assets ................. 1.85% 1.85% 1.85% 1.85% 1.85%
Ratio of Net Investment Income to Average Net Assets .... 5.30% 5.18% 5.72% 5.70% 5.80%
Portfolio Turnover Rate ................................. 36% 64% 120% 292% 200%
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
29
<PAGE> 31
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
U.S. GOVERNMENT SERIES (CLASS A)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
----------------------------------------------------------------------
1999(b)(c) 1998(b)(c) 1997(b)(c) 1996(b)(c)(e) 1995(b)(c)(e)
---------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ..................... $ 4.96 $ 4.81 $ 4.71 $ 4.97 $ 4.35
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................................... 0.26 0.27 0.32 0.31 0.30
Net Gain (Loss) on Securities
(realized & unrealized) ............................... (0.44) 0.16 0.10 (0.26) 0.62
---------- ---------- ---------- ---------- ----------
Total from Investment Operations ........................ (0.18) 0.43 0.42 0.05 0.92
LESS DISTRIBUTIONS:
Dividends (from Net Investment Income) .................. (0.26) (0.28) (0.32) (0.31) (0.30)
Distributions (from Realized Gains) ..................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total Distributions ................................... (0.26) (0.28) (0.32) (0.31) (0.30)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE END OF PERIOD ........................... $ 4.52 $ 4.96 $ 4.81 $ 4.71 $ 4.97
========== ========== ========== ========== ==========
TOTAL RETURN (A) ........................................ (3.6%) 9.1% 9.2% 1.3% 21.9%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) .................... $ 12,723 $ 12,664 $ 7,652 $ 8,036 $ 10,080
Ratio of Expenses to Average Net Assets ................. 0.87% 0.93% 0.60% 0.65% 1.11%
Ratio of Net Investment Income to Average Net Assets .... 5.58% 5.62% 6.10% 6.44% 6.41%
Portfolio Turnover Rate ................................. 65% 78% 39% 75% 81%
</TABLE>
U.S. GOVERNMENT SERIES (CLASS B)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
----------------------------------------------------------------------
1999(b)(c) 1998(b)(c) 1997(b)(c) 1996(b)(c)(e) 1995(b)(c)(e)
---------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ..................... $ 4.95 $ 4.80 $ 4.71 $ 4.97 $ 4.35
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................................... 0.22 0.22 0.26 0.25 0.26
Net Gain (Loss) on Securities
(realized & unrealized) ............................... (0.44) 0.16 0.10 (0.25) 0.63
--------- --------- --------- --------- ---------
Total from Investment Operations ........................ (0.22) 0.38 0.36 (0.00) 0.89
LESS DISTRIBUTIONS:
Dividends (from Net Investment Income) .................. (0.22) (0.23) (0.27) (0.26) (0.27)
Distributions (from Realized Gains) ..................... -- -- -- -- --
--------- --------- --------- --------- ---------
Total Distributions ................................... (0.22) (0.23) (0.27) (0.26) (0.27)
--------- --------- --------- --------- ---------
NET ASSET VALUE END OF PERIOD ........................... $ 4.51 $ 4.95 $ 4.80 $ 4.71 $ 4.97
========= ========= ========= ========= =========
TOTAL RETURN (A) ........................................ (4.6%) 8.0% 7.9% (0.02%) 20.9%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) .................... $ 2,356 $ 3,668 $ 1,091 $ 661 $ 582
Ratio of Expenses to Average Net Assets ................. 1.85% 1.85% 1.68% 1.86% 1.87%
Ratio of Net Investment Income to Average Net Assets .... 4.55% 4.66% 5.02% 5.23% 5.69%
Portfolio Turnover Rate ................................. 65% 78% 39% 75% 81%
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
30
<PAGE> 32
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
LIMITED MATURITY BOND SERIES (CLASS A)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
------------------------------------------------------------------------------
1999(b)(c) 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.................... 0.64 0.65 0.72 0.72 0.62
Net Gain (Loss) on Securities
(realized & unrealized)................ (0.82) 0.10 0.16 (0.51) 0.65
------- ------- ------- ------- -------
Total from Investment Operations......... (0.18) 0.75 0.88 0.21 1.27
LESS DISTRIBUTIONS:
Dividends (from Net Investment Income)... (0.65) (0.65) (0.72) (0.72) (0.61)
Distributions (from Realized Gains)...... -- -- -- -- --
Return of Capital........................ -- -- -- (0.01) --
------- ------- ------- ------- -------
