<PAGE>
File No. 811-1136
File No. 2-19458
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Post-Effective Amendment No. 83 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Post-Effective Amendment No. 83 |X|
(Check appropriate box or boxes)
SECURITY EQUITY FUND
(Exact Name of Registrant as Specified in Charter)
700 HARRISON STREET, TOPEKA, KANSAS 66636-0001
(Address of Principal Executive Offices/Zip Code)
Registrant's Telephone Number, including area code:
(785) 431-3127
Copies To:
John D. Cleland, President Amy J. Lee, Secretary
Security Equity Fund Security Equity Fund
700 Harrison Street 700 Harrison Street
Topeka, KS 66636-0001 Topeka, KS 66636-0001
(Name and address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
|_| immediately upon filing pursuant to paragraph (b)
|_| on January 28, 1999, pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| on January 28, 1999, pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2)
|X| on January 28, 1999, pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>
* SECURITY GROWTH AND INCOME FUND
* SECURITY EQUITY FUND
- Equity Series
- Global Series
- Value Series
- Small Company Series
- Enhanced Index Series
- International Series
- Select 25 Series
* SECURITY ULTRA FUND
JANUARY 31, 1999
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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<PAGE>
FUNDS' OBJECTIVES........................................................... 2
Security Growth and Income Fund............................................ 2
Security Equity Fund....................................................... 2
Security Global Fund....................................................... 2
Security Value Fund........................................................ 2
Security Small Company Fund................................................ 2
Security Enhanced Index Fund............................................... 2
Security International Fund................................................ 2
Security Select 25 Fund.................................................... 2
Security Ultra Fund........................................................ 2
FUNDS' PRINCIPAL INVESTMENT STRATEGIES...................................... 2
Security Growth and Income Fund........................................... 2
Security Equity Fund...................................................... 2
Security Global Fund...................................................... 3
Security Value Fund....................................................... 3
Security Small Company Fund............................................... 3
Security Enhanced Index Fund.............................................. 3
Security International Fund............................................... 4
Security Select 25 Fund................................................... 4
Security Ultra Fund....................................................... 4
MAIN RISKS.................................................................. 5
Market Risk............................................................... 5
Smaller Companies......................................................... 5
Value Stocks.............................................................. 5
Growth Stocks............................................................. 5
Foreign Securities........................................................ 5
Emerging Markets.......................................................... 5
Options and Futures....................................................... 6
Fixed-Income Securities................................................... 6
Active Trading............................................................ 6
PAST PERFORMANCE............................................................ 7
FEES AND EXPENSES OF THE FUNDS.............................................. 10
INVESTMENT ADVISER.......................................................... 11
Management Fees........................................................... 12
Portfolio Managers........................................................ 12
Year 2000 Compliance...................................................... 13
BUYING SHARES............................................................... 14
Class A Shares............................................................ 14
Class A Distribution Plan................................................. 14
Class B Shares............................................................ 14
Class B Distribution Plan................................................. 15
Class C Shares............................................................ 15
Class C Distribution Plan................................................. 15
Waiver of Deferred Sales Charge........................................... 15
Confirmations and Statements.............................................. 15
SELLING SHARES.............................................................. 16
By Mail................................................................... 16
By Telephone.............................................................. 16
By Broker................................................................. 16
Payment of Redemption Proceeds............................................ 16
DIVIDENDS AND TAXES......................................................... 17
Taxability of Distributions............................................... 17
Taxes on Sales or Exchanges............................................... 17
DETERMINATION OF NET ASSET VALUE............................................ 17
SHAREHOLDER SERVICES........................................................ 17
Accumulation Plan......................................................... 17
Systematic Withdrawal Program............................................. 18
Exchange Privilege........................................................ 18
Retirement Plans.......................................................... 19
GENERAL INFORMATION......................................................... 19
Stockholder Inquiries..................................................... 19
FINANCIAL HIGHLIGHTS........................................................ 20
APPENDIX A - CLASS A SHARES REDUCED SALES CHARGES........................... 26
Rights of Accumulation.................................................... 26
Statement of Intention.................................................... 26
Reinstatement Privilege................................................... 26
<PAGE>
FUNDS' OBJECTIVES
Described below are the investment objectives for each of the Funds. The Funds'
Board of Directors may change their investment objectives without shareholder
approval.
SECURITY GROWTH AND INCOME FUND -- The Growth and Income Fund seeks long-term
growth of capital with secondary emphasis on income.
SECURITY EQUITY FUND -- The Equity Fund seeks long-term capital growth.
SECURITY GLOBAL FUND -- The Global Fund seeks long-term growth of capital
primarily through investment in securities of companies domiciled in foreign
countries and the United States.
SECURITY VALUE FUND -- The Value Fund seeks long-term growth of capital.
SECURITY SMALL COMPANY FUND -- The Small Company Fund seeks long-term growth of
capital.
SECURITY ENHANCED INDEX FUND -- The Enhanced Index Fund seeks to outperform the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index") through
stock selection resulting in different weightings of common stocks relative to
the index.
SECURITY INTERNATIONAL FUND -- The International Fund seeks long-term capital
appreciation primarily by investing in non-U.S. equity securities and other
securities with equity characteristics.
SECURITY SELECT 25 FUND -- The Select 25 Fund seeks long-term growth of capital.
SECURITY ULTRA FUND -- The Ultra Fund seeks capital appreciation.
FUNDS' PRINCIPAL INVESTMENT STRATEGIES
SECURITY GROWTH AND INCOME FUND -- The Fund pursues its objective by investing
in a well-diversified portfolio of stocks that the Investment Manager believes
are attractively valued with above-average growth potential. The Fund also
invests in fixed-income securities, which are less volatile than stocks, to
adjust the risk characteristics of the portfolio. Fixed-income securities and
stocks that provide income will make up at least 25 percent of the Fund's
portfolio.
The Investment Manager uses a value-oriented strategy to choose stocks. The
Investment Manager identifies stocks that are believed to be undervalued in
terms of price or other financial measurements and that have above average
growth potential. The Fund typically invests in the common stock of companies
whose total market value is $1 billion or greater at the time of purchase.
To manage risk, the Investment Manager invests more in fixed-income securities,
stocks that provide income and cash during declining or volatile market
conditions. Fixed-income securities consist of U.S. government securities and
high yield securities (also referred to as "junk bonds").
Under adverse market conditions, the fund could invest some or all of its assets
in government bonds or money market securities. Although the Fund would do this
only in seeking to avoid losses, it could reduce the benefit from any upswing in
the market.
SECURITY EQUITY FUND -- The Fund pursues its objective by investing at least 65%
of its total assets in a widely-diversified portfolio of stocks.
To choose stocks, the Investment Manager uses a blended approach, investing in
growth stocks and value stocks. The Investment Manager typically chooses larger,
growth-oriented companies. The Investment Manager will also invest in
value-oriented stocks to reduce the Fund's potential volatility. In choosing the
balance of growth stocks and value stocks, the Investment Manager compares the
potential risks and rewards of each category.
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GROWTH-ORIENTED STOCKS are stocks of established companies that typically have a
record of consistent earnings growth.
VALUE-ORIENTED STOCKS are stocks of companies that are believed to be
undervalued in terms of price or other financial measurements and that have
above average growth potential.
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Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, it could reduce the benefit from any upswing in the
market.
SECURITY GLOBAL FUND -- The Fund pursues its objective by investing in a
diversified portfolio of securities with at least 65% of its total assets in at
least three countries, one of which may be the United States. The Fund primarily
invests in foreign and domestic common stocks or convertible stocks of
growth-oriented companies considered to have appreciation possibilities.
Investments in debt securities may be made in uncertain market conditions.
The Sub-Adviser, OppenheimerFunds, Inc., uses a disciplined theme approach to
choose securities in foreign and U.S. markets. By identifying key worldwide
trends, Oppenheimer can focus on areas they believe offer some of the best
opportunities for long-term growth. These trends fall into three categories of
change: (1) technological change; (2) demographic/geopolitical change; and (3)
changing resource need.
Oppenheimer looks for the following securities:
* Stocks of small, medium and large growth-oriented companies worldwide.
* Companies that stand to benefit from one or more global trends.
* Businesses with strong competitive positions and high demand for their
products or services.
To lower the risks of foreign investing, such as currency fluctuations,
Oppenheimer diversifies broadly across countries and industries.
Under adverse market conditions, the Fund could invest some or all of its assets
in debt obligations consisting of repurchase agreements and money market
instruments of foreign or domestic countries and the U.S. and foreign
governments.
SECURITY VALUE FUND -- The Fund pursues its objective by investing at least 65%
of its total assets in a diversified portfolio of stocks which are considered
undervalued.
The Investment Manager typically chooses stocks that appear undervalued relative
to assets, earnings, growth potential or cash flows. The value stocks included
in the Fund's portfolio consist of all sizes of companies, but due to the nature
of value companies, typically consist of small- to medium-size companies.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, it could reduce the benefit from any upswing in the
market.
SECURITY SMALL COMPANY FUND -- The Fund pursues its investment objective by
investing at least 65% of its assets in equity securities of domestic and
foreign companies with market capitalizations of less than $1.2 billion at the
time of purchase. In addition, the Fund may invest in securities of emerging
growth companies (some of which have market capitalizations over $1.2 billion)
including companies that are past their start-up phase and that show positive
earnings and prospects of achieving significant profit and gain in a relatively
short period of time.
The Sub-Adviser, Strong Capital Management, Inc., focuses on common stocks of
companies that it believes are reasonably priced and have above-average growth
potential. Strong may decide to sell a stock when the company's growth prospects
become less attractive.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash, fixed-income securities or money market securities. Although the Fund
would do this only in seeking to avoid losses, it could reduce the benefit from
any upswing in the market.
SECURITY ENHANCED INDEX FUND -- The Fund pursues its objective by investing in a
portfolio of stocks representative of the holdings in the S&P 500 Index. The
stocks are analyzed with a set of quantitative criteria that may indicate
whether a particular stock will predictably generate returns that will exceed or
be less than the S&P 500 Index. Based on the quantitative criteria, the
Sub-Adviser, Bankers Trust Company, determines whether the Fund should (1)
overweight - invest more in a particular stock, (2) underweight - invest less in
a particular stock or (3) hold a neutral position in the stock - invest a
similar amount in a particular stock, relative to the proportion of the S&P 500
Index that the stock represents. While the majority of issues held by the Fund
will be similar to those comprising the S&P 500, approximately 100 will be over
or underweighted relative to the index. In addition, Bankers Trust may determine
that certain S&P 500 stocks should not be held by the Fund in any amount. The
Fund may invest up to 25% of its assets in equity securities of companies not
included in the index. Bankers Trust believes that its quantitative criteria
will result in a portfolio with an overall risk similar to that of the S&P 500.
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THE S&P 500 INDEX is a well-known stock market index that includes common stocks
of 500 companies from several industrial sectors representing a significant
portion of the market value of all common stocks publicly traded in the U.S.,
most of which are listed on the NYSE.
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SECURITY INTERNATIONAL FUND -- The Fund pursues its objective by investing,
under normal circumstances, at least 65% of its assets in equity securities of
foreign issuers. These issuers are primarily established companies based in
developed countries outside of the United States. However, the Fund may also
invest in securities of issuers based in underdeveloped countries. Investments
in these countries will be based on what the Sub-Adviser, Bankers Trust Company,
believes to be an acceptable degree of risk in anticipation of superior returns.
The Fund will at all times be invested in the securities of issuers based in at
least 3 countries other than the United States.
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EQUITY SECURITIES include common stock, preferred stock, trust or limited
partnership interests, rights and warrants and convertible securities
(consisting of debt securities or preferred stock that may be converted into
common stock or that carry the right to purchase common stock).
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The Fund's investments will generally be diversified among several geographic
regions and countries. Bankers Trust uses the following criteria to determine
the appropriate distribution of investments among various countries and regions:
* The prospects for relative growth among foreign countries;
* Expected levels of inflation;
* Government policies influencing business conditions;
* The outlook for currency relationships; and
* The range of alternative opportunities available to international investors.
In countries and regions with well-developed capital markets where more
information is available, Bankers Trust will seek to select individual
investments for the Fund. Criteria for selection of individual securities
include:
* The issuer's competitive position;
* Prospects for growth;
* Management strength;
* Earnings quality;
* Underlying asset value;
* Relative market value; and
* Overall marketability.
In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, Bankers Trust may choose
to invest only at the market level. Here the Fund may seek to achieve country
exposure through use of options or futures based upon an established index of
securities of locally based issuers. Similarly, country exposure may also be
achieved through investments in other registered investment companies.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, it could reduce the benefit from any upswing in the
market.
SECURITY SELECT 25 FUND -- The Fund pursues its objective by concentrating its
investments in a core position of 20-30 common stocks of growth companies which
have exhibited consistent above average earnings growth. The Investment Manager
selects as the core position for the Fund, what it believes to be the premier
growth companies. The Investment Manager uses a "bottom-up" approach in
selecting growth stocks. Portfolio holdings will be replaced when one or more of
the companies' fundamentals have changed and, in the opinion of the Investment
Manager, it is no longer a premier growth company.
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BOTTOM-UP APPROACH means that the Investment Manager looks primarily at
individual companies against the context of broader market factors.
- --------------------------------------------------------------------------------
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, it could reduce the benefit from any upswing in the
market.
SECURITY ULTRA FUND -- The Fund pursues its objective by investing in a
diversified portfolio of stocks that the Investment Manager believes are
attractively valued with the greatest potential for appreciation. The Investment
Manager uses a value-oriented strategy and "bottom-up" approach to choose
stocks. The Investment Manager identifies stock of companies that are in the
early to middle stages of growth and are valued at a reasonable price. Stocks
considered to have appreciation potential often include securities of smaller
and less mature companies which often have unique proprietary products or
profitable market niches and the potential to grow very rapidly.
Under adverse market conditions, the Fund could invest some or all of its assets
in cash or money market securities. Although the Fund would do this only in
seeking to avoid losses, it could reduce the benefit from any upswing in the
market.
MAIN RISKS
An investment in the Funds is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK -- While stocks have historically been a leading choice of long-term
investors, they do fluctuate in price. The value of an investment in the Funds
will go up and down, which means investors could lose money.
SMALLER COMPANIES -- Securities of smaller companies may present additional
risks because their earnings are less predictable, their share prices more
volatile and their securities are less liquid than larger, more established
companies. Some of the Funds' investments will rise and fall based on investor
perception rather than economics.
VALUE STOCKS -- Investments in value stocks are subject to the risk that their
intrinsic values may never be realized by the market, or their prices may go
down. While the funds' investments in value stocks may limit downside risk over
time, the fund may, as a trade-off, produce more modest gains than riskier stock
funds.
GROWTH STOCKS -- Investments in growth stocks may lack the dividend yield that
can cushion stock prices in market downturns. Growth companies are expected to
increase their earnings at a certain rate. If expectations are not met,
investors can punish the stocks inordinately, even if earnings do increase.
FOREIGN SECURITIES -- Global Fund, International Fund and, to a lesser extent,
the other Funds may invest in foreign securities and/or American Depositary
Receipts (ADRs). Investing in foreign securities involves additional risks such
as currency fluctuations, differences in financial reporting standards, a lack
of adequate company information and political instability.
RISKS OF CONVERSION TO EURO. On January 1, 1999, eleven countries in the
European Monetary Union will adopt the euro as their official currency. However,
their current currencies (for example, the franc, the mark, and the lire) will
also continue in use until January 1, 2002. After that date, it is expected that
only the euro will be used in those countries. A common currency is expected to
confer some benefits in those markets, by consolidating the government debt
market for those countries and reducing some currency risks and costs. But the
conversion to the new currency will affect the Funds operationally and also has
potential risks, some of which are listed below. Among other things, the
conversion will affect:
* issuers in which the Funds invest, because of changes in the competitive
environment from a consolidated currency market and greater operational costs
from converting to the new currency. This might depress stock values.
* vendors the Funds depend on to carry out their business, such as the
custodian bank (which holds the foreign securities the Funds buy), the
Investment Manager (which prices the Funds' investments to deal with the
conversion to the euro) and brokers, foreign markets and securities
depositories. If they are not prepared, there could be delays in settlements
and additional costs to the Funds.
* exchange contracts and derivatives that are outstanding during the transition
to the euro. The lack of currency rate calculations between the affected
currencies and the need to update the Funds' contracts could pose extra costs
to the Funds.
The Investment Manager is upgrading its computer and bookkeeping systems to deal
with the conversion. The Funds' custodian bank has advised the Investment
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The possible effect of these factors on the Funds' investments cannot be
determined with certainty at this time, but they may reduce the value of some of
the Funds' holdings and increase its operational costs.
EMERGING MARKETS -- Global Fund and International Fund may invest in securities
of developing countries or emerging markets. All of the risks of investing in
foreign securities are heightened by investing in developing countries and
emerging markets. The markets of developing countries have been more volatile
than the markets of developed countries with mature economies. These markets
often have provided higher rates of return, and greater risks, to investors.
OPTIONS AND FUTURES -- Global Fund, Enhanced Index Fund and International Fund
may invest some of their assets in options and futures. These practices are used
primarily to hedge the fund's portfolio or to increase returns. However, there
is the risk that such practices sometimes may reduce returns or increase
volatility.
FIXED-INCOME SECURITIES -- Growth and Income Fund may invest a significant
portion of its assets in fixed-income securities. Bond investing may present
risks because their market value is affected by changes in interest rates. When
interest rates rise, the market value of a bond declines. Generally, the longer
a bond's maturity, the greater the risk. A bond's value can also be affected by
changes in the credit rating or financial condition of its issuer. In addition,
investments in higher yielding, high risk debt securities may present additional
risk because these securities may be less liquid than investment grade bonds and
they tend to be more susceptible to high interest rates and to real or perceived
adverse economic and competitive industry conditions. Because bond values
fluctuate, an investor may receive more or less money than originally invested.
ACTIVE TRADING -- The Growth and Income, Global, Value, Small Company and Ultra
Funds may engage in active trading which will increase the costs the Funds
incur. It may also increase the amount of capital gains tax an investor pays on
the Funds' returns.
PAST PERFORMANCE
The charts and tables below give an indication of the Funds' risks and
performance. The charts show changes in the Funds' performance from year to
year. The tables show how the Funds' average annual total returns for the
periods indicated compare to those of broad measures of market performance. As
with all mutual funds, past performance is not a prediction of future results.
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SECURITY GROWTH AND INCOME FUND
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[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1998 %
1997 31.7%
1996 12.0%
1995 27.8%
1994 -7.9%
1993 8.2%
1992 4.8%
1991 21.8%
1990 -3.0%
1989 20.5%
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HIGHEST AND LOWEST RETURNS (QUARTERLY 1989-1998)
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QUARTER ENDING
Highest %
Lowest %
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AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1998)
--------------------------------------------------------------
PAST PAST PAST
1 YEAR 5 YEARS 10 YEARS
Series A % % %
S&P 500* % % %
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SECURITY EQUITY FUND
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[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1998 %
1997 29.6%
1996 22.7%
1995 38.4%
1994 -2.5%
1993 14.6%
1992 10.7%
1991 35.2%
1990 -4.6%
1989 30.7%
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HIGHEST AND LOWEST RETURNS (QUARTERLY 1989-1998)
--------------------------------------------------------------
QUARTER ENDING
Highest %
Lowest %
--------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1998)
--------------------------------------------------------------
PAST PAST PAST
1 YEAR 5 YEARS 10 YEARS
Series A % % %
S&P 500 % % %
--------------------------------------------------------------
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SECURITY GLOBAL FUND
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[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1998 %
1997 6.9%
1996 17.1%
1995 10.4%
1994 1.3%
1993 3.3%
1992 N/A
1991 N/A
1990 N/A
1989 N/A
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HIGHEST AND LOWEST RETURNS (QUARTERLY 1989-1998)
--------------------------------------------------------------
QUARTER ENDING
Highest %
Lowest %
--------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1998)
--------------------------------------------------------------
PAST PAST LIFE OF FUND
1 YEAR 5 YEARS (SINCE 10/1/93)
Series A % % %
Morgan Stanley % % %
Capital International
World Index
--------------------------------------------------------------
*For the period October 1, 1993 (date of inception) to
December 31, 1993.
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SECURITY VALUE FUND
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[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1998 %
1997 29.5%
1996 N/A
1995 N/A
1994 N/A
1993 N/A
1992 N/A
1991 N/A
1990 N/A
1989 N/A
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HIGHEST AND LOWEST RETURNS (QUARTERLY 1989-1998)
--------------------------------------------------------------
QUARTER ENDING
Highest %
Lowest %
--------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1998)
--------------------------------------------------------------
PAST LIFE OF FUND
1 YEAR (SINCE 5/1/97)
Series A % %
BARRA Value Index % %
--------------------------------------------------------------
*For the period May 1, 1997 (date of inception) to December
31, 1997.
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SECURITY SMALL COMPANY FUND
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[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1998 %
1997 -3.9%
1996 N/A
1995 N/A
1994 N/A
1993 N/A
1992 N/A
1991 N/A
1990 N/A
1989 N/A
--------------------------------------------------------------
HIGHEST AND LOWEST RETURNS (QUARTERLY 1989-1998)
--------------------------------------------------------------
QUARTER ENDING
Highest %
Lowest %
--------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1998)
--------------------------------------------------------------
PAST LIFE OF FUND
1 YEAR (SINCE 10/15/97)
Series A % %
Russell 2000 Index % %
--------------------------------------------------------------
*For the period of October 15, 1997 (date of inception) to
December 31, 1997.
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SECURITY ULTRA FUND
- --------------------------------------------------------------------------------
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1998 %
1997 17.8%
1996 18.0%
1995 19.3%
1994 -6.6%
1993 9.9%
1992 7.7%
1991 59.7%
1990 -27.4%
1989 11.9%
--------------------------------------------------------------
HIGHEST AND LOWEST RETURNS (QUARTERLY 1989-1998)
--------------------------------------------------------------
QUARTER ENDING
Highest %
Lowest %
--------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1998)
--------------------------------------------------------------
PAST PAST PAST
1 YEAR 5 YEARS 10 YEARS
Series A % % %
S&P Midcap 400 % % %
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<PAGE>
FEES AND EXPENSES OF THE FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
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SHAREHOLDER FEES (ALL FUNDS)
(fees paid directly from your investment)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES(1) SHARES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, whichever is lower) None(2) 5%(3) 1%(4)
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<TABLE>
<CAPTION>
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DISTRIBUTION TOTAL ANNUAL FUND
MANAGEMENT FEES (12b-1) FEES(5) OTHER EXPENSES(6) OPERATING EXPENSES
------------------------- ------------------------- ------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund 1.21% 1.21% 1.21% None 1.00% 1.00% 0.00% 0.00% 0.00% 1.21% 2.21% 2.21%
Equity Fund 1.02% 1.02% 1.02% None 1.00% 1.00% 0.00% 0.00% 0.00% 1.02% 2.02% 2.02%
Global Fund 2.00% 2.00% 2.00% None 1.00% 1.00% 0.00% 0.00% 0.00% 2.00% 3.00% 3.00%
Value Fund 1.00% 1.00% 1.00% None 1.00% 1.00% 0.51% 0.59% 0.59% 1.51%* 2.59%* 2.59%*
Small Company Fund 1.00% 1.00% 1.00% 0.25% 1.00% 1.00% 1.40% 1.38% 1.38% 2.63%* 3.38%* 3.38%*
Enhanced Index Fund 0.75% 0.75% 0.75% 0.25% 1.00% 1.00% 0.52% 0.52% 0.52% 1.52% 2.27% 2.27%
International Fund 1.10% 1.10% 1.10% 0.25% 1.00% 1.00% 0.57% 0.57% 0.57% 1.92% 2.67% 2.67%
Select 25 Fund 0.75% 0.75% 0.75% 0.25% 1.00% 1.00% 0.79% 0.79% 0.79% 1.79% 2.54% 2.54%
Ultra Fund 1.23% 1.23% 1.23% None 1.00% 1.00% 0.00% 0.00% 0.00% 1.23% 2.23% 2.23%
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</TABLE>
1 Class B shares convert tax-free to Class A shares automatically after eight
years.
2 Purchases of Class A shares in amounts of $1,000,000 or more are not subject
to an initial sales load; however, a deferred sales charge of 1% is imposed
in the event of redemption within one year of purchase.
3 5% during the first year, decreasing to 0% in the sixth and following years.
4 A deferred sales charge of 1% is imposed in the event of redemption within
one year of purchase.
5 Long-term holders of shares that are subject to an asset-based sales charge
may pay more than the equivalent of the maximum front-end sales charge
otherwise permitted by NASD Rules.
6 The amount of "Other Expenses" of Enhanced Index Fund, International Fund and
Select 25 Fund is based on estimated amounts for the period ending September
30, 1999.
*Each of these Funds' total annual operating expenses for the most recent fiscal
year were less than the amount shown because of a fee waiver or reimbursement
of expenses by the Funds' Investment Manager. The Investment Manager waives a
portion of its management fee and/or reimburses expenses in order to keep each
Fund's total operating expenses at or below a specified level. The Investment
Manager may eliminate all or part of the fee waiver or reimbursement at any
time. With the fee waiver and reimbursement, the Funds' actual total annual
fund operating expenses for the year ended September 30, 1998, were as follows:
----------------------------------------
CLASS A CLASS B
----------------------------------------
Value Fund 1.27% 2.34%
Small Company Fund 1.40% 2.38%
----------------------------------------
EXAMPLE
This example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of these periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------- ------------------------- ------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund $690 $720 $320 $ 940 $ 990 $ 690 $1,200 $1,380 $1,180 $1,950 $2,540 $2,540
Equity Fund 670 710 310 880 930 630 1,110 1,290 1,090 1,750 2,350 2,350
Global Fund 770 800 400 1,170 1,230 930 1,590 1,780 1,580 2,770 3,320 3,320
Value Fund 720 760 360 1,020 1,110 810 1,350 1,580 1,380 2,270 2,920 2,920
Small Company Fund 830 840 440 1,350 1,340 1,040 1,890 1,960 1,760 3,370 3,670 3,670
Enhanced Index Fund 720 730 330 1,030 1,010 710 --- --- --- --- --- ---
International Fund 760 770 370 1,140 1,130 830 --- --- --- --- --- ---
Select 25 Fund 750 760 360 1,110 1,090 790 --- --- --- --- --- ---
Ultra Fund 690 730 330 940 1,000 700 1,210 1,390 1,190 1,980 2,560 2,560
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------- ------------------------- ------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund $690 $220 $220 $ 940 $ 690 $ 690 $1,200 $1,180 $1,180 $1,950 $2,540 $2,540
Equity Fund 670 210 210 880 630 630 1,110 1,090 1,090 1,750 2,350 2,350
Global Fund 770 300 300 1,170 930 930 1,590 1,580 1,580 2,770 3,320 3,320
Value Fund 720 260 260 1,020 810 810 1,350 1,380 1,380 2,270 2,920 2,920
Small Company Fund 830 340 340 1,350 1,040 1,040 1,890 1,760 1,760 3,370 3,670 3,670
Enhanced Index Fund 720 230 230 1,030 710 710 --- --- --- --- --- ---
International Fund 760 270 270 1,140 830 830 --- --- --- --- --- ---
Select 25 Fund 750 260 260 1,110 790 790 --- --- --- --- --- ---
Ultra Fund 690 230 230 940 700 700 1,210 1,190 1,190 1,980 2,560 2,560
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT ADVISER
Security Management Company, LLC (the "Investment Manager"), 700 SW Harrison
Street, Topeka, Kansas, is the Funds' investment adviser. On September 30, 1998,
the aggregate assets of all of the mutual funds under the investment management
of the Investment Manager were approximately $4.7 billion.
The Investment Manager has engaged OppenheimerFunds, Inc., Two World Trade
Center, New York, New York 10048, to provide investment advisory services to
Global Fund. Oppenheimer currently manages over $85 billion in assets.
Oppenheimer became the Global Fund's Sub-Adviser on November 1, 1998, replacing
Lexington Management Corporation which served as Sub-Adviser of the Fund from
its inception in October 1993 to November 1, 1998.
The Investment Manager has engaged Strong Capital Management, Inc. ("Strong"),
900 Heritage Reserve, Menomonee Falls, Wisconsin 53051, to provide investment
advisory services to the Small Company Fund. Strong was established in 1974 and
as of September 30, 1998, manages over $30 billion in assets.
The Investment Manager has also engaged Bankers Trust Company, One Bankers Trust
Plaza, New York, New York 10006, to provide investment advisory services to the
Enhanced Index Fund and International Fund. Banker's Trust was founded in 1903
and manages over $300 billion in assets.
MANAGEMENT FEES -- The following chart shows the investment management fees paid
by each fund during the last fiscal year.
-------------------------------------------------------
MANAGEMENT FEES
(expressed as a percentage of average net assets)
-------------------------------------------------------
Growth and Income Fund........................ 1.21%
Equity Fund................................... 1.02%
Global Fund................................... 2.00%
Value Fund.................................... 1.00%
Small Company Fund............................ 1.00%
Enhanced Index Fund*.......................... 0.75%
International Fund*........................... 1.10%
Select 25 Fund*............................... 0.75%
Ultra Fund.................................... 1.23%
-------------------------------------------------------
*These Funds were not available until January 31, 1998.
-------------------------------------------------------
The Investment Manager, as part of the investment advisory agreement with
Security Equity Fund, has agreed to cap the total annual expenses of Enhanced
Index Fund and Select 25 Fund to 1.75% and International Fund to 2.25%, in each
case exclusive of interest, taxes, extraordinary expenses, brokerage fees and
commissions and 12b-1 fees.
PORTFOLIO MANAGERS -- SIDNEY F. HOOTS, Managing Director of Bankers Trust, has
been the manager of Enhanced Index Fund since its inception in January 1999. He
is the Senior Portfolio Manager for the Structured Equity Group at Bankers
Trust. He has responsibility for a variety of funds ranging from an enhanced
index fund using quantitative stock selection to an equity-based relative value
hedge fund which combines traditional hedge fund trading with quantitative
techniques. In addition, he is responsible for a tax-advantaged equity product.
Mr. Hoots also directs the quantitative equity research effort. Mr. Hoots joined
Bankers Trust in 1983 and has 15 years of investment experience. He has a B.S.
degree from Duke University and a M.B.A. from the University of Chicago. He is
also a Member of the American Finance Association.
MICHAEL LEVY, Managing Director of Bankers Trust, has been co-lead manager of
International Fund since its inception in January 1999. He has been a portfolio
manager of other investment products with similar investment objectives since
joining Bankers Trust in 1993. Mr. Levy is Bankers Trust's International Equity
Strategist and is head of the international equity team. He has served in each
of these capacities since 1993. The international equity team is responsible for
the day-to-day management of the Fund as well as other international equity
portfolios managed by Bankers Trust. Mr. Levy's experience prior to joining
Bankers Trust includes senior equity analyst with Oppenheimer & Company, as well
as positions in investment banking, technology and manufacturing enterprises. He
has 27 years of business experience, of which seventeen years have been in the
investment industry.
TERRY A. MILBERGER, Senior Portfolio Manager of the Investment Manager, has been
the manager of Equity Fund since 1981 and has been the manager of Select 25 Fund
since its inception in January 1999. He has more than 20 years of investment
experience. He began his career as an investment analyst in the insurance
industry and from 1974 through 1978 he served as an assistant portfolio manager
for the Investment Manager. He was then employed as Vice President of Texas
Commerce Bank and managed its pension assets until he returned to the Investment
Manager in 1981. Mr. Milberger holds a bachelor's degree in business and a
Masters of Business Administration from the University of Kansas and is a
Chartered Financial Analyst. His investment philosophy is based on patience and
opportunity for the long-term investor.
RONALD C. OGNAR, Portfolio Manager of Strong, has been the manager of Small
Company Fund since its inception in 1997. He is a Chartered Financial Analyst
with more than 25 years of investment experience. Mr. Ognar joined Strong in
April 1993 after two years as a principal and portfolio manager with RCM Capital
Management. For approximately 3 years prior to his position at RCM Capital
Management, he was a portfolio manager at Kemper Financial Services in Chicago.
Mr. Ognar began his investment career in 1968 at LaSalle National Bank. He is a
graduate of the University of Illinois with a bachelor's degree in accounting.
MICHAEL A. PETERSEN, Senior Portfolio Manager of the Investment Manager, has
been the manager of Growth and Income Fund since January 1998. He has 15 years
of investment experience. Prior to joining the Investment Manager in 1997, he
was Director of Equity Research and Fund Management at Old Kent Bank and Trust
Corporation from 1988 to 1997. Prior to 1988, he was an Investment Officer at
First Asset Management. Mr. Petersen earned a Bachelor of Science degree in
Accounting from the University of Minnesota. He is a Chartered Financial
Analyst.
ROBERT REINER, Principal at Bankers Trust, has been co-lead manager of
International Fund since its inception in January 1999. He has been a portfolio
manager of other investment products with similar investment objectives since
joining Bankers Trust in 1994. At Bankers Trust, he has been involved in
developing analytical and investment tools for the group's international equity
team; his primary focus has been on Japanese and European markets. Prior to
joining Bankers Trust, he was an equity analyst and also provided macroeconomic
coverage for Scudder, Stevens & Clark from 1993 to 1994. He previously served as
Senior Analyst at Sanford C. Bernstein & Co. from 1991 to 1992, and was
instrumental in the development of Bernstein's International Value Fund. Mr.
Reiner spent more than nine years at Standard & Poor's Corporation, where he was
a member of its international ratings group. His tenure included managing the
day-to-day operations of the Standard & Poor's Corporation Tokyo office for
three years.
JAMES P. SCHIER, Portfolio Manager of the Investment Manager, has been the
manager of Value Fund since its inception in 1997 and has managed Ultra Fund
since January 1998. He has 13 years experience in the investment field and is a
Chartered Financial Analyst. While employed by the Investment Manager, he also
served as a research analyst. Prior to joining the Investment Manager in 1995,
he was a portfolio manager for Mitchell Capital Management from 1993 to 1995.
From 1988 to 1993 he served as Vice President and Portfolio Manager for Fourth
Financial. Prior to 1988, Mr. Schier served in various positions in the
investment field for Stifel Financial, Josepthal & Company and Mercantile Trust
Company. Mr. Schier earned a bachelor of business degree from the University of
Notre Dame and an M.B.A. from Washington University.
JULIE WANG, Principal at Bankers Trust, has been co-manager of International
Fund since its inception in January 1999. She has been a manager of other
investment products with similar investment objectives since joining Bankers
Trust in 1994. Ms. Wang has primary focus on the Asia-Pacific region and the
Fund's emerging market exposure. Prior to joining Bankers Trust, Ms. Wang was an
investment manager at American International Group, where she advised in the
management of $7 billion of assets in Southeast Asia, including private and
listed equities, bonds, loans and structured products. Ms. Wang received her
B.A. (economics) from Yale University and her M.B.A. from the Wharton School.
YEAR 2000 COMPLIANCE -- Like other mutual funds, as well as other financial and
business organizations around the world, the Funds could be adversely affected
if the computer systems used by the Investment Manager, and other service
providers, in performing their administrative functions do not properly process
and calculate date-related information and data before, during and after January
1, 2000. Some computer software and hardware systems currently cannot
distinguish between the year 2000 and the year 1900 or some other date because
of the way date fields were encoded. This is commonly known as the "Year 2000
Problem." If not addressed, the Year 2000 Problem could impact the management
services provided to the Funds by the Investment Manager, as well as transfer
agency, accounting, custody, distribution and other services provided to the
Funds and their shareholders.
The Investment Manager has adopted a plan to be "Year 2000 Compliant" with
respect to both its internally built systems as well as systems provided by
external vendors. "Year 2000 Compliant" means that systems and programs which
require modification will have the date fields expanded to include the century
information and that for interfaces to external organizations as well as new
systems development the year portion of the date field will be expanded to four
digits using the format YYYYMMDD. The Investment Manager's overall approach to
addressing the Year 2000 issue is as follows: (1) to inventory its internal and
external hardware, software, telecommunications and data transmissions to
customers and conduct a risk assessment with respect to the impact that a
failure on any such system would have on its business operations; (2) to modify
or replace its internal systems and obtain vendor certifications of Year 2000
compliance for systems provided by vendors or replace such systems that are not
Year 2000 Compliant; and (3) to implement and test its systems for Year 2000
compliance. The Investment Manager has completed the inventory of its internal
and external systems and has made substantial progress toward completing the
modification/replacement of its internal systems as well as towards obtaining
Year 2000 Compliant certifications from its external vendors. Overall systems
testing is scheduled to commence in December 1998 and extend into the first six
months of 1999.
Although the Investment Manager has taken steps to ensure that its systems will
function properly before, during and after the Year 2000, its key operating
systems and information sources are provided by or through external vendors
which creates uncertainty to the extent the Investment Manager is relying on the
assurance of such vendors as to whether their systems will be Year 2000
Compliant. The costs or consequences of incomplete or untimely resolution of the
Year 2000 issue are unknown to the Investment Manager at this time but could
have a material adverse impact on the operations of the Funds and the Investment
Manager.
The Year 2000 Problem is also expected to impact companies, which may include
issuers of portfolio securities held by the Funds, to varying degrees based upon
various factors, including, but not limited to, the company's industry sector
and degree of technological sophistication. The Funds and the Investment Manager
are unable to predict what impact, if any, the Year 2000 Problem will have on
issuers of the portfolio securities held by the Funds.
BUYING SHARES
There are three different ways to buy shares of the Funds--Class A shares, Class
B shares or Class C shares. The minimum initial investment is $100. Subsequent
investments must be $100 (or $20 under an Accumulation Plan). The Funds reserve
the right to reject any order to purchase shares.
CLASS A SHARES -- Class A shares are subject to a sales charge at the time of
purchase. An order for Class A shares will be priced at the Fund's net asset
value (NAV), plus the sales charge set forth below. The NAV, plus the sales
charge is the "offering price." A Fund's NAV is generally calculated as of the
close of trading on every day the New York Stock Exchange is open. An order for
Class A shares is priced at the NAV next calculated after the order is accepted
by the Fund, plus the sales charge.
---------------------------------------------------------
SALES CHARGE
-------------------------------------
AS A PERCENTAGE
AS A PERCENTAGE OF NET AMOUNT
AMOUNT OF ORDER OF OFFERING PRICE INVESTED
---------------------------------------------------------
Less than $50,000 5.75% 6.10%
$50,000 to $99,999 4.75% 4.99%
$100,000 to $249,999 3.75% 3.90%
$250,000 to $499,999 2.75% 2.83%
$500,000 to $999,999 2.00% 2.04%
$1,000,000 or more* None None
---------------------------------------------------------
*Purchases of $1,000,000 or more are not subject to a
sales charge at the time of purchase, but are subject to
a deferred sales charge of 1.00% if redeemed within one
year following purchase. The deferred sales charge is a
percentage of the lesser of the NAV of the shares
redeemed or the net cost of such shares. Shares that are
not subject to a deferred sales charge are redeemed
first.
---------------------------------------------------------
CLASS A DISTRIBUTION PLAN -- The Small Company, International, Enhanced Index
and Select 25 Funds have adopted Class A Distribution Plans that allow the Funds
to pay distribution fees to the Funds' Distributor, Security Distributors, Inc.
The Distributor uses the fees to pay for activities related to the sale of Class
A shares and services provided to shareholders. The distribution fee is equal to
0.25% of the average daily net assets of the Fund's Class A shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
CLASS B SHARES -- Class B shares are not subject to a sales charge at the time
of purchase. An order for Class B shares will be priced at the Fund's NAV next
calculated after the order is accepted by the Fund. A Fund's NAV is generally
calculated as of the close of trading on every day the New York Stock Exchange
is open.
Class B shares are subject to a deferred sales charge if withdrawn within 5
years from the date of purchase. The deferred sales charge is a percentage of
the NAV of the shares at the time they are redeemed or the original purchase
price, whichever is less. Shares that are not subject to the deferred sales
charge are redeemed first. Then, shares held the longest will be the first to be
redeemed.
The amount of the deferred sales charge is based upon the number of years since
the shares were purchased, as follows:
--------------------------------
NUMBER OF YEARS DEFERRED
SINCE PURCHASE SALES CHARGE
--------------------------------
1 5%
2 4%
3 3%
4 3%
5 2%
6 and more 0%
--------------------------------
The Distributor will waive the deferred sales charge under certain
circumstances. See "Waiver of the Deferred Sales Charge" below.
CLASS B DISTRIBUTION PLAN -- The Funds have adopted Class B Distribution Plans
that allow the Funds to pay distribution fees to the Distributor. The
Distributor uses the fees to finance activities related to the sale of Class B
shares and services to shareholders. The distribution fee is equal to 1.00% of
the average daily net assets of the Fund's Class B shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
Class B shares automatically convert to Class A shares on the eighth anniversary
of purchase. This is advantageous because Class A shares are subject to a lower
distribution fee than Class B shares (or in some cases, no distribution fee). A
pro rata amount of Class B shares purchased through the reinvestment of
dividends or other distributions is also converted to Class A shares each time
that shares purchased directly are converted.
CLASS C SHARES -- Class C shares are not subject to a sales charge at the time
of purchase. An order for Class C shares will be priced at the Fund's NAV next
calculated after the order is accepted by the Fund. A Fund's NAV is generally
calculated as of the close of trading on every day the New York Stock Exchange
is open.
Class C shares are subject to a deferred sales charge of 1.00% if withdrawn
within one year from the date of purchase. The deferred sales charge is a
percentage of the NAV of the shares at the time they are redeemed or the
original purchase price, whichever is less. Shares that are not subject to the
deferred sales charge are redeemed first. Then, shares held the longest will be
the first to be redeemed. The Distributor will waive the deferred sales charge
under certain circumstances. See "Waiver of the Deferred Sales Charge" below.
CLASS C DISTRIBUTION PLAN -- The Funds have adopted Class C Distribution Plans
that allow the Funds to pay distribution fees to the Distributor. The
Distributor uses the fees to finance activities related to the sale of Class C
shares and services to shareholders. The distribution fee is equal to 1.00% of
the average daily net assets of the Fund's Class C shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
WAIVER OF DEFERRED SALES CHARGE -- The Distributor will waive the deferred sales
charge under the following circumstances:
* Upon the death of the shareholder if shares are redeemed within one year of
the shareholder's death
* Upon the disability of the shareholder prior to age 65 if shares are redeemed
within one year of the shareholder becoming disabled and the shareholder was
not disabled when the shares were purchased
* In connection with required minimum distributions from a retirement plan
qualified under Section 401(a), 401(k), 403(b) or 408 of the Internal Revenue
Code
* In connection with distributions from retirement plans qualified under
Section 401(a) or 401(k) of the Code for:
- returns of excess contributions to the plan
- retirement of a participant in the plan
- a loan from the plan (loan repayments are treated as new sales for
purposes of the deferred sales charge)
* Upon the financial hardship (as defined in regulations under the Code) of a
participant in a plan
* Upon termination of employment of a participant in a plan
* Upon any other permissible withdrawal under the terms of the plan.
CONFIRMATIONS AND STATEMENTS -- Certain transactions may be confirmed on a
quarterly basis including systematic withdrawals, automatic purchases and
reinvested dividends.
SELLING SHARES
Selling your shares of a Fund is called a "redemption," because the Fund buys
back its shares. A stockholder may sell shares at any time. Shares will be sold
at the NAV next determined after the order is accepted by the Fund's transfer
agent, less any applicable deferred sales charge. Any share certificates
representing Fund shares being sold must be returned with a request to sell the
shares.
For selling recently purchased shares, if the Fund has not collected payment for
the shares, it may delay sending the proceeds until it has collected payment,
which may take up to 15 days.
BY MAIL -- To sell shares by mail, send a letter of instruction that includes:
* The name and signature of the account owner(s)
* The name of the Fund
* The dollar amount or number of shares to sell
* Where to send the proceeds
* A signature guarantee if
- The check will be mailed to a payee or address different than that of the
account owner, or
- The sale of shares is more than $10,000.
- --------------------------------------------------------------------------------
A SIGNATURE GUARANTEE helps protect against fraud. Banks, brokers, credit
unions, national securities exchanges and savings associations provide signature
guarantees. A notary public is not an eligible signature guarantor. For joint
accounts, both signatures must be guaranteed.
- --------------------------------------------------------------------------------
Mail your request to:
Security Management Company, LLC
P.O. Box 750525
Topeka, KS 66675-9135
Signature requirements vary based on the type of account you have:
* INDIVIDUAL OR JOINT TENANTS: Written instructions must be signed by an
individual shareholder, or in the case of joint accounts, all of the
shareholders, exactly as the name(s) appears on the account.
* UGMA OR UTMA: Written instructions must be signed by the custodian as it
appears on the account.
* SOLE PROPRIETOR OR GENERAL PARTNER: Written instructions must be signed by an
authorized individual as it appears on the account.
* CORPORATION OR ASSOCIATION: Written instructions must be signed by the
person(s) authorized to act on the account. A resolution form, authorizing
the signer to act, must accompany the request if not on file with the Funds.
* TRUST: Written instructions must be signed by the trustee(s). If the name of
the current trustee(s) does not appear on the account, a certified
certificate of incumbency dated within 60 days must also be submitted.
* RETIREMENT: Written instructions must be signed by the account owner.
BY TELEPHONE -- If you selected this option on your account application, you may
make redemptions from your account by calling 1-800-888-2461, extension 3127, on
weekdays (except holidays) between 7:00 a.m. and 6:00 p.m. Central time. The
Funds require that requests for redemptions over $10,000 be in writing with
signatures guaranteed. You may not close your account by telephone or redeem
shares for which a certificate has been issued. If you would like to establish
this option on an existing account, please call 1-800-888-2461, extension 3127.
Shareholders may not redeem shares held in an IRA or 403(b)(7) account by
telephone.
BY BROKER -- You may redeem your shares through your broker. Brokers may charge
a commission upon the redemption of shares.
PAYMENT OF REDEMPTION PROCEEDS -- Payments may be made by check, wire transfer
or electronic transfer.
BY CHECK. Redemption proceeds will be sent to the shareholder(s) on our records
at the address on our records within seven days after receipt of a valid
redemption request. For a charge of $15 deducted from redemption proceeds, the
Investment Manager will provide a certified or cashier's check, or send the
redemption proceeds by express mail, upon the shareholder's request.
BY WIRE. Your redemption proceeds will be wired directly into your designated
bank account, normally on the next business day after receipt of your redemption
request is received. There is no limitation on redemptions by wire. However,
there is a $15 fee for each wire and your bank may charge an additional fee to
receive the wire. If you would like to establish this option on an existing
account, please call 1-800-888-2461, extension 3127, to sign up for this
service. Wire redemptions are not available for retirement accounts.
BY ELECTRONIC TRANSFER. If you have established this option, your redemption
proceeds will be transferred electronically to your predesignated bank account.
To establish this option on an existing account, please call 1-800-888-2461,
extension 3127, to request the appropriate form.
DIVIDENDS AND TAXES
Each Fund pays its shareholders dividends from its net investment income, and
distributes any net capital gains that it has realized, at least annually. Your
dividends and distributions will be reinvested in the Fund, unless you instruct
the Investment Manager otherwise. There are no fees or sales charges on
reinvestments.
TAXABILITY OF DISTRIBUTIONS -- Fund dividends and distributions are taxable to
shareholders (unless your investment is in an IRA or other tax-advantaged
retirement account) whether you reinvest your dividends or distributions or take
them in cash. If a Fund declares a distribution in October, November or December
but pays it in January, you may be taxed on that distribution as if you received
it in the previous year. In general, distributions from the Funds are taxable as
follows:
------------------------------------------------------
TYPE OF TAX RATE FOR TAX RATE FOR 28%
DISTRIBUTION 15% BRACKET BRACKET OR ABOVE
------------------------------------------------------
Income Ordinary Ordinary
dividends Income rate Income rate
Short-term Ordinary Ordinary
capital gains Income rate Income rate
Long-term
capital gains 10% 20%
------------------------------------------------------
The Fund will mail you information concerning the tax status of the
distributions for each calendar year on or before January 31 of each year.
TAXES ON SALES OR EXCHANGES -- You may be taxed on any sale or exchange of Fund
shares. Tax-deferred retirement accounts do not generate a tax liability unless
you are taking a distribution or making a withdrawal.
The table above can provide a guide for your potential tax liability when
selling or exchanging Fund shares. "Short-term capital gains" applies to fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares held for more than 12 months.
You should consult your tax professional about federal, state and local tax
consequences to you of an investment in the Fund. Please see the Statement of
Additional Information for additional tax information.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each Fund is computed as of the close of
regular trading hours on the New York Stock Exchange (normally 3 p.m. Central
time) on days when the Exchange is open. The Exchange is open Monday through
Friday, except on the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Each Fund's NAV is generally based upon the market value of securities held in
the Fund's portfolio. If market values are not available, the fair value of
securities is determined using procedures approved by the Funds' Board of
Directors.
Foreign securities are valued based on quotations from the primary market in
which they are traded, and are converted from the local currency into U.S.
dollars using current exchange rates. Foreign securities may trade in their
primary markets on weekends or other days when the Fund does not price its
shares. Therefore, the NAV of Funds holding foreign securities may change on
days when shareholders will not be able to buy or sell shares of the Funds.
SHAREHOLDER SERVICES
ACCUMULATION PLAN -- An investor may choose to invest in one of the Funds
through a voluntary Accumulation Plan. This allows for an initial investment of
$100 minimum and subsequent investments of $20 minimum at any time. An
Accumulation Plan involves no obligation to make periodic investments, and is
terminable at will.
Payments are made by sending a check to the Distributor who (acting as an agent
for the dealer) will purchase whole and fractional shares of the Fund as of the
close of business on such day as the payment is received. The investor will
receive a confirmation and statement after each investment.
Investors may choose to use "Secur-O-Matic" (automatic bank draft) to make their
Fund purchases. There is no additional charge for choosing to use Secur-O-Matic.
An application for Secur-O-Matic may be obtained from the Funds.
SYSTEMATIC WITHDRAWAL PROGRAM -- Stockholders who wish to receive regular
monthly, quarterly, semiannual, or annual payments of $25 or more may establish
a Systematic Withdrawal Program. A stockholder may elect a payment that is a
specified percentage of the initial or current account value or a specified
dollar amount. A Systematic Withdrawal Program will be allowed only if shares
with a current offering price of $5,000 or more are deposited with the
Investment Manager, which will act as agent for the stockholder under the
Program. Shares are liquidated at net asset value. The Program may be terminated
on written notice, or it will terminate automatically if all shares are
liquidated or withdrawn from the account.
A stockholder may establish a Systematic Withdrawal Program with respect to
Class B and Class C shares without the imposition of any applicable contingent
deferred sales charge, provided that such withdrawals do not in any 12-month
period, beginning on the date the Program is established, exceed 10 percent of
the value of the account on that date ("Free Systematic Withdrawals"). Free
Systematic Withdrawals are not available if a Program established with respect
to Class B or Class C shares provides for withdrawals in excess of 10 percent of
the value of the account in any Program year and, as a result, all withdrawals
under such a Program would be subject to any applicable contingent deferred
sales charge. Free Systematic Withdrawals will be made first by redeeming those
shares that are not subject to the contingent deferred sales charge and then by
redeeming shares held the longest. The contingent deferred sales charge
applicable to a redemption of Class B or Class C shares requested while Free
Systematic Withdrawals are being made will be calculated as described under "and
Waiver of Deferred Sales Charges," page 15. A Systematic Withdrawal form may be
obtained from the Funds.
EXCHANGE PRIVILEGE -- Stockholders who own shares of the Funds may exchange
those shares for shares of another of the Funds, for shares of the other mutual
funds distributed by the Distributor or for shares of Security Cash Fund at net
asset value. The other funds currently distributed by the Distributor include
Security Asset Allocation, Social Awareness, Corporate Bond, Limited Maturity
Bond, U.S. Government, High Yield, Emerging Markets Total Return, Global Asset
Allocation, Global High Yield and Municipal Bond Funds. Exchanges may be made
only in those states where shares of the fund into which an exchange is to be
made are qualified for sale. No service fee is presently imposed on such an
exchange. Shares of a particular class of the Funds may be exchanged only for
shares of the same class of another fund distributed by the Distributor or for
shares of Security Cash Fund, a money market fund that offers a single class of
shares. At present, Corporate Bond, Limited Maturity Bond, U.S. Government, High
Yield, Emerging Markets Total Return, Global Asset allocation and Municipal Bond
Funds do not offer Class C shares. Any applicable contingent deferred sales
charge will be imposed upon redemption and calculated from the date of the
initial purchase without regard to the time shares were held in Security Cash
Fund. For tax purposes, an exchange is a sale of shares which may result in a
taxable gain or loss. Special rules may apply to determine the amount of gain or
loss on an exchange occurring within ninety days after the exchanged shares were
acquired. Exchanges are made upon receipt of a properly completed Exchange
Authorization form. A current prospectus of the fund into which an exchange is
made will be given to each stockholder exercising this privilege.
To exchange shares by telephone, a stockholder must hold shares in
non-certificate form and must either have completed the Telephone Exchange
section of the application or a Telephone Transfer Authorization form which may
be obtained from the Investment Manager. Once authorization has been received by
the Investment Manager, a stockholder may exchange shares by telephone by
calling the Funds at (800) 888-2461, extension 3127, on weekdays (except
holidays) between the hours of 7:00 a.m. and 6:00 p.m. Central time. Exchange
requests received by telephone after the close of the New York Stock Exchange
(normally 3 p.m. Central time) will be treated as if received on the next
business day. A stockholder who authorizes telephone exchanges authorizes the
Investment Manager to act upon the instructions of any person by telephone to
exchange shares between any identically registered accounts with the Funds
listed above. The Investment Manager has established procedures to confirm that
instructions communicated by telephone are genuine and may be liable for any
losses due to fraudulent or unauthorized instructions if it fails to comply with
its procedures. The Investment Manager's procedures require that any person
requesting an exchange by telephone provide the account registration and number
and the owner's tax identification number and such instructions must be received
on a recorded line. Neither the Fund, the Investment Manager nor the Distributor
shall be liable for any loss, liability, cost or expense arising out of any
request, including any fraudulent request, provided the Investment Manager
complied with its procedures. Thus, a stockholder who authorizes telephone
exchanges may bear the risk of loss from a fraudulent or unauthorized request.
The exchange privilege, including telephone exchanges, may be changed or
discontinued at any time by either the Investment Manager or the Funds upon 60
days' notice to stockholders.
In periods of severe market or economic conditions, the telephone exchange of
shares may be difficult to implement and stockholders should make exchanges by
writing to Security Distributors, Inc., 700 SW Harrison Street, Topeka, Kansas
66636-0001.
RETIREMENT PLANS -- The Funds have available tax-qualified retirement plans for
individuals, prototype plans for the self-employed, pension and profit sharing
plans for corporations and custodial accounts for employees of public school
systems and organizations meeting the requirements of Section 501(c)(3) of the
Internal Revenue Code. Further information concerning these plans is contained
in the Funds' Statement of Additional Information.
GENERAL INFORMATION
STOCKHOLDER INQUIRIES -- Stockholders who have questions concerning their
account or wish to obtain additional information, may call the Funds (see back
cover for address and telephone numbers), or contact their securities dealer.
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund assuming reinvestment of all dividends and distributions. This
information has been audited by Ernst & Young LLP, whose report, along with the
Funds' financial statements, are included in the annual report, which is
available upon request..
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY GROWTH AND INCOME FUND (CLASS A)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
------------------------------------------------------------------
1997(d) 1996(d) 1995(d) 1994(d) 1993
------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 9.05 $ 7.93 $ 6.96 $ 7.84 $ 7.13
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... 0.144 0.18 0.16 0.13 0.21
Net gain (loss) on securities (realized & unrealized)..... 2.813 1.373 1.183 (0.713) 0.876
------ ------ ------ ------ ------
Total from investment operations.......................... 2.957 1.553 1.343 (0.583) 1.086
LESS DISTRIBUTIONS
Dividends (from net investment income).................... (0.155) (0.158) (0.158) (0.128) (0.218)
Distributions (from capital gains)........................ (0.708) (0.275) (0.215) (0.169) (0.158)
------ ------ ------ ------ ------
Total distributions....................................... (0.863) (0.433) (0.373) (0.297) (0.376)
------ ------ ------ ------ ------
Net asset value end of period............................. $11.14 $ 9.05 $ 7.93 $ 6.96 $ 7.84
====== ====== ====== ====== ======
Total return (a).......................................... 35.31% 20.31% 20.25% (7.6)% 15.6%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $91,252 $73,273 $67,430 $65,328 $81,982
Ratio of expenses to average net assets................... 1.24% 1.29% 1.31% 1.28% 1.26%
Ratio of net investment income to average net assets...... 1.53% 2.09% 2.21% 1.70% 2.80%
Portfolio turnover rate................................... 124% 69% 130% 163% 135%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY GROWTH AND INCOME FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------------------------------
1997(d) 1996(d) 1995(d) 1994(b)
------- ------- ------- -------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 8.94 $ 7.85 $ 6.90 $ 7.83
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... 0.048 0.09 0.08 0.05
Net gain (loss) on securities (realized & unrealized)..... 2.776 1.353 1.179 (0.694)
------ ------ ------ ------
Total from investment operations.......................... 2.824 1.443 1.259 (0.644)
LESS DISTRIBUTIONS
Dividends (from net investment income).................... (0.063) (0.078) (0.094) (0.117)
Distributions (from capital gains)........................ (0.708) (0.275) (0.215) (0.169)
------ ------ ------ ------
Total distributions....................................... (0.771) (0.353) (0.309) (0.286)
------ ------ ------ ------
Net asset value end of period............................. $10.99 $ 8.94 $ 7.85 $ 6.90
====== ====== ====== ======
Total return (a).......................................... 34.01% 19.01% 19.07% (8.00)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $6,737 $2,247 $1,130 $668
Ratio of expenses to average net assets................... 2.24% 2.29% 2.31% 2.27%
Ratio of net investment income to average net assets...... 0.53% 1.09% 1.21% 1.03%
Portfolio turnover rate................................... 124% 69% 130% 178%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY FUND (CLASS A)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------
1997(d) 1996(d) 1995(d) 1994(d) 1993
------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 7.54 $ 6.55 $ 5.54 $ 6.73 $ 5.86
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... 0.04 0.05 0.04 0.05 0.12
Net gain (loss) on securities (realized & unrealized)..... 2.199 1.482 1.377 0.085 1.165
------ ------ ------ ------ ------
Total from investment operations.......................... 2.239 1.532 1.417 0.135 1.285
LESS DISTRIBUTIONS
Dividends (from net investment income).................... (0.041) (0.060) --- (0.120) (0.053)
Distributions (from capital gains)........................ (0.648) (0.482) (0.407) (1.205) (0.362)
------ ------ ------ ------ ------
Total distributions....................................... (0.689) (0.542) (0.407) (1.325) (0.415)
------ ------ ------ ------ ------
Net asset value end of period............................. $ 9.09 $ 7.54 $ 6.55 $ 5.54 $ 6.73
====== ====== ====== ====== ======
Total return (a).......................................... 32.08% 24.90% 27.77% 1.95% 22.7%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $757,520 $575,680 $440,339 $358,237 $375,565
Ratio of expenses to average net assets................... 1.03% 1.04% 1.05% 1.06% 1.06%
Ratio of net investment income to average net assets...... 0.46% 0.75% 0.87% 0.86% 1.95%
Portfolio turnover rate................................... 66% 64% 95% 79% 95%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------------------------------
1997(d) 1996(d) 1995(d) 1994(b)
------- ------- ------- -------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 7.36 $ 6.43 $ 5.49 $ 6.81
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.04) (0.02) (0.01) 0.01
Net gain (loss) on securities (realized & unrealized)..... 2.148 1.449 1.357 (0.005)
------ ------ ------ ------
Total from investment operations.......................... 2.108 1.429 1.347 0.005
LESS DISTRIBUTIONS
Dividends (from net investment income).................... --- (0.017) --- (0.12)
Distributions (from capital gains)........................ (0.648) (0.482) (0.407) (1.205)
------ ------ ------ ------
Total distributions....................................... (0.648) (0.499) (0.407) (1.325)
------ ------ ------ ------
Net asset value end of period............................. $ 8.82 $ 7.36 $ 6.43 $ 5.49
====== ====== ====== ======
Total return (a).......................................... 30.85% 23.57% 26.69% (0.15)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $89,336 $38,822 $19,288 $7,452
Ratio of expenses to average net assets................... 2.03% 2.04% 2.05% 2.07%
Ratio of net investment loss to average net assets........ (0.54)% (0.25)% (0.013)% (0.01)%
Portfolio turnover rate................................... 66% 64% 95% 80%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY GLOBAL FUND (CLASS A)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------------------------------
1997(d) 1996(d) 1995(d) 1994(c)
------- ------- ------- -------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $12.42 $10.94 $10.84 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. 0.01 0.01 (0.02) (0.03)
Net gain on securities (realized & unrealized)............ 2.289 1.874 0.31 0.87
------ ------ ----- -----
Total from investment operations.......................... 2.299 1.884 0.29 0.84
LESS DISTRIBUTIONS
Dividends (from net investment income).................... (0.376) (0.248) --- ---
Distributions (from capital gains)........................ (0.783) (0.156) (0.19) ---
------ ------ ----- -----
Total distributions....................................... (1.159) (0.404) (0.19) ---
------ ------ ----- -----
Net asset value end of period............................. $13.56 $12.42 $10.94 $10.84
====== ====== ===== =====
Total return (a).......................................... 20.22% 17.73% 2.80% 8.40%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $24,193 $19,644 $16,261 $20,128
Ratio of expenses to average net assets................... 2.00% 2.00% 2.00% 2.00%
Ratio of net investment income (loss) to average net (0.07)% 0.07% (0.17)% (0.01)%
assets.................................................
Portfolio turnover rate................................... 132% 142% 141% 73%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY GLOBAL FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------------------------------
1997(d) 1996(d) 1995(d) 1994(b)(c)
------- ------- ------- ----------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $12.18 $10.74 $10.75 $ 9.96
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss....................................... (0.11) (0.10) (0.12) (0.12)
Net gain on securities (realized & unrealized)............ 2.237 1.841 0.30 0.91
------ ------ ----- -----
Total from investment operations.......................... 2.127 1.741 0.18 0.79
LESS DISTRIBUTIONS
Dividends (from net investment income).................... (0.304) (0.145) --- ---
Distributions (from capital gains)........................ (0.783) (0.156) (0.19) ---
------ ------ ----- -----
Total distributions....................................... (1.087) (0.301) (0.19) ---
------ ------ ----- -----
Net asset value end of period............................. $13.22 $12.18 $10.74 $10.75
====== ====== ===== =====
Total return (a).......................................... 19.01% 16.57% 1.79% 7.90%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $13,061 $7,285 $5,433 $3,960
Ratio of expenses to average net assets................... 3.00% 3.00% 3.00% 3.00%
Ratio of net investment loss to average net assets........ (0.93)% (0.93)% (1.17)% (0.01)%
Portfolio turnover rate................................... 132% 142% 141% 73%
</TABLE>
- --------------------------------------------------------------------------------
SECURITY VALUE FUND (CLASS A)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
----------------
1997(d)(e)(f)(g)
----------------
PER SHARE DATA
Net asset value beginning of period............ $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................... 0.05
Net gain on securities (realized & unrealized). 2.90
-----
Total from investment operations............... 2.95
LESS DISTRIBUTIONS
Dividends (from net investment income)......... ---
Distributions (from capital gains)............. ---
-----
Total distributions............................ ---
-----
Net asset value end of period.................. $12.95
=====
Total return (a)............................... 29.50%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)........... $4,631
Ratio of expenses to average net assets........ 1.10%
Ratio of net investment income to average net
assets...................................... 1.43%
Portfolio turnover rate........................ 35%
- --------------------------------------------------------------------------------
SECURITY VALUE FUND (CLASS B)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
----------------
1997(d)(e)(f)(g)
----------------
PER SHARE DATA
Net asset value beginning of period............ $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................... 0.01
Net gain on securities (realized & unrealized). 2.90
-----
Total from investment operations............... 2.91
LESS DISTRIBUTIONS
Dividends (from net investment income)......... ---
Distributions (from capital gains)............. ---
-----
Total distributions............................ ---
-----
Net asset value end of period.................. $12.91
=====
Total return (a)............................... 29.10%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)........... $3,572
Ratio of expenses to average net assets ....... 2.26%
Ratio of net investment income to average net
assets...................................... 0.27%
Portfolio turnover rate........................ 35%
- --------------------------------------------------------------------------------
SECURITY SMALL COMPANY FUND (CLASS A)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
FEBRUARY 28
----------------
1998(g)(k)(l)
-------------
PER SHARE DATA
Net asset value beginning of period............ $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................... 0.01
Net gain on securities (realized & unrealized). 0.19
-----
Total from investment operations............... 0.20
LESS DISTRIBUTIONS
Dividends (from net investment income)......... (0.01)
Distributions (from capital gains)............. ---
-----
Total distributions............................ (0.01)
-----
Net asset value end of period.................. $10.19
=====
Total return (a)............................... 1.90%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)........... $1,972
Ratio of expenses to average net assets ....... 1.10%
Ratio of net investment income to average net
assets...................................... 0.37%
Portfolio turnover rate........................ 360%
- --------------------------------------------------------------------------------
SECURITY SMALL COMPANY FUND (CLASS B)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
FEBRUARY 28
----------------
1998(d)(g)(h)
-------------
PER SHARE DATA
Net asset value beginning of period............ $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................... (0.02)
Net gain on securities (realized & unrealized). 0.19
-----
Total from investment operations............... 0.17
LESS DISTRIBUTIONS
Dividends (from net investment income)......... ---
Distributions (from capital gains)............. ---
-----
Total distributions............................ ---
-----
Net asset value end of period.................. $10.17
=====
Total return (a)............................... 1.70%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)........... $1,614
Ratio of expenses to average net assets ....... 2.16%
Ratio of net investment income to average net
assets...................................... (0.69)%
Portfolio turnover rate........................ 360%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY ULTRA FUND (CLASS A)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
-----------------------------------------------------------------------
1997(d) 1996(d) 1995(d) 1994(d) 1993
------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 8.25 $ 8.20 $ 6.82 $ 8.13 $ 6.66
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.08) (0.05) (0.02) (0.056) (0.028)
Net gain (loss) on securities (realized & unrealized)..... 1.649 1.096 1.535 (0.188) 1.791
------ ------ ------ ------ ------
Total from investment operations.......................... 1.569 1.046 1.515 (0.244) 1.763
LESS DISTRIBUTIONS
Dividends (from net investment income).................... --- --- --- --- ---
Distributions (from capital gains)........................ (0.579) (0.996) (0.135) (1.066) (0.293)
------ ------ ------ ------ ------
Total distributions....................................... (0.579) (0.996) (0.135) (1.066) (0.293)
------ ------ ------ ------ ------
Net asset value end of period............................. $ 9.24 $ 8.25 $ 8.20 $ 6.82 $ 8.13
====== ====== ====== ====== ======
Total return (a).......................................... 20.57% 15.36% 22.69% (3.60)% 26.80%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $84,504 $74,230 $66,052 $60,695 $71,056
Ratio of expenses to average net assets................... 1.71% 1.31% 1.32% 1.33% 1.30%
Ratio of net investment income (loss) to average net (1.01)% (0.61)% (0.31)% (0.80)% (0.50)%
assets.................................................
Portfolio turnover rate................................... 68% 161% 180% 111% 101%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY ULTRA FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------------------------------
1997(d) 1996(d) 1995(d) 1994(b)
------- ------- ------- -------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period....................... $ 8.03 $ 8.11 $ 6.81 $ 8.30
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............................. (0.15) (0.13) (0.09) (0.103)
Net gain (loss) on securities (realized & unrealized)..... 1.599 1.046 1.525 (0.321)
------ ------ ------ ------
Total from investment operations.......................... 1.449 0.916 1.435 (0.424)
LESS DISTRIBUTIONS
Dividends (from net investment income).................... --- --- --- ---
Distributions (from capital gains)........................ (0.579) (0.996) (0.135) (1.066)
------ ------ ------ ------
Total distributions....................................... (0.579) (0.996) (0.135) (1.066)
------ ------ ------ ------
Net asset value end of period............................. $ 8.90 $ 8.03 $ 8.11 $ 6.81
====== ====== ====== ======
Total return (a).......................................... 19.58% 13.81% 21.53% (5.70)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)...................... $5,964 $2,698 $5,428 $1,254
Ratio of expenses to average net assets................... 2.71% 2.31% 2.32% 2.36%
Ratio of net investment income (loss) to average net (2.01)% (1.61)% (1.32)% (1.76)%
assets.................................................
Portfolio turnover rate................................... 68% 161% 180% 110%
</TABLE>
(a) Total return information does not take into account any sales charge at
time of purchase for Class A shares or upon redemption for Class B shares.
(b) Class "B" shares were initially offered on October 19, 1993. Percentage
amounts for the period, except total return, have been annualized. Per
share data has been calculated using the average month-end shares
outstanding.
(c) Security Global Fund was initially capitalized on October 1, 1993, with a
net asset value of $10 per share.
(d) Net investment income (loss) was computed using average shares outstanding
throughout the period.
(e) Figures for the period May 1, 1997 (date of inception) to September 30,
1997. Percentage amounts have been annualized, except for total return.
(f) Security Value Fund was initially capitalized on May 1, 1997, with a net
asset value of $10 per share.
(g) Fund expenses were reduced by the Investment Manager during the period, and
expense ratios absent such reimbursement would have been as follows:
CLASS A CLASS B
Value Fund 1.90% 2.80%
Small Company Fund 2.10% 3.16%
(h) Security Small Company Fund was initially capitalized on October 15, 1997,
with a net asset value of $10 per share. Percentage amounts for the period
have been annualized, except for total return.
<PAGE>
APPENDIX A
CLASS A SHARES
REDUCED SALES CHARGES
Initial sales charges may be reduced or eliminated for persons or organizations
purchasing Class A shares of the Funds alone or in combination with Class A
shares of other Security Funds.
For purposes of qualifying for reduced sales charges on purchases made pursuant
to Rights of Accumulation or a Statement of Intention, the term "Purchaser"
includes the following persons: an individual, his or her spouse and children
under the age of 21; a trustee or other fiduciary of a single trust estate or
single fiduciary account established for their benefit; an organization exempt
from federal income tax under Section 501(c)(3) or (13) of the Internal Revenue
Code; or a pension, profit-sharing or other employee benefit plan whether or not
qualified under Section 401 of the Internal Revenue Code.
RIGHTS OF ACCUMULATION -- To reduce sales charges on purchases of Class A shares
of a Fund, a Purchaser may combine all previous purchases of the Funds with a
contemplated current purchase and receive the reduced applicable front-end sales
charge. The Distributor must be notified when a sale takes place which might
qualify for the reduced charge on the basis of previous purchases.
Rights of accumulation also apply to purchases representing a combination of the
Class A shares of the Funds, and other Security Funds, except Security Cash
Fund, in those states where shares of the fund being purchased are qualified for
sale.
STATEMENT OF INTENTION -- A Purchaser may choose to sign a Statement of
Intention within 90 days after the first purchase to be included thereunder,
which will cover future purchases of Class A shares of the Funds, and other
Security Funds, except Security Cash Fund. The amount of these future purchases
shall be specified and must be made within a 13-month period (or 36-month period
for purchases of $1 million or more) to become eligible for the reduced
front-end sales charge applicable to the actual amount purchased under the
Statement. Five percent (5%) of the amount specified in the Statement of
Intention will be held in escrow shares until the statement is completed or
terminated. These shares may be redeemed by the Fund if the Purchaser is
required to pay additional sales charges.
A Statement of Intention may be revised during the 13-month (or, if applicable,
36-month) period. Additional Class A shares received from reinvestment of income
dividends and capital gains distributions are included in the total amount used
to determine reduced sales charges. A Statement of Intention may be obtained
from the Funds.
REINSTATEMENT PRIVILEGE -- Stockholders who redeem their Class A shares of the
Funds have a one-time privilege (1) to reinstate their accounts by purchasing
Class A shares without a sales charge up to the dollar amount of the redemption
proceeds; or (2) to the extent the redeemed shares would have been eligible for
the exchange privilege, to purchase Class A shares of another of the Security
Funds, without a sales charge up to the dollar amount of the redemption
proceeds. To exercise this privilege, a stockholder must provide written notice
and a check in the amount of the reinvestment to the Fund within thirty days
after the redemption request; the reinstatement will be made at the net asset
value on the date received by the Fund.
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
BY TELEPHONE -- Call 1-800-888-2461.
BY MAIL -- Write to:
Security Management Company, LLC
700 SW Harrison
Topeka, KS 66636-0001
ON THE INTERNET -- Reports and other information about the Funds can be viewed
online or downloaded from:
SEC: http://www.sec.gov
SMC, LLC: http://www.securitybenefit.com
Additional information about the Funds (including the statement of additional
information) can be reviewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, DC. Information about the
operation of the public reference room may be obtained by calling the Commission
at 1-800-SEC-0330. Copies may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, DC
20549-6009.
- --------------------------------------------------------------------------------
ANNUAL/SEMI-ANNUAL REPORT -- Additional information about the Funds' investments
is available in the Funds' annual and semi-annual reports to shareholders. In
the Funds' annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Funds' performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION -- The Funds' statement of additional
information and the Funds' annual or semi-annual report are available, without
charge upon request by calling the Funds' toll-free telephone number
1-800-888-2461, extension 3127. Shareholder inquiries should be addressed to
SMC, LLC, 700 SW Harrison Street, Topeka, Kansas 66636-0001, or by calling the
Funds' toll-free telephone number listed above. The Funds' Statement of
Additional Information is incorporated into this prospectus by reference.
Each Fund's Investment Company Act file number is listed below:
Security Equity Fund...................... 811-1136
Security Growth and Income Fund........... 811-0487
Security Ultra Fund....................... 811-1316
<PAGE>
* SECURITY EQUITY FUND
- Asset Allocation Series
JANUARY 31, 1999
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
OBJECTIVE................................................................... 2
PRINCIPAL INVESTMENT STRATEGIES............................................. 2
MAIN RISKS.................................................................. 2
Market Risk............................................................... 2
Fixed-Income Securities................................................... 3
Foreign Securities........................................................ 3
Gold Stocks............................................................... 3
PAST PERFORMANCE............................................................ 4
FEES AND EXPENSES OF THE FUNDS.............................................. 5
INVESTMENT ADVISER.......................................................... 6
Management Fees........................................................... 6
Portfolio Managers........................................................ 6
Year 2000 Compliance...................................................... 7
BUYING SHARES............................................................... 8
Class A Shares............................................................ 8
Class B Shares............................................................ 9
Class B Distribution Plan................................................. 9
Class C Shares............................................................ 9
Class C Distribution Plan................................................. 10
Waiver of Deferred Sales Charge........................................... 10
Confirmations and Statements.............................................. 10
SELLING SHARES.............................................................. 11
By Mail................................................................... 11
By Telephone.............................................................. 12
By Broker................................................................. 12
Payment of Redemption Proceeds............................................ 12
DIVIDENDS AND TAXES......................................................... 12
Taxability of Distributions............................................... 12
Taxes on Sales or Exchanges............................................... 13
DETERMINATION OF NET ASSET VALUE............................................ 13
SHAREHOLDER SERVICES........................................................ 13
Accumulation Plan......................................................... 13
Systematic Withdrawal Program............................................. 14
Exchange Privilege........................................................ 14
Retirement Plans.......................................................... 15
GENERAL INFORMATION......................................................... 16
Organization.............................................................. 16
Stockholder Inquiries..................................................... 16
FINANCIAL HIGHLIGHTS........................................................ 17
APPENDIX A - CLASS A SHARES REDUCED SALES CHARGES........................... 18
Rights of Accumulation.................................................... 18
Statement of Intention.................................................... 18
Reinstatement Privilege................................................... 18
<PAGE>
OBJECTIVE
Described below is the investment objective for Security Asset Allocation Fund.