Total Distributions.................... (0.65) (0.65) (0.72) (0.73) (0.61)
------- ------- ------- ------- -------
NET ASSET VALUE END OF PERIOD............ $9.57 $10.40 $10.30 $10.14 $10.66
======= ======= ======= ======= =======
TOTAL RETURN (a)......................... (1.8%) 7.5% 9.0% 2.1% 13.0%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands)..... $5,570 $6,365 $5,490 $4,938 $3,322
Ratio of Expenses to Average Net Assets.. 0.77% 0.87% 0.55% 0.90% 0.84%
Ratio of Net Investment Income
to Average Net Assets ................. 6.34% 6.30% 7.10% 6.97% 5.97%
Portfolio Turnover Rate.................. 31% 58% 76% 105% 4%
LIMITED MATURITY BOND SERIES (CLASS B)
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
------------------------------------------------------------------------------
1999(b)(c) 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.................. 0.53 0.53 0.61 0.63 0.53
Net Gain (Loss) on Securities
(realized & unrealized) (0.82) 0.11 0.14 (0.52) 0.66
------- ------- ------- ------- -------
Total from Investment Operations....... (0.29) 0.64 0.75 0.11 1.19
LESS DISTRIBUTIONS:
Dividends (from Net Investment Income)... (0.54) (0.54) (0.62) (0.63) (0.52)
Distributions (from Realized Gains)...... -- -- -- -- --
Return of Capital........................ -- -- -- (0.01) --
------- ------- ------- ------- -------
Total Distributions...................... (0.54) (0.54) (0.62) (0.64) (0.52)
------- ------- ------- ------- -------
NET ASSET VALUE END OF PERIOD............ $9.54 $10.37 $10.27 $10.14 $10.67
======= ======= ======= ======= =======
TOTAL RETURN (a)......................... (2.9%) 6.4% 7.7% 1.1% 12.2%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands)..... $1,325 $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
to Average Net Assets ................. 5.27% 5.18% 6.15% 5.99% 5.12%
Portfolio Turnover Rate.................. 31% 58% 76% 105% 4%
</TABLE>
See accompanying notes.
- -------------------------------------------------------------------------------
31
<PAGE> 33
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
HIGH YIELD SERIES (CLASS A)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
-------------------------------------------------------
1999(b)(c) 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...................... 1.25 1.22 1.25 0.45
Net Gain (Loss) on Securities
(realized & unrealized).................. (1.32) (0.47) 0.60 0.32
------- ------- ------- -------
Total from Investment Operations...... (0.07) 0.75 1.85 0.77
LESS DISTRIBUTIONS:
Dividends (from Net Investment Income)..... (1.18) (1.22) (1.25) (0.45)
Distributions (from Realized Gains)........ (0.15) (0.19) (0.21) --
------- ------- ------- -------
Total Distributions...................... (1.33) (1.41) (1.46) (0.45)
------- ------- ------- -------
NET ASSET VALUE END OF PERIOD.............. $13.65 $15.05 $15.71 $15.32
======= ======= ======= =======
TOTAL RETURN (a)........................... (0.5)% 5.0% 12.6% 5.2%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands)....... $6,328 $5,781 $5,179 $2,780
Ratio of Expenses to Average Net Assets.... 0.72% 0.76% 0.87% 1.54%
Ratio of Net Investment Income
to Average Net Assets ................... 8.17% 7.96% 8.14% 7.47%
Portfolio Turnover Rate.................... 36% 103% 87% 168%
HIGH YIELD SERIES (CLASS B)
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
-------------------------------------------------------
1999(b)(c) 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..................... 1.06 1.10 1.10 0.41
Net Gain (Loss) on Securities
(realized & unrealized)................. (1.25) (0.47) 0.59 0.32
------- ------- ------- -------
Total from Investment Operations.......... (0.19) 0.63 1.69 0.73
LESS DISTRIBUTIONS:
Dividends (from Net Investment Income).... (1.06) (1.10) (1.12) (0.41)
Distributions (from Realized Gains)....... (0.15) (0.19) (0.21) --
------- ------- ------- -------
Total Distributions..................... (1.21) (1.29) (1.33) (0.41)
------- ------- ------- -------
NET ASSET VALUE END OF PERIOD............. $13.62 $15.02 $15.68 $15.32
======= ======= ======= =======
TOTAL RETURN (a).......................... (1.3)% 4.2% 11.5% 4.9%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands)...... $4,469 $4,236 $4,432 $2,719
Ratio of Expenses to Average Net Assets... 1.53% 1.53% 1.80% 2.26%
Ratio of Net Investment Income
to Average Net Assets .................. 7.35% 7.17% 7.21% 6.74%
Portfolio Turnover Rate................... 36% 103% 87% 168%
</TABLE>
See accompanying notes.
- ------------------------------------------------------------------------------
32
<PAGE> 34
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
SECURITY MUNICIPAL BOND FUND (CLASS A)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
---------------------------------------------------------------------------
1999(b)(c)(e) 1998(b)(c)(e) 1997(b)(c)(e) 1996(b)(c)(e) 1995(b)(c)(e)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ..... $ 10.24 $ 10.08 $ 9.72 $ 9.94 $ 9.05
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................... 0.42 0.43 0.42 0.45 0.48
Net Gain (Loss) on Securities
(realized & unrealized) ............... (0.76) 0.17 0.36 (0.21) 0.89
---------- ---------- ---------- ---------- ---------
Total from Investment Operations ........ (0.34) 0.60 0.78 0.24 1.37
LESS DISTRIBUTIONS:
Dividends (from Net Investment Income) (0.42) (0.44) (0.42) (0.46) (0.48)
Distributions (from Realized Gains) ..... -- -- -- -- --
---------- ---------- ---------- ---------- ---------
Total Distributions ................... (0.42) (0.44) (0.42) (0.46) (0.48)
---------- ---------- ---------- ---------- ---------
NET ASSET VALUE END OF PERIOD ........... $ 9.48 $ 10.24 $ 10.08 $ 9.72 $ 9.94
========== ========== ========== ========== =========
TOTAL RETURN (a) ........................ (3.5%) 6.1% 8.3% 2.5% 15.5%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) .... $ 17,630 $ 19,012 $ 21,953 $ 23,304 $ 25,026
Ratio of Expenses to Average Net Assets.. 1.01% 0.82% 0.82% 0.78% 0.86%
Ratio of Net Investment Income
to Average Net Assets ................. 4.19% 4.23% 4.29% 4.67% 5.02%
Portfolio Turnover Rate ................. 108% 94% 48% 54% 103%
<CAPTION>
SECURITY MUNICIPAL BOND FUND (CLASS B)
FISCAL YEARS ENDED DECEMBER 31
---------------------------------------------------------------------------
1999(b)(c)(e) 1998(b)(c)(e) 1997(b)(c)(e) 1996(b)(c)(e) 1995(b)(c)(e)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD $ 10.26 $ 10.08 $ 9.73 $ 9.95 $ 9.05
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.................... 0.34 0.31 0.29 0.33 0.37
Net Gain (Loss) on Securities
(realized & unrealized)................ (0.76) 0.17 0.37 (0.21) 0.90
---------- ---------- ---------- ---------- ---------
Total from Investment Operations......... (0.42) 0.48 0.66 0.12 1.27
LESS DISTRIBUTIONS:
Dividends (from Net Investment Income)... (0.34) (0.30) (0.31) (0.34) (0.37)
Distributions (from Realized Gains)...... -- -- -- -- --
---------- ---------- ---------- ---------- ---------
Total Distributions.................... (0.34) (0.30) (0.31) (0.34) (0.37)
---------- ---------- ---------- ---------- ---------
NET ASSET VALUE END OF PERIOD............ $ 9.50 $ 10.26 $ 10.08 $ 9.73 $ 9.95
========== ========== ========== ========== =========
TOTAL RETURN (a)......................... (4.2%) 4.8% 6.9% 1.2% 14.3%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands)..... $ 1,661 $ 1,367 $ 2,344 $ 1,510 $ 1,190
Ratio of Expenses to Average Net Assets.. 1.76% 2.01% 2.00% 2.01% 2.00%
Ratio of Net Investment Income
to Average Net Assets ................. 3.45% 3.04% 3.11% 3.44% 3.90%
Portfolio Turnover Rate.................. 108% 94% 48% 54% 103%
</TABLE>
See accompanying notes.