The Fund's Board of Directors may change its investment objective without
shareholder approval.
The Security Asset Allocation Fund seeks high total return, consisting of
capital appreciation and current income.
PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by following an asset allocation strategy that
contemplates shifts among a wide range of investment categories and market
sectors. Meridian decides what percentage of the Fund's assets will be invested
in the various investment categories. The Fund expects that normally:
* A minimum of 35% of its assets will be invested in equity securities; and
* A minimum of 10% of its assets will be invested in debt securities.
The Fund may invest:
* Up to 55% of its assets in money market instruments;
* Up to 80% of its assets in foreign securities; and
* Up to 20% of its assets in gold stocks.
The Fund's Sub-Adviser, Meridian Investment Management Corporation, uses a
quantitative asset allocation model to strategically allocate the Fund's assets
among the investment categories. In choosing equity securities, the model
analyzes equity securities based on the following factors: (1) current earnings;
(2) earnings history; (3) long-term earnings projections; (4) current-price; and
(5) risk.
When selecting equity securities for the Fund, Meridian uses a "top-down"
approach, first determining a sector and/or country, and then identifying which
equity securities to purchase within that sector/country.
- --------------------------------------------------------------------------------
TOP-DOWN APPROACH means that the Sub-Adviser looks first at broad market
factors, and on the basis of those market factors, chooses certain sectors or
industries within the overall market. The Sub-Adviser then looks at individual
companies within those sectors or industries.
- --------------------------------------------------------------------------------
When selecting debt securities for the Fund, Meridian's asset allocation model
analyzes the prices of commodities and finished goods to arrive at an interest
rate projection. The Investment Manager then determines the portion of the
portfolio to allocate to debt securities and the duration of those securities
based on the model's interest rate projection.
MAIN RISKS
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK -- While stocks have historically been a leading choice of long-term
investors, they do fluctuate in price. The value of an investment in the Funds
will go up and down, which means investors could lose money.
FIXED-INCOME SECURITIES -- Bond investing may present risks because their market
value is affected by changes in interest rates. When interest rates rise, the
MARKET value of a bond declines. Generally, the longer a bond's maturity, the
greater the risk. A bond's value can also be affected by changes in the credit
rating or financial condition of its issuer. Because bond values fluctuate, an
investor may receive more or less money than originally invested.
FOREIGN SECURITIES -- Investing in foreign securities involves additional risks
such as currency fluctuations, differences in financial reporting standards, a
lack of adequate company information and political instability.
RISKS OF CONVERSION TO EURO. On January 1, 1999, eleven countries in the
European Monetary Union will adopt the euro as their official currency. However,
their current currencies (for example, the franc, the mark, and the lire) will
also continue in use until January 1, 2002. After that date, it is expected that
only the euro will be used in those countries. A common currency is expected to
confer some benefits in those markets, by consolidating the government debt
market for those countries and reducing some currency risks and costs. But the
conversion to the new currency will affect the Fund operationally and also has
potential risks, some of which are listed below. Among other things, the
conversion will affect:
* issuers in which the Fund invest, because of changes in the competitive
environment from a consolidated currency market and greater operational costs
from converting to the new currency. This might depress stock values.
* vendors the Fund depends on to carry out their business, such as the
custodian bank (which holds the foreign securities the Fund buys), the
Investment Manager (which prices the Fund's investments to deal with the
conversion to the euro) and brokers, foreign markets and securities
depositories. If they are not prepared, there could be delays in settlements
and additional costs to the Fund.
* exchange contracts and derivatives that are outstanding during the transition
to the euro. The lack of currency rate calculations between the affected
currencies and the need to update the Fund's contracts could pose extra costs
to the Fund.
The Investment Manager is upgrading its computer and bookkeeping systems to deal
with the conversion. The Fund's custodian bank has advised the Investment
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The possible effect of these factors on the Fund's investments cannot be
determined with certainty at this time, but they may reduce the value of some of
the Fund's holdings and increase its operational costs.
GOLD STOCKS -- The Fund may invest a portion of its assets in equity securities
of companies involved in the exploration, mining, development, production and
distribution of gold. Investing in gold stocks presents risks because the prices
of gold can fluctuate substantially over short periods of time. Prices may be
affected by unpredictable monetary and political policies, such as currency
devaluations or revaluations, economic and social conditions within an
individual country, trade imbalances, or trade or currency restrictions between
countries.
PAST PERFORMANCE
The chart and table below gives an indication of the Fund's risks and
performance. The chart shows changes in the Fund's performance from year to
year. The table shows how the Fund's average annual total returns for the
periods indicated compare to those of broad measures of market performance. As
with all mutual funds, past performance is not a prediction of future results.
- --------------------------------------------------------------------------------
SECURITY ASSET ALLOCATION FUND
- --------------------------------------------------------------------------------
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1998 %
1997 6.1%
1996 13.2%
1995 7.8%
1994 N/A
1993 N/A
1992 N/A
1991 N/A
1990 N/A
1989 N/A
--------------------------------------------------------------
HIGHEST AND LOWEST RETURNS (QUARTERLY 1989-1998)
--------------------------------------------------------------
QUARTER ENDING
Highest %
Lowest %
--------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1998)
--------------------------------------------------------------
PAST LIFE OF FUND
1 YEAR (SINCE JUNE 1, 1995)
Security Asset Allocation Fund % %
S&P 500* % %
--------------------------------------------------------------
*For the period June 1, 1995 (date of inception) to December
31, 1995).
<PAGE>
FEES AND EXPENSES OF THE FUNDS
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES(1) SHARES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, whichever is lower) None(2) 5%(3) 1%(4)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTION TOTAL ANNUAL FUND
MANAGEMENT FEES (12B-1) FEES(5) OTHER EXPENSES OPERATING EXPENSES
- ------------------------- ------------------------- ------------------------- ----------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.00% 1.00% 1.00% None 1.00% 1.00% 1.50% 1.44% 1.44% 2.50%* 3.44%* 3.44%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
1 Class B shares convert tax-free to Class A shares automatically after eight
years.
2 Purchases of Class A shares in amounts of $1,000,000 or more are not subject
to an initial sales load; however, a deferred sales charge of 1% is imposed
in the event of redemption within one year of purchase.
3 5% during the first year, decreasing to 0% in the sixth and following years.
4 A deferred sales charge of 1% is imposed in the event of redemption within
one year of purchase.
5 Long-term holders of shares that are subject to an asset-based sales charge
may pay more than the equivalent of the maximum front-end sales charge
otherwise permitted by NASD Rules.
*The Fund's total annual operating expenses for the most recent fiscal year were
less than the amount shown because of a fee waiver or reimbursement of expenses
by the Fund's Investment Manager. The Investment Manager waives a portion of
its management fee and/or reimburses expenses in order to keep each Fund's
total operating expenses at or below a specified level. The Investment Manager
may eliminate all or part of the fee waiver or reimbursement at any time. With
the fee waiver and reimbursement, the Fund's actual total annual fund operating
expenses were as follows:
CLASS A CLASS B
2.00% 2.93%
EXAMPLE
This example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of these periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------- ------------------------- ------------------------- -------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$810 $850 $450 $1,310 $1,360 $1,060 $1,830 $1,990 $1,790 $3,250 $3,720 $3,720
- -------------------------------------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------- ------------------------- ------------------------- -------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$810 $350 $350 $1,310 $1,060 $1,060 $1,830 $1,790 $1,790 $3,250 $3,720 $3,720
- -------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT ADVISER
Security Management Company, LLC (the "Investment Manager'), 700 SW Harrison
Street, Topeka, Kansas, is the Fund's investment adviser. On September 30, 1998,
the aggregate assets of all of the Funds under the investment management of the
Investment Manager were approximately $4.7 billion.
The Investment Manager has engaged Meridian Investment Management Corporation,
12835 East Arapahoe Road, Tower II, 7th Floor, Englewood, Colorado 80112
("Meridian") to provide investment advisory services to Asset Allocation Fund.
Meridan provides invstment advice to individuals, pension and proft sharing
plans, pulic retirement systems an registered ivnestment companies and currently
managers over $500 million in assets.
MANAGEMENT FEES -- The investment management fees paid by the Fund during the
last fiscal year was equal to 1.00% of the Fund's average net assets.
The Investment Manager may waive its management fee to limit the total operating
expenses of a Fund to a specified level. The Investment Manager also may
reimburse expenses of the Fund from time to time to help it maintain competitive
expense ratios. These arrangements are voluntary and may be terminated at any
time. The fees without waivers or reimbursements are shown in the fee table on
page ___.
PORTFOLIO MANAGERS -- STEVE BOWSER, Second Vice President and Portfolio Manger
of the Investment Manger, has co-managed the fixed-income portion of the Fund's
portfolio since January 1998. He joined the Investment Manager in 1992. Prior to
joining the Investment Manager, he was Assistant Vice President and Portfolio
Manager with the Federal Home Loan Bank of Topeka from 1989 to 1992. He was
employed at the Federal Reserve Bank of Kansas City in 1988 and began his career
with the Farm Credit System from 1982 to 1987, serving as a Senior Financial
Analyst and Assistant Controller. He graduated with a Bachelor of Science degree
from Kansas State University in 1982. He is a Chartered Financial Analyst.
PAT BOYLE, Portfolio Manager of Meridian, has managed the equity portion of the
Fund's portfolio since August 1997. He is a research analyst and portfolio
manager of the Sub-Adviser. Prior to joining Meridian, Mr. Boyle was employed at
Citicorp as an Operations Analyst. He has five years of investment experience
and is a Chartered Financial Analyst. Mr. Boyle graduated from the University of
Denver with a B.S.B.A. degree in Finance and a M.S. degree.
DAVID ESHNAUR, Assistant Vice President and Portfolio Manager of the Investment
Manager, has co-managed the fixed-income portion of the Fund's portfolio since
January 1998. Mr. Eshnaur has 15 years of investment experience. Prior to
joining the Investment Manager in 1997, he worked at Waddell & Reed in the
positions of Assistant Vice President, Assistant Portfolio Manager, Senior
Analyst, Industry Analyst and Account Administrator. Mr. Eshnaur earned a
Bachelor of Arts degree in Business Administration from Coe College and an
M.B.A. degree in Finance from the University of Missouri - Kansas City.
YEAR 2000 COMPLIANCE -- Like other mutual funds, as well as other financial and
business organizations around the world, the Fund could be adversely affected if
the computer systems used by the Investment Manager, and other service
providers, in performing their administrative functions do not properly process
and calculate date-related information and data before, during and after January
1, 2000. Some computer software and hardware systems currently cannot
distinguish between the year 2000 and the year 1900 or some other date because
of the way date fields were encoded. This is commonly known as the "Year 2000
Problem." If not addressed, the Year 2000 Problem could impact the management
services provided to the Fund by the Investment Manager, as well as transfer
agency, accounting, custody, distribution and other services provided to the
Fund and its shareholders.
The Investment Manager has adopted a plan to be "Year 2000 Compliant" with
respect to both its internally built systems as well as systems provided by
external vendors. "Year 2000 Compliant" means that systems and programs which
require modification will have the date fields expanded to include the century
information and that for interfaces to external organizations as well as new
systems development the year portion of the date field will be expanded to four
digits using the format YYYYMMDD. The Investment Manager's overall approach to
addressing the Year 2000 issue is as follows: (1) to inventory its internal and
external hardware, software, telecommunications and data transmissions to
customers and conduct a risk assessment with respect to the impact that a
failure on any such system would have on its business operations; (2) to modify
or replace its internal systems and obtain vendor certifications of Year 2000
compliance for systems provided by vendors or replace such systems that are not
Year 2000 Compliant; and (3) to implement and test its systems for Year 2000
compliance. The Investment Manager has completed the inventory of its internal
and external systems and has made substantial progress toward completing the
modification/replacement of its internal systems as well as towards obtaining
Year 2000 Compliant certifications from its external vendors. Overall systems
testing is scheduled to commence in December 1998 and extend into the first six
months of 1999.
Although the Investment Manager has taken steps to ensure that its systems will
function properly before, during and after the Year 2000, its key operating
systems and information sources are provided by or through external vendors
which creates uncertainty to the extent the Investment Manager is relying on the
assurance of such vendors as to whether their systems will be Year 2000
Compliant. The costs or consequences of incomplete or untimely resolution of the
Year 2000 issue are unknown to the Investment Manager at this time but could
have a material adverse impact on the operations of the Fund and the Investment
Manager.
The Year 2000 Problem is also expected to impact companies, which may include
issuers of portfolio securities held by the Fund, to varying degrees based upon
various factors, including, but not limited to, the company's industry sector
and degree of technological sophistication. The Fund and the Investment Manager
are unable to predict what impact, if any, the Year 2000 Problem will have on
issuers of the portfolio securities held by the Fund.
BUYING SHARES
There are three different ways to buy shares of the Fund--Class A shares, Class
B shares or Class C shares. The minimum initial investment is $100. Subsequent
investments must be $100 (or $20 under an Accumulation Plan). The Fund reserves
the right to reject any order to purchase shares.
CLASS A SHARES -- Class A shares are subject to a sales charge at the time of
purchase. An order for Class A shares will be priced at the Fund's net asset
value (NAV), plus the sales charge set forth below. The NAV, plus the sales
charge is the "offering price." The Fund's NAV is generally calculated as of the
close of trading on every day the New York Stock Exchange is open. An order for
Class A shares is priced at the NAV next calculated after the order is accepted
by the Fund, plus the sales charge.
---------------------------------------------------------
SALES CHARGE
-------------------------------------
AS A PERCENTAGE
AS A PERCENTAGE OF NET AMOUNT
AMOUNT OF ORDER OF OFFERING PRICE INVESTED
---------------------------------------------------------
Less than $50,000 5.75% 6.10%
$50,000 to $99,999 4.75% 4.99%
$100,000 to $249,999 3.75% 3.90%
$250,000 to $499,999 2.75% 2.83%
$500,000 to $999,999 2.00% 2.04%
$1,000,000 or more* None None
---------------------------------------------------------
*Purchases of $1,000,000 or more are not subject to a
sales charge at the time of purchase, but are subject to
a deferred sales charge of 1.00% if redeemed within one
year following purchase. The deferred sales charge is a
percentage of the lesser of the NAV of the shares
redeemed or the net cost of such shares. Shares that are
not subject to a deferred sales charge are redeemed
first.
---------------------------------------------------------
CLASS B SHARES -- Class B shares are not subject to a sales charge at the time
of purchase. An order for Class B shares will be priced at the Fund's NAV next
calculated after the order is accepted by the Fund. The Fund's NAV is generally
calculated as of the close of trading on every day the New York Stock Exchange
is open.
Class B shares are subject to a deferred sales charge if withdrawn within 5
years from the date of purchase. The deferred sales charge is a percentage of
the NAV of the shares at the time they are redeemed or the original purchase
price, whichever is less. Shares that are not subject to the deferred sales
charge are redeemed first. Then, shares held the longest will be the first to be
redeemed.
The amount of the deferred sales charge is based upon the number of years since
the shares were purchased, as follows:
--------------------------------
NUMBER OF YEARS DEFERRED
SINCE PURCHASE SALES CHARGE
--------------------------------
1 5%
2 4%
3 3%
4 3%
5 2%
6 and more 0%
--------------------------------
The Distributor will waive the deferred sales charge under certain
circumstances. See "Waiver of the Deferred Sales Charge" below.
CLASS B DISTRIBUTION PLAN -- The Fund has adopted a Class B Distribution Plan
that allows the Fund to pay distribution fees to the Distributor. The
Distributor uses the fees to finance activities related to the sale of Class B
shares and services to shareholders. The distribution fee is equal to 1.00% of
the average daily net assets of the Fund's Class B shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
Class B shares automatically convert to Class A shares on the eighth anniversary
of purchase. This is advantageous because Class A shares are subject to a lower
distribution fee than Class B shares. A pro rata amount of Class B shares
purchased through the reinvestment of dividends or other distributions is also
converted to Class A shares each time that shares purchased directly are
converted.
CLASS C SHARES -- Class C shares are not subject to a sales charge at the time
of purchase. An order for Class C shares will be priced at the Fund's NAV next
calculated after the order is accepted by the Fund. The Fund's NAV is generally
calculated as of the close of trading on every day the New York Stock Exchange
is open.
Class C shares are subject to a deferred sales charge of 1.00% if withdrawn
within one year from the date of purchase. The deferred sales charge is a
percentage of the NAV of the shares at the time they are redeemed or the
original purchase price, whichever is less. Shares that are not subject to the
deferred sales charge are redeemed first. Then, shares held the longest will be
the first to be redeemed. The Distributor will waive the deferred sales charge
under certain circumstances. See "Waiver of the Deferred Sales Charge" below.
CLASS C DISTRIBUTION PLAN -- The Fund has adopted a Class C Distribution Plan
that allows the Fund to pay distribution fees to the Distributor. The
Distributor uses the fees to finance activities related to the sale of Class C
shares and services to shareholders. The distribution fee is equal to 1.00% of
the average daily net assets of the Fund's Class C shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
WAIVER OF DEFERRED SALES CHARGE -- The Distributor will waive the deferred sales
charge under the following circumstances:
* Upon the death of the shareholder if shares are redeemed within one year of
the shareholder's death
* Upon the disability of the shareholder prior to age 65 if shares are redeemed
within one year of the shareholder becoming disabled and the shareholder was
not disabled when the shares were purchased
* In connection with required minimum distributions from a retirement plan
qualified under Section 401(a), 401(k), 403(b) or 408 of the Internal Revenue
Code
* In connection with distributions from retirement plans qualified under
Section 401(a) or 401(k) of the Code for:
- returns of excess contributions to the plan
- retirement of a participant in the plan
- a loan from the plan (loan repayments are treated as new sales for
purposes of the deferred sales charge)
* Upon the financial hardship (as defined in regulations under the Code) of a
participant in a plan
* Upon termination of employment of a participant in a plan
* Upon any other permissible withdrawal under the terms of the plan
CONFIRMATIONS AND STATEMENTS -- The Funds will send you a confirmation statement
after every transaction that affects your account balance or registration.
Certain automatic transactions may be confirmed on a quarterly basis including
systematic withdrawals, automatic purchases and reinvested dividends. Each
shareholder will receive a quarterly statement setting forth a summary of the
transactions that occurred during the preceding quarter.
SELLING SHARES
Selling your shares of a Fund is called a "redmption," because the Fund buys
back its shares. A stockholder may sell shares at any time. Shares will be sold
at the NAV next determined after the order is accepted by the Fund's transfer
agent, less any applicable deferred sales charge. Any share certificates
representing Fund shares being sold must be returned with a request to sell the
shares.
For selling recently purchased shares, if the Fund has not collected payment for
the shares, it may delay sending the proceeds until it has collected payment,
which may take up to 15 days.
BY MAIL -- To sell shares by mail, send a letter of instruction that includes:
* The name and signature of the account owner(s)
* The name of the Fund
* The dollar amount or number of shares to sell
* Where to send the proceeds
* A signature guarantee if
- The check will be mailed to a payee or address different than that of the
account owner, or
- The sale of shares is more than $10,000.
- --------------------------------------------------------------------------------
A SIGNATURE GUARANTEE helps protect against fraud. Banks, brokers, credit
unions, national securities exchanges and savings associations provide signature
guarantees. A notary public is not an eligible signature guarantor. For joint
accounts, both signatures must be guaranteed.
- --------------------------------------------------------------------------------
Mail your request to:
Security Management Company, LLC
700 SW Harrison Street
Topeka, KS 66636-0001
Signature requirements vary based on the type of account you have:
* INDIVIDUAL OR JOINT TENANTS: Written instructions must be signed by an
individual shareholder, or in the case of joint accounts, all of the
shareholders, exactly as the name(s) appears on the account.
* UGMA OR UTMA: Written instructions must be signed by the custodian as it
appears on the account.
* SOLE PROPRIETOR OR GENERAL PARTNER: Written instructions must be signed by an
authorized individual as it appears on the account.
* CORPORATION OR ASSOCIATION: Written instructions must be signed by the
person(s) authorized to act on the account. A resolution form, authorizing
the signer to act, must accompany the request if not on file with the Fund.
* TRUST: Written instructions must be signed by the trustee(s). If the name of
the current trustee(s) does not appear on the account, a certified
certificate of incumbency dated within 60 days must also be submitted.
* RETIREMENT: Written instructions must be signed by the account owner.
BY TELEPHONE -- If you selected this option on your account application, you may
make redemptions from your account by calling 1-800-888-2461, extension 3127, on
weekdays (except holidays) between 7:00 a.m. and 6:00 p.m. Central time. The
Fund requires that requests for redemptions over $10,000 be in writing with
signatures guaranteed. You may not close your account by telephone or redeem
shares for which a certificate has been issued. If you would like to establish
this option on an existing account, please call 1-800-888-2461, extension 3127.
Shareholders may not redeem shares held in an IRA or 403(b)(7) account by
telephone.
BY BROKER -- You may redeem your shares through your broker. Brokers may charge
a commission upon the redemption of shares.
PAYMENT OF REDMPTION PROCEEDS -- Payments may be made by check, wire transfer or
electronic transfer.
BY CHECK. Redemption proceeds will be sent to the shareholder(s) on our records
at the address on our records within seven days after receipt of a valid
redemption request. For a charge of $15 deducted from redemption proceeds, the
Investment Manager will provide a certified or cashier's check, or send the
redemption proceeds by express mail, upon the shareholder's request.
BY WIRE. Your redemption proceeds will be wired directly into your designated
bank account, normally on the next business day after receipt of your redemption
request is received. There is no limitation on redemptions by wire. However,
there is a $15 fee for each wire and your bank may charge an additional fee to
receive the wire. If you would like to establish this option on an existing
account, please call 1-800-888-2461, extension 3127, to sign up for this
service. Wire redemptions are not available for retirement accounts.
BY ELECTRONIC TRANSFER. If you have established this option, your redemption
proceeds will be transferred electronically to your predesignated bank account.
To establish this option on an existing account, please call 1-800-888-2461,
extension 3127, to request the appropriate form.
DIVIDENDS AND TAXES
Each Fund pays its shareholders dividends from its net investment income, and
distributes any net capital gains that it has realized, at least annually. Your
dividends and distributions will be reinvested in the Fund, unless you instruct
the Investment Manager otherwise. There are no fees or sales charges on
reinvestments.
TAXABILITY OF DISTRIBUTIONS -- Fund dividends and distributions are taxable to
shareholders (unless your investment is in an IRA or other tax-advantaged
retirement account) whether you reinvest your dividends or distributions or take
them in cash. If the Fund declares a distribution in October, November, or
December but pays it in January, you may be taxed on that distribution as if you
received it in the previous year. In general, distributions from the Fund are
taxable as follows:
------------------------------------------------
TYPE OF TAX RATE FOR TAX RATE FOR 28%
DISTRIBUTION 15% BRACKET BRACKET OR ABOVE
------------------------------------------------
Income Ordinary Ordinary
dividends Income rate Income rate
Short-term Ordinary Ordinary
capital gains Income rate Income rate
Long-term
capital gains 10% 20%
------------------------------------------------
The Fund will mail you information concerning the tax status of the
distributions for each calendar year on or before January 31 of each year.
TAXES ON SALES OR EXCHANGES -- You may be taxed on any sale or exchange of Fund
shares. Tax-deferred retirement accounts do not generate a tax liability unless
you are taking a distribution or making a withdrawal.
The table above can provide a guide for your potential tax liability when
selling or exchanging Fund shares. "Short-term capital gains" applies to Fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares held for more than 12 months.
You should consult your tax professional about federal, state and local tax
consequences to you of an investment in the Fund. Please see the Statement of
Additional Information for additional tax information.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is computed as of the close of regular
trading hours on the New York Stock Exchange (normally 3 p.m. Central time) on
days when the Exchange is open. The Exchange is open Monday through Friday,
except on the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Fund's NAV is generally based upon the market value of securities held in
the Fund's portfolio. If market values are not available, the fair value of
securities is determined using procedures approved by the Fund's Board of
Directors.
Foreign securities are valued based on quotations from the primary market in
which they are traded, and are converted from the local currency into U.S.
dollars using current exchange rates. Foreign securities may trade in their
primary markets on weekends or other days when the Fund does not price its
shares. Therefore, the NAV of Funds holding foreign securities may change on
days when shareholders will not be able to buy or sell shares of the Funds.
SHAREHOLDER SERVICES
ACCUMULATION PLAN -- An investor may choose to invest in the Fund through a
voluntary Accumulation Plan. This allows for an initial investment of $100
minimum and subsequent investments of $20 minimum at any time. An Accumulation
Plan involves no obligation to make periodic investments, and is terminable at
will.
Payments are made by sending a check to the Distributor who (acting as an agent
for the dealer) will purchase whole and fractional shares of the Fund as of the
close of business on such day as the payment is received. The investor will
receive a confirmation and statement after each investment.
Investors may choose to use "Secur-O-Matic" (automatic bank draft) to make their
Fund purchases. There is no additional charge for choosing to use Secur-O-Matic.
An application for Secur-O-Matic may be obtained from the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM -- Stockholders who wish to receive regular
monthly, quarterly, semiannual, or annual payments of $25 or more may establish
a Systematic Withdrawal Program. A stockholder may elect a payment that is a
specified percentage of the initial or current account value or a specified
dollar amount. A Systematic Withdrawal Program will be allowed only if shares
with a current offering price of $5,000 or more are deposited with the
Investment Manager, which will act as agent for the stockholder under the
Program. Shares are liquidated at net asset value. The Program may be terminated
on written notice, or it will terminate automatically if all shares are
liquidated or withdrawn from the account.
A stockholder may establish a Systematic Withdrawal Program with respect to
Class B shares without the imposition of any applicable contingent deferred
sales charge, provided that such withdrawals do not in any 12-month period,
beginning on the date the Program is established, exceed 10 percent of the value
of the account on that date ("Free Systematic Withdrawals"). Free Systematic
Withdrawals are not available if a Program established with respect to Class B
shares provides for withdrawals in excess of 10 percent of the value of the
account in any Program year and, as a result, all withdrawals under such a
Program would be subject to any applicable contingent deferred sales charge.
Free Systematic Withdrawals will be made first by redeeming those shares that
are not subject to the contingent deferred sales charge and then by redeeming
shares held the longest. The contingent deferred sales charge applicable to a
redemption of Class B shares requested while Free Systematic Withdrawals are
being made will be calculated as described under "Waiver of Deferred Sales
Charges," page 10. A Systematic Withdrawal form may be obtained from the Fund.
EXCHANGE PRIVILEGE -- Stockholders who own shares of the Fund may exchange those
shares for shares of another series of Security Equity Fund, Security Ultra
Fund, Security Growth and Income Fund, Security Income Fund, Security Municipal
Bond Fund, or Security Cash Fund (the "Security Funds") at net asset value.
Exchanges may be made only in those states where shares of the fund into which
an exchange is to be made are qualified for sale. No service fee is presently
imposed on such an exchange. Class A and Class B shares of the Fund may be
exchanged for Class A and Class B shares, respectively, of another fund or for
shares of Security Cash Fund, a money market fund that offers a single class of
shares. Any applicable contingent deferred sales charge will be imposed upon
redemption and calculated from the date of the initial purchase without regard
to the time shares were held in Security Cash Fund. For tax purposes, an
exchange is a sale of shares which may result in a taxable gain or loss. Special
rules may apply to determine the amount of gain or loss on an exchange occurring
within ninety days after the exchanged shares were acquired. Exchanges are made
upon receipt of a properly completed Exchange Authorization form. A current
prospectus of the fund into which an exchange is made will be given to each
stockholder exercising this privilege.
To exchange shares by telephone, a stockholder must hold shares in
non-certificate form and must either have completed the Telephone Exchange
section of the application or a Telephone Transfer Authorization form which may
be obtained from the Investment Manager. Once authorization has been received by
the Investment Manager, a stockholder may exchange shares by telephone by
calling the Fund at (800) 888-2461, extension 3127, on weekdays (except
holidays) between the hours of 7:00 a.m. and 6:00 p.m. Central time. Exchange
requests received by telephone after the close of the New York Stock Exchange
(normally 3 p.m. Central time) will be treated as if received on the next
business day on which the Exchange is open. A stockholder who authorizes
telephone exchanges authorizes the Investment Manager to act upon the
instructions of any person by telephone to exchange shares between any
identically registered accounts with the Security Funds. The Investment Manager
has established procedures to confirm that instructions communicated by
telephone are genuine and may be liable for any losses due to fraudulent or
unauthorized instructions if it fails to comply with its procedures. The
Investment Manager's procedures require that any person requesting an exchange
by telephone provide the account registration and number and the owner's tax
identification number and such instructions must be received on a recorded line.
Neither the Fund, the Investment Manager nor the Distributor shall be liable for
any loss, liability, cost or expense arising out of any request, including any
fraudulent request, provided the Investment Manager complied with its
procedures. Thus, a stockholder who authorizes telephone exchanges may bear the
risk of loss from a fraudulent or unauthorized request. The exchange privilege,
including telephone exchanges, may be changed or discontinued at any time by
either the Investment Manager or the Fund upon 60 days' notice to stockholders.
In periods of severe market or economic conditions, the telephone exchange of
shares may be difficult to implement and stockholders should make exchanges by
writing to Security Distributors, Inc., 700 Harrison Street, Topeka, Kansas
66636-0001.
RETIREMENT PLANS -- The Fund has available tax-qualified retirement plans for
individuals, prototype plans for the self-employed, pension and profit sharing
plans for corporations and custodial accounts for employees of public school
systems and organizations meeting the requirements of Section 501(c)(3) of the
Internal Revenue Code. Further information concerning these plans is contained
in the Fund's Statement of Additional Information.
GENERAL INFORMATION
ORGANIZATION -- The Articles of Incorporation of Security Equity Fund provide
for the issuance of an indefinite number of shares of common stock in one or
more classes or series. Security Equity Fund has authorized capital stock of
$.25 par value and currently issues its shares in six series, Equity Fund,
Global Fund, Social Awareness Fund, Asset Allocation Fund, Value Fund and Small
Company Fund. The shares of each series of Security Equity Fund represent a pro
rata beneficial interest in that series' net assets and in the earnings and
profits or losses derived from the investment of such assets.
The Fund currently issues three classes of shares which participate
proportionately based on their relative net asset values in dividends and
distributions and have equal voting, liquidation and other rights except that
(i) expenses related to the distribution of each class of shares or other
expenses that the Board of Directors may designate as class expenses from time
to time, are borne solely by that class; (ii) each class of shares has exclusive
voting rights with respect to any Distribution Plan adopted for that class;
(iii) each class has different exchange privileges; and (iv) each class has a
different designation. When issued and paid for, the shares will be fully paid
and nonassessable by the Fund. Shares may be exchanged as described above under
"Exchange Privilege," but will have no other preference, conversion, exchange or
preemptive rights. Shares are transferable, redeemable and assignable and have
cumulative voting privileges for the election of directors.
On certain matters, such as the election of directors, all shares of the series
of Security Equity Fund vote together, with each share having one vote. On other
matters affecting a particular series, such as the investment advisory contract
or the fundamental policies, only shares of that series are entitled to vote,
and a majority vote of the shares of that series is required for approval of the
proposal.
The Fund does not generally hold annual meetings of stockholders and will do so
only when required by law. Stockholders may remove directors from office by vote
cast in person or by proxy at a meeting of stockholders. Such a meeting will be
called at the written request of 10 percent of Security Equity Fund's
outstanding shares.
STOCKHOLDER INQUIRIES -- Stockholders who have questions concerning their
account or wish to obtain additional information, may call the Fund (see back
cover for address and telephone numbers), or contact their securities dealer.
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate than an investor would have earned (or lost) on an investment
in the Fund assuming reinvestment of all dividends and distributions. This
information has been audited by Ernst & Young LLP, whose report, along with the
Fund"s financial statements, are included in the annual erport, which is
available upon request.
<TABLE>
<CAPTION>
Net gain
Fiscal Net asset (loss) on Dividends
year value Net securities Total from (from net Distributions
ended beginning Investment (realized & investment investment (from capital Total
September 30 of period Income unrealized) operations income) gains) distributions
- ------------ --------- ------ ----------- ---------- ------- ------ -------------
SECURITY ASSET ALLOCATION FUND (CLASS A)
<S> <C> <C> <C> <C> <C> <C> <C>
1995(b)(c)(d) $ 10.00 $ 0.04 $ 0.50 $ 0.54 $ -- $ -- $ --
1996(c)(d) 10.54 0.25 0.765 1.015 (0.328) (0.167) (0.495)
1997(c)(d)(f) 11.06 0.17 1.862 2.032 (0.260) (0.252) (0.512)
SECURITY ASSET ALLOCATION FUND (CLASS B)
1995(b)(c)(d) $ 10.00 $ 0.01 $ 0.49 $ 0.50 $ -- $ -- $ --
1996(c)(d) 10.50 0.14 0.77 0.91 (0.273) (0.167) (0.44)
1997(c)(d)(f) 10.97 0.07 1.843 1.913 (0.181) (0.252) (0.433)
Net
Fiscal assets Ratio of Ratio of net
year Net asset Total end of expenses income (loss) Portfolio
ended value end return period to average to average turn-over
September 30 of period (a) (thousands) net assets net assets rate
- ------------ --------- --- ----------- ---------- ---------- ----
SECURITY ASSET ALLOCATION FUND (CLASS A)
1995(b)(c)(d) $ 10.54 5.40% $ 1,906 2.00% 1.33% 129%
1996(c)(d) 11.06 10.01% 2,449 2.00% 2.32% 75%
1997(c)(d)(f) 12.58 19.00% 3,906 1.68% 1.52% 79%
SECURITY ASSET ALLOCATION FUND (CLASS B)
1995(b)(c)(d) $ 10.50 5.00% $ 1,529 3.00% 0.31% 129%
1996(c)(d) 10.97 8.97% 2,781 3.00% 1.32% 75%
1997(c)(d)(f) 12.45 17.95% 3,851 2.58% 0.61% 79%
</TABLE>
(a) Total return information does not reflect deduction of any sales charges
imposed at the time of purchase for Class A shares or upon redemption for
Class B shares.
(b) Security Asset Allocation Fund was initially capitalized on June 1, 1995,
with a net asset value of $10 per share. Percentage amounts for the period
have been annualized, except for total return.
(c) Fund expenses were reduced by the Investment Manager during the period and
expense ratios absent such reimbursement would have been as follows:
1995 1996 1997
---- ---- ----
Class A 3.6% 3.1% 2.4%
Class B 4.7% 3.9% 3.3%
(d) Net investment income (loss) was computed using average shares outstanding
throughout the period.
(e) Meridian Investment Management Corporation ("Meridian") was added as a
sub-adviser to the Fund effective August 1, 1997.
<PAGE>
APPENDIX A
CLASS A SHARES
REDUCED SALES CHARGES
Initial sales charges may be reduced or eliminated for persons or organizations
purchasing Class A shares of the Fund alone or in combination with Class A
shares of certain other Security Funds.
For purposes of qualifying for reduced sales charges on purchases made pursuant
to Rights of Accumulation or a Statement of Intention, the term "Purchaser"
includes the following persons: an individual, his or her spouse and children
under the age of 21; a trustee or other fiduciary of a single trust estate or
single fiduciary account established for their benefit; an organization exempt
from federal income tax under Section 501(c)(3) or (13) of the Internal Revenue
Code; or a pension, profit-sharing or other employee benefit plan whether or not
qualified under Section 401 of the Internal Revenue Code.
RIGHTS OF ACCUMULATION -- To reduce sales charges on purchases of Class A shares
of the Fund, a Purchaser may combine all previous purchases of the Fund with a
contemplated current purchase and receive the reduced applicable front-end sales
charge. The Distributor must be notified when a sale takes place which might
qualify for the reduced charge on the basis of previous purchases.
Rights of accumulation also apply to purchases representing a combination of the
Class A shares of the Fund and other Security Funds, except Security Cash Fund,
in those states where shares of the fund being purchased are qualified for sale.
STATEMENT OF INTENTION -- A Purchaser may choose to sign a Statement of
Intention within 90 days after the first purchase to be included thereunder,
which will cover future purchases of Class A shares of the Fund and other
Security Funds, except Security Cash Fund. The amount of these future purchases
shall be specified and must be made within a 13-month period (or 36-month period
for purchases of $1 million or more) to become eligible for the reduced
front-end sales charge applicable to the actual amount purchased under the
Statement. Five percent (5%) of the amount specified in the Statement of
Intention will be held in escrow shares until the statement is completed or
terminated. These shares may be redeemed by the Fund if the Purchaser is
required to pay additional sales charges.
A Statement of Intention may be revised during the 13-month (or if applicable,
36-month) period. Additional Class A shares received from reinvestment of income
dividends and capital gains distributions are included in the total amount used
to determine reduced sales charges. A Statement of Intention may be obtained
from the Fund.
REINSTATEMENT PRIVILEGE -- Stockholders who redeem their Class A shares of the
Fund have a one-time privilege (1) to reinstate their accounts by purchasing
Class A shares without a sales charge up to the dollar amount of the redemption
proceeds; or (2) to the extent the redeemed shares would have been eligible for
the exchange privilege, to purchase Class A shares of another of the Security
Funds without a sales charge up to the dollar amount of the redemption proceeds.
To exercise this privilege, a stockholder must provide written notice and a
check in the amount of the reinvestment to the Fund within thirty days after the
redemption request; the reinstatement will be made at the net asset value on the
date received by the Fund.
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
BY TELEPHONE -- Call 1-800-888-2461.
BY MAIL -- Write to:
Security Management Company, LLC
700 SW Harrison
Topeka, KS 66636-0001
ON THE INTERNET -- Reports and other information about the Fund can be viewed
online or downloaded from:
SEC: http://www.sec.gov
SMC, LLC: http://www.securitybenefit.com
Additional information about the Fund (including the Statement of Additional
Information) can be reviewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, DC. Information about the
operation of the public reference room may be obtained by calling the Commission
at 1-800-SEC-0330. Copies may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, DC
20549-6009.
ANNUAL/SEMI-ANNUAL REPORT -- Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION -- The Fund's Statement of Additional
Information and the Fund's annual or semi-annual report are available, without
charge upon request by calling the Fund's toll-free telephone number
1-800-888-2461, extension 3127. Shareholder inquiries should be addressed to
SMC, LLC, 700 SW Harrison Street, Topeka, Kansas 66636-0001, or by calling the
Fund's toll-free telephone number listed above. The Fund's Statement of
Additional Information is incorporated into this prospectus by reference.
The Fund's Investment Company Act file number is listed below:
Security Equity Fund.............. 811-1136
<PAGE>
* SECURITY EQUITY FUND
- Social Awareness Series
JANUARY 31, 1999
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
OBJECTIVE.................................................................. 2
PRINCIPAL INVESTMENT STRATEGIES............................................ 2
MAIN RISKS................................................................. 3
Market Risk............................................................ 3
Social Investing....................................................... 3
Value Stocks........................................................... 3
Growth Stocks.......................................................... 3
PAST PERFORMANCE........................................................... 4
FEES AND EXPENSES OF THE FUNDS............................................. 4
INVESTMENT ADVISER......................................................... 6
Management Fees........................................................ 6
Portfolio Managers..................................................... 6
Year 2000 Compliance................................................... 6
BUYING SHARES.............................................................. 7
Class A Shares......................................................... 7
Class B Shares......................................................... 8
Class B Distribution Plan.............................................. 8
Class C Shares......................................................... 8
Class C Distribution Plan.............................................. 9
Waiver of Deferred Sales Charge........................................ 9
Confirmations and Statements........................................... 9
SELLING SHARES............................................................. 10
By Mail................................................................ 10
By Telephone........................................................... 11
By Broker.............................................................. 11
Payment of Redemption Proceeds......................................... 11
DIVIDENDS AND TAXES........................................................ 11
Taxability of Distributions............................................ 11
Taxes on Sales or Exchanges............................................ 12
DETERMINATION OF NET ASSET VALUE........................................... 12
SHAREHOLDER SERVICES....................................................... 12
Accumulation Plan...................................................... 12
Systematic Withdrawal Program.......................................... 13
Exchange Privilege..................................................... 13
Retirement Plans....................................................... 14
GENERAL INFORMATION........................................................ 15
Organization........................................................... 15
Stockholder Inquiries.................................................. 15
FINANCIAL HIGHLIGHTS....................................................... 16
APPENDIX A - CLASS A SHARES REDUCED SALES CHARGES.......................... 16
Rights of Accumulation................................................. 16
Statement of Intention................................................. 16
Reinstatement Privilege................................................ 16
<PAGE>
- --------------------------------------------------------------------------------
OBJECTIVE
Described below is the investment objective for Security Social Awareness Fund.
The Fund's Board of Directors may change its investment objective without
shareholder approval.
The Security Social Awareness Fund seeks capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by investing in a well-diversified portfolio of
stocks that the Investment Manager believes have above-average earnings
potential and which meet certain established social criteria. The Fund may also
invest in fixed-income securities.
The Investment Manager uses a "bottom-up" approach when selecting
growth-oriented and value-oriented stocks. The Fund typically invests in the
common stock of companies whose total market value is $1 billion or greater at
the time of purchase.
- --------------------------------------------------------------------------------
BOTTOM-UP APPROACH means that the Investment Manager looks primarily at
individual companies against the context of broader market factors.
GROWTH-ORIENTED STOCKS are stocks of established companies that typically have a
record of consistent growth.
VALUE-ORIENTED STOCKS are stocks of companies that are believed to be
undervalued in terms of price or other financial measurements and that have
above average growth potential.
- --------------------------------------------------------------------------------
After identifying potential investments, the Investment Manager determines if
the securities meet the Fund's established social criteria. The Fund does not
invest in securities of companies that engage in the production of:
* Nuclear energy,
* Alcoholic beverages, or
* Tobacco products.
Additionally, the Fund does not invest in companies that significantly engage
in:
* The manufacture of weapons;
* Practices that have a detrimental effect on the environment; or
* The gambling industry.
The Fund seeks out companies that:
* Contribute substantially to the communities in which they operate;
* Demonstrate a positive record on employment relations;
* Demonstrate substantial progress in the promotion of women and minorities or
in the implementation of benefit policies that support working parents; or
* Take notably positive steps in addressing environmental challenges.
The Investment Manager continues to evaluate an issuer's activities to determine
whether it engages in any practices prohibited by the Fund's social criteria. If
the Investment Manager determines that securities held by the Fund do not comply
with its social criteria, the security is sold within a reasonable time.
MAIN RISKS
MARKET RISK -- While stocks have historically been a leading choice of long-term
investors, they do fluctuate in price. The value of your investment in the Fund
will go up and down, which means you could lose money.
SOCIAL INVESTING -- Investment in companies that must meet the Fund's
established social criteria may present additional risks because it will limit
the availability of investment opportunities compared to those of similar funds
which do not impose such restrictions on investment. In addition, if the
Investment Manager determines that securities held by the Fund do not comply
with its social criteria, the Fund must sell the security at a time when it may
be disadvantageous to do so.
VALUE STOCKS -- Investments in value stocks are subject to the risk that the
market may never realize their intrinsic values, or their prices may go down.
While the fund's investments in value stocks may limit downside risk over time,
the fund may, as a trade-off, produce more modest gains than riskier stock
funds.
GROWTH STOCKS -- Investments in growth stocks may lack the dividend yield that
can cushion stock prices in market downturns. Growth companies are expected to
increase their earnings at a certain rate. If expectations are not met,
investors can punish the stocks inordinately, even if earnings do increase.
<PAGE>
PAST PERFORMANCE
The chart and table below gives an indication of the Fund's risks and
performance. The chart shows changes in the Fund's performance from year to
year. The table shows how the Fund's average annual total returns for the
periods indicated compare to those of broad measures of market performance. As
with all mutual funds, past performance is not a prediction of future results.
- --------------------------------------------------------------------------------
SECURITY SOCIAL AWARENESS FUND
- --------------------------------------------------------------------------------
[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1998 %
1997 22.3%
1996 0.2%
1995 N/A
1994 N/A
1993 N/A
1992 N/A
1991 N/A
1990 N/A
1989 N/A
--------------------------------------------------------------
HIGHEST AND LOWEST RETURNS (QUARTERLY 1989-1998)
--------------------------------------------------------------
QUARTER ENDING
Highest %
Lowest %
--------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1998)
--------------------------------------------------------------
PAST LIFE OF FUND
1 YEAR (SINCE 11/4/96)
Security Social Awareness Fund % %
S&P 500 % %
--------------------------------------------------------------
For the period November 4, 1996 to December 31, 1996.
<PAGE>
FEES AND EXPENSES OF THE FUNDS
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
- --------------------------------------------------------------------------------
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
SHARES SHARES(1) SHARES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.75% None None
Maximum Deferred Sales Charge (as a
percentage of original purchase price or
redemption proceeds, whichever is lower) None(2) 5%(3) 1%(4)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTION TOTAL ANNUAL FUND
MANAGEMENT FEES (12B-1) FEES(5) OTHER EXPENSES OPERATING EXPENSES
- ------------------------- ------------------------- ------------------------- ----------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1.00% 1.00% 1.00% None 1.00% 1.00% 0.51% 0.48% 0.48% 1.51% 2.48% 2.48%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
1 Class B shares convert tax-free to Class A shares automatically after eight
years.
2 Purchases of Class A shares in amounts of $1,000,000 or more are not subject
to an initial sales load; however, a deferred sales charge of 1% is imposed in
the event of redemption within one year of purchase.
3 5% during the first year, decreasing to 0% in the sixth and following years.
4 A deferred sales charge of 1% is imposed in the event of redemption within one
year of purchase.
5 Long-term holders of shares that are subject to an asset-based sales charge
may pay more than the equivalent of the maximum front-end sales charge
otherwise permitted by NASD Rules.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of these periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------- ------------------------- ------------------------- -------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$720 $750 $350 $1,020 $1,070 $770 $1,350 $1,520 $1,320 $2,270 $2,820 $2,820
- -------------------------------------------------------------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------- ------------------------- ------------------------- -------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$720 $250 $250 $1,020 $770 $770 $1,350 $1,320 $1,320 $2,270 $2,820 $2,820
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INVESTMENT ADVISER
Security Management Company, LLC (the "Investment Manager'), 700 SW Harrison
Street, Topeka, Kansas, is the Fund's investment adviser. On September 30, 1998,
the aggregate assets of all of the Funds under the investment management of the
Investment Manager were approximately $4.7 billion.
MANAGEMENT FEES -- The investment management fees paid by the Fund during the
last fiscal year was equal to 1.00% of the Fund's average net assets.
The Investment Manager may waive its management fee to limit the total operating
expenses of a Fund to a specified level. The Investment Manager also may
reimburse expenses of the Fund from time to time to help it maintain competitive
expense ratios. These arrangements are voluntary and may be terminated at any
time. The fees without waivers or reimbursements are shown in the fee table on
page 4.
PORTFOLIO MANAGER -- CINDY SHIELDS, Assistant Vice President and Portfolio
Manager of the Investment Manager, has managed the Social Awareness Fund since
its inception in 1996. She joined the Investment Manager in 1989. Ms. Shields
graduated from Washburn University with a Bachelor of Business Administration
degree, majoring in finance and economics. She is a Chartered Financial Analyst
with nine years of investment experience.
YEAR 2000 COMPLIANCE -- Like other mutual funds, as well as other financial and
business organizations around the world, the Fund could be adversely affected if
the computer systems used by the Investment Manager, and other service
providers, in performing their administrative functions do not properly process
and calculate date-related information and data before, during and after January
1, 2000. Some computer software and hardware systems currently cannot
distinguish between the year 2000 and the year 1900 or some other date because
of the way date fields were encoded. This is commonly known as the "Year 2000
Problem." If not addressed, the Year 2000 Problem could impact the management
services provided to the Fund by the Investment Manager, as well as transfer
agency, accounting, custody, distribution and other services provided to the
Fund and its shareholders.
The Investment Manager has adopted a plan to be "Year 2000 Compliant" with
respect to both its internally built systems as well as systems provided by
external vendors. "Year 2000 Compliant" means that systems and programs which
require modification will have the date fields expanded to include the century
information and that for interfaces to external organizations as well as new
systems development the year portion of the date field will be expanded to four
digits using the format YYYYMMDD. The Investment Manager's overall approach to
addressing the Year 2000 issue is as follows: (1) to inventory its internal and
external hardware, software, telecommunications and data transmissions to
customers and conduct a risk assessment with respect to the impact that a
failure on any such system would have on its business operations; (2) to modify
or replace its internal systems and obtain vendor certifications of Year 2000
compliance for systems provided by vendors or replace such systems that are not
Year 2000 Compliant; and (3) to implement and test its systems for Year 2000
compliance. The Investment Manager has completed the inventory of its internal
and external systems and has made substantial progress toward completing the
modification/replacement of its internal systems as well as towards obtaining
Year 2000 Compliant certifications from its external vendors. Overall systems
testing is scheduled to commence in December 1998 and extend into the first six
months of 1999.
Although the Investment Manager has taken steps to ensure that its systems will
function properly before, during and after the Year 2000, its key operating
systems and information sources are provided by or through external vendors
which creates uncertainty to the extent the Investment Manager is relying on the
assurance of such vendors as to whether their systems will be Year 2000
Compliant. The costs or consequences of incomplete or untimely resolution of the
Year 2000 issue are unknown to the Investment Manager at this time but could
have a material adverse impact on the operations of the Fund and the Investment
Manager.
The Year 2000 Problem is also expected to impact companies, which may include
issuers of portfolio securities held by the Fund, to varying degrees based upon
various factors, including, but not limited to, the company's industry sector
and degree of technological sophistication. The Fund and the Investment Manager
are unable to predict what impact, if any, the Year 2000 Problem will have on
issuers of the portfolio securities held by the Fund.
BUYING SHARES
There are three different ways to buy shares of the Fund--Class A shares, Class
B shares or Class C shares. The minimum initial investment is $100. Subsequent
investments must be $100 (or $20 under an Accumulation Plan). The Fund reserves
the right to reject any order to purchase shares.
CLASS A SHARES -- Class A shares are subject to a sales charge at the time of
purchase. An order for Class A shares will be priced at the Fund's net asset
value (NAV), plus the sales charge set forth below. The NAV, plus the sales
charge is the "offering price." The Fund's NAV is generally calculated as of the
close of trading on every day the New York Stock Exchange is open. An order for
Class A shares is priced at the NAV next calculated after the order is accepted
by the Fund, plus the sales charge.
---------------------------------------------------------
SALES CHARGE
-------------------------------------
AS A PERCENTAGE
AS A PERCENTAGE OF NET AMOUNT
AMOUNT OF ORDER OF OFFERING PRICE INVESTED
---------------------------------------------------------
Less than $50,000 5.75% 6.10%
$50,000 to $99,999 4.75% 4.99%
$100,000 to $249,999 3.75% 3.90%
$250,000 to $499,999 2.75% 2.83%
$500,000 to $999,999 2.00% 2.04%
$1,000,000 or more* None None
---------------------------------------------------------
*Purchases of $1,000,000 or more are not subject to a
sales charge at the time of purchase, but are subject to
a deferred sales charge of 1.00% if redeemed within one
year following purchase. The deferred sales charge is a
percentage of the lesser of the NAV of the shares
redeemed or the net cost of such shares. Shares that are
not subject to a deferred sales charge are redeemed
first.
---------------------------------------------------------
CLASS B SHARES -- Class B shares are not subject to a sales charge at the time
of purchase. An order for Class B shares will be priced at the Fund's NAV next
calculated after the order is accepted by the Fund. The Fund's NAV is generally
calculated as of the close of trading on every day the New York Stock Exchange
is open.
Class B shares are subject to a deferred sales charge if withdrawn within 5
years from the date of purchase. The deferred sales charge is a percentage of
the NAV of the shares at the time they are redeemed or the original purchase
price, whichever is less. Shares that are not subject to the deferred sales
charge are redeemed first. Then, shares held the longest will be the first to be
redeemed.
The amount of the deferred sales charge is based upon the number of years since
the shares were purchased, as follows:
--------------------------------
NUMBER OF YEARS DEFERRED
SINCE PURCHASE SALES CHARGE
--------------------------------
1 5%
2 4%
3 3%
4 3%
5 2%
6 and more 0%
--------------------------------
The Distributor will waive the deferred sales charge under certain
circumstances. See "Waiver of the Deferred Sales Charge" below.
CLASS B DISTRIBUTION PLAN -- The Fund has adopted a Class B Distribution Plan
that allows the Fund to pay distribution fees to the Distributor. The
Distributor uses the fees to finance activities related to the sale of Class B
shares and services to shareholders. The distribution fee is equal to 1.00% of
the average daily net assets of the Fund's Class B shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
Class B shares automatically convert to Class A shares on the eighth anniversary
of purchase. This is advantageous because Class A shares are subject to a lower
distribution fee than Class B shares. A pro rata amount of Class B shares
purchased through the reinvestment of dividends or other distributions is also
converted to Class A shares each time that shares purchased directly are
converted.
CLASS C SHARES -- Class C shares are not subject to a sales charge at the time
of purchase. An order for Class C shares will be priced at the Fund's NAV next
calculated after the order is accepted by the Fund. The Fund's NAV is generally
calculated as of the close of trading on every day the New York Stock Exchange
is open.
Class C shares are subject to a deferred sales charge of 1.00% if withdrawn
within one year from the date of purchase. The deferred sales charge is a
percentage of the NAV of the shares at the time they are redeemed or the
original purchase price, whichever is less. Shares that are not subject to the
deferred sales charge are redeemed first. Then, shares held the longest will be
the first to be redeemed. The Distributor will waive the deferred sales charge
under certain circumstances. See "Waiver of the Deferred Sales Charge" below.
CLASS C DISTRIBUTION PLAN -- The Fund has adopted a Class C Distribution Plan
that allows the Fund to pay distribution fees to the Distributor. The
Distributor uses the fees to finance activities related to the sale of Class C
shares and services to shareholders. The distribution fee is equal to 1.00% of
the average daily net assets of the Fund's Class C shares. Because the
distribution fees are paid out of the Fund's assets on an ongoing basis, over
time these fees will increase the cost of a shareholder's investment and may
cost an investor more than paying other types of sales charges.
WAIVER OF DEFERRED SALES CHARGE -- The Distributor will waive the deferred sales
charge under the following circumstances:
* Upon the death of the shareholder if shares are redeemed within one year of
the shareholder's death
* Upon the disability of the shareholder prior to age 65 if shares are redeemed
within one year of the shareholder becoming disabled and the shareholder was
not disabled when the shares were purchased
* In connection with required minimum distributions from a retirement plan
qualified under Section 401(a), 401(k), 403(b) or 408 of the Internal Revenue
Code
* In connection with distributions from retirement plans qualified under
Section 401(a) or 401(k) of the Code for:
- returns of excess contributions to the plan
- retirement of a participant in the plan
- a loan from the plan (loan repayments are treated as new sales for
purposes of the deferred sales charge)
* Upon the financial hardship (as defined in regulations under the Code) of a
participant in a plan
* Upon termination of employment of a participant in a plan
* Upon any other permissible withdrawal under the terms of the plan
CONFIRMATIONS AND STATEMENTS -- The Fund will send you a confirmation statement
after every transaction that affects your account balance or registration.
Certain automatic transactions may be confirmed on a quarterly basis including
systematic withdrawals, automatic purchases and reinvested dividends. Each
shareholder will receive a quarterly statement setting forth a summary of the
transactions that occurred during the preceding quarter.
SELLING SHARES
Selling your shares of a Fund is called a "redemption," because the Fund buys
back its shares. A stockholder may sell shares at any time. Shares will be sold
at the NAV next determined after the order is accepted by the Fund's transfer
agent, less any applicable deferred sales charge. Any share certificates
representing Fund shares being sold must be returned with a request to sell the
shares.
For selling recently purchased shares, if the Fund has not collected payment for
the shares, it may delay sending the proceeds until it has collected payment,
which may take up to 15 days.
BY MAIL -- To sell shares by mail, send a letter of instruction that includes:
* The name and signature of the account owner(s)
* The name of the Fund
* The dollar amount or number of shares to sell
* Where to send the proceeds
* A signature guarantee if
- The check will be mailed to a payee or address different than that of
the account owner, or
- The sale of shares is more than $10,000.
- --------------------------------------------------------------------------------
A SIGNATURE GUARANTEE helps protect against fraud. Banks, brokers, credit
unions, national securities exchanges and savings associations provide signature
guarantees. A notary public is not an eligible signature guarantor. For joint
accounts, both signatures must be guaranteed.
- --------------------------------------------------------------------------------
Mail your request to:
Security Management Company, LLC
700 SW Harrison Street
Topeka, KS 66636-0001
Signature requirements vary based on the type of account you have:
* INDIVIDUAL OR JOINT TENANTS: Written instructions must be signed by an
individual shareholder, or in the case of joint accounts, all of the
shareholders, exactly as the name(s) appears on the account.
* UGMA OR UTMA: Written instructions must be signed by the custodian as it
appears on the account.
* SOLE PROPRIETOR OR GENERAL PARTNER: Written instructions must be signed by an
authorized individual as it appears on the account.
* CORPORATION OR ASSOCIATION: Written instructions must be signed by the
person(s) authorized to act on the account. A resolution form, authorizing
the signer to act, must accompany the request if not on file with the Fund.
* TRUST: Written instructions must be signed by the trustee(s). If the name of
the current trustee(s) does not appear on the account, a certified
certificate of incumbency dated within 60 days must also be submitted.
* RETIREMENT: Written instructions must be signed by the account owner.
BY TELEPHONE -- If you selected this option on your account application, you may
make redemptions from your account by calling 1-800-888-2461, extension 3127, on
weekdays (except holidays) between 7:00 a.m. and 6:00 p.m. Central time. The
Fund requires that requests for redemptions over $10,000 be in writing with
signatures guaranteed. You may not close your account by telephone or redeem
shares for which a certificate has been issued. If you would like to establish
this option on an existing account, please call 1-800-888-2461, extension 3127.
Shareholders may not redeem shares held in an IRA or 403(b)(7) account by
telephone.
BY BROKER -- You may redeem your shares through your broker. Brokers may charge
a commission upon the redemption of shares.
PAYMENT OF REDEMPTION PROCEEDS -- Payments may be made by check, wire transfer
or electronic transfer.
BY CHECK. Redemption proceeds will be sent to the shareholder(s) on our records
at the address on our records within seven days after receipt of a valid
redemption request. For a charge of $15 deducted from redemption proceeds, the
Investment Manager will provide a certified or cashier's check, or send the
redemption proceeds by express mail, upon the shareholder's request.
BY WIRE. Your redemption proceeds will be wired directly into your designated
bank account, normally on the next business day after receipt of your redemption
request is received. There is no limitation on redemptions by wire. However,
there is a $15 fee for each wire and your bank may charge an additional fee to
receive the wire. If you would like to establish this option on an existing
account, please call 1-800-888-2461, extension 3127, to sign up for this
service. Wire redemptions are not available for retirement accounts.
BY ELECTRONIC TRANSFER. If you have established this option, your redemption
proceeds will be transferred electronically to your predesignated bank account.
To establish this option on an existing account, please call 1-800-888-2461,
extension 3127, to request the appropriate form.
DIVIDENDS AND TAXES
Each Fund pays its shareholders dividends from its net investment income, and
distributes any net capital gains that it has realized, at least annually. Your
dividends and distributions will be reinvested in the Fund, unless you instruct
the Investment Manager otherwise. There are no fees or sales charges on
reinvestments.
TAXABILITY OF DISTRIBUTIONS -- Fund dividends and distributions are taxable to
shareholders (unless your investment is in an IRA or other tax-advantaged
retirement account) whether you reinvest your dividends or distributions or take
them in cash. If the Fund declares a distribution in October, November or
December but pays it in January, you may be taxed on that distribution as if you
received it in the previous year. In general, distributions from the Fund are
taxable as follows:
------------------------------------------------------
TYPE OF TAX RATE FOR TAX RATE FOR 28%
DISTRIBUTION 15% BRACKET BRACKET OR ABOVE
------------------------------------------------------
Income Ordinary Ordinary
dividends Income rate Income rate
Short-term Ordinary Ordinary
capital gains Income rate Income rate
Long-term
capital gains 10% 20%
------------------------------------------------------
The Fund will mail you information concerning the tax status of the
distributions for each calendar year on or before January 31 of each year.
TAXES ON SALES OR EXCHANGES -- You may be taxed on any sale or exchange of Fund
shares. Tax-deferred retirement accounts do not generate a tax liability unless
you are taking a distribution or making a withdrawal.
The table above can provide a guide for your potential tax liability when
selling or exchanging Fund shares. "Short-term capital gains" applies to Fund
shares sold or exchanged up to 12 months after buying them. "Long-term capital
gains" applies to shares held for more than 12 months.
You should consult your tax professional about federal, state and local tax
consequences to you of an investment in the Fund. Please see the Statement of
Additional Information for additional tax information.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is computed as of the close of regular
trading hours on the New York Stock Exchange (normally 3 p.m. Central time) on
days when the Exchange is open. The Exchange is open Monday through Friday,
except on the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The Fund's NAV is generally based upon the market value of securities held in
the Fund's portfolio. If market values are not available, the fair value of
securities is determined using procedures approved by the Fund's Board of
Directors.
Foreign securities are valued based on quotations from the primary market in
which they are traded, and are converted from the local currency into U.S.
dollars using current exchange rates. Foreign securities may trade in their
primary markets on weekends or other days when the Fund does not price its
shares. Therefore, the NAV of Funds holding foreign securities may change on
days when shareholders will not be able to buy or sell shares of the Funds.
SHAREHOLDER SERVICES
ACCUMULATION PLAN -- An investor may choose to invest in the Fund through a
voluntary Accumulation Plan. This allows for an initial investment of $100
minimum and subsequent investments of $20 minimum at any time. An Accumulation
Plan involves no obligation to make periodic investments, and is terminable at
will.
Payments are made by sending a check to the Distributor who (acting as an agent
for the dealer) will purchase whole and fractional shares of the Fund as of the
close of business on such day as the payment is received. The investor will
receive a confirmation and statement after each investment.
Investors may choose to use "Secur-O-Matic" (automatic bank draft) to make their
Fund purchases. There is no additional charge for choosing to use Secur-O-Matic.
An application for Secur-O-Matic may be obtained from the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM -- Stockholders who wish to receive regular
monthly, quarterly, semiannual, or annual payments of $25 or more may establish
a Systematic Withdrawal Program. A stockholder may elect a payment that is a
specified percentage of the initial or current account value or a specified
dollar amount. A Systematic Withdrawal Program will be allowed only if shares
with a current offering price of $5,000 or more are deposited with the
Investment Manager, which will act as agent for the stockholder under the
Program. Shares are liquidated at net asset value. The Program may be terminated
on written notice, or it will terminate automatically if all shares are
liquidated or withdrawn from the account.
A stockholder may establish a Systematic Withdrawal Program with respect to
Class B shares without the imposition of any applicable contingent deferred
sales charge, provided that such withdrawals do not in any 12-month period,
beginning on the date the Program is established, exceed 10 percent of the value
of the account on that date ("Free Systematic Withdrawals"). Free Systematic
Withdrawals are not available if a Program established with respect to Class B
shares provides for withdrawals in excess of 10 percent of the value of the
account in any Program year and, as a result, all withdrawals under such a
Program would be subject to any applicable contingent deferred sales charge.
Free Systematic Withdrawals will be made first by redeeming those shares that
are not subject to the contingent deferred sales charge and then by redeeming
shares held the longest. The contingent deferred sales charge applicable to a
redemption of Class B shares requested while Free Systematic Withdrawals are
being made will be calculated as described under "Waiver of Deferred Sales
Charge," page 9. A Systematic Withdrawal form may be obtained from the Fund.
EXCHANGE PRIVILEGE -- Stockholders who own shares of the Fund may exchange those
shares for shares of the other mutual funds distributed by the Distributor or
for shares of Security Cash Fund at net asset value. The other mutual funds
currently distributed by the Distributor include Security Equity, Ultra, Growth
and Income, Asset Allocation, Global, Value, Small Company, Corporate Bond,
Limited Maturity Bond, U.S. Government, High Yield, Emerging Markets Total
Return, Global Asset Allocation, Global High Yield and Municipal Bond Funds.
Exchanges may be made only in those states where shares of the fund into which
an exchange is to be made are qualified for sale. No service fee is presently
imposed on such an exchange. Class A and Class B shares of the Fund may be
exchanged for Class A and Class B shares, respectively, of another fund
distributed by the Distributor or for shares of Security Cash Fund, a money
market fund that offers a single class of shares. Any applicable contingent
deferred sales charge will be imposed upon redemption and calculated from the
date of the initial purchase without regard to the time shares were held in
Security Cash Fund. For tax purposes, an exchange is a sale of shares which may
result in a taxable gain or loss. Special rules may apply to determine the
amount of gain or loss on an exchange occurring within ninety days after the
exchanged shares were acquired. Exchanges are made upon receipt of a properly
completed Exchange Authorization form. A current prospectus of the fund into
which an exchange is made will be given to each stockholder exercising this
privilege.
To exchange shares by telephone, a stockholder must hold shares in
non-certificate form and must either have completed the Telephone Exchange
section of the application or a Telephone Transfer Authorization form which may
be obtained from the Investment Manager. Once authorization has been received by
the Investment Manager, a stockholder may exchange shares by telephone by
calling the Fund at (800) 888-2461, extension 3127, on weekdays (except
holidays) between the hours of 7:00 a.m. and 6:00 p.m. Central time. Exchange
requests received by telephone after the close of the New York Stock Exchange
(normally 3 p.m. Central time) will be treated as if received on the next
business day. A stockholder who authorizes telephone exchanges authorizes the
Investment Manager to act upon the instructions of any person by telephone to
exchange shares between any identically registered accounts with the Funds
listed above. The Investment Manager has established procedures to confirm that
instructions communicated by telephone are genuine and may be liable for any
losses due to fraudulent or unauthorized instructions if it fails to comply with
its procedures. The Investment Manager's procedures require that any person
requesting an exchange by telephone provide the account registration and number
and the owner's tax identification number and such instructions must be received
on a recorded line. Neither the Fund, the Investment Manager nor the Distributor
shall be liable for any loss, liability, cost or expense arising out of any
request, including any fraudulent request, provided the Investment Manager
complied with its procedures. Thus, a stockholder who authorizes telephone
exchanges may bear the risk of loss from a fraudulent or unauthorized request.
The exchange privilege, including telephone exchanges, may be changed or
discontinued at any time by either the Investment Manager or the Fund upon 60
days' notice to stockholders.
In periods of severe market or economic conditions, the telephone exchange of
shares may be difficult to implement and stockholders should make exchanges by
writing to Security Distributors, Inc., 700 Harrison, Topeka, Kansas 66636-0001.
RETIREMENT PLANS -- The Fund has available tax-qualified retirement plans for
individuals, prototype plans for the self-employed, pension and profit sharing
plans for corporations and custodial accounts for employees of public school
systems and organizations meeting the requirements of Section 501(c)(3) of the
Internal Revenue Code. Further information concerning these plans is contained
in the Fund's Statement of Additional Information.
GENERAL INFORMATION
ORGANIZATION -- The Articles of Incorporation of Security Equity Fund provide
for the issuance of an indefinite number of shares of common stock in one or
more classes or series. Security Equity Fund has authorized capital stock of
$.25 par value and currently issues its shares in six series, Equity Fund,
Global Fund, Asset Allocation Fund, Social Awareness Fund, Value Fund and Small
Company Fund. The shares of each series of Security Equity Fund represent a pro
rata beneficial interest in that series' net assets and in the earnings and
profits or losses derived from the investment of such assets.
The Fund currently issues three classes of shares which participate
proportionately based on their relative net asset values in dividends and
distributions and have equal voting, liquidation and other rights except that
(i) expenses related to the distribution of each class of shares or other
expenses that the Board of Directors may designate as class expenses from time
to time, are borne solely by each class; (ii) each class of shares has exclusive
voting rights with respect to any Distribution Plan adopted for that class;
(iii) each class has different exchange privileges; and (iv) each class has a
different designation. When issued and paid for, the shares will be fully paid
and nonassessable by the Fund. Shares may be exchanged as described above under
"Exchange Privilege," but will have no other preference, conversion, exchange or
preemptive rights. Shares are transferable, redeemable and assignable and have
cumulative voting privileges for the election of directors.
On certain matters, such as the election of directors, all shares of the series
of Security Equity Fund vote together, with each share having one vote. On other
matters affecting a particular series, such as the investment advisory contract
or the fundamental policies, only shares of that series are entitled to vote,
and a majority vote of the shares of that series is required for approval of the
proposal.
The Fund does not generally hold annual meetings of stockholders and will do so
only when required by law. Stockholders may remove directors from office by vote
cast in person or by proxy at a meeting of stockholders. Such a meeting will be
called at the written request of 10 percent of Security Equity Fund's
outstanding shares.
STOCKHOLDER INQUIRIES -- Stockholders who have questions concerning their
account or wish to obtain additional information, may call the Fund (see back
cover for address and telephone numbers), or contact their securities dealer.
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate than an investor would have earned (or lost) on an investment
in the Fund assuming reinvestment of all dividends and distributions. This
information has been audited by Ernst & Young LLP, whose report, along with the
Fund's financial statements, are included in the annual report, which is
available upon request.
<TABLE>
<CAPTION>
Net Net Distri-
Fiscal asset Net gain on Total Dividends butions
period value investment securities from (from net (from Total
ended beginning income (realized & investment investment capital distri-
September 30 of period (loss) unrealized) operations Income) gains) butions
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SOCIAL AWARENESS FUND (CLASS A)
1997(b)(c)(d) $ 15.00 $ 0.08 $ 2.91 $ 2.99 $ -- $ -- $ --
SOCIAL AWARENESS FUND (CLASS B)
1997(b)(c)(d) $ 15.00 $ (0.08) $ 2.89 $ 2.81 $ -- $ -- $ --
Net Ratio of
Fiscal assets Ratio of net income
period Net asset Total end of expenses (loss) to Portfolio
ended value end Return period to average average turn-over
September 30 of period (a) (thousands) net assets net assets rate
- --------------------------------------------------------------------------------------------
SOCIAL AWARENESS FUND (CLASS A)
1997(b)(c)(d) $ 17.99 19.93% $ 6,209 0.67% 0.57% 38%
SOCIAL AWARENESS FUND (CLASS B)
1997(b)(c)(d) $ 17.81 18.73% $ 3,641 1.84% (0.60%) 38%
</TABLE>
(a) Total return information does not reflect deduction of any sales
charge imposed at the time of purchase for Class A shares or upon
redemption for Class B shares.
(b) Fund expenses were reduced by the Investment Manager during the
period, and expense ratios absent such reimbursement would have
been as follows:
1997
----
Class A 1.70%
Class B 2.80%
(c) Net investment income was computed using the average month-end
shares outstanding throughout the period.
(d) Social Awareness Fund was initially capitalized on November
4,1996, with a net asset value of $15 per share. Percentage
amounts for the period have been annualized, except for total
return.
<PAGE>
APPENDIX A
CLASS A SHARES
REDUCED SALES CHARGES
Initial sales charges may be reduced or eliminated for persons or organizations
purchasing Class A shares of the Fund alone or in combination with Class A
shares of other Security Funds.
For purposes of qualifying for reduced sales charges on purchases made pursuant
to Rights of Accumulation or a Statement of Intention, the term "Purchaser"
includes the following persons: an individual, his or her spouse and children
under the age of 21; a trustee or other fiduciary of a single trust estate or
single fiduciary account established for their benefit; an organization exempt
from federal income tax under Section 501(c)(3) or (13) of the Internal Revenue
Code; or a pension, profit-sharing or other employee benefit plan whether or not
qualified under Section 401 of the Internal Revenue Code.
RIGHTS OF ACCUMULATION -- To reduce sales charges on purchases of Class A shares
of the Fund, a Purchaser may combine all previous purchases of the Fund with a
contemplated current purchase and receive the reduced applicable front-end sales
charge. The Distributor must be notified when a sale takes place which might
qualify for the reduced charge on the basis of previous purchases.
Rights of accumulation also apply to purchases representing a combination of the
Class A shares of the Fund, and other Security Funds, except Security Cash Fund,
in those states where shares of the fund being purchased are qualified for sale.
STATEMENT OF INTENTION -- A Purchaser may choose to sign a Statement of
Intention within 90 days after the first purchase to be included thereunder,
which will cover future purchases of Class A shares of the Fund, and other
Security Funds, except Security Cash Fund. The amount of these future purchases
shall be specified and must be made within a 13-month period (or 36-month period
for purchases of $1 million or more) to become eligible for the reduced
front-end sales charge applicable to the actual amount purchased under the
Statement. Five percent (5%) of the amount specified in the Statement of
Intention will be held in escrow shares until the statement is completed or
terminated. These shares may be redeemed by the Fund if the Purchaser is
required to pay additional sales charges.
A Statement of Intention may be revised during the 13-month (or, if applicable,
36-month) period. Additional Class A shares received from reinvestment of income
dividends and capital gains distributions are included in the total amount used
to determine reduced sales charges. A Statement of Intention may be obtained
from the Fund.
REINSTATEMENT PRIVILEGE -- Stockholders who redeem their Class A shares of the
Fund have a one-time privilege (1) to reinstate their accounts by purchasing
Class A shares without a sales charge up to the dollar amount of the redemption
proceeds; or (2) to the extent the redeemed shares would have been eligible for
the exchange privilege, to purchase Class A shares of another of the Security
Funds, without a sales charge up to the dollar amount of the redemption
proceeds. To exercise this privilege, a stockholder must provide written notice
and a check in the amount of the reinvestment to the Fund within thirty days
after the redemption request; the reinstatement will be made at the net asset
value on the date received by the Fund.
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
BY TELEPHONE -- Call 1-800-888-2461.
BY MAIL -- Write to:
Security Management Company, LLC
700 SW Harrison
Topeka, KS 66636-0001
ON THE INTERNET -- Reports and other information about the Fund can be viewed
online or downloaded from:
SEC: http://www.sec.gov
SMC, LLC: http://www.securitybenefit.com
Additional information about the Fund (including the Statement of Additional
Information) can be reviewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, DC. Information about the
operation of the public reference room may be obtained by calling the Commission
at 1-800-SEC-0330. Copies may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, DC
20549-6009.