- -------------------------------------------------------------------------------
33
<PAGE> 35
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
SECURITY CASH FUND
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
---------------------------------------------------------------------
1999(c) 1998(c)(e) 1997(e) 1996(b)(c)(e) 1995(b)(c)(e)
------- --------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD............ $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income.......................... 0.04 0.05 0.05 0.05 0.05
Net Gain (Loss) on Securities
(realized & unrealized)...................... -- -- -- -- --
------ ------ ------ ------ ------
Total from Investment Operations............... 0.04 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS:
Dividends (from Net Investment Income)......... (0.04) (0.05) (0.05) (0.05) (0.05)
Distributions (from Realized Gains)............ -- -- -- -- --
------ ------ ------ ------ ------
Total Distributions.......................... (0.04) (0.05) (0.05) (0.05) (0.05)
------ ------ ------ ------ ------
NET ASSET VALUE END OF PERIOD.................. $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ===== ======
TOTAL RETURN (a)............................... 4.4% 4.7% 4.9% 4.6% 5.0%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands)........... $53,137 $61,828 $57,441 $45,331 $38,158
Ratio of Expenses to Average Net Assets........ 0.86% 0.89% 0.90% 1.01% 1.00%
Ratio of Net Investment Income
to Average Net Assets........................ 4.30% 4.60% 4.80% 4.47% 5.00%
</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 reimbursement from the Investment Manager.
Expense ratios absent such reimbursements would have been as follows:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Corporate Bond Series Class A -- -- -- -- 1.10%
Class B 2.19% 2.05% 2.10% 2.32% 2.15%
U.S. Government Series Class A 1.22% 1.17% 1.06% 1.43% 1.37%
Class B 3.70% 3.26% 2.14% 3.03% 2.36%
Limited Maturity Class A 1.04% 1.40% 1.04% 1.38% 1.27%
Bond Series Class B 2.12% 2.60% 1.99% 2.70% 2.41%
High Yield Series Class A -- 2.11% 1.44% 1.36% 1.32%
Class B -- 2.83% 2.37% 2.13% 2.13%
Municipal Bond Fund Class A 0.86% 0.78% 0.83% 0.82% 1.14%
Class B 2.45% 2.19% 2.00% 2.18% 2.19%
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> <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% 1.00%
Class B 2.00% 2.00% 2.00% 2.00% 1.75%
Cash Fund 1.00% 1.00% 1.00% 0.89% --
</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.
See accompanying notes.
- -------------------------------------------------------------------------------
34
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 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. Class B 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.
A. SECURITY VALUATION - Valuations of Security Income and Municipal Bond
Funds' 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 of 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. Fluctuations 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 treatment of paydown gains and losses on mortgage-backed
securities.
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. SMC 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,
- -------------------------------------------------------------------------------
35
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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
qualified for sale. For the year ended December 31, 1999, SMC 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.
Security 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. (SDI), 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 year
ended December 31, 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) $3,277 $1,643 $ 382 $1,889 $2,115
SDI CDSC
(Class B) $14,636 $10,847 $4,522 $4,770 $2,024
Broker/Dealer
(Class A) $34,372 $9,296 $2,096 $9,108 $8,437
Broker/Dealer
(Class B) $12,627 $21,115 $7,752 $13,787 $6,454
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) for federal income tax
purposes as of December 31, 1999, were as follows:
CORPORATE U.S. LIMITED HIGH MUNICIPAL
BOND GOVERNMENT MATURITY YIELD BOND
SERIES SERIES SERIES SERIES FUND
--------- ---------- -------- ------ ---------
Gross unrealized
appreciation $19,093 $4,558 $18,704 $89,680 $267,547
Gross unrealized
depreciation (3,632,752) (987,794) (431,443) (1,276,810) (553,050)
----------- --------- --------- ----------- ---------
Net unrealized
appreciation ($3,613,659) ($983,236) ($412,739) ($1,187,130) ($285,503)
=========== ========= ========= =========== =========
At December 31, 1999, the following Funds had accumulated net realized
capital loss carryovers as shown:
CAPITAL LOSS EXPIRATION
CARRYOVER YEAR
Corporate Bond Series $12,374,110 2002, 2004, 2005, 2007
U.S. Government Series $1,294,738 2002, 2007
Limited Maturity Bond Series $10,661 2004, 2007
Municipal Bond Fund $1,032,746 2002, 2007
For federal income tax purposes, High Yield Series designated $53,805 as
capital gains dividend.
4. INVESTMENT TRANSACTIONS
Investment transactions for the year ended December 31, 1999, (excluding
overnight investments and short-term debt securities) were as follows:
CORPORATE U.S. LIMITED HIGH MUNICIPAL
BOND GOVERNMENT MATURITY YIELD BOND
SERIES SERIES SERIES SERIES FUND
--------- ---------- -------- ------ ---------
Purchases $23,788,567 $12,721,798 $2,136,521 $4,893,755 $21,751,261
Proceeds from
sales $20,272,897 $11,831,171 $2,306,083 $3,701,493 $21,369,440
- -------------------------------------------------------------------------------
36
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 Share Amount
--------- --------- ---------- ----------- --------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Corporate Bond Series
Class A Shares 2,391,058 $16,132,580 330,654 $2,232,888 (2,503,119) ($17,012,973) 218,593 $1,352,495
Class B Shares 1,118,587 7,689,004 56,864 384,276 (882,167) (6,093,869) 293,284 1,979,411
--------- ----------- ------- ---------- --------- ----------- ------- ----------
Total 3,509,645 $23,821,584 387,518 $2,617,164 (3,385,286) ($23,106,842) 511,877 $3,331,906
U.S. Government Series
Class A Shares 1,716,274 $8,156,070 147,671 $693,206 (1,605,175) ($7,500,908) 258,770 $1,348,368
Class B Shares 908,677 4,373,730 43,049 202,125 (1,170,493) (5,424,597) (218,767) (848,742)
--------- ----------- ------- ---------- --------- ----------- ------- ----------
Total 2,624,951 $12,529,800 190,720 $895,331 (2,775,668) ($12,925,505) 40,003 $499,626
Limited Maturity Bond Series
Class A Shares 100,280 $1,003,826 33,881 $336,083 (164,281) ($1,658,641) (30,120) ($318,732)
Class B Shares 54,343 542,454 7,399 73,082 (53,461) (531,595) 8,281 83,941
--------- ----------- ------- ---------- --------- ----------- ------- ----------
Total 154,623 $1,546,280 41,280 $409,165 (217,742) ($2,190,236) (21,839) ($234,791)
High Yield Bond Series
Class A Shares 108,545 $1,600,578 39,302 $562,642 (68,191) ($986,560) 79,656 $1,176,660
Class B Shares 70,803 1,036,665 25,082 357,999 (49,757) (723,390) 46,128 671,274
--------- ----------- ------- ---------- --------- ----------- ------- ----------
Total 179,348 $2,637,243 64,384 $920,641 (117,948) ($1,709,950) 125,784 $1,847,934
Municipal Bond Fund
Class A Shares 276,786 $2,707,060 49,534 $488,667 (323,371) ($3,193,665) 2,949 $ 2,062
Class B Shares 64,561 649,552 2,964 29,292 (25,898) (251,249) 41,627 427,595
--------- ----------- ------- ---------- --------- ----------- ------- ----------
Total 341,347 $3,356,612 52,498 $517,959 (349,269) ($3,444,914) 44,576 $429,657
Cash Fund 180,060,073 $180,060,073 2,577,911 $2,577,911 (191,328,841) ($191,328,841) (8,690,857) ($8,690,857)
<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 Share 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> 39
REPORT OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
SECURITY INCOME FUND, SECURITY MUNICIPAL BOND FUND
AND SECURITY CASH FUND
We have audited the accompanying statements of assets and liabilities of
Security Income Fund (comprised of Security Corporate Bond Series, Security U.S.