- --------------------------------------------------------------------------------
ANNUAL/SEMI-ANNUAL REPORT -- Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION -- The Fund's Statement of Additional
Information and the Fund's annual or semi-annual report are available, without
charge upon request by calling the Funds' toll-free telephone number
1-800-888-2461, extension 3127. Shareholder inquiries should be addressed to
SMC, LLC, 700 SW Harrison Street, Topeka, Kansas 66636-0001, or by calling the
Fund's toll-free telephone number listed above. The Fund's Statement of
Additional Information is incorporated into this prospectus by reference.
The Fund's Investment Company Act file number is listed below:
Security Equity Fund.............. 811-1136
<PAGE>
SECURITY GROWTH AND INCOME FUND
SECURITY EQUITY FUND
* Equity Series
* Global Series
* Asset Allocation Series
* Social Awareness Series
* Value Series
* Small Company Series
* Enhanced Index Series
* International Series
* Select 25 Series
SECURITY ULTRA FUND
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 31, 1999
RELATING TO THE PROSPECTUS DATED JANUARY 31, 1999
AS IT MAY BE SUPPLEMENTED FROM TIME TO TIME
(785) 431-3127
(800) 888-2461
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
Security Management Company, LLC
700 SW Harrison Street
Topeka, Kansas 66636-0001
UNDERWRITER
Security Distributors, Inc.
700 SW Harrison Street
Topeka, Kansas 66636-0001
CUSTODIANS
UMB Bank, N.A.
928 Grand Avenue
Kansas City, Missouri 64106
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245
INDEPENDENT AUDITORS
Ernst & Young LLP
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105-2143
<PAGE>
SECURITY GROWTH AND INCOME FUND
SECURITY EQUITY FUND
SECURITY ULTRA FUND
Members of The Security Benefit Group of Companies
700 SW Harrison, Topeka, Kansas 66636-0001
STATEMENT OF
ADDITIONAL INFORMATION
January 31, 1999
(RELATING TO THE PROSPECTUS DATED JANUARY 31, 1999,
AS IT MAY BE SUPPLEMENTED FROM TIME TO TIME)
This Statement of Additional Information is not a Prospectus. It should be
read in conjunction with the Prospectus dated January 31, 1999 as it may be
supplemented from time to time. A Prospectus may be obtained by writing Security
Distributors, Inc., 700 SW Harrison Street, Topeka, Kansas 66636-0001, or by
calling (785) 431-3127 or (800) 888-2461, ext. 3127.
TABLE OF CONTENTS
Page
General Information....................................... 1
Investment Objective and Policies of the Funds............ 2
Security Growth and Income Fund........................ 2
Security Equity Fund................................... 4
Equity Fund.......................................... 4
Global Fund.......................................... 5
Asset Allocation Fund................................ 6
Social Awareness Fund................................ 8
Value Fund........................................... 9
Small Company Fund................................... 9
Enhanced Index Fund.................................. 9
International Fund................................... 9
Select 25 Fund....................................... 9
Security Ultra Fund.................................... 16
Investment Methods and Risk Factors....................... 17
Investment Policy Limitations............................. 35
Security Growth and Income Fund's Fundamental Policies. 35
Security Equity Fund's Fundamental Policies............ 36
Security Ultra Fund's Fundamental Policies............. 39
Officers and Directors.................................... 40
Remuneration of Directors and Others...................... 41
How to Purchase Shares.................................... 42
Alternative Purchase Options........................... 43
Class A Shares......................................... 43
Security Equity Fund's Class A Distribution Plan....... 43
Class B Shares......................................... 44
Class B Distribution Plan.............................. 45
Class C Shares.........................................
Class C Distribution Plan..............................
Calculation and Waiver of Contingent Deferred Sales
Charges.............................................. 45
Arrangements With Broker-Dealers and Others............ 46
Purchases at Net Asset Value........................... 47
Accumulation Plan......................................... 48
Systematic Withdrawal Program............................. 48
Investment Management..................................... 48
Portfolio Management................................... 53
Code of Ethics......................................... 53
Distributor............................................... 55
Allocation of Portfolio Brokerage......................... 56
How Net Asset Value is Determined......................... 57
How to Redeem Shares...................................... 58
Telephone Redemptions.................................. 59
How to Exchange Shares.................................... 59
Exchange by Telephone.................................. 60
Dividends and Taxes....................................... 60
Organization.............................................. 65
Custodian, Transfer Agent and Dividend-Paying Agent....... 65
Independent Auditors...................................... 65
Performance Information................................... 66
Retirement Plans.......................................... 67
Individual Retirement Accounts (IRAs)..................... 68
Roth IRAs................................................. 69
Education IRAs............................................ 69
SIMPLE IRAs............................................... 69
Pension and Profit-Sharing Plans.......................... 69
403(b) Retirement Plans................................... 70
Simplified Employee Pension Plans (SEPPs)................. 70
Financial Statements...................................... 70
Appendix A................................................ 71
Appendix B................................................ 72
<PAGE>
GENERAL INFORMATION
Security Growth and Income Fund, Security Equity Fund and Security Ultra
Fund were organized as Kansas corporations on February 2, 1944, November 27,
1961 and April 20, 1965, respectively. The name of Security Growth and Income
Fund (formerly Security Investment Fund) was changed effective July 6, 1993. The
Funds are registered with the Securities and Exchange Commission ("SEC") as
investment companies. Such registration does not involve supervision by the SEC
of the management or policies of the Funds. The Funds are open-end investment
companies that, upon the demand of the investor, must redeem their shares and
pay the investor the current net asset value thereof. (See "How to Redeem
Shares," page 58.)
Each of Security Growth and Income Fund ("Growth and Income Fund"), the
Equity Series ("Equity Fund"), Global Series ("Global Fund"), Asset Allocation
Series ("Asset Allocation Fund"), Social Awareness Series ("Social Awareness
Fund"), Value Series ("Value Fund"), Small Company Series ("Small Company
Fund"), Enhanced Index Series ("Enhanced Index Fund"), International Series
("International Fund") and Select 25 Series ("Select 25 Fund") of Security
Equity Fund, and Security Ultra Fund ("Ultra Fund") (collectively, the "Funds")
has its own investment objective and policies which are described below. While
there is no present intention to do so, the investment objective and policies of
each Fund, unless otherwise noted, may be changed by its Board of Directors
without the approval of stockholders. Each of the Funds is also required to
operate within limitations imposed by its fundamental investment policies which
may not be changed without stockholder approval. These limitations are set forth
below under "Investment Policy Limitations," beginning on page 35. An investment
in one of the Funds does not constitute a complete investment program.
The value of the shares of each Fund fluctuates, reflecting fluctuations in
the value of the portfolio securities and, to the extent it is invested in
foreign securities, its net currency exposure. Each Fund may realize losses or
gains when it sells portfolio securities and will earn income to the extent that
it receives dividends or interest from its investments. (See "Dividends and
Taxes," page 60.)
The Funds' shares are sold to the public at net asset value, plus a sales
commission which is allocated between the principal underwriter and dealers who
sell the shares ("Class A Shares"), or at net asset value with a contingent
deferred sales charge ("Class B Shares and Class C Shares"). (See "How to
Purchase Shares," page 42.)
Professional investment advice is provided to each Fund by Security
Management Company, LLC (the "Investment Manager"). The Investment Manager has
engaged OppenheimerFunds, Inc. ("Oppenheimer") to provide investment advisory
services to Global Fund, Meridian Investment Management Corporation ("Meridian")
to provide quantitative investment research and investment advisory services to
the Asset Allocation Fund, Strong Capital Management, Inc. ("Strong) to provide
investment advisory services to Small Company Fund and Bankers Trust Company
("Bankers Trust") to provide investment advisory services to Enhanced Index Fund
and International Fund.
The Funds receive investment advisory, administrative, accounting, and
transfer agency services from the Investment Manager for a fee. The fee for each
of the Growth and Income, Equity and Ultra Funds, on an annual basis, is 2% of
the first $10 million of the average net assets, 1 1/2% of the next $20 million
of the average net assets and 1% of the remaining average net assets of the
respective Funds, determined daily and payable monthly. The fee paid by Global
Fund, on an annual basis, is 2% of the first $70 million of the average net
assets, and 1 1/2% of the remaining average net assets, determined daily and
payable monthly.
Separate fees are paid by Asset Allocation, Social Awareness, Value, Small
Company, Enhanced Index, International and Select 25 Funds, to the Investment
Manager for investment advisory, administrative and transfer agency services.
The investment advisory fee for Asset Allocation, Social Awareness, Value, and
Small Company Funds on an annual basis is equal to 1% of the average daily net
assets of each Fund, calculated daily and payable monthly. The investment
advisory fee for Enhanced Index and Select 25 Funds is equal to .75% of the
average daily net assets of each Fund, calculated daily and payable monthly. The
investment advisory fee for International Fund is equal to 1.10% of the average
daily net assets of the Fund, calculated daily and payable monthly. The
administrative fee for Asset Allocation Fund on an annual basis is equal to
.045% of the average daily net assets of the Fund plus the greater of .10% of
its average net assets or $60,000. The administrative fee for the Social
Awareness, Value, Small Company, Enhanced Index and Select 25 Funds on an annual
basis is equal to .09% of the average daily net assets of each respective Fund.
The administrative fee for International Fund on an annual basis is equal to
.045% of the average daily net assets of the Fund plus the greater of .10% of
its average net assets or (i) $30,000 in the year ending January 31, 2000; (ii)
$45,000 in the year ending January 31, 2001; or (iii) $60,000 in the year ending
January 31, 2002 and thereafter. The transfer agency fee for the Asset
Allocation, Social Awareness, Value, Small Company, Enhanced Index,
International and Select 25 Funds consists of an annual maintenance fee of $8.00
per account, and a transaction fee of $1.00 per transaction.
The Investment Manager bears all expenses of the Funds (except Asset
Allocation, Social Awareness, Value, Small Company, Enhanced Index,
International and Select 25 Funds) except for its fees and the expenses of
brokerage commissions, interest, taxes, Class B and Class C distribution fees,
and extraordinary expenses approved by the Board of Directors of the Funds. The
Asset Allocation, Social Awareness, Value, Small Company, Enhanced Index,
International and Select 25 Funds pay all of their expenses not assumed by the
Investment Manager or Security Distributors, Inc. (the "Distributor") as
described under "Investment Management," page 48.
The Investment Manager has agreed that the total annual expenses of any
class or Series of a Fund (including the management fee and its other fees, but
excluding interest, taxes, brokerage commissions, extraordinary expenses and
Class B and Class C distribution fees) will not exceed any expense limitation
imposed by any state. See "Investment Management," page 48 for a discussion of
the Investment Manager and the Investment Management and Services Agreements.
Under a Distribution Plan adopted with respect to the Class A shares of
Small Company, Enhanced Index, International and Select 25 Funds, pursuant to
Rule 12b-1 under the Investment Company Act of 1940, each such Fund is
authorized to pay the Distributor an annual fee of .25% of the average daily net
assets of the Class A shares of the respective Funds to finance various
distribution-related activities. Under Distribution Plans adopted with respect
to the Class B shares and Class C shares of the Funds, pursuant to Rule 12b-1,
each Fund is authorized to pay the Distributor an annual fee of 1.00% of the
average daily net assets of the Class B shares and Class C shares, respectively,
of the Funds to finance various distribution-related activities. (See "Class A
Distribution Plan," page 43, "Class B Distribution Plan," page 45 and "Class C
Distribution Plan," page ____.)
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS
SECURITY GROWTH AND INCOME FUND
The investment objective of Growth and Income Fund is long-term growth of
capital with a secondary emphasis on income. The value of Growth and Income
Fund's shares will fluctuate with changes in the market value of the Fund's
investments. The investment objective and policies of Growth and Income Fund may
be altered by the Board of Directors without the approval of stockholders of the
Fund. There can be no assurance that the stated investment objective will be
achieved.
The policy of Growth and Income Fund is to invest in a diversified
portfolio which will ordinarily consist principally of common stocks (which may
include ADRs), but may also include other securities when deemed advisable. Such
other securities may include (i) securities convertible into common stocks; (ii)
preferred stocks; (iii) debt securities issued by U.S. corporations; (iv)
securities issued by the U.S. Government or any of its agencies or
instrumentalities, including Treasury bills, certificates of indebtedness, notes
and bonds; (v) securities issued by foreign governments, their agencies, and
instrumentalities, and foreign corporations, provided that such securities are
denominated in U.S. dollars; (vi) higher yielding, high risk debt securities
(commonly referred to as "junk bonds"); and (vii) zero coupon securities. The
Fund may also invest in warrants. However, such investment may not exceed 5% of
its total assets valued at the lower of cost or market. Included in that amount,
but not to exceed 2% of the value of the Fund's assets may be warrants which are
not listed on the New York or American Stock Exchange. Warrants acquired by the
Fund in units or attached to securities may be deemed to be without value. In
the selection of securities for investment, the potential for appreciation and
future dividends is given more weight than current dividends.
Except when in a temporary defensive position, Growth and Income Fund will
maintain at least 25% of its assets invested in securities selected for their
capital growth potential, principally common stocks, and at least another 25% of
its total assets invested in securities which provide income.
With respect to Growth and Income Fund's investment in debt securities,
there is no percentage limitation on the amount of the Fund's assets that may be
invested in securities within any particular rating classification (see Appendix
A for a more complete description of the corporate bond ratings), and the Fund
may invest without limit in unrated securities. Growth and Income Fund may
invest in securities rated Baa by Moody's Investors Service, Inc., or BBB by
Standard & Poor's Corporation. Baa securities are considered to be "medium
grade" obligations by Moody's and BBB is the lowest classification which is
still considered an "investment grade" rating by Standard & Poor's. Bonds rated
Baa by Moody's or BBB by Standard & Poor's have speculative characteristics and
may be more susceptible than higher grade bonds to adverse economic conditions
or other adverse circumstances which may result in a weakened capacity to make
principal and interest payments. In addition, the Fund may invest in higher
yielding, longer-term debt securities in the lower rating (higher risk)
categories of the recognized rating services (commonly referred to as "junk
bonds"). These include securities rated Ba or lower by Moody's or BB or lower by
Standard & Poor's and are regarded as predominantly speculative with respect to
the ability of the issuer to meet principal and interest payments. However, the
Investment Manager will not rely principally on the ratings assigned by the
rating services. Because Growth and Income Fund may invest in lower rated
securities and unrated securities of comparable quality, the achievement of the
Fund's investment objective may be more dependent on the Investment Manager's
own credit analysis than would be the case if investing in higher rated
securities.
As discussed above, Growth and Income Fund may invest in foreign debt
securities that are denominated in U.S. dollars. Such foreign debt securities
may include debt of foreign governments, including Brady Bonds, and debt of
foreign corporations. The Fund expects to limit its investment in foreign debt
securities, excluding Canadian securities, to not more than 15% of its total
assets and its investment in debt securities of issuers in emerging markets,
excluding Brady Bonds, to not more than 5% of its net assets. See the discussion
of the risks associated with investing in foreign securities and, in particular,
Brady Bonds and emerging markets under "Investment Methods and Risk Factors."
Growth and Income Fund may purchase securities on a "when issued" or
"delayed delivery basis" in excess of customary settlement periods for the type
of security involved. The Fund may purchase securities that are restricted as to
disposition under the federal securities laws, provided that such securities are
eligible for resale to qualified institutional investors pursuant to Rule 144A
under the Securities Act of 1933 and subject to the Fund's policy that not more
than 15% of its total assets will be invested in illiquid securities. From time
to time, Growth and Income Fund may purchase government bonds or commercial
notes for temporary defensive purposes. The Fund may also utilize repurchase
agreements on an overnight basis or bank demand accounts, pending investment in
securities or to meet potential redemptions or expenses. See the discussion of
when issued securities, restricted securities, and repurchase agreements under
"Investment Methods and Risk Factors" and see the discussion of restricted
securities under the same heading in the prospectus.
The Fund may enter into futures contracts (a type of derivative) to hedge
all or a portion of its portfolio, or as an efficient means of adjusting its
exposure to the stock market. The Fund will limit its use of futures contracts
so that initial margin deposits or premiums on such contracts used for
non-hedging purposes will not equal more than 5% of the Fund's net asset value.
Futures contracts and the risks associated with such instruments are described
in further detail under "Investment Methods and Risk Factors" below.
The Fund may invest in real estate investment trusts ("REITs") and other
real estate industry companies or companies with substantial real estate
investments. See the discussion of real estate securities under "Investment
Methods and Risk Factors."
The Fund may also invest in zero coupon securities which are debt
securities that pay no cash income but are sold at substantial discounts from
their face value. Certain zero coupon securities also provide for the
commencement of regular interest payments at a deferred date. See "Investment
Methods and Risk Factors" for a discussion of zero coupon securities.
Growth and Income Fund's policy is to diversify its investments among
various industries, but freedom of action is reserved (at times when deemed
appropriate for the attainment of its investment objectives) to invest up to 25%
of its assets in one industry. This is a fundamental policy of Growth and Income
Fund which cannot be changed without stockholder approval.
There is no restriction on Growth and Income Fund's portfolio turnover, but
it is the Fund's practice to invest its funds for long-term growth and
secondarily for income. The portfolio turnover rate for Class A and Class B
shares of the Fund for the fiscal years ended September 30, 1998, 1997 and 1996
was as follows: 1998 - 144%, 1997 - 124% and 1996 - 69%. Portfolio turnover is
the percentage of the lower of security sales or purchases to the average
portfolio value and would be 100% if all securities in the Fund were replaced
within a period of one year. The Fund will not usually trade securities for
short-term profits.
SPECIAL RISKS OF HIGH YIELD INVESTING. Because Growth and Income Fund
invests in the high yield, high risk debt securities (commonly referred to as
"junk bonds") described above, its share price and yield are expected to
fluctuate more than the share price and yield of a fund investing in higher
quality, shorter-term securities. High yield bonds may be more susceptible to
real or perceived adverse economic and competitive industry conditions than
investment grade bonds. A projection of an economic downturn, or higher interest
rates, for example, could cause a decline in high yield bond prices because an
advent of such events could lessen the ability of highly leveraged companies to
make principal and interest payments on its debt securities. In addition, the
secondary trading market for high yield bonds may be less liquid than the market
for higher grade bonds, which can adversely affect the ability of Growth and
Income Fund to dispose of its portfolio securities. Bonds for which there is
only a "thin" market can be more difficult to value inasmuch as objective
pricing data may be less available and judgment may play a greater role in the
valuation process. Debt securities issued by governments in emerging markets can
differ from debt obligations issued by private entities in that remedies from
defaults generally must be pursued in the courts of the defaulting government,
and legal recourse is therefore somewhat diminished. Political conditions, in
terms of a government's willingness to meet the terms of its debt obligations,
also are of considerable significance. There can be no assurance that the
holders of commercial bank debt may not contest payments to the holders of debt
securities issued by governments in emerging markets in the event of default by
the governments under commercial bank loan agreements.
SECURITY EQUITY FUND
Security Equity Fund currently issues its shares in nine series -- Equity
Series ("Equity Fund"), Global Series ("Global Fund"), Asset Allocation Series
("Asset Allocation Fund"), Social Awareness Series ("Social Awareness Fund"),
Value Series ("Value Fund"), Small Company Series ("Small Company Fund"),
Enhanced Index Series ("Enhanced Index Fund"), International Series
("International Fund") and Select 25 Series ("Select 25 Fund"). The assets of
each Series are held separate from the assets of the other Series and each
Series has an investment objective which differs from that of the other Series.
The investment objective and policies of each Series are described below. There
are risks inherent in the ownership of any security and there can be no
assurance that such investment objective will be achieved.
Although there is no present intention to do so, the investment objective
of the Funds may be altered by the Board of Directors without the approval of
stockholders of the Fund.
EQUITY FUND
The investment objective of Equity Fund is to provide a medium for
investment in equity securities to complement fixed-obligation types of
investments. Emphasis will be placed upon selection of those securities which in
the opinion of the Investment Manager offer basic value and have the most
long-term capital growth potential. Income potential will be considered in
selecting investments, to the extent doing so is consistent with Equity Fund's
investment objective of long-term capital growth.
Equity Fund ordinarily will have at least 90% of its total assets invested
in a broadly diversified selection of common stocks (which may include ADRs) and
of preferred stocks convertible into common stocks. However, the Fund reserves
the right to invest temporarily in fixed income securities or in cash and money
market instruments. Equity Fund may invest in certificates of deposit issued by
banks or other bank demand accounts, pending investment in other securities or
to meet potential redemptions or expenses. Equity Fund's investment policy, with
emphasis on investing in securities for potential capital enhancement
possibilities, may involve a more rapid portfolio turnover than other investment
companies.
The portfolio turnover rate for Class A and Class B shares of Equity Fund
for the fiscal years ended September 30, 1998, 1997 and 1996 was as follows:
1998 - 47%, 1997 - 66% and 1996 - 64%. Portfolio turnover is the percentage of
the lower of security sales or purchases to the average portfolio value and
would be 100% if all securities in the Fund were replaced within a period of one
year.
It is not the policy of Equity Fund to purchase securities for trading
purposes. Nevertheless, securities may be disposed of without regard to the
length of time held if such sales are deemed advisable in order to meet the
Fund's investment objective. Equity Fund does not intend to purchase restricted
stock.
GLOBAL FUND
The investment objective of Global Fund is to seek long-term growth of
capital primarily through investment in securities of companies domiciled in
foreign countries and the United States. Global Fund will seek to achieve its
objective through investment in a diversified portfolio of securities which
under normal circumstances will consist primarily of various types of common
stocks and equivalents (the following constitute equivalents: convertible debt
securities, real estate investment trusts (REITs), warrants and options). The
Fund may also invest in preferred stocks, bonds and other debt obligations,
which include money market instruments of foreign and domestic companies and the
U.S. Government and foreign governments, governmental agencies and international
organizations. For a full description of the Fund's investment objective and
policies, see the Prospectus.
In seeking to achieve its investment objective, Global Fund may from time
to time engage in the following investment practices:
SETTLEMENT TRANSACTIONS. Global Fund may, for a fixed amount of United
States dollars, enter into a forward foreign exchange contract for the purchase
or sale of the amount of foreign currency involved in the underlying securities
transactions. In so doing, the Fund will attempt to insulate itself against
possible losses and gains resulting from a change in the relationship between
the United States dollar and the foreign currency during the period between the
date a security is purchased or sold and the date on which payment is made or
received. This process is known as "transaction hedging."
To effect the translation of the amount of foreign currencies involved in
the purchase and sale of foreign securities and to effect the "transaction
hedging" described above, the Fund may purchase or sell foreign currencies on a
"spot" (i.e. cash) basis or on a forward basis whereby the Fund purchases or
sells a specific amount of foreign currency, at a price set at the time of the
contract, for receipt of delivery at a specified date which may be any fixed
number of days in the future.
Such spot and forward foreign exchange transactions may also be utilized to
reduce the risk inherent in fluctuations in the exchange rate between the United
States dollar and the relevant foreign currency when foreign securities are
purchased or sold for settlement beyond customary settlement time (as described
below). Neither type of foreign currency transaction will eliminate fluctuations
in the prices of the Fund's portfolio or securities or prevent loss if the price
of such securities should decline.
PORTFOLIO HEDGING. When, in the opinion of the Fund's Sub-Adviser,
OppenheimerFunds, Inc. ("Oppenheimer"), it is desirable to limit or reduce
exposure in a foreign currency in order to moderate potential changes in the
United States dollar value of the portfolio, Global Fund may enter into a
forward foreign currency exchange contract by which the United States dollar
value of the underlying foreign portfolio securities can be approximately
matched by an equivalent United States dollar liability. The Fund may also enter
into forward currency exchange contracts to increase its exposure to a foreign
currency that Oppenheimer expects to increase in value relative to the United
States dollar. The Fund will not attempt to hedge all of its portfolio positions
and will enter into such transactions only to the extent, if any, deemed
appropriate by Oppenheimer. Hedging against a decline in the value of currency
does not eliminate fluctuations in the prices of portfolio securities or prevent
losses if the prices of such securities decline. The Fund intends to limit such
transactions to not more than 70% of its total assets.
FORWARD COMMITMENTS. Global Fund may make contracts to purchase securities
for a fixed price at a future date beyond customary settlement time ("forward
commitments") because new issues of securities are typically offered to
investors on that basis. Forward commitments involve a risk of loss if the value
of the security to be purchased declines prior to the settlement date. This risk
is in addition to the risk of decline in value of the Fund's other assets.
Although the Fund will enter into such contracts with the intention of acquiring
the securities, it may dispose of a commitment prior to settlement if Lexington
deems it appropriate to do so.
COVERED CALL OPTIONS. Global Fund may seek to preserve capital by writing
covered call options on securities which it owns. Such an option on an
underlying security would obligate the Fund to sell, and give the purchaser of
the option the right to buy, that security at a stated exercise price at any
time until a stated expiration date of the option.
REPURCHASE AGREEMENTS. A repurchase agreement is a contract under which
Global Fund would acquire a security for a relatively short period (usually not
more than 7 days) subject to the obligation of the seller to repurchase and the
Fund to resell such security at a fixed time and price (representing the Fund's
cost plus interest). Although the Fund may enter into repurchase agreements with
respect to any portfolio securities which it may acquire consistent with its
investment policies and restrictions, it is the Fund's present intention to
enter into repurchase agreements only with respect to obligations of the United
States Government or its agencies or instrumentalities to meet anticipated
redemptions or pending investment or reinvestment of Fund assets in portfolio
securities. The Fund will enter into repurchase agreements only with member
banks of the Federal Reserve System and with "primary dealers" in United States
Government securities. Repurchase agreements will be fully collateralized
including interest earned thereon during the entire term of the agreement. If
the institution defaults on the repurchase agreement, the Fund will retain
possession of the underlying securities. If bankruptcy proceedings are commenced
with respect to the seller, realization on the collateral by Global Fund may be
delayed or limited and the Fund may incur additional costs. In such case, the
Fund will be subject to risks associated with changes in market value of the
collateral securities. The Fund may enter into repurchase agreements only with
(a) securities dealers that have a total capitalization of at least $40,000,000
and a ratio of aggregate indebtedness to net capital of no more than 4 to 1, or,
alternatively, net capital equal to 6% of aggregate debit balances, or (b) banks
that have at least $1,000,000,000 in assets and a net worth of at least
$100,000,000 as of its most recent annual report. In addition, the aggregate
repurchase price of all repurchase agreements held by the Fund with any broker
shall not exceed 15% of the total assets of the Fund or $5,000,000, whichever is
greater. The Fund will not enter into repurchase agreements maturing in more
than seven days if the aggregate of such repurchase agreements and other
illiquid investments would exceed 10%. The operating expenses of Global Fund can
be expected to be higher than those of an investment company investing
exclusively in United States securities.
RULE 144A SECURITIES. Global Fund may purchase securities that are
restricted as to disposition under the federal securities laws, provided that
such restricted securities are eligible for resale to qualified institutional
investors pursuant to Rule 144A under the Securities Act of 1933 and subject to
the Fund's investment policy limitation that not more than 10% of its total
assets will be invested in restricted securities which are not eligible for
resale pursuant to Rule 144A. The Investment Manager, under procedures adopted
by the Board of Directors, will determine whether securities eligible for resale
under Rule 144A are liquid or not.
Portfolio turnover rates for Class A and Class B shares of Global Fund for
the fiscal years ended September 30, 1998, 1997 and 1996 were 122%, 132% and
142%, respectively. Portfolio turnover is the percentage of the lower of
security sales or purchases to the average portfolio value and would be 100% if
all securities in the Fund were replaced within a period of one year.
ASSET ALLOCATION FUND
The investment objective of Asset Allocation Fund is to seek high total
return, consisting of capital appreciation and current income. The Fund seeks
this objective by following an asset allocation strategy that contemplates
shifts among a wide range of investment categories and market sectors. The Fund
will invest in the following investment categories: equity securities of
domestic and foreign issuers, including common stocks, ADRs, preferred stocks,
convertible securities and warrants; debt securities of domestic and foreign
issuers, including mortgage-related and other asset-backed securities;
exchange-traded real estate investment trusts (REITs); equity securities of
companies involved in the exploration, mining, development, production and
distribution of gold ("gold stocks"); zero coupon securities and domestic money
market instruments. See "Investment Methods and Risk Factors" in the Prospectus
for a discussion of the additional risks associated with investment in foreign
securities and real estate securities, and see the discussion of the risks
associated with investment in gold stocks below.
Investment in gold stocks presents risks, because the prices of gold have
fluctuated substantially over short periods of time. Prices may be affected by
unpredictable monetary and political policies, such as currency devaluations or
revaluations, economic and social conditions within an individual country, trade
imbalances, or trade or currency restrictions between countries. The unstable
political and social conditions in South Africa and unsettled political
conditions prevailing in neighboring countries may have disruptive effects on
the market prices of securities of South African companies.
The Fund is not required to maintain a portion of its assets in each of the
permitted investment categories. The Fund, however, will maintain under normal
circumstances a minimum of 35% of its total assets in equity securities and 10%
in debt securities. The Fund will not invest more than 55% of its total assets
in money market instruments (except for temporary defensive purposes), more than
80% of its total assets in foreign securities, nor more than 20% of its total
assets in gold stocks. The Fund will not invest 25% or more of its assets in the
securities of any single country other than the United States.
The Fund's Sub-Adviser, Meridian Investment Management Corporation
("Meridian"), conducts quantitative investment research and uses the research to
strategically allocate the Fund's assets among the investment categories
identified above, primarily on the basis of a quantitative asset allocation
model. With respect to equity securities, the model analyzes a large number of
equity securities based on the following factors: current earnings, earnings
history, long-term earnings projections, current price, and risk. Meridian then
determines which sectors within an identified investment category are deemed to
be the most attractive relative to other sectors. For example, the model may
indicate that a portion of the Fund's assets should be invested in the domestic
equity category of the market and within this category that pharmaceutical
stocks represent a sector with an attractive total return potential.
Meridian identifies sectors of the domestic and international economy in
which the Fund will invest and then determines which equity securities to
purchase within the identified sectors.
With respect to the selection of debt securities for the Fund, the asset
allocation model provided by Meridian analyzes the prices of commodities and
finished goods to arrive at an interest rate projection. The Investment Manager
will determine the portion of the portfolio to allocate to debt securities and
the duration of those securities based on the model's interest rate projections.
Gold stocks and REITs will be analyzed in a manner similar to that used for
equity securities. Money market instruments will be analyzed based on current
returns and the current yield curve. The asset allocation model and stock
selection techniques used by the Fund may evolve over time or be replaced by
other asset allocation models and/or stock selection techniques. There is no
assurance that the model will correctly predict market trends or enable the Fund
to achieve its investment objective.
The debt securities, including convertible securities, in which the Fund
may invest will, at the time of investment, consist of "investment grade" bonds,
which are bonds rated BBB or better by S&P or Baa or better by Moody's or that
are unrated by S&P and Moody's but considered by the Investment Manager to be of
equivalent credit quality. If the Fund holds a security whose rating drops below
Baa or BBB, the Investment Manager will reevaluate the credit risk of the
security in light of then current market conditions and determine whether to
retain or dispose of the security. The Fund will not retain securities rated
below Baa or BBB in an amount that exceeds 5% of its net assets. Securities
rated BBB by S&P or Baa by Moody's have speculative characteristics as described
in Appendix A.
Asset Allocation Fund may invest in investment grade mortgage-backed
securities (MBSs), including mortgage pass-through securities and collateralized
mortgage obligations (CMOs). The Fund will not invest in an MBS if, as a result
of such investment, 25% or more of its total assets would be invested in MBSs,
including CMOs and mortgage pass-through securities. For a discussion of MBSs
and the risks associated with such securities, see "Investment Methods and Risk
Factors" - "Mortgage-Backed Securities" in the Prospectus.
The Fund may invest up to 10%, at the time of investment, of its total
assets in restricted securities, that are eligible for resale pursuant to Rule
144A under the Securities Act of 1933. See "Investment Methods and Risk Factors"
in the Prospectus for a discussion of restricted securities. The Fund may also
invest in shares of other investment companies as discussed under "Investment
Methods and Risk Factors," below.
The Fund may invest in zero coupon securities which are debt securities
that pay no cash income but are sold at substantial discounts from their face
value. Certain zero coupon securities also provide for the commencement of
regular interest payments at a deferred date. See "Investment Methods and Risk
Factors" for a discussion of zero coupon securities.
The Fund may write covered call options and purchase put options on
securities, financial indices and foreign currencies and may enter into futures
contracts. The Fund may buy and sell futures contracts (and options on such
contracts) to manage exposure to changes in securities prices and foreign
currencies and as an efficient means of adjusting overall exposure to certain
markets. It is the Fund's operating policy that initial margin deposits and
premiums on options used for non-hedging purposes will not equal more than 5% of
the Fund's net assets. The total market value of securities against which the
Fund has written call options may not exceed 25% of its total assets. The Fund
will not commit more than 5% of its total assets to premiums when purchasing put
options. Futures contracts and options may not always be successful hedges and
their prices can be highly volatile. Using futures contracts and options could
lower the Fund's total return and the potential loss from the use of futures can
exceed the Fund's initial investment in such contracts. Futures contracts and
options and the risks associated with such derivative securities are described
in further detail under "Investment Methods and Risk Factors" below.
The Fund may not purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, or equity
securities of issuers which are not readily marketable if, at the time of
investment, its aggregate investment in such securities would exceed 5% of its
total assets.
The Fund's investment in warrants may not exceed 5% of the value of the
Fund's net assets. Included in that amount, but not to exceed 2.0% of the value
of the Fund's net assets, may be warrants which are not listed on the New York
or American Stock Exchange. Warrants acquired by the Fund in units or attached
to securities are deemed to be without value. The portfolio turnover rate for
Class A and Class B shares of Asset Allocation Fund, for the fiscal years ended
September 30, 1998, 1997 and 1996 was 45%, 79% and 75%, respectively. Portfolio
turnover is the percentage of the lower of security sales or purchases to the
average portfolio value and would be 100% if all securities in the Fund were
replaced within a period of one year.
SOCIAL AWARENESS FUND
The investment objective of Social Awareness Fund is to seek capital
appreciation by investing in various types of securities which meet certain
social criteria established for the Fund. Social Awareness Fund will invest in a
diversified portfolio of common stocks (which may include ADRs), convertible
securities, preferred stocks and debt securities. See "Investment Methods and
Risk Factors" - "American Depositary Receipts." From time to time, the Fund may
purchase government bonds or commercial notes on a temporary basis for defensive
purposes.
Securities selected for their appreciation possibilities will be primarily
common stocks or other securities having the investment characteristics of
common stocks, such as securities convertible into common stocks. Securities
will be selected on the basis of their appreciation and growth potential.
Securities considered to have capital appreciation and growth potential will
often include securities of smaller and less mature companies. Such companies
may present greater opportunities for capital appreciation because of high
potential earnings growth, but may also involve greater risk. They may have
limited product lines, markets or financial resources, and they may be dependent
on a limited management group. Their securities may trade less frequently and in
limited volume, and only in the over-the-counter ("OTC") market or on smaller
securities exchanges. As a result, the securities of smaller companies may have
limited marketability and may be subject to more abrupt or erratic changes in
value than securities of larger, more established companies. The Fund may also
invest in larger companies where opportunities for above-average capital
appreciation appear favorable and the Fund's social criteria are satisfied.
The Social Awareness Fund may enter into futures contracts (a type of
derivative) (or options thereon) to hedge all or a portion of its portfolio or
as an efficient means of adjusting its exposure to the stock market. The Fund
will limit its use of futures contracts so that initial margin deposits or
premiums on such contracts used for non-hedging purposes will not equal more
than 5% of the Fund's net assets. The Fund may also write call and put options
on a covered basis and purchase put and call options on securities and financial
indices. The aggregate market value of the Fund's portfolio securities covering
call or put options will not exceed 25% of the Fund's net assets. See the
discussion of options and futures contracts under "Investment Methods and Risk
Factors." Under normal circumstances, the Social Awareness Fund will invest all
of its assets in issuers that meet its social criteria as set forth below and
that offer investment potential. Because of the limitations on investment
imposed by the social criteria, the availability of investment opportunities for
the Fund may be limited as compared to those of similar funds which do not
impose such restrictions on investment.
The Social Awareness Fund will not invest in securities of companies that
engage in the production of nuclear energy, alcoholic beverages or tobacco
products.
In addition, the Fund will not invest in securities of companies that
significantly engage in: (1) the manufacture of weapon systems; (2) practices
that, on balance, have a detrimental effect on the environment; or (3) the
gambling industry. The Fund will monitor the activities identified above to
determine whether they are significant to an issuer's business. Significance may
be determined on the basis of the percentage of revenue generated by, or the
size of operations attributable to, such activities. The Fund may invest in an
issuer that engages in the activities set forth above, in a degree that is not
deemed significant by the Investment Manager. In addition, the Fund will seek
out companies that have contributed substantially to the communities in which
they operate, have a positive record on employment relations, have made
substantial progress in the promotion of women and minorities or in the
implementation of benefit policies that support working parents, or have taken
notably positive steps in addressing environmental challenges.
The Investment Manager will evaluate an issuer's activities to determine
whether it engages in any practices prohibited by the Fund's social criteria. In
addition to its own research with respect to an issuer's activities, the
Investment Manager will also rely on other organizations that publish
information for investors concerning the social policy implications of corporate
activities. The Investment Manager may rely upon information provided by
advisory firms that provide social research on U.S. corporations, such as
Kinder, Lydenberg & Domini & Co., Inc., Franklin Insight, Inc. and
Prudential-Bache Capital Funding. Investment selection on the basis of social
attributes is a relatively new practice and the sources for this type of
information are not well established. The Investment Manager will continue to
identify and monitor sources of such information to screen issuers which do not
meet the social investment restrictions of the Fund.
If after purchase of an issuer's securities by Social Awareness Fund, it is
determined that such securities do not comply with the Fund's social criteria,
the securities will be eliminated from the Fund's portfolio within a reasonable
time. This requirement may cause the Fund to dispose of a security at a time
when it may be disadvantageous to do so. The portfolio turnover rate for Class A
and Class B shares of Social Awareness Fund for the fiscal year ended September
30, 1998, was 41%. The annualized portfolio turnover rate for Class A and Class
B shares for the period November 4, 1996 (date of inception) to September 30,
1997, was 38% for Social Awareness Fund. Portfolio turnover is the percentage of
the lower of security sales or purchases to the average portfolio value and
would be 100% if all securities in the Fund were replaced within a period of one
year.
VALUE FUND
The investment objective of the Value Fund is to seek long-term growth of
capital. The Value Fund will seek to achieve its objective through investment in
a diversified portfolio of securities. Under normal circumstances the Fund will
consist primarily of various types of common stock, which may include ADRs, and
securities convertible into common stocks which the Investment Manager believes
are undervalued relative to assets, earnings, growth potential or cash flows.
See the discussion of ADRs under "Investment Methods and Risk Factors." Under
normal circumstances, the Fund will invest at least 65% of its total assets in
the securities of companies which the Investment Manager believes are
undervalued.
The Value Fund may also invest in (i) preferred stocks; (ii) warrants; and
(iii) investment grade debt securities (or unrated securities of comparable
quality). The Value Fund may purchase securities on a "when-issued" or "delayed
delivery basis" in excess of customary settlement periods for the type of
security involved. The Fund may purchase securities which are restricted as to
disposition under the federal securities laws, provided that such securities are
eligible for resale to qualified institutional investors pursuant to Rule 144A
under the Securities Act of 1933 and subject to the Fund's policy that not more
than 15% of its net assets will be invested in illiquid securities. The Value
Fund reserves the right to invest its assets temporarily in cash and money
market instruments when, in the opinion of the Investment Manager, it is
advisable to do so on account of current or anticipated market conditions. The
Fund may utilize repurchase agreements on an overnight basis or bank demand
accounts, pending investment in securities or to meet potential redemptions or
expenses. See the discussion of when-issued securities, restricted securities
and repurchase agreements under "Investment Methods and Risk Factors."
The portfolio turnover rate for Class A and Class B shares of Value Fund
for the fiscal year ended September 30, 1998, was 98%. The annualized portfolio
turnover rate for Class A and Class B shares for the period May 1, 1997 (date of
inception) to September 30, 1997, was 35% for Value Fund. Portfolio turnover is
the percentage of the lower of security sales or purchases to the average
portfolio value and would be 100% if all securities in the Fund were replaced
within a period of one year. A 100% turnover rate is substantially greater than
that of most mutual funds.
SMALL COMPANY FUND
The investment objective of the Small Company Fund is to seek long-term
growth of capital. The Fund invests primarily in equity securities of small
market capitalization companies ("small company stocks"). Market capitalization
means the total market value of a company's outstanding common stock. The Fund
anticipates that under normal market conditions, the Fund will invest at least
65% of its assets in equity securities of domestic and foreign companies with
market capitalizations of less than $1 billion at the time of purchase. The
equity securities in which the Fund may invest include common stocks, preferred
stocks (both convertible and non-convertible), warrants and rights. It is
anticipated that the Fund will invest primarily in companies whose securities
are traded on foreign or domestic stock exchanges or in the over-the-counter
market ("OTC"). The Fund also may invest in securities of emerging growth
companies, some of which may have market capitalizations over $1 billion.
Emerging growth companies are companies which have passed their start-up phase
and which show positive earnings and prospects of achieving significant profit
and gain in a relatively short period of time.
Under normal conditions, the Fund intends to invest primarily in small
company stocks; however, the Fund is also permitted to invest up to 35% of its
assets in equity securities of domestic and foreign issuers with a market
capitalization of more than $1 billion at the time of purchase, debt obligations
and domestic and foreign money market instruments, including bankers
acceptances, certificates of deposit and discount notes of U.S. Government
securities. Debt obligations in which the Fund may invest will be investment
grade debt obligations, although the Fund may invest up to 5% of its assets in
non-investment grade debt obligations. In addition, for temporary or emergency
purposes, the Fund can invest up to 100% of total assets in cash, cash
equivalents, U.S. Government securities, commercial paper and certain other
money market instruments, as well as repurchase agreements collateralized by
these types of securities. The Fund also may invest in reverse repurchase
agreements and shares of non-affiliated investment companies. See the discussion
of such securities under "Investment Methods and Risk Factors" in the
Prospectus.
The Fund may purchase an unlimited number of foreign securities, including
securities of companies in emerging markets. The Fund may invest in foreign
securities, either directly or indirectly through the use of depositary
receipts. Depositary receipts, including American Depositary Receipts ("ADRs"),
European Depository Receipts and American Depository Shares are generally issued
by banks or trust companies and evidence ownership of underlying foreign
securities. The Fund also may invest in securities of foreign investment funds
or trusts (including passive foreign investment companies). See the discussion
of foreign securities, emerging growth stocks, currency risk and ADRs under
"Investment Methods and Risk Factors."
Some of the countries in which the Fund may invest may not permit direct
investment by outside investors. Investment in such countries may only be
permitted through foreign government-approved or government-authorized
investment vehicles, which may include other investment companies. Investing
through such vehicles may involve frequent or layered fees or expenses and may
also be subject to limitation under the Investment Company Act of 1940. See
"Investment Methods and Risk Factors" - "Shares of Other Investment Companies"
for more information.
The Fund may purchase and sell foreign currency on a spot basis and may
engage in forward currency contracts, currency options and futures transactions
for hedging or risk management purposes. See the discussion of currency risk
under "Investment Methods and Risk Factors."
At various times the Fund may invest in derivative instruments for hedging
or risk management purposes or for any other permissible purpose consistent with
the Fund's investment objective. Derivative transactions in which the Fund may
engage include the writing of covered put and call options on securities and the
purchase of put and call options thereon, the purchase of put and call options
on securities indexes and exchange-traded options on currencies and the writing
of put and call options on securities indexes. The Fund may enter into spread
transactions and swap agreements. The Fund also may buy and sell financial
futures contracts which may include interest-rate futures, futures on currency
exchanges, and stock and bond index futures contracts. The Fund may enter into
any futures contracts and related options without limit for "bona fide hedging"
purposes (as defined in the Commodity Futures Trading Commission regulations)
and for other permissible purposes, provided that aggregate initial margin and
premiums on positions engaged in for purposes other than "bona fide hedging"
will not exceed 5% of its net asset value, after taking into account unrealized
profits and losses on such contracts. See "Investment Methods and Risk Factors"
for more information on options, futures (and options thereon) and other
derivative instruments.
The Fund may acquire warrants which are securities giving the holder the
right, but not the obligation, to buy the stock of an issuer at a given price
(generally higher that the value of the stock at the time of issuance), on a
specified date, during a specified period, or perpetually. Warrants may be
acquired separately or in connection with the acquisition of securities. The
Fund may purchase warrants, valued at the lower of cost or market value, of up
to 5% of the Fund's net assets. Included in that amount, but not to exceed 2% of
the Fund's net assets, may be warrants that are not listed on any recognized
U.S. or foreign stock exchange. Warrants acquired by the Fund in units or
attached to securities are not subject to these restrictions.
The Fund may engage in short selling against the box, provided that no more
that 15% of the value of the Fund's net assets is in deposits on short sales
against the box at any one time. The Fund also may invest in real estate
investment trusts ("REITs") and other real estate industry companies or
companies with substantial real estate investments. See the discussion of real
estate securities under "Investment Methods and Risk Factors."
The Fund may invest in restricted securities, including Rule 144A
securities. See the discussion of restricted securities under "Investment
Methods and Risk Factors." The Fund also may invest without limitation in
securities purchased on a when-issued or delayed delivery basis as discussed
under "Investment Methods and Risk Factors."
While there is careful selection and constant supervision by the Fund's
Sub-Adviser, Strong Capital Management, Inc. ("Strong"), there can be no
guarantee that the Fund's objective will be achieved. Strong invests in
companies whose earnings are believed to be in a relatively strong growth trend,
and, to a lesser extent, in companies in which significant further growth is not
anticipated but which are perceived to be undervalued. In identifying companies
with favorable growth prospects, Strong considers factors such as prospects for
above-average sales and earnings growth; high return on invested capital;
overall financial strength; competitive advantages, including innovative
products and services; effective research, product development and marketing;
and stable, capable management.
Investing in securities of small-sized and emerging growth companies may
involve greater risks than investing in larger, more established issuers since
these securities may have limited marketability and, thus, they may be more
volatile than securities of larger, more established companies or the market
averages in general. Because small-sized companies normally have fewer shares
outstanding than larger companies, it may be more difficult for the Fund to buy
or sell significant numbers of such shares without an unfavorable impact on
prevailing prices. Small-sized companies may have limited product lines, markets
or financial resources and may lack management depth. In addition, small-sized
companies are typically subject to wider variations in earnings and business
prospects than are larger, more established companies. There is typically less
publicly available information concerning small-sized companies than for larger,
more established ones.
Securities of issuers in "special situations" also may be more volatile,
since the market value of these securities may decline in value if the
anticipated benefits do not materialize. Companies in "special situations"
include, but are not limited to, companies involved in an acquisition or
consolidation; reorganization; recapitalization; merger, liquidation or
distribution of cash, securities or other assets; a tender or exchange offer, a
breakup or workout of a holding company; litigation which, if resolved
favorably, would improve the value of the companies' securities; or a change in
corporate control.
Although investing in securities of emerging growth companies or issuers in
"special situations" offers potential for above-average returns if the companies
are successful, the risk exists that the companies will not succeed and the
prices of the companies' shares could significantly decline in value. Therefore,
an investment in the Fund may involve a greater degree of risk than an
investment in other mutual funds that seek long-term growth of capital by
investing in better-known, larger companies.
The annualized portfolio turnover rate for Class A and Class B shares for
the period October 15, 1997 (date of inception) to September 30, 1998 was 366%
for Small Company Fund. Portfolio turnover is the percentage of the lower of
securities sales or purchases to the average portfolio value and would be 100%
if all securities in the Fund were replaced within a period of one year. A 100%
turnover rate is substantially greater than that of most mutual funds.
SECURITY ENHANCED INDEX FUND
The investment objective of the Security Enhanced Index Fund (the "Fund")
is to outperform the Standard & Poor's 500 Composite Stock Price index (the "S&P
500(R) Index") through stock selection resulting in different weightings of
common stocks relative to the index.
The Fund will include the common stock of companies included in the S&P
500. The S&P 500 is an index of 500 common stocks, most of which trade on the
New York Stock Exchange Inc. (the "NYSE"). The Sub-Adviser, Bankers Trust
Company, believes that the S&P 500 is representative of the performance of
publicly traded common stocks in the U.S. in general.
In seeking to outperform the S&P 500, the Sub-Adviser starts with a
portfolio of stocks representative of the holdings of the index. It then uses a
set of quantitative criteria that are designed to indicate whether a particular
stock will predictably generate returns that will exceed or be less than the
performance of the S&P 500. Based on these criteria, the Sub-Adviser determines
whether the Fund should overweight, underweight or hold a neutral position in
the stock relative to the proportion of the S&P 500 that the stock represents.
While the majority of the issues held by the Fund will have neutral weightings
to the S&P 500, approximately 100 will be over or underweighted relative to the
index. In addition, the Sub-Adviser may determine based on the quantitative
criteria that certain S&P 500 stocks should not be held by the Fund in any
amount. The Sub-Adviser believes that the various quantitative criteria used to
determine which issues to over or underweight will balance each other so that
the overall risk of the Fund will not be materially different than risk of the
S&P 500 itself.
The Sub-Adviser will not purchase the stock of its parent company, Bankers
Trust New York Corporation, which is included in the S&P 500.
ABOUT THE S&P 500. The S&P 500 is well-known stock market index that
includes common stocks of 500 companies from several industrial sectors
representing a significant portion of the market value of all common stocks
publicly traded in the United States, most of which are listed on the NYSE.
Stocks in the S&P 500 are weighted according to their market capitalization
(i.e., the number of shares outstanding multiplied by the stock's current
price). The composition of the S&P 500 is determined by S&P and is based on such
factors as the market capitalization and trading activity of each stock and its
adequacy as a representation of stocks in a particular industry group, and may
be changed from time to time. "Standard & Poor's (R)", "S&P 500(R) ", "Standard
& Poor's 500", and "500" are trademarks of the McGraw-Hill Companies, Inc.
The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's,
a division of the McGraw-Hill Companies, Inc. ("S&P"). S&P makes no
representation or warranty, express or implied, to the shareholders of the Fund
or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly or the ability of the S&P 500
to track general stock market performance. S&P has no obligation to take the
needs of the Investment Manger, Bankers Trust or the shareholders of the Fund
into consideration in determining, composing or calculating the S&P 500. S&P is
not responsible for and has not participated in the determination of the prices
and amount of the Fund or the timing of the issuance or sale of the Fund, or in
the determination or calculation of the Fund's net asset value. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the Fund.
INVESTMENT CONSIDERATIONS. The Fund may be appropriate for investors who
are willing to endure stock market fluctuations in pursuit of potentially higher
long-term returns. The Fund invests primarily for growth. The Fund is intended
to be a long-term investment vehicle and is not designed to provide investors
with a means of speculating on short-term market movements.
As a mutual fund investing primarily in common stocks, the Fund is subject
to market risk --- i.e., the possibility that common stock prices will decline
over short or even extended periods. The U.S. stock market tends to be cyclical,
with periods when stock prices generally rise and periods when prices generally
decline.
As a diversified mutual fund, no more than 5% of the assets of the Fund may
be invested in the securities of one issuer (other than U.S. Government
Securities), except that up to 25% of the Fund's assets may be invested without
regard to this limitation. The Fund will not invest more than 25% of its assets
in the securities of issuers in any one industry. In the unlikely event that the
S&P 500 should concentrate to an extent greater than that amount, the Fund's
ability to achieve its objective may be impaired. No more than 15% of the
Portfolio's net assets may be invested in illiquid or not readily marketable
securities (including repurchase agreements and time deposits with maturities of
more than seven days).
The Fund may maintain up to 25% of its assets in short-term debt securities
and money market instruments to meet redemption requests or to facilitate
investment in the securities of the S&P 500. Securities index futures contracts
and related options, warrants and convertible securities may be used for several
reasons: to simulate full investment in the S&P 500 while retaining a cash fund
for management purposes, to facilitate trading, to reduce transaction costs or
to seek higher investment returns when a futures contract, option, warrant or
convertible security is priced more attractively than the underlying equity
security or S&P 500. These instruments may be considered derivatives. See
"Investment Methods and Risk Factors" for more information about futures,
options and warrants.
The following discussion contains more detailed information about types of
instruments in which the Fund may invest and strategies the Sub-Adviser may
employ in pursuit of the Fund's investment objective.
OTHER EQUITY SECURITIES. As part of one of the strategies used to
outperform the S&P 500, the Fund may invest in the equity securities of
companies that are not included in the S&P 500. These equity securities may
include securities of companies that are the subject of publicly announced
acquisitions or other major corporate transactions. Securities of some of these
companies may perform much like a fixed income investment because the market
anticipates that the transaction will likely be consummated, resulting in a cash
payment for the securities. In such cases, the Fund may enter into securities
index futures contracts and/or related options as described in this statement of
additional information in order to maintain its exposure to the equity markets
when investing in these companies. While this strategy is intended to generate
additional gains for the Fund without materially increasing the risk to which
the Fund is subject, there can be no assurance that the strategy will achieve
its intended results. The Fund will not invest more than 25% of its total assets
in equity securities of companies not included in the S&P 500.
SHORT-TERM INSTRUMENTS. When the Fund experiences large cash inflows
through the sale of securities and desirable equity securities that are
consistent with the Fund's investment objective are unavailable in sufficient
quantities or at attractive prices, the Fund may hold short-term investments for
a limited time pending availability of such equity securities. Short-term
instruments consist of: (i) short-term obligations issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities or by any of the
states; (ii) other short-term debt securities rated AA or higher by S&P or Aa or
higher by Moody's or, if unrated, of comparable quality in the opinion of the
Sub-Advisor; (iii) commercial paper; (iv) bank obligations, including negotiable
certificates of deposit, time deposits and bankers' acceptances; and (v)
repurchase agreements. At the time the Fund invests in commercial paper, bank
obligations or repurchase agreements, the issuer or the issuer's parent must
have outstanding debt rated AA or higher by S&P or Aa or higher by Moody's or
outstanding commercial paper or bank obligations rated A-1 by S&P or Prime-1 by
Moody's; or, if no such ratings are available, the instrument must be of
comparable quality in the opinion of the Sub-Adviser.
U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations issued or
guaranteed by U.S. Government, its agencies or instrumentalities. These
obligations may or may not be backed by the "full faith and credit" of the
United States. In the case of securities not backed by the full faith and credit
of the United States, the Fund must look principally to the federal agency
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments. Securities in which the Fund
may invest that are not backed by the full faith and credit of the United States
include, but are not limited to, obligations of the Tennessee Valley Authority,
the Federal Home Loan Mortgage Corporation and the U.S. Postal Service, each of
which has the right to borrow from the U.S. Treasury to meet its obligations,
and obligations of the Federal Farm Credit System and the Federal Home Loan
Banks, both of whose obligations may be satisfied only by the individual credits
of each issuing agency. Securities which are backed by the full faith and credit
of the United States include obligations of the Government National Mortgage
Association, the Farmers Home Administration, and the Export-Import Bank.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Funds may purchase
securities on a when-issued or delayed delivery basis. For example, delivery of
and payment for these securities can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
the settlement date is fixed. The value of such securities is subject to market
fluctuation and no interest accrues to the Portfolio until settlement takes
place. See "Investment Methods and Risk Factors" - "When Issued Securities" for
more information.
EQUITY INVESTMENTS. The Fund may invest in equity securities listed on any
domestic securities exchange or traded in the over-the-counter market as well as
certain restricted or unlisted securities. They may or may not pay dividends or
carry voting rights. Common stock occupies the most junior position in a
company's capital structure.
REVERSE REPURCHASE AGREEMENTS. The Fund may borrow funds for temporary or
emergency purposes, such as meeting larger than anticipated redemption requests,
and not for leverage, by among other things, agreeing to sell portfolio
securities to financial institutions such as banks and broker-dealers and to
repurchase them at a mutually agreed date and price (a "reverse repurchase
agreement"). At the time the Fund enters into a reverse repurchase agreement it
will place in a segregated custodial account cash or other liquid assets having
a value equal to the repurchase price, including accrued interest. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by the Fund may decline below the repurchase price of those securities.
Reverse repurchase agreements are considered to be borrowings by the Fund.
CONVERTIBLE SECURITIES. Convertible securities may be debt securities or
preferred stocks that may be converted into common stock or that carry the right
to purchase common stock. Convertible securities entitle the holder to exchange
the securities for a specified number of shares of common stock, usually of the
same company, at specified prices within a certain period of time.
The terms of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holders' claims on assets and earnings are subordinated to the claims of other
creditors, and are senior to the claims of preferred and common shareholders. In
the case of preferred stock, the holders' claims on assets and earnings are
subordinated to the claims of all creditors and are senior to the claims of
common shareholders.
DERIVATIVES. The Fund may invest in various instruments that are commonly
known as derivatives. Generally, a derivative is a financial arrangement, the
value of which is based on, or "derived" from, a traditional security, asset, or
market index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use the.
There are a range of risks associated with those uses. Futures and options are
commonly used for traditional hedging purposes to attempt to protect a fund from
exposure to changing interest rates, securities prices or currency exchange
rates and as a low cost method of gaining exposure to a particular securities
market without investing directly in those securities.
The Fund will only use derivatives for hedging purposes. While derivatives
can be used as leveraged investments, the Fund may not use them to leverage its
net assets. Derivatives will not be used to increase portfolio risk above the
level that would be achieved using only traditional investment securities or to
acquire exposure to changes in the value of assets or indices that by themselves
would not be purchased for the Fund. The Fund will not invest in such
instruments as part of a temporary defensive strategy (in anticipation of
declining stock prices) to protect against potential market declines. See
"Investment Methods and Risk Factors" for more information about options and
futures.
The portfolio turnover rate is not yet available for Enhanced Index Fund as
it did not begin operations until January 1999. However, it is anticipated that
the annual portfolio turnover ate will not exceed ____%. Portfolio turnover is
the percentage of the lower of security sales or purchases to the average
portfolio value and would be 100% if all securities in the Fund were replaced
within a period of one year.
SECURITY INTERNATIONAL FUND
The investment objective of the Fund is long-term capital appreciation from
investment in foreign equity securities (or other securities with equity
characteristics); the production of any current income is incidental to this
objective. The Fund invests primarily in established companies based in
developed countries outside the United States, but may also invest in emerging
market securities. There can be no assurance that the investment objective of
the Fund will be achieved.
The Fund is designed for investors who are willing to accept short-term
domestic and/or foreign stock market fluctuations in pursuit of potentially
higher long-term returns.
The Fund is not itself a balanced investment plan. Investors should
consider their investment objective and tolerance for risk when making an
investment decision.
The value of the Fund's investments varies based upon many factors. Stock
values fluctuate, sometimes dramatically, in response to the activities of
individual companies and general market and economic conditions. Over time,
however, stocks have shown greater long-term growth potential than other types
of securities. Lower quality securities offer higher yields, but also carry more
risk. Because many foreign investments are denominated in foreign currencies,
changes in the value of these currencies can significantly affect the Fund's
share price. General economic factors in the various world markets can also
impact the value of an investor's investment. When an investor sells his or her
shares, they may be worth more or less than what the investor paid for them.
The following is a discussion of the various investments of and techniques
employed by the Fund. Additional information about the investment policies of
the Fund appears in "Investment Methods and Risk Factors" herein.
Under normal circumstances, the Fund will invest at least 65% of the value
of its total assets in the equity securities of foreign issuers, consisting of
common stock and other securities with equity characteristics. These issuers are
primarily established companies based in developed countries outside the United
States. However the Fund may also invest in securities of issuers in
underdeveloped countries. Investments in these countries will be based upon what
the Sub-Adviser, Bankers Trust Company ("Bankers Trust"), believes to be an
acceptable degree of risk in anticipation of superior returns. The Fund will at
all times be invested in the securities of issuers based in a least three
countries other than the United States. For further discussion of the unique
risks associated with investing in foreign securities in both developed and
underdeveloped countries, see "Investment Objectives and Risk Factors" -
"Certain Risks of Foreign Investing".
The Fund's investment will generally be diversified among several
geographic regions and countries. Criteria for determining the appropriate
distribution of investments among various countries and regions include the
prospects for relative growth among foreign countries, expected levels of
inflation, government policies influencing business conditions, the outlook for
currency relationships and the range of alternative opportunities available to
international investors.
In countries and regions with well-developed capital markets where more
information is available, Bankers Trust will seek to select individual
investments for the Fund. Criteria for selection of individual securities
include the issuer's competitive position, prospects for growth, adviserial
strength, earnings quality, underlying asset value, relative market value and
overall marketability. The Fund may invest in securities of companies having
various levels of net worth, including smaller companies whose securities may be
more volatile than securities offered by larger companies with higher levels of
net worth.
In other countries and regions where capital markets are underdeveloped or
not easily accessed and information is difficult to obtain, the Fund may choose
to invest only at the market level. Here the Fund may seek to achieve country
exposure through use of options or futures based upon an established index of
securities issued by local issuers. Similarly, country exposure may also be
achieved through investments in other registered investment companies.
Restrictions on both these types of investment are more fully described below.
The remainder of the Fund's assets will be invested in dollar and
non-dollar denominated short-term instruments. These investments are subject to
the conditions discussed in more detail below.
The Fund invests primarily in common stocks and other securities with
equity characteristics. For purposes of the Fund's policy of investing at least
65% of the value of its total assets in the equity securities of foreign
issuers, "equity securities" are defined as common stock, preferred stock, trust
or limited partnership interests, rights and warrants, and convertible
securities (consisting of debt securities or preferred stock that may be
converted into common stock or that carry the right to purchase common stock).
The Fund invests in securities listed on foreign or domestic securities
exchanges and securities traded in foreign or domestic over-the-counter markets
and may invest in restricted or unlisted securities.
The Fund may also utilize the following investments and investment
techniques and practices: American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRS"), European Depositary Receipts ("EDRs"), Rule 144A
securities, when-issued and delayed deliver securities, securities lending,
repurchase agreements, foreign currency exchange transactions, options on
stocks, options on foreign stock indices, futures contracts on foreign stock
indices, and options on futures contracts. See "Investment Methods and Risk
Factors" for further information.
The Fund intends to stay invested in the securities described above to the
extent practical in light of its objective and long-term investment perspective.
However the Fund assets may be invested in short-term instruments with remaining
maturities of 397 days or less (or in money market mutual funds) to meet
anticipated redemptions and expenses or for day-to-day operating purposes and
when, in the Sub-Adviser's opinion, it is advisable to adopt a temporary
defensive position because of unusual or adverse conditions affecting the equity
markets. In addition, when the Fund experiences large cash inflows through the
sale of securities, and desirable equity securities that are consistent with the
Fund's investment objective are unavailable in sufficient quantities or at
attractive prices, the Fund may hold short-term investments for a limited time
pending availability of such equity securities. Short-term instruments consist
of foreign and domestic: (i) short-term obligations of sovereign governments,
their agencies, instrumentalities, authorities or political subdivisions; (ii)
other short-term debt securities rated Aa or higher by Moody's Investors
Service, Inc. ("Moody's") or AA or higher by Standard & Poor's Ratings Group
("S&P") or, if unrated, of comparable quality in the opinion of the Sub-Adviser;
(iii) commercial paper; (iv) bank obligations, including negotiable certificates
of deposit, time deposits and bankers' acceptances; and (v) repurchase
agreements. At the time the Fund invests in commercial paper, bank obligations
or repurchase agreements, the issuer or the issuer's parent must have
outstanding commercial paper or bank obligations rated Prime-1 by Moody's or A-1
by S&P; or, if no such rating are available, the instrument must be of
comparable quality in the opinion of the Sub-Adviser. These instruments may be
denominated in U.S. dollars or in foreign currencies that have been determined
to be of high quality by a nationally recognized statistical rating
organization, or if unrated, by the Sub-Adviser. For more information on these
rating categories see the "Appendix".
As a diversified mutual fund, no more than 5% of the assets of the Fund may
be invested in the securities of one issuer (other than U.S. government
securities), except that up to 25% of the Fund's assets may be invested without
regard to this limitation. The Fund will not invest more than 25% of its assets
in the securities of issuers in any one industry. No more than 15% of the Fund's
net assets may be invested in illiquid or not readily marketable securities
(including repurchase agreements and time deposits maturing in more than seven
calendar days).
The portfolio turnover rate is not yet available for International Fund as
it did not begin operations until January 1999. However, it is anticipated that
the annual portfolio turnover ate will not exceed ____%. Portfolio turnover is
the percentage of the lower of security sales or purchases to the average
portfolio value and would be 100% if all securities in the Fund were replaced
within a period of one year.
SECURITY SELECT 25 FUND
The investment objective of the Select 25 Fund is to seek long-term growth
of capital. It is a diversified fund that pursues its objective by normally
concentrating its investments in a core position of 20-30 common stocks of
growth companies which have exhibited consistent above average earnings growth.
The Investment Manager selects as the core position for the Fund, what it
believes to be the premier growth companies. The Investment Manager uses a
"bottom-up" approach in selecting growth stocks. Portfolio holdings will be
replaced when one or more of the companies' fundamentals have changed and, in
the opinion of the Investment Manager, it is no longer a premier growth company.
There can be no assurance that the Fund's objective will be achieved.
The Select 25 Fund may invest in (i) common stocks; (ii) preferred stocks;
(iii) foreign securities (including ADRs); and (iv) investment grade debt
securities (or unrated securities of comparable quality). The Fund may purchase
securities on a "when-issued" or "delayed delivery basis" in excess of customary
settlement periods for the type of security involved. The Fund may purchase
securities which are restricted as to disposition under the federal securities
laws, including securities that are eligible for resale to qualified
institutional investors pursuant to Rule 144A under the Securities Act of 1933
and subject to the Fund's policy that not more than 15% of its net assets will
be invested in illiquid securities. The Select 25 Fund reserves the right to
invest its assets temporarily in cash and money market instruments when, in the
opinion of the Investment Manager, it is advisable to do so on account of
current or anticipated market conditions. The Fund may utilize repurchase
agreements on an overnight basis or bank demand accounts, pending investment in
securities or to meet potential redemptions or expenses. See the discussion of
foreign securities, when issued securities, restricted securities and repurchase
agreements under "Investment Methods and Risk Factors."
The portfolio turnover rate is not yet available for the Select 25 Fund as
it did not begin operations until January of 1999. However, it is anticipated
that the annual portfolio turnover rate will normally be less than 25%.
Portfolio turnover is the percentage of the lower of security sales or purchases
to the average portfolio value and would be 100% if all securities in the Fund
were replaced within a period of one year.
SECURITY ULTRA FUND
The investment objective of Ultra Fund is to seek capital appreciation.
Investment securities will be selected on the basis of their appreciation
possibilities. Current income will not be a factor in selecting investments and
any such income should be considered incidental.
There can be no assurance that the investment objective of Ultra Fund will
be achieved. Nevertheless, Ultra Fund hopes, by careful selection of individual
securities and by supervision of the investment portfolio, to increase the value
of the Fund's shares.
Stocks considered to have growth potential will include securities of
newer, unseasoned companies and may involve greater risks than investments in
companies with demonstrated earning power. At times Ultra Fund may invest in
warrants to purchase (or securities convertible into) common stocks or in other
classes of securities which the Investment Manager believes will contribute to
the attainment of its investment objective. Securities other than common stock
may be held, but Ultra Fund will not normally invest in fixed income securities
except for defensive purposes or to employ uncommitted cash balances. Ultra Fund
expects that it may invest in certificates of deposit issued by banks or other
bank demand accounts, pending investment in other securities or to meet
potential redemptions or expenses. Ultra Fund will not concentrate its
investments in a particular industry or group of industries. As a matter of
operating policy, Ultra Fund may not invest in illiquid securities in excess of
15% of its net assets.
The Fund may enter into futures contracts to hedge all or a portion of its
portfolio, or as an efficient means of adjusting its exposure to the stock
market. The Fund will limit its use of futures contracts so that initial margin
deposits or premiums on such contracts used for non-hedging purposes will not
equal more than 5% of the Fund's net asset value. Futures contracts and the
risks associated with such instruments are described in further detail under
"Investment Methods and Risk Factors" below.
In seeking capital appreciation, Ultra Fund expects to trade to a
substantial degree in securities for the short term. That is, Ultra Fund will be
engaged essentially in trading operations based on short term market
considerations, as distinct from long-term investments, based upon fundamental
evaluation of securities. Investments for long-term profits are made when such
action is considered to be sound and helpful to Ultra Fund's overall objective.
This investment policy is very speculative and involves substantial risk. An
investor should not consider a purchase of Ultra Fund's shares as equivalent to
a complete investment program. Ultra Fund does not presently purchase letter or
restricted stock.
Since Ultra Fund will trade securities for the short term, the annual
portfolio turnover rate generally may be expected to be greater than 100%.
Portfolio turnover is the percentage of the lower of security sales or purchases
to the average portfolio value and would be 100% if all securities in Ultra Fund
were replaced within a period of one year. A 100% turnover rate is substantially
greater than that of most mutual funds. The portfolio turnover rate for Class A
and Class B shares of Ultra Fund for the fiscal years ended September 30, 1998,
1997 and 1996 was as follows: 1998 - 116%, 1997 - 68% and 1996 - 161%.
Short-term investments increase portfolio turnover and brokerage costs to
Ultra Fund and thus to its stockholders. Moreover, to the extent short-term
transactions result in the realization of net gains in securities held less than
one year, Ultra Fund's stockholders will be taxed on any such gains at ordinary
income tax rates.
Ultra Fund will not make short sales of securities unless at the time of
such sales it owns or has the right to acquire, as a result of the ownership of
convertible or exchangeable securities and without the payment of further
consideration, an equal amount of such securities, and it will retain such
securities so long as it is in a short position as to them. Should such
securities be sold short, the underlying security will be valued at the asked
price. Such short sales will be used by Ultra Fund only for the purpose of
deferring recognition of gain or loss for federal income tax purposes.
The foregoing investment objective and policies of Ultra Fund may be
altered by the Board of Directors without the approval of stockholders.
INVESTMENT METHODS AND RISK FACTORS
Some of the risk factors related to certain securities, instruments and
techniques that may be used by one or more of the Funds are described in the
"Investment Objectives and Policies" and "Investment Methods and Risk Factors"
sections of the applicable Prospectus and in this Statement of Additional
Information. The following is a description of certain additional risk factors
related to various securities, instruments and techniques. The risks so
described only apply to those Funds which may invest in such securities and
instruments or which use such techniques. Also included is a general description
of some of the investment instruments, techniques and methods which may be used
by one or more of the Funds. The methods described only apply to those Funds
which may use such methods. Although a Fund may employ the techniques,
instruments and methods described below, consistent with its investment
objective and policies and any applicable law, no Fund will be required to do
so.
SHARES OF OTHER INVESTMENT COMPANIES. Certain of the Funds may invest in
shares of other investment companies. The Fund's investment in shares of other
investment companies may not exceed immediately after purchase 10 percent of the
Fund's total assets and no more than 5 percent of its total assets may be
invested in the shares of any one investment company. Investment in the shares
of other investment companies has the effect of requiring shareholders to pay
the operating expenses of two mutual funds.
REPURCHASE AGREEMENTS. Each of the Funds may utilize repurchase agreements
on an overnight basis (or with maturities of up to seven days in the case of
Global, Small Company, Enhanced Index and International Funds) wherein the Fund
acquires a debt instrument for the short period, subject to the obligation of
the seller to repurchase and the Fund to resell such debt instrument at a fixed
price. Although each of the Funds may enter into repurchase agreements with
respect to any portfolio securities which it may acquire consistent with its
investment policies and restrictions, it is the intention of each Fund, except
Small Company, Enhanced Index and International Funds to enter into repurchase
agreements only with respect to obligations of the United States Government or
its agencies or instrumentalities to meet anticipated redemptions or pending
investment or reinvestment of Fund assets in portfolio securities. The Funds,
except the Enhanced Index and International Funds, will enter into repurchase
agreements only with (i) banks which are members of the Federal Reserve System,
or (ii) securities dealers (if permitted to do so under the Investment Company
Act of 1940) who are members of a national securities exchange or market makers
in government securities. The Enhanced Index and International Funds may enter
into repurchase agreements only with issuers who, individually or with the
issuer's parent, have outstanding debt rated AA or higher by S&P or Aa or higher
by Moody's or outstanding commercial paper or bank obligations rated A-1 by S&P
or Prime-1 by Moody's; or if no such ratings are available, the instrument must
be of comparable quality in the opinion of Bankers Trust. Such repurchase
agreements may subject the Funds to the risks that (i) they may not be able to
liquidate the securities immediately upon the insolvency of the other party, or
(ii) that amounts received in closing out a repurchase transaction might be
deemed voidable preferences upon the bankruptcy of the other party. In the
opinion of the Investment Manager, such risks are not material.
WHEN ISSUED AND FORWARD COMMITMENT SECURITIES. Purchase or sale of
securities on a "forward commitment" basis may be used to hedge against
anticipated changes in interest rates and prices. The price, which is generally
expressed in yield terms, is fixed at the time the commitment is made, but
delivery and payment for the securities take place at a later date. When issued
securities and forward commitments may be sold prior to the settlement date, but
the Funds will enter into when issued and forward commitments only with the
intention of actually receiving or delivering the securities, as the case may
be; however, a Fund may dispose of a commitment prior to settlement if the
Investment Manager deems it appropriate to do so. No income accrues on
securities which have been purchased pursuant to a forward commitment or on a
when issued basis prior to delivery of the securities. If a Fund disposes of the
right to acquire a when issued security prior to its acquisition or disposes of
its right to deliver or receive against a forward commitment, it may incur a
gain or loss. At the time a Fund enters into a transaction on a when issued or
forward commitment basis, a segregated account consisting of cash or liquid
securities equal to the value of the when issued or forward commitment
securities will be established and maintained with its custodian and will be
marked to market daily. There is a risk that the securities may not be delivered
and that the Fund may incur a loss.
AMERICAN DEPOSITARY RECEIPTS. Each of the Funds may purchase American
Depositary Receipts ("ADRs") which are dollar-denominated receipts issued
generally by U.S. banks and which represent the deposit with the bank of a
foreign company's securities. ADRs are publicly traded on exchanges or
over-the-counter in the United States. Investors should consider carefully the
substantial risks involved in investing in securities issued by companies of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. ADRs, European Depositary Receipts ("EDRs") and Global Depository
Receipts (GDRs) or other securities convertible into securities of issuers based
in foreign countries are not necessarily denominated in the same currency as the
securities into which they may be converted. In general, ADRs, in registered
form, are denominated in U.S. dollars and are designed for use in the U.S.
securities markets, while EDRs (also referred to as Continental Depositary
Receipts (CDRs"), in bearer form, may be denominated in other currencies and are
designed for use in European securities markets. ADRs are receipts typically
issued by a U.S. bank or trust company evidencing ownership of the underlying
securities. EDRs are European receipts evidencing a similar arrangement. GDRs
are global receipts evidencing a similar arrangement. For purposes of the Fund's
investment policies, ADRs, EDRs and GDRs are deemed to have the same
classification as the underlying securities they represent. Thus, an ADR, EDR or
GDR representing ownership of common stock will be treated as common stock.
Depositary receipts are issued through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
underlying security and a depositary, whereas a depositary may establish an
unsponsored facility without participation by the issuer of the deposited
security. Holders of unsponsored depositary receipts generally bear all the cost
of such facilities and the depositary of an unsponsored facility frequently is
under no obligation to distribute shareholder communications received from the
issuer of the deposited security or to pass through voting rights to the holders
of such receipts in respect of the deposited securities.
RESTRICTED SECURITIES. Restricted securities cannot be sold to the public
without registration under the Securities Act of 1933 ("1933 Act"). Unless
registered for sale, restricted securities can be sold only in privately
negotiated transactions or pursuant to an exemption from registration.
Restricted securities are generally considered illiquid and, therefore, subject
to the Fund's limitation on illiquid securities.
Non-publicly traded securities (including Rule 144A Securities) may involve
a high degree of business and financial risk which may result in substantial
losses. The securities may be less liquid than publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices realized from these sales could be less than those originally paid by
the Fund. In particular, Rule 144A Securities may be resold only to qualified
institutional buyers in accordance with Rule 144A under the Securities Act of
1933. Rule 144A permits the resale to "qualified institutional buyers" of
"restricted securities" that, when issued, were not of the same class as
securities listed on a U.S. securities exchange or quoted in the National
Association of Securities Dealers Automated Quotation System (the "Rule 144A
Securities"). A "qualified institutional buyer" is defined by Rule 144A
generally as an institution, acting for its own account or for the accounts of
other qualified institutional buyers, that in the aggregate owns and invests on
a discretionary basis at least $100 million in securities of issuers not
affiliated with the institution. A dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), acting for its own account or the
accounts of other qualified institutional buyers, that in the aggregate owns and
invests on a discretionary basis at least $10 million in securities of issuers
not affiliated with the dealer may also qualify as a qualified institutional
buyer, as well as an Exchange Act registered dealer acting in a riskless
principal transaction on behalf of a qualified institutional buyer.
The Funds' Board of Directors is responsible for developing and
establishing guidelines and procedures for determining the liquidity of Rule
144A Securities. As permitted by Rule 144A, the Board of Directors has delegated
this responsibility to the Investment Manager or relevant Sub-Adviser. In making
the determination regarding the liquidity of Rule 144A Securities, the
Investment Manager or relevant Sub-Adviser will consider trading markets for the
specific security taking into account the unregistered nature of a Rule 144A
security. In addition, the Investment Manager or relevant Sub-Adviser may
consider: (1) the frequency of trades and quotes; (2) the number of dealers and
potential purchasers; (3) dealer undertakings to make a market; and (4) the
nature of the security and of the market place trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer). Investing in Rule 144A Securities and other restricted securities
could have the effect of increasing the amount of a Fund's assets invested in
illiquid securities to the extent that qualified institutional buyers become
uninterested, for a time, in purchasing these securities.
REAL ESTATE SECURITIES. Certain of the Funds may invest in equity
securities of real estate investment trusts ("REITs") and other real estate
industry companies or companies with substantial real estate investments and
therefore, such Funds may be subject to certain risks associated with direct
ownership of real estate and with the real estate industry in general. These
risks include, among others: possible declines in the value of real estate;
possible lack of availability of mortgage funds; extended vacancies of
properties; risks related to general and local economic conditions;
overbuilding; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earthquakes or other natural
disasters; limitations on and variations in rents; and changes in interest
rates.
REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans or interests. REITs are
generally classified as equity REITs, mortgage REITs or hybrid REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the Internal Revenue Code, as amended (the "Code"). Finally, certain REITs may
be self-liquidating in that a specific term of existence is provided for in the
trust document. Such trusts run the risk of liquidating at an economically
inopportune time.
ZERO COUPON SECURITIES. Certain of the Funds may invest in certain zero
coupon securities that are "stripped" U.S. Treasury notes and bonds. These Funds
also may invest in zero coupon and other deep discount securities issued by
foreign governments and domestic and foreign corporations, including certain
Brady Bonds and other foreign debt and payment-in-kind securities. Zero coupon
securities pay no interest to holders prior to maturity, and payment-in-kind
securities pay interest in the form of additional securities. However, a portion
of the original issue discount on zero coupon securities and the "interest" on
payment-in-kind securities will be included in the investing Fund's income.
Accordingly, for the Fund to qualify for tax treatment as a regulated investment
company and to avoid certain taxes (see "Taxes" in the Statement of Additional
Information), the Fund may be required to distribute an amount that is greater
than the total amount of cash it actually receives. These distributions must be
made from the Fund's cash assets or, if necessary, from the proceeds of sales of
portfolio securities. The Fund will not be able to purchase additional
income-producing securities with cash used to make such distributions and its
current income ultimately may be reduced as a result. Zero coupon and
payment-in-kind securities usually trade at a deep discount from their face or
par value and will be subject to greater fluctuations of market value in
response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
FOREIGN INVESTMENT RISKS. Investment in foreign securities involves risks
and considerations not present in domestic investments. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable
to U.S. companies. The securities of non-U.S. issuers generally are not
registered with the SEC, nor are the issuers thereof usually subject to the
SEC's reporting requirements. Accordingly, there may be less publicly available
information about foreign securities and issuers than is available with respect
to U.S. securities and issuers. Foreign securities markets, while growing in
volume, have for the most part substantially less volume than United States
securities markets and securities of foreign companies are generally less liquid
and at times their prices may be more volatile than prices of comparable United
States companies. Foreign stock exchanges, brokers and listed companies
generally are subject to less government supervision and regulation than in the
United States. The customary settlement time for foreign securities may be
longer than the customary settlement time for United States securities. A Fund's
income and gains from foreign issuers may be subject to non-U.S. withholding or
other taxes, thereby reducing its income and gains. In addition, with respect to
some foreign countries, there is the increased possibility of expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of
the Fund, political or social instability, or diplomatic developments which
could affect the investments of the Fund in those countries. Moreover,
individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
rate of savings and capital reinvestment, resource self-sufficiency and balance
of payments positions.
RISKS OF CONVERSION TO EURO. On January 1, 1999, eleven countries in the
European Monetary Union will adopt the euro as their official currency. However,
their current currencies (for example, the franc, the mark, and the lire) will
also continue in use until January 1, 2002. After that date, it is expected that
only the euro will be used in those countries. A common currency is expected to
confer some benefits in those markets, by consolidating the government debt
market for those countries and reducing some currency risks and costs. But the
conversion to the new currency will affect the Funds operationally and also has
potential risks, some of which are listed below. Among other things, the
conversion will affect:
* issuers in which the Funds invest, because of changes in the competitive
environment from a consolidated currency market and greater operational
costs from converting to the new currency. This might depress stock values.
* vendors the Funds depend on to carry out their business, such as the
custodian bank (which holds the foreign securities the Funds buy), the
Investment Manager (which prices the Funds' investments to deal with the
conversion to the euro) and brokers, foreign markets and securities
depositories. If they are not prepared, there could be delays in
settlements and additional costs to the Funds.
* exchange contracts and derivatives that are outstanding during the
transition to the euro. The lack of currency rate calculations between the
affected currencies and the need to update the Funds' contracts could pose
extra costs to the Funds.
The Investment Manager is upgrading its computer and bookkeeping systems to
deal with the conversion. The Funds' custodian bank has advised the Investment
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The possible effect of these factors on the Funds' investments cannot be
determined with certainty at this time, but they may reduce the value of some of
the Funds' holdings and increase its operational costs.
BRADY BONDS. Growth and Income and Small Company Funds may invest in "Brady
Bonds," which are debt restructurings that provide for the exchange of cash and
loans for newly issued bonds. Brady Bonds are securities created through the
exchange of existing commercial bank loans to public and private entities in
certain emerging markets for new bonds in connection with debt restructuring
under a debt restructuring plan introduced by former U.S. Secretary of the
Treasury, Nicholas F. Brady. Brady Bonds recently have been issued by the
governments of Argentina, Brazil, Bulgaria, Costa Rica, Dominican Republic,
Jordan, Mexico, Nigeria, The Philippines, Uruguay, Venezuela, Ecuador and
Poland, and are expected to be issued by other emerging market countries.
Investors should recognize that Brady Bonds have been issued only recently and,
accordingly, do not have a long payment history. Brady Bonds may be
collateralized or uncollateralized, are issued in various currencies (primarily
the U.S. dollar) and are actively traded in the secondary market for Latin
American debt. The Salomon Brothers Brady Bond Index provides a benchmark that
can be used to compare returns of emerging market Brady Bonds with returns in
other bond markets, e.g., the U.S. bond market.
Growth and Income Fund may invest only in collateralized Brady Bonds
denominated in U.S. dollars. U.S. dollar-denominated, collateralized Brady
Bonds, which may be fixed rate par bonds or floating rate discount bonds, are
collateralized in full as to principal by U.S. Treasury zero coupon bonds having
the same maturity as the bonds. Interest payments on such bonds generally are
collateralized by cash or securities in an amount that, in the case of fixed
rate bonds, is equal to at least one year of rolling interest payments or, in
the case of floating rate bonds, initially is equal to at least one year's
rolling interest payments based on the applicable interest rate at the time and
is adjusted at regular intervals thereafter.
EMERGING COUNTRIES. Certain Funds may invest in debt securities in emerging
markets. Investing in securities in emerging countries may entail greater risks
than investing in debt securities in developed countries. These risks include
(i) less social, political and economic stability; (ii) the small current size
of the markets for such securities and the currently low or nonexistent volume
of trading, which result in a lack of liquidity and in greater price volatility;
(iii) certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation; and (v) the
absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property.
POLITICAL AND ECONOMIC RISKS. Investing in securities of non-U.S. companies
may entail additional risks due to the potential political and economic
instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event of such
expropriation, nationalization or other confiscation by any country, a Fund
could lose its entire investment in any such country.
An investment in the Fund is subject to the political and economic risks
associated with investments in emerging markets. Even though opportunities for
investment may exist in emerging markets, any change in the leadership or
policies of the governments of those countries or in the leadership or policies
of any other government which exercises a significant influence over those
countries, may halt the expansion of or reverse the liberalization of foreign
investment policies now occurring and thereby eliminate any investment
opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian
regimes, the governments of a number of emerging market countries previously
expropriated large quantities of real and personal property similar to the
property which will be represented by the securities purchased by the Fund. The
claims of property owners against those governments were never finally settled.
There can be no assurance that any property represented by securities purchased
by the Fund will not also be expropriated, nationalized, or otherwise
confiscated. If such confiscation were to occur, the Fund could lose a
substantial portion of its investments in such countries. The Fund's investments
would similarly be adversely affected by exchange control regulation in any of
those countries.
RELIGIOUS AND ETHNIC INSTABILITY. Certain countries in which the Funds may
invest may have vocal minorities that advocate radical religious or
revolutionary philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for wide-spread
destruction or confiscation of property owned by individuals and entities
foreign to such country and could cause the loss of the Fund's investment in
those countries.
FOREIGN INVESTMENT RESTRICTIONS. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as the Funds. As illustrations,
certain countries require governmental approval prior to investments by foreign
persons, or limit the amount of investment by foreign persons in a particular
company, or limit the investments by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals. Moreover, the national policies
of certain countries may restrict investment opportunities in issuers or
industries deemed sensitive to national interests. In addition, some countries
require governmental approval for the repatriation of investment income, capital
or the proceeds of securities sales by foreign investors. The Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investments.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION.
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. companies. In particular, the assets, liabilities and profits appearing
on the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Such securities held by Growth and Income Fund will not
be registered with the SEC or regulators of any foreign country, nor will the
issuers thereof be subject to the SEC's reporting requirements. Thus, there will
be less available information concerning foreign issuers of such securities held
by the Fund than is available concerning U.S. issuers. In instances where the
financial statements of an issuer are not deemed to reflect accurately the
financial situation of the issuer, the Investment Manager will take appropriate
steps to evaluate the proposed investment, which may include interviews with its
management and consultations with accountants, bankers and other specialists.
There is substantially less publicly available information about foreign
companies than there are reports and ratings published about U.S. companies and
the U.S. Government. In addition, where public information is available, it may
be less reliable than such information regarding U.S. issuers.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be
less liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities exchanges and brokers generally are
subject to less governmental supervision and regulation than in the U.S., and
foreign securities exchange transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign securities exchange transactions may be
subject to difficulties associated with the settlement of such transactions.
Delays in settlement could result in temporary periods when assets of the Fund
are uninvested and no return is earned thereon. The inability of the Fund to
make intended security purchases due to settlement problems could cause it to
miss attractive opportunities. Inability to dispose of a portfolio security due
to settlement problems either could result in losses to the Fund due to
subsequent declines in value of the portfolio security or, if the Fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser. The Investment Manager or relevant Sub-Adviser will consider
such difficulties when determining the allocation of the Fund's assets.
NON-U.S. WITHHOLDING TAXES. A Fund's investment income and gains from
foreign issuers may be subject to non-U.S. withholding and other taxes, thereby
reducing the Fund's investment income and gains.
CURRENCY RISK. Because certain Funds, under normal circumstances, may
invest substantial portions of its total assets in the securities of foreign
issuers which are denominated in foreign currencies, the strength or weakness of
the U.S. dollar against such foreign currencies will account for part of the
Fund's investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
Fund's holdings of securities denominated in such currency and, therefore, will
cause an overall decline in the Fund's net asset value and any net investment
income and capital gains to be distributed in U.S. dollars to shareholders of
the Fund.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the pace of business activity in certain other countries and
the U.S., and other economic and financial conditions affecting the world
economy.
Although the Funds value assets daily in terms of U.S. dollars, the Funds
do not intend to convert holdings of foreign currencies into U.S. dollars on a
daily basis. A Fund will do so from time to time, and investors should be aware
of the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
("spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
sell that currency to the dealer.
PUT AND CALL OPTIONS:
WRITING (SELLING) COVERED CALL OPTIONS. A call option gives the holder
(buyer) the "right to purchase" a security or currency at a specified price (the
exercise price) at any time until a certain date (the expiration date). So long
as the obligation of the writer of a call option continues, he may be assigned
an exercise notice by the broker-dealer through whom such option was sold,
requiring him to deliver the underlying security or currency against payment of
the exercise price. This obligation terminates upon the expiration of the call
option, or such earlier time at which the writer effects a closing purchase
transaction by repurchasing an option identical to that previously sold.
Certain Funds may write (sell) "covered" call options and purchase options
to close out options previously written by the Fund. In writing covered call
options, the Fund expects to generate additional premium income which should
serve to enhance the Fund's total return and reduce the effect of any price
decline of the security or currency involved in the option. Covered call options
will generally be written on securities or currencies which, in the opinion of
the Investment Manager or relevant Sub-Adviser, are not expected to have any
major price increases or moves in the near future but which, over the long term,
are deemed to be attractive investments for the Fund.
The Fund will write only covered call options. This means that the Fund
will own the security or currency subject to the option or an option to purchase
the same underlying security or currency, having an exercise price equal to or
less than the exercise price of the "covered" option, or will establish and
maintain with its custodian for the term of the option, an account consisting of
cash or liquid securities having a value equal to the fluctuating market value
of the optioned securities or currencies. In order to comply with the
requirements of several states, the Fund will not write a covered call option
if, as a result, the aggregate market value of all Fund securities or currencies
covering call or put options exceeds 25% of the market value of the Fund's net
assets. Should these state laws change or should the Fund obtain a waiver of
their application, the Fund reserves the right to increase this percentage. In
calculating the 25% limit, the Fund will offset, against the value of assets
covering written calls and puts, the value of purchased calls and puts on
identical securities or currencies with identical maturity dates.
Fund securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objectives. The writing of covered call options is a
conservative investment technique believed to involve relatively little risk (in
contrast to the writing of naked or uncovered options, which the Fund will not
do), but capable of enhancing the Fund's total return. When writing a covered
call option, the Fund, in return for the premium, gives up the opportunity for
profit from a price increase in the underlying security or currency above the
exercise price, but conversely, retains the risk of loss should the price of the
security or currency decline. Unlike one who owns securities or currencies not
subject to an option, the Fund has no control over when it may be required to
sell the underlying securities or currencies, since it may be assigned an
exercise notice at any time prior to the expiration of its obligations as a
writer. If a call option which the Fund has written expires, the Fund will
realize a gain in the amount of the premium; however, such gain may be offset by
a decline in the market value of the underlying security or currency during the
option period. If the call option is exercised, the Fund will realize a gain or
loss from the sale of the underlying security or currency.
Call options written by the Fund will normally have expiration dates of
less than nine months from the date written. The exercise price of the options
may be below, equal to, or above the current market values of the underlying
securities or currencies at the time the options are written. From time to time,
the Fund may purchase an underlying security or currency for delivery in
accordance with an exercise notice of a call option assigned to it, rather than
delivering such security or currency from its portfolio. In such cases,
additional costs may be incurred.
The premium received is the market value of an option. The premium the Fund
will receive from writing a call option will reflect, among other things, the
current market price of the underlying security or currency, the relationship of
the exercise price to such market price, the historical price volatility of the
underlying security or currency, and the length of the option period. Once the
decision to write a call option has been made, the Investment Manager or
relevant Sub-Adviser, in determining whether a particular call option should be
written on a particular security or currency, will consider the reasonableness
of the anticipated premium and the likelihood that a liquid secondary market
will exist for those options. The premium received by the Fund for writing
covered call options will be recorded as a liability of the Fund. This liability
will be adjusted daily to the option's current market value, which will be the
latest sale price at the time at which the net asset value per share of the Fund
is computed (close of the New York Stock Exchange), or, in the absence of such
sale, the latest asked price. The option will be terminated upon expiration of
the option, the purchase of an identical option in a closing transaction, or
delivery of the underlying security or currency upon the exercise of the option.
The Fund will realize a profit or loss from a closing purchase transaction
if the cost of the transaction is less or more than the premium received from
the writing of the option. Because increases in the market price of a call
option will generally reflect increases in the market price of the underlying
security or currency, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security or currency owned by the Fund.
WRITING (SELLING) COVERED PUT OPTIONS. A put option gives the purchaser of
the option the right to sell, and the writer (seller) has the obligation to buy,
the underlying security or currency at the exercise price during the option
period (American style) or at the expiration of the option (European style). So
long as the obligation of the writer continues, he may be assigned an exercise
notice by the broker-dealer through whom such option was sold, requiring him to
make payment of the exercise price against delivery of the underlying security
or currency. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
Certain Funds may write American or European style covered put options and
purchase options to close out options previously written by the Fund.
Certain Funds may write put options on a covered basis, which means that
the Fund would either (i) maintain in a segregated account cash or liquid
securities in an amount not less than the exercise price at all times while the
put option is outstanding; (ii) sell short the security or currency underlying
the put option at the same or higher price than the exercise price of the put
option; or (iii) purchase an option to sell the underlying security or currency
subject to the option having an exercise price equal to or greater than the
exercise price of the "covered" option at all times while the put option is
outstanding. (The rules of a clearing corporation currently require that such
assets be deposited in escrow to secure payment of the exercise price.) The Fund
would generally write covered put options in circumstances where the Investment
Manager or relevant Sub-Adviser wishes to purchase the underlying security or
currency for the Fund's portfolio at a price lower than the current market price
of the security or currency. In such event the Fund would write a put option at
an exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay. Since the Fund would also receive interest
on debt securities or currencies maintained to cover the exercise price of the
option, this technique could be used to enhance current return during periods of
market uncertainty. The risk in such a transaction would be that the market
price of the underlying security or currency would decline below the exercise
price less the premiums received. Such a decline could be substantial and result
in a significant loss to the Fund. In addition, the Fund, because it does not
own the specific securities or currencies which it may be required to purchase
in the exercise of the put, cannot benefit from appreciation, if any, with
respect to such specific securities or currencies. In order to comply with the
requirements of several states, the Fund will not write a covered put option if,
as a result, the aggregate market value of all portfolio securities or
currencies covering put or call options exceeds 25% of the market value of the
Fund's net assets. Should these state laws change or should the Fund obtain a
waiver of their application, the Fund reserves the right to increase this
percentage. In calculating the 25% limit, the Fund will offset against the value
of assets covering written puts and calls, the value of purchased puts and calls
on identical securities or currencies.
PREMIUM RECEIVED FROM WRITING CALL OR PUT OPTIONS. A Fund will receive a
premium from writing a put or call option, which increases such Fund's return in
the event the option expires unexercised or is closed out at a profit. The
amount of the premium will reflect, among other things, the relationship of the
market price of the underlying security to the exercise price of the option, the
term of the option and the volatility of the market price of the underlying
security. By writing a call option, a Fund limits its opportunity to profit from
any increase in the market value of the underlying security above the exercise
price of the option. By writing a put option, a Fund assumes the risk that it
may be required to purchase the underlying security for an exercise price higher
than its then current market value, resulting in a potential capital loss if the
purchase price exceeds the market value plus the amount of the premium received,
unless the security subsequently appreciates in value.
CLOSING TRANSACTIONS. Closing transactions may be effected in order to
realize a profit on an outstanding call option, to prevent an underlying
security or currency from being called, or, to permit the sale of the underlying
security or currency. A Fund may terminate an option that it has written prior
to its expiration by entering into a closing purchase transaction in which it
purchases an option having the same terms as the option written. A Fund will
realize a profit or loss from such transaction if the cost of such transaction
is less or more than the premium received from the writing of the option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the purchase of a call option is likely to be offset in whole or in part by
unrealized appreciation of the underlying security owned by such Fund.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both. If the Fund desires to sell
a particular security or currency from its portfolio on which it has written a
call option, it will seek to effect a closing transaction prior to, or
concurrently with, the sale of the security or currency. There is, of course, no
assurance that the Fund will be able to effect such closing transactions at a
favorable price. If the Fund cannot enter into such a transaction, it may be
required to hold a security or currency that it might otherwise have sold. When
the Fund writes a covered call option, it runs the risk of not being able to
participate in the appreciation of the underlying securities or currencies above
the exercise price, as well as the risk of being required to hold on to
securities or currencies that are depreciating in value. This could result in
higher transaction costs. The Fund will pay transaction costs in connection with
the writing of options to close out previously written options. Such transaction
costs are normally higher than those applicable to purchases and sales of
portfolio securities.
PURCHASING CALL OPTIONS. Certain Funds may purchase American or European
call options. The Fund may enter into closing sale transactions with respect to
such options, exercise them or permit them to expire. The Fund may purchase call
options for the purpose of increasing its current return.
Call options may also be purchased by a Fund for the purpose of acquiring
the underlying securities or currencies for its portfolio. Utilized in this
fashion, the purchase of call options enables the Fund to acquire the securities
or currencies at the exercise price of the call option plus the premium paid. At
times the net cost of acquiring securities or currencies in this manner may be
less than the cost of acquiring the securities or currencies directly. This
technique may also be useful to a Fund in purchasing a large block of securities
or currencies that would be more difficult to acquire by direct market
purchases. So long as it holds such a call option rather than the underlying
security or currency itself, the Fund is partially protected from any unexpected
decline in the market price of the underlying security or currency and in such
event could allow the call option to expire, incurring a loss only to the extent
of the premium paid for the option.
To the extent required by the laws of certain states, the Fund may not be
permitted to commit more than 5% of its assets to premiums when purchasing call
and put options. Should these state laws change or should the Fund obtain a
waiver of their application, the Fund may commit more than 5% of its assets to
premiums when purchasing call and put options. The Fund may also purchase call
options on underlying securities or currencies it owns in order to protect
unrealized gains on call options previously written by it. Call options may also
be purchased at times to avoid realizing losses. For example, where the Fund has
written a call option on an underlying security or currency having a current
market value below the price at which such security or currency was purchased by
the Fund, an increase in the market price could result in the exercise of the
call option written by the Fund and the realization of a loss on the underlying
security or currency with the same exercise price and expiration date as the
option previously written.
PURCHASING PUT OPTIONS. Certain Funds may purchase put options. The Fund
may enter into closing sale transactions with respect to such options, exercise
them or permit them to expire. A Fund may purchase a put option on an underlying
security or currency (a "protective put") owned by the Fund as a defensive
technique in order to protect against an anticipated decline in the value of the
security or currency. Such hedge protection is provided only during the life of
the put option when the Fund, as the holder of the put option, is able to sell
the underlying security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's exchange value.
The premium paid for the put option and any transaction costs would reduce any
capital gain otherwise available for distribution when the security or currency
is eventually sold.
A Fund may purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund seeks to benefit from a decline in the market
price of the underlying security or currency. If the put option is not sold when
it has remaining value, and if the market price of the underlying security or
currency remains equal to or greater than the exercise price during the life of
the put option, the Fund will lose its entire investment in the put option. In
order for the purchase of a put option to be profitable, the market price of the
underlying security or currency must decline sufficiently below the exercise
price to cover the premium and transaction costs, unless the put option is sold
in a closing sale transaction.
DEALER OPTIONS. Certain Funds may engage in transactions involving dealer
options. Certain risks are specific to dealer options. While the Fund would look
to a clearing corporation to exercise exchange-traded options, if the Fund were
to purchase a dealer option, it would rely on the dealer from whom it purchased
the option to perform if the option were exercised. Exchange-traded options
generally have a continuous liquid market while dealer options have none.
Consequently, the Fund will generally be able to realize the value of a dealer
option it has purchased only by exercising it or reselling it to the dealer who
issued it. Similarly, when the Fund writes a dealer option, it generally will be
able to close out the option prior to its expiration only by entering into a
closing purchase transaction with the dealer to which the Fund originally wrote
the option. While the Fund will seek to enter into dealer options only with
dealers who will agree to and which are expected to be capable of entering into
closing transactions with the Fund, there can be no assurance that the Fund will
be able to liquidate a dealer option at a favorable price at any time prior to
expiration. Failure by the dealer to do so would result in the loss of the
premium paid by the Fund as well as loss of the expected benefit of the
transaction. Until the Fund, as a covered dealer call option writer, is able to
effect a closing purchase transaction, it will not be able to liquidate
securities (or other assets) used as cover until the option expires or is
exercised. In the event of insolvency of the contra party, the Fund may be
unable to liquidate a dealer option. With respect to options written by the
Fund, the inability to enter into a closing transaction may result in material
losses to the Fund. For example, since the Fund must maintain a secured position
with respect to any call option on a security it writes, the Fund may not sell
the assets which it has segregated to secure the position while it is obligated
under the option. This requirement may impair the Fund's ability to sell
portfolio securities at a time when such sale might be advantageous.
The Staff of the SEC has taken the position that purchased dealer options
and the assets used to secure the written dealer options are illiquid
securities. The Fund may treat the cover used for written OTC options as liquid
if the dealer agrees that the Fund may repurchase the OTC option it has written
for a maximum price to be calculated by a predetermined formula. In such cases,
the OTC option would be considered illiquid only to the extent the maximum
repurchase price under the formula exceeds the intrinsic value of the option. To
this extent, the Fund will treat dealer options as subject to the Fund's
limitation on illiquid securities. If the SEC changes its position on the
liquidity of dealer options, the Fund will change its treatment of such
instrument accordingly.
CERTAIN RISK FACTORS IN WRITING CALL OPTIONS AND IN PURCHASING CALL AND PUT
OPTIONS: During the option period, a Fund, as writer of a call option has, in
return for the premium received on the option, given up the opportunity for
capital appreciation above the exercise price should the market price of the
underlying security increase, but has retained the risk of loss should the price
of the underlying security decline. The writer has no control over the time when
it may be required to fulfill its obligation as a writer of the option. The risk
of purchasing a call or put option is that the Fund may lose the premium it paid
plus transaction costs. If the Fund does not exercise the option and is unable
to close out the position prior to expiration of the option, it will lose its
entire investment.
An option position may be closed out only on an exchange which provides a
secondary market. There can be no assurance that a liquid secondary market will
exist for a particular option at a particular time and that the Fund, can close
out its position by effecting a closing transaction. If the Fund is unable to
effect a closing purchase transaction, it cannot sell the underlying security
until the option expires or the option is exercised. Accordingly, the Fund may
not be able to sell the underlying security at a time when it might otherwise be
advantageous to do so. Possible reasons for the absence of a liquid secondary
market include the following: (i) insufficient trading interest in certain
options; (ii) restrictions on transactions imposed by an exchange; (iii) trading
halts, suspensions or other restrictions imposed with respect to particular
classes or Fund of options or underlying securities; (iv) inadequacy of the
facilities of an exchange or the clearing corporation to handle trading volume;
and (v) a decision by one or more exchanges to discontinue the trading of
options or impose restrictions on orders. In addition, the hours of trading for
options may not conform to the hours during which the underlying securities are
traded. To the extent that the options markets close before the markets for the
underlying securities, significant price and rate movements can take place in
the underlying markets that cannot be reflected in the options markets. The
purchase of options is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary Fund
securities transactions.
Each exchange has established limitations governing the maximum number of
call options, whether or not covered, which may be written by a single investor
acting alone or in concert with others (regardless of whether such options are
written on the same or different exchanges or are held or written on one or more
accounts or through one or more brokers). An exchange may order the liquidation
of positions found to be in violation of these limits and it may impose other
sanctions or restrictions.
OPTIONS ON STOCK INDICES. Options on stock indices are similar to options
on specific securities except that, rather than the right to take or make
delivery of the specific security at a specific price, an option on a stock
index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of that stock index is greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
option. This amount of cash is equal to such difference between the closing
price of the index and the exercise price of the option expressed in dollars
multiplied by a specified multiple. The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. Unlike options
on specific securities, all settlements of options on stock indices are in cash
and gain or loss depends on general movements in the stocks included in the
index rather than price movements in particular stocks. A stock index futures
contract is an agreement in which one party agrees to deliver to the other an
amount of cash equal to a specific amount multiplied by the difference between
the value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made.No physical delivery of
securities is made.
RISK FACTORS IN OPTIONS ON INDICES. Because the value of an index option
depends upon the movements in the level of the index rather than upon movements
in the price of a particular security, whether the Fund will realize a gain or a
loss on the purchase or sale of an option on an index depends upon the movements
in the level of prices in the market generally or in an industry or market
segment rather than upon movements in the price of the individual security.
Accordingly, successful use of positions will depend upon the ability of the
Investment Manager or relevant Sub-Adviser to predict correctly movements in the
direction of the market generally or in the direction of a particular industry.
This requires different skills and techniques than predicting changes in the
prices of individual securities.
Index prices may be distorted if trading of securities included in the
index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
securities in the index. If this occurred, a Fund would not be able to close out
options which it had written or purchased and, if restrictions on exercise were
imposed, might be unable to exercise an option it purchased, which would result
in substantial losses.
Price movements in Fund securities will not correlate perfectly with
movements in the level of the index and therefore, a Fund bears the risk that
the price of the securities may not increase as much as the level of the index.
In this event, the Fund would bear a loss on the call which would not be
completely offset by movements in the prices of the securities. It is also
possible that the index may rise when the value of the Fund's securities does
not. If this occurred, a Fund would experience a loss on the call which would
not be offset by an increase in the value of its securities and might also
experience a loss in the market value of its securities.
Unless a Fund has other liquid assets which are sufficient to satisfy the
exercise of a call on the index, the Fund will be required to liquidate
securities in order to satisfy the exercise.
When a Fund has written a call on an index, there is also the risk that the
market may decline between the time the Fund has the call exercised against it,
at a price which is fixed as of the closing level of the index on the date of
exercise, and the time the Fund is able to sell securities. As with options on
securities, the Investment Manager or relevant Sub-Adviser will not learn that a
call has been exercised until the day following the exercise date, but, unlike a
call on securities where the Fund would be able to deliver the underlying
security in settlement, the Fund may have to sell part of its securities in
order to make settlement in cash, and the price of such securities might decline
before they could be sold.
If a Fund exercises a put option on an index which it has purchased before
final determination of the closing index value for the day, it runs the risk
that the level of the underlying index may change before closing. If this change
causes the exercised option to fall "out-of-the-money" the Fund will be required
to pay the difference between the closing index value and the exercise price of
the option (multiplied by the applicable multiplier) to the assigned writer.
Although the Fund may be able to minimize this risk by withholding exercise
instructions until just before the daily cutoff time or by selling rather than
exercising an option when the index level is close to the exercise price, it may
not be possible to eliminate this risk entirely because the cutoff time for
index options may be earlier than those fixed for other types of options and may
occur before definitive closing index values are announced.
TRADING IN FUTURES. Certain Funds may enter into futures contracts,
including stock and bond index, interest rate and currency futures ("futures" or
"futures contracts"). A futures contract provides for the future sale by one
party and purchase by another party of a specific financial instrument (e.g.,
units of a stock index) for a specified price, date, time and place designated
at the time the contract is made. Brokerage fees are incurred when a futures
contract is bought or sold and margin deposits must be maintained. Entering into
a contract to buy is commonly referred to as buying or purchasing a contract or
holding a long position. Entering into a contract to sell is commonly referred
to as selling a contract or holding a short position.
An example of a stock index futures contract follows. The Standard & Poor's
500 Stock Index ("S&P 500 Index") is composed of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The S&P 500 Index
assigns relative weightings to the common stocks included in the Index, and the
Index fluctuates with changes in the market values of those common stocks. In
the case of the S&P 500 Index, contracts are to buy or sell 500 units. Thus, if
the value of the S&P 500 Index were $150, one contract would be worth $75,000
(500 units x $150). The stock index futures contract specifies that no delivery
of the actual stock making up the index will take place. Instead, settlement in
cash occurs. Over the life of the contract, the gain or loss realized by the
Fund will equal the difference between the purchase (or sale) price of the
contract and the price at which the contract is terminated. For example, if the
Fund enters into a futures contract to BUY 500 units of the S&P 500 Index at a
specified future date at a contract price of $150 and the S&P 500 Index is at
$154 on that future date, the Fund will gain $2,000 (500 units x gain of $4). If
the Fund enters into a futures contract to SELL 500 units of the stock index at
a specified future date at a contract price of $150 and the S&P 500 Index is at
$152 on that future date, the Fund will lose $1,000 (500 units x loss of $2).
Unlike when the Fund purchases or sells a security, no price would be paid
or received by the Fund upon the purchase or sale of a futures contract. Upon
entering into a futures contract, and to maintain the Fund's open positions in
futures contracts, the Fund would be required to deposit with its custodian in a
segregated account in the name of the futures broker an amount of cash or liquid
securities known as "initial margin." The margin required for a particular
futures contract is set by the exchange on which the contract is traded, and may
be significantly modified from time to time by the exchange during the term of
the contract. Futures contracts are customarily purchased and sold on margins
that may range upward from less than 5% of the value of the contract being
traded.
Margin is the amount of funds that must be deposited by the Fund with its
custodian in a segregated account in the name of the futures commission merchant
in order to initiate futures trading and to maintain the Fund's open position in
futures contracts. A margin deposit is intended to ensure the Fund's performance
of the futures contract. The margin required for a particular futures contract
is set by the exchange on which the futures contract is traded, and may be
significantly modified from time to time by the exchange during the term of the
futures contract.
If the price of an open futures contract changes (by increase in the case
of a sale or by decrease in the case of a purchase) so that the loss on the
futures contract reaches a point at which the margin on deposit does not satisfy
margin requirements, the broker will require an increase in the margin. However,
if the value of a position increases because of favorable price changes in the
futures contract so that the margin deposit exceeds the required margin, the
broker will pay the excess to the Fund.
These subsequent payments, called "variation margin," to and from the
futures broker, are made on a daily basis as the price of the underlying assets
fluctuate making the long and short positions in the futures contract more or
less valuable, a process known as "marking to the market." The Fund expects to
earn interest income on its margin deposits.
Although certain futures contracts, by their terms, require actual future
delivery of and payment for the underlying instruments, in practice most futures
contracts are usually closed out before the delivery date. Closing out an open
futures contract sale or purchase is effected by entering into an offsetting
futures contract purchase or sale, respectively, for the same aggregate amount
of the identical securities and the same delivery date. If the offsetting
purchase price is less than the original sale price, the Fund realizes a gain;
if it is more, the Fund realizes a loss. Conversely, if the offsetting sale
price is more than the original purchase price, the Fund realizes a gain; if it
is less, the Fund realizes a loss. The transaction costs must also be included
in these calculations. There can be no assurance, however, that the Fund will be
able to enter into an offsetting transaction with respect to a particular
futures contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund will continue to be required to maintain the
margin deposits on the futures contract.
Options on futures are similar to options on underlying instruments except
that options on futures give the purchaser the right, in return for the premium
paid, to assume a position in a futures contract (a long position if the option
is a call and a short position if the option is a put), rather than to purchase
or sell the futures contract, at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the delivery of the
futures position by the writer of the option to the holder of the option will be
accompanied by the delivery of the accumulated balance in the writer's futures
margin account which represents the amount by which the market price of the
futures contract, at exercise, exceeds (in the case of a call) or is less than
(in the case of a put) the exercise price of the option on the futures contract.
Alternatively, settlement may be made totally in cash. Purchasers of options who
fail to exercise their options prior to the exercise date suffer a loss of the
premium paid.
The writer of an option on a futures contract is required to deposit margin
pursuant to requirements similar to those applicable to futures contracts. Upon
exercise of an option on a futures contract, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Commissions on financial futures contracts and related options transactions
may be higher than those which would apply to purchases and sales of securities
directly. From time to time, a single order to purchase or sell futures
contracts (or options thereon) may be made on behalf of the Fund and other
mutual funds or Fund of mutual funds for which the Investment Manager or
relevant Sub-Adviser serves as adviser or sub-adviser, respectively. Such
aggregated orders would be allocated among the Fund and such other mutual funds
or Fund of mutual funds in a fair and non-discriminatory manner.
A public market exists in interest rate futures contracts covering
primarily the following financial instruments: U.S. Treasury bonds; U.S.
Treasury notes; Government National Mortgage Association ("GNMA") modified
pass-through mortgage-backed securities; three-month U.S. Treasury bills; 90-day
commercial paper; bank certificates of deposit; and Eurodollar certificates of
deposit. It is expected that futures contracts trading in additional financial
instruments will be authorized. The standard contract size is generally $100,000
for futures contracts in U.S. Treasury bonds, U.S. Treasury notes, and GNMA
pass-through securities and $1,000,000 for the other designated futures
contracts. A public market exists in futures contracts covering a number of
indexes, including, but not limited to, the Standard & Poor's 500 Index, the
Standard & Poor's 100 Index, the NASDAQ 100 Index, the Value Line Composite
Index and the New York Stock Exchange Composite Index.
Stock index futures contracts may be used to provide a hedge for a portion
of the Fund's portfolio, as a cash management tool, or as an efficient way for
the Investment Manager or relevant Sub-Adviser to implement either an increase
or decrease in portfolio market exposure in response to changing market
conditions. Stock index futures contacts are currently traded with respect to
the S&P 500 Index and other broad stock market indices, such as the New York
Stock Exchange Composite Stock Index and the Value Line Composite Stock Index.
The Fund may, however, purchase or sell futures contracts with respect to any
stock index. Nevertheless, to hedge the Fund's portfolio successfully, the Fund
must sell futures contracts with respect to indexes or subindexes whose
movements will have a significant correlation with movements in the prices of
the Fund's securities.
Interest rate or currency futures contracts may be used as a hedge against
changes in prevailing levels of interest rates or currency exchange rates in
order to establish more definitely the effective return on securities or
currencies held or intended to be acquired by the Fund. In this regard, the Fund
could sell interest rate or currency futures as an offset against the effect of
expected increases in interest rates or currency exchange rates and purchase
such futures as an offset against the effect of expected declines in interest
rates or currency exchange rates.
The Fund may enter into futures contracts which are traded on national or
foreign futures exchanges and are standardized as to maturity date and
underlying financial instrument. The principal financial futures exchanges in
the United States are the Board of Trade of the City of Chicago, the Chicago
Mercantile Exchange, the New York Futures Exchange, and the Kansas City Board of
Trade. Futures exchanges and trading in the United States are regulated under
the Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC").
Futures are traded in London at the London International Financial Futures
Exchange, in Paris at the MATIF and in Tokyo at the Tokyo Stock Exchange.
Although techniques other than the sale and purchase of futures contracts could
be used for the above-referenced purposes, futures contracts offer an effective
and relatively low cost means of implementing the Fund's objectives in these
areas.
CERTAIN RISKS RELATING TO FUTURES CONTRACTS AND RELATED OPTIONS. There are
special risks involved in futures transactions.
SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
VOLATILITY AND LEVERAGE. The prices of futures contracts are volatile and
are influenced, among other things, by actual and anticipated changes in the
market and interest rates, which in turn are affected by fiscal and monetary
policies and national and international policies and economic events.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss or
gain, to the investor. For example, if at the time of purchase, 10% of the value
of the futures contract is deposited as margin, a subsequent 10% decrease in the
value of the futures contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out. A 15% decrease would result in a loss equal to 150% of the
original margin deposit, if the contract were closed out. Thus, a purchase or
sale of a futures contract may result in losses in excess of the amount invested
in the futures contract. However, the Fund would presumably have sustained
comparable losses if, instead of the futures contract, it had invested in the
underlying financial instrument and sold it after the decline. Furthermore, in
the case of a futures contract purchase, in order to be certain that the Fund
has sufficient assets to satisfy its obligations under a futures contract, the
Fund earmarks to the futures contract cash or liquid securities equal in value
to the current value of the underlying instrument less the margin deposit.
LIQUIDITY. The Fund may elect to close some or all of its futures positions
at any time prior to their expiration. The Fund would do so to reduce exposure
represented by long futures positions or increase exposure represented by short
futures positions. The Fund may close its positions by taking opposite positions
which would operate to terminate the Fund's position in the futures contracts.
Final determinations of variation margin would then be made, additional cash
would be required to be paid by or released to the Fund, and the Fund would
realize a loss or a gain.
Futures contracts may be closed out ONLY on the exchange or board of trade
where the contracts were initially traded. For example, stock index futures
contracts can currently be purchased or sold with respect to the S&P 500 Index
on the Chicago Mercantile Exchange, the New York Stock Exchange Composite Stock
Index on the New York Futures Exchange and the Value Line Composite Stock Index
on the Kansas City Board of Trade. Although the Fund intends to purchase or sell
futures contracts only on exchanges or boards of trade where there appears to be
an active market, there is no assurance that a liquid market on an exchange or
board of trade will exist for any particular contract at any particular time. In
such event, it might not be possible to close a futures contract, and in the
event of adverse price movements, the Fund would continue to be required to make
daily cash payments of variation margin. However, in the event futures contracts
have been used to hedge portfolio securities, the Fund would continue to hold
securities subject to the hedge until the futures contracts could be terminated.
In such circumstances, an increase in the price of the securities, if any, might
partially or completely offset losses on the futures contract. However, as
described below, there is no guarantee that the price of the securities will, in
fact, correlate with the price movements in the futures contract and thus
provide an offset to losses on a futures contract.
HEDGING RISK. A decision of whether, when, and how to hedge involves skill
and judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or market trends. There are several risks
in connection with the use by the Fund of futures contracts as a hedging device.
One risk arises because of the imperfect correlation between movements in the
prices of the futures and movements in the prices of the underlying instruments
which are the subject of the hedge. The Investment Manager or relevant
Sub-Adviser will, however, attempt to reduce this risk by entering into futures
contracts whose movements, in its judgment, will have a significant correlation
with movements in the prices of the Fund's underlying instruments sought to be
hedged.
Successful use of futures contracts by the Fund for hedging purposes is
also subject to the Investment Manager's or relevant Sub-Adviser's ability to
correctly predict movements in the direction of the market. It is possible that,
when the Fund has sold futures to hedge its portfolio against a decline in the
market, the index, indices, or instruments underlying futures might advance and
the value of the underlying instruments held in the Fund's portfolio might
decline. If this were to occur, the Fund would lose money on the futures and
also would experience a decline in value in its underlying instruments. However,
while this might occur to a certain degree, the Investment Manager believes that
over time the value of the Fund's portfolio will tend to move in the same
direction as the market indices used to hedge the portfolio. It is also possible
that if the Fund were to hedge against the possibility of a decline in the
market (adversely affecting the underlying instruments held in its portfolio)
and prices instead increased, the Fund would lose part or all of the benefit of
increased value of those underlying instruments that it had hedged, because it
would have offsetting losses in its futures positions. In addition, in such
situations, if the Fund had insufficient cash, it might have to sell underlying
instruments to meet daily variation margin requirements. Such sales of
underlying instruments might be, but would not necessarily be, at increased
prices (which would reflect the rising market). The Fund might have to sell
underlying instruments at a time when it would be disadvantageous to do so.
In addition to the possibility that there might be an imperfect
correlation, or no correlation at all, between price movements in the futures
contracts and the portion of the portfolio being hedged, the price movements of
futures contracts might not correlate perfectly with price movements in the
underlying instruments due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors might close future contracts through offsetting transactions which
could distort the normal relationship between the underlying instruments and
futures markets. Second, the margin requirements in the futures market are less
onerous than margin requirements in the securities markets, and as a result the
futures market might attract more speculators than the securities markets do.
Increased participation by speculators in the futures market might also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market and also because of the imperfect correlation between movements
in the underlying instruments and movements in the prices of futures contracts,
even a correct forecast of general market trends by the Investment Manager or
relevant Sub-Adviser might not result in a successful hedging transaction over a
very short time period.
CERTAIN RISKS OF OPTIONS ON FUTURES CONTRACTS. The Fund may seek to close
out an option position by writing or buying an offsetting option covering the
same index, underlying instruments, or contract and having the same exercise
price and expiration date. The ability to establish and close out positions on
such options will be subject to the maintenance of a liquid secondary market.
Reasons for the absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in certain options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or Fund of
options, or underlying instruments; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
a clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or Fund of options), in which event the
secondary market on that exchange (or in the class or Fund of options) would
cease to exist, although outstanding options on the exchange that had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an exchange of
special procedures which may interfere with the timely execution of customers'
orders.
REGULATORY LIMITATIONS. The Funds will engage in transactions in futures
contracts and options thereon only for bona fide hedging, yield enhancement and
risk management purposes, in each case in accordance with the rules and
regulations of the CFTC.
The Funds may not enter into futures contracts or options thereon if, with
respect to positions which do not qualify as bona fide hedging under applicable
CFTC rules, the sum of the amounts of initial margin deposits on the Fund's
existing futures and premiums paid for options on futures would exceed 5% of the
net asset value of the Funds after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into; provided, however,
that in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5% limitation.
To the extent necessary to comply with applicable regulations, in instances
involving the purchase of futures contracts or call options thereon or the
writing of put options thereon by the Fund, an amount of cash or liquid
securities, equal to the market value of the futures contracts and options
thereon (less any related margin deposits), will be identified in an account
with the Fund's custodian to cover the position, or alternative cover will be
employed.
In addition, CFTC regulations may impose limitations on the Funds' ability
to engage in certain yield enhancement and risk management strategies. If the
CFTC or other regulatory authorities adopt different (including less stringent)
or additional restrictions, the Funds would comply with such new restrictions.
FORWARD CURRENCY CONTRACTS AND RELATED OPTIONS. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the Contract.
These contracts are principally traded in the interbank market conducted
directly between currency traders (usually large, commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.
Depending on the investment policies and restrictions applicable to a Fund,
a Fund will generally enter into forward foreign currency exchange contracts
under two circumstances. First, when a Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, it may desire
to "lock in" the U.S. dollar price of the security. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the amount
of foreign currency involved in the underlying security transactions, the Fund
will be able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date the security is purchased or sold
and the date on which payment is made or received.
Second, when the Investment Manager or relevant Sub-Adviser believes that
the currency of a particular foreign country may suffer or enjoy a substantial
movement against another currency, including the U.S. dollar, it may enter into
a forward contract to sell or buy the amount of the former foreign currency,
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. Alternatively, where appropriate, the Fund
may hedge all or part of its foreign currency exposure through the use of a
basket of currencies or a proxy currency where such currencies or currency act
as an effective proxy for other currencies. In such a case, the Fund may enter
into a forward contract where the amount of the foreign currency to be sold
exceeds the value of the securities denominated in such currency. The use of
this basket hedging technique may be more efficient and economical than entering
into separate forward contracts for each currency held in the Fund. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of short-term currency
market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain.
The Fund will also not enter into such forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate a Fund to deliver an amount of foreign currency in excess of the value
of the Fund's portfolio securities or other assets denominated in that currency.
The Funds, however, in order to avoid excess transactions and transaction costs,
may maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets to which the forward contracts
relate (including accrued interest to the maturity of the forward contract on
such securities) provided the excess amount is "covered" by liquid securities,
denominated in any currency, at least equal at all times to the amount of such
excess. For these purposes the securities or other assets to which the forward
contracts relate may be securities or assets denominated in a single currency,
or where proxy forwards are used, securities denominated in more than one
currency. Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the longer term investment decisions made
with regard to overall diversification strategies. However, the Investment
Manager and relevant Sub-Advisers believe that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of the Fund will be served.
At the maturity of a forward contract, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract obligating it to purchase, on
the same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision
the market value of portfolio securities at the expiration of the forward
contract. Accordingly, it may be necessary for a Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security is less than the amount of foreign currency the
Fund is obligated to deliver and if a decision is made to sell the security and
make delivery of the foreign currency. Conversely, it may be necessary to sell
on the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. However, as noted, in order to avoid excessive
transactions and transaction costs, the Fund may use liquid securities,
denominated in any currency, to cover the amount by which the value of a forward
contract exceeds the value of the securities to which it relates.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund entering into a forward contract for the sale
of a foreign currency and the date it enters into an offsetting contract for the
purchase of the foreign currency, the Fund will realize a gain to the extent the
price of the currency it has agreed to sell exceeds the price of the currency it
has agreed to purchase. Should forward prices increase, the Fund will suffer a
loss to the extent the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.
The Funds dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. However, the Funds
reserve the right to enter into forward foreign currency contracts for different
purposes and under different circumstances. Of course, the Funds are not
required to enter into forward contracts with regard to their foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Investment Manager or relevant Sub-Adviser. It also should be realized that
this method of hedging against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange at a future date. Additionally, although such
contracts tend to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time, they tend to limit any potential gain which
might result from an increase in the value of that currency.
Although the Funds value their assets daily in terms of U.S. dollars, they
do not intend to convert their holdings of foreign currencies into U.S. dollars
on a daily basis. They will do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to a Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
PURCHASE AND SALE OF CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. As
noted above, a currency futures contract sale creates an obligation by a Fund,
as seller, to deliver the amount of currency called for in the contract at a
specified future time for a specified price. A currency futures contract
purchase creates an obligation by a Fund, as purchaser, to take delivery of an
amount of currency at a specified future time at a specified price. Although the
terms of currency futures contracts specify actual delivery or receipt, in most
instances the contracts are closed out before the settlement date without the
making or taking of delivery of the currency. Closing out of a currency futures
contract is effected by entering into an offsetting purchase or sale
transaction. Unlike a currency futures contract, which requires the parties to
buy and sell currency on a set date, an option on a currency futures contract
entitles its holder to decide on or before a future date whether to enter into
such a contract. If the holder decides not to enter into the contract, the
premium paid for the option is fixed at the point of sale.
SWAPS, CAPS, FLOORS AND COLLARS. Certain Funds may enter into interest
rate, securities index, commodity, or security and currency exchange rate swap
agreements for any lawful purpose consistent with the Fund's investment
objective, such as for the purpose of attempting to obtain or preserve a
particular desired return or spread at a lower cost to the Fund than if the Fund
had invested directly in an instrument that yielded that desired return or
spread. The Fund also may enter into swaps in order to protect against an
increase in the price of, or the currency exchange rate applicable to,
securities that the Fund anticipates purchasing at a later date. Swap agreements
are two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to several years. In a standard "swap"
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments. The gross returns to be exchanged or "swapped" between the parties
are calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of securities
representing a particular index. Swap agreements may include interest rate caps,
under which, in return for a premium, one party agrees to make payments to the
other to the extent that interests rates exceed a specified rate, or "cap";
interest rate floors under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates fall below a
specified level, or "floor"; and interest rate collars, under which a party
sells a cap and purchases a floor, or vice versa, in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum
levels.
The "notional amount" of the swap agreement is the agreed upon basis for
calculating the obligations that the parties to a swap agreement have agreed to
exchange. Under most swap agreements entered into by the Funds, the obligations
of the parties would be exchanged on a "net basis." Consequently, the Fund's
obligation (or rights) under a swap agreement will generally be equal only to
the net amount to be paid or received under the agreement based on the relative
value of the positions held by each party to the agreement (the "net amount").
The Fund's obligation under a swap agreement will be accrued daily (offset
against amounts owed to the Fund) and any accrued but unpaid net amounts owed to
a swap counterparty will be covered by the maintenance of a segregated account
consisting of cash or liquid securities.
Whether a Fund's use of swap agreements will be successful in furthering
its investment objective will depend, in part, on the Investment Manager or
relevant Sub-Adviser's ability to predict correctly whether certain types of
investments are likely to produce greater returns than other investments. Swap
agreements may be considered to be illiquid. Moreover, the Fund bears the risk
of loss of the amount expected to be received under a swap agreement in the
event of the default or bankruptcy of a swap agreement counterparty. Certain
restrictions imposed on the Fund's by the Internal Revenue Code may limit a
Fund' ability to use swap agreements. The swaps market is largely unregulated.
The Funds will enter swap agreements only with counterparties that the
Investment Manager or relevant Sub-Adviser reasonably believes are capable of
performing under the swap agreements. If there is a default by the other party
to such a transaction, the Fund will have to rely on its contractual remedies
(which may be limited by bankruptcy, insolvency or similar laws) pursuant to the
agreements related to the transaction.
SPREAD TRANSACTIONS. Certain Funds may purchase covered spread options from
securities dealers. Such covered spread options are not presently
exchange-listed or exchange-traded. The purchase of a spread option gives the
Fund the right to put, or sell, a security that it owns at a fixed dollar spread
or fixed yield spread in relationship to another security that the Fund does not
own, but which is used as a benchmark. The risk to the Funds in purchasing
covered spread options is the cost of the premium paid for the spread option and
any transaction costs. In addition, there is no assurance that closing
transactions will be available. The purchase of spread options will be used to
protect the Fund against adverse changes in prevailing credit quality spreads,
i.e., the yield spread between high quality and lower quality securities. Such
protection is only provided during the life of the spread option.
HYBRID INSTRUMENTS. Hybrid instruments combine the elements of futures
contracts or options with those of debt, preferred equity or a depository
instrument ("Hybrid Instruments"). Often these Hybrid Instruments are indexed to
the price of a commodity or particular currency or a domestic or foreign debt or
equity securities index. Hybrid Instruments may take a variety of forms,
including, but not limited to, debt instruments with interest or principal
payments or redemption terms determined by reference to the value of a currency
or commodity at a future point in time, preferred stock with dividend rates
determined by reference to the value of a currency, or convertible securities
with the conversion terms related to a particular commodity. The risks of
investing in Hybrid Instruments reflect a combination of the risks from
investing in securities, futures and currencies, including volatility and lack
of liquidity. Reference is made to the discussion of futures and forward
contracts in this Statement of Additional Information for a discussion of these
risks. Further, the prices of the Hybrid Instrument and the related commodity or
currency may not move in the same direction or at the same time. Hybrid
Instruments may bear interest or pay preferred dividends at below market (or
even relatively nominal) rates. In addition, because the purchase and sale of
Hybrid Instruments could take place in an over-the-counter market or in a
private transaction between a Fund and the seller of the Hybrid Instrument, the
creditworthiness of the contract party to the transaction would be a risk factor
which the Fund would have to consider. Hybrid Instruments also may not be
subject to regulation of the CFTC, which generally regulates the trading of
commodity futures by U.S. persons, the SEC, which regulates the offer and sale
of securities by and to U.S. persons, or any other governmental regulatory
authority.
LENDING OF PORTFOLIO SECURITIES. For the purpose of realizing additional
income, certain of the Funds may make secured loans of Fund securities amounting
to not more than 33 1/3% of its total assets. Securities loans are made to
broker/dealers, institutional investors, or other persons pursuant to agreements
requiring that the loans be continuously secured by collateral at least equal at
all times to the value of the securities lent marked to market on a daily basis.
The collateral received will consist of cash, U.S. Government securities,
letters of credit or such other collateral as may be permitted under its
investment program. While the securities are being lent, the Fund will continue
to receive the equivalent of the interest or dividends paid by the issuer on the
securities, as well as interest on the investment of the collateral or a fee
from the borrower. The Fund has a right to call each loan and obtain the
securities on five business days' notice or, in connection with securities
trading on foreign markets, within such longer period of time which coincides
with the normal settlement period for purchases and sales of such securities in
such foreign markets. The Fund will not have the right to vote securities while
they are being lent, but it will call a loan in anticipation of any important
vote. The risks in lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving additional collateral or
in the recovery of the securities or possible loss of rights in the collateral
should the borrower fail financially. Loans will only be made to persons deemed
by the Investment Manager or relevant Sub-Adviser to be of good standing and
will not be made unless, in the judgment of the Investment Manager or relevant
Sub-Adviser, the consideration to be earned from such loans would justify the
risk.
INVESTMENT POLICY LIMITATIONS
Each of the Funds operates within certain fundamental investment policy
limitations which may not be changed without the approval of the lesser of (i)
67% or more of the voting securities present at a meeting if the holders of more
than 50% of the outstanding voting securities of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding voting securities
of the Fund. Investments bound by the following limitations are adhered to at
the time of investment, but later increases or decreases in percentages
resulting from change in value or net assets will not result in violation of
such limitations.
SECURITY GROWTH AND INCOME FUND'S FUNDAMENTAL POLICIES
Growth and Income Fund's fundamental investment policy limitations are:
1. Not to invest more than 5% of its total assets in the securities of any one
issuer.
2. Not to purchase more than 10% of the outstanding voting securities of any
one issuer.
3. Not to purchase securities for the purpose of exercising control over the
issuers thereof.
4. Not to act as an underwriter, either directly or indirectly.
5. Not to borrow money or securities for any purpose except to the extent that
borrowing up to 5% of the Fund's total assets is permitted for emergency
purposes, provided such borrowing is made on a temporary basis from
commercial banks and is not used for investment purposes.
6. Not to lend money or securities to any person, corporation, securities
dealer, or bank, other than the purchase of publicly distributed debt
securities which are not considered loans, or by entry into repurchase
agreements.
7. Not to buy securities on margin or effect short sales of securities.
8. Not to mortgage, pledge or hypothecate any securities or funds of the Fund
other than as might become necessary to furnish bond to governmental
agencies required for the conduct of the business of the Fund.
9. Not to purchase any security other than securities listed on a national
securities exchange registered under the Securities Exchange Act of 1934,
or actively traded over-the-counter.
10. Not to invest in companies having a record of less than three years'
continuous operation, which may include the operations of predecessor
companies.
11. Not to invest in the securities of an issuer if the officers and directors
of the Fund, Underwriter or Manager own more than 1/2 of 1% of such
securities, or if all such persons together own more than 5% of such
securities.
12. Not to invest in the securities of other investment companies except in the
open market at ordinary broker's commissions.
13. Not to allow officers or directors of the Fund, Underwriter or Manager to
purchase shares of the Fund except for investment at current net asset
value.
14. Not to own, buy or sell real estate, commodities or commodity contracts.
(This policy shall not prevent the Fund from investing in securities or
other instruments backed by real estate or in securities of companies
engaged in the real estate business.)
15. Not to invest in puts, calls, straddles, spreads or any combination
thereof.
16. Not to invest in limited partnerships or similar interests in oil, gas,
mineral leases, and other mineral exploration development programs;
provided, however, that the Fund may invest in the securities of other
corporations whose activities include such exploration and development.
Although Fundamental Policy 16 is intended to apply only to certain oil,
gas and other mineral exploration development programs and not to securities
traded on national securities exchanges, the Board of Directors reviewed and
considered in 1986 the scope of this limitation. Prior to that time, the Fund
had made an investment, which incurred a loss, in an oil and gas company which
was organized as a limited partnership with its securities traded on the New
York Stock Exchange. The directors concluded that the limitation was not
intended to apply to such investments, but in order to avoid possible future
questions regarding the permissibility of such investments, have determined that
Growth and Income Fund will not purchase limited partnership securities of any
type in the future. The Fund does not interpret Fundamental Policy 7 or 14 as
prohibiting transactions in financial futures contracts.
SECURITY EQUITY FUND'S FUNDAMENTAL POLICIES
Security Equity Fund's fundamental policy limitations, which are applicable
to each of Equity Fund, Asset Allocation Fund, Social Awareness Fund, Value Fund
and Small Company Fund, are:
1. Not to invest more than 5% of its total assets in the securities of any one
issuer; provided, however, that for Asset Allocation Fund, Social Awareness
Fund, Value Fund and Small Company Fund, this limitation applies only with
respect to 75% of its total assets.
2. Not to purchase more than 10% of the outstanding voting securities of any
one issuer.
3. Not to purchase securities for the purpose of exercising control over the
issuers thereof.
4. Not to underwrite securities of other issuers, provided that this policy
shall not be construed to prevent or limit in any manner the right of the
Fund to purchase securities for investment purposes.
5. With respect to Equity Fund, not to borrow money or securities for any
purpose except to the extent that borrowing up to 10% of the Fund's total
assets is permitted for emergency purposes on a temporary basis from banks
and will not be made for investment purposes. Asset Allocation Fund, Social
Awareness Fund, Value Fund and Small Company Fund may borrow up to 33 1/3%
of total assets and may borrow for emergency, temporary or investment
purposes from a variety of sources, including banks. Each of the Funds may
also obtain such short-term credits as are necessary for the clearance of
portfolio transactions.
6. Not to make loans to other persons other than the purchase of publicly
distributed debt securities which are not considered loans, or by entry
into repurchase agreements; provided, however, that this investment
limitation does not apply to Asset Allocation Fund, Social Awareness Fund,
Value Fund and Small Company Fund.
7. Not to buy securities on margin or effect short sales of securities;
provided, however, that Asset Allocation Fund, Social Awareness Fund and
Value Fund may make margin deposits in connection with transactions in
options, futures, and options on futures and provided further that this
investment limitation does not apply to Small Company Fund.
8. Not to issue senior securities; provided, however, that Asset Allocation
Fund, Social Awareness Fund, Value Fund and Small Company Fund may issue
senior securities in compliance with the Investment Company Act of 1940.
9. Not to invest in the securities of other investment companies; provided,
however, that this investment limitation does not apply to Asset Allocation
Fund, Social Awareness Fund, Value Fund and Small Company Fund which may
invest in the securities of other investment companies. (Social Awareness
Fund does not presently intend to invest in the securities of other
investment companies.)
10. Not to invest in companies having a record of less than three years'
continuous operation, which may include the operations of predecessor
companies; provided, however, that this investment limitation does not
apply to Asset Allocation Fund, Social Awareness Fund, Value Fund and Small
Company Fund.
11. Not to invest in the securities of an issuer if the officers and directors
of the Fund, the Underwriter or Investment Manager own more than 1/2 of 1%
of such securities, or if all such persons together own more than 5% of
such securities; provided, however, that this limitation does not apply to
the Small Company Fund.
12. Not to allow officers or directors of the Fund, the Underwriter or
Investment Manager to purchase shares of the Fund except for investment at
current net asset value.
13. Not to invest 25% or more of the Fund's total assets in a particular
industry.
14. Not to own, buy or sell real estate, commodities or commodity contracts;
provided, however, that Asset Allocation Fund, Social Awareness Fund, Value
Fund and Small Company Fund may enter into forward currency contracts and
forward commitments, and transactions in futures, options, and options on
futures. (This policy shall not prevent any of the Funds from investing in
securities or other instruments backed by real estate or in securities of
companies engaged in the real estate business.)
15. Not to invest in warrants unless acquired as a unit or attached to other
securities; provided, however, that this investment limitation does not
apply to Asset Allocation Fund, Social Awareness Fund, Value Fund and Small
Company Fund.
16. Not to invest more than 10% of its total assets in restricted securities;
provided, however, that this investment limitation does not apply to Asset
Allocation Fund, Social Awareness Fund, Value Fund and Small Company Fund
which may invest in restricted securities. (Restricted securities are those
securities for which an active and substantial market does not exist at the
time of purchase or upon subsequent valuation, or for which there are legal
or contractual restrictions as to disposition.)
17. Not to invest more than 2% of its total assets in puts, calls, straddles,
spreads, or any combination thereof; provided, however, that this
investment limitation does not apply to Asset Allocation Fund, Social
Awareness Fund, Value Fund and Small Company Fund which may invest in such
instruments. (With respect to Equity Fund, there is no present intention to
invest any of the Fund's assets in puts, calls, straddles, spreads, or any
combination thereof.)
18. Not to invest in limited partnerships or similar interests in oil, gas,
mineral leases or other mineral exploration development programs; provided,
however, that the Funds may invest in the securities of other corporations
whose activities include such exploration and development and provided
further that this investment limitation does not apply to Small Company
Fund.
The Fund interprets Fundamental Policy 14 to prohibit the purchase of real
estate limited partnerships. The Fund does not interpret Fundamental Policy 7 or
14 as prohibiting transactions in options, financial futures contracts or
options on financial futures contracts; however, with respect to Equity and
Global Funds, transactions in options and options on financial futures contracts
are subject to the limits set forth in Fundamental Policy 17.
Security Equity Fund's fundamental policy limitations, which are applicable
to Global Fund, Enhanced Index Fund, International Fund and Select 25 Fund, are:
1. Not to invest more than 5% of its total assets in the securities of any one
issuer (other than obligations of, or guaranteed by, the U.S. Government,
its agencies or instrumentalities); provided that this limitation applies
only with respect to 75% of the Fund's total assets.
2. Not to purchase more than 10% of the outstanding voting securities of any
one issuer.
3. Not to purchase securities for the purpose of exercising control over the
issuers thereof.
4. Not to act as underwriter of securities issued by others, except to the
extent that the Fund may be considered an underwriter within the meaning of
the Securities Act of 1933 in the disposition of restricted securities.
5. Not to borrow in excess of 33 1/3% of its total assets.
6. Not to lend any security or make any other loan if, as a result, more than
33 1/3% of the Fund's total assets would be lent to other parties, except
(i) through the purchase of a portion of an issue of debt securities in
accordance with its investment objective and policies, or (ii) by engaging
in repurchase agreements with respect to portfolio securities.
7. Not to issue senior securities, except as permitted under the Investment
Company Act of 1940.
8. Not to purchase or sell physical commodities, except that the Fund may
enter into futures contracts and options thereon.
9. Not to allow officers or directors of the Fund, the Underwriter or the
Investment Manager to purchase shares of the Fund except for investment at
current net asset value.
10. Not to invest 25% or more of the Fund's total assets in a particular
industry.
11. Not to purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Fund from investment in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business).
The following operating policies of Global Fund are not fundamental
policies and may be changed by a vote of a majority of the Fund's Board of
Directors without shareholder approval.
1. The Fund may not borrow money or securities for any purposes except that
borrowing up to 10% of the Fund's total assets from commercial banks is
permitted for emergency or temporary purposes.
2. The Fund does not currently intend to lend assets other than securities to
other parties. (This limitation does not apply to purchases of debt
securities or to repurchase agreements).
3. The Fund does not currently intend to sell securities short, unless it owns
or has the right to obtain securities equivalent in kind and amount to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling securities short. In
addition, the Fund does not currently intend to purchase securities on
margin, except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
4. The Fund may not, except in connection with a merger, consolidation,
acquisition, or reorganization, invest in the securities of other
investment companies, including investment companies advised by the
Investment Manager, if, immediately after such purchase or acquisition,
more than 10% of the value of the Fund's total assets would be invested in
such securities, more than 5% of the value of the Fund's total assets would
be invested in the securities of any one investment company, or the Fund
would own more than 3% of the total outstanding stock of another investment
company.
5. The Fund may not invest in securities of an issuer, that together with any
predecessor, has been in operation for less than three years, if, as a
result, more than 5% of the total assets of the fund would then be invested
in such securities.
6. The Fund does not currently intend to purchase warrants, valued at the
lower of cost or market, in excess of 10% of the Fund's net assets.
Included in that amount but not to exceed 2% of net assets, are warrants of
which the underlying securities are not traded on principal domestic or
foreign exchanges. Warrants acquired by the Fund in units or attached to
securities are not subject to these restrictions.
7. The Fund may not invest more than 10% of its total assets in securities
which are restricted as to disposition under the federal securities laws,
except that the Fund may purchase without regard to this limitation
restricted securities which are eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 (the "1933 Act").
8. The Fund may buy and sell exchange-traded and over-the-counter put and call
options, including index options, securities options, currency options and
options on futures, provided that a call or put may be purchased only if
after such purchase, the value of all call and put options held by the Fund
will not exceed 5% of the Fund's total assets. The Fund may write only
covered put and call options. The Fund does not currently intend to engage
in spread or straddle transactions.
9. The Fund does not currently intend to invest in oil, gas, mineral leases or
other mineral exploration or development programs.
SECURITY ULTRA FUND'S FUNDAMENTAL POLICIES
Ultra Fund's fundamental policy limitations are:
1. Not to invest more than 5% of its total assets in the securities of any one
issuer (other than the United States of America).
2. Not to purchase more than 10% of the outstanding voting securities (or of
any class of outstanding securities) of any one issuer.
3. Not to purchase securities for the purpose of exercising control over the
issuers thereof.
4. Not to underwrite securities of other issuers.
5. Not to purchase restricted securities.
6. Not to pledge any portion of its assets.
7. Not to make loans to other persons other than the purchase of publicly
distributed debt securities which are not considered loans, or by entry
into repurchase agreements.
8. Not to buy securities on margin but it may obtain such short-term credits
as may be necessary for the clearance of purchases and sales of securities.
9. Not to issue senior securities, except that it may borrow money from banks
for temporary or emergency purposes in an amount up to 5% of the Fund's
total assets, provided that the Fund will not purchase portfolio securities
at any time it has outstanding borrowings.
10. Not to invest in the securities of other investment companies.
11. Not to make short sales of securities unless at the time it owns an equal
amount of such securities, or by virtue of ownership of convertible or
exchangeable securities, it has the right to obtain through the conversion
or exchange of such other securities an equal amount of securities sold
short.
12. Not to invest more than 25% of the Fund's total assets in a particular
industry.
13. Not to own, buy or sell real estate, commodities or commodity contracts.
14. Not to invest more than 5% of the value of the Fund's net assets in
warrants, valued at the lower of cost or market. Included within that
amount (but not to exceed 2% of the value of the Fund's net assets) may be
warrants which are not listed on the New York or American Stock Exchanges.
Warrants acquired by the Fund in units or attached to securities may be
deemed to be without value.
15. Not to invest more than 5% of its total assets in any issuer or issuers
having a record of less than three years continuous operation, which may
include the operations of predecessor companies.
16. Not to invest in puts, calls, straddles, spreads, or any combination
thereof.
17. Not to invest in limited partnerships or similar interests in oil, gas,
mineral leases, and other mineral exploration or development programs;
provided, however, that the Fund may invest in the securities of other
corporations whose activities include such exploration and development.
The Fund does not interpret Fundamental Policy 8 or 13 as prohibiting
transactions in financial futures contracts.
OFFICERS AND DIRECTORS
The officers and directors of the Funds and their principal occupations for
at least the last five years are as follows. Unless otherwise noted, the address
of each officer and director is 700 Harrison Street, Topeka, Kansas 66636-0001.
<TABLE>
<CAPTION>
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NAME, ADDRESS AND POSITIONS HELD WITH THE FUNDS PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
- --------------------------------------------------------------- -------------------------------------------------------------
<S> <C>
JOHN D. CLELAND,* President and Director Senior Vice President and Managing Member Representative,
Security Management Company, LLC; Senior Vice President,
Security Benefit Group, Inc. and Security Benefit Life
Insurance Company.
DONALD A. CHUBB, JR.,** Director Business broker, Griffith & Blair Realtors. Prior to 1997,
2222 SW 29th Street President, Neon Tube Light Company, Inc.
Topeka, Kansas 66611
PENNY A. LUMPKIN,** Director Vice President, Palmer Companies (Wholesalers, Retailers
3616 Canterbury Town Road and Developers) and Bellairre Shopping Center (Leasing and
Topeka, Kansas 66610 Shopping Center Management); President, Vivian's (Corporate
Sales).
MARK L. MORRIS, JR.,** Director Retired. Former General Partner, Mark Morris Associates
5500 SW 7th Street (Veterinary Research and Education).
Topeka, Kansas 66606
MAYNARD F. OLIVERIUS, Director President and Chief Executive Officer,
1500 SW 10th Avenue Stormont-Vail Health Care.
Topeka, Kansas 66604
JAMES R. SCHMANK,* Vice President and Director President and Managing Member Representative, Security
Management Company, LLC; Senior Vice President, Security
Benefit Group, Inc. and Security Benefit Life Insurance
Company.
MARK E. YOUNG, Vice President Vice President, Security Management Company, LLC; Assistant
Vice President, Security Benefit Group, Inc. and Security
Benefit Life Insurance Company.
JANE A. TEDDER, Vice President Vice President and Senior Economist, Security Management
(Equity Fund only) Company, LLC; Vice President, Security Benefit Group, Inc.
and Security Benefit Life Insurance Company.
TERRY A. MILBERGER, Vice President Senior Vice President and Senior Portfolio Manager,
(Equity Fund only) Security Management Company, LLC; Senior Vice President,
Security Benefit Group, Inc. and Security Benefit Life
Insurance Company.
MICHAEL A. PETERSEN, Vice President Vice President and Senior Portfolio Manager, Security
(Growth and Income Fund only) Management Company, LLC; Vice President, Security Benefit
Group, Inc. and Security Benefit Life Insurance Company.
Prior to November 1997, Director of Equity Research
and Fund Management, Old Kent Bank and Trust Corporation.
AMY J. LEE, Secretary Secretary, Security Management Company, LLC; Vice
President, Associate General Counsel and Assistant
Secretary, Security Benefit Group, Inc. and Security
Benefit Life Insurance Company.
BRENDA M. HARWOOD, Treasurer Assistant Vice President and Treasurer, Security Management
Company, LLC; Assistant Vice President, Security Benefit
Group, Inc. and Security Benefit Life Insurance Company.
CINDY L. SHIELDS, Vice President Assistant Vice President and Portfolio Manager, Security
(Equity Fund only) Management Company, LLC; Assistant Vice President, Security
Benefit Group, Inc. and Security Benefit Life Insurance
Company. Prior to August 1994, Junior Portfolio Manager,
Research Analyst, Junior Research Analyst and Portfolio
Assistant, Security Management Company.
THOMAS A. SWANK, Vice President Vice President and Portfolio Manager, Security Management
(Growth and Income Fund only) Company, LLC; Vice President and Chief Investment Officer,
Security Benefit Group, Inc. and Security Benefit Life
Insurance Company.
JIM SCHIER, Vice President Assistant Vice President and Portfolio Manager, Security
Management Company, LLC; Assistant Vice President, Security
Benefit Group, Inc. and Security Benefit Life Insurance
Company. Prior to February 1997, Assistant Vice President
and Senior Research Analyst, Security Management Company,
LLC. Prior to August 1995, Portfolio Manager, Mitchell
Capital Management. Prior to March 1993, Vice President and
Portfolio Manager, Fourth Financial.