Government Series, Security Limited Maturity Series, and Security High Yield
Bond Series), Security Municipal Bond Fund, and Security Cash Fund
(collectively, the Funds), including the schedules of investments, as of
December 31, 1999, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for the periods indicated
herein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express and
opinion on these financial statements and financial highlights based on our
audits.
We have conducted our audits in accordance with auditing standards,
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of investments owned as of December 31, 1999, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the Funds indicated above at December 31, 1999, and the results of their
operations, changes in their net assets and the financial highlights for the
periods indicated therein in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
Kansas City, Missouri
February 11, 2000
- -------------------------------------------------------------------------------
38
<PAGE> 40
SHAREHOLDER UPDATE
- --------------------------------------------------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the Security Income Fund, Security Municipal Bond Fund
and the Security Cash Fund was held on October 29, 1999. Each matter voted upon
at that meeting, as well as the number of votes cast for, against or withheld,
and the number of abstentions with respect to such matters are set forth below.
(1) The election of six directors to serve on the Board of Directors of each
Fund until the next annual meeting, if any, or until their successors shall have
been duly elected and qualified. The following votes were cast regarding this
matter:
VOTES
- ----------------------------------------------------------------------
DIRECTORS FOR AGAINST/ABSTENTIONS
- ----------------------------------------------------------------------
SECURITY INCOME FUND
Donald A. Chubb, Jr. 11,340,581 244,051
John D. Cleland 11,349,804 234,833
Penny A. Lumpkin 11,344,664 239,968
Mark L. Morris, Jr. 11,344,664 239,968
Maynard F. Oliverius 11,307,117 277,515
James R. Schmank 11,349,576 235,056
SECURITY MUNICIPAL BOND FUND
Donald A. Chubb, Jr. 1,054,548 24,653
John D. Cleland 1,054,783 24,418
Penny A. Lumpkin 1,054,534 24,667
Mark L. Morris, Jr. 1,054,548 24,653
Maynard F. Oliverius 1,054,434 24,767
James R. Schmank 1,054,783 24,418
SECURITY CASH FUND
Donald A. Chubb, Jr. 35,710,067 1,822,334
John D. Cleland 35,767,238 1,765,163
Penny A. Lumpkin 35,766,898 1,765,503
Mark L. Morris, Jr. 35,739,669 1,792,732
Maynard F. Oliverius 35,791,618 1,740,783
James R. Schmank 35,708,198 1,824,203
(2) The ratification of Ernst & Young LLP as the independent accountants for
each Fund. The following votes were cast regarding this matter:
VOTES AGAINST/
VOTES FOR ABSTENTIONS
--------- --------------
Security Income Fund 11,248,801 335,831
Security Municipal Bond Fund 931,179 148,022
Security Cash Fund 34,814,166 2,718,235
(3) The approval of an arrangement and new investment advisory contract that
would permit Security Management Company, LLC, the Funds' investment manager,
with Board approval, to enter into or amend sub-advisory agreements without
stockholder approval. The following votes were cast regarding this matter:
VOTES AGAINST/
VOTES FOR ABSTENTIONS
--------- --------------
Security Income Fund
Corporate Bond Series 4,691,045 539,457
U.S. Government Series 2,130,643 289,476
Limited Maturity Bond Series 420,722 117,889
High Yield Bond Series 554,702 68,654
Security Municipal Bond Fund 817,749 240,674
Security Cash Fund 29,713,887 6,961,975
(4) The approval of proposed changes to Security Income Fund's fundamental
policies. The following votes were cast regarding the following issues relating
to the fundamental policies:
a. To eliminate the Fund's fundamental investment limitation concerning
investment in companies with less than three years' operating history.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,598,364 632,138
U.S. Government 2,146,215 273,904
Limited Maturity Bond 423,915 114,696
High Yield Bond N/A N/A
b. To eliminate the Fund's fundamental investment limitation concerning
purchasing securities of an issuer in which the officers and directors of the
Fund, investment manager or underwriter own more than five percent of the
outstanding securities of such issuer.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,598,364 632,138