CHRISTOPHER D. SWICKARD, Assistant Secretary Assistant Secretary, Security Management Company, LLC;
Assistant Vice President and Assistant Counsel, Security
Benefit Group, Inc. and Security Benefit Life Insurance
Company. Prior to June 1992, student at Washburn
University School of Law.
- -----------------------------------------------------------------------------------------------------------------------------
*These directors are deemed to be "interested persons" of the Funds under the Investment Company Act of 1940, as amended,
by reason of their positions with the Funds' Investment Manager and/or the parent of the Investment Manager.
**These directors serve on the Funds' joint audit committee, the purpose of which is to meet with the independent auditors,
to review the work of the auditors, and to oversee the handling by Security Management Company, LLC of the accounting
functions for the Funds.
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</TABLE>
The directors and officers of the Funds hold identical offices in the other
Funds managed by the Investment Manager, except Ms. Tedder who is also Vice
President of SBL Fund and Security Income Fund, Messrs. Milberger and Petersen
who are also Vice Presidents of SBL Fund, Ms. Shields who is also Assistant Vice
President of SBL Fund and Messrs. Swank and Schier who are Assistant Vice
Presidents of SBL Fund. (See the table under "Investment Management," page 48,
for positions held by such persons with the Investment Manager.) Ms. Lee holds
identical offices for the Funds' distributor, Security Distributors, Inc., and
Messrs. Cleland, Schmank and Young serve as Vice President and Director, while
Ms. Harwood serves as Treasurer of the distributor.
REMUNERATION OF DIRECTORS AND OTHERS
The Funds' directors, except those directors who are "interested persons"
of the Funds, receive from each of Security Growth and Income Fund, Security
Equity Fund and Security Ultra Fund an annual retainer of $1,667 and a fee of
$1,000 per meeting, plus reasonable travel costs, for each meeting of the board
attended. In addition, certain directors who are members of the Funds' joint
audit committee receive a fee of $1,000 and reasonable travel costs for each
meeting of the Funds' audit committee attended. Such fees and travel costs are
paid by the Investment Manager for each Fund, except Asset Allocation, Social
Awareness, Value, Small Company, Enhanced Index, International and Select 25
Funds, pursuant to its Investment Management and Services Agreements with the
Funds which provide that the Investment Manager will bear all Fund expenses
except for its fee and the expenses of brokerage commissions, interest, taxes,
extraordinary expenses approved by the Board of Directors and Class B
distribution fees. Asset Allocation, Social Awareness, Value, Small Company,
Enhanced Index, International and Select 25 Funds pay their respective share of
directors' fees, audit committee fees and travel costs based on relative net
assets. (See page 48, "Investment Management.")
The Funds do not pay any fees to, or reimburse expenses of, directors who
are considered "interested persons" of the Funds. The aggregate compensation
paid by the Funds to each of the directors during the fiscal year ended
September 30, 1998, and the aggregate compensation paid to each of the directors
during calendar year 1998 by all seven of the registered investment companies to
which the Investment Manager provides investment advisory services
(collectively, the "Security Fund Complex"), are set forth below. Each of the
directors is a director of each of the other registered investment companies in
the Security Fund Complex.
<TABLE>
<CAPTION>
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AGGREGATE COMPENSATION
-------------------------------------- TOTAL COMPENSATION
SECURITY SECURITY SECURITY ESTIMATED ANNUAL FROM THE SECURITY
NAME OF DIRECTOR GROWTH AND EQUITY ULTRA BENEFITS UPON FUND COMPLEX,
OF THE FUND INCOME FUND FUND FUND RETIREMENT INCLUDING THE FUNDS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Donald A. Chubb, Jr. $2,273 $2,273 $2,273 $0 $27,275
John D. Cleland 0 0 0 0 0
Donald L. Hardesty* 1,106 1,106 1,106 0 13,275
Penny A. Lumpkin 2,273 2,273 2,273 0 27,275
Mark L. Morris, Jr. 2,273 2,273 2,273 0 27,275
Maynard Oliverius 1,000 1,000 1,000 0 13,275
Hugh Thompson* 1,106 1,106 1,106 0 12,000
Harold G. Worswick** 0 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------------
* Mr. Hardesty resigned as a fund director April 1998. Mr. Thompson resigned as a fund director February 1998.
** Mr. Worswick retired as a fund director February 1996. The amount of deferred compensation accrued for Mr. Worswick
as of September 30, 1998 was $8,386. Mr. Worswick received deferred compensation in the amount of $15,266 during
the fiscal-year ended September 30, 1998.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Investment Manager compensates its officers and directors who may also
serve as officers or directors of the Funds. On __________, 1998, the Funds'
officers and directors (as a group) beneficially owned less than one percent of
the total outstanding Class A and Class B shares of Growth and Income Fund,
Equity Fund, Global Fund, Asset Allocation Fund, Social Awareness Fund, Value
Fund and Ultra Fund.
HOW TO PURCHASE SHARES
Investors may purchase shares of the Funds through authorized dealers who
are members of the National Association of Securities Dealers, Inc. In addition,
banks and other financial institutions may make shares of the Funds available to
their customers. (Banks and other financial institutions that make shares of the
Funds available to their customers in Texas must be registered with that state
as securities dealers.) The minimum initial investment is $100. The minimum
subsequent investment is $100 unless made through an Accumulation Plan which
allows for subsequent investments of $20. (See "Accumulation Plan," page 48.) An
application may be obtained from the Investment Manager.
As a convenience to investors and to save operating expenses, the Funds do
not issue certificates for full shares except upon written request by the
investor or his or her investment dealer. Certificates will be issued at no cost
to the stockholder. No certificates will be issued for fractional shares and
fractional shares may be withdrawn only by redemption for cash.
Orders for the purchase of shares of the Funds will be confirmed at an
offering price equal to the net asset value per share next determined after
receipt of the order in proper form by Security Distributors, Inc. (the
"Distributor") (generally as of the close of the Exchange on that day) plus the
sales charge in the case of Class A shares. Orders received by dealers or other
firms prior to the close of the Exchange and received by the Distributor prior
to the close of its business day will be confirmed at the offering price
effective as of the close of the Exchange on that day.
Dealers and other financial services firms are obligated to transmit orders
promptly.
The Funds reserve the right to withdraw all or any part of the offering
made by this prospectus and to reject purchase orders.
ALTERNATIVE PURCHASE OPTIONS
The Funds offer three classes of shares:
CLASS A SHARES - FRONT-END LOAD OPTION. 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 shares sold in an amount of
$1,000,000 or more without a front-end sales charge will be subject to a
contingent deferred sales charge for one year). See Appendix B for a discussion
of "Rights of Accumulation" and "Statement of Intention," which options may
serve to reduce the front-end sales charge.
CLASS B SHARES - BACK-END LOAD OPTION. Class B shares are sold without a
sales charge at the time of purchase, but are subject to a deferred sales charge
if they are redeemed within five years of the date of purchase. Class B shares
will automatically convert to Class A shares at the end of eight years after
purchase.
CLASS C SHARES - LEVEL LOAD OPTION. Class C shares are sold without a sales
charge at the time of purchase, but are subject to a contingent deferred sales
charge if they are redeemed within one year of the date of purchase.
The decision as to which class is more beneficial to an investor depends on
the amount and intended length of the investment. Investors who would rather pay
the entire cost of distribution at the time of investment, rather than spreading
such cost over time, might consider Class A shares. Other investors might
consider Class B or Class C shares, in which case 100% of the purchase price is
invested immediately, depending on the amount of the purchase and the intended
length of investment. The Funds will not normally accept any purchase of Class B
shares in the amount of $500,000 or more.
Dealers or others may receive different levels of compensation depending on
which class of shares they sell.
CLASS A SHARES
Class A shares are offered at net asset value plus an initial sales charge
as follows:
- --------------------------------------------------------------------------------
SALES CHARGE
--------------------------------------------
PERCENTAGE OF PERCENTAGE
AMOUNT OF PURCHASE PERCENTAGE OF NET AMOUNT REALLOWABLE
AT OFFERING PRICE OFFERING PRICE INVESTED TO DEALERS
- --------------------------------------------------------------------------------
Less than $50,000................. 5.75% 6.10% 5.00%
$50,000 but less than $100,000.... 4.75 4.99 4.00
$100, 000 but less than $250,000.. 3.75 3.90 3.00
$250,000 but less than $500,000... 2.75 2.83 2.25
$500,000 but less than $1,000,000. 2.00 2.04 1.75
$1,000,000 and over............... None None (See below)
- --------------------------------------------------------------------------------
The Underwriter will pay a commission to dealers on purchases of $1,000,000 or
more as follows: 1.00% on sales up to $5,000,000, plus .50% on sales of
$5,000,000 or more up to $10,000,000, and .10% on any amount of $10,000,000 or
more.
The Investment Manager may, at its expense, pay a service fee to dealers
who satisfy certain criteria established by the Investment Manager from time to
time relating to the volume of their sales of Class A shares of the Funds and
certain other Security Funds during prior periods and certain other factors,
including providing to their clients who are stockholders of the Funds certain
services, which include assisting in maintaining records, processing purchase
and redemption requests and establishing shareholder accounts, assisting
shareholders in changing account options or enrolling in specific plans, and
providing shareholders with information regarding the Funds and related
developments.Service fees are paid quarterly and may be discontinued at any
time.
SECURITY EQUITY FUND'S CLASS A DISTRIBUTION PLAN
As discussed in the Prospectus, Small Company Fund, Enhanced Index Fund,
International Fund and Select 25 Fund have a Distribution Plan for their Class A
shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plan
authorizes each such Fund to pay an annual fee to the Distributor of .25% of the
average daily net asset value of the Class A shares of the Fund to finance
various activities relating to the distribution of such shares of the Fund to
investors. These expenses include, but are not limited to, the payment of
compensation (including compensation to securities dealers and other financial
institutions and organizations) to obtain various administrative services for
the Fund. These services include, among other things, processing new shareholder
account applications and serving as the primary source of information to
customers in answering questions concerning the Fund and their transactions with
the Fund. The Distributor is also authorized to engage in advertising, the
preparation and distribution of sales literature and other promotional
activities on behalf of the Fund. The Distributor is required to report in
writing to the Board of Directors of Equity Fund and the board will review at
least quarterly the amounts and purpose of any payments made under the Plan. The
Distributor is also required to furnish the board with such other information as
may reasonably be requested in order to enable the board to make an informed
determination of whether the Plan should be continued.
The Plan became effective on October 15, 1997 for Small Company Fund and
January 31, 1999 for Enhanced Index, International and Select 25 Funds. The Plan
will continue from year to year, provided that such continuance is approved at
least annually by a vote of a majority of the Board of Directors of the Fund,
including a majority of the independent directors cast in person at a meeting
called for the purpose of voting on such continuance. The Plan can be terminated
at any time on 60 days' written notice, without penalty, if a majority of the
disinterested directors or the Class A shareholders vote to terminate the Plan.
Any agreement relating to the implementation of the Plan terminates
automatically if it is assigned. The Plan may not be amended to increase
materially the amount of payments thereunder without approval of the Class A
shareholders of the Fund.
Because all amounts paid pursuant to the Distribution Plan are paid to the
Distributor, the Investment Manager and its officers, directors and employees,
including Messrs. Cleland and Schmank (directors of the Fund), Messrs. Young and
Swickard, Ms. Tedder, Ms. Lee and Ms. Harwood (officers of the Fund), all may be
deemed to have a direct or indirect financial interest in the operation of the
Distribution Plan. None of the independent directors have a direct or indirect
financial interest in the operation of the Distribution Plan.
Benefits from the Distribution Plan may accrue to the Fund and its
stockholders from the growth in assets due to sales of shares to the public
pursuant to the Distribution Agreement with the Distributor. Increases in the
net assets of Small Company, Enhanced Index, International and Select 25 Funds
from sales pursuant to their respective Distribution Plans and Agreements may
benefit shareholders by reducing per share expenses, permitting increased
investment flexibility and diversification of such Funds' assets, and
facilitating economies of scale (e.g., block purchases) in the Funds' securities
transactions.
CLASS B SHARES
Class B shares are offered at net asset value, without an initial sales
charge. With certain exceptions, the Funds may impose a deferred sales charge on
shares redeemed within five years of the date of purchase. No deferred sales
charge is imposed on amounts redeemed thereafter. If imposed, the deferred sales
charge is deducted from the redemption proceeds otherwise payable to you. The
deferred sales charge is retained by the Distributor.
Whether a contingent deferred sales charge is imposed and the amount of the
charge will depend on the number of years since the investor made a purchase
payment from which an amount is being redeemed, according to the following
schedule:
- ---------------------------------------------------------------
YEAR SINCE PURCHASE CONTINGENT DEFERRED
PAYMENT WAS MADE SALES CHARGE
- ----------------------------------- ---------------------------
First............................. 5%
Second............................ 4%
Third............................. 3%
Fourth............................ 3%
Fifth............................. 2%
Sixth and Following............... 0%
- ----------------------------------- ---------------------------
Class B shares (except shares purchased through the reinvestment of
dividends and other distributions paid with respect to Class B shares) will
automatically convert, on the eighth anniversary of the date such shares were
purchased, to Class A shares which are subject to a lower distribution fee. This
automatic conversion of Class B shares will take place without imposition of a
front-end sales charge or exchange fee. (Conversion of Class B shares
represented by stock certificates will require the return of the stock
certificates to the Investment Manager.) All shares purchased through
reinvestment of dividends and other distributions paid with respect to Class B
shares ("reinvestment shares") will be considered to be held in a separate
subaccount. Each time any Class B shares (other than those held in the
subaccount) convert to Class A shares, a pro rata portion of the reinvestment
shares held in the subaccount will also convert to Class A shares. Class B
shares so converted will no longer be subject to the higher expenses borne by
Class B shares. Because the net asset value per share of the Class A shares may
be higher or lower than that of the Class B shares at the time of conversion,
although the dollar value will be the same, a shareholder may receive more or
less Class A shares than the number of Class B shares converted. Under current
law, it is the Funds' opinion that such a conversion will not constitute a
taxable event under federal income tax law. In the event that this ceases to be
the case, the Board of Directors will consider what action, if any, is
appropriate and in the best interests of the Class B stockholders.
CLASS B DISTRIBUTION PLAN
Each Fund bears some of the costs of selling its Class B shares under a
Distribution Plan adopted with respect to its Class B shares ("Class B
Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 ("1940 Act"). This Plan provides for payments at an annual rate of 1.00% of
the average daily net asset value of Class B shares. Amounts paid by the Funds
are currently used to pay dealers and other firms that make Class B shares
available to their customers (1) a commission at the time of purchase normally
equal to 4.00% of the value of each share sold and (2) a service fee for account
maintenance and personal service to shareholders payable for the first year,
initially, and for each year thereafter, quarterly, in an amount equal to .25%
annually of the average daily net asset value of Class B shares sold by such
dealers and other firms and remaining outstanding on the books of the Funds.
Rules of the National Association of Securities Dealers, Inc. ("NASD")
limit the aggregate amount that a Fund may pay annually in distribution costs
for the sale of its Class B shares to 6.25% of gross sales of Class B shares
since the inception of the Distribution Plan, plus interest at the prime rate
plus 1% on such amount (less any contingent deferred sales charges paid by Class
B shareholders to the Distributor). The Distributor intends, but is not
obligated, to continue to pay or accrue distribution charges incurred in
connection with the Class B Distribution Plan which exceed current annual
payments permitted to be received by the Distributor from the Funds. The
Distributor intends to seek full payment of such charges from the Fund (together
with annual interest thereon at the prime rate plus 1%) at such time in the
future as, and to the extent that, payment thereof by the Funds would be within
permitted limits.
Each Fund's Class B Distribution Plan may be terminated at any time by vote
of its directors who are not interested persons of the Fund as defined in the
1940 Act or by vote of a majority of the outstanding Class B shares. In the
event the Class B Distribution Plan is terminated by the Class B stockholders or
the Funds' Board of Directors, the payments made to the Distributor pursuant to
the Plan up to that time would be retained by the Distributor. Any expenses
incurred by the Distributor in excess of those payments would be absorbed by the
Distributor. The Funds make no payments in connection with the sales of their
shares other than the distribution fee paid to the Distributor.
CLASS C SHARES
Class C shares are offered at net asset value, without an initial sales
charge. With certain exceptions, the Funds may impose a deferred sales charge on
shares redeemed within one year of the date of purchase. No deferred sales
charge is imposed on amounts redeemed thereafter. If imposed, the deferred sales
charge is deducted from the redemption proceeds otherwise payable to you. The
deferred sales charge is retained by the Distributor.
CLASS C DISTRIBUTION PLAN
Each Fund bears some of the costs of selling its Class C shares under a
Distribution Plan adopted with respect to its Class C shares ("Class C
Distribution Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940 ("1940 Act"). This Plan provides for payments at an annual rate of 1.00% of
the average daily net asset value of Class C shares. Amounts paid by the Funds
are currently used to pay dealers and other firms that make Class C shares
available to their customers (1) a commission at the time of purchase normally
equal to 0.75% of the value of each share sold and (2) a service fee for account
maintenance and personal service to shareholders payable for the first year,
initially, and for each year thereafter, quarterly, in an amount equal to .25%
annually of the average daily net asset value of Class C shares sold by such
dealers and other firms and remaining outstanding on the books of the Funds.
Rules of the National Association of Securities Dealers, Inc. ("NASD")
limit the aggregate amount that a Fund may pay annually in distribution costs
for the sale of its Class C shares to 6.25% of gross sales of Class C shares
since the inception of the Distribution Plan, plus interest at the prime rate
plus 1% on such amount (less any contingent deferred sales charges paid by Class
C shareholders to the Distributor). The Distributor intends, but is not
obligated, to continue to pay or accrue distribution charges incurred in
connection with the Class C Distribution Plan which exceed current annual
payments permitted to be received by the Distributor from the Funds. The
Distributor intends to seek full payment of such charges from the Fund (together
with annual interest thereon at the prime rate plus 1%) at such time in the
future as, and to the extent that, payment thereof by the Funds would be within
permitted limits.
The Fund's Class C Distribution Plan may be terminated at any time by vote
of its directors who are not interested persons of the Fund as defined in the
1940 Act or by vote of a majority of the outstanding Class C shares. In the
event the Class C Distribution Plan is terminated by the Class C stockholders or
the Fund's Board of Directors, the payments made to the Distributor pursuant to
the Plan up to that time would be retained by the Distributor. Any expenses
incurred by the Distributor in excess of those payments would be absorbed by the
Distributor. The Fund makes no payments in connection with the sales of their
shares other than the distribution fee paid to the Distributor.
CALCULATION AND WAIVER OF CONTINGENT DEFERRED SALES CHARGES
Any contingent deferred sales charge imposed upon redemption of Class A
shares (purchased in amounts of $1,000,000 or more), Class B shares and Class C
shares is a percentage of the lesser of (1) the net asset value of the shares
redeemed or (2) the net cost of such shares. No contingent deferred sales charge
is imposed upon redemption of amounts derived from (1) increases in the value
above the net cost of such shares due to increases in the net asset value per
share of the Fund; (2) shares acquired through reinvestment of income dividends
and capital gain distributions; or (3) Class A shares (purchased in amounts of
$1,000,000 or more) or Class C shares held for more than one year or Class B
shares held for more than five years. Upon request for redemption, shares not
subject to the contingent deferred sales charge will be redeemed first.
Thereafter, shares held the longest will be the first to be redeemed.
The contingent deferred sales charge is waived: (1) following the death of
a stockholder if redemption is made within one year after death; (2) upon the
disability (as defined in section 72(m)(7) of the Internal Revenue Code) of a
stockholder prior to age 65 if redemption is made within one year after the
disability, provided such disability occurred after the stockholder opened the
account; (3) in connection with required minimum distributions in the case of an
IRA, SAR-SEP or Keogh or any other retirement plan qualified under Section
401(a), 401(k) or 403(b) of the Code; and (4) in the case of distributions from
retirement plans qualified under Section 401(a) or 401(k) of the Internal
Revenue Code due to (i) returns of excess contributions to the plan, (ii)
retirement of a participant in the plan, (iii) a loan from the plan (repayment
of loans, however, will constitute new sales for purposes of assessing the
contingent deferred sales charge), (iv) "financial hardship" of a participant in
the plan, as that term is defined in Treasury Regulation Section
1.401(k)-1(d)(2), as amended from time to time, (v) termination of employment of
a participant in the plan, (vi) any other permissible withdrawal under the terms
of the plan. The contingent deferred sales charge will also be waived in the
case of certain redemptions of Class B shares of the Funds pursuant to a
systematic withdrawal program. (See "Systematic Withdrawal Program," page 48.)
ARRANGEMENTS WITH BROKER-DEALERS AND OTHERS
The Investment Manager or Distributor, from time to time, will provide
promotional incentives or pay a bonus, to certain dealers whose representatives
have sold or are expected to sell significant amounts of the Funds and/or
certain other funds managed by the Investment Manager. Such promotional
incentives will include payment for attendance (including travel and lodging
expenses) by qualifying registered representatives (and members of their
families) at sales seminars at luxury resorts within or without the United
States. Bonus compensation may include reallowance of the entire sales charge
and may also include, with respect to Class A shares, an amount which exceeds
the entire sales charge and, with respect to Class B or Class C shares, an
amount which exceeds the maximum commission. The Distributor, or the Investment
Manager, may also provide financial assistance to certain dealers in connection
with conferences, sales or training programs for their employees, seminars for
the public, advertising, sales campaigns, and/or shareholder services and
programs regarding one or more of the funds managed by the Investment Manager.
Certain of the promotional incentives or bonuses may be financed by payments to
the Distributor under a Rule 12b-1 Distribution Plan. The payment of promotional
incentives and/or bonuses will not change the price an investor will pay for
shares or the amount that the Funds will receive from such sale. No compensation
will be offered to the extent it is prohibited by the laws of any state or
self-regulatory agency, such as the National Association of Securities Dealers,
Inc. ("NASD"). A dealer to whom substantially the entire sales charge of Class A
shares is reallowed may be deemed to be an "underwriter" under federal
securities laws.
The Distributor also may pay banks and other financial services firms that
facilitate transactions in shares of the Funds for their clients a transaction
fee up to the level of the payments made allowable to dealers for the sale of
such shares as described above. Banks currently are prohibited under the
Glass-Steagall Act from providing certain underwriting or distribution services.
If banking firms were prohibited from acting in any capacity or providing any of
the described services, the Fund's Board of Directors would consider what
action, if any, would be appropriate.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
The Investment Manager or Distributor also may pay a marketing allowance to
dealers who meet certain eligibility criteria. This allowance is paid with
reference to new sales of Fund shares in a calendar year and may be discontinued
at any time. To be eligible for this allowance in any given year, the dealer
must sell a minimum of $2,000,000 of Class A, Class B and Class C shares during
that year. The applicable marketing allowance factors are set forth below.
- --------------------------------------------------------------------------------
APPLICABLE MARKETING
AGGREGATE NEW SALES ALLOWANCE FACTOR*
- --------------------------------------------------------------------------------
Less than $2 million................................... .00%
$2 million but less than $5 million.................... .15%
$5 million but less than $10 million................... .25%
$10 million but less than $15 million.................. .35%
$15 million but less than $20 million.................. .50%
or $20 million or more................................. .75%
- --------------------------------------------------------------------------------
* The maximum marketing allowance factor applicable per this schedule will be
applied to all new sales in the calendar year to determine the marketing
allowance payable for such year.
- --------------------------------------------------------------------------------
PURCHASES AT NET ASSET VALUE
Class A shares of the Funds may be purchased at net asset value by (1)
directors, officers and employees of the Funds, the Funds' Investment Manager or
Distributor; directors, officers and employees of Security Benefit Life
Insurance Company and its subsidiaries; agents licensed with Security Benefit
Life Insurance Company; spouses or minor children of any such agents; as well as
the following relatives of any such directors, officers and employees (and their
spouses): spouses, grandparents, parents, children, grandchildren, siblings,
nieces and nephews; (2) any trust, pension, profit sharing or other benefit plan
established by any of the foregoing corporations for persons described above;
(3) retirement plans where third party administrators of such plans have entered
into certain arrangements with the Distributor or its affiliates provided that
no commission is paid to dealers; and (4) officers, directors, partners or
registered representatives (and their spouses and minor children) of
broker-dealers who have a selling agreement with the Distributor. Such sales are
made upon the written assurance of the purchaser that the purchase is made for
investment purposes and that the securities will not be transferred or resold
except through redemption or repurchase by or on behalf of the Fund.
Class A shares of the Funds may also be purchased at net asset value when
the purchase is made on the recommendation of (i) a registered investment
adviser, trustee or financial intermediary who has authority to make investment
decisions on behalf of the investor; or (ii) a certified financial planner or
registered broker-dealer who either charges periodic fees to its customers for
financial planning, investment advisory or asset management services, or
provides such services in connection with the establishment of an investment
account for which a comprehensive "wrap fee" is imposed. The Distributor must be
notified when a purchase is made that qualifies under these provisions.
A stockholder of Equity Fund who formerly invested in the Bondstock
Investment Plans or Life Insurance Investors Investment Plans received Class A
shares of Equity Fund in liquidation of the Plans. Such a stockholder may
purchase Class A shares of Equity Fund at net asset value provided that such
stockholder maintains his or her Equity Fund account.
ACCUMULATION PLAN
Investors may purchase shares on a periodic basis under an Accumulation
Plan which provides for an initial investment of $100 minimum and subsequent
investments of $20 minimum at any time. An Accumulation Plan is a voluntary
program, involving no obligation to make periodic investments, and is terminable
at will. Payments are made by sending a check to the Distributor who (acting as
an agent for the dealer) will purchase whole and fractional shares of the Fund
as of the close of business on the day such payment is received. A confirmation
and statement of account will be sent to the investor following each investment.
Certificates for whole shares will be issued upon request. No certificates will
be issued for fractional shares which may be withdrawn only by redemption for
cash. Investors may choose to use "Secur-O-Matic" (automatic bank draft) to make
their Fund purchases. There is no additional charge for using Secur-O-Matic. An
application may be obtained from the Funds.
SYSTEMATIC WITHDRAWAL PROGRAM
A Systematic Withdrawal Program may be established by stockholders who wish
to receive regular monthly, quarterly, semiannual or annual payments of $25 or
more. A stockholder may elect a payment that is a specified percentage of the
initial or current account value or a specified dollar amount. The Program may
also be based upon the liquidation of a fixed or variable number of shares
provided that the amount withdrawn monthly is at least $25. However, the Funds
do not recommend this (or any other amount) as an appropriate monthly
withdrawal. Shares with a current aggregate offering price of $5,000 or more
must be deposited with the Investment Manager acting as agent for the
stockholder under the Program. There is no service charge on the Program.
Sufficient shares will be liquidated at net asset value to meet the
specified withdrawals. Liquidation of shares may deplete the investment,
particularly in the event of a market decline. Payments cannot be considered as
actual yield or income since part of such payments is a return of capital. Such
withdrawals constitute a taxable event to the stockholder. The maintenance of a
Withdrawal Program concurrently with purchases of additional shares of the Fund
would be disadvantageous because of the sales commission payable in respect to
such purchases. During the withdrawal period, no payments will be accepted under
an Accumulation Plan. Income dividends and capital gains distributions are
automatically reinvested at net asset value. If an investor has an Accumulation
Plan in effect, it must be terminated before a Systematic Withdrawal Program may
be initiated.
A stockholder may establish a Systematic Withdrawal Program with respect to
Class B or Class C shares without the imposition of any applicable contingent
deferred sales charge, provided that such withdrawals do not in any 12-month
period, beginning on the date the Program is established, exceed 10% of the
value of the account on that date ("Free Systematic Withdrawals"). Free
Systematic Withdrawals are not available if a Program established with respect
to Class B or Class C shares provides for withdrawals in excess of 10% of the
value of the account in any Program year and, as a result, all withdrawals under
such a Program are subject to any applicable contingent deferred sales charge.
Free Systematic Withdrawals will be made first by redeeming those shares that
are not subject to the contingent deferred sales charge and then by redeeming
shares held the longest. The contingent deferred sales charge applicable to a
redemption of Class B and Class C shares requested while Free Systematic
Withdrawals are being made will be calculated as described under "Calculation
and Waiver of Contingent Deferred Sales Charges," page 45.
The stockholder receives confirmation of each transaction showing the
source of the payment and the share balance remaining in the Program. A Program
may be terminated on written notice by the stockholder or by the Fund, and it
will terminate automatically if all shares are liquidated or withdrawn from the
account.
INVESTMENT MANAGEMENT
Security Management Company, LLC (the "Investment Manager"), 700 SW
Harrison Street, Topeka, Kansas, has served as investment adviser to Security
Growth and Income Fund (formerly Security Investment Fund), Security Equity
Fund, and Security Ultra Fund, respectively, since April 1, 1964, January 1,
1964, and April 22, 1965. The Investment Manager also acts as investment adviser
to Security Income Fund, Security Cash Fund, SBL Fund, and Security Municipal
Bond Fund. The Investment Manager is a limited liability company controlled by
its members, Security Benefit Life Insurance Company and Security Benefit Group,
Inc. ("SBG"). SBG is an insurance and financial services holding company
wholly-owned by Security Benefit Life Insurance Company, 700 SW Harrison Street,
Topeka, Kansas 66636-0001. Security Benefit Life, a stock life insurance company
which together with its subsidiaries has over $4.7 billion of assets under
management, is incorporated under the laws of Kansas.
The Investment Manager serves as investment adviser to Security Growth and
Income Fund, Security Equity Fund and Security Ultra Fund, respectively, under
Investment Management and Services Agreements, which were approved by the
shareholders of the Funds on March 29, 1989, December 8, 1988 and December 30,
1988, and which became effective on March 31, 1989, January 31, 1989 and
February 28, 1989. Security Equity Fund's Agreement was amended by its Board of
Directors at a regular meeting held on July 23, 1993, to provide for the
Investment Manager to serve as investment adviser to Global Fund and on April 3,
1995, July 26, 1996, February 7, 1997 and July 25, 1997, respectively, to
provide for the Investment Manager to serve as investment adviser to Asset
Allocation Fund, Social Awareness Fund, Value Fund and Small Company Fund.
Security Equity Fund's Agreement was also amended by the Board of Directors at a
meeting held on November 6, 1998, to provide for the Investment Manager to serve
as investment adviser to Enhanced Index, International and Select 25 Funds. The
Agreements were last renewed by the Funds' Board of Directors at a regular
meeting held on November 6, 1998.
Pursuant to the Investment Management and Services Agreements, the
Investment Manager furnishes investment advisory, statistical and research
services to the Funds, supervises and arranges for the purchase and sale of
securities on behalf of the Funds, and provides for the compilation and
maintenance of records pertaining to the investment advisory function.
The Investment Manager has entered into a sub-advisory agreement with
OppenheimerFunds, Inc. ("Oppenheimer"), Two World Trade Center, New York, NY
10048-0203, to provide investment advisory services to Global Fund. Pursuant to
this agreement, Oppenheimer furnishes investment advisory, statistical and
research facilities, supervises and arranges for the purchase and sale of
securities on behalf of Global Fund and provides for the compilation and
maintenance of records pertaining to such investment advisory services, subject
to the control and supervision of the Fund's Board of Directors and the
Investment Manager. For such services, the Investment Manager pays Oppenheimer
an annual fee equal to a percentage of the average daily closing value of the
combined net assets of Global Fund and another Fund managed by the Investment
Manager, SBL Fund, Fund D, computed on a daily basis as follows: 0.35% of the
combined average daily net assets up to $300 million, plus 0.30% of such assets
over $300 million up to $750 million and 0.25% of such assets over $750 million.
Oppenheimer is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of Oppenheimer and controlled by
Massachusetts Mutual Life Insurance Company. Oppenheimer has been providing
investment advice since 1959. In addition, Oppenheimer and its subsidiaries
currently manage investment companies with assets of more than $85 billion, and
more than 4 million shareholder accounts.
The Investment Manager has entered into a sub-advisory research agreement
with Meridian Investment Management Corporation ("Meridian"), 12835 East
Arapahoe Road, Tower II, 7th Floor, Englewood, Colorado 80112. Pursuant to the
agreement, Meridian furnishes investment advisory, statistical and research
facilities, supervises and arranges for the purchase and sale of equity
securities on behalf of the Fund and provides for the compilation and
maintenance of records pertaining to such investment advisory services, subject
to the control and supervision of the Board of Directors of the Fund and the
Investment Manager. Meridian is a wholly-owned subsidiary of Meridian Management
& Research Corporation which is controlled by its two stockholders, Michael J.
Hart and Craig T. Callahan. The Investment Manager pays Meridian an annual fee
equal to a percentage of the average daily closing value of the net assets of
Asset Allocation Fund, computed on a daily basis, according to the following
schedule:
- ---------------------------------------------------------------------
AVERAGE DAILY NET ASSETS OF THE FUND ANNUAL FEE
- ---------------------------------------------------------------------
Less than $100 million.............................. .40%, plus
$100 million but less than $200 million............. .35%, plus
$200 million but less than $400 million............. .30%, plus
$400 million or more................................ .25%
- ---------------------------------------------------------------------
The Investment Manager has engaged Strong Capital Management, Inc.
("Strong"), 900 Heritage Reserve, Menomonee Falls, Wisconsin 53051, to provide
investment advisory services to the Small Company Fund. For such services, the
Investment Manager pays Strong, an annual fee based on the combined average net
assets of Small Company Fund and another fund for which the Investment Manager
has engaged Strong to provide advisory services. The fee is equal to .50% of the
combined average net assets under $150 million, .45% of the combined average net
assets at or above $150 million but less than $500 million, and .40% of the
combined average net assets at or above $500 million. Strong is a privately held
corporation which is controlled by Richard S. Strong. Strong was established in
1974 and as of September 30, 1998, manages over $30 billion in assets.
The Investment Manager has retained Bankers Trust Company, One Bankers
Trust Plaza, New York, New York 10006, to provide investment advisory services
to Enhanced Index Fund and International Fund. Pursuant to the agreement,
Bankers Trust furnishes investment advisory, statistical and research
facilities, supervises and arranges for the purchase and sale of securities on
behalf of the Funds and provides for the compilation and maintenance of records
pertaining to such investment advisory services, subject to the control and
supervision of the Fund's Board of Directors and the Investment Manager. For
such services to Enhanced Index Fund, the Investment Manager pays Bankers Trust
an annual fee equal to a percentage of the average daily closing value of the
combined net assets of Enhanced Index Fund and another fund, computed on a daily
basis as follows: 0.20% of the combined average daily net assets of $100 million
or less; and 0.15% of the combined average daily net assets of more than $100
million but less than $300 million; and 0.13% of the combined average daily net
assets of more than $300 million. The Investment Manager also will pay Bankers
Trust the following minimum fees with respect to the Enhanced Index Fund: (i) no
minimum fee in the first year the Enhanced Index Fund begins operations; (ii)
$100,000 in the Fund's second year of operations; and (iii) $200,000 in the
third and following years of the Fund's operations. For the services provided to
the International Fund, the Investment Manager pays Bankers Trust an annual fee
equal to a percentage of the average daily closing value of the combined net
assets of International Fund and another fund managed by the Investment Manager,
computed on a daily basis as follows: 0.60% of the combined average daily net
assets of $200 million or less and 0.55% of the combined average daily net
assets of more than $200 million.
Bankers Trust is wholly owned by Bankers Trust Corporation. As of March 31,
1998, Bankers Trust New York Corporation was the seventh largest bank holding
company in the United States with total assets of over $150 billion. Bankers
Trust is dedicated to services the needs of corporations, of over 90 offices in
more than 50 countries. Investment management is a core business of Bankers
Trust, built on a tradition of excellence from its roots as a trust bank founded
in 1903. The scope of Bankers Trust's investment management capability is unique
due to its leadership positions in both active and passive quantitative
management and its presence in major equity and fixed income markets around the
world. Bankers Trust is one of the nation's largest and most experienced
investment managers with over $300 billion in assets under management globally.
Pursuant to the Investment Management and Services Agreements, the
Investment Manager also performs administrative functions and the bookkeeping,
accounting and pricing functions for the Funds, and performs all shareholder
servicing functions, including transferring record ownership, processing
purchase and redemption transactions, answering inquiries, mailing shareholder
communications and acting as the dividend disbursing agent.
The Investment Manager has also agreed to arrange for others (or itself) to
provide to the Funds, except Asset Allocation, Social Awareness, Value, Small
Company, Enhanced Index, International and Select 25 Funds, all other services,
including custodian and independent accounting services, required by the Funds.
The Investment Manager will, when necessary, engage the services of third
parties such as a custodian bank or independent auditors, in accordance with
applicable legal requirements, including approval by the Funds' Board of
Directors. The Investment Manager bears the expenses of providing the services
it is required to furnish under the Agreement for each Fund, except Asset
Allocation, Social Awareness, Value, Small Company Enhanced Index, International
and Select 25 Funds. Thus, those Funds' expenses include only fees paid to the
Investment Manager as well as expenses of brokerage commissions, interest,
taxes, extraordinary expenses approved by the Board of Directors, and Class A,
Class B and Class C distribution fees.
Asset Allocation, Social Awareness, Value, Small Company, Enhanced Index,
International and Select 25 Funds will pay all of their respective expenses not
assumed by the Investment Manager or the Distributor, including organization
expenses; directors' fees; fees of its custodian; taxes and governmental fees;
interest charges; any membership dues; brokerage commissions; expenses of
preparing and distributing reports to shareholders; costs of shareholder and
other meetings; Class A, Class B and Class C distribution fees; and legal,
auditing and accounting expenses. Asset Allocation, Social Awareness, Value,
Small Company, Enhanced Index, International and Select 25 Funds will also pay
for the preparation and distribution of the prospectus to their shareholders and
all expenses in connection with registration under the Investment Company Act of
1940 and the registration of their capital stock under federal and state
securities laws. Asset Allocation, Social Awareness, Value, Small Company,
Enhanced Index, International and Select 25 Funds will pay nonrecurring expenses
as may arise, including litigation expenses affecting them.
The Investment Manager has agreed to reimburse the Funds or waive a portion
of its management fee for any amount by which the total annual expenses of the
Funds (including management fees, but excluding interest, taxes, brokerage
commissions, extraordinary expenses and Class A, Class B and Class C
distribution fees) for any fiscal year that exceeds the level of expenses which
the Funds are permitted to bear under the most restrictive expense limitation
imposed by any state in which shares of the Funds are then qualified for sale.
(The Investment Manager is not aware of any state that currently imposes limits
on the level of mutual fund expenses.) The Investment Manager, as part of the
investment advisory agreement with Security Equity Fund, has agreed to cap the
total annual expenses of Enhanced Index Fund and Select 25 Fund to 1.75% and
International Fund to 2.25%, in each case exclusive of interest, taxes,
extraordinary expenses, brokerage fees and commissions and 12b-1 fees.
As compensation for its services, the Investment Manager receives with
respect to Growth and Income, Equity and Ultra Funds, on an annual basis, 2% of
the first $10 million of the average net assets, 1 1/2% of the next $20 million
of the average net assets and 1% of the remaining average net assets of the
Funds, determined daily and payable monthly. The Investment Manager receives
with respect to the Global Fund, on an annual basis, 2% of the first $70 million
of the average net assets and 1 1/2% of the remaining average net assets,
determined daily and payable monthly.
Separate fees are paid by Asset Allocation, Social Awareness, Value, Small
Company, Enhanced Index, International and Select 25 Funds to the Investment
Manager for investment advisory, administrative and transfer agency services.
With respect to Asset Allocation Fund the Investment Manager receives, on an
annual basis, an investment advisory fee equal to 1% of the average daily net
assets of the Fund, calculated daily and payable monthly. The Investment Manager
also receives, on an annual basis, an administrative fee equal to .045% of the
average daily net assets of the Asset Allocation Fund plus the greater of .10%
of its average net assets or $60,000. With respect to the Social Awareness,
Value and Small Company Funds, the Investment Manager receives, on an annual
basis, an investment advisory fee equal to 1% of the average daily net assets of
the respective Funds, calculated daily and payable monthly. The Investment
Manager has agreed to waive the investment advisory fee of Small Company Fund
for the fiscal year ending September 30, 1999. The investment advisory fee for
Enhanced Index and Select 25 Funds is equal to 0.75% of the average daily net
assets of each Fund, calculated daily and payable monthly. The investment
advisory fee for International Fund is equal to 1.10% of the average daily net
assets of the Fund, calculated daily and payable monthly. The Investment Manager
also receives, on an annual basis, an administrative fee equal to .09% of the
average daily net assets of the Social Awareness, Value, Small Company, Enhanced
Index and Select 25 Funds. The Investment manager receives, on an annual basis,
an administrative fee equal to 0.045% of the average daily net assets of
International Fund plus the greater of 0.10% of its average net assets or (i)
$30,000 in the year ending January 31, 2000; (ii) $45,000 in the year ending
January 31, 2001; or $60,000 in the year ending January 31, 2002 and thereafter.
For transfer agency services provided to each of the Asset Allocation, Social
Awareness, Value, Small Company, Enhanced Index, International and Select 25
Funds, the Investment Manager receives an annual maintenance fee of $8.00 per
account, and a transaction fee of $1.00 per transaction.
During the fiscal years ended September 30, 1998, 1997 and 1996, the Funds
paid the following amounts to the Investment Manager for its services:
- ------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------
Growth and Income Fund $1,168,375 $1,024,369 $ 919,674
Equity Fund 9,261,209 7,375,751 5,528,818
Ultra Fund 1,068,177 985,285 862,190
Global Fund 670,488 642,585 470,077
Asset Allocation Fund 72,662 62,322 39,560
Social Awareness Fund 120,016 0 ---
Value Fund 144,005 0 ---
- ------------------------------------------------------------------------------
For the fiscal years ended September 30, 1998, 1997 and 1996, the Investment
manager waived $14,762, $45,581 and $24,236, respectively, of Asset Allocation
Fund's investment advisory fee. For the fiscal year ended September 30, 1998,
the Investment Manager waived $34,388 of Social Awareness Fund's investment
advisory fee. For the period November 4, 1996 (date of inception) to September
30, 1997, the Investment Manager waived its entire advisory fee for the Social
Awareness Fund in the amount of $50,880. For the fiscal year ended September 30,
1998, the Investment Manager waived $35,151 of Value Fund's investment advisory
fee. For the period May 1, 1997 (date of inception) to September 30, 1997, the
Investment Manager waived its entire advisory fee for the Value Fund in the
amount of $17,003. For the period October 15, 1997 (date of inception) to
September 30, 1998, the Investment Manager waived its entire advisory fee for
the Small Company Fund in the amount of $33,554.
Asset Allocation Fund paid the Investment Manager for administrative and
transfer agency services for fiscal year ended September 30, 1998 - $63,270 and
$12,372, respectively. For fiscal year ended September 30, 1997, $53,010 and
$7,611 respectively, and for the fiscal year ended September 30, 1996, $36,957
and $5,571, respectively. For the fiscal years ended September 30, 1998 and
1996, the Investment Manager reimbursed the Asset Allocation Fund $21,941 and
$19,620, respectively, of the Fund's administrative and transfer agency fees.
For the fiscal year ended September 30, 1998, the Social Awareness Fund paid the
Investment Manager for administrative and transfer agency fees, $14,400 and
$10,801, respectively. For the period November 4, 1996 (date of inception) to
September 30, 1997, the Social Awareness Fund paid the Investment Manager for
administrative and transfer agency services, $4,579 and $3,925, respectively.
For the fiscal year ended September 30, 1998, the Value Fund paid the Investment
Manager for administrative and transfer agency fees, $19,523 and $12,984,
respectively. For the period May 1, 1997 (date of inception) to September 30,
1997, the Value Fund paid the Investment Manager for administrative and transfer
agency services, $1,530 and $1,345 respectively. For the period October 15, 1997
(date of inception) to September 30, 1998, the Small Company Fund paid the
Investment Manager for administrative and transfer agency services, $3,020 and
$4,672, respectively.
The total expenses for Growth and Income Fund, Equity Fund, Global Fund,
Asset Allocation Fund, Social Awareness Fund, Value Fund and Ultra Fund,
respectively, for the fiscal year ended September 30, 1998 were 1.21%, 1.02%,
2.00%, 2.00%, 1.22%, 1.27% and 1.23% of the average net assets of each Fund's
Class A shares for the fiscal year. Total expenses of Class B shares for Growth
and Income Fund, Equity Fund, Global Fund, Asset Allocation Fund, Social
Awareness Fund, Value Fund and Ultra Fund, respectively, for the fiscal year
ended September 30, 1998 were 2.21%, 2.02%, 3.00%, 2.93%, 2.20%, 2.34% and 1.23%
of the average net assets of each Fund's Class B shares for the fiscal year. The
total expenses of the average net assets for Class A and Class B shares of Small
Company Fund for the period October 15, 1997 (date of inception) to September
30, 1998, were 1.39% and 2.38%, respectively.
The Funds' Investment Management and Services Agreements are renewable
annually by the Funds' Board of Directors or by a vote of a majority of the
individual Fund's outstanding securities and, in either event, by a majority of
the board who are not parties to the Agreement or interested persons of any such
party. The Agreements provide that they may be terminated without penalty at any
time by either party on 60 days' notice and are automatically terminated in the
event of assignment.
The following persons are affiliated with the Funds and also with the
Funds' investment adviser, Security Management Company, LLC, in these
capacities:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NAME POSITION(S) WITH THE FUNDS POSITION(S) WITH SECURITY MANAGEMENT COMPANY, LLC
- ----------------------- -------------------------------------------- --------------------------------------------------------
<S> <C> <C>
James R. Schmank Vice President and Director President and Managing Member Representative
John D. Cleland President and Director Senior Vice President and Managing Member Representative
Jane A. Tedder Vice President (Equity Fund only) Vice President and Senior Economist
Terry A. Milberger Vice President (Equity Fund only) Senior Vice President and Senior Portfolio Manager
Michael A. Petersen Vice President (Growth and Income Fund only) Vice President and Senior Portfolio Manager
Mark E. Young Vice President Vice President
Amy J. Lee Secretary Secretary
Brenda M. Harwood Treasurer Assistant Vice President and Treasurer
Cindy L. Shields Vice President (Equity Fund only) Assistant Vice President and Portfolio Manager
Thomas A. Swank Vice President (Growth and Income Fund only) Vice President and Portfolio Manager
Christopher D. Swickard Assistant Secretary Assistant Secretary
James P. Schier Vice President Assistant Vice President and Portfolio Manager
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PORTFOLIO MANAGEMENT
STEVEN M. BOWSER, Portfolio Manager of the Investment Manager, has
co-managed the fixed-income portion of Asset Allocation Fund's portfolio since
January 1998. He joined the Investment Manager in 1992. Prior to joining the
Investment Manager, he was Assistant Vice President and Portfolio Manager with
the Federal Home Loan Bank of Topeka from 1989 to 1992. He was employed at the
Federal Reserve Bank of Kansas City in 1988 and began his career with the Farm
Credit System from 1982 to 1987, serving as a Senior Financial Analyst and
Assistant Controller. He graduated with a Bachelor of Science Degree from Kansas
State University in 1982.
PAT BOYLE, Portfolio Manager of Meridian, has managed the equity portion of
Asset Allocation Fund's portfolio since August 1997. Prior to joining Meridian,
Mr. Boyle was employed at Citicorp as an Operations Analyst. He has five years
of investment experience and is a Chartered Financial Analyst. Mr. Boyle
graduated from the University of Denver with a B.S.B.A. degree and an M.S.
degree in Finance.
DAVID ESHNAUR, Portfolio Manager of the Investment Manager, has co-managed
the fixed-income portion of Asset Allocation Fund's portfolio since January
1998. Mr. Eshnaur has 15 years of investment experience. Prior to joining the
Investment Manager in 1997, he worked at Waddell & Reed in the positions of
Assistant Vice President, Assistant Portfolio Manager, Senior Analyst, Industry
Analyst and Account Administrator. Mr. Eshnaur earned a Bachelor of Arts degree
in Business Administration from Coe College and an M.B.A. degree in Finance from
the University of Missouri - Kansas City.
SIDNEY F. HOOTS, Managing Director of Bankers Trust Company, has managed
the Equity Index Fund since its inception in January 1999. He is the Senior
Portfolio Manager for the Structured Equity Group at Bankers Trust. He has
responsibility for a variety of funds ranging from an enhanced index fund using
quantitative stock selection to an equity-based relative value hedge fund which
combines traditional hedge fund trading with quantitative techniques. In
addition, he is responsible for a tax-advantaged equity product. Mr. Hoots also
directs the quantitative equity research effort. Mr. Hoots joined Bankers Trust
in 1983 and has 15 years of investment experience. He has a B.S. degree from
Duke University and a M.B.A. from the University of Chicago. He is also a Member
of the American Finance Association.
MICHAEL LEVY, Managing Director of Bankers Trust, has been co-lead manager
of the International Fund since its inception in January 1999. He has been a
portfolio manager of other investment products with similar investment
objectives since joining Bankers Trust in 1993. Mr. Levy is Bankers Trust's
International Equity Strategist and is head of the international equity team. He
has served in each of these capacities since 1993. The international equity team
is responsible for the day-to-day management of the Fund as well as other
international equity portfolios managed by Bankers Trust. Mr. Levy's experience
prior to joining Bankers Trust includes serving as senior equity analyst with
Oppenheimer & Company, as well as positions in investment banking, technology
and manufacturing enterprises. He has 27 years of business experience, of which
seventeen years have been in the investment industry.
TERRY A. MILBERGER, Senior Portfolio Manager of the Investment Manager, has
managed Equity Fund since 1981 and Select 25 Fund since its inception in 1999.
He has more than 20 years of investment experience. He began his career as an
investment analyst in the insurance industry and from 1974 through 1978 he
served as an assistant portfolio manager for the Investment Manager. He was then
employed as Vice President of Texas Commerce Bank and managed its pension assets
until he returned to the Investment Manager in 1981. Mr. Milberger holds a
bachelor's degree in business and a Masters of Business Administration from the
University of Kansas and is a Chartered Financial Analyst. His investment
philosophy is based on patience and opportunity for the long-term investor.
RONALD C. OGNAR, Portfolio Manager of Strong, has managed Small Company
Fund since its inception in 1997. He is a Chartered Financial Analyst with more
than 25 years of investment experience. Mr. Ognar joined Strong in April 1993
after two years as a principal and portfolio manager with RCM Capital
Management. For approximately 3 years prior to his position at RCM Capital
Management, he was a portfolio manager at Kemper Financial Services in Chicago.
Mr. Ognar began his investment career in 1968 at LaSalle National Bank. He is a
graduate of the University of Illinois with a bachelor's degree in accounting.
MICHAEL A. PETERSEN, Senior Portfolio Manager of the Investment Manager,
has managed Growth and Income Fund since January 1998. He has 15 years of
investment experience. Prior to joining the Investment Manager in 1997, he was
Director of Equity Research and Fund Management at Old Kent Bank and Trust
Corporation from 1988 to 1997. Prior to 1988, he was an Investment Officer at
First Asset Management. Mr. Petersen earned a Bachelor of Science degree in
Accounting from the University of Minnesota. He is a Chartered Financial
Analyst.
ROBERT REINER, Principal at Bankers Trust, has been co-lead manager of the
International Fund since its inception in January 1999. He has been a portfolio
manager of other investment products with similar investment objectives since
joining Bankers Trust in 1994. At Bankers Trust, he has been involved in
developing analytical and investment tools for the group's international equity
team; his primary focus has been on Japanese and European markets. Prior to
joining Bankers Trust, he was an equity analyst and also provided macroeconomic
coverage for Scudder, Stevens & Clark from 1993 to 1994. He previously served as
Senior Analyst at Sanford C. Bernstein & Co. from 1991 to 1992, and was
instrumental in the development of Bernstein's International Value Fund. Mr.
Reiner spent more than nine years at Standard & Poor's Corporation, where he was
a member of its international ratings group. His tenure included managing the
day-to-day operations of the Standard & Poor's Corporation Tokyo office for
three years.
JAMES P. SCHIER, Portfolio Manager of the Investment Manager, has managed
Value Fund since its inception in 1997 and Ultra Fund since January 1998. He has
13 years experience in the investment field and is a Chartered Financial
Analyst. While employed by the Investment Manager, he also served as research
analyst. Prior to joining the Investment Manager in 1995, he was a portfolio
manager for Mitchell Capital Management from 1993 to 1995. From 1988 to 1995 he
served as Vice President and Portfolio Manager for Fourth Financial. Prior to
1988, Mr. Schier served in various positions in the investment field for Stifel
Financial, Josepthal & Company and Mercantile Trust Company. Mr. Schier earned a
Bachelor of Business degree from the University of Notre Dame and an M.B.A. from
Washington University.
CINDY L. SHIELDS, Portfolio Manager of the Investment Manager, has managed
Social Awareness Fund since its inception in 1996. Ms. Shields has eight years
experience in the securities field and joined the Investment Manager in 1989.
She has been a portfolio manager since 1994, and prior to that time, she served
as a research analyst for the Investment Manager. Ms. Shields graduated from
Washburn University with a Bachelor of Business Administration degree, majoring
in finance and economics. She is a Chartered Financial Analyst.
JULIE WANG, Principal at Bankers Trust, has been co-lead manager of the
International Fund since its inception in January 1999. She has been a manager
of other investment products with similar investment objectives since joining
Bankers Trust in 1994. Ms. Wang has primary focus on the Asia-Pacific region and
the Fund's emerging market exposure. Prior to joining Bankers Trust, Ms. Wang
was an investment manager at American International Group, where she advised in
the management of $7 billion of assets in Southeast Asia, including private and
listed equities, bonds, loans and structured products. Ms. Wang received her
B.A. degree in economics from Yale University and her M.B.A. from the Wharton
School.
WILLIAM L. WILBY, Senior Vice President of Oppenheimer, became the manager
of Global Fund in November 1998. Prior to joining Oppenheimer in 1991, he was an
international investment strategist at Brown Brothers Hamman & Co. Prior to
Brown Brothers, Mr. Wilby was a managing director and portfolio manager at AIG
Global Investors. He joined AIG from Northern Trust Bank in Chicago, where he
was an international pension manager. Before starting his career in portfolio
management, Mr. Wilby was an international financial economist at Northern Trust
Bank and at the Federal Reserve Bank in Chicago. Mr. Wilby is a graduate of the
United States Military Academy and holds an M.A. and a Ph.D. in International
Monetary Economics from the University of Colorado. He is a Chartered Financial
Analyst.
CODE OF ETHICS
The Funds, the Investment Manager and the Distributor have a written code
of ethics (the "Code of Ethics") which requires all access persons to obtain
prior clearance before engaging in any personal securities transactions. Access
persons include officers and directors of the Funds and Investment Manager and
employees that participate in, or obtain information regarding, the purchase or
sale of securities by the Funds or whose job relates to the making of any
recommendations with respect to such purchases or sales. All access persons must
report their personal securities transactions within ten days of the end of each
calendar quarter. Access persons will not be permitted to effect transactions in
a security if it: (a) is being considered for purchase or sale by the Funds; (b)
is being purchased or sold by the Funds; or (c) is being offered in an initial
public offering. Portfolio managers are also prohibited from purchasing or
selling a security within seven calendar days before or after a Fund that he or
she manages trades in that security. Any material violation of the Code of
Ethics is reported to the Board of the Funds. The Board also reviews the
administration of the Code of Ethics on an annual basis. In addition, each
Sub-Adviser must have its own code of ethics to which its portfolio managers and
other access persons are subject.
DISTRIBUTOR
Security Distributors, Inc. (the "Distributor"), a Kansas corporation and
wholly-owned subsidiary of Security Benefit Group, Inc., serves as the principal
underwriter for shares of Growth and Income Fund, Equity Fund, Global Fund,
Asset Allocation Fund, Social Awareness Fund, Value Fund, Small Company Fund,
Enhanced index Fund, International Fund, Select 25 Fund and Ultra Fund pursuant
to Distribution Agreements with the Funds. The Distributor also acts as
principal underwriter for Security Income Fund and Security Municipal Bond Fund.
The Distributor receives a maximum commission on sales of Class A shares of
5.75% and allows a maximum discount of 5% from the offering price to authorized
dealers on the Fund shares sold. The discount is the same for all dealers, but
the Distributor at its discretion may increase the discount for specific
periods. Salespersons employed by dealers may also be licensed to sell insurance
with Security Benefit Life.
For the fiscal years ended September 30, 1997 and September 30, 1998, the
Distributor (i) received gross underwriting commissions on Class A shares, (ii)
retained net underwriting commissions on Class A shares, and (iii) received
contingent deferred sales charges on redemptions of Class B shares in the
amounts set forth in the table below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
GROSS UNDERWRITING NET UNDERWRITING
COMMISSIONS COMMISSIONS COMPENSATION ON REDEMPTION
------------------------- ------------------------ ---------------------------
1997 1998 1997 1998 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Growth and Income Fund $ 62,437 $ 161,083 $ 6,497 $ 11,930 $ 1,741 $ 12,982
Equity Fund 799,937 1,586,589 21,344 137,516 31,015 123,648
Ultra Fund 34,612 51,626 5,388 3,908 20,208 19,376
Global Fund 29,789 16,810 2,930 66 13,291 24,076
Asset Allocation Fund 28,996 14,300 3,114 728 1,692 7,197
Social Awareness Fund* 61,945 73,830 7,639 4,310 267 4,833
Value Fund** 74,602 176,512 2,015 4,530 2 5,438
Small Company Fund*** --- 29,790 --- 28 --- 2,250
- --------------------------------------------------------------------------------------------------------------
*For the period November 4, 1996 (date of inception) to September 30, 1997.
**For the period May 1, 1997 (date of inception) to September 30, 1997.
***For the period October 15, 1997 (date of inception) to September 30, 1998.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
For the fiscal year ended September 30, 1996, the Distributor received
gross underwriting commissions on the sale of Class A shares of the Funds of:
$38,156 for Growth and Income Fund; $869,310 for Equity Fund; $42,335 for Ultra
Fund; and $29,472 for Global Fund. For that same year, the Distributor retained
net underwriting commissions as follows: $7,615 for Growth and Income Fund;
$107,976 for Equity Fund; $9,163 for Ultra Fund; and $3,907 for Global Fund. For
the fiscal year ended September 30, 1996, the Distributor received gross
underwriting commissions on the sale of Class A shares of $7,393 for Asset
Allocation Fund and retained net underwriting commissions of $911.
The Distributor, on behalf of the Funds, may act as a broker in the
purchase and sale of securities not effected on a securities exchange, provided
that any such transactions and any commissions shall comply with requirements of
the Investment Company Act of 1940 and all rules and regulations of the SEC. The
Distributor has not acted as a broker.
The Funds' Distribution Agreements are renewable annually either by the
Board of Directors or by the vote of a majority of the Fund's outstanding
securities, and, in either event, by a majority of the board who are not parties
to the contract or interested persons of any such party. The contract may be
terminated by either party upon 60 days' written notice.
ALLOCATION OF PORTFOLIO BROKERAGE
Transactions in portfolio securities shall be effected in such manner as
deemed to be in the best interests of the respective Funds. In reaching a
judgment relative to the qualifications of a broker-dealer ("broker") to obtain
the best execution of a particular transaction, all relevant factors and
circumstances will be taken into account by the Investment Manager or relevant
Sub-Adviser, including the overall reasonableness of commissions paid to a
broker, the firm's general execution and operational capabilities, and its
reliability and financial condition. Subject to the foregoing considerations,
the execution of portfolio transactions may be directed to brokers who furnish
investment information or research services to the Investment Manager or
relevant Sub-Adviser. Such investment information and research services include
advice as to the value of securities, the advisability of investing in,
purchasing or selling securities, and the availability of securities and
purchasers or sellers of securities, and furnishing analyses and reports
concerning issues, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts. Such investment information and
research services may be furnished by brokers in many ways, including: (1)
on-line data base systems, the equipment for which is provided by the broker,
that enable the Investment Manager to have real-time access to market
information, including quotations; (2) economic research services, such as
publications, chart services and advice from economists concerning macroeconomic
information; and (3) analytical investment information concerning particular
corporations. If a transaction is directed to a broker supplying such
information or services, the commission paid for such transaction may be in
excess of the commission another broker would have charged for effecting that
transaction provided that the Investment Manager or relevant Sub-Adviser shall
have determined in good faith that the commission is reasonable in relation to
the value of the investment information or the research services provided,
viewed in terms of either that particular transaction or the overall
responsibilities of the Investment Manager or relevant Sub-Adviser with respect
to all accounts as to which it exercises investment discretion. The Investment
Manager or relevant Sub-Adviser may use all, none, or some of such information
and services in providing investment advisory services to each of the mutual
funds under its management, including the Funds. Portfolio transactions,
including options, futures contracts and options on futures transactions and the
purchase or sale of underlying securities upon the exercise of options, for
Series I may also be executed through Bankers Trust or any subsidiary or
affiliate to the extent and in the manner permitted by applicable law.
In addition, brokerage transactions may be placed with broker-dealers who
sell shares of the Funds managed by the Investment Manager and who may or may
not also provide investment information and research services. The Investment
Manager may, consistent with the NASD's Conduct Rules, consider sales of shares
of the Funds in the selection of a broker.
The Funds may also buy securities from, or sell securities to, dealers
acting as principals or market makers. The Investment Manager generally will not
purchase investment information or research services in connection with such
principal transactions.
Securities held by the Funds may also be held by other investment advisory
clients of the Investment Manager and/or relevant Sub-Adviser, including other
investment companies. In addition, Security Benefit Life Insurance Company
("SBL"), may also hold some of the same securities as the Funds. When selecting
securities for purchase or sale for a Fund, the Investment Manager may at the
same time be purchasing or selling the same securities for one or more of such
other accounts. Subject to the Investment Manager's obligation to seek best
execution, such purchases or sales may be executed simultaneously or "bunched."
It is the policy of the Investment Manager not to favor one account over the
other. Any purchase or sale orders executed simultaneously (which may also
include orders from SBL) are allocated at the average price and as nearly as
practicable on a pro rata basis (transaction costs will also be shared on a pro
rata basis) in proportion to the amounts desired to be purchased or sold by each
account. In those instances where it is not practical to allocate purchase or
sale orders on a pro rata basis, then the allocation will be made on a rotating
or other equitable basis. While it is conceivable that in certain instances this
procedure could adversely affect the price or number of shares involved in the
Fund's transaction, it is believed that the procedure generally contributes to
better overall execution of the Fund's portfolio transactions. With respect to
the allocation of initial public offerings ("IPOs"), the Investment Manager may
determine not to purchase such offerings for certain of its clients (including
investment company clients) due to the limited number of shares typically
available to the Investment Manager in an IPO.
The following table sets forth the brokerage fees paid by the Funds during
the last three fiscal years and certain other information:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FUND TRANSACTIONS DIRECTED
TO AND COMMISSIONS PAID
FUND BROKERAGE TO BROKER-DEALERS WHO
FUND TOTAL COMMISSIONS PAID ALSO PERFORMED SERVICES
BROKERAGE TO SECURITY -----------------------------------
COMMISSIONS DISTRIBUTORS INC., BROKERAGE
FUND YEAR PAID THE UNDERWRITER TRANSACTIONS COMMISSIONS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Growth and Income Fund 1998 $ 332,718 $0 $ 68,503,622 $105,204
1997 251,945 0 26,335,380 40,539
1996 98,516 0 15,375,167 22,566
- ----------------------------------------------------------------------------------------------------------------------------
Security Equity Fund - Equity Fund 1998 1,099,219 0 263,017,019 359,314
1997 1,111,928 0 234,139,342 301,670
1996 919,879 0 181,146,205 227,747
- ----------------------------------------------------------------------------------------------------------------------------
Security Equity Fund - Global Fund 1998 218,464 0 21,465,232 59,626
1997 270,065 0 14,817,527 39,165
1996 194,768 0 11,476,297 20,493
- ----------------------------------------------------------------------------------------------------------------------------
Security Equity Fund - Asset Allocation 1998 9,871 0 3,474,334 7,670
Fund 1997 18,571 0 6,075,844 15,313
1996 10,674 0 259,602 724
- ----------------------------------------------------------------------------------------------------------------------------
Security Equity Fund - Social Awareness 1998 10,661 1,418,953 1,722
Fund 1997(1) 12,365 0 6,419,564 8,327
- ----------------------------------------------------------------------------------------------------------------------------
Security Equity Fund - Value Fund 1998 64,157 8,264,311 14,947
1997(2) 15,192 0 3,606,587 7,392
- ----------------------------------------------------------------------------------------------------------------------------
Security Equity Fund - Small Company Fund 1998(3) 22,215
- ----------------------------------------------------------------------------------------------------------------------------
Security Ultra Fund 1998 268,722 0 39,308,363 69,536
1997 83,841 0 22,060,304 41,217
1996 200,614 0 45,866,810 76,520
- ----------------------------------------------------------------------------------------------------------------------------
1 Social Awareness Fund's figures are based on the period November 4, 1996 (date of inception) to September 30, 1997.
2 Value Fund's figures are based on the period May 1, 1997 (date of inception) to September 30, 1997.
3 Small Company Fund's figures are based on the period October 15, 1997 (date of inception) to September 30, 1998.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
HOW NET ASSET VALUE IS DETERMINED
The per share net asset value of each Fund is determined by dividing the
total value of its securities and other assets, less liabilities, by the total
number of shares outstanding. The public offering price for each Fund is its net
asset value per share plus, in the case of Class A shares, the applicable sales
charge. The net asset value and offering price are computed once daily as of the
close of regular trading hours on the New York Stock Exchange (normally 3:00
p.m. Central time) on each day the Exchange is open for trading, which is Monday
through Friday, except for the following dates when the exchange is closed in
observance of federal holidays: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The offering price determined at the close of business on the New York
Stock Exchange on each day on which the Exchange is open will be applicable to
all orders for the purchase of Fund shares received by the dealer prior to such
close of business and transmitted to the Funds prior to the close of their
business day (normally 5:00 p.m. Central time unless the Exchange closes early).
Orders accepted by the dealer after the close of business of the Exchange or on
a day when the Exchange is closed will be filled on the basis of the offering
price determined as of the close of business of the Exchange on the next day on
which the Exchange is open. It is the responsibility of the dealer to promptly
transmit orders to the Funds.
In determining net asset value, securities listed or traded on a national
securities exchange are valued on the basis of the last sale price. If there are
no sales on a particular day, then the securities shall be valued at the last
bid price. All other securities for which market quotations are available are
valued on the basis of the last current bid price. If there is no bid price, or
if the bid price is deemed to be unsatisfactory by the Board of Directors or the
Funds' Investment Manager, then the securities shall be valued in good faith by
such method as the Board of Directors determines will reflect their fair market
value.
Because the expenses of distribution are borne by Class A shares through a
front-end sales charge and by Class B and Class C shares through an ongoing
distribution fee, the expenses attributable to each class of shares will differ,
resulting in different net asset values. The net asset value of Class B and
Class C shares will generally be lower than the net asset value of Class A
shares as a result of the distribution fee charged to Class B and Class C
shares. It is expected, however, that the net asset value per share will tend to
converge immediately after the payment of dividends which will differ in amount
for Class A, B and C shares by approximately the amount of the different
distribution expenses attributable to Class A, B and C shares.
HOW TO REDEEM SHARES
Stockholders may turn in their shares directly to the Investment Manager
for redemption at net asset value (which may be more or less than the investor's
cost, depending upon the market value of the portfolio securities at the time of
redemption). The redemption price in cash will be the net asset value next
determined after the time when such shares are tendered for redemption.
Shares will be redeemed on request of the stockholder in proper order to
the Investment Manager, which serves as the Funds' transfer agent. A request is
made in proper order by submitting the following items to the Investment
Manager: (1) a written request for redemption signed by all registered owners
exactly as the account is registered, including fiduciary titles, if any, and
specifying the account number and the dollar amount or number of shares to be
redeemed; (2) a guarantee of all signatures on the written request or on the
share certificate or accompanying stock power; (3) any share certificates issued
for any of the shares to be redeemed; and (4) any additional documents which may
be required by the Investment Manager for redemption by corporations or other
organizations, executors, administrators, trustees, custodians or the like.
Transfers of shares are subject to the same requirements. A signature guarantee
is not required for redemptions of $10,000 or less, requested by and payable to
all stockholders of record for an account, to be sent to the address of record.
The signature guarantee must be provided by an eligible guarantor institution,
such as a bank, broker, credit union, national securities exchange or savings
association. The Investment Manager reserves the right to reject any signature
guarantee pursuant to its written procedures which may be revised in the future.
To avoid delay in redemption or transfer, stockholders having questions should
contact the Investment Manager.
The Articles of Incorporation of Security Equity Fund provide that the
Board of Directors, without the vote or consent of the stockholders, may adopt a
plan to redeem at net asset value all shares in any stockholder account in which
there has been no investment (other than the reinvestment of income dividends or
capital gains distributions) for the last six months and in which there are
fewer than 25 shares or such fewer number of shares as may be specified by the
Board of Directors. Any plan of involuntary redemption adopted by the Board of
Directors shall provide that the plan is in the economic best interests of the
Fund or is necessary to reduce disproportionately burdensome expenses in
servicing stockholder accounts. Such plan shall further provide that prior
notice of at least six months shall be given to a stockholder before involuntary
redemption, and that the stockholder will have at least six months from the date
of the notice to avoid redemption by increasing his or her account to at least
the minimum number of shares established in the Articles of Incorporation, or
such fewer shares as are specified in the plan.
When investing in the Funds, stockholders are required to furnish their tax
identification number and to state whether or not they are subject to
withholding for prior underreporting, certified under penalties of perjury as
prescribed by the Internal Revenue Code. To the extent permitted by law, the
redemption proceeds of stockholders who fail to furnish this information will be
reduced by $50 to reimburse for the IRS penalty imposed for failure to report
the tax identification number on information reports.
Payment in cash of the amount due on redemption, less any applicable
deferred sales charge, for shares redeemed will be made within seven days after
tender, except that the Funds may suspend the right of redemption during any
period when trading on the New York Stock Exchange is restricted or such
Exchange is closed for other than weekends or holidays, or any emergency is
deemed to exist by the Securities and Exchange Commission. When a redemption
request is received, the redemption proceeds are deposited into a redemption
account established by the Distributor and the Distributor sends a check in the
amount of redemption proceeds to the stockholder. The Distributor earns interest
on the amounts maintained in the redemption account. Conversely, the Distributor
causes payments to be made to the Funds in the case of orders for purchase of
Fund shares before it actually receives federal funds.
The Funds have committed themselves to pay in cash all requests for
redemptions by any stockholder of record limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the net asset value of the Fund at the
beginning of such period.
In addition to the foregoing redemption procedure, the Funds repurchase
shares from broker-dealers at the price determined as of the close of business
on the day such offer is confirmed. The Distributor has been authorized, as
agent, to make such repurchases for the Funds' account. Dealers may charge a
commission on the repurchase of shares.
The repurchase or redemption of shares held in a tax-qualified retirement
plan must be effected through the trustee of the plan and may result in adverse
tax consequences. (See "Retirement Plans," page 67.)
At various times the Funds may be requested to redeem shares for which they
have not yet received good payment. Accordingly, the Funds may delay the mailing
of a redemption check until such time as they have assured themselves that good
payment (e.g., cash or certified check on a U.S. bank) has been collected for
the purchase of such shares.
TELEPHONE REDEMPTIONS
A stockholder may redeem uncertificated shares in amounts up to $10,000 by
telephone request, provided the stockholder has completed the Telephone
Redemption section of the application or a Telephone Redemption form which may
be obtained from the Investment Manager. The proceeds of a telephone redemption
will be sent to the stockholder at his or her address as set forth in the
application or in a subsequent written authorization with a signature guarantee.
Once authorization has been received by the Investment Manager, a stockholder
may redeem shares by calling the Funds at (800) 888-2461, extension 3127, on
weekdays (except holidays) between the hours of 7:00 a.m. and 6:00 p.m. Central
time. Redemption requests received by telephone after the close of the New York
Stock Exchange (normally 3:00 p.m. Central time) will be treated as if received
on the next business day. Telephone redemptions are not accepted for IRA and
403(b)(7) accounts. A stockholder who authorizes telephone redemptions
authorizes the Investment Manager to act upon the instructions of any person
identifying themselves as the owner of the account or the owner's broker. The
Investment Manager has established procedures to confirm that instructions
communicated by telephone are genuine and may be liable for any losses due to
fraudulent or unauthorized instructions if it fails to comply with its
procedures. The Investment Manager's procedures require that any person
requesting a redemption by telephone provide the account registration and
number, the owner's tax identification number, and the dollar amount or number
of shares to be redeemed, and such instructions must be received on a recorded
line. Neither the Fund, the Investment Manager, nor the Distributor will be
liable for any loss, liability, cost or expense arising out of any redemption
request provided that the Investment Manager complied with its procedures. Thus,
a stockholder who authorizes telephone redemptions may bear the risk of loss
from a fraudulent or unauthorized request. The telephone redemption privilege
may be changed or discontinued at any time by the Investment Manager or the
Funds.
During periods of severe market or economic conditions, telephone
redemptions may be difficult to implement and stockholders should make
redemptions by mail as described under "How to Redeem Shares," page 58.
HOW TO EXCHANGE SHARES
Pursuant to arrangements with the Distributor and with Security Cash Fund,
stockholders of the Funds may exchange their shares for shares of another of the
Funds, for shares of the other mutual funds distributed by the Distributor or
for shares of Security Cash Fund at net asset value. The other mutual funds
currently distributed by the Distributor currently include Security Corporate
Bond, Limited Maturity Bond, U.S. Government, High Yield, Emerging Markets Total
Return, Global Asset Allocation, Global High Yield and Municipal Bond Funds.
Exchanges may be made only in those states where shares of the fund into which
an exchange is to be made are qualified for sale.
Class A, Class B and Class C shares of the Funds may be exchanged for Class
A, Class B and Class C shares, respectively, of another Fund distributed by the
Distributor or for shares of Security Cash Fund, a money market fund that offers
a single class of shares. No exchanges are allowed with a Fund that does not
offer Class C shares, except that a stockholder may exchange Class C shares for
shares of Security Cash Fund. Any applicable contingent deferred sales charge
will be imposed upon redemption and calculated from the date of the initial
purchase without regard to the time shares were held in Security Cash Fund. Such
transactions generally have the same tax consequences as ordinary sales and
purchases. No service fee is presently imposed on such an exchange. They are not
tax-free exchanges.
Exchanges are made promptly upon receipt of a properly completed Exchange
Authorization form and (if issued) share certificates in good order for
transfer. If the stockholder is a corporation, partnership, agent, fiduciary or
surviving joint owner, additional documentation of a customary nature, such as a
stock power and guaranteed signature, will be required. (See "How to Redeem
Shares," page 58.)
This privilege may be changed or discontinued at any time at the discretion
of the management of the Funds upon 60 days' notice to stockholders. It is
contemplated, however, that the privilege will be extended in the absence of
objection by regulatory authorities and provided shares of the respective
companies are available and may be legally sold in the jurisdiction in which the
stockholder resides. A current prospectus of the Fund into which an exchange is
made will be given each stockholder exercising this privilege.
EXCHANGE BY TELEPHONE
To exchange shares by telephone, a shareholder must have completed either
the Telephone Exchange section of the application or a Telephone Transfer
Authorization form which may be obtained from the Investment Manager.
Authorization must be on file with the Investment Manager before exchanges may
be made by telephone. Once authorization has been received by the Investment
Manager, a stockholder may exchange shares by telephone by calling the Funds at
(800) 888-2461, extension 3127 on weekdays (except holidays) between the hours
of 7:00 a.m. and 6:00 p.m. Central time. Exchange requests received after the
close of the New York Stock Exchange (normally 3:00 p.m. Central time) will be
treated as if received on the next business day. Shares which are held in
certificate form may not be exchanged by telephone.
The telephone exchange privilege is only permitted between accounts with
identical registration. The Investment Manager has established procedures to
confirm that instructions communicated by telephone are genuine and may be
liable for any losses due to fraudulent or unauthorized instructions if it fails
to comply with its procedures. The Investment Manager's procedures require that
any person requesting an exchange by telephone provide the account registration
and number, the tax identification number, the dollar amount or number of shares
to be exchanged, and the names of the Security Funds from which and into which
the exchange is to be made, and such instructions must be received on a recorded
line. Neither the Funds, the Investment Manager nor the Distributor will be
liable for any loss, liability, cost or expense arising out of any request,
including any fraudulent request provided the Investment Manager complied with
its procedures. Thus, a stockholder who authorizes telephone exchanges may bear
the risk of loss in the event of a fraudulent or unauthorized request. This
telephone exchange privilege may be changed or discontinued at any time at the
discretion of the management of the Funds. In particular, the Funds may set
limits on the amount and frequency of such exchanges, in general or as to any
individual who abuses such privilege.
DIVIDENDS AND TAXES
It is each Fund's policy to pay dividends from net investment income as
from time to time declared by the Board of Directors, and to distribute realized
capital gains (if any) in excess of any capital losses and capital loss
carryovers, at least once a year. Because Class A shares of the Funds bear most
of the costs of distribution of such shares through payment of a front-end sales
charge, while Class B and Class C shares of the Funds bear such costs through a
higher distribution fee, expenses attributable to Class B and Class C shares,
generally, will be higher and as a result, income distributions paid by the
Funds with respect to Class B and Class C shares generally will be lower than
those paid with respect to Class A shares. Because the value of a share is based
directly on the amount of the net assets rather than on the principle of supply
and demand, any distribution of capital gains or payment of an income dividend
will result in a decrease in the value of a share equal to the amount paid. All
such dividends and distributions are automatically reinvested on the payable
date in shares of the Funds at net asset value as of the record date (reduced by
an amount equal to the amount of the dividend or distribution), unless the
Investment Manager is previously notified in writing by the stockholder that
such dividends or distributions are to be received in cash. A stockholder may
request that such dividends or distributions be directly deposited to the
stockholder's bank account. A stockholder who elected not to reinvest dividends
or distributions paid with respect to Class A shares may, at any time within 30
days after the payment date, reinvest a dividend check without imposition of a
sales charge.
The following summarizes certain federal income tax considerations
generally affecting the Funds and their stockholders. No attempt is made to
present a detailed explanation of the tax treatment of the Funds or their
stockholders, and the discussion here is not intended as a substitute for
careful tax planning. The discussion is based upon present provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder, and judicial and administrative ruling authorities, all
of which are subject to change, which change may be retroactive. Prospective
investors should consult their own tax advisors with regard to the federal tax
consequences of the purchase, ownership, and disposition of Fund shares, as well
as the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction.
For federal income tax purposes, dividends paid by the Funds from net
investment income may qualify for the corporate stockholder's dividends received
deduction to the extent the Funds designate the amount distributed as a
qualified dividend. The aggregate amount designated as a qualified dividend by
the Funds cannot exceed the aggregate amount of dividends received by the Funds
from domestic corporations for the taxable year. The corporate dividends
received deduction will be limited if the shares with respect to which the
dividends are received are treated as debt-financed or are deemed to have been
held less than 46 days. In addition, a corporate stockholder must hold Fund
shares for at least 46 days to be eligible to claim the dividends received
deduction. All dividends from net investment income, together with distributions
of any realized net short-term capital gains, whether paid direct to the
stockholder or reinvested in shares of the Funds, are taxable as ordinary
income.
The excess of net long-term capital gains over short-term capital losses
realized and distributed by the Funds or reinvested in Fund shares will
generally be taxable to shareholders as long-term gain. Net capital gains from
assets held for one year or less will be taxed as ordinary income. Distributions
will be subject to these capital gains rates regardless of how long a
shareholder has held Fund shares. Advice as to the tax status of each year's
dividends and distributions will be mailed annually. At September 30, 1997,
Social Awareness Fund had accumulated net realized losses on sales of
investments of $204,858.
A purchase of shares shortly before payment of a dividend or distribution
is disadvantageous because the dividend or distribution to the purchaser has the
effect of reducing the per share net asset value of the shares by the amount of
the dividends or distributions. In addition, all or a portion of such dividends
or distributions (although in effect a return of capital) may be taxable.
Each Fund intends to qualify annually and to elect to be treated as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code").
To qualify as a regulated investment company, each Fund must, among other
things: (i) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income derived with respect to its business of investing in
such stock, securities, or currencies ("Qualifying Income Test"); (ii) diversify
its holdings so that, at the end of each quarter of the taxable year, (a) at
least 50% of the market value of the Fund's assets is represented by cash, cash
items, U.S. Government securities, the securities of other regulated investment
companies, and other securities, with such other securities of any one issuer
limited for the purposes of this calculation to an amount not greater than 5% of
the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (b) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), or of two or more issuers which the Fund controls (as that term is
defined in the relevant provisions of the Code) and which are determined to be
engaged in the same or similar trades or businesses or related trades or
businesses; and (iii) distribute at least 90% of the sum of its investment
company taxable income (which includes, among other items, dividends, interest,
and net short-term capital gains in excess of any net long-term capital losses)
and its net tax-exempt interest each taxable year. The Treasury Department is
authorized to promulgate regulations under which foreign currency gains would
constitute qualifying income for purposes of the Qualifying Income Test only if
such gains are directly related to investing in securities (or options and
futures with respect to securities). To date, no such regulations have been
issued.
Certain requirements relating to the qualification of a Fund as a regulated
investment company may limit the extent to which a Fund will be able to engage
in certain investment practices, including transactions in futures contracts and
other types of derivative securities transactions. In addition, if a Fund were
unable to dispose of portfolio securities due to settlement problems relating to
foreign investments or due to the holding of illiquid securities, the Fund's
ability to qualify as a regulated investment company might be affected.
A Fund qualifying as a regulated investment company generally will not be
subject to U.S. federal income tax on its investment company taxable income and
net capital gains (any net long-term capital gains in excess of the net
short-term capital losses), if any, that it distributes to shareholders. Each
Fund intends to distribute to its shareholders, at least annually, substantially
all of its investment company taxable income and any net capital gains.
Generally, regulated investment companies, like the Fund, must distribute
amounts on a timely basis in accordance with a calendar year distribution
requirement in order to avoid a nondeductible 4% excise tax. Generally, to avoid
the tax, a regulated investment company must distribute during each calendar
year, (i) at least 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, (ii) at least 98% of its capital
gains in excess of its capital losses (adjusted for certain ordinary losses) for
the 12-month period ending on October 31 of the calendar year, and (iii) all
ordinary income and capital gains for previous years that were not distributed
during such years. To avoid application of the excise tax, each Fund intends to
make its distributions in accordance with the calendar year distribution
requirement. A distribution is treated as paid on December 31 of the calendar
year if it is declared by a Fund in October, November or December of that year
to shareholders of record on a date in such a month and paid by the Fund during
January of the following calendar year. Such distributions are taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received.
If, as a result of exchange controls or other foreign laws or restrictions
regarding repatriation of capital, a Fund were unable to distribute an amount
equal to substantially all of its investment company taxable income (as
determined for U.S. tax purposes) within applicable time periods, the Fund would
not qualify for the favorable federal income tax treatment afforded regulated
investment companies, or, even if it did so qualify, it might become liable for
federal taxes on undistributed income. In addition, the ability of a Fund to
obtain timely and accurate information relating to its investments is a
significant factor in complying with the requirements applicable to regulated
investment companies in making tax-related computations. Thus, if a Fund were
unable to obtain accurate information on a timely basis, it might be unable to
qualify as a regulated investment company, or its tax computations might be
subject to revisions (which could result in the imposition of taxes, interest
and penalties).
Generally, gain or loss realized upon the sale or redemption of shares
(including the exchange of shares for shares of another fund) will be capital
gain or loss if the shares are capital assets in the shareholder's hands, and
will be taxable to stockholders as long-term capital gains if the shares had
been held for more than one year at the time of sale or redemption. Net capital
gains on shares held for less than one year will be taxable to shareholders as
ordinary income. Investors should be aware that any loss realized upon the sale
or redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of any distribution of long-term capital
gain to the shareholder with respect to such shares. In addition, any loss
realized on a sale or exchange of shares will be disallowed to the extent the
shares disposed of are replaced within a period of 61 days, beginning 30 days
before and ending 30 days after the date the shares are disposed of, such as
pursuant to the reinvestment of dividends. In such case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
Under certain circumstances, the sales charge incurred in acquiring Class A
shares of the Funds may not be taken into account in determining the gain or
loss on the disposition of those shares. This rule applies in circumstances when
shares of the Fund are exchanged within 90 days after the date they were
purchased and new shares in a regulated investment company are acquired without
a sales charge or at a reduced sales charge. In that case, the gain or loss
recognized on the exchange will be determined by excluding from the tax basis of
the shares exchanged all or a portion of the sales charge incurred in acquiring
those shares. This exclusion applies to the extent that the otherwise applicable
sales charge with respect to the newly acquired shares is reduced as a result of
having incurred the sales charge initially. Instead, the portion of the sales
charge affected by this rule will be treated as an amount paid for the new
shares.
The Funds are required by law to withhold 31% of taxable dividends and
distributions to shareholders who do not furnish their correct taxpayer
identification numbers, or are otherwise subject to the backup withholding
provisions of the Internal Revenue Code.
Each Fund of Security Equity Fund will be treated separately in determining
the amounts of income and capital gains distributions. For this purpose, each
Fund will reflect only the income and gains, net of losses of that Fund.
PASSIVE FOREIGN INVESTMENT COMPANIES. Some of the Funds may invest in
stocks of foreign companies that are classified under the Code as passive
foreign investment companies ("PFICs"). In general, a foreign company is
classified as a PFIC if at least one half of its assets constitutes
investment-type assets or 75% or more of its gross income is investment-type
income. Under the PFIC rules, an "excess distribution" received with respect to
PFIC stock is treated as having been realized ratably over a period during which
the Fund held the PFIC stock. The Fund itself will be subject to tax on the
portion, if any, of the excess distribution that is allocated to the Fund's
holding period in prior taxable years (an interest factor will be added to the
tax, as if the tax had actually been payable in such prior taxable years) even
though the Fund distributes the corresponding income to shareholders. Excess
distributions include any gain from the sale of PFIC stock as well as certain
distributions from a PFIC. All excess distributions are taxable as ordinary
income.
A Fund may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that currently may be available, a Fund generally would
be required to include in its gross income its share of the earnings of a PFIC
on a current basis, regardless of whether any distributions are received from
the PFIC. If this election is made, the special rules, discussed above, relating
to the taxation of excess distributions, would not apply. In addition, another
election may be available that would involve marking to market a Fund's PFIC
stock at the end of each taxable year (and on certain other dates prescribed in
the Code), with the result that unrealized gains are treated as though they were
realized. If this election were made, tax at the Fund level under the PFIC rules
would be eliminated, but a Fund could, in limited circumstances, incur
nondeductible interest charges. A Fund's intention to qualify annually as a
regulated investment company may limit the Fund's elections with respect to PFIC
stock.
Because the application of the PFIC rules may affect, among other things,
the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject a Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC stock.
OPTIONS, FUTURES AND FORWARD CONTRACTS AND SWAP AGREEMENTS. Certain
options, futures contracts, and forward contracts in which a Fund may invest may
be "Section 1256 contracts." Gains or losses on Section 1256 contracts generally
are considered 60% long-term and 40% short-term capital gains or losses;
however, foreign currency gains or losses arising from certain Section 1256
contracts may be treated as ordinary income or loss. Also, Section 1256
contracts held by a Fund at the end of each taxable year (and at certain other
times as prescribed pursuant to the Code) are "marked to market" with the result
that unrealized gains or losses are treated as though they were realized.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by a Fund. In addition, losses
realized by a Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which such losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences of transactions in options, futures, forward
contracts, swap agreements and other financial contracts to a Fund are not
entirely clear. The transactions may increase the amount of short-term capital
gain realized by a Fund which is taxed as ordinary income when distributed to
shareholders.
A Fund may make one or more of the elections available under the Code which
are applicable to straddles. If a Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased as compared to a fund that
did not engage in such hedging transactions.
Because only a few regulations regarding the treatment of swap agreements,
and related caps, floors and collars, have been implemented, the tax
consequences of such transactions are not entirely clear. The Funds intend to
account for such transactions in a manner deemed by them to be appropriate, but
the Internal Revenue Service might not necessarily accept such treatment. If it
did not, the status of a Fund as a regulated investment company might be
affected.
The requirements applicable to a Fund's qualification as a regulated
investment company may limit the extent to which a Fund will be able to engage
in transactions in options, futures contracts, forward contracts, swap
agreements and other financial contracts.
MARKET DISCOUNT. If a Fund purchases a debt security at a price lower than
the stated redemption price of such debt security, the excess of the stated
redemption price over the purchase amount is "market discount". If the amount of
market discount is more than a DE MINIMIS amount, a portion of such market
discount must be included as ordinary income (not capital gain) by the Fund in
each taxable year in which the Fund owns an interest in such debt security and
receives a principal payment on it. In particular, the Fund will be required to
allocate that principal payment first to a portion of the market discount on the
debt security that has accrued but has not previously been includable in income.
In general, the amount of market discount that must be included for each period
is equal to the lesser of (i) the amount of market discount accruing during such
period (plus any accrued market discount for prior periods not previously taken
into account) or (ii) the amount of the principal payment with respect to such
period. Generally, market discount accrues on a daily basis for each day the
debt security is held by a Fund at a constant rate over the time remaining to
the debt security's maturity or, at the election of the Fund, at a constant
yield to maturity which takes into account the semi-annual compounding of
interest, Gain realized on the disposition of a market discount obligation must
be recognized as ordinary interest income (not capital gain) to the extent of
the "accrued market discount."
ORIGINAL ISSUE DISCOUNT. Certain debt securities acquired by the Funds may
be treated as debt securities that were originally issued at a discount. Very
generally, original issue discount is defined as the difference between the
price at which a security was issued and its stated redemption price at
maturity. Although no cash income on account of such discount is actually
received by a Fund, original issue discount that accrues on a debt security in a
given year generally is treated for federal income tax purposes as interest and,
therefore, such income would be subject to the distribution requirements
applicable to regulated investment companies.
Some debt securities may be purchased by the Funds at a discount that
exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for federal income tax purposes
(see above).
CONSTRUCTIVE SALES. Recently enacted rules may affect timing and character
of gain if a Fund engages in transactions that reduce or eliminate its risk of
loss with respect to appreciated financial positions. If the Fund enters into
certain transactions in property while holding substantially identical property,
the Fund would be treated as if it had sold and immediately repurchased the
property and would be taxed on any gain (but not loss) from the constructive
sale. The character of gain from a constructive sale would depend upon the
Fund's holding period in the property. Loss from a constructive sale would be
recognized when the property was subsequently disposed of, and its character
would depend on the Fund's holding period and the application of various loss
deferral provisions of the Code.
FOREIGN TAXATION. Income received by a Fund from sources within a foreign
country may be subject to withholding and other taxes imposed by that country.
Tax conventions between certain countries and the U.S. may reduce or eliminate
such taxes.
The payment of such taxes will reduce the amount of dividends and
distributions paid to the Fund's stockholders. So long as a Fund qualifies as a
regulated investment company, certain distribution requirements are satisfied,
and more than 50% of such Fund's assets at the close of the taxable year
consists of securities of foreign corporations, the Fund may elect, subject to
limitation, to pass though its foreign tax credits to its stockholders.
FOREIGN CURRENCY TRANSACTIONS. Under the Code, gains or losses attributable
to fluctuations in exchange rates which occur between the time a Fund accrues
income or other receivables or accrues expenses or other liabilities denominated
in a foreign currency and the time that a Fund actually collects such
receivables or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of certain futures contracts, forward
contracts and options, gains or losses attributable to fluctuations in the value
of foreign currency between the date of acquisition of the security or contract
and the date of disposition also are treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "Section 988" gains or losses,
may increase or decrease the amount of a Fund's investment company taxable
income to be distributed to its shareholders as ordinary income.
OTHER TAXES. The foregoing discussion is general in nature and is not
intended to provide an exhaustive presentation of the tax consequences of
investing in a Fund. Distributions may also be subject to additional state,
local and foreign taxes, depending on each shareholder's particular situation.
Depending upon the nature and extent of a Fund's contacts with a state or local
jurisdiction, the Fund may be subject to the tax laws of such jurisdiction if it
is regarded under applicable law as doing business in, or as having income
derived from, the jurisdiction. Shareholders are advised to consult their own
tax advisers with respect to the particular tax consequences to them of an
investment in a Fund.
ORGANIZATION
The Articles of Incorporation of each Fund provide for the issuance of an
indefinite number of shares of common stock in one or more classes or Fund.
Security Equity Fund has authorized capital stock of $.25 par value and
currently issues its shares in nine Fund, Equity Fund, Global Fund, Asset
Allocation Fund, Social Awareness Fund, Value Fund, Small Company Fund, Enhanced
Index Fund, International Fund and Select 25 Fund. The shares of each Fund of
Security Equity Fund represent a pro rata beneficial interest in that Fund' net
assets and in the earnings and profits or losses derived from the investment of
such assets. Growth and Income and Ultra Funds have not issued shares in any
additional Fund at the present time. Growth and Income and Ultra Funds each have
authorized capital stock of $1.00 par value and $.50 par value, respectively.
Each of the Funds currently issues three classes of shares which
participate proportionately based on their relative net asset values in
dividends and distributions and have equal voting, liquidation and other rights
except that (i) expenses related to the distribution of each class of shares or
other expenses that the Board of Directors may designate as class expenses from
time to time, are borne solely by each class; (ii) each class of shares has
exclusive voting rights with respect to any Distribution Plan adopted for that
class; (iii) each class has different exchange privileges; and (iv) each class
has a different designation. When issued and paid for, the shares will be fully
paid and nonassessable by the Funds. Shares may be exchanged as described under
"How to Exchange Shares," page 59, but will have no other preference,
conversion, exchange or preemptive rights. Shares are transferable, redeemable
and assignable and have cumulative voting privileges for the election of
directors.
On certain matters, such as the election of directors, all shares of the
Fund of Security Equity Fund, Equity Fund, Global Fund, Asset Allocation Fund,
Social Awareness Fund, Value Fund, Small Company Fund, Enhanced Index Fund,
International Fund and Select 25 Fund, vote together, with each share having one
vote. On other matters affecting a particular Fund, such as the investment
advisory contract or the fundamental policies, only shares of that Fund are
entitled to vote, and a majority vote of the shares of that Fund is required for
approval of the proposal.
The Funds do not generally hold annual meetings of stockholders and will do
so only when required by law. Stockholders may remove directors from office by
vote cast in person or by proxy at a meeting of stockholders. Such a meeting
will be called at the written request of 10% of a Fund's outstanding shares.
CUSTODIANS, TRANSFER AGENT AND DIVIDEND-PAYING AGENT
UMB Bank, N.A., 928 Grand Avenue, Kansas City, Missouri 64106, acts as the
custodian for the portfolio securities of Growth and Income Fund, Equity Fund,
Social Awareness Fund, Value Fund, Small Company Fund, Enhanced Index Fund and
Ultra Fund. Chase Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, New York
11245 acts as custodian for the portfolio securities of Global, Asset Allocation
and International Funds, including those held by foreign banks and foreign
securities depositories which qualify as eligible foreign custodians under the
rules adopted by the SEC. Security Management Company, LLC acts as the Funds'
transfer and dividend-paying agent.
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP, One Kansas City Place, 1200 Main Street,
Kansas City, Missouri 64105-2143, has been selected by the Funds' Board of
Directors to serve as the Funds' independent auditors, and as such, will perform
the annual audit of the Funds' financial statements.
PERFORMANCE INFORMATION
The Funds may, from time to time, include performance information in
advertisements, sales literature or reports to shareholders or prospective
investors. Performance information in advertisements or sales literature may be
expressed as average annual total return or aggregate total return.
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Funds over periods of 1, 5 and 10 years (up to the life of the Fund), calculated
pursuant to the following formula:
P(1 + T)^n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). All total
return figures will reflect the deduction of the maximum initial sales load of
5.75% in the case of quotations of performance of Class A shares or the
applicable contingent deferred sales charge in the case of quotations of
performance of Class B and Class C shares and a proportional share of Fund
expenses on an annual basis, and assume that all dividends and distributions are
reinvested when paid.
For the 1-, 5- and 10-year periods ended September 30, 1998, respectively,
the average annual total return of Class A shares of Growth and Income Fund was
- -13.24%, 9.42% and 10.24%. For the 1-year period ended September 30, 1998, the
average annual total return of Class B shares of Growth and Income Fund was
- -13.50%. For the period October 19, 1993 (date of inception) to September 30,
1998, the average annual total return for Class B shares of Growth and Income
Fund was 9.41%.
For the 1-, 5- and 10-year periods ended September 30, 1998, respectively,
the average annual total return of Class A shares of Equity Fund was 1.25%,
16.81% and 16.73%. For the 1-year period ended September 30, 1998, the average
annual total return of Class B shares of Equity Fund was 1.38%. For the period
October 19, 1993 (date of inception) to September 30, 1998, the average annual
total return for Class B shares of Equity Fund was 16.67%.
For the 1-year period ended September 30, 1998, the average annual total
return of Class A shares of Global Fund was -13.75%. For the period October 5,
1993 (date of inception) to September 30, 1998, the average annual total return
of Class A shares of Global Fund was 6.35%. For the 1-year period ended
September 30, 1998, the average annual total return of Class B shares of Global
Fund was -13.96%. For the period October 19, 1993 (date of inception) to
September 30, 1998, the average annual total return of Class B shares of Global
Fund was 6.26%.
For the 1-, 5- and 10-year periods ended September 30, 1998, respectively,
the average annual total return of Class A shares of Ultra Fund was -17.45%,
6.29% and 7.68%. For the 1-year period ended September 30, 1998, the average
annual total return of Class B shares of Ultra Fund was -17.64%. For the period
October 19, 1993 (date of inception) to September 30, 1998, the average annual
total return for Class B shares of Ultra Fund was 5.80%.
For the 1-year period ended September 30, 1998 the average annual total
return of Class A and Class B shares of Asset Allocation Fund was -12.52% and
- -12.59%, respectively. For the period June 1, 1995 (date of inception) through
September 30, 1998, the average annual total return of Class A and Class B
shares of Asset Allocation Fund was 5.81% and 5.93%, respectively.
For the 1-year period ended September 30, 1998, the average annual total
return for Class A and Class B shares of Social Awareness Fund was 1.67% and
1.74%, respectively. For the period November 4, 1996 (date of inception) to
September 30, 1998, the average annual total return of Class A and Class B
shares of Social Awareness Fund was 10.90% and 11.29%, respectively.
For the 1-year period ended September 30, 1998, the average annual total
return of Class A and Class B shares of Value Fund was -9.81% and -10.11%,
respectively. For the period May 1, 1997 (date of inception) to September 30,
1998, the average annual total return of Class A and Class B shares of Value
Fund was 11.56% and 12.47%, respectively.
For the period October 15, 1997 (date of inception) to September 30, 1998,
the average annual total return of Class A and Class B shares of Small Company
Fund was -17.95% and -18.2%, respectively.
Quotations of aggregate total return will be calculated for any specified
period pursuant to the following formula:
ERV - P
------- = T
P
(where P = a hypothetical initial payment of $1,000, T = the total return, and
ERV = the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). All total return figures will assume that all
dividends and distributions are reinvested when paid. The Funds may, from time
to time, include quotations of aggregate total return that do not reflect
deduction of the sales load. The sales load, if reflected, would reduce the
total return.
The aggregate total return on an investment made in Class A shares of
Growth and Income Fund, Equity Fund and Ultra Fund calculated as described above
for the period from October 1, 1988 through September 30, 1998 was 165.17%,
369.52% and 109.52%, respectively. Aggregate total return on an investment made
in Class A shares of Global Fund calculated as described above for the period
October 1, 1993 through September 30, 1998 was 36.07%. Aggregate total return on
an investment made in Class B shares of Growth and Income, Equity, Global and
Ultra Funds calculated as described above for the period October 19, 1993
through September 30, 1998 was 56.12%, 114.57%, 35.05% and 32.21%, respectively.
Aggregate total return made on an investment made in Class A and Class B shares
of Asset Allocation Fund calculated as described above for the period June 1,
1995 through September 30, 1998 was 20.71% and 21.17%, respectively. Aggregate
total return on an investment made in Class A and Class B shares of Social
Awareness Fund calculated as described above for the period November 4, 1996
(date of inception) to September 30, 1998 was 21.92% and 22.73%, respectively.
Aggregate total return on an investment made in Class A and Class B shares of
Value Fund calculated as described above for the period May 1, 1997 (date of
inception) to September 30, 1998, was 16.80% and 18.15%, respectively. Aggregate
total return on an investment made in Class A and Class B shares of Small
Company Fund calculated as described above for the period October 15, 1997 (date
of inception) to September 30, 1998, was -17.95% and -18.02%, respectively.
These figures reflect deduction of the maximum sales load. Fee waivers for the
Asset Allocation, Social Awareness, Value and Small Company Funds reduced Fund
expenses and in the absence of such waiver, the average annual total return and
aggregate total return would be reduced.
In addition, quotations of total return will also be calculated for several
consecutive one-year periods, expressing the total return as a percentage
increase or decrease in the value of the investment for each year relative to
the ending value for the previous year.
Quotations of average annual total return and aggregate total return will
reflect only the performance of a hypothetical investment in the Funds during
the particular time period shown. Such quotations for the Funds will vary based
on changes in market conditions and the level of the Funds' expenses, and no
reported performance figure should be considered an indication of performance
which may be expected in the future.
In connection with communicating its average annual total return or
aggregate total return to current or prospective shareholders, the Funds also
may compare these figures to the performance of other mutual funds tracked by
mutual fund rating services or to other unmanaged indexes which may assume
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs. Such mutual fund rating services include
the following: Lipper Analytical Services; Morningstar, Inc.; Investment Company
Data; Schabacker Investment Management; Wiesenberger Investment Companies
Service; Computer Directions Advisory (CDA); and Johnson's Charts. Such
unmanaged indexes include, but are not limited to, the following: S&P 500; the
Dow Jones Industrial Average; NASDAQ 100 and NASDAQ 200; Russell 2000 and
Russell 2500; the Wilshire 1750 and Wilshire 4500; and the Domini Social Index.
When comparing the Funds' performance with that of other alternatives, investors
should understand that shares of the Funds may be subject to greater market
risks than are certain other types of investments.
RETIREMENT PLANS
The Funds offer tax-qualified retirement plans for individuals (Individual
Retirement Accounts, known as IRAs), several prototype retirement plans for the
self-employed (Keogh plans), pension and profit-sharing plans for corporations,
and custodial account plans for employees of public school systems and
organizations meeting the requirements of Section 501(c)(3) of the Internal
Revenue Code. Actual documents and detailed materials about the plans will be
provided upon request to the Distributor.
Purchases of the Funds' shares under any of these plans are made at the
public offering price next determined after contributions are received by the
Distributor. The Funds' shares owned under any of the plans have full dividend,
voting and redemption privileges. Depending on the terms of the particular plan,
retirement benefits may be paid in a lump sum or in installment payments over a
specified period. There are possible penalties for premature distributions from
such plans.
Security Management Company, LLC is available to act as custodian for the
plans on a fee basis. For IRAs, SIMPLE IRAs, Roth IRAs, Section 403(b)
Retirement Plans, and Simplified Employee Pension Plans (SEPPs), service fees
for such custodial services currently are: (1) $10 for annual maintenance of the
account and (2) benefit distribution fee of $5 per distribution. Service fees
for other types of plans will vary. These fees will be deducted from the plan
assets. Optional supplemental services are available from Security Benefit Life
Insurance Company for additional charges.
Retirement investment programs involve commitments covering future years.
It is important that the investment objectives and structure of the Funds be
considered by the investors for such plans. A brief description of the available
tax-qualified retirement plans is provided below. However the tax rules
applicable to such qualified plans vary according to the type of plan and the
terms and conditions of the plan itself. Therefore, no attempt is made to
provide more than general information about the various types of qualified
plans.
Investors are urged to consult their own attorneys or tax advisers when
considering the establishment and maintenance of any such plans.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
Individual Retirement Account Custodial Agreements are available to provide
investment in shares of the Funds or in other Funds in the Security Group. An
individual may initiate an IRA through the Underwriter by executing the
custodial agreement and making a minimum initial investment of at least $100. A
$10 annual fee is charged for maintaining the account.
An individual may make a contribution to a traditional IRA each year of up
to the lesser of $2,000 or 100% of earned income under current tax law. The IRAs
described in this paragraph are called "traditional IRAs" to distinguish them
from the new "Roth IRAs" which became available in 1998. Roth IRAs are described
below. Spousal IRAs allow an individual and his or her spouse to contribute up
to $2,000 to their respective IRAs so long as a joint tax return is filed and
joint income is $4,000 or more. The maximum amount the higher compensated spouse
may contribute for the year is the lesser of $2,000 or 100% of that spouse's
compensation. The maximum the lower compensated spouse may contribute is the
lesser of (i) $2,000 or (ii) 100% of that spouse's compensation plus the amount
by which the higher compensated spouse's compensation exceeds the amount the
higher compensated spouse contributes to his or her IRA.
Generally if a taxpayer is not covered by an employer-sponsored retirement
plan, the amount the taxpayer may deduct for federal income tax purposes in a
year for contributions to an IRA is the lesser of $2,000 or the taxpayer's
compensation for the year. If the taxpayer is covered by an employer-sponsored
retirement plan, the amount of IRA contributions the taxpayer may deduct in a
year may be reduced or eliminated based on the taxpayer's adjusted gross income
for the year. The adjusted gross income level at which a single taxpayer's
deduction for 1998 is affected, $30,000, will increase annually to $50,000 in
the year 2005. The adjusted gross income level at which the deduction for 1998
for a married taxpayer (who does not file a separate return) is affected,
$50,000, will increase annually to $80,000 in the year 2007. If the taxpayer is
married, files a separate tax return, and is covered by a qualified retirement
plan, the taxpayer may not make a deductible contribution to an IRA if the
taxpayer's income exceeds $10,000. If the taxpayer is not covered by an
employer-sponsored retirement plan, but the taxpayer's spouse is, the amount the
taxpayer may deduct for IRA contributions will be phased out if the taxpayer's
adjusted gross income is between $150,000 and $160,000.
Contributions must be made in cash no later than April 15 following the
close of the tax year. No annual contribution is permitted for the year in which
the investor reaches age 70 1/2 or any year thereafter.
In addition to annual contributions, total distributions and certain
partial distributions from certain employer-sponsored retirement plans may be
eligible to be reinvested into a traditional IRA if the reinvestment is made
within 60 days of receipt of the distribution by the taxpayer. Such rollover
contributions are not subject to the limitations on annual IRA contributions
described above.
ROTH IRAS
Section 408A of the Code permits eligible individuals to establish a Roth
IRA, a new type of IRA which became available in 1998. Contributions to a Roth
IRA are not deductible, but withdrawals that meet certain requirements are not
subject to federal income tax. The maximum annual contribution amount of $2,000
is phased out if the individual is single and has an adjusted gross income
between $95,000 and $110,000, or if the individual is married and the couple has
a combined adjusted gross income between $150,000 and $160,000. In general, Roth
IRAs are subject to certain required distribution requirements. Unlike a
traditional IRA, Roth IRAs are not subject to minimum required distribution
rules during the owner's lifetime. Generally, however, the amount in a remaining
Roth IRA must be distributed by the end of the fifth year after the death of the
owner.
Beginning in 1998 the owner of a traditional IRA may convert the
traditional IRA into a Roth IRA under certain circumstances. The conversion of a
traditional IRA to a Roth IRA will subject the amount of the converted
traditional IRA to federal income tax. If a traditional IRA is converted to a
Roth IRA, the taxable amount of the owner's traditional IRA will be considered
taxable income for federal income tax purposes for the year of conversion.
Generally, all amounts in a traditional IRA are taxable except for the owner's
prior non-deductible contributions to the traditional IRA.
EDUCATION IRAS
Section 530 of the Code permits eligible individuals to establish an
Education IRA on behalf of a beneficiary for tax years beginning in 1998.
Contributions to an Education IRA are not deductible, but qualified
distributions to the beneficiary are not subject to federal income tax. The
maximum annual contribution amount of $500 is phased out if the individual is
single and has an adjusted gross income between $95,000 and $110,000, or if the
individual is married and the couple has a combined adjusted gross income
between $150,000 and $160,000. Education IRAs are subject to certain required
distribution requirements. Generally, the amount remaining in an Education IRA
must be distributed by the beneficiary's 30th birthday or rolled into a new
Education IRA for another eligible beneficiary.
SIMPLE IRAS
The Small Business Job Protection Act of 1996 created a new retirement
plan, the Savings Incentive Match Plan for Employees of Small Employers (SIMPLE
Plans) for tax years beginning in 1997. SIMPLE Plan participants must establish
a SIMPLE IRA into which plan contributions will be deposited.
The Investment Manager makes available SIMPLE IRAs to provide investment in
shares of the Funds. Contributions to a SIMPLE IRA may be either salary deferral
contributions or employer contributions. Contributions must be made in cash and
cannot exceed the maximum amount allowed under the Internal Revenue Code. On a
pre-tax basis, up to $6,000 of compensation (through salary deferrals) may be
contributed to a SIMPLE IRA. In addition, employers are required to make either
(1) a dollar-for-dollar matching contribution or (2) a nonelective contribution
to each participant's account each year. In general, matching contributions must
equal up to 3% of compensation, but under certain circumstances, employers may
make lower matching contributions. Instead of the match, employers may make a
nonelective contribution equal to 2% of compensation (compensation for purposes
of any nonelective contribution is limited to $160,000, as indexed).
Distributions from a SIMPLE IRA are (1) taxed as ordinary income; (2)
includable in gross income; and (3) subject to applicable state tax laws.
Distributions prior to age 59 1/2 may be subject to a 10% penalty tax which
increases to 25% for distributions made before a participant has participated in
the SIMPLE Plan for at least two years. An annual fee of $10 is charged for
maintaining the SIMPLE IRA.
PENSION AND PROFIT-SHARING PLANS
Prototype corporate pension or profit-sharing plans meeting the
requirements of Internal Revenue Code Section 401(a) are available. Information
concerning these plans may be obtained from the Distributor.
403(B) RETIREMENT PLANS
Employees of public school systems and tax-exempt organizations meeting the
requirements of Internal Revenue Code Section 501(c)(3) may purchase shares of
the Funds or of the other Funds in the Security Group under a Section 403(b)
Plan. Section 403(b) Plans are subject to numerous restrictions on the amount
that may be contributed, the persons who are eligible to participate and on the
time when distributions may commence.
SIMPLIFIED EMPLOYEE PENSION PLANS (SEPPS)
A prototype SEPP is available for corporations, partnerships or sole
proprietors desiring to adopt such a plan for purchases of IRAs for their
employees. Employers establishing a SEPP may contribute a maximum of $30,000 a
year to an IRA for each employee. This maximum is subject to a number of
limitations.
FINANCIAL STATEMENTS
The audited financial statement of the Funds, which are contained in the
Funds' September 30, 1997 Annual Report and the unaudited financial statements
for the six-month period ended March 31, 1998, are incorporated herein by
reference. Copies of the Annual Report and Semiannual Report are provided to
every person requesting a Statement of Additional Information.
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
AAA - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
BAA - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
STANDARD & POOR'S CORPORATION
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC - Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominately speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C - The rating C is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
<PAGE>
APPENDIX B
REDUCED SALES CHARGES
CLASS A SHARES
Initial sales charges may be reduced or eliminated for persons or
organizations purchasing Class A shares of the Funds alone or in combination
with Class A shares of certain other Security Funds.
For purposes of qualifying for reduced sales charges on purchases made
pursuant to Rights of Accumulation or a Statement of Intention (also referred to
as a "Letter of Intent"), the term "Purchaser" includes the following persons:
an individual, his or her spouse and children under the age 21; a trustee or
other fiduciary of a single trust estate or single fiduciary account established
for their benefit; an organization exempt from federal income tax under Section
501(c)(3) or (13) of the Internal Revenue Code; or a pension, profit-sharing or
other employee benefit plan whether or not qualified under Section 401 of the
Internal Revenue Code.
RIGHTS OF ACCUMULATION
A Purchaser may combine all previous purchases with his or her contemplated
current purchases of Class A Shares of a Fund, for the purpose of determining
the sales charge applicable to the current purchase. For example, an investor
who already owns Class A shares of a Fund either worth $30,000 at the applicable
current offering price or purchased for $30,000 and who invests an additional
$25,000, is entitled to a reduced front-end sales charge of 4.75% on the latter
purchase. The Underwriter must be notified when a sale takes place which would
qualify for the reduced charge on the basis of previous purchases subject to
confirmation of the investor's holding through the Fund's records. Rights of
accumulation apply also to purchases representing a combination of the Class A
shares of the Funds, Security Income Fund or Security Tax-Exempt Fund in those
states where shares of the Fund being purchased are qualified for sale.
STATEMENT OF INTENTION
A Purchaser may sign a Statement of Intention, which may be signed within
90 days after the first purchase to be included thereunder, in the form provided
by the Underwriter covering purchases of Class A shares of the Funds, Security
Income Fund or Security Tax-Exempt Fund to be made within a period of 13 months
(or a 36-month period for purchases of $1 million or more) and thereby become
eligible for the reduced front-end sales charge applicable to the actual amount
purchased under the Statement. Five percent of the amount specified in the
Statement of Intention will be held in escrow shares until the Statement is
completed or terminated. The shares so held may be redeemed by the Funds if the
investor is required to pay additional sales charges which may be due if the
amount of purchases made by the Purchaser during the period the Statement is
effective is less than the total specified in the Statement of Intention.
A Statement of Intention may be revised during the 13-month period (or a
36-month period for purchases of $1 million or more). Additional Class A shares
received from reinvestment of income dividends and capital gains distributions
are included in the total amount used to determine reduced sales charges. The
Statement is not a binding obligation upon the investor to purchase or any Fund
to sell the full indicated amount. A Statement of Intention form may be obtained
from the Funds. An investor considering signing such an agreement should read
the Statement of Intention carefully.
REINSTATEMENT PRIVILEGE
Stockholders who redeem their Class A shares of the Funds have a one-time
privilege (1) to reinstate their accounts by purchasing shares without a sales
charge up to the dollar amount of the redemption proceeds, or (2) to the extent
the redeemed shares would have been eligible for the exchange privilege, to
purchase Class A shares of another of the Funds, Security Income Fund and
Security Tax-Exempt Fund, without a sales charge up to the dollar amount of the
redemption proceeds. Written notice and a check in the amount of the
reinvestment from eligible stockholders wishing to exercise this reinstatement
privilege must be received by a fund within 30 days after the redemption request
was received (or such longer period as may be permitted by rules and regulations
promulgated under the Investment Company Act of 1940). The reinstatement or
exchange will be made at the net asset value next determined after the
reinvestment is received by the Fund. Stockholders making use of the
reinstatement privilege should note that any gains realized upon the redemption
will be taxable while any losses may be deferred under the "wash sale" provision
of the Internal Revenue Code.
<PAGE>
SECURITY FUNDS
ANNUAL REPORT
SEPTEMBER 30, 1997
o Security Growth and Income Fund
o Security Equity Fund
- Equity Series
- Global Series
- Asset Allocation Series
- Social Awareness Series
- Value Series
o Security Ultra Fund
SECURITY DISTRIBUTORS, INC.
[LOGO] A MEMBER OF THE SECURITY BENEFIT
GROUP OF COMPANIES
<PAGE>
SECURITY FUNDS
PRESIDENT'S COMMENTARY
NOVEMBER 15, 1997
To Our Shareholders:
The fiscal year ended September 30 proved to be another extremely rewarding year
for investors in equity oriented funds. Shareholders in all the series
experienced absolute returns well above historic averages, with performance
varying on differing investment objectives. Please read the portfolio managers'
letters which follow for more detail about performance in their individual
series.
IMPROVING GLOBAL ECONOMIC PICTURE
The global economic backdrop for investors was perhaps the most favorable of any
time in the last 30 years. With the United States as the only world superpower,
the geopolitical environment produced steady progress toward expansion of
democracy and the free market system around the world. Economic globalization
has resulted in the most competitive marketplace in history, forcing U.S.
companies to focus on productivity improvement rather than price increases to
produce record levels of profit growth. Reduced global inflation continued to
encourage lower interest rates and the financial markets responded as one would
expect from such a bullish scenario.
We continue to believe that the picture remains bright and the potential for
further gains in the markets lie ahead in the years to come. The global picture
on balance continues to be one which should remain favorable for the markets.
Concerns about high valuation levels for equities should ease if, as we expect,
long-term interest rates continue to decline in response to favorable global
inflation conditions. We believe that the productivity improvement story still
has an extended life and will enable companies to generate further earnings
gains in the years ahead.
OUR VIEW OF THE MARKETS IN THE MONTHS AHEAD
We expect the markets to respond positively to both lower interest rates and
continued improvement in corporate earnings. With continuing strong money flows
from investors into equity mutual fund portfolios, we should have ample
opportunity for further market moves to the upside. We would not, however,
expect total returns to be of the magnitude of those produced the last three
years. On a further cautionary note we expect market volatility to be extremely
high by historical standards and suggest investors continue to focus on their
long-term investment plans in order to keep from being distracted by short-term
events.
As always, we appreciate your confidence in our investment professionals. We
invite your comments and questions at any time.
Sincerely,
/s/ John Cleland
President
1
<PAGE>
SECURITY GROWTH AND INCOME FUND
MANAGER'S COMMENTARY
NOVEMBER 15, 1997
To Our Shareholders:
The Growth and Income Fund returned 35.31% in the fiscal year ended September
30, very close to the average return of 35.76% for its peer group.1 Performance
was improved in the last half of the fiscal year after the emphasis was shifted
from well-known large capitalization companies to investment in midcap issues.
In addition, the fixed income portion of the portfolio was reduced from near 20%
to about 10% over that period.
THE STRUCTURE OF THE PORTFOLIO
The Growth and Income Fund held large weightings in specialty chemicals,
utilities, and technology stocks compared with its benchmark, the S&P 500 Index.
At the same time it was underweighted in energy and financial stocks. Stock
selection rather than sector selection, however, provided the most return in the
portfolio.
For example, Tandem Computers increased 170% in value after it was purchased by
Compaq Computer Corporation. Mylan Laboratories, Inc., the country's largest
producer of generic pharmaceuticals, increased over 80%, recovering from
distressed levels which had resulted from fears of too much competition in the
generic drug industry.
Other "winners" included Forcenergy, Inc., a small oil exploration and
production company with activity in Alaska and China. Its stock appreciated
sharply after the company announced a minor discovery in the Gulf of Mexico in
March and drew strong purchase recommendations by analysts in subsequent months.
McGraw-Hill Companies, Inc., performed well after gaining market share in the
recent textbook adoption cycle. Its subsidiary, Standard & Poor's, made a strong
contribution to earnings as a beneficiary of the strong market cycle.
THE BONDS IN THE PORTFOLIO
The fixed income holdings in the portfolio are all bonds which are rated BB or
B, the upper tier ratings in the high yield market. The portfolio was the
beneficiary of a number of upgrades or potential upgrades including bonds of
Seagull Energy Corporation and Heritage Media Corporation. The issuers of two of
our holdings, Regency Health Services, Inc. and TLC/Beatrice Holdings, made
tender offers for their bonds substantially above the levels at which we had
purchased them.
The bond portion of the portfolio is well diversified, with a large number of
companies represented. We continue to seek out companies with solid asset value
and quality management. These companies are generally considered takeover
candidates, but remain strong enough on their own merits that they could come to
market with initial public offerings of their own as well.
PLANS FOR THE COMING FISCAL YEAR
We anticipate that for at least the next few months the stock/bond balance in
the portfolio will remain close to the current levels. With stock indexes at
record high levels, it would be hard to find buying opportunities should we
decide to sell holdings in either part of the Fund. As in the past, we retain
the flexibility to add to or reduce fixed income positions as market conditions
dictate.
Jim Schier
Portfolio Manager
Tom Swank
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect
deduction of the sales charge.
2
<PAGE>
SECURITY GROWTH AND INCOME FUND
MANAGER'S COMMENTARY (continued)
NOVEMBER 15, 1997
Security Growth and Income Fund
vs. S&P 500
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
Blended Index of 80%
S&P 500 and 20%
Security Growth Lehman Brothers Long BB
& Income Fund S&P 500 High Yield Bond Index
12/31/87 .... 7,797.81 7,737.00 8,216
3/31/88 ..... 8,242.31 8,191.45 8,683
6/30/88 ..... 8,516.36 8,731.68 9,190
9/30/88 ..... 8,398.14 8,765.43 9,267
12/31/88 .... 8,634.09 9,037.53 9,550
3/31/89 ..... 9,163.57 9,672.65 10,094
6/30/89 ..... 9,731.38 10,523.53 10,895
9/30/89 ..... 10,186.62 11,644.29 11,873
12/31/89 .... 10,397.92 11,883.53 12,084
3/31/90 ..... 10,009.53 11,524.48 11,813
6/30/90 ..... 10,072.70 12,249.36 12,504
9/30/90 ..... 9,597.34 10,561.09 10,980
12/31/90 .... 10,086.40 11,506.50 11,794
3/31/91 ..... 10,961.24 13,181.80 13,400
6/30/91 ..... 11,132.78 13,154.52 13,519
9/30/91 ..... 11,734.31 13,862.61 14,206
12/31/91 .... 12,291.54 15,021.68 15,289
3/31/92 ..... 12,058.61 14,638.33 15,137
6/30/92 ..... 11,940.75 14,926.04 15,414
9/30/92 ..... 12,281.57 15,388.86 15,923
12/31/92 .... 12,882.97 16,173.87 16,602
3/31/93 ..... 13,462.60 16,866.88 17,335
6/30/93 ..... 13,584.67 16,953.66 17,550
9/30/93 ..... 14,198.80 17,387.25 18,026
12/31/93 .... 13,936.03 17,789.61 18,457
3/31/94 ..... 13,599.78 17,110.97 17,816
6/30/94 ..... 12,746.07 17,180.83 17,852
9/30/94 ..... 13,114.66 18,026.75 18,634
12/31/94 .... 12,841.14 18,022.17 18,644
3/31/95 ..... 13,594.05 19,776.75 20,334
6/30/95 ..... 14,879.60 21,653.34 22,164
9/30/95 ..... 15,770.24 23,374.82 23,694
12/31/95 .... 16,404.77 24,767.78 24,958
3/31/96 ..... 17,519.85 26,114.05 26,056
6/30/96 ..... 18,211.31 27,293.02 27,042
9/30/96 ..... 18,973.42 28,128.03 27,898
12/31/96 .... 19,570.68 30,482.74 30,951
3/31/97 ..... 19,522.10 31,280.23 31,672
6/30/97 ..... 22,226.84 36,752.08 36,424
9/30/97 ..... 25,672.03 39,516.47 38,955
12/31/97
$10,000 OVER TEN YEARS
This chart assumes a $10,000 investment in Class A shares of Growth and Income
Fund on September 30, 1987, and reflects deduction of the 5.75% sales load. On
September 30, 1997, the value of your investment in Class A shares of the fund
(with dividends reinvested) would have grown to $25,672. By comparison, the same
$10,000 investment would have grown to $39,516 based on the S&P's performance.
Comparison is also made to a blend of market indexes which reflect the asset
classes in which the Fund invests. The blended index consists of 80% S&P 500 and
20% Lehman Brothers BB Composite Index. The same $10,000 investment in the
blended index would have grown to $38,955.
The performance illustrated above is based on the performance of Class A shares.
The performance of Class B shares, which were first offered on October 19, 1993,
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.
TOP 5 HOLDINGS**
% of net assets
---------------
Mylan Laboratories, Inc. 5.0%
Harris Corporation 3.4%
Computer Sciences Corporation 3.3%
The Cheesecake Factory 3.1%
Equitable Resources, Inc. 2.7%
**At September 30, 1997
AVERAGE ANNUAL RETURNS
As of September 30, 1997
1 year 5 years 10 years
------ ------- --------
A Shares 35.31% 15.89% 10.54%
A Shares with sales charge 27.55% 14.54% 9.89%
B Shares 34.01% 15.18% N/A
(10-19-93)
(since inception)
B Shares with CDSC 29.01% 14.67% N/A
(10-19-93)
(since inception)
ONE YEAR RETURN INCREASES 15%
A Shares: 9/30/97 35.31%
9/30/96 20.31%
The performance data above represents past performance which is not predictive
of future results. The investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The figures above do not reflect
deduction of the maximum front-end sales charge of 5.75% for Class A shares or
contingent deferred sales charge of 5% for Class B shares, as applicable, except
where noted. Such figures would be lower if the maximum sales charge were
deducted.
3
<PAGE>
SECURITY EQUITY FUND-EQUITY SERIES
MANAGER'S COMMENTARY
NOVEMBER 15, 1997
TO OUR SHAREHOLDERS:
The environment for the stock market continued to be positive throughout the
fiscal year just completed. Inflation extended its downward progress, and
interest rates followed suit. These factors combined with moderate economic
growth to provide favorable market conditions in which stock prices could
appreciate. Security Equity Series gained 32.08% for the year, slightly below
the 33.52% average return of its peer group of funds.(1)
CONTRIBUTORS TO SOLID PERFORMANCE
Our emphasis on high quality, above-average earnings growth companies was the
primary reason for good performance in the Series. Large cap companies with a
portion of their earnings coming from international operations were the stars of
the stock markets during the first part of the fiscal year. Our overweighting in
financial stocks such as banks and insurance companies added to total return,
too, as these issues benefited from falling interest rates and low inflation.
We also had an above-average weighting in the health care sector, which was a
positive for performance as this sector continued to do well. Early in the year,
the expectation was that economic growth would slow, and we believed that
earnings of health care companies would remain stable in this slowing
environment.
WINNERS IN THE PORTFOLIO
Among stocks which contributed the most to total return was Microsoft
Corporation, up just over 100% during the fiscal year. Bristol-Myers Squibb
Company rose over 76% in the year as an improving new product outlook was
perceived as leading to an accelerating growth rate.
A new holding in the portfolio, Halliburton Company (a diversified energy
services firm), rose steadily along with other stocks in the oil services
industry. This is one of very few industries that had the ability to increase
prices in a very price-competitive environment as capacity has not increased and
consolidation of companies within the industry decreased competition.
ADVERSE EFFECTS ON PERFORMANCE
During the late months of the fiscal year, disturbances in the currency markets
caused the foreign earnings of some of the same large multinational companies
that had done well earlier, to be hurt because of the currency translations.
Stocks of midcap companies outperformed during this time because of their
smaller exposure to currency risks. Our underweighting in midcap issues hurt our
performance in these later months.
Specific earnings problems at Corning, Inc., a manufacturer of fiber for
fiberoptic cable, had a negative impact on portfolio return as Corning lowered
its estimate of its earnings growth. Similarly, analysts expected that earnings
disappointments were possible for Aetna, Inc. The concerns were based on medical
claims cost increases overwhelming gains in medical insurance premiums.
THE COMING YEAR
Expectations are for economic growth to moderate without sliding
into a recession in coming months. We believe inflation and interest rates
should continue to support a positive environment for stocks. Our emphasis will
remain on seeking companies with consistent above-average earnings growth. We
also plan to increase our investment in medium sized companies. Their relative
valuation and earnings growth potential at this time make them more attractive
than many larger companies.
Terry Milberger
Senior Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect
deduction of the sales charge.
4
<PAGE>
SECURITY EQUITY FUND-EQUITY SERIES
MANAGER'S COMMENTARY (continued)
NOVEMBER 15, 1997
PERFORMANCE
SECURITY EQUITY SERIES VS. S&P 500
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
S&P 500 Equity Series
12/31/87 ..... 7,737.00 7,324.67
3/31/88 ...... 8,191.45 7,822.46
6/30/88 ...... 8,731.68 8,106.92
9/30/88 ...... 8,765.43 8,409.15
12/31/88 ..... 9,037.53 8,728.25
3/31/89 ...... 9,672.65 9,457.13
6/30/89 ...... 10,523.53 10,404.67
9/30/89 ...... 11,644.29 11,898.85
12/31/89 ..... 11,883.53 11,413.68
3/31/90 ...... 11,524.48 11,102.38
6/30/90 ...... 12,249.36 11,807.95
9/30/90 ...... 10,561.09 10,002.52
12/31/90 ..... 11,506.50 10,885.65
3/31/91 ...... 13,181.80 12,753.74
6/30/91 ...... 13,154.52 12,776.80
9/30/91 ...... 13,862.61 13,422.56
12/31/91 ..... 15,021.68 14,720.94
3/31/92 ...... 14,638.33 14,897.70
6/30/92 ...... 14,926.04 14,695.69
9/30/92 ...... 15,388.86 14,796.69
12/31/92 ..... 16,173.87 16,298.23
3/31/93 ...... 16,866.88 17,296.62
6/30/93 ...... 16,953.66 17,161.72
9/30/93 ...... 17,387.25 18,160.11
12/31/93 ..... 17,789.61 18,681.85
3/31/94 ...... 17,110.97 18,013.45
6/30/94 ...... 17,180.83 17,712.67
9/30/94 ...... 18,026.75 18,514.74
12/31/94 ..... 18,022.17 18,203.12
3/31/95 ...... 19,776.75 19,972.88
6/30/95 ...... 21,653.34 21,959.33
9/30/95 ...... 23,374.82 23,656.84
12/31/95 ..... 24,767.78 25,197.00
3/31/96 ...... 26,114.05 27,234.70
6/30/96 ...... 27,293.02 28,410.30
9/30/96 ...... 28,128.03 29,546.70
12/31/96 ..... 30,482.74 30,910.18
3/31/97 ...... 31,280.23 31,124.85
6/30/97 ...... 36,752.08 36,405.34
9/30/97 ...... 39,516.47 39,024.12
12/31/97
$10,000 OVER TEN YEARS
This chart assumes a $10,000 investment in Class A shares of Equity Series on
September 30, 1987, and reflects deduction of the 5.75% sales load. On September
30, 1997, the value of your investment in Class A shares of the Series (with
dividends reinvested) would have grown to $39,024. By comparison, the same
$10,000 investment would have grown to $39,516 based on the S&P's performance.
The performance illustrated above is based on the performance of Class A shares.
The performance of Class B shares, which were first offered on October 19, 1993,
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.
TOP 5 HOLDINGS**
% of net assets
---------------
Tyco International, Ltd. 1.9%
Compaq Computer Corporation 1.8%
Bristol-Myers Squibb Company 1.8%
U.S. Industries, Inc. 1.7%
Omnicom Group, Inc. 1.7%
**At September 30, 1997
AVERAGE ANNUAL RETURNS
As of September 30, 1997
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
A Shares 32.08% 21.40% 15.26%
A Shares with sales charge 24.48% 19.97% 14.59%
B Shares 30.85% 19.86% N/A
(10-19-93)
(since inception)
B Shares with CDSC 25.85% 19.41% N/A
(10-19-93)
(since inception)
The performance data above represents past performance which is not predictive
of future results. The investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The figures above do not reflect
deduction of the maximum front-end sales charge of 5.75% for Class A shares or
contingent deferred sales charge of 5% for Class B shares, as applicable, except
where noted. Such figures would be lower if the maximum sales charge were
deducted.
5
<PAGE>
SECURITY EQUITY FUND-GLOBAL SERIES
MANAGER'S COMMENTARY
NOVEMBER 15, 1997
[LOGO] SUBADVISOR - LEXINGTON
MANAGEMENT CORPORATION
TO OUR SHAREHOLDERS:
The Global Equity Series of Security Equity Fund returned 20.22% during the
fiscal year ended September 30, 1997.(1) The average global fund gained 24.63%
according to Lipper Analytical Services, Inc., while the benchmark Morgan
Stanley Capital International World Index rose 22.36%.
CONTRIBUTORS TO PERFORMANCE
The Series benefited from strength in European holdings, low weightings in Japan
and Southeast Asia, and strong stock selection in several smaller countries.
Nonetheless, an underweighting of U.S. stocks, which climbed an astounding
40.45% as measured by the S&P 500 Index, held performance down. The value bias
of the portfolio hurt as well, as value investing trailed momentum and growth
stock investing throughout the year.
STRONG PERFORMANCES IN WORLD EQUITY MARKETS
The global bull market continued in 1997 driven by liquidity and by companies'
greater emphasis on shareholder value. World bond market yields declined between
50 and 100 basis points, while a strong dollar enhanced earnings of many
businesses in Europe and Japan. The dollar rose 15.4% against the German mark
and 8.1% against the Japanese yen.
European markets performed extremely well for several reasons. Falling interest
rates, driven lower by weak economic activity as well as growing investor belief
in European Monetary Union, drove European equity prices higher. Profits also
surged in Europe due to an accelerated pace of corporate restructuring and a
strong U.S. dollar, which improved the earnings of export-driven companies. The
U.S. market powered ahead as a result of continued money flows into U.S. stocks
and bonds. Earnings often surprised on the upside as American profit
maximization continued. Japan remains the one troubled economic power
struggling, while corporate Japan still lacks a focus on shareholder value.
LOOKING AHEAD AT GLOBAL MARKETS
It is unlikely that 1998 will be as strong a year for stocks as 1997 proved to
be. Global liquidity may be less accommodative if interest rates rise in Europe
and the United States. European markets appear to offer the best investment
opportunity because of a relatively young restructuring story. We believe
profits should remain strong in Europe; however, U.S. profit growth may be dull.
It is hard to argue for a further rise in U.S. profitability when it is already
at historically lofty levels.
Inflation remains a major risk particularly on the wage front. Rising wages
could lead to higher interest rates as well as some profit margin contraction,
and this is not a good scenario for U.S. stocks. Japanese equities may at some
point present a buying opportunity if they continue to plummet.
OUR PLANS FOR THE COMING FISCAL YEAR
The Global Equity Series maintains its focus on individual stocks which offer
good value. Strong management with high incentives to create shareholder value
remains our major criterion for stock selection. Opportunities are still
plentiful, but as always, risk must be considered as well as reward. Weightings
in the Series continue to favor Europe over Japan and the U.S. because of the
stronger profit outlook there and increasing corporate activity in some sectors.
After the sharp fall in Asian markets, we added several export-driven companies
to the portfolio, in keeping with our focus on finding quality companies at
attractive prices. We expect this strategy to pay off in the long term.
Richard Saler
Portfolio Manager
Alan Wapnick
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect
deduction of the sales charge. Investing in foreign countries may involve
risks, such as currency fluctuations and political instability, not
associated with investing exclusively in the U.S.
6
<PAGE>
SECURITY EQUITY FUND-GLOBAL SERIES
MANAGER'S COMMENTARY (continued)
NOVEMBER 15, 1997
PERFORMANCE
SECURITY GLOBAL SERIES VS. MORGAN
STANLEY CAPITAL INTERNATIONAL WORLD INDEX
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
MSCI Global Series
12/31/93 .... 10,093.00 10,283.02
3/31/94 ..... 10,452.39 9,971.70
6/30/94 ..... 10,993.54 10,132.08
9/30/94 ..... 11,011.45 10,443.40
12/31/94 .... 10,906.63 9,436.69
3/31/95 ..... 11,118.33 9,926.78
6/30/95 ..... 11,207.89 10,561.01
9/30/95 ..... 11,684.06 10,339.99
12/31/95 .... 12,166.47 11,330.95
3/31/96 ..... 12,527.21 12,018.59
6/30/96 ..... 12,734.65 11,839.21
9/30/96 ..... 12,728.36 12,277.69
12/31/96 .... 12,940.36 13,146.09
3/31/97 ..... 12,746.89 13,080.25
6/30/97 ..... 14,411.02 14,901.82
9/30/97 ..... 14,318.68 14,879.87
12/31/97
This chart assumes a $10,000 investment in Class A shares of Global Series on
October 1, 1993, and reflects deduction of the 5.75% sales load. On September
30, 1997, the value of your investment in Class A shares of the Series (with
dividends reinvested) would have grown to $14,880. By comparison, the same
$10,000 investment would have grown to $14,319 based on the MSCI's performance.
The performance illustrated above is based on the performance of Class A shares.
The performance of Class B shares, which were first offered on October 19, 1993,
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.
TOP 5 HOLDINGS**
% of net assets
---------------
Bohler-Uddeholm AG 2.6%
Foster's Brewing Group, Ltd. 2.3%
Imax Corporation 2.0%
Jefferson Smurfit 1.9%
Deutsche Bank AG 1.9%
**At September 30, 1997
AVERAGE ANNUAL RETURNS
As of September 30, 1997
1 YEAR SINCE INCEPTION
------ ---------------
A Shares 20.22% 12.07%
(10-1-93)
A Shares with sales charge 13.29% 10.42%
(10-1-93)
B Shares 19.01% 11.26%
(10-19-93)
B Shares with CDSC 14.01% 10.70%
(10-19-93)
The performance data above represents past performance which is not predictive
of future results. The investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The figures above do not reflect
deduction of the maximum front-end sales charge of 5.75% for Class A shares or
contingent deferred sales charge of 5% for Class B shares, as applicable, except
where noted. Such figures would be lower if the maximum sales charge were
deducted.
7
<PAGE>
SECURITY EQUITY FUND-ASSET ALLOCATION SERIES
MANAGER'S COMMENTARY
NOVEMBER 15, 1997
MERIDIAN
[LOGO] INVESTMENT
MANAGEMENT
SUBADVISOR: MERIDIAN INVESTMENT MANAGEMENT CORPORATION
TO OUR SHAREHOLDERS:
The Asset Allocation Series returned 19.00% over the last 12 months, relative to
a peer group average return of 21.22%.(1) A continued surge in global equity
markets has allowed asset allocation portfolios to post returns far in excess of
historical norms.
The strong performance of many asset allocation portfolios is due to their heavy
weightings in large capitalization U.S. stocks. This is evidenced by the high
correlation between the S&P 500 and the Lipper asset allocation peer group. As
the S&P 500 has gained approximately 40% the last 12 months, many asset
allocation portfolios have benefited. However, the reliance on U.S stocks in
asset allocation portfolios reduces the potential benefits of diversification
and exposes these portfolios to the risk of a falling U.S.
market.
DIVERSIFICATION IN THE PORTFOLIO
The Asset Allocation Series has demonstrated low correlation with the S&P 500, a
desirable portfolio characteristic for investors seeking diversification from a
typical domestic equity portfolio. The low correlation relative to the S&P 500
is due to the portfolio's composition, which can include foreign stocks, U.S.
stocks, U.S. bonds, gold stocks, and real estate investment trusts (REITs).
Throughout the fiscal year we maintained approximately 25% of the portfolio in
the U.S. stock market, and many industries we have owned have been market
leaders. The truck parts & supplies, trucking, and computer peripheral
industries have been among the best in the market the last twelve months.
Since valuations for the U.S. stock market have remained near historic highs,
the portfolio has invested in undervalued markets outside the U.S. Foreign
equity markets emphasized the last year include Japan, Germany, Italy, and
Belgium. All of these markets, with the exception of Japan, have outperformed
the U.S. market in local currency terms. Due to the strength of the dollar,
however, the full benefit of these market rallies was reduced when converted to
dollar terms.
THE ATTRACTIVENESS OF THE JAPANESE MARKET
Most equity markets in the last several years have appreciated far in excess of
their historical norms. Because of this, many markets are not the bargains they
once were. The exception to this is Japan. The Japanese market has yet to
recover from the decline it has seen through much of the 1990s. However, our
valuation measures suggest that the Japanese stock market is undervalued and a
compelling investment opportunity. With negative sentiment in the market, prices
near recent lows, and attractive valuations, we remain bullish and expect that
market to contribute to the appreciation of the Asset Allocation portfolio.
VALUE IN DEPRESSED GOLD STOCKS
The portfolio holds a small position in gold stocks, purchased in spite of
recent negative market sentiment. As a portfolio that seeks undervalued
investments, the Asset Allocation portfolio often owns securities that are out
of favor with the investing public. This negative market sentiment, however,
creates an opportunity for value investors as prices are pushed below their
intrinsic values. As gold prices were dropping to recent lows and the prices of
gold stocks were being punished, we purchased select gold issues. Initially a
drag on the portfolio, these holdings were among the market leaders as the
fiscal year ended.
Many asset categories and markets have experienced rapid appreciation in the
last year, and many valuations in some markets are stretched. Because of this we
will continue to be deliberate in our selection process and valuation
methodology.
Patrick Boyle
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect
deduction of the sales charge. The Investment Manager waived a portion
of the Fund's management fee for the fiscal year ended September 30,
1997, and in the absence of such waiver the performance quoted would be
reduced.
Investing in foreign countries may involve risks, such as currency
fluctuations and political instability, not associated with investing
exclusively in the U.S.
8
<PAGE>
SECURITY EQUITY FUND-ASSET ALLOCATION SERIES
MANAGER'S COMMENTARY (continued)
NOVEMBER 15, 1997
PERFORMANCE
SECURITY ASSET ALLOCATION SERIES
VS. S&P 500
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
S&P 500 Meridian Blended Index Asset Allocation Series
6/30/95 ..... 10,235.00 10,083 9,500.47
9/30/95 ..... 11,049.00 10,607 9,934.02
12/31/95 .... 11,707.00 11,109 10,158.02
3/31/96 ..... 12,343.00 11,445 10,563.16
6/30/96 ..... 12,901.00 11,784 10,790.43
9/30/96 ..... 13,295.00 12,052 10,928.77
12/31/96 .... 14,408.00 12,800 11,496.36
3/31/97 ..... 14,785.00 12,909 11,568.73
6/30/97 ..... 17,372.00 14,391 12,375.13
9/30/97 ..... 18,679.00 15,083 13,005.77
12/31/97
This chart assumes a $10,000 investment in Class A shares of Asset Allocation
Series on June 1, 1995, and reflects deduction of the 5.75% sales load. On
September 30, 1997, the value of your investment in Class A shares of the Series
(with dividends reinvested) would have grown to $13,006. By comparison, the same
$10,000 investment would have grown to $18,679, based on the S&P's performance.
Comparison is also made to a blend of market indexes which reflect the asset
classes in which the Series has invested over the past fiscal year. The blended
index consists of 40% S&P 500, 5% U.S. 30-day Treasury, 20% Lehman Brothers
Aggregate Bond, 25% Financial Times World Index (excluding U.S.), 10% Wilshire
Real Estate Securities. The same $10,000 investment in the blended index would
have grown to $15,083.
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.
TOP 5 EQUITY HOLDINGS**
% of net assets
---------------
Placer Dome, Inc. 2.0%
Barrick Gold Corporation 1.9%
Newmont Mining Corporation1 1.7%
Battle Mountain Gold Company 1.3%
Homestake Mining Company 1.2%
**At September 30, 1997
AVERAGE ANNUAL RETURNS
As of September 30, 1997
1 year Since Inception
------ ---------------
A Shares 19.00% 14.79% (6-1-95)
A Shares with sales charge 12.16% 11.92% (6-1-95)
B Shares 17.95% 13.70% (6-1-95)
B Shares with CDSC 12.95% 12.25% (6-1-95)
ONE YEAR RETURN INCREASES 8.99%
A Shares: 9/30/97 19.00%
9/30/96 10.01%
The performance data above represents past performance which is not predictive
of future results. The investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The figures above do not reflect
deduction of the maximum front-end sales charge of 5.75% for Class A shares or
contingent deferred sales charge of 5% for Class B shares, as applicable, except
where noted. In addition, the investment manager is waiving a portion of the
management fee for the Series. Performance figures would be lower if the maximum
sales charge and advisory fee were deducted.
9
<PAGE>
SECURITY EQUITY FUND-SOCIAL AWARENESS SERIES
MANAGER'S COMMENTARY
NOVEMBER 15, 1997
To Our Shareholders:
The Social Awareness Series is off to a great start. The Series began operations
on November 1, 1996, and has returned 19.93% to its shareholders in this partial
year of operation.(1) Net assets have grown quickly to nearly $10 million.
THE SOCIAL SCREENS USED FOR THE SERIES
Portfolio managers for this type of fund have the responsibility of monitoring
the social records of companies held or considered for inclusion in the funds.
In the Social Awareness Series we seek out companies that substantially support
the communities in which they operate, have sound employee relations policies
and practices, have fair and unbiased employment practices, have strong family
benefits, and have taken positive steps to address environmental challenges.
In addition to these positive screens, we also include a list of six negative
screens. We look for companies that do not engage in the production of nuclear
energy, manufacturing of weapons systems, practices that pollute the
environment, production of alcoholic beverages, manufacturing of tobacco
products, or engage in gaming operations. We will be happy to provide more
details about our screening processes to any requesting shareholder .
STRONG PERFORMERS IN THE PORTFOLIO
Electronics manufacturer, Solectron Corporation, has risen 66% since the
inception of the Social Awareness Series. Five out of the company's eight senior
line executives are Asian American, including one woman. Located in Milpitas,
California, the company's workforce is remarkably diverse. It often publishes
information sheets for employees in six languages. Solectron encourages
self-directed work teams and provides substantial employee training. It was
recently announced that Solectron again won the Malcolm Baldridge National
Quality Award for performance excellence among U.S. companies. It's the first
company in the award's ten-year history to win for a second time.
Oxford Health Plans, Inc., up 60% since the portfolio's inception, provides
managed care health benefit plans in the northeastern United States. Its
SmokEnders subsidiary provides smoking cessation services. In 1996 the company
donated 2.2% of its average earnings for the past three years to charity, and
gave 42 computers to schools and community organizations in its service areas.
Oxford Health Plans believes strongly in incentive compensation and performance
awards for employees at all levels.
Coffee and expresso beverage retailer, Starbucks Corporation, is well known for
its strong social practices. The company is one of few U.S. firms that offers
part-time employees health benefits, stock options, and participation in its
401(k) plan. Even local communities of the countries where the company purchases
its coffee beans receive generous charitable support. Starbucks stock has risen
28% since it was included in the portfolio.
THE FUTURE FOR SOCIAL FUNDS
Demand for investments in the social awareness arena continues to grow. The
Social Investment Forum has just released a study on the growth of the industry
which shows that money invested in social funds has grown from $639 billion in
1995 to nearly $1.2 trillion currently. We are pleased to note that far more
corporations are willing to openly discuss their progress on social issues as
public demand has increased for them to do so. We look forward to combining
strong performance with social consciousness for shareholders in the Social
Awareness Series in the years ahead.
Cindy Shields
Portfolio Manager
(1) Performance figures are based on Class A shares, are not annualized and
do not reflect deduction of the sales charge. The Investment Manager
waived the Fund's management fee for the fiscal year ended September 30,
1997 and in the absence of such waiver the performance quoted would be
reduced.
10
<PAGE>
SECURITY EQUITY SOCIAL AWARENESS SERIES
MANAGER'S COMMENTARY (continued)
NOVEMBER 15, 1997
PERFORMANCE
SECURITY SOCIAL AWARENESS SERIES
VS. S&P 500 AND DOMINI SOCIAL INDEX
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
S&P 500 Domini Social Index Social Awareness Series
12/31/96 .... 10,548.00 10,553.42 9,440.95
3/31/97 ..... 10,824.00 10,912.97 9,007.54
6/30/97 ..... 12,718.00 12,857.55 10,433.42
9/30/97 ..... 13,675.00 13,937.09 11,300.25
This chart assumes a $10,000 investment in Class A shares of Social Awareness
Series on November 1, 1996, and reflects deduction of the 5.75% sales load. On
September 30, 1997, the value of your investment in Class A shares of the Series
(with dividends reinvested) would have grown to $11,300. By comparison, the same
$10,000 investment would have grown to $13,675 based on the S&P 500 Index's
performance and $13,937 based on the Domini Social 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.
TOP 5 HOLDINGS**
% of net assets
---------------
Intel Corporation 3.4%
Microsoft Corporation 2.8%
Coca-Cola Company 2.6%
Merck & Company, Inc. 2.5%
Procter & Gamble, Inc. 2.1%
**At September 30, 1997
AVERAGE ANNUAL RETURNS
As of September 30, 1997
Since Inception
---------------
A Shares 19.93%
A Shares with sales charge 13.00%
B Shares 18.73%
B Shares with CDSC 13.73%
The performance data above represents past performance which is not predictive
of future results. The returns have been calculated from November 1, 1996 (date
of inception) to September 30, 1997 and are not annualized. The investment
return and principal value of an investment in the fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. The figures above do not reflect deduction of the maximum
front-end sales charge of 5.75% for Class A shares or contingent deferred sales
charge of 5% for Class B shares, as applicable, except where noted. In addition,
the investment manager waived the management fee for the Series for the fiscal
year ended September 30, 1997. Performance figures would be lower if the maximum
sales charge and advisory fee were deducted.
11
<PAGE>
SECURITY EQUITY FUND-VALUE SERIES
MANAGER'S COMMENTARY
NOVEMBER 15, 1997
To Our Shareholders:
The Value Series of Security Equity Fund is off to an amazing start. >From its
inception May 1, 1997, through September 30, it returned 29.50%.(1) This
compares most favorably with the 20.39% same-period return of a group of 218
funds with a similar objective.
The portfolio is diversified across a broad variety of industries. The primary
reason for strong performance wasn't the choice of industries, it was instead
stock selection within those industries. The outperforming issues were mostly in
three sectors: health care, energy, and consumer staples.
SOME STOCKS PERFORMED EXCEPTIONALLY WELL
Leading the winning stocks was Tandem Computers, which was bought by Compaq
Computer Corporation in June and subsequently rose 170% in value. Another
outperformer was Mylan Laboratories, Inc., the largest producer of generic drugs
in the U.S. Prior to our purchase of the stock, Mylan's stock had declined in
value because of investors' fears that increasing competition in the generic
pharmaceuticals industry would erode its earnings. We believed that the company
had value greater than the price to which its stock had fallen, and were
rewarded after our purchase with an 80% return.
Canandaigua Brands, Inc., a company which produces and markets wines, beers and
distilled spirits, has generated a 60% return since we purchased it. The stock's
price had been depressed based on fears of higher grape costs. Canandaigua's
earnings results were strong and once these cost pressures subsided, the stock
price recovered. Other companies which have performed favorably in the portfolio
include Louisiana Land and Exploration Company, Forcenergy, Inc., and Corporate
Express, Inc.