U.S. Government 2,143,863 276,256
Limited Maturity Bond 423,650 114,961
High Yield Bond 558,049 65,307
c. To amend the Fund's fundamental investment limitation concerning
diversification.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,735,123 495,379
U.S. Government 2,214,336 205,783
Limited Maturity Bond 430,923 107,688
High Yield Bond N/A N/A
d. To amend the Fund's fundamental investment limitation concerning share
ownership of any one issuer.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,651,806 578,696
U.S. Government 2,172,798 247,321
Limited Maturity Bond 424,664 113,947
High Yield Bond 560,406 62,950
e. To eliminate the Fund's fundamental investment limitation concerning
investing for control of portfolio companies.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,742,189 488,313
U.S. Government 2,173,553 246,566
Limited Maturity Bond 423,372 115,238
High Yield Bond 558,051 65,305
- -------------------------------------------------------------------------------
39
<PAGE> 41
SHAREHOLDER UPDATE
f. To amend the Fund's fundamental investment limitation concerning
underwriting.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,687,448 543,054
U.S. Government 2,177,620 242,499
Limited Maturity Bond 423,650 114,961
High Yield Bond 558,957 64,398
g. To amend the Fund's fundamental investment limitation concerning buying or
selling real estate.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,701,054 529,448
U.S. Government 2,190,022 230,097
Limited Maturity Bond 429,124 109,487
High Yield Bond 566,258 57,097
h. To amend the Fund's fundamental investment limitation concerning commodities
or commodities contracts.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 3,803,013 1,427,489
U.S. Government 1,655,072 765,047
Limited Maturity Bond 430,138 108,473
High Yield Bond 560,406 62,950
i. To amend the Fund's fundamental investment limitation concerning lending.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,707,858 522,644
U.S. Government 2,144,235 275,884
Limited Maturity Bond 421,375 117,235
High Yield Bond 566,278 57,077
j. To eliminate the Fund's fundamental investment limitation concerning
investments in puts, calls, straddles or spreads.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,662,516 567,986
U.S. Government 2,172,163 247,956
Limited Maturity Bond 422,395 116,215
High Yield Bond N/A N/A
k. To eliminate the Fund's fundamental investment limitation concerning oil,
gas, mineral leases or other mineral exploration development programs.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 3,973,136 1,257,366
U.S. Government 1,657,142 762,977
Limited Maturity Bond 421,230 117,381
High Yield Bond 558,472 64,884
l. To amend the Fund's fundamental investment limitation concerning borrowing.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,668,048 562,454
U.S. Government 2,148,608 271,511
Limited Maturity Bond 421,653 116,958
High Yield Bond 558,951 64,404
m. To eliminate the Fund's fundamental investment limitation concerning
investment in other investment companies.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,777,479 453,023
U.S. Government 2,173,908 246,211
Limited Maturity Bond 529,594 8,657
High Yield Bond 566,322 57,034
n. To amend the Fund's fundamental investment limitation concerning senior
securities.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,760,578 469,924
U.S. Government 2,180,120 239,999
Limited Maturity Bond N/A N/A
High Yield Bond N/A N/A
o. To eliminate the Fund's fundamental investment limitation concerning
restricted securities.
SERIES OF VOTES AGAINST/
SECURITY INCOME FUND VOTES FOR ABSTENTIONS
-------------------- --------- -------------
Corporate Bond 4,712,600 517,902
U.S. Government 2,138,945 281,174
Limited Maturity Bond 524,202 14,409
High Yield Bond 561,084 62,272
(5) The approval of proposed changes to Security Municipal Bond Fund's
fundamental policies. The following votes were cast regarding the following
issues relating to the fundamental policies:
VOTES VOTES AGAINST/
ISSUES FOR ABSTENTIONS
- ----------------------------------------------------------------------------
a. To amend the Fund's fundamental 833,701 224,722
investment limitation concerning
borrowing.
b. To amend the Fund's fundamental 894,738 163,685
investment limitation concerning
senior securities.
c. To eliminate the Fund's fundamental 799,173 259,250
investment limitation concerning
margin purchases of securities and
short sales.