It is interesting to note that among the top ten strongest-performing stocks in
the Value Series, only two were large capitalization companies over $5 billion
in size. The average asset size of the companies represented in the portfolio as
of September 30, was about $3.4 billion.
NOT ALL THE HOLDINGS WERE WINNERS
As you would expect, some of the portfolio holdings underperformed industry
averages. A small-cap company called Material Sciences Corporation had the most
significant negative impact on performance, declining 5% over the holding
period. Material Sciences is an industrial company with wide product lines that
capitalizes on its skills in metallurgy and chemistry to provide value-added
features to everyday products. Its second quarter earnings were disappointing
because sales were below expectations and manufacturing efficiencies that the
company had projected developed slower than planned. We still hold the stock
because of its strong propietary market positions in several areas such as the
manufacture of a film used in window glass to block various types of the sun's
rays, and a metal coating on the interior of automobile brakes to make them
quieter.
LOOKING AHEAD TO OUR FIRST FULL FISCAL YEAR
In the Value Series portfolio we look for undervalued individual stocks rather
than betting on the performance of particular industries. We are currently
seeing more attractive ideas in the small capitalization area, along with a few
occasionally in the large-cap arena. With the strong market advances we have
experienced in recent months, it is difficult to find undervalued issues. If we
have difficulty locating enough stocks that look relatively underpriced, we
anticipate that our focus will shift to emphasizing stable low-risk investments.
Jim Schier
Portfolio Manager
(1) Performance figures are based on Class A shares, are not annualized and
do not reflect deduction of the sales charge. The Investment Manager
waived the Fund's management fee for the fiscal year ended September 30,
1997, and in the absence of such waiver the performance quoted would be
reduced.
12
<PAGE>
SECURITY EQUITY FUND-VALUE SERIES
MANAGER'S COMMENTARY (continued)
NOVEMBER 15, 1997
PERFORMANCE
SECURITY VALUE SERIES
VS. S&P 500/BARRA VALUE INDEX
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
Value Series S&P 500/BARRA Value Index
5/31/97 .... 10,084.83 10,593
6/30/97 .... 10,386.43 10,980
7/31/97 .... 11,489.16 11,841
8/31/97 .... 11,555.14 11,282
9/30/97 .... 12,205.47 11,922
This chart assumes a $10,000 investment in Class A shares of Value Series on May
1, 1997, and reflects deduction of the 5.75% sales load. On September 30, 1997,
the value of your investment in Class A shares of the Series (with dividends
reinvested) would have grown to $12,205. By comparison, the same $10,000
investment would have grown to $11,922, based on the S&P 500 Index performance.
Comparison is also made to the S&P 500/BARRA Value Index. The same $10,000
investment in the S&P 500/BARRA Value Index would have grown to $11,922.
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.
TOP 5 HOLDINGS**
% of net assets
---------------
Angelica Corporation 3.8%
Computer Sciences Corporation 3.5%
Mylan Laboratories, Inc. 3.3%
Chiquita Brands International, Inc. 3.1%
Corporate Express, Inc. 3.1%
**At September 30, 1997
AVERAGE ANNUAL RETURNS
As of September 30, 1997
Since Inception
---------------
A Shares 29.50%
(5-1-97)
A Shares with sales charge 22.05%
(5-1-97)
B Shares 29.10%
(5-1-97)
B Shares with CDSC 24.10%
(5-1-97)
The performance data above represents past performance which is not predictive
of future results. The returns have been caluclated from May 1, 1997 (date of
inception) to September 30, 1997, and are not annualized. The investment return
and principal value of an investment in the fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The figures above do not reflect deduction of the maximum front-end sales
charge of 5.75% for Class A shares or contingent deferred sales charge of 5% for
Class B shares, as applicable, except where noted. In addition, the investment
manager waived the management fee for the Series for the fiscal year ended
September 30, 1997. Performance figures would be lower if the maximum sales
charge and advisory fee were deducted.
13
<PAGE>
SECURITY ULTRA FUND
MANAGER'S COMMENTARY
NOVEMBER 15, 1997
To Our Shareholders:
During the first half of the fiscal year, the emphasis on growth stocks held
back performance in the Ultra Fund as value-oriented issues outperformed their
growth counterparts. Our total return of 20.57% for the year ended September 30,
while very attractive, was less than the 26.88% average of our peer group of
funds.(1)
A BETTER SECOND HALF
Performance in the midcap sector improved in the second half of the fiscal year
as expectations for a slowdown in earnings of S&P 500 companies became a
reality. The strong U.S. dollar had a negative impact on larger companies, while
midsized firms with less exposure to foreign earnings, benefited.
The supply and demand ratio became better balanced in the second half, also. The
calendar of initial public offerings diminished while cash flows into mutual
funds remained strong. Passage of a capital gains tax cut gave a psychological
boost to midcap stocks during this period as well. Stocks of midsized companies
generally receive a smaller portion of their total return from dividends, which
are taxed as ordinary income rather than at the more favorable capital gains
levels.
AREAS OF STRONG PERFORMANCE
Stocks representing the financial sector in the Ultra Fund did especially well
in the year just completed. Our investments in this area were tailored primarily
around asset management firms, which gained because of the strong equity
markets. These included Franklin Resources, Inc., up 110% over the year, State
Street Corporation which rose 112%, and Charles Schwab Corporation, gaining 133%
during the period. Our investments in the oil field service company area of the
energy sector outperformed also. The companies advanced in share price as
drilling activity and demand for equipment increased. The capacity in the oil
field service area is less than in the late 1980's as companies have merged or
gone out of business. This enables the remaining firms to raise their prices, a
feat that other industries have found difficult in these price-competitive
times. Two of our stronger performers were ENSCO International, Inc., up 71%,
and Global Marine, Inc., returning 112%.
PLANS FOR THE MONTHS AHEAD
We believe that midcap stocks still have upside price potential, although a
"breather" from the upward market movement would not be surprising. In general,
midcap valuations remain lower than their large-cap counterparts, and growth
prospects for the sector are favorable. When the currency markets are extremely
volatile, those midcap companies with smaller portions of earnings coming from
overseas should stay in favor with investors. Finally, when earnings of the
Standard and Poor's 500 stocks show signs of slowing, the growth component of
the midcap sector should gain as investors seek faster earnings growth.
Cindy Shields
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect
deduction of the sales charge.
14
<PAGE>
SECURITY ULTRA FUND
MANAGER'S COMMENTARY (continued)
NOVEMBER 15, 1997
PERFORMANCE
SECURITY ULTRA FUND
VS. S&P MIDCAP 400
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
S&P Midcap 400 Security Ultra Fund
12/31/87 .... 7,820.77 6,285.32
3/31/88 ..... 8,839.42 7,134.37
6/30/88 ..... 9,325.29 7,794.74
9/30/88 ..... 9,203.14 7,452.76
12/31/88 .... 9,452.84 7,730.71
3/31/89 ..... 10,355.07 8,026.67
6/30/89 ..... 11,391.35 8,358.15
9/30/89 ..... 12,634.49 9,340.77
12/31/89 .... 12,812.45 8,654.28
3/31/90 ..... 12,412.89 8,616.32
6/30/90 ..... 13,149.55 9,590.56
9/30/90 ..... 10,811.73 5,642.99
12/31/90 .... 12,156.85 6,280.08
3/31/91 ..... 14,947.18 8,581.88
6/30/91 ..... 14,837.45 8,169.42
9/30/91 ..... 16,250.45 8,941.13
12/31/91 .... 18,247.00 10,031.64
3/31/92 ..... 18,154.77 10,127.04
6/30/92 ..... 17,589.99 8,709.53
9/30/92 ..... 18,273.82 9,077.55
12/31/92 .... 20,420.52 10,805.04
3/31/93 ..... 21,089.64 10,890.01
6/30/93 ..... 21,581.62 10,847.52
9/30/93 ..... 22,668.00 11,513.09
12/31/93 .... 23,272.13 11,878.08
3/31/94 ..... 22,389.26 11,227.23
6/30/94 ..... 21,573.66 10,218.40
9/30/94 ..... 23,034.67 11,097.06
12/31/94 .... 22,440.35 11,091.44
3/31/95 ..... 24,276.53 11,473.33
6/30/95 ..... 26,394.03 12,237.10
9/30/95 ..... 28,970.11 13,615.23
12/31/95 .... 29,383.93 13,231.44
3/31/96 ..... 31,192.81 14,164.31
6/30/96 ..... 32,091.02 15,325.63
9/30/96 ..... 33,025.30 15,706.39
12/31/96 .... 35,025.97 15,616.47
3/31/97 ..... 34,505.64 14,386.82
6/30/97 ..... 39,577.13 16,415.73
9/30/97 ..... 45,941.47 18,936.50
12/31/97
$10,000 OVER TEN YEARS
This chart assumes a $10,000 investment in Class A shares of Ultra Fund on
September 30, 1987, and reflects deduction of the 5.75% sales load. On September
30, 1997, the value of your investment in Class A shares of the fund (with
dividends reinvested) would have grown to $18,937. In comparison, the same
$10,000 investment would have grown to $45,941 based on the S&P Midcap's
performance.
The performance illustrated above is based on the performance of Class A shares.
The performance of Class B shares, which were first offered on October 19, 1993,
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.
TOP 5 HOLDINGS**
% of net assets
---------------
Franklin Resources, Inc. 2.9%
Coca-Cola Enterprises, Inc. 2.6%
State Street Corporation 2.4%
Charles Schwab Corporation 2.3%
SunAmerica, Inc. 2.1%
**At September 30, 1997
AVERAGE ANNUAL RETURNS
As of September 30, 1997
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
A Shares 20.57% 14.96% 6.90%
A Shares with sales charge 13.68% 13.59% 6.27%
B Shares 19.58% 11.91% N/A
(10-19-93)
(since inception)
B Shares with CDSC 14.58% 11.36% N/A
(10-19-93)
(since inception)
ONE YEAR RETURN INCREASES 5.21%
A Shares: 9/30/97 20.57%
9/30/96 15.36%
The performance data above represents past performance which is not predictive
of future results. The investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The figures above do not reflect
deduction of the maximum front-end sales charge of 5.75% for Class A shares or
contingent deferred sales charge of 5% for Class B shares, as applicable, except
where noted. Such figures would be lower if the maximum sales charge were
deducted.
15
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY GROWTH AND INCOME FUND
PRINCIPAL
AMOUNT OR
NUMBER MARKET
PREFERRED STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
BANKING AND CREDIT - 1.0%
California Federal Bank ...................... 8,250 $ 941,015
COMMUNICATION - 0.2%
Cablevision Systems Corporation .............. 2,193 240,172
ENTERTAINMENT - 0.4%
Time Warner, Inc. ............................ 322 367,526
PUBLISHING & PRINTING - 0.3%
K-III Communications Corporation ............. 3,000 319,500
----------
Total preferred stocks - 1.9% ............... 1,868,213
TRUST PREFERRED SECURITIES(1)
FINANCE - 0.3%
S I Financing, Inc., 9.50% - 2026 ............ 10,000 268,125
CORPORATE BONDS
AEROSPACE & DEFENSE - 0.2%
Burke Industries, Inc.,
10.00% - 2007 ............................... $ 200,000 204,500
BANKING & CREDIT - 0.4%
BF Saul REIT, 11.625% - 2002 ................. $ 250,000 269,062
Bay View Capital Corporation,
9.125% - 2007 ............................... $ 100,000 103,250
----------
372,312
OFFICE EQUIPMENT & SUPPLIES - 0.1%
Knoll, Inc., 10.875% - 2006 .................. $ 63,000 70,245
CHEMICALS - 0.3%
Envirodyne Industries, Inc.,
12.00% - 2000 ............................... $ 250,000 274,687
COMMUNICATIONS - 1.6%
Albritton Communications Company,
9.75% - 2007 ................................ $ 125,000 124,375
Century Communications Corporation,
9.50% - 2005 ................................ $ 250,000 261,250
CF Cable TV, Inc., 11.625% - 2005 ............ $ 200,000 230,500
Comcast Corporation, 9.125% - 2006 ........... $ 385,000 413,394
Heritage Media Corporation,
8.75% - 2006 ................................ $ 100,000 107,625
Rogers Cablesystems Ltd.,
9.625% - 2002 ............................... $ 250,000 265,000
Rogers Communications, Inc.,
9.125% - 2006 ............................... $ 200,000 205,000
----------
1,607,144
DIVERSIFIED - 0.3%
Sequa Corporation, 9.375% - 2003 ............. $ 250,000 $ 261,875
ELECTRIC & GAS COMPANIES - 0.5%
AES Corporation, 10.25% - 2006 ............... 250,000 274,375
Cal Energy Company, Inc.,
9.50% - 2006 ................................ 200,000 215,500
----------
489,875
ENTERTAINMENT - 0.4%
Harrah's Operating, Inc.,
8.75% - 2000 ................................ 400,000 411,500
FINANCE - 0.5%
Dollar Financial Group, Inc.,
10.875% - 2006 .............................. 300,000 323,250
Homeside, Inc., 11.25% - 2003 ................ 121,000 142,629
----------
465,879
FOOD & BEVERAGE TRADE - 0.5%
Cott Corporation, 9.375% - 2005 .............. 250,000 261,875
Delta Beverage Group,
9.75% - 2003 ................................ 250,000 262,813
----------
524,688
HOSPITAL MANAGEMENT - 0.8%
Regency Health Services, Inc.,
9.875% - 2002 ............................... 475,000 526,062
Tenet Healthcare Corporation,
10.125% - 2005 .............................. 250,000 273,437
----------
799,499
INDUSTRIAL PRODUCT - 0.3%
Shop Vac Corporation,
10.625% - 2003 .............................. 250,000 269,688
MANUFACTURING - 0.3%
AGCO Corporation, 8.50% - 2006 ............... 250,000 259,375
OIL & GAS COMPANIES - 0.3%
Seagull Energy Corporation,
8.625% - 2005 ............................... 250,000 261,875
PUBLISHING & PRINTING - 0.2%
Golden Books Publishing, Inc.,
7.65% - 2002 ................................ 250,000 237,500
REFINERY - 0.3%
Crown Central Petroleum Corporation,
10.875% - 2005 .............................. 250,000 262,812
RESTAURANTS - 0.5%
Carrols Corporation, 11.50% - 2003 ........... 475,000 507,063
See accompanying notes
16
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY GROWTH AND INCOME FUND (continued)
PRINCIPAL
AMOUNT OR
NUMBER MARKET
CORPORATE BONDS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
RETAIL - SPECIALTY - 0.1%
Zale's Corporation, 8.50% - 2007 ............. $ 100,000 $ 100,125
STEEL & METAL PRODUCTS - 0.1%
AK Steel Corporation,
9.125% - 2006 .............................. $ 125,000 132,500
TEXTILES - 0.5%
Delta Mills, Inc., 9.625% - 2007 ............. $ 100,000 100,375
Pillowtex Corporation, 10.00% - 2006 ......... $ 125,000 131,875
Westpoint Stevens, Inc.,
9.375% - 2005 ............................... $ 250,000 263,125
----------
495,375
----------
Total corporate bonds - 8.2% ................ 8,008,517
COMMON STOCKS
BANKS - MAJOR REGIONAL - 3.8%
Bank Of New York Company, Inc. ............... 20,000 960,000
Northern Trust Corporation ................... 20,000 1,182,500
Wells Fargo & Company ........................ 5,800 1,595,000
----------
3,737,500
CHEMICALS - BASIC - 1.3%
Praxair, Inc. ................................ 25,000 1,279,687
CHEMICALS - SPECIALTY - 3.4%
Dexter Corporation ........................... 40,000 1,602,500
Materials Sciences Corporation* .............. 28,000 399,000
Minerals Technologies, Inc. .................. 30,000 1,336,875
----------
3,338,375
COMMUNICATION EQUIPMENT - 4.6%
ANTEC Corporation* ........................... 100,000 1,175,000
Harris Corporation ........................... 72,000 3,294,000
----------
4,469,000
COMPUTER HARDWARE - 0.6%
Compaq Computer Corporation* ................. 8,000 598,000
COMPUTER PERIPHERALS - 0.5%
Seagate Technology, Inc.* .................... 13,200 476,850
COMPUTER SOFTWARE/SERVICES - 5.6%
Computer Sciences Corporation* ............... 46,000 3,254,500
DST Systems, Inc.* ........................... 60,000 2,220,000
----------
5,474,500
ELECTRIC COMPANIES - 2.0%
Scana Corporation ............................ 40,000 1,002,500
Wisconsin Energy Corporation ................. 36,000 936,000
----------
1,938,500
ELECTRONICS - SEMICONDUCTORS - 1.1%
Atmel Corporation* ........................... 30,000 $1,093,125
ELECTRONICS - INSTRUMENTATION - 1.6%
E G & G, Inc. ................................ 22,000 455,125
Perkin-Elmer Corporation ..................... 15,000 1,095,938
----------
1,551,063
FINANCIAL - DIVERSE - 1.6%
Capital One Financial Corporation ............ 34,000
1,555,500
FOODS - 1.7%
Chiquita Brands International, Inc. .......... 105,000
1,693,125
HEALTH CARE - SPECIALIZED SERVICES - 1.0%
Allegiance Corporation ....................... 30,000 930,000
HOUSEHOLD FURNISHINGS & APPLIANCES - 1.8%
Leggett & Platt, Inc. ........................ 40,000 1,782,500
INSURANCE - LIFE/HEALTH - 1.0%
AFLAC, Inc. .................................. 18,000 976,500
INSURANCE - PROPERTY - 2.9%
Allstate Corporation ......................... 15,000 1,205,625
Leucadia National Corporation ................ 30,000 1,031,250
W.R. Berkley Corporation ..................... 15,000 645,938
----------
2,882,813 IRON & STEEL - 0.7%
Cleveland-Cliffs, Inc. ....................... 15,000 654,375
LEISURE TIME PRODUCTS - 2.6%
Hasbro, Inc. ................................. 50,000 1,406,250
Mattel, Inc. ................................. 35,000 1,159,375
----------
2,565,625
LODGING - HOTELS - 1.4%
Carnival Corporation (Cl. A) ................. 30,000 1,387,500
MANUFACTURING - DIVERSIFIED - 1.8%
U.S. Industries, Inc. ........................ 60,000 1,740,000
MEDICAL PRODUCTS & SUPPLIES - 1.9%
ATLUltrasound, Inc.* ......................... 20,000 935,000
Sunrise Medical, Inc.* ....................... 60,000 937,500
----------
1,872,500
METALS & MINING - 1.0%
Cyprus Amax Minerals Company ................. 40,000 960,000
NATURAL GAS - 7.3%
Coastal Corporation .......................... 25,000 1,531,250
Eastern Enterprises .......................... 48,000 1,791,000
Equitable Resources, Inc. .................... 85,200 2,683,800
People's Energy Corporation .................. 30,000 1,130,625
----------
7,136,675
See accompanying notes
17
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY GROWTH AND INCOME FUND (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 1.8%
Corporate Express, Inc.* ..................... 82,000 $1,732,250
OIL & GAS - EXPLORATION & PRODUCTION - 7.7%
Forcenergy, Inc.* ............................ 60,000 2,328,750
Louisiana Land & Exploration
Company ..................................... 20,000 1,566,250
Noble Affiliates, Inc. ....................... 24,000 1,074,000
YPF Sociedad Anomima ADR ..................... 70,000 2,581,250
----------
7,550,250
PHARMACEUTICALS - 8.2%
Mylan Laboratories, Inc. ..................... 220,000 4,936,250
SmithKline Beecham PLC ADR ................... 30,000 1,466,250
Teva Pharmaceutical Industries,
Ltd., ADR ................................... 30,000 1,672,500
----------
8,075,000
PUBLISHING - 0.7%
McGraw-Hill Companies, Inc. .................. 10,000 676,875
PUBLISHING - NEWSPAPER - 4.1%
E.W. Scripps Company ......................... 60,000 2,636,250
Tribune Company .............................. 25,000 1,332,812
----------
3,969,062
RAILROADS - 1.2%
Canadian Pacific, Ltd. ....................... 40,000 1,182,500
RESTAURANTS - 3.1%
The Cheesecake Factory* ...................... 111,500 3,073,219
RETAIL - SPECIALTY - 4.1%
AutoZone, Inc.* .............................. 75,000 2,250,000
Toys "R" Us, Inc.* ........................... 50,000 1,775,000
----------
4,025,000
SERVICES - ADVERTISING / MARKETING - 2.6%
Acxiom Corporation* .......................... 60,000 1,046,250
Omnicom Group, Inc. .......................... 20,000 1,455,000
----------
2,501,250
SERVICES - COMMERCIAL & CONSUMER - 2.6%
Angelica Corporation ......................... 130,000 2,583,750
SERVICES - DATA PROCESSING - 1.4%
First Data Corporation ....................... 38,000 1,427,375
TRUCKS & PARTS - 0.8%
Titan International, Inc. .................... 40,800 816,000
----------
Total common stocks - 89.5% ................. 87,706,244
----------
Total investments - 99.9% ................... $97,851,099
Other assets, less liabilities - 0.1% ....... 137,329
----------
Total net assets - 100.0% ................... $97,988,428
==========
SECURITY EQUITY FUND - EQUITY SERIES
COMMON STOCKS
AEROSPACE / DEFENSE - 0.9%
Boeing Company ............................... 50,000 $2,721,875
Lockheed Martin Corporation .................. 50,000 5,331,250
----------
8,053,125
AGRICULTURAL PRODUCTS - 0.9%
Archer-Daniels-Midland Company ............... 315,000 7,540,313
ALUMINUM - 1.0%
Aluminum Company of America .................. 100,000 8,200,000
BANKS - MAJOR REGIONAL - 4.1%
Bank of New York Company, Inc. ............... 200,000 9,600,000
Northern Trust Corporation ................... 200,000 11,825,000
Norwest Corporation .......................... 120,000 7,350,000
Wells Fargo & Company ........................ 20,000 5,500,000
----------
34,275,000
BANKS - MONEY CENTER - 1.5%
Chase Manhattan Corporation .................. 110,000 12,980,000
BEVERAGES - SOFT DRINK - 1.2%
PepsiCo, Inc. ................................ 260,000 10,546,250
CHEMICALS - BASIC - 1.2%
Praxair, Inc. ................................ 200,000 10,237,500
CHEMICALS - DIVERSIFIED - 1.4%
BF Goodrich Company .......................... 100,000 4,525,000
Monsanto Company ............................. 200,000 7,800,000
----------
12,325,000
CHEMICALS - SPECIALTY - 0.5%
Nalco Chemical Company ....................... 95,000 3,805,938
COMPUTER HARDWARE - 3.0%
Compaq Computer Corporation* ................. 200,000 14,950,000
International Business Machines
Corporation ................................. 100,000 10,593,750
----------
25,543,750
See accompanying notes
18
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY EQUITY FUND-EQUITY SERIES (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
COMPUTERS - NETWORKING - 1.2%
3Com Corporation* ............................ 60,000 $3,075,000
Cisco Systems, Inc.* ......................... 100,000 7,306,250
Wang Laboratories, Inc. Warrants ............. 2,369 15,398
----------
10,396,648
COMPUTER SOFTWARE/SERVICES - 3.4%
BMC Software, Inc.* .......................... 135,000 8,741,250
Computer Sciences Corporation* ............... 100,000 7,075,000
Microsoft Corporation* ....................... 100,000 13,231,250
----------
29,047,500
ELECTRICAL EQUIPMENT - 2.3%
Emerson Electric Company ..................... 100,000 5,762,500
General Electric Company ..................... 200,000 13,612,500
----------
19,375,000
ELECTRONICS - SEMICONDUCTORS - 2.0%
Intel Corporation ............................ 90,000 8,308,125
Linear Technology Corporation ................ 70,000 4,812,500
Xilinx, Inc.* ................................ 70,000 3,543,750
----------
16,664,375
ELECTRONICS - INSTRUMENTATION - 1.0%
Perkin-Elmer Corporation ..................... 120,000 8,767,500
FINANCIAL - DIVERSE - 2.4%
Federal National Mortgage
Association ................................. 230,000 10,810,000
Federal Home Loan Mortgage
Corporation ................................. 270,000 9,517,500
----------
20,327,500
FOODS - 2.6%
Conagra, Inc. ................................ 160,000 10,560,000
CPC International, Inc. ...................... 120,000 11,115,000
----------
21,675,000
HEALTH CARE - DIVERSE - 3.1%
American Home Products Corporation ........... 150,000 10,950,000
Bristol-Myers Squibb Company ................. 180,000 14,895,000
----------
25,845,000
HOUSEHOLD PRODUCTS - 3.5%
Colgate-Palmolive Company .................... 150,000 10,453,125
Fort James Corporation ....................... 200,000 9,162,500
Procter & Gamble Company ..................... 150,000 10,359,375
----------
29,975,000
INSURANCE - LIFE/HEALTH - 0.5%
Equitable Companies, Inc. .................... 108,500 4,455,281
INSURANCE - MULTI-LINE - 2.5%
American International Group, Inc. ........... 120,000 $12,382,500
Hartford Financial Services Group,
Inc ......................................... 100,000 8,606,250
----------
20,988,750
INSURANCE - PROPERTY - 4.5%
Allstate Corporation ......................... 175,000 14,065,625
Chubb Corporation ............................ 160,000 11,370,000
St. Paul Companies, Inc. ..................... 150,000 12,234,375
----------
37,670,000
LODGING - HOTELS - 1.3%
Carnival Corporation (Cl. A) ................. 240,000 11,100,000
MANUFACTURING - DIVERSIFIED - 7.8%
AlliedSignal, Inc. ........................... 320,000 13,600,000
Crane Company ................................ 200,000 8,225,000
Textron, Inc. ................................ 60,000 3,900,000
Tyco International, Ltd. ..................... 192,532 15,799,657
U.S. Industries, Inc. ........................ 510,000 14,790,000
United Technologies Corporation .............. 115,000 9,315,000
----------
65,629,657
MEDICAL PRODUCTS & SUPPLIES - 4.5%
Baxter International, Inc. ................... 200,000 10,450,000
Becton, Dickinson & Company .................. 200,000 9,575,000
Boston Scientific Corporation* ............... 120,000 6,622,500
Medtronic, Inc. .............................. 240,000 11,280,000
----------
37,927,500
NATURAL GAS - 1.2%
Coastal Corporation .......................... 170,000 10,412,500
OIL - INTERNATIONAL - 5.0%
Amoco Corporation ............................ 100,000 9,637,500
Mobil Corporation ............................ 140,000 10,360,000
Royal Dutch Petroleum Company
NY Shares ................................... 200,000 11,100,000
Texaco, Inc. ................................. 180,000 11,058,750
----------
42,156,250
OIL & GAS - DRILLING & EQUIPMENT - 2.1%
Halliburton Company .......................... 170,000 8,840,000
Schlumberger, Ltd. ........................... 110,000 9,260,625
----------
18,100,625
OIL & GAS - EXPLORATION & PRODUCTION - 1.4%
Louisiana Land & Exploration Company ......... 150,000 11,746,875
See accompanying notes
19
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY EQUITY FUND-EQUITY SERIES (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
PERSONAL CARE - 1.0%
Gillette Company ............................. 100,000 $8,631,250
PHARMACEUTICALS - 3.6%
Merck & Company, Inc. ........................ 90,000 8,994,375
Schering-Plough Corporation .................. 220,000 11,330,000
SmithKline Beecham PLC ADR ................... 200,000 9,775,000
----------
30,099,375
PHOTOGRAPHY / IMAGING - 1.2%
Xerox Corporation ............................ 120,000 10,102,500
PUBLISHING - 1.2%
McGraw-Hill Companies, Inc. .................. 145,000 9,814,687
PUBLISHING - NEWSPAPER - 2.4%
Gannett Company, Inc. ........................ 90,000 9,714,375
Tribune Company .............................. 200,000 10,662,500
----------
20,376,875
RAILROADS - 1.4%
Canadian Pacific, Ltd. ....................... 400,000 11,825,000
RETAIL - APPAREL - 0.9%
TJXCompanies, Inc. ........................... 260,000 7,946,250
RETAIL - BUILDING SUPPLIES - 1.2%
Sherwin-Williams Company ..................... 350,000 10,303,125
RETAIL - DEPARTMENT STORES - 1.2%
Federated Department Stores, Inc.* ........... 235,000
10,134,375
RETAIL - DRUG STORES - 2.3%
Rite Aid Corporation ......................... 170,000 9,424,375
Walgreen Company ............................. 400,000 10,250,000
----------
19,674,375
RETAIL - FOOD CHAINS - 1.1%
Safeway, Inc.* ............................... 170,000 9,243,750
RETAIL - GENERAL MERCHANDISE - 0.9%
Dayton Hudson Corporation .................... 125,000 7,492,188
RETAIL - SPECIALTY - 3.9%
Payless ShoeSource, Inc.* .................... 225,000 13,429,687
Toys "R"Us, Inc.* ............................ 300,000 10,650,000
Woolworth Corporation* ....................... 400,000 8,850,000
----------
32,929,687
SERVICES - ADVERTISING / MARKETING - 1.7%
Omnicom Group, Inc. .......................... 200,000 14,550,000
SERVICES - COMMERCIAL & CONSUMER - 0.9%
Viad Corporation ............................. 400,000 7,625,000
WASTE MANAGEMENT - 0.9%
Waste Management, Inc. ....................... 220,000 $7,686,250
----------
Total common stocks - 93.8% ................. 794,202,524
Cash and other assets,
less liabilities - 6.2% ................... 52,653,715
----------
Total net assets - 100.0% ................... $846,856,239
==========
SECURITY EQUITY FUND - GLOBAL SERIES
PREFERRED STOCKS
GERMANY - 0.8%
Sto AG ....................................... 758 $ 309,005
COMMON STOCKS
AUSTRALIA - 3.4%
Foster's Brewing Group, Ltd. ................. 400,000 842,892
QBE Insurance Group, Ltd.* ................... 66,425 418,042
----------
1,260,934
AUSTRIA - 4.3%
Bohler-Uddeholm AG ........................... 11,400 958,432
Wienerberger Bastoffindustrie AG ............. 3,100 646,702
----------
1,605,134
BRAZIL - 1.3%
Aracruz Cellulose S.A. ADR ................... 23,350 480,134
CANADA - 7.0%
Bombardier, Inc. `B' ......................... 26,800 542,686
Hudson's Bay Company ......................... 13,200 351,777
Imax Corporation* ............................ 28,800 748,800
Noranda Forest, Inc. ......................... 36,400 247,448
Tarragon Oil & Gas, Ltd.* .................... 24,600 277,533
Yogen Fruz World-Wide, Inc.* ................. 72,600 430,533
----------
2,598,777
CHILE - 0.8%
Banco Santander ADR .......................... 11,100 163,725
Maderas y Sinteticos Sociedad
Anonima S.A. ADR ............................ 10,500 147,000
----------
310,725
See accompanying notes
20
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY EQUITY FUND-GLOBAL SERIES (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
FRANCE - 5.9%
Alcatel Alsthom .............................. 2,570 $ 341,817
Elf Aquitaine S.A. ADR ....................... 8,500 566,844
Lafarge ...................................... 6,600 483,745
Sidel S.A .................................... 2,520 165,247
Usinor Sacilor* .............................. 32,600 658,900
----------
2,216,553
GERMANY - 4.1%
Continental AG ............................... 12,300 316,660
Deutsche Bank AG ............................. 9,800 690,255
Hoechst AG ................................... 2,500 110,974
Volkswagon AG* ............................... 590 409,883
----------
1,527,772
GREECE - 1.2%
Hellenic Tellecom ............................ 11,900 298,204
Michaniki S.A ................................ 19,080 155,272
----------
453,476
HONG KONG - 1.4%
JCG Holdings, Ltd. ........................... 320,000 252,245
National Mutual Asia, Ltd. ................... 272,000 291,736
----------
543,981
INDONESIA - 1.4%
HM Sampoerna* ................................ 84,000 173,394
PT Tambang Timah ............................. 250,500 369,621
----------
543,015
IRELAND - 4.0%
Allied Irish Banks Plc ....................... 38,900 343,664
Elan Corporation Plc ADR* .................... 3,700 185,231
Jefferson Smurfit ............................ 212,900 712,688
Ryanair Holdings PLC* ........................ 41,900 240,884
----------
1,482,467
ITALY - 1.6%
Industrie Natuzzi S.p.a. ADR ................. 11,300 267,669
Telecom Italia ............................... 47,100 314,782
----------
582,451
JAPAN - 6.6%
Acom Company, Ltd. ........................... 4,700 244,869
Amway Japan, Ltd. ............................ 7,300 209,211
Douter Coffee Company, Ltd.* ................. 4,500 129,338
Maruco Company, Ltd. ......................... 2,200 10,751
Matsushita Electric Industrial
Company, Ltd. ............................... 12,000 216,682
Mitsubishi Estate Company,Ltd ................ 20,000 291,560
Nippon Steel Corporation ..................... 84,000 185,074
JAPAN (CONTINUED)
Omron Corporation ............................ 7,000 $ 146,691
Sony Corporation ............................. 3,400 321,047
Sumitomo Electric Industries ................. 9,000 128,965
Tiemco, Ltd.* ................................ 3,300 55,214
Tokyo Electron, Ltd. ......................... 6,000 366,272
Yamato Kogyo Company, Ltd. ................... 16,000 141,804
----------
2,447,478
MALAYSIA - 1.1%
Austral Enterprises* ......................... 33,000 51,411
Kuala Lumpur Kepong* ......................... 73,000 180,161
Tanjong PLC .................................. 81,000 173,667
----------
405,239
MEXICO - 2.3%
Cemex S.A. de C.V. "B"* ...................... 48,400 289,758
Grupo Financiero Banamex "B"* ................ 107,000 337,147
Grupo Financiero Bancomer
S.A. de C.V.* ............................... 355,000 241,977
----------
868,882
NETHERLANDS - 1.0%
Ahrend NV* ................................... 1,600 55,092
Philips Electronics N.V ...................... 3,950 334,360
----------
389,452
NEW ZEALAND - 2.5%
Brierley Investments, Ltd. ................... 361,100 312,010
Carter Holt Harvey, Ltd. ..................... 110,600 239,973
Fletcher Challenge Building, Ltd. ............ 113,000 368,856
----------
920,839
NORWAY - 1.6%
Saga Petroleum AS ............................ 27,800 588,069
PHILIPPINES - 0.8%
C & P Homes, Inc. ............................ 1,397,450 134,253
Ionics Circuit* .............................. 34,200 155,274
----------
289,527
POLAND - 1.2%
Elektrim S.A ................................. 18,000 201,636
Wedel S.A .................................... 4,239 247,965
----------
449,601
SPAIN - 1.8%
Adolfo Dominguez S.A.* ....................... 6,900 241,918
Banco Popular Espanol S.A .................... 3,600 231,681
Tele Pizza S.A.* ............................. 2,700 188,241
----------
661,840
See accompanying notes
21
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY EQUITY FUND-GLOBAL SERIES (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
SWEDEN - 3.4%
Castellum AB* ................................ 33,000 $ 317,707
Hufvudstaden* ................................ 19,200 96,475
Industrial & Financial Systems,
IFS AB* ..................................... 55,300 306,312
S,K.F. AB "B"* ............................... 10,800 314,779
Skandianviska Enskiilda Banken ............... 18,900 229,318
----------
1,264,591
SWITZERLAND - 2.6%
Nestle S.A ................................... 226 315,282
Novartis AG .................................. 190 291,749
Saurer AG* ................................... 440 349,328
----------
956,359
UNITED KINGDOM - 11.5%
Aegis Group PLC .............................. 222,500 234,525
D.F.S. Furniture Company PLC ................. 29,600 291,677
George Wimpey PLC ............................ 212,000 417,807
Grand Metropolitan PLC ....................... 28,800 275,419
Harvey Nichols PLC ........................... 22,800 105,705
Inchcape PLC ................................. 82,100 381,295
Oriflame International S.A ................... 12,000 93,048
PizzaExpress PLC ............................. 25,400 329,275
Polypipe PLC ................................. 74,300 259,252
Provident Financial PLC ...................... 27,300 298,118
Regent Inns PLC* ............................. 22,200 106,152
Rio Tinto PLC ................................ 13,800 220,807
Royal Bank of Scotland* ...................... 25,900 288,897
Tomkins PLC .................................. 69,000 389,562
Vodafone Group PLC ........................... 53,400 286,823
Whitbread PLC* ............................... 23,000 298,720
----------
4,277,082
UNITED STATES - 21.4%
Ace, Ltd. .................................... 2,000 188,000
Adaptec, Inc.* ............................... 4,700 219,431
AlliedSignal, Inc. ........................... 3,200 136,000
Allstate Corporation ......................... 1,400 112,525
BJ Services Company* ......................... 1,900 141,075
Boeing Company ............................... 2,400 130,650
Borders Group, Inc.* ......................... 6,000 165,000
Bristol-Myers Squibb Company ................. 2,000 165,500
CVS Corporation .............................. 2,800 159,250
Cardinal Health, Inc. ........................ 2,000 142,000
Case Corporation ............................. 2,400 159,900
Chase Manhattan Corporation .................. 1,400 165,200
Citicorp ..................................... 1,200 160,725
Conseco, Inc. ................................ 3,200 156,200
Costco Companies, Inc.* ...................... 4,200 157,894
UNITED STATES (CONTINUED)
Cymer, Inc.* ................................. 4,500 $ 123,047
Dana Corporation ............................. 3,300 162,938
Data General Corporation* .................... 5,300 141,113
Diamond Offshore Drilling, Inc. .............. 2,400 132,450
Disney (Walt) Productions .................... 1,800 145,125
Dover Corporation ............................ 2,700 183,263
EMC Corporation* ............................. 3,100 180,963
Equity Residential Properties Trust .......... 2,600 141,863
Federal National Mortgage
Association ................................. 3,500 164,500
Fort James Corporation ....................... 4,300 196,994
Gap, Inc. .................................... 3,300 165,206
General Electric Company ..................... 2,300 156,544
Georgia Pacific Corporation .................. 1,700 177,438
Global Industries, Ltd.* ..................... 3,600 143,775
Ingersoll-Rand Company ....................... 3,150 135,647
LSI Logic Corporation ........................ 3,100 99,588
Lilly, (Eli) and Company ..................... 1,300 156,894
Mobil Corporation ............................ 1,800 133,200
NAC Re Corporation ........................... 3,000 154,125
NationsBank Corporation ...................... 1,900 117,563
Nu Skin Asia, Inc.* .......................... 6,300 121,669
PepsiCo, Inc. (New) .......................... 3,900 146,250
Perkin Elmer Corporation ..................... 1,500 109,594
Pfizer, Inc. ................................. 2,100 126,131
Procter & Gamble Company ..................... 2,000 138,125
Reynolds Metals Company ...................... 2,200 155,788
Rite Aid Corporation ......................... 3,400 188,488
Rofin-Sinar Technologies, Inc.* .............. 11,300 187,863
Safeway, Inc.* ............................... 2,400 130,500
Structural Dynamics
Research Corporation* ....................... 6,000 154,125
Texaco, Inc. ................................. 2,800 172,025
Tyco International, Ltd. ..................... 2,100 172,331
UNUM Corporation ............................. 3,600 164,250
Union Planters Corporation ................... 2,600 145,275
United Healthcare Corporation ................ 3,000 150,000
Valero Energy Corporation .................... 4,900 160,781
Warner-Lambert Company ....................... 3,000 161,925
----------
7,956,706
----------
Total common stocks - 94.2% .................. 35,081,084
----------
Total investments - 95.0% .................... 35,390,089
Cash and other assets,
less liabilities - 5.0% .................... 1,864,410
----------
Total net assets - 100.0% .................... $37,254,499
==========
See accompanying notes
22
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY EQUITY FUND-GLOBAL SERIES (continued)
INVESTMENT CONCENTRATION
At September 30, 1997, Global Series' investment concentration,
by industry, was as follows:
Banking ......................................................... 8.0%
Capital Equipment ............................................... 10.2%
Construction and Housing ........................................ 1.9%
Consumer Durables ............................................... 5.7%
Consumer Nondurables ............................................ 9.5%
Electrical and Electronics ...................................... 3.7%
Energy Sources .................................................. 5.8%
Financial Services .............................................. 7.8%
Healthcare ...................................................... 4.3%
Materials ....................................................... 17.8%
Merchandising ................................................... 6.6%
Multi-Industry .................................................. 3.4%
Real Estate ..................................................... 2.3%
Services ........................................................ 3.3%
Telecommunications .............................................. 2.4%
Trade ........................................................... 1.6%
Transportation .................................................. 0.7%
Cash and other assets, less liabilities ......................... 5.0%
----------
100.0%
==========
SECURITY EQUITY FUND-ASSET ALLOCATION SERIES
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS
BROKERAGE - 0.7%
Merrill Lynch & Company, Inc.,
8.00% - 2007 ................................ $ 50,000 $ 54,375
FINANCIAL SERVICES - 0.3%
MCN Investment Corporation,
6.32% - 2003 ................................ 25,000 24,781
INDUSTRIAL SERVICES - 9.7%
Rite Aid Corporation, 6.70% - 2001 ........... 125,000 125,938
Sun Company, 7.125% - 2004 ................... 300,000 306,375
Xerox Corporation, 8.125% - 2002 ............. 300,000 320,250
----------
752,563
INSURANCE - 2.0%
Hartford Life, Inc., 7.10% - 2007 ............ 150,000 153,375
RENTAL AUTO/EQUIPMENT - 2.0%
Hertz Corporation, 7.00% - 2004 .............. 150,000 152,250
----------
Total corporate bonds - 14.7% ............... 1,137,344
NUMBER MARKET
COMMON STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
AMERICAN GOLD - 9.9%
Barrick Gold Corporation ..................... 6,000 $ 148,500
Battle Mountain Gold Company ................. 14,000 100,625
Echo Bay Mines, Ltd. ......................... 16,000 91,000
Hecla Mining Company* ........................ 4,000 24,250
Homestake Mining Company ..................... 6,000 91,875
Newmont Mining Corporation ................... 3,000 134,813
Placer Dome, Inc. ............................ 8,000 153,000
Stillwater Mining Company* ................... 1,000 21,312
----------
765,375
BROADCAST MEDIA - 1.4%
A.H. Belo Corporation ........................ 300 14,550
TCI Satellite Entertainment, Inc.* ........... 240 1,815
Tele-Communications, Inc.* ................... 2,400 49,200
U.S. West Media Group* ....................... 2,000 44,625
----------
110,190
ENTERTAINMENT - 1.6%
King World Productions, Inc. ................. 600 25,950
Time Warner, Inc. ............................ 1,000 54,187
Viacom, Inc.* ................................ 600 18,863
The Walt Disney Company ...................... 300 24,188
----------
123,188
GAMING & LOTTERY - 2.4%
Circus Circus Enterprises, Inc.* ............. 1,400 35,262
Harrah's Entertainment, Inc.* ................ 2,100 47,119
International Game Technology, Inc. .......... 2,300 52,325
Mirage Resorts, Inc.* ........................ 1,750 52,719
----------
187,425
LEISURE TIME PRODUCTS - 0.9%
Brunswick Corporation ........................ 1,200 42,300
Callaway Golf Company ........................ 700 24,413
----------
66,713
LONG TERM CARE - 2.1%
Beverly Enterprises* ......................... 1,100 19,113
Genesis Health Ventures, Inc.* ............... 1,000 38,937
Healthsouth Corporation* ..................... 750 20,016
Health Care and Retirements
Corporation* ................................ 500 18,594
Horizon/CMS Healthcare
Corporation* ................................ 950 21,256
Integrated Health Services, Inc. ............. 700 23,406
Mariner Health Group, Inc.* .................. 1,450 22,837
----------
164,159
See accompanying notes
23
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY EQUITY FUND-ASSET ALLOCATION SERIES (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
MANAGED CARE - 1.6%
Express Scripts, Inc.* ....................... 500 $ 26,938
Healthcare Compare Corporation* .............. 500 31,938
Oxford Health Plans* ......................... 350 26,206
Pacificare Health Systems, Inc.* ............. 250 17,031
United Healthcare Corporation ................ 400 20,000
----------
122,113
NETWORKING - 2.5%
Bay Networks, Inc.* .......................... 1,500 57,938
Cabletron Systems, Inc.* ..................... 1,500 48,000
Cisco Systems, Inc.* ......................... 500 36,531
3Com Corporation* ............................ 1,000 51,250
----------
193,719
PERIPHERALS - 2.2%
EMC Corporation* ............................. 500 29,188
Iomega Corporation* .......................... 1,000 26,125
Lexmark International Group, Inc.* ........... 800 26,400
Quantum Corporation* ......................... 800 30,650
Read-Rite Corporation* ....................... 700 17,150
Seagate Technology, Inc.* .................... 400 14,450
Storage Technology Corporation* .............. 600 28,687
----------
172,650
RESTAURANTS - 2.6%
Applebees International, Inc. ................ 600 15,000
Brinker International, Inc.* ................. 1,700 30,281
CKE Restaurants, Inc. ........................ 1,500 63,000
Cracker Barrel Old Country Store, Inc. ....... 700 22,663
McDonalds Corporation ........................ 400 19,050
Outback Steakhouse, Inc.* .................... 1,100 30,387
Wendy's International, Inc. .................. 1,000 21,250
----------
201,631
STEEL - 1.8%
Allegheny Teledyne, Inc. ..................... 500 14,312
Carpenter Technology Corporation ............. 400 19,800
Cleveland-Cliffs, Inc. ....................... 1,300 56,713
Quanex Corporation ........................... 1,000 35,063
Steel Technologies, Inc. ..................... 1,000 12,437
----------
138,325
TELECOMMUNICATIONS - 2.3%
Ameritech Corporation ........................ 600 $ 39,900
Bell Atlantic Corporation .................... 807 64,913
Bellsouth Corporation ........................ 500 23,125
GTE Corporation .............................. 500 22,688
SBC Communication, Inc. ...................... 292 17,921
Southern New England
Telecommunications Corporation .............. 300 12,281
----------
180,828
TRUCKING - 1.8%
Caliber System, Inc. ......................... 700 37,975
Rollings Truck Leasing Corporation ........... 1,500 25,594
Ryder System, Inc. ........................... 650 23,359
USFreightways Corporation .................... 800 26,900
Werner Enterprises, Inc. ..................... 1,100 26,675
----------
140,503
TRUCKING PARTS & SUPPLIES - 2.4%
Cummins Engine Company, Inc. ................. 600 46,837
Navistar International
Corporation* ................................ 3,000 82,875
PACCAR, Inc. ................................. 1,000 56,000
----------
185,712
----------
Total common stocks - 35.5% ................. 2,752,531
U.S. GOVERNMENT AGENCIES
FEDERAL HOME LOAN MORTGAGES - 1.9%
7.00% - 2020 ................................ $ 100,000 100,268
7.00% - 2021 ................................ $ 50,000 49,770
----------
150,038
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.8%
6.50% - 2018 ................................ $ 50,000 49,227
6.95% - 2020 ................................ $ 130,000 129,284
7.50% - 2020 ................................ $ 40,000 40,657
----------
219,168
----------
Total U.S. government & government
agencies - 4.7% ........................... 369,206
See accompanying notes
24
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY EQUITY FUND-ASSET ALLOCATION SERIES (continued)
NUMBER MARKET
REAL ESTATE INVESTMENT TRUSTS OF SHARES VALUE
- --------------------------------------------------------------------------------
American Health Properties, Inc. ............. 700 $ 17,150
Avalon Properties, Inc. ...................... 600 17,850
CBL & Associates Properties, Inc. ............ 700 18,156
Duke Realty Investments, Inc. ................ 900 20,531
Equity Residential Properties Trust .......... 400 21,825
Federal Realty Investment Trust .............. 650 16,372
General Growth Property, Inc. ................ 550 20,350
Glimcher Realty Trust ........................ 850 19,497
Health Care Property Investors, Inc. ......... 500 19,375
Kimco Realty Corporation ..................... 600 20,888
Merry Land & Investment Company .............. 800 17,650
New Plan Realty Trust ........................ 800 18,900
Post Properties, Inc. ........................ 450 17,888
Public Storage, Inc. ......................... 600 17,775
Security Capital Pacific Trust ............... 800 18,800
Simon Debartolo Group, Inc ................... 600 19,800
Spieker Properties, Inc. ..................... 500 20,281
United Realty Trust Dominion ................. 1,200 18,000
Washington Real Estate Investment
Trust ....................................... 1,000 17,000
Weingarten Realty Investors .................. 400 15,975
----------
Total real estate investment
trusts - 4.8% ............................. 374,063
FOREIGN STOCKS
BELGIUM - 5.7%
Cementbedrijven Cimenteries .................. 800 70,025
Compagnie Benelux Pariabas SA
(COBEPA) .................................... 200 8,671
Delhaize - Le Lion ........................... 800 39,513
Electrabel ................................... 150 31,445
Fortis AG .................................... 300 60,092
Gevaert NV ................................... 400 17,342
Petrofina SA ................................. 150 58,754
Royale Belgium ............................... 250 65,100
Solvay SA .................................... 1,500 90,550
----------
441,492
DENMARK - 3.5%
A/S Dampskibsselskabet Svendborg ............. 1 72,121
A/S Forsikringsselskabet Codan ............... 45 6,190
Akeiselskabet Potagua ........................ 140 4,476
Bang & Olufsen Holding A/S ................... 82 4,877
BG Bank A/S .................................. 133 7,614
Carlsberg A/S ................................ 197 10,780
Cheminova Holding A/S ........................ 214 5,692
DENMARK (CONTINUED)
D/S Norden A/S ............................... 35 $ 4,996
Danisco A/S .................................. 244 13,897
Danske Traelast .............................. 54 4,858
Den Danske Bank .............................. 245 26,705
Finansierings Instituttet for Industri
og Handvaerk A/S ............................ 189 4,918
Finansieringsselskabet Gefion A/S ............ 240 5,175
FLS Industries A/S ........................... 212 6,305
ISS International Service System A/S ......... 148 4,864
J. Lauritzen Holdings A/S* ................... 89 9,132
Jyske Bank A/S ............................... 61 5,724
Korn-OG Foderstof Kompagniet A/S ............. 153 4,778
Novo Nordisk A/S ............................. 263 29,410
Radiometer A/S ............................... 94 4,389
Sophus Berendsen A/S ......................... 88 14,105
Sydbank A/S .................................. 108 4,995
Tele Danmark A/S ............................. 94 4,948
Topdanmark A/S* .............................. 30 4,417
Tryg-Baltica Forsikring A/S .................. 128 7,309
----------
272,675
GERMANY - 7.2%
Allianz AG Holding ........................... 360 87,096
BASF AG ...................................... 1,081 39,110
Bayer AG ..................................... 735 29,255
Continental AG ............................... 202 5,192
Daimler-Benz AG .............................. 850 70,240
Degussa AG ................................... 140 7,681
Deutsche Bank AG ............................. 692 48,584
Dresdner Bank AG ............................. 1,211 55,607
Friedrich Grohe AG-Vorzugsak ................. 7 1,994
Heidelberger Zement AG ....................... 87 6,997
Hochtief AG .................................. 180 8,286
Linde AG ..................................... 14 9,829
Merck KGAA ................................... 187 7,200
Muenchener Rueckversicherungs-
Gesellschaft AG ............................. 70 23,614
Preussag AG .................................. 72 20,179
SAP AG ....................................... 122 31,360
Siemens AG ................................... 1,038 70,025
Veba AG ...................................... 634 36,991
----------
559,240
See accompanying notes
25
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY EQUITY FUND-ASSET ALLOCATION SERIES (continued)
NUMBER MARKET
FOREIGN STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
ITALY - 4.9%
Assicurazioni Gererali ....................... 2,475 $ 55,935
Banco Commerciale Italiane ................... 11,000 31,617
Edison SPA ................................... 4,000 21,534
Fiat SPA ..................................... 7,700 27,487
Ina - Instituto Naz Assicuraz ................ 16,638 26,563
Instituto Mobiliare Italiano ................. 3,208 34,429
Mediobanca ................................... 3,500 27,381
Montedison SPA ............................... 29,600 21,613
Telecom Italia Mobile SPA .................... 18,821 74,710
Telecom Italia - SPA ......................... 8,333 55,532
----------
376,801
JAPAN - 11.8%
All Nippon Airways Company, Ltd. ............. 2,000 11,182
Asahi Glass Company, Ltd. .................... 2,000 15,539
Chubu Electric Power Company, Inc. ........... 400 6,792
Fuji Bank, Ltd. .............................. 1,000 11,016
Fujitsu, Ltd. ................................ 2,000 25,014
Hitachi, Ltd. (Hit. Seisakusho) .............. 3,000 26,091
Industrial Bank of Japan ..................... 2,000 24,849
Kansai Electric Power Company ................ 1,400 24,932
Kawasaki Heavy Industries .................... 4,000 13,816
Kawasaki Steel Corporation ................... 5,000 9,567
Kinki Nippon Railway ......................... 2,000 11,414
Kirin Brewery Company, Ltd. .................. 1,000 8,233
Kyocera Corporation .......................... 100 6,535
Marubeni Corporation ......................... 3,000 9,940
Marui Company, Ltd. .......................... 1,000 16,483
Matsushita Electric Industrial
Company, Ltd. ............................... 2,000 36,114
Mitsubishi Corporation ....................... 4,000 38,764
Mitsubishi Estate Company Limited ............ 1,000 14,578
Mitsubishi Heavy Industrial, Ltd. ............ 4,000 21,900
Mitsubishi Motors Corporation ................ 2,000 10,271
Mitsubishi Trust & Bank ...................... 1,000 15,572
Mitsui Fudosan Company, Ltd. ................. 1,000 12,176
NEC Corporation .............................. 2,000 24,352
Nippon Steel Corporation ..................... 6,000 13,220
Nissan Motor Company, Ltd. ................... 2,000 11,927
Normura Securities Company, Ltd. ............. 2,000 26,008
NSK Limited .................................. 4,000 17,096
Sekisui House, Ltd. .......................... 4,000 38,102
Sharp Corporation ............................ 2,000 18,222
Shin-Etsu Chemical Company ................... 1,000 27,499
Sony Corporation ............................. 100 9,443
Sumitomo Bank ................................ 4,000 60,300
Sumitomo Chemical Company .................... 6,000 22,016
The Bank of Tokyo-Mitsubishi ................. 3,000 57,152
Tokio Marine & Fire Insurance
Company ..................................... 2,000 24,021
Tokyo Electric Power ......................... 2,700 51,884
Tokyu Corporation ............................ 4,000 19,216
Toshiba Corporation .......................... 3,000 15,207
Toyoda Automatic Loom Works .................. 1,000 19,879
Toyota Motor Corporation ..................... 3,000 91,941
----------
918,263
----------
Total foreign stocks - 33.1% ................ 2,568,471
TEMPORARY CASH INVESTMENTS
MONEY MARKET FUNDS - 3.2%
Chase Master Note Program ................... 251,000 251,000
FEDERAL MORTGAGE CORPORATION - 3.9%
5.20% - 10-21-97 ............................ $ 300,000 299,133
----------
Total temporary cash investments - 7.1% ..... 550,133
----------
Total investments - 99.9% ................... 7,751,748
Cash and other assets,
less liabilities - 0.1% ................... 5,632
----------
Total net assets - 100% ..................... $7,757,380
==========
SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES
COMMON STOCKS
AUTO PARTS & EQUIPMENT - 1.4%
Snap-On, Inc. ................................ 2,900 $ 133,581
BANKS - MAJOR REGIONAL - 5.5%
Banc One Corporation ......................... 2,400 133,950
Bank of New York Company, Inc. ............... 2,900 139,200
Northern Trust Corporation ................... 2,600 153,725
Wells Fargo & Company ........................ 400 110,000
----------
536,875
BEVERAGES - SOFT DRINK - 4.1%
Coca-Cola Company ............................ 4,200 255,938
PepsiCo, Inc. ................................ 3,600 146,025
----------
401,963
See accompanying notes
26
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY EQUITY FUND-SOCIAL AWARENESS SERIES (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
CHEMICALS - BASIC - 1.1%
Praxair, Inc. ................................ 2,200 $ 112,612
CHEMICALS - SPECIALTY - 0.8%
Sigma-Aldrich Corporation .................... 2,500 82,344
COMMUNICATION EQUIPMENT - 0.9%
Tellabs, Inc.* ............................... 1,700 87,550
COMPUTER HARDWARE - 4.0%
Compaq Computer Corporation* ................. 2,000 149,500
Hewlett-Packard Company ...................... 2,000 139,125
Sun Microsystems, Inc.* ...................... 2,300 107,669
----------
396,294
COMPUTER NETWORKING - 2.3%
3Com Corporation* ............................ 2,000 102,500
Cisco Systems, Inc.* ......................... 1,700 124,206
----------
226,706
COMPUTER PERIPHERALS - 0.4%
Seagate Technology, Inc.* .................... 1,100 39,738
COMPUTER SOFTWARE/SERVICES - 5.7%
BMC Software, Inc.* .......................... 1,900 123,025
Electronics for Imaging, Inc.* ............... 1,300 66,300
Microsoft Corporation* ....................... 2,100 277,856
PeopleSoft, Inc.* ............................ 1,600 95,600
----------
562,781
DISTRIBUTION - FOOD & HEALTH - 1.0%
Cardinal Health, Inc ......................... 1,350 95,850
ELECTRICAL EQUIPMENT - 2.8%
Sanmina Corporation* ......................... 1,500 129,844
Solectron Corporation* ....................... 3,200 142,400
----------
272,244
ELECTRONICS - INSTRUMENTATION - 0.7%
Perkin-Elmer Corporation ..................... 1,000 73,063
ELECTRONICS - SEMICONDUCTORS - 6.5%
Analog Devices, Inc.* ........................ 3,200 107,200
Atmel Corporation* ........................... 2,600 94,737
Intel Corporation ............................ 3,600 332,325
Xilinx, Inc.* ................................ 2,100 106,313
----------
640,575
FINANCIAL - DIVERSE - 5.0%
Federal Home Loan Mortgage
Corporation ................................. 3,500 123,375
Federal National Mortgage Association ........ 2,600 122,200
Finova Group, Inc. ........................... 1,400 132,475
SunAmerica, Inc. ............................. 3,000 117,563
----------
495,613
FOODS - 1.0%
Interstate Bakeries Corporation .............. 1,500 $ 102,844
HEALTH CARE - DIVERSE - 1.6%
Johnson & Johnson ............................ 2,800 161,350
HEALTH CARE - MANAGED CARE - 1.2%
Oxford Health Plans, Inc.* ................... 1,600 119,800
HEALTH CARE - SPECIALIZED SERVICES - 1.0%
Quintiles Transnational Corporation* ......... 1,200 101,100
HOUSEHOLD FURNISHINGS & APPLIANCES - 1.5%
Leggett & Platt, Inc. ........................ 3,400 151,512
HOUSEHOLD PRODUCTS - 5.5%
Clorox Company ............................... 1,800 133,425
Colgate-Palmolive Company .................... 1,800 125,438
Kimberly-Clark Corporation ................... 1,500 73,406
Procter & Gamble Company ..................... 3,000 207,187
----------
539,456
INSURANCE - MULTI-LINE - 1.9%
American International Group, Inc. ........... 1,800 185,737
INSURANCE - PROPERTY - 1.4%
Chubb Corporation ............................ 2,000 142,125
LEISURE TIME PRODUCTS - 0.9%
Mattel, Inc. ................................. 2,700 89,437
MACHINERY - DIVERSE - 1.2%
Deere & Company .............................. 2,200 118,250
MANUFACTURING - DIVERSIFIED - 1.2%
Illinois Tool Works, Inc. .................... 2,400 120,000
MANUFACTURING - SPECIALIZED - 2.1%
Sealed Air Corporation* ...................... 1,900 104,381
United States Filter Corporation* ............ 2,400 103,350
----------
207,731
MEDICAL PRODUCTS & SUPPLIES - 1.7%
Guidant Corporation .......................... 2,900 162,400
NATURAL GAS - 0.8%
Sonat, Inc. .................................. 1,600 81,400
OFFICE EQUIPMENT & SUPPLIES - 1.2%
Corporate Express, Inc.* ..................... 5,500 116,187
OIL & GAS - EXPLORATION/PRODUCTION - 2.2%
Anadarko Petroleum Corporation ............... 1,400 100,538
Apache Corporation ........................... 2,600 111,475
----------
212,013
See accompanying notes
27
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY EQUITY FUND-SOCIAL AWARENESS SERIES (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
PHARMACEUTICALS - 5.0%
Dura Pharmaceuticals, Inc.* .................. 2,000 $ 87,250
Merck & Company, Inc. ........................ 2,500 249,844
Schering-Plough Corporation .................. 3,000 154,500
----------
491,594
RESTAURANTS - 1.8%
Papa John's International, Inc.* ............. 2,350 80,341
Starbucks Corporation* ....................... 2,400 100,350
----------
180,691
RETAIL - APPAREL - 1.1%
TJX Companies, Inc. .......................... 3,400 103,912
RETAIL - DEPARTMENT STORES - 2.4%
Kohl's Corporation* .......................... 1,500 106,500
Proffitt's, Inc.* ............................ 2,200 130,350
----------
236,850
RETAIL - DRUG STORES - 1.3%
Walgreen Company ............................. 4,800 123,000
RETAIL - GENERAL MERCHANDISE - 1.5%
Dayton Hudson Corporation .................... 2,400 143,850
RETAIL - SPECIALTY - 2.9%
Staples, Inc.* ............................... 4,900 135,363
Tiffany & Company ............................ 1,700 72,250
Woolworth Corporation ........................ 3,500 77,437
----------
285,050
SAVINGS & LOAN - 1.5%
Ahmanson (H.F.) & Company .................... 2,600 147,713
SERVICES - ADVERTISING/MARKETING - 1.5%
Omnicom Group, Inc. .......................... 2,000 145,500
SERVICES - COMMERCIAL & CONSUMER - 2.9%
Apollo Group, Inc.* .......................... 3,000 127,125
Service Corporation International ............ 1,900 61,156
Sylvan Learning Systems, Inc.* ............... 2,250 98,719
----------
287,000
SERVICES - DATA PROCESSINGS - 1.9%
Automatic Data Processing, Inc. .............. 1,600 80,000
Paychex, Inc. ................................ 3,150 109,856
----------
189,856
TEXTILES - APPAREL - 1.2%
Jones Apparel Group, Inc.* ................... 2,200 118,800
----------
Total common stocks - 93.6% ................. 9,222,947
Cash and other assets,
less liabilities - 6.4% ................... 626,997
----------
Total net assets - 100.0% ................... $9,849,944
==========
SECURITY EQUITY FUND-VALUE SERIES
COMMON STOCKS
AIR FREIGHT - 2.0%
Old Dominion Freight Line, Inc.* ............. 8,500 $ 163,625
BANKS - MAJOR REGIONAL - 2.7%
Bank of New York Company, Inc. ............... 900 43,200
Northern Trust Corporation ................... 1,600 94,600
Wells Fargo & Company ........................ 300 82,500
----------
220,300
BEVERAGES - ALCOHOLIC - 1.1%
Canandaigu Brands, Inc. (Cl. A)* ............. 1,900 89,538
CHEMICALS - SPECIALTY - 7.0%
Dexter Corporation ........................... 2,400 96,150
M.A. Hanna Company ........................... 9,000 239,062
Material Sciences Corporation* ............... 9,000 128,250
Minerals Technologies, Inc. .................. 2,500 111,406
----------
574,868
COMMUNICATION EQUIPMENT - 3.8%
ANTEC Corporation* ........................... 10,800 126,900
Harris Corporation ........................... 4,000 183,000
----------
309,900
COMPUTER HARDWARE - 1.2%
Compaq Computer Corporation* ................. 1,312 98,072
COMPUTER PERIPHERALS - 0.9%
Seagate Technology, Inc.* .................... 2,000 72,250
COMPUTER SOFTWARE/SERVICES - 4.6%
Computer Sciences Corporation* ............... 4,000 283,000
DST Systems, Inc.* ........................... 2,700 99,900
----------
382,900
CONTAINERS & PACKAGING - 1.7%
Sealright Company, Inc.* ..................... 10,600 139,125
ELECTRIC COMPANIES - 6.6%
Aquarion Company ............................. 2,500 69,375
CIPSCO, Inc. ................................. 3,700 141,062
Scana Corporation ............................ 8,000 200,500
Wisconsin Energy Corporation ................. 5,000 130,000
----------
540,937
ELECTRONICS - SEMICONDUCTORS - 0.7%
Atmel Corporation* ........................... 1,600 58,300
ELECTRONICS - INSTRUMENTATION - 1.7%
E G & G, Inc. ................................ 1,400 28,963
Perkin-Elmer Corporation ..................... 1,500 109,594
----------
138,557
See accompanying notes
28
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY EQUITY FUND-VALUE SERIES (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIAL - DIVERSE - 2.0%
American Express Company ..................... 600 $ 49,125
Capital One Financial Corporation ............ 2,600 118,950
----------
168,075
FOODS - 4.1%
Chiquita Brands International, Inc. .......... 16,000 258,000
Hormel Foods Corporation ..................... 2,400 76,950
----------
334,950
HOUSEHOLD FURNISHINGS & APPLIANCES - 0.8%
Leggett & Platt, Inc. ........................ 1,400 62,388
HOUSEHOLD PRODUCTS - 2.7%
Dial Corporation ............................. 4,500 78,469
Kimberly-Clark Corporation ................... 3,000 146,812
----------
225,281
INSURANCE - LIFE/HEALTH - 2.6%
AFLAC, Inc. .................................. 4,000 217,000
INSURANCE - PROPERTY - 2.4%
Leucadia National Corporation ................ 3,000 103,125
W.R. Berkley Corporation ..................... 2,100 90,431
----------
193,556
IRON & STEEL - 1.7%
Cleveland-Cliffs, Inc. ....................... 3,300 143,963
LEISURE TIME PRODUCTS - 2.5%
Hasbro, Inc. ................................. 5,000 140,625
Mattel, Inc. ................................. 2,000 66,250
----------
206,875
MANUFACTURING - DIVERSIFIED - 2.4%
Textron, Inc. ................................ 400 26,000
U.S. Industries, Inc. ........................ 6,000 174,000
----------
200,000
MEDICAL PRODUCTS & SUPPLIES - 2.9%
ATL Ultrasound, Inc.* ........................ 1,000 46,750
Sunrise Medical, Inc.* ....................... 12,000 187,500
----------
234,250
METALS & MINING - 0.4%
Cyprus Amax Minerals Company ................. 1,500 36,000
NATURAL GAS - 7.5%
Coastal Corporation .......................... 700 42,875
Eastern Enterprises .......................... 4,500 167,906
Equitable Resources, Inc. .................... 8,000 252,000
People's Energy Corporation .................. 4,000 150,750
----------
613,531
OFFICE EQUIPMENT & SUPPLIES - 3.1%
Corporate Express, Inc.* ..................... 12,000 $ 253,500
OIL & GAS - EXPLORATION & PRODUCTION - 7.3%
Apache Corporation ........................... 2,000 85,750
Forcenergy, Inc.* ............................ 4,800 186,300
Louisiana Land & Exploration
Company ..................................... 900 70,481
Noble Affiliates, Inc. ....................... 1,600 71,600
YPF Sociedad Anomima ADR ..................... 5,000 184,375
----------
598,506
PHARMACEUTICALS - 6.1%
Mylan Laboratories, Inc. ..................... 12,200 273,737
R.P. Scherer Corporation* .................... 2,000 123,875
Teva Pharmaceutical Industries,
Ltd. ADR .................................... 1,900 105,925
----------
503,537
PUBLISHING - 0.5%
McGraw-Hill Companies, Inc. .................. 600 40,613
PUBLISHING - NEWSPAPER - 3.4%
E.W. Scripps Company ......................... 4,200 184,537
Tribune Company* ............................. 1,800 95,963
----------
280,500
REAL ESTATE INVESTMENT TRUSTS - 0.1%
CCA Prison Realty Trust ...................... 200 7,550
RESTAURANTS - 2.5%
The Cheesecake Factory* ...................... 7,500 206,719
RETAIL - SPECIALTY - 2.2%
AutoZone, Inc.* .............................. 3,000 90,000
Payless ShoeSource, Inc.* .................... 800 47,750
Toys "R" Us, Inc.* ........................... 1,100 39,050
----------
176,800
SERVICES - ADVERTISING / MARKETING - 0.7%
Acxiom Corporation* .......................... 3,300 57,544
SERVICES - COMMERCIAL & CONSUMER - 3.8%
Angelica Corporation ......................... 15,500 308,062
SERVICES - DATA PROCESSING - 2.1%
First Data Corporation ....................... 4,500 169,031
TRUCKS & PARTS - 1.5%
Titan International, Inc. .................... 6,000 120,000
----------
Total common stocks - 99.3% ................. 8,146,603
Cash and other assets,
less liabilities - 0.7% ................... 55,988
----------
Total net assets - 100.0% ................... $8,202,591
==========
See accompanying notes
29
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY ULTRA FUND
NUMBER MARKET
COMMON STOCKS OF SHARES VALUE
- --------------------------------------------------------------------------------
AUTO PARTS &EQUIPMENT - 1.0%
Snap-On, Inc. ................................ 20,250 $ 932,766
BANKS - MAJOR REGIONAL - 4.1%
Northern Trust Corporation ................... 26,000 1,537,250
State Street Corporation ..................... 36,000 2,193,750
----------
3,731,000
BEVERAGES - SOFT DRINK - 2.6%
Coca-Cola Enterprises, Inc. .................. 85,800 2,311,238
BIOTECHNOLOGY - 2.7%
BioChem Pharma, Inc.* ........................ 37,000 1,165,500
Biogen, Inc.* ................................ 17,200 557,925
Centocor, Inc.* .............................. 16,000 761,000
----------
2,484,425
CHEMICALS - BASIC - 1.2%
Praxair, Inc. ................................ 21,000 1,074,938
CHEMICALS - SPECIALTY - 0.8%
Sigma-Aldrich Corporation .................... 22,000 724,625
COMMUNICATION EQUIPMENT - 2.5%
ADC Telecommunications, Inc.* ................ 28,000 910,000
CIENA Corporation* ........................... 9,000 445,781
Tellabs, Inc.* ............................... 17,000 875,500
----------
2,231,281
COMPUTER HARDWARE - 2.9%
Dell Computer Corporation* ................... 19,000 1,840,625
ENCAD, Inc.* ................................. 24,500 753,375
----------
2,594,000
COMPUTER SOFTWARE/SERVICES - 9.6%
America OnLine, Inc.* ........................ 20,500 1,546,469
BMC Software, Inc.* .......................... 25,000 1,618,750
Cambridge Technology Partners,
Inc.* ....................................... 26,000 931,125
Compuware Corporation* ....................... 17,800 1,076,900
Electronics for Imaging, Inc.* ............... 18,000 918,000
McAfee Associates, Inc.* ..................... 12,000 636,000
PeopleSoft, Inc.* ............................ 23,000 1,374,250
Viasoft, Inc.* ............................... 12,000 594,000
----------
8,695,494
DISTRIBUTION - FOOD & HEALTH - 1.4%
Cardinal Health, Inc. ........................ 17,500 1,242,500
ELECTRIC COMPANIES - 1.4%
AES Corporation* ............................. 29,000 1,268,750
ELECTRICAL EQUIPMENT - 2.9%
Sanmina Corporation* ......................... 13,500 $1,168,594
SCI Systems, Inc.* ........................... 30,000 1,486,875
----------
2,655,469
ELECTRONICS - INSTRUMENTATION - 0.6%
Perkin-Elmer Corporation ..................... 7,300 533,356
ELECTRONICS - SEMICONDUCTORS - 6.6%
Altera Corporation* .......................... 19,000 973,750
ANADIGICS, Inc.* ............................. 18,000 887,625
Analog Devices, Inc.* ........................ 34,666 1,161,311
Atmel Corporation* ........................... 24,500 892,719
Linear Technology Corporation ................ 16,000 1,100,000
Xilinx, Inc.* ................................ 18,000 911,250
----------
5,926,655
FINANCIAL - DIVERSE - 2.1%
SunAmerica, Inc. ............................. 48,000 1,881,000
FOODS - 1.2%
Dole Food Company, Inc. ...................... 12,800 578,400
Interstate Bakeries Corporation .............. 8,000 548,500
----------
1,126,900
HEALTH CARE - MANAGED CARE - 1.4%
Oxford Health Plans, Inc.* ................... 17,100 1,280,362
HEALTH CARE - SPECIALIZED SERVICES - 1.9%
Parexel International Corporation* ........... 19,500 770,250
Quintiles Transnational Corporation* ......... 11,100 935,175
----------
1,705,425
HOUSEHOLD FURNISHINGS & APPLIANCES - 1.0%
Leggett & Platt, Inc. ........................ 19,900 886,794
HOUSEHOLD PRODUCTS - 0.4%
Dial Corporation ............................. 22,000 383,625
INSURANCE - LIFE/HEALTH - 1.8%
AFLAC, Inc. .................................. 29,300 1,589,525
INSURANCE - PROPERTY - 1.5%
Progressive Corporation ...................... 13,000 1,392,625
INVESTMENT BANK/BROKERAGE - 6.2%
Franklin Resources, Inc. ..................... 28,000 2,607,500
Charles Schwab Corporation ................... 58,500 2,091,375
T. Rowe Price Associates, Inc. ............... 13,700 921,325
----------
5,620,200
LEISURE TIME PRODUCTS - 0.6%
Callaway Golf Company ........................ 15,800 551,025
LODGING - HOTELS - 0.5%
Promus Hotel Corporation* .................... 11,000 492,937
See accompanying notes
30
<PAGE>
STATEMENTS OF NET ASSETS
SEPTEMBER 30, 1997
SECURITY ULTRA FUND (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
MANUFACTURING - DIVERSIFIED - 1.2%
Illinois Tool Works, Inc. .................... 21,000 $1,050,000
MANUFACTURING - SPECIALIZED - 1.8%
Sealed Air Corporation* ...................... 17,000 933,938
United States Filter Corporation* ............ 16,500 710,531
----------
1,644,469
MEDICAL PRODUCTS & SUPPLIES - 2.7%
ATL Ultrasound, Inc.* ........................ 20,500 958,375
Guidant Corporation .......................... 26,500 1,484,000
----------
2,442,375
NATURAL GAS - 0.9%
Sonat, Inc. .................................. 16,500 839,437
OFFICE EQUIPMENT & SUPPLIES - 1.1%
Corporate Express, Inc.* ..................... 47,000 992,875
OIL & GAS - DRILLING & EQUIPMENT - 6.1%
BJ Services Company* ......................... 9,000 668,250
ENSCO International, Inc. .................... 35,000 1,380,313
Global Marine, Inc.* ......................... 42,000 1,396,500
Smith International, Inc.* ................... 10,000 776,875
Tidewater, Inc. .............................. 15,000 888,750
Varco International, Inc.* ................... 8,000 388,000
----------
5,498,688
OIL & GAS - EXPLORATION & PRODUCTION - 1.0%
Anadarko Petroleum Corporation ............... 12,400 890,475
PHARMACEUTICALS - 2.5%
Dura Pharmaceuticals, Inc.* .................. 36,000 1,570,500
Jones Medical Industries, Inc. ............... 15,500 488,250
Miravant Medical Technologies* ............... 4,000 220,000
----------
2,278,750
RESTAURANTS - 1.6%
Papa John's International, Inc.* ............. 22,125 756,398
Starbucks Corporation* ....................... 16,500 689,906
----------
1,446,304
RETAIL - DEPARTMENT STORES - 3.8%
Dollar General Corporation ................... 31,250 1,064,453
Kohl's Corporation* .......................... 20,000 1,420,000
Proffitt's, Inc.* ............................ 16,000 948,000
----------
3,432,453
RETAIL - GENERAL MERCHANDISE - 0.9%
Consolidated Stores Corporation* ............. 20,000 837,500
RETAIL - SPECIALTY - 3.1%
Bed Bath & Beyond, Inc.* ..................... 16,000 $ 562,000
Payless ShoeSource, Inc.* .................... 11,000 656,563
Staples, Inc.* ............................... 46,375 1,281,109
Tiffany & Company ............................ 8,000 340,000
----------
2,839,672
SERVICES - ADVERTISING/MARKETING - 1.5%
Omnicom Group, Inc. .......................... 19,000 1,382,250
SERVICES - COMMERCIAL & CONSUMER - 3.5%
Apollo Group, Inc.* .......................... 22,400 949,200
Manpower, Inc. ............................... 17,000 671,500
Robert Half International, Inc.* ............. 18,750 775,781
Stewart Enterprises, Inc. .................... 17,500 765,625
----------
3,162,106
SERVICES - COMPUTER SYSTEMS - 0.5%
Sungard Data Systems, Inc.* .................. 17,000 412,250
SERVICES - DATA PROCESSING - 1.4%
Fiserv, Inc.* ................................ 9,500 416,812
Paychex, Inc. ................................ 23,400 816,075
----------
1,232,887
TEXTILES - APPAREL - 0.8%
Jones Apparel Group, Inc.* ................... 13,000 702,000
WASTE MANAGEMENT - 1.4%
USA Waste Services, Inc.* .................... 31,075 1,239,116
----------
Total common stocks - 94.7% ................. 85,640,522
Cash and other assets,
less liabilities - 5.3% ................... 4,826,749
----------
Total net assets - 100.0% ................... $90,467,271
==========
The identified cost of investments owned at September 30, 1997, was the same for
federal income tax and financial statement purposes, except for Growth & Income
Fund, Global Series Asset Allocation Series and Ultra Fund for which the
identified cost of investments for federal income tax purposes was $79,181,851,
$30,885,836, $7,025,531 and $55,393,579, respectively.