d. To amend the Fund's fundamental 885,062 173,361
investment limitation concerning
lending.
e. To amend the Fund's fundamental 805,799 252,624
investment limitation concerning
buying or selling real estate,
commodities, commodities futures
contracts or interests in oil, gas or
other mineral exploration or
development programs.
f. To eliminate the Fund's fundamental 843,617 214,806
investment limitation concerning
investment in other investment
companies.
g. To eliminate the Fund's fundamental 831,800 226,623
investment limitation concerning
pledging, mortgaging or hypothecating
its assets.
h. To eliminate the Fund's fundamental 789,546 268,877
investment limitation concerning
investment in puts and calls.
i. To eliminate the Fund's fundamental 808,330 250,093
investment limitation concerning
illiquid and restricted securities.
- -------------------------------------------------------------------------------
40
<PAGE> 42
SHAREHOLDER UPDATE
- -------------------------------------------------------------------------------
(6) The approval of proposed changes to Security Cash Fund's fundamental
policies. The following votes were cast regarding the following issues relating
to the fundamental policies:
VOTES VOTES AGAINST/
ISSUES FOR ABSTENTIONS
- ----------------------------------------------------------------------------
a. To eliminate the Fund's fundamental 30,039,307 6,636,555
investment limitation limiting the
fund to investing in U.S. government
securities; bank obligations; and
corporate obligations.
b. To amend the Fund's fundamental 29,895,150 6,780,712
investment limitation concerning
borrowing.
c. To eliminate the Fund's fundamental 29,564,256 7,111,605
investment limitation concerning
pledging its assets.
d. To amend the Fund's fundamental 29,322,331 7,353,530
investment limitation concerning lending.
e. To eliminate the Fund's fundamental 29,542,387 7,133,475
investment limitation concerning
purchasing securities of an issuer in
which the officers and directors of
the Fund own more than five percent
of the outstanding securities of such
issuer.
f. To amend the Fund's fundamental 30,256,042 6,419,819
investment limitation concerning
share ownership of any one issuer.
g. To eliminate the Fund's fundamental 29,082,284 7,593,578
investment limitation concerning
margin purchases of securities.
h. To eliminate the Fund's fundamental 30,883,470 5,792,392
investment limitation concerning
investment in companies with less
than three years' operating history.
i. To eliminate the Fund's fundamental 29,910,404 6,765,458
investment limitation concerning
short sales of securities.
j. To amend the Fund's fundamental 30,309,703 6,366,159
investment limitation concerning
buying or selling real estate.
k. To eliminate the Fund's fundamental 30,373,792 6,302,069
investment limitation concerning
investing for control of portfolio
companies.
l. To eliminate the Fund's fundamental 30,195,889 6,479,973
investment limitation concerning
investment in oil, gas, or other
mineral leases, rights or royalty
contracts or exploration or
development programs
m. To eliminate the Fund's fundamental 30,572,692 6,103,170
investment limitation concerning
investment in other investment
companies.
n. To eliminate the Fund's fundamental 28,686,328 7,989,534
investment limitation concerning
investment in puts and calls.
o. To amend the Fund's fundamental 28,831,770 7,844,092
investment limitation concerning
commodities or commodities contracts.
p. To amend the Fund's fundamental 30,812,833 5,863,029
investment limitation concerning
senior securities.
- -------------------------------------------------------------------------------
41
<PAGE> 43
THE SECURITY GROUP OF
MUTUAL FUNDS
Security Growth and Income Fund
Security Equity Fund
- Equity Series
- Global Series
- Total Return Series
- Social Awareness Series
- Value Series
- Small Company Series
- Enhanced Index Series
- International Series
- Select 25 Series
Security Ultra Fund
Security Income Fund
- Corporate Bond Series
- U.S. Government Series
- Limited Maturity Bond Series
- High Yield Series
- Capital Preservation Series
Security Municipal Bond Fund
Security Cash Fund
- -------------------------------------
[LOGO] SECURITY DISTRIBUTORS, INC.
- -------------------------------------
700 SW Harrison St.
Topeka, KS 66636-0001
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 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