* Securities on which no cash dividend was paid during the preceding twelve
months. ADR (American Depositary Receipt)
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.
See accompanying notes
31
<PAGE>
BALANCE SHEETS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Security Equity Fund
---------------------------------------------
Security Asset
Growth and Equity Global Allocation
Income Fund Series Series Series
------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (identified cost $79,178,585,
$494,763,814, $30,841,704 and $7,005,829,
respectively) .............................................. $ 97,851,099 $794,202,524 $35,390,089 $7,751,748
Cash ......................................................... (1,219,246) 41,330,829 3,481,020 467
Receivables:
Fund shares sold ........................................... 127,671 4,025,627 73,342 29
Securities sold ............................................ 1,273,410 9,013,937 144,822 --
Forward foreign exchange contracts ......................... -- -- 37,290 --
Interest ................................................... 166,860 169,484 16,050 25,356
Dividends .................................................. 118,648 914,046 66,175 5,786
Foreign taxes recoverable .................................. -- -- 31,278 2,333
Prepaid expenses ........................................... -- -- -- 10,211
------------ ------------ ----------- ----------
Total assets ............................................... $ 98,318,442 $849,656,447 $39,240,066 $7,795,930
============ ============ =========== ==========
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased ....................................... $ -- $ 1,666,534 $ 1,717,101 $ --
Fund shares redeemed ....................................... 222,762 315,308 196,921 20,177
Other Liabilities:
Management fees ............................................ 101,742 744,097 60,999 2,617
Custodian fees ............................................. -- -- -- 1,001
Transfer and administration fees ........................... -- -- -- 6,018
Professional fees .......................................... -- -- -- 5,063
12b-1 distribution plan fees ............................... 5,510 74,269 10,546 3,244
Other payables ............................................. -- -- -- 430
------------ ------------ ----------- ----------
Total liabilities ........................................ 330,014 2,800,208 1,985,567 38,550
Net Assets:
Paid in capital .............................................. 58,128,021 482,735,990 29,641,700 6,490,140
Undistributed net investment income .......................... 96,355 2,266,283 105,784 67,914
Accumulated undistributed net realized gain
on sale of investments, and foreign
currency transactions ...................................... 21,091,538 62,415,256 2,920,172 453,490
Net unrealized appreciation
in value of investments, futures and
translation of assets and liabilities
in foreign currency ........................................ 18,672,514 299,438,710 4,586,843 745,836
------------ ------------ ----------- ----------
Net assets ............................................... 97,988,428 846,856,239 37,254,499 7,757,380
------------ ------------ ----------- ----------
Total liabilities and net assets ....................... $ 98,318,442 $849,656,447 $39,240,066 $7,795,930
============ ============ =========== ==========
CLASS "A" SHARES
Capital shares outstanding ................................... 8,190,671 83,310,733 1,784,153 310,479
Net assets ................................................... $ 91,251,769 $757,520,288 $24,193,467 $3,906,431
Net asset value per share (net assets
divided by shares outstanding) ........................... $ 11.14 $ 9.09 $ 13.56 $ 12.58
Add: Selling commission (5.75% of
the offering price) ....................................... $ 0.68 $ 0.55 $ 0.83 $ 0.77
------------ ------------ ----------- ----------
Offering price per share (net asset value
divided by 94.25%) ......................................... $ 11.82 $ 9.64 $ 14.39 $ 13.35
============ ============ =========== ==========
CLASS "B" SHARES
Capital shares outstanding ................................... 613,052 10,125,359 987,744 309,214
Net assets ................................................... $ 6,736,659 $ 89,335,951 $13,061,032 $3,850,949
Net asset value per share (net assets
divided by shares outstanding) ............................ $ 10.99 $ 8.82 $ 13.22 $ 12.45
============ ============ =========== ==========
SEE ACCOMPANYING NOTES
32
</TABLE>
<PAGE>
BALANCE SHEETS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Security Equity Fund
--------------------------------
Social Security
Awareness Value Ultra
Series Series Fund
------------ ---------- -----------
<S> <C> <C> <C>
ASSETS
Investments, at value (identified cost $7,582,342,
$7,289,634 and $55,329,839, respectively) ..................... $ 9,222,947 $8,146,603 $85,640,522
Cash ............................................................ 613,875 9,995 5,170,008
Receivables:
Fund shares sold .............................................. 3,653 72,133 5,300
Securities sold ............................................... 303,738 65,498 740,265
Interest ...................................................... 2,816 1,636 21,636
Dividends ..................................................... 5,884 11,359 26,742
Prepaid expenses ................................................ 7,424 14,486 --
------------ ---------- -----------
Total assets ................................................ $ 10,160,337 $8,321,710 $91,604,473
============ ========== ===========
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased .......................................... $ 301,375 $ 107,423 $ 159,000
Fund shares redeemed .......................................... 977 6,360 517,390
Other Liabilities:
Management fees ............................................... -- -- 95,032
Custodian fees ................................................ -- 375 --
Transfer and administration fees .............................. 1,388 972 --
Professional fees ............................................. 3,500 991 --
12b-1 distribution plan fees .................................. 3,128 2,956 4,910
Other payables ................................................ 25 42 360,870
------------ ---------- -----------
Total liabilities ........................................... 310,393 119,119 1,137,202
Net Assets:
Paid in capital ................................................. 8,408,655 7,227,345 58,126,275
Undistributed net investment income ............................. 5,542 11,189 --
Accumulated undistributed net realized gain (loss)
on sale of investments and futures ............................ (204,858) 107,088 2,030,313
Net unrealized appreciation
in value of investments and futures ........................... 1,640,605 856,969 30,310,683
------------ ---------- -----------
Net assets .................................................. 9,849,944 8,202,591 90,467,271
------------ ---------- -----------
Total liabilities and net assets .......................... $ 10,160,337 $8,321,710 $91,604,473
============ ========== ===========
CLASS "A" SHARES
Capital shares outstanding ...................................... 345,128 357,524 9,149,312
Net assets ...................................................... $ 6,209,250 $4,630,730 $84,503,522
Net asset value per share (net assets divided by
shares outstanding) ........................................... $ 17.99 $ 12.95 $ 9.24
Add: Selling commission (5.75% of the
offering price) ............................................... $ 1.10 $ 0.79 $ 0.56
------------ ---------- -----------
Offering price per share (net asset value
divided by 94.25%) ............................................ $ 19.09 $ 13.74 $ 9.80
============ ========== ===========
CLASS "B" SHARES
Capital shares outstanding ...................................... 204,366 276,573 669,926
Net assets ...................................................... $ 3,640,694 $3,571,861 $ 5,963,749
Net asset value per share (net assets divided by
shares outstanding) ........................................... $ 17.81 $ 12.91 $ 8.90
============ ========== ===========
SEE ACCOMPANYING NOTES
33
</TABLE>
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Security Equity Fund
-------------------------------------------------
Security Asset
Growth and Equity Global Allocation
Income Fund Series Series Series
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ..................................... $ 1,076,326 $ 9,352,053 $ 628,639 $ 91,400
Interest ...................................... 1,209,223 1,347,977 105,160 127,936
----------- ------------ ----------- -----------
2,285,549 10,700,030 733,799 219,336
Less foreign tax expense ........................ -- -- (68,229) (5,595)
----------- ------------ ----------- -----------
Total investment income ......................... 2,285,549 10,700,030 665,570 213,741
EXPENSES:
Management fees ............................... 1,024,369 7,375,751 642,585 62,322
Custodian fees ................................ -- -- -- 12,017
Transfer/maintenance fees ..................... -- -- -- 7,611
Administration fees ........................... -- -- -- 53,010
Directors' fees ............................... -- -- -- 99
Professional fees ............................. -- -- -- 4,870
Reports to shareholders ....................... -- -- -- 699
Registration fees ............................. -- -- -- 12,727
Other expenses ................................ -- -- -- 1,015
12b-1 distribution plan fees (Class B) ........ 40,165 631,537 100,029 34,702
Reimbursement of expenses ..................... -- -- -- (45,581)
----------- ------------ ----------- -----------
Total expenses .............................. 1,064,534 8,007,288 742,614 143,491
----------- ------------ ----------- -----------
Net investment income (loss) .............. 1,221,015 2,692,742 (77,044) 70,250
NET REALIZED AND UNREALIZED GAIN:
Net realized gain during the period on:
Investments ................................... 21,245,450 70,480,807 3,217,212 460,170
Foreign currency transactions ................. -- -- 210,315 923
----------- ------------ ----------- -----------
Net realized gain ............................. 21,245,450 70,480,807 3,427,527 461,093
Net change in unrealized appreciation
(depreciation) during the period on:
Investments ................................... 3,450,512 126,763,115 2,598,290 619,830
Translation of assets and liabilities
in foreign currencies ....................... -- -- (34,399) (72)
----------- ------------ ----------- -----------
Net unrealized appreciation ................... 3,450,512 126,763,115 2,563,891 619,758
----------- ------------ ----------- -----------
Net gain .................................... 24,695,962 197,243,922 5,991,418 1,080,851
----------- ------------ ----------- -----------
Net increase in net assets
resulting from operations ............... $25,916,977 $199,936,664 $ 5,914,374 $ 1,151,101
=========== ============ =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES
34
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Security Equity Fund
-----------------------------
Social Security
Awareness Value Ultra
Series* Series** Fund
----------- --------- ------------
<S> <C> <C> <C>
Investment Income:
Dividends ....................................................... $ 35,732 $ 25,955 $ 231,003
Interest ........................................................ 27,525 7,972 325,052
----------- --------- ------------
Total investment income ....................................... 63,257 33,927 556,055
Expenses:
Management fees ................................................. 50,880 17,003 985,285
Custodian fees .................................................. 2,195 1,048 --
Transfer/maintenance fees ....................................... 3,925 1,345 --
Administration fees ............................................. 4,579 1,530 --
Directors' fees ................................................. 74 26 --
Professional fees ............................................... 4,704 991 --
Reports to shareholders ......................................... 114 23 --
Registration fees ............................................... 21,309 8,575 --
Other expenses .................................................. 774 459 360,870
12b-1 distribution plan fees (Class B) .......................... 20,041 8,741 42,336
Reimbursement of expenses ....................................... (50,880) (17,003) --
----------- --------- ------------
Total expenses ................................................ 57,715 22,738 1,388,491
----------- --------- ------------
Net investment income (loss) ................................ 5,542 11,189 (832,436)
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) during the period on:
Investments ..................................................... (204,858) 107,088 2,810,675
Futures contracts ............................................... -- -- (8,387)
----------- --------- ------------
Net realized gain (loss) ...................................... (204,858) 107,088 2,802,288
Net change in unrealized appreciation during the period on:
Investments ..................................................... 1,640,605 856,969 13,191,840
----------- --------- ------------
Net gain ...................................................... 1,435,747 964,057 15,994,128
----------- --------- ------------
Net increase in net assets
resulting from operations ................................. $ 1,441,289 $ 975,246 $ 15,161,692
=========== ========= ============
</TABLE>
*Period November 1, 1996 (inception) through September 30, 1997.
**Period May 1, 1997 (inception) through September 30, 1997.
SEE ACCOMPANYING NOTES
35
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Security Equity Fund
--------------------------------------------------
Security Asset
Growth and Equity Global Allocation
Income Fund Series Series Series
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) ......................... $ 1,221,015 $ 2,692,742 $ (77,044) $ 70,250
Net realized gain .................................... 21,245,450 70,480,807 3,427,527 461,093
Unrealized appreciation during the period ............ 3,450,512 126,763,115 2,563,891 619,758
------------ ------------- ------------ -----------
Net increase in net assets resulting from operations 25,916,977 199,936,664 5,914,374 1,151,101
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ............................................ (1,278,257) (3,155,322) (597,023) (63,009)
Class B ............................................ (29,101) -- (199,976) (52,830)
Net realized gain
Class A ............................................ (5,648,284) (49,869,431) (1,243,269) (61,070)
Class B ............................................ (232,550) (4,463,901) (515,069) (73,554)
------------ ------------- ------------ -----------
Total distributions to shareholders .............. (7,188,192) (57,488,654) (2,555,337) (250,463)
CAPITAL SHARE TRANSACTIONS (A):
Proceeds from sales of shares
Class A ............................................ 5,721,292 221,241,550 6,304,969 1,478,803
Class B ............................................ 3,688,134 110,104,405 6,613,460 1,009,991
Dividends reinvested
Class A ............................................ 6,351,214 49,656,213 1,808,607 122,613
Class B ............................................ 253,502 4,431,044 714,502 124,004
Shares redeemed
Class A ............................................ (11,732,659) (219,339,034) (5,834,526) (595,393)
Class B ............................................ (542,134) (76,188,625) (2,640,062) (513,448)
------------ ------------- ------------ -----------
Net increase from capital share transactions ....... 3,739,349 89,905,553 6,966,950 1,626,570
------------ ------------- ------------ -----------
Total increase in net assets ..................... 22,468,134 232,353,563 10,325,987 2,527,208
NET ASSETS:
Beginning of year .................................... 75,520,294 614,502,676 26,928,512 5,230,172
------------ ------------- ------------ -----------
End of year .......................................... $ 97,988,428 $ 846,856,239 $ 37,254,499 $ 7,757,380
============ ============= ============ ===========
Undistributed net investment income at end of year ... $ 96,355 $ 2,266,283 $ 105,784 $ 67,914
============ ============= ============ ===========
(a) Shares issued and redeemed
Shares sold
Class A ............................................ 602,485 27,937,552 503,842 128,634
Class B ............................................ 388,324 14,249,362 537,435 89,049
Dividends reinvested
Class A ............................................ 721,721 6,886,178 157,805 11,078
Class B ............................................ 29,373 628,340 63,438 11,246
Shares redeemed
Class A ............................................ (1,232,959) (27,902,983) (459,717) (50,647)
Class B ............................................ (56,091) (10,027,869) (211,371) (44,492)
------------ ------------- ------------ -----------
Net increase ....................................... 452,853 11,770,580 591,432 144,868
============ ============= ============ ===========
</TABLE>
SEE ACCOMPANYING NOTES
36
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Security Equity Fund
--------------------------------
Social Security
Awareness Value Ultra
Series* Series** Fund
----------- ----------- ------------
<S> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) ..................................... $ 5,542 $ 11,189 $ (832,436)
Net realized gain (loss) ......................................... (204,858) 107,088 2,802,288
Unrealized appreciation during the period ........................ 1,640,605 856,969 13,191,840
----------- ----------- ------------
Net increase in net assets
resulting from operations ..................................... 1,441,289 975,246 15,161,692
Distributions to shareholders from:
Net investment income
Class A ........................................................ -- -- --
Class B ........................................................ -- -- --
Net realized gain
Class A ........................................................ -- -- (5,180,781)
Class B ........................................................ -- -- (326,156)
----------- ----------- ------------
Total distributions to shareholders ............................ -- -- (5,506,937)
Capital share transactions (a):
Proceeds from sales of shares
Class A ........................................................ 5,535,748 4,177,778 22,311,821
Class B ........................................................ 3,185,475 3,087,104 6,072,670
Dividends reinvested
Class A ........................................................ -- -- 4,973,701
Class B ........................................................ -- -- 326,142
Shares redeemed
Class A ........................................................ (306,673) (23,359) (26,312,322)
Class B ........................................................ (5,895) (14,178) (3,487,931)
----------- ----------- ------------
Net increase from capital share transactions ................... 8,408,655 7,227,345 3,884,081
----------- ----------- ------------
Total increase in net assets ................................. 9,849,944 8,202,591 13,538,836
Net assets:
Beginning of period .............................................. -- -- 76,928,435
----------- ----------- ------------
End of period .................................................... $ 9,849,944 $ 8,202,591 $ 90,467,271
=========== =========== ============
Undistributed net investment income at
end of period .................................................. $ 5,542 $ 11,189 $ --
=========== =========== ============
(a) Shares issued and redeemed
Shares sold
Class A ........................................................ 363,334 359,432 2,872,813
Class B ........................................................ 204,698 277,836 766,245
Dividends reinvested
Class A ........................................................ -- -- 656,941
Class B ........................................................ -- -- 44,428
Shares redeemed
Class A ........................................................ (18,206) (1,908) (3,375,134)
Class B ........................................................ (332) (1,263) (476,747)
----------- ----------- ------------
Net increase ................................................... 549,494 634,097 488,546
=========== =========== ============
</TABLE>
*Period November 1, 1996 (inception) through September 30, 1997.
**Period May 1, 1997 (inception) through September 30, 1997.
SEE ACCOMPANYING NOTES
37
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Security Equity Fund
--------------------------------------------
Security Asset Security
Growth and Equity Global Allocation Ultra
Income Fund Series Series Series Fund
------------ ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Increase in net assets from operations:
Net investment income (loss) ..................... $ 1,481,389 $ 3,642,879 $ (42,350) $ 84,407 $ (439,871)
Net realized gain ................................ 6,097,347 54,909,397 2,667,735 252,773 7,865,014
Unrealized appreciation during the year .......... 5,572,992 59,008,440 1,091,782 49,605 2,292,201
------------ ------------- ------------ ----------- ------------
Net increase in net assets resulting
from operations .............................. 13,151,728 117,560,716 3,717,167 386,785 9,717,344
Distributions to shareholders from:
Net investment income
Class A ........................................ (1,303,374) (4,154,225) (357,503) (59,841) --
Class B ........................................ (16,567) (64,778) (72,239) (50,821) --
Net realized gain
Class A ........................................ (2,290,075) (33,371,334) (224,880) (30,468) (7,109,009)
Class B ........................................ (44,993) (1,836,652) (77,719) (31,088) (500,515)
------------ ------------- ------------ ----------- ------------
Total distributions to shareholders .......... (3,655,009) (39,426,989) (732,341) (172,218) (7,609,524)
Capital share transactions (a):
Proceeds from sale of shares
Class A ........................................ 3,975,290 299,520,899 5,778,490 682,087 27,602,365
Class B ........................................ 1,200,271 93,534,094 2,179,465 1,119,612 3,050,423
Dividends reinvested
Class A ........................................ 3,265,411 34,973,081 570,969 89,987 6,772,088
Class B ........................................ 60,327 1,882,247 149,212 81,908 500,487
Shares redeemed
Class A ........................................ (10,667,756) (273,412,317) (5,192,505) (337,484) (28,420,959)
Class B ........................................ (369,561) (79,755,552) (1,236,321) (55,397) (6,164,145)
------------ ------------- ------------ ----------- ------------
Net increase (decrease) from capital share
transactions ............................... (2,536,018) 76,742,452 2,249,310 1,580,713 3,340,259
------------ ------------- ------------ ----------- ------------
Total increase in net assets ............. 6,960,701 154,876,179 5,234,136 1,795,280 5,448,079
Net assets:
Beginning of year ................................ 68,559,593 459,626,497 21,694,376 3,434,892 71,480,356
------------ ------------- ------------ ----------- ------------
End of year ...................................... $ 75,520,294 $ 614,502,676 $ 26,928,512 $ 5,230,172 $ 76,928,435
============ ============= ============ =========== ============
Undistributed net investment income
at end of year ................................... $ 182,698 $ 2,728,863 $ 671,849 $ 112,622 $ --
============ ============= ============ =========== ============
(a) Shares issued and redeemed
Shares sold
Class A ...................................... 474,232 43,657,565 491,586 63,688 3,632,551
Class B ...................................... 143,440 13,771,902 186,645 104,927 412,321
Dividends reinvested
Class A ...................................... 404,486 5,483,525 52,399 8,801 996,776
Class B ...................................... 7,601 300,151 13,842 8,014 75,103
Shares redeemed
Class A ...................................... (1,281,262) (39,986,054) (447,772) (31,916) (3,688,397)
Class B ...................................... (43,575) (11,797,000) (107,952) (5,145) (820,769)
------------ ------------- ------------ ----------- ------------
Net increase (decrease) .................... (295,078) 11,430,089 188,748 148,369 607,585
============ ============= ============ =========== ============
</TABLE>
SEE ACCOMPANYING NOTES
38
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SECURITY GROWTH AND INCOME FUND (CLASS A) (b)
Fiscal Period Ended September 30
------------------------------------------------------------------------------
1997(g) 1996(g) 1995(g) 1994(c) 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ........... $ 9.05 $ 7.93 $ 6.96 $ 7.84 $ 7.13
Income from Investment Operations:
Net Investment Income ......................... 0.144 0.18 0.16 0.13 0.21
Net Gain (Loss) on Securities
(realized and unrealized) .................... 2.813 1.373 1.183 (0.713) 0.876
------------ ------------ ------------ ------------ ------------
Total from Investment Operations .............. 2.957 1.553 1.343 (0.583) 1.086
Less Distributions
Dividends (from Net Investment Income) ........ (0.155) (0.158) (0.158) (0.128) (0.218)
Distributions (from Capital Gains) ............ (0.708) (0.275) (0.215) (0.169) (0.158)
------------ ------------ ------------ ------------ ------------
Total Distributions ........................ (0.863) (0.433) (0.373) (0.297) (0.376)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE END OF PERIOD ................. $ 11.14 $ 9.05 $ 7.93 $ 6.96 $ 7.84
============ ============ ============ ============ ============
TOTAL RETURN (a) .............................. 35.31% 20.31% 20.25% (7.6%) 15.6
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) .......... $ 91,252 $ 73,273 $ 67,430 $ 65,328 $ 81,982
Ratio of Expenses to Average Net Assets ....... 1.24% 1.29% 1.31% 1.28% 1.26%
Ratio of Net Investment Income (Loss)
to Average Net Assets ....................... 1.53% 2.09% 2.21% 1.70% 2.80%
Portfolio Turnover Rate ....................... 124% 69% 130% 163% 135%
Average Commission Paid Per Equity
Share Traded (j) ............................ $ 0.0600 $ 0.0625 -- -- --
SECURITY GROWTH AND INCOME FUND (CLASS B)
Fiscal Period Ended September 30
--------------------------------------------------------------
1997(g) 1996(g) 1995(g) 1994(c)
------------ ------------ ------------ ------------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ........... $ 8.94 $ 7.85 $ 6.90 $ 7.83
Income from Investment Operations:
Net Investment Income ......................... 0.048 0.09 0.08 0.05
Net Gain (Loss) on Securities
(realized and unrealized) .................... 2.776 1.353 1.179 (0.694)
------------ ------------ ------------ ------------
Total from Investment Operations .............. 2.824 1.443 1.259 (0.644)
Less Distributions
Dividends (from Net Investment Income) ........ (0.063) (0.078) (0.094) (0.117)
Distributions (from Capital Gains) ............ (0.708) (0.275) (0.215) (0.169)
------------ ------------ ------------ ------------
Total Distributions ........................ (0.771) (0.353) (0.309) (0.286)
------------ ------------ ------------ ------------
NET ASSET VALUE END OF PERIOD ................. $ 10.99 $ 8.94 $ 7.85 $ 6.90
============ ============ ============ ============
TOTAL RETURN (a) .............................. 34.01% 19.01% 19.07% (8.0%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) .......... $ 6,737 $ 2,247 $ 1,130 $ 668
Ratio of Expenses to Average Net Assets ....... 2.24% 2.29% 2.31% 2.27%
Ratio of Net Investment Income (Loss)
to Average Net Assets ....................... 0.53% 1.09% 1.21% 1.03%
Portfolio Turnover Rate ....................... 124% 69% 130% 178%
Average Commission Paid Per
Equity Share Traded (j) ..................... $ 0.0600 $ 0.0625 -- --
</TABLE>
SEE ACCOMPANYING NOTES
39
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SECURITY EQUITY SERIES (CLASS A)
Fiscal Period Ended September 30
-------------------------------------------------------------------------------
1997(g) 1996(g) 1995(g) 1994(c) 1993
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .............. $ 7.54 $ 6.55 $ 5.54 $ 6.73 $ 5.86
Income from Investment Operations:
Net Investment Income ............................ 0.04 0.05 0.04 0.05 0.12
Net Gain (Loss) on Securities
(realized and unrealized) ....................... 2.199 1.482 1.377 0.085 1.165
------------- ------------- ------------- ------------- -------------
Total from Investment Operations ................. 2.239 1.532 1.417 0.135 1.285
Less Distributions
Dividends (from Net Investment Income) ........... (0.041) (0.060) -- (0.120) (0.053)
Distributions (from Capital Gains) ............... (0.648) (0.482) (0.407) (1.205) (0.362)
------------- ------------- ------------- ------------- -------------
Total Distributions ........................... (0.689) (0.542) (0.407) (1.325) (0.415)
------------- ------------- ------------- ------------- -------------
NET ASSET VALUE END OF PERIOD .................... $ 9.09 $ 7.54 $ 6.55 $ 5.54 $ 6.73
============= ============= ============= ============= =============
TOTAL RETURN(a) .................................. 32.08% 24.90% 27.77% 1.95% 22.70%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ............. $ 757,520 $ 575,680 $ 440,339 $ 358,237 $ 375,565
Ratio of Expenses to Average Net Assets .......... 1.03% 1.04% 1.05% 1.06% 1.06%
Ratio of Net Investment Income (Loss) to Average
Net Assets ..................................... 0.46% 0.75% 0.87% 0.86% 1.95%
Portfolio Turnover Rate .......................... 66% 64% 95% 79% 95%
Average Commission Paid Per Equity
Share Traded (j) ............................... $ 0.0600 $ 0.0609 -- -- --
SECURITY EQUITY SERIES (CLASS B)
Fiscal Period Ended September 30
---------------------------------------------------------------
1997(g) 1996(g) 1995(g) 1994(c)
------------- ------------- ------------- -------------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .............. $ 7.36 $ 6.43 $ 5.49 $ 6.81
Income from Investment Operations:
Net Investment Income (Loss) ..................... (0.04) (0.02) (0.01) 0.01
Net Gain (Loss) on Securities
(realized and unrealized) ....................... 2.148 1.449 1.357 (0.005)
------------- ------------- ------------- -------------
Total from Investment Operations ................. 2.108 1.429 1.347 0.005
Less Distributions
Dividends (from Net Investment Income) ........... -- (0.017) -- (0.12)
Distributions (from Capital Gains) ............... (0.648) (0.482) (0.407) (1.205)
------------- ------------- ------------- -------------
Total Distributions ........................... (0.648) (0.499) (0.407) (1.325)
------------- ------------- ------------- -------------
NET ASSET VALUE END OF PERIOD .................... $ 8.82 $ 7.36 $ 6.43 $ 5.49
============= ============= ============= =============
TOTAL RETURN(a) .................................. 30.85% 23.57% 26.69% (0.15%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ............. $ 89,336 $ 38,822 $ 19,288 $ 7,452
Ratio of Expenses to Average Net Assets .......... 2.03% 2.04% 2.05% 2.07%
Ratio of Net Investment Income
(Loss) to Average Net Assets ................... (0.54%) (0.25%) (0.13%) (0.01%)
Portfolio Turnover Rate .......................... 66% 64% 95% 80%
Average Commission Paid Per Equity
Share Traded (j) ............................... $ 0.0600 $ 0.0609 -- --
</TABLE>
SEE ACCOMPANYING NOTES
40
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SECURITY GLOBAL SERIES (CLASS A)
Fiscal Period Ended September 30
-------------------------------------------------------------------
1997(g) 1996(g) 1995(g) 1994(c)(d)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .................. $ 12.42 $ 10.94 $ 10.84 $ 10.00
Income from Investment Operations:
Net Investment Income (Loss) ......................... 0.01 0.01 (0.02) (0.03)
Net Gain (Loss) on Securities
(realized and unrealized) ........................... 2.289 1.874 0.31 0.87
------------ ------------ ------------ ------------
Total from Investment Operations ..................... 2.299 1.884 0.29 0.84
Less Distributions
Dividends (from Net Investment Income) ............... (0.376) (0.248) -- --
Distributions (from Capital Gains) ................... (0.783) (0.156) (0.19) --
------------ ------------ ------------ ------------
Total Distributions ............................... (1.159) (0.404) (0.19) --
------------ ------------ ------------
NET ASSET VALUE END OF PERIOD ........................ $ 13.56 $ 12.42 $ 10.94 $ 10.84
============ ============ ============ ============
TOTAL RETURN (a) ..................................... 20.22% 17.73% 2.80% 8.40%
RATIOS/SUPPLEMENTAL DATA NET ASSETS
End of Period (thousands) ............................ $ 24,193 $ 19,644 $ 16,261 $ 20,128
Ratio of Expenses to
Average Net Assets ................................. 2.00% 2.00% 2.00% 2.00%
Ratio of Net Investment Income (Loss)
to Average Net Assets .............................. (0.07%) 0.07% (0.17%) (0.01%)
Portfolio Turnover Rate .............................. 132% 142% 141% 73%
Average Commission Paid Per Equity
Share Traded (j) ................................... $ 0.0141 $ 0.0338 -- --
SECURITY GLOBAL SERIES (CLASS B)
Fiscal Period Ended September 30
-------------------------------------------------------------------
1997(g) 1996(g) 1995(g) 1994(c)(d)
------------ ------------ ------------ ------------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .................. $ 12.18 $ 10.74 $ 10.75 $ 9.96
Income from Investment Operations:
Net Investment Loss .................................. (0.11) (0.10) (0.12) (0.12)
Net Gain on Securities
(realized and unrealized) ........................... 2.237 1.841 0.30 0.91
------------ ------------ ------------ ------------
Total from Investment Operations ..................... 2.127 1.741 0.18 0.79
Less Distributions
Dividends (from Net Investment Income) ............... (0.304) (0.145) -- --
Distributions (from Capital Gains) ................... (0.783) (0.156) (0.19) --
------------ ------------ ------------ ------------
Total Distributions ............................... (1.087) (0.301) (0.19) --
------------ ------------ ------------ ------------
NET ASSET VALUE END OF PERIOD ........................ $ 13.22 $ 12.18 $ 10.74 $ 10.75
============ ============ ============ ============
TOTAL RETURN(a) ..................................... 19.01% 16.57% 1.79% 7.90%
Ratios/Supplemental Data
Net Assets End of Period (thousands) ................. $ 13,061 $ 7,285 $ 5,433 $ 3,960
Ratio of Expenses to Average Net Assets .............. 3.00% 3.00% 3.00% 3.00%
Ratio of Net Investment Income (Loss) to Average
Net Assets ......................................... (0.93%) (0.93%) (1.17%) (0.01%)
Portfolio Turnover Rate .............................. 132% 142% 141% 73%
Average Commission Paid Per Equity
Share Traded (j) ................................... $ 0.0141 $ 0.0338 -- --
</TABLE>
SEE ACCOMPANYING NOTES
41
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SECURITY ASSET ALLOCATION SERIES (CLASS A)
Fiscal Period Ended September 30
-----------------------------------------------------------
1997(f)(g)(k) 1996(f)(g) 1995(e)(f)(g)
----------- ----------- -----------
<S> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ...................... $ 11.06 $ 10.54 $ 10.00
Income from Investment Operations:
Net Investment Income (Loss) ............................. 0.17 0.25 0.04
Net Gain (Loss) on Securities
(realized and unrealized) ............................... 1.862 0.765 0.50
----------- ----------- -----------
Total from Investment Operations ......................... 2.032 1.015 0.54
Less Distributions
Dividends (from Net Investment Income) ................... (0.260) (0.328) --
Distributions (from Capital Gains) ....................... (0.252) (0.167) --
----------- ----------- -----------
Total Distributions ................................... (0.512) --
----------- ----------- -----------
NET ASSET VALUE END OF PERIOD ............................ $ 12.58 $ 11.06 $ 10.54
=========== =========== ===========
TOTAL RETURN(a) .......................................... 19.00% 10.01% 5.40%
Ratios/Supplemental Data
Net Assets End of Period (thousands) ..................... $ 3,906 $ 2,449 $ 1,906
Ratio of Expenses to Average Net Assets .................. 1.68% 2.00% 2.00%
Ratio of Net Investment Income (Loss) to Average
Net Assets ............................................. 1.52% 2.32% 1.33%
Portfolio Turnover Rate .................................. 79% 75% 129%
Average Commission Paid Per Equity
Share Traded (j) ....................................... $ 0.0409 $ 0.0247 --
SECURITY ASSET ALLOCATION SERIES (CLASS B)
Fiscal Period Ended September 30
-----------------------------------------------------------
1997(f)(g)(k) 1996(f)(g) 1995(e)(f)(g)
----------- ----------- -----------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ...................... $ 10.97 $ 10.50 $ 10.00
Income from Investment Operations:
Net Investment Income (Loss) ............................. 0.07 0.14 0.01
Net Gain (Loss) on Securities
(realized and unrealized) ............................... 1.843 0.77 0.49
----------- ----------- -----------
Total from Investment Operations ......................... 1.913 0.91 0.50
Less Distributions
Dividends (from Net Investment Income) ................... (0.181) (0.273) --
Distributions (from Capital Gains) ....................... (0.252) (0.167) --
----------- ----------- -----------
Total Distributions ................................... (0.433) (0.440) --
----------- ----------- -----------
NET ASSET VALUE END OF PERIOD ............................ $ 12.45 $ 10.97 $ 10.50
=========== =========== ===========
TOTAL RETURN(a) .......................................... 17.95% 8.97% 5.00%
Ratios/Supplemental Data
Net Assets End of Period (thousands) ..................... $ 3,851 $ 2,781 $ 1,529
Ratio of Expenses to Average Net Assets .................. 2.58% 3.00% 3.00%
Ratio of Net Investment Income (Loss) to Average
Net Assets ............................................. 0.61% 1.32% 0.31%
Portfolio Turnover Rate .................................. 79% 75% 129%
Average Commission Paid Per Equity
Share Traded (j) ....................................... $ 0.0409 $ 0.0247 --
</TABLE>
SEE ACCOMPANYING NOTES
42
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
SECURITY SOCIAL AWARENESS SERIES (CLASS A)
Fiscal Period Ended September 30
--------------------------------
1997(g)(h)
-----------
Per Share Data
Net Asset Value Beginning of Period ............. $ 15.00
Income from Investment Operations:
Net Investment Income (Loss) .................... 0.08
Net Gain (Loss) on Securities
(realized and unrealized) ...................... 2.91
-----------
Total from Investment Operations ................ 2.99
Less Distributions
Dividends (from Net Investment Income) .......... --
Distributions (from Capital Gains) .............. --
-----------
Total Distributions .......................... --
-----------
Net Asset Value End of Period ................... $ 17.99
===========
Total Return (a) ................................ 19.93%
Ratios/Supplemental Data
Net Assets End of Period (thousands) ............ $ 6,209
Ratio of Expenses to Average Net Assets ......... 0.67%
Ratio of Net Investment Income (Loss) to Average
Net Assets .................................... 0.57%
Portfolio Turnover Rate ......................... 38%
Average Commission Paid Per Equity
Share Traded (j) .............................. $ 0.0600
SECURITY SOCIAL AWARENESS SERIES (CLASS B)
Fiscal Period Ended September 30
--------------------------------
1997(f)(g)(h)
-----------
Per Share Data
Net Asset Value Beginning of Period ............. $ 15.00
Income from Investment Operations:
Net Investment Income (Loss) .................... (0.08)
Net Gain (Loss) on Securities
(realized and unrealized) ...................... 2.89
-----------
Total from Investment Operations ................ 2.81
Less Distributions
Dividends (from Net Investment Income) .......... --
Distributions (from Capital Gains) .............. --
-----------
Total Distributions .......................... --
-----------
Net Asset Value End of Period ................... $ 17.81
===========
Total Return (a) ................................ 18.73%
Ratios/Supplemental Data
Net Assets End of Period (thousands) ............ $ 3,641
Ratio of Expenses to Average Net Assets ......... 1.84%
Ratio of Net Investment Income (Loss) to Average
Net Assets .................................... (0.60%)
Portfolio Turnover Rate ......................... 38%
Average Commission Paid Per Equity
Share Traded (j) .............................. $ 0.0600
SEE ACCOMPANYING NOTES
43
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
SECURITY VALUE SERIES (CLASS A)
Fiscal Period Ended September 30
--------------------------------
1997(f)(g)(i)
-----------
Per Share Data
Net Asset Value Beginning of Period ............. $ 10.00
Income from Investment Operations:
Net Investment Income (Loss) .................... 0.05
Net Gain (Loss) on Securities
(realized and unrealized) ...................... 2.90
-----------
Total from Investment Operations ................ 2.95
Less Distributions
Dividends (from Net Investment Income) .......... --
Distributions (from Capital Gains) .............. --
-----------
Total Distributions .......................... --
-----------
Net Asset Value End of Period ................... $ 12.95
===========
Total Return (a) ................................ 29.50%
Ratios/Supplemental Data
Net Assets End of Period (thousands) ............ $ 4,631
Ratio of Expenses to Average Net Assets ......... 1.10%
Ratio of Net Investment Income (Loss) to Average
Net Assets .................................... 1.43%
Portfolio Turnover Rate ......................... .35%
Average Commission Paid Per Equity
Share Traded (j) .............................. $ 0.0600
SECURITY VALUE SERIES (CLASS B)
Fiscal Period Ended September 30
--------------------------------
1997(f)(g)(i)
-----------
Per Share Data
Net Asset Value Beginning of Period ............. $ 10.00
Income from Investment Operations:
Net Investment Income (Loss) .................... 0.01
Net Gain (Loss) on Securities
(realized and unrealized) ...................... 2.90
-----------
Total from Investment Operations ................ 2.91
Less Distributions
Dividends (from Net Investment Income) .......... --
Distributions (from Capital Gains) .............. --
-----------
Total Distributions .......................... --
-----------
Net Asset Value End of Period ................... $ 12.91
===========
Total Return (a) ................................ 29.10%
Ratios/Supplemental Data
Net Assets End of Period (thousands) ............ $ 3,572
Ratio of Expenses to Average Net Assets ......... 2.26%
Ratio of Net Investment Income (Loss) to Average
Net Assets .................................... 0.27%
Portfolio Turnover Rate ......................... .35%
Average Commission Paid Per Equity
Share Traded (j) .............................. $ 0.0600
SEE ACCOMPANYING NOTES
44
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SECURITY ULTRA FUND (CLASS A)
Fiscal Period Ended September 30
---------------------------------------------------------------------------
1997(g) 1996(g) 1995(f) 1994(c) 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .............. $ 8.25 $ 8.20 $ 6.82 $ 8.13 $ 6.66
Income from Investment Operations:
Net Investment Income (loss) ..................... (0.08) (0.05) (0.02) (0.056)
Net Gain (Loss) on Securities
(realized and unrealized) ....................... 1.649 1.096 1.535 (0.188) 1.791
------------ ------------ ------------ ------------ ------------
Total from Investment Operations ................. 1.569 1.046 1.515 (0.244) 1.763
Less Distributions
Dividends (from Net Investment Income) ........... -- -- -- -- --
Distributions (from Capital Gains) ............... (0.579) (0.996) (0.135) (1.066) (0.293)
------------ ------------ ------------ ------------ ------------
Total Distributions ........................... (0.579) (0.996) (0.135) (1.066) (0.293)
------------ ------------ ------------ ------------ ------------
Net Asset Value End of Period .................... $ 9.24 $ 8.25 $ 8.20 $ 6.82 $ 8.13
============ ============ ============ ============ ============
TOTAL RETURN(a) 20.57% 15.36% 22.69% (3.6%) 26.80%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ............. $ 84,504 $ 74,230 $ 66,052 $ 60,695 $ 71,056
Ratio of Expenses to Average Net Assets .......... 1.71% 1.31% 1.32% 1.33% 1.30%
Ratio of Net Investment Income (Loss)
to Average Net Assets .......................... (1.01%) (.61%) (.31%) (.80%) (.50%)
Portfolio Turnover Rate .......................... 68% 161% 180% 111% 101%
Average Commission Paid Per Equity
Share Traded (j) ............................... $ 0.0600 $ 0.0606 -- -- --
SECURITY ULTRA FUND (CLASS B)
Fiscal Period Ended September 30
-----------------------------------------------------------
1997(g) 1996(g) 1995(g) 1994(c)
------------ ------------ ------------ ------------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .............. $ 8.03 $ 8.11 $ 6.81 $ 8.30
Income from Investment Operations:
Net Investment Income (loss) ..................... (0.15) (0.13) (0.09) (0.103)
Net Gain (Loss) on Securities
(realized and unrealized) ....................... 1.599 1.046 1.525 (0.321)
------------ ------------ ------------ ------------
Total from Investment Operations ................. 1.449 0.916 1.435 (0.424)
Less Distributions
Dividends (from Net Investment Income) ........... -- -- -- --
Distributions (from Capital Gains) ............... (0.579) (0.996) (0.135) (1.066)
------------ ------------ ------------ ------------
Total Distributions ........................... (0.579) (0.996) (0.135) (1.066)
------------ ------------ ------------ ------------
NET ASSET VALUE END OF PERIOD .................... $ 8.90 $ 8.03 $ 8.11 $ 6.81
============ ============ ============ ============
TOTAL RETURN(a) .................................. 19.58% 13.81% 21.53% (5.70%)
Ratios/Supplemental Data
Net Assets End of Period (thousands) ............. $ 5,964 $ 2,698 $ 5,428 $ 1,254
Ratio of Expenses to Average Net Assets .......... 2.71% 2.31% 2.32% 2.36%
Ratio of Net Investment Income
(Loss) to Average Net Assets ................... (2.01%) (1.61%) (1.32%) (1.76%)
Portfolio Turnover Rate .......................... 68% 161% 180% 110%
Average Commission Paid Per Equity
Share Traded (j) ............................... $ 0.0600 $ 0.0606 -- --
</TABLE>
SEE ACCOMPANYING NOTES
45
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF
CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
(a) Total return information does not reflect deduction of any sales
charges imposed at the time of purchase for Class A shares or upon
redemption for Class B shares.
(b) Effective July 6, 1993, Security Growth and Income Fund changed its
investment objective from investing for income with secondary emphasis
on long-term capital growth to long-term capital growth with secondary
emphasis on income. Effective the same date the fund changed its name
from Security Investment Fund to Security Growth and Income Fund.
(c) Class "B: Shares were initially capitalized on October 19, 1993.
Percentage amounts for the period, except total return, have been
annualized. Per share data has been calculated using the average
month-end shares outstanding.
(d) Security Global Series was initially capitalized on October 1, 1993,
with a net asset value of $10 per share. Percentage amounts for the
period, except for total return, have been annualized.
(e) Security Asset Allocation Series was initially capitalized on June 1,
1995, with a net asset value of $10 per share. Percentage amounts for
the period have been annualized, except for total return. Per share
data has been calculated using average month-end shares outstanding.
(f) Fund expenses were reduced by the Investment Manager during the period
and expense ratios absent such reimbursement would have been as
follows:
1995 1996 1997
Asset Allocation Series Class A 3.6% 3.1% 2.4%
Class B 4.7% 3.9% 3.3%
Social Awareness Series Class A N/A N/A 1.7%
Class B N/A N/A 2.8%
Value Series Class A N/A N/A 1.9%
Class B N/A N/A 2.8%
(g) Net investment income (loss) was computed using average shares
outstanding throughout the period.
(h) Security Social Awareness Series was initially capitalized on November
1, 1996, with a net asset value of $15 per share. Percentage amounts
for the period, except for total return, have been annualized.
(i) Security Value Series was initially capitalized on May 1, 1997, with a
net asset value of $10 per share. Percentage amounts for the period,
except for total return, have been annualized.
(j) Brokerage commissions paid on portfolio transactions increase the cost
of securities purchased or reduce the proceeds of securities sold and
are not reflected in the Fund's statement of operations. Shares traded
on a principal basis, such as most over-the-counter and fixed-income
transactions, pay a "spread" or "mark-up" rather than a commission and
are therefore excluded from this calculation. Generally, non-U.S.
commissions are lower than U.S. commissions when expressed as cents
per share but higher when expressed as a percentage of transactions
because of the lower per-share prices of many non-U.S. securities.
Prior to 1996, average commission information was not required to be
disclosed.
(k) Meridian Investment Management Corporation (Meridian) became the
sub-advisor of Asset Allocation Series effective August 1, 1997. Prior
to August 1, 1997 SMC paid Templeton/Franklin Investment Services,
Inc. and Meridian for research services provided to Asset Allocation
Series.
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Security Growth and Income, Equity and Ultra Funds (the Funds) are
registered under the Investment Company Act of 1940, as amended, as diversified
open-end management investment companies. The shares of Security Equity Fund are
currently issued in five Series, the Equity Series, the Global Series, the Asset
Allocation Series, the Social Awareness Series and the Value Series, with each
Series, in effect representing a separate Fund. 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. The Funds began offering an additional class of
shares ("B" shares) to the public on October 19, 1993. The shares are offered
without a front-end sales charge but incur additional class - specific expenses.
Redemptions of the shares within five years of acquisition incur a contingent
deferred sales charge. The following is a summary of the significant accounting
policies followed by the Funds in the preparation of their financial
statements.These policies are in conformity with generally accepted accounting
principles.
A. SECURITY VALUATION - Valuations of the Funds' securities are supplied
by a pricing service 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. If a security is traded on multiple exchanges, its
value will be based on prices from the principal exchange where it is traded.
All other securities for which market quotations are available are valued on the
basis of the current bid price. If there is no bid price or if the bid price is
deemed to be unsatisfactory by the Board of Directors or 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 market value. The Funds
generally will value short-term debt securities at prices based on market
quotations for securities of similar type, yield, quality and duration, except
those securities purchased with 60 days or less to maturity are valued on the
basis of amortized cost which approximates market value.
Generally, trading in foreign securities markets is substantially
completed each day at various times prior to the close of the New York Stock
Exchange. The values of foreign securities are determined as of the close of
such foreign markets or the close of the New York Stock Exchange, if earlier.
All investments quoted in foreign currency are valued in U.S. dollars on the
basis of the foreign currency exchange rates prevailing at the close of
business. The Global Series' and Asset Allocation Series' investments in foreign
securities may involve risks not present in domestic investments. Since foreign
securities may be denominated in a foreign currency and involve settlement and
pay interest or dividends in foreign currencies, changes in the relationship of
these foreign currencies to the U.S. dollar can significantly affect the value
of the investments and earnings of the Funds. Foreign investments may also
subject the Global Series and Asset Allocation Series to foreign government
exchange restrictions, expropriation, taxation or other political, social or
economic developments, all of which could affect the market and/or credit risk
of the investments.
B. FOREIGN CURRENCY TRANSACTIONS - The accounting records of the Funds
are maintained in U.S. dollars. All assets and liabilities initially expressed
in foreign currencies are converted into U.S. dollars at prevailing exchange
rates. Purchases and sales of investment securities, dividend and interest
income, and certain expenses are translated at the rates of exchange prevailing
on the respective dates of such transactions.
The Funds do not isolate that portion of the results of operations
resulting from changes in the foreign exchange rates on investments from the
fluctuations arising from changes in the market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss on
investments.
Net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales of foreign currencies, and the difference between
asset and liability amounts initially stated in foreign currencies and the U.S.
dollar value of the amounts actually received or paid. Net unrealized foreign
exchange gains or losses arise from changes in the value of portfolio securities
and other assets and liabilities at the end of the reporting period, resulting
from changes in the exchange rates.
C. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - Global Series and Asset
Allocation Series may enter into forward foreign exchange contracts in order to
manage against foreign currency risk from purchase or sale of securities
denominated in foreign currency. Global Series and Asset Allocation Series may
also enter into such contracts to manage changes in foreign currency exchange
rates on portfolio positions. These contracts are marked to market daily, by
recognizing the difference between the contract exchange rate and the current
market rate as unrealized gains or losses. Realized gains or losses are
recognized when contracts are settled and are reflected in the statement of
operations. These contracts involve market risk in excess of the amount
reflected in the balance sheet. The face or contract amount in U.S. dollars
reflects the total exposure the Global Series and Asset Allocation Series have
in that particular currency contract. Losses may arise due to changes in the
value of the foreign currency or if the counterparty does not perform under the
contract.
D. FUTURES - Asset Allocation Series, Social Awareness Series and Ultra
Fund utilize futures contracts to a limited extent, with the objectives of
maintaining full exposure to the underlying stock markets, enhancing returns,
maintaining liquidity, and minimizing transaction costs. Asset Allocation
Series, Social Awareness Series and Ultra Fund may purchase futures contracts to
immediately position incoming cash in the market, thereby simulating a fully
invested position in the underlying index while maintaining a cash balance for
liquidity. In the event of redemptions, the Asset Allocation Series, Social
Awareness Series and Ultra Fund may pay departing shareholders from its cash
balances and reduce their futures positions accordingly. Returns may be enhanced
by purchasing futures contracts instead of the underlying securities when
futures are believed to be priced more attractively than the underlying
securities. The primary risks associated with the use of futures contracts are
imperfect correlation between changes in market values of stocks contained in
the indexes and the prices of futures contracts, and the possibility of an
illiquid market. Futures contracts are valued based upon their quoted daily
settlement prices. Upon entering into a futures contract, the Funds are
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (continued)
required to deposit either cash or securities, representing the initial margin,
equal to a certain percentage of the contract value. Subsequent changes in the
value of the contract, or variation margin, are recorded as unrealized gains or
losses. The variation margin is paid or received in cash daily by the Funds. The
Funds realize a gain or loss when the contract is closed or expires. There were
no futures contracts held by the Funds at September 30, 1997.
E. 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. Dividend income less
foreign taxes withheld (if any) plus foreign taxes recoverable (if any) are
recorded on the ex-dividend date. Interest income is recognized on the accrual
basis. Premium and discounts (except original issue discounts) on debt
securities are not amortized.
F. 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 differing treatments relating to the expiration of net
operating losses and the recharacterization of foreign currency gains and
losses.
G. 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.
2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under terms of the investment advisory contract, Security Management
Company, LLC (SMC) agrees to provide, or arrange for others to provide, all the
services required by the Funds for a single fee (except for the Asset
Allocation, Social Awareness and Value Series of Security Equity Fund),
including investment advisory services, transfer agent services and certain
other administrative services. For Growth and Income Fund, Equity Series and
Ultra Fund this fee is equal to 2% of the first $10 million of the average daily
closing value of each Fund's net assets, 1 1/2% of the next $20 million, and 1%
of the remaining net assets of the Fund for the fiscal year. For Global Series
this fee is equal to 2% of the first $70 million of the average daily closing
value of the Series' net assets and 1 1/2% of the remaining average net assets
of the Series for the fiscal year. Additionally, SMC agrees to assume all of the
Funds' expenses, except for its fee and the expenses of interest, taxes,
brokerage commissions and extraordinary items and Class B distribution fees. SMC
also serves as Investment Advisor to the Asset Allocation, Social Awareness and
Value Series, and accordingly receives a fee equal to 1% of the average net
assets of these Series.
SMC also acts as the administrative agent and transfer agent for the
Asset Allocation, Social Awareness and Value Series, and as such performs
administrative functions, transfer agency and dividend disbursing services, and
the bookkeeping, accounting and pricing functions for each Series. For these
services, the Investment Manager receives, from Asset Allocation Series, an
administrative fee equal to .045% of the average daily net assets of the Series
plus, the greater of .10% of its average net assets or (i) $45,000 in the year
ended June 1, 1997; and (ii) $60,000 thereafter. For administrative services
provided to the Social Awareness Series and the Value Series, SMC receives an
administrative fee equal to .09% of the average daily net assets of each Series.
For transfer agent services, SMC is paid an annual fixed charge per account as
well as a transaction fee for all shareholder and dividend payments.
SMC pays a Sub-Advisor, Lexington Management Corporation (LMC), an
annual fee in an amount equal to .50% of the average daily net assets of Global
Series, for investment advisory and certain administrative services provided to
the Global Series. SMC pays Meridian Investment Management Corporation for
subadvisory services provided to the Asset Allocation Series, an annual fee
equal to the following schedule:
Average Daily Net Assets of the Series
- --------------------------------------
Annual Fees Less Than $100 Million ...................... .40%, plus
$100 Million but less than $200 Million ................ .35%, plus
$200 Million but less than $400 Million ................. .30%, plus
$400 Million or more .................................... .25%
SMC has agreed to limit the total expenses of the Asset Allocation
Series, Social Awareness Series and Value Series to 2% of the average net
assets, excluding 12b-1 fees. SMC has agreed to waive a portion of the
management fees for the Asset Allocation Series until December 31, 1997. SMC has
also agreed to waive the management fees for the Social Awareness Series and
Value Series until December 31, 1997.
The Funds have adopted Distribution Plans related to the offering of
Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The Plans provide for payments at an annual rate of 1.0% of the average net
assets of each Fund's Class B shares.
Security Distributors, Inc. (SDl), a wholly-owned subsidiary of SMC and
the national distributor for the Funds, received net underwriting commissions on
sales of Class A shares and contingent deferred sales charges on redemptions
occurring within 5 years of the date of purchase of Class B shares after
allowances to brokers and dealers in the amounts presented in the following
table:
SDI BROKER/ BROKER/
UNDERWRITING CDSC DEALER DEALER
(CLASS A) (CLASS B) (CLASS A) (CLASS B)
------- ------- -------- ----------
Growth & Income Fund $ 6,497 $ 1,741 $ 55,940 $ 85,564
Equity Series $21,344 $31,015 $778,593 $1,754,380
Global Series $ 2,930 $13,291 $ 26,859 $ 55,345
Asset Allocation Series $ 3,114 $ 1,692 $ 25,882 $ 31,946
Social Awareness Series $ 7,639 $ 267 $ 54,306 $ 32,082
Value Series $ 2,015 $ 2 $ 72,587 $ 103,444
Ultra Fund $ 5,388 $20,208 $ 29,224 $ 27,608
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
For federal income tax purposes, the amounts of unrealized appreciation
(depreciation) at September 30, 1997, were as follows:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION DEPRECIATION (DEPRECIATION)
----------- ---------- -----------
Growth & Income Fund $18,918,936 $(249,688) $18,669,248
Equity Series 300,425,818 (987,108) 299,438,710
Global Series 5,804,947 (1,270,603) 4,534,344
Asset Allocation Series 862,282 (136,148) 726,134
Social Awareness Series 1,689,008 (48,403) 1,640,605
Value Series 907,176 (50,207) 856,969
Ultra Fund 30,685,496 (438,553) 30,246,943
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (continued)
The Growth and Income Fund, Equity Series and Ultra Fund hereby respectively
designate $2,267,187, $34,713,025 and $5,506,937 as capital gain dividends paid
during the fiscal year ended September 30, 1997, for the purpose of the
dividends paid deduction on each Funds' federal income tax return.
4. INVESTMENT TRANSACTIONS
Investment transactions for the year ended September 30, 1997,
(excluding overnight investments and short-term commercial paper) are as
follows:
PROCEEDS
PURCHASES FROM SALES
------------ ------------
Growth & Income Fund $ 99,960,633 $ 99,598,523
Equity Series 460,221,504 449,109,177
Global Series 45,641,917 39,169,516
Asset Allocation Series 6,558,807 5,418,430
Social Awareness Series 9,617,933 1,830,734
Value Series 7,852,627 670,080
Ultra Fund 48,583,055 50,356,848
5. FORWARD FOREIGN EXCHANGE CONTRACTS
At September 30, 1997, Global Series had the following open forward
foreign exchange contracts to sell currency (excluding foreign currency
contracts used for purchase and sale settlements):
UNREALIZED
SETTLEMENT CONTRACT CONTRACT CURRENCY GAIN
CURRENCY DATE AMOUNT RATE RATE (LOSS)
- ------------------ ------- ---------- ------- ------- -------
British Pound 4/1/98 $1,161,148 1.59965 1.6057 ($7,025)
New Zealand Dollar 10/3/97 $917,017 0.689975 0.64165 44,315
-------
$37,290
=======
6. FEDERAL TAX STATUS OF DIVIDENDS
The income dividends paid by the Funds are taxable as ordinary income on
the shareholder's tax return. The portion of ordinary income of dividends
(including net short-term capital gains) attributed to fiscal year ended
September 30, 1997, that qualified for the dividends received deductions for
corporate shareholders was 12%, 86%, 4%, 15%, 100%, 21% and 0% of the amount
taxable as ordinary income for Growth and Income Fund, Equity Series, Global
Series, Asset Allocation Series, Social Awareness Series, Value Series and Ultra
Fund respectively, in accordance with the provisions of the Internal Revenue
Code.
7. LEGAL PROCEEDINGS
Security Ultra Fund was named as a class defendant in an adversary
proceeding filed on March 14, 1995, in a pending bankruptcy, captioned In re:
Integra Realty Resources, Inc., Integra-a Hotel and restaurant Company
(Integra), and BHC of Denver, Inc., United States Bankruptcy Court for the
District of Colorado. The adversary proceeding was brought by the Trustee for
the Integra Unsecured Creditors against the principal defendant Fidelity Capital
Appreciation Fund and over 6,000 other class defendants, including the Ultra
Fund. The Trustee alleges that the defendants, former shareholders of Integra
Realty Resources, Inc., improperly received a distribution of Integra's assets
in December 1988, when Integra distributed all of the shares of its subsidiary,
ShowBiz Pizza Time, to its shareholders, leaving insufficient resources for
Integra to continue to operate to the detriment of the Integra Unsecured
Creditors. Ultra Fund has reached a settlement agreement, with the plaintiff for
$360,870, which will be paid in October, 1997. This settlement was approved by
the Fund's Board of Directors and is reflected as other payables and other
expenses in the accompanying financial statements.
8. SHAREHOLDERS' MEETING
A special meeting of the shareholders of the Asset Allocation Series was
held on August 1, 1997. At this meeting, shareholders voted to approve a new
Sub-Advisory Contract between Security Management Company, LLC and Meridian
Investment Management Corporation. Holders of 449,320 shares out of a total of
611,069 shares of capital stock of the Series issued and outstanding on the
record date for the meeting (close of business on June 5, 1997) were represented
at the meeting. Of the shares 449,320 represented, 428,751 shares were voted
for, 11,732 shares abstained and 8,837 shares voted against.
49
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
THE SHAREHOLDERS AND BOARD OF DIRECTORS
SECURITY GROWTH AND INCOME FUND, SECURITY EQUITY FUND, AND SECURITY ULTRA FUND
We have audited the accompanying balance sheets and statements of net
assets of Security Growth and Income Fund, Security Equity Fund (comprised of
the Equity, Global, Asset Allocation, Social Awareness and Value Series) and
Security Ultra Fund (the Funds) as of September 30, 1997, and the related
statements of operations, changes in net assets, and financial highlights for
the periods indicated therein. These financial statements and the financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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. Our procedures included confirmation of investments owned as of
September 30, 1997, by correspondence with the custodian. As to securities
relating to uncompleted transactions, we performed other audit procedures. 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 the Funds at September 30, 1997, and the results of their
operations, changes in their net assets and the financial highlights for the
periods indicated above in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Kansas City, Missouri
October 31, 1997
50
<PAGE>
The Security Group of Mutual Funds
Security Growth and Income Fund
Security Equity Fund
o Equity Series
o Global Series
o Asset Allocation Series
o Social Awareness Series
o Value Series
Security Ultra Fund
Security Income Fund
o Corporate Bond Series
o U.S. Government Series
o Limited Maturity Bond Series
o High Yield Series
Security Tax-Exempt Fund
Security Cash Fund
This report is submitted for the general information of the shareholders of the
Funds. The report is not authorized for distribution to prospective investors in
the Funds unless preceded or accompanied by an effective prospectus which
contains details concerning the sales charges and other pertinent information.
SECURITY FUNDS
OFFICERS AND DIRECTORS
DIRECTORS
Donald A. Chubb, Jr.
John D. Cleland
Donald L. Hardesty
Penny A. Lumpkin
Mark L. Morris, Jr., D.V.M.
Hugh L. Thompson, Ph.D.
OFFICERS
John D. Cleland, President
James R. Schmank, Vice President and Treasurer
Mark E. Young, Vice President
Terry A. Milberger, Vice President, Equity Fund
Jane A. Tedder, Vice President
Cindy L. Shields, Assistant Vice President
Thomas A. Swank, Vice President
Amy J. Lee, Secretary
Christopher D. Swickard, Assistant Secretary
Brenda M. Harwood, Assistant Treasurer and Assistant Secretary
Security Distributors, Inc.
700 SW Harrison St.
Topeka, KS 66636-0001
(785) 431-3127
(800) 888-2461
<PAGE>
SECURITY
FUNDS
SEMI-ANNUAL
REPORT
MARCH 31, 1998
o Security
Growth and
Income Fund
o Security Equity
Fund
-Equity Series
-Global Series
-Asset
Allocation
Series
-Social
Awareness
Series
-Value
Series
-Small
Company
Series
o Security Ultra
Fund
[LOGO] Security Distributors, Inc.
<PAGE>
PRESIDENT'S COMMENTARY
May 15, 1998
To Our Shareholders:
The financial markets continued to reward investors over the last six months.
After a short-lived correction last fall, the markets began 1998 with another
rally led once again by the larger companies. This rally produced returns for
the six months ended March 31, 1998 of 17.22% for the S&P 500 Index and 11.74%
for the Dow Jones Industrial Average.
AMAZING EQUITY MARKET PERFORMANCE
The equity markets continue to defy the expectations of most forecasters, who
believed that the turmoil in southeast Asia would produce a dramatic decline in
global economic growth. This slowdown was expected to produce negative earnings
surprises which would be sufficient to dampen market sentiment. However, these
potential negatives have simply been overwhelmed by the great supply of new
investment money pouring into the markets month after month in 1998. A large
part of these cash flows is coming from a new generation of investors who are
using 401(k), 403(b), and other types of long-term investment instruments
centered around a portfolio of common stocks to maximize retirement savings.
CASH FLOWS INTO EQUITY MARKETS SHOULD
CONTINUE
We believe that these money flows, absent some unforeseen shock to change
investor psychology, are likely to continue. Although we expect a slowdown in
earnings growth due to a moderating economy, we believe that cash flows will be
sufficient to offset this negative influence on the markets. We would caution,
however, that increased volatility is to be expected and a short-lived
correction in the markets of as much as 10% to 15% could occur at any time. The
long-term fundamentals continue to be enormously positive for owners of
financial assets, and in our view, short-term volatility should be ignored by
investors who hold a long-term optimistic outlook.
ADDITIONS TO OUR PORTFOLIO MANAGEMENT TEAM
Since my last writing in the annual report, Security Management Company, LLC has
made some major additions to our investment management team. Security Growth and
Income Fund is now managed by Michael Petersen, Senior Portfolio Manager. Mike
joined the Security family in November 1997, bringing with him ten years of
experience in managing a growth and income fund for another organization. Jim
Schier, Portfolio Manager for the Value Series, is also taking on responsibility
for the Security Ultra Fund portfolio. We have added a new Small Company Series
which will be subadvised for us by Strong Capital Management, Inc., with Ron
Ognar of that organization acting as lead portfolio manager.
In the pages that follow, our portfolio managers discuss their performance as
well as the current structure of the portfolios and their outlook for the months
ahead. As always, we appreciate your continuing investments in Security
products. We invite your questions and comments at any time.
John Cleland, President
The Security Funds
1
<PAGE>
MANAGER'S COMMENTARY
SECURITY GROWTH AND INCOME FUND
May 15, 1998
To Our Shareholders:
The Growth and Income Fund returned 8.55% in the first six months of the fiscal
year, underperforming its Lipper peer group's average return of 12.49% primarily
because of its orientation toward small-cap and midcap stocks, which returned
less than their large-cap counterparts.1 We began restructuring the portfolio
toward the larger-cap growth and value names at the beginning of 1998. Because
of the lower returns year to date in the small-cap markets and the high
valuations in the large-cap issues, this must be a slow and careful process.
OVERALL RESTRUCTURING STRATEGY
Our general strategy is to realign the sector weightings in the Fund to more
closely resemble those of other growth and income funds. This includes
overweighting income-oriented sectors such as energy and utilities while
underweighting the pure growth areas like health care and technology. The focus
is primarily to have a value orientation, concentrating on stocks with earnings
per share potential better than that of the overall S&P 500 average. For
example, the paper industry is currently undervalued because of a perceived lack
of pricing power. This situation is beginning to turn around, and analysts
expect 10% to 20% earnings growth in the industry this calendar year.
Additionally, we will target a portfolio yield which is about 50% above that of
the S&P 500--our target now is a 2.5% yield versus the S&P's 1.6%.
FAVORED INDUSTRIES
We currently overweight the energy industry, including such integrated oil
companies as Phillips Petroleum Company, Amoco Corporation, and Kerr McGee
Corporation. This strategy is based on expectations that oil prices will move up
more on a percentage basis than the overall Consumer Price Index or Producer
Price Index.
The utility sector is another area of emphasis. We have added electric and
natural gas utilities to the portfolio including Consolidated Natural Gas
Company, American Electric Power Company, Inc., and Texas Utilities Company.
While earnings growth is expected to slow in many S&P 500 companies, these
utilities are predicted to show better-than-average earnings increases.
Additionally, their valuations are presently more attractive than those in many
other sectors.
Within the broad capital goods category, waste management companies have been
out of favor for a very long time. Because of this disfavor, they now display
attractive valuations. We believe that ongoing consolidation in the industry
should lead to better pricing potential, which will in turn strengthen profits.
Companies in this category include Browning Ferris, perceived as a likely merger
candidate, and Waste Management, which has benefited from its purchase by USA
Waste which should close by the end of this
2
<PAGE>
MANAGER'S COMMENTARY (continued)
SECURITY GROWTH AND INCOME FUND
May 15, 1998
calendar year. Waste Management's stock has risen nearly 40% from its pre-buyout
level.
SUMMARY OF PLANS FOR THE NEXT SIX MONTHS
The overall strategy in the portfolio restructuring is to keep the risk--the
pattern of volatility in returns over time--lower than that of competing funds.
We hope to compile a portfolio of stocks which will generate higher earnings
than those of the average growth and income fund. We plan to increase the
large-cap holdings to be about half of the total assets. We also will strive to
reduce risk by diversifying the portfolio, increasing the number of holdings
from sixty at the beginning of this fiscal year to about 105 names. We plan to
maintain a bond position of about 10% of total portfolio assets, emphasizing
corporate bonds yielding about 8% to 9%.
Michael A. Petersen
Portfolio Manager
(1) Performance figures are based on Class A shares and do not reflect deduction
of the sales charge.
--PERFORMANCE--
TOP 5 HOLDINGS**
% of
net assets
----------
Equitable Resources, Inc. 2.8%
AlliedSignal, Inc. 2.0%
Wells Fargo & Company 1.9%
Texaco, Inc. 1.7%
St. Paul Companies, Inc. 1.7%
**At March 31, 1998
AVERAGE ANNUAL RETURNS
As of March 31, 1998
1 year 5 years 10 years
------ ------- --------
A Shares 42.7% 15.7% 13.0%
A Shares with sales charge 34.6% 14.3% 12.3%
B Shares 41.3% 15.3% N/A
(10-19-93)
(since inception)
B Shares with CDSC 36.3% 14.9% N/A
(10-19-93)
(since inception)
The performance data above represents past performance which is not predictive
of future results. The investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The figures above do not reflect
deduction of the maximum front-end sales charge of 5.75% for Class A shares or
contingent deferred sales charge of 5% for Class B shares, as applicable, except
where noted. Such figures would be lower if the maximum sales charge were
deducted.
3
<PAGE>
MANAGER'S COMMENTARY
SECURITY EQUITY FUND - EQUITY SERIES
May 15, 1998
To Our Shareholders:
The stock market turned in very different performances in the fourth quarter of
1997 and the first quarter of 1998. The benchmark S&P 500 Stock Index returned a
meager 2.87% in the last three months of last year, but regained momentum and
climbed 13.95% in the first quarter this year. The Equity Series mirrored this
diverse performance, but overall fared very well as it rose 17.32% for the first
half of the fiscal year, comparing favorably with its Lipper peer group average
of 11.55%.(1)
CONSISTENT EARNERS PROVIDE FAVORABLE RETURNS
The portfolio continues to perform well due to our concentration on high quality
companies with consistent earnings growth records. Because we expect an earnings
slowdown in coming months as a result of the weak Asian economies, we have no
plans to shift away from this strategy at this time. In an environment of
slowing earnings those corporations which have proven their ability to generate
consistent earnings are likely to continue doing so. Among the steady growers
are companies in the consumer nondurables sector including health care giants
Schering Plough Corporation, SmithKline Beecham PLC ADR, and American Home
Products Corporation. Over the past six months Schering rose nearly 60%, and the
other two were each up close to 30%. Other consumer nondurables which have
continued to perform well are Colgate-Palmolive Company, Procter & Gamble
Company, and Gillette Company, all of which rose more than the S&P 500.
DECLINING INTEREST RATES BOOST FINANCIAL COMPANIES
The environment for stocks in the financial sector remained positive as interest
rates continued to decline. The insurance segment of the portfolio is
overweighted versus the corresponding segment in the S&P 500. Among our holdings
in this group are multiline insurors American International Group, Inc. and
Allstate Corporation. We also own Lincoln National Corporation, which sold its
property and casualty lines and now focuses on life and health insurance as well
as other financial services.
Also in the financial sector in the portfolio are stocks of banks whose primary
source of revenue is fee-based services. For example, Bank of New York Company,
Inc., derives a large portion of its income from processing services. They are
the largest servicer of American Depositary Receipts, and are continuing to
expand their other lines. Northern Trust Corporation remains a major player in
the fee-based trust services arena. We also own Federal National Mortgage
Association ("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie
Mac") stocks, both of which are benefiting from their mortgage businesses in a
low interest rate climate.
Although the portfolio has performed very well over the six months, there are
some areas that have hurt total return. Telephone issues outperformed general
market indexes late in 1997 when investors were frightened by the events in Asia
and sought out stocks in companies whose earnings were largely
4
<PAGE>
MANAGER'S COMMENTARY (continued)
SECURITY EQUITY FUND - EQUITY SERIES
May 15, 1998
domestically generated. Our low weighting in telephone stocks was harmful, as
this sector has a large weighting in the benchmark S&P 500 Index. We have been
adding names in this area in recent months, including WorldCom, Inc., LCI
International, and Lucent Technologies, Inc.
PLANS FOR THE COMING SIX MONTHS
Looking forward, we plan to stay with our practice of buying those companies
which display consistent earnings growth, and which have a low level of economic
sensitivity. We also prefer companies with little earnings exposure in Asia at
the present time. We presently hold about 95 different names in the portfolio,
and plan to increase that number to provide a measure of safety through
diversification. As the opportunity for earnings disappointments increases,
having smaller exposure in any one name reduces the impact of negative earnings
surprises.
Terry Milberger
Portfolio Manager
(1)Performance figures are based on Class A shares and do not reflect deduction
of the sales charge.
--PERFORMANCE--
TOP 5 HOLDINGS**
% of
net assets
----------
General Electric Company 1.8%
Tyco International, Ltd. 1.8%
Payless ShoeSource, Inc. 1.8%
Schering-Plough Corporation 1.7%
Microsoft Corporation 1.7%
**At March 31, 1998
AVERAGE ANNUAL RETURNS
As of March 31, 1998
1 year 5 years 10 years
------ ------- --------
A Shares 47.1% 21.5% 19.3%
A Shares with sales charge 38.7% 20.1% 18.6%
B Shares 45.4% 21.6% N/A
(10-19-93)
(since inception)
B Shares with CDSC 40.4% 21.3% N/A
(10-19-93)
(since inception)
The performance data above represents past performance which is not predictive
of future results. The investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The figures above do not reflect
deduction of the maximum front-end sales charge of 5.75% for Class A shares or
contingent deferred sales charge of 5% for Class B shares, as applicable, except
where noted. Such figures would be lower if the maximum sales charge were
deducted.
5
<PAGE>
MANAGER'S COMMENTARY
SECURITY EQUITY FUND - GLOBAL SERIES
May 15, 1998
[LOGO] Subadvisor - LEXINGTON
MANAGEMENT CORPORATION
To Our Shareholders:
The Global Series of Security Equity Fund returned 5.63% for the six-month
period ended March 31, 1998, underperforming the Lipper peer group average of
7.79%.(1) The Series' underperformance occurred during the first half of the
period when a substantial underweighting in U.S. equities combined with sharp
falls in Asian markets to lead to weak returns. The second three months of the
fiscal period produced better results, primarily because of strong gains in
European equities. During this three-month period the Series increased 15.30%
versus the peer group's average 13.55%.
HOW THE MARKETS LOOK NOW
The current investment environment remains extremely favorable for both U.S. and
European equities. Low inflation has allowed interest rates to fall and remain
at low levels. Merger and acquisition activity in North America and Europe has
gained momentum. Strategic buyers believe size to be a competitive advantage in
the global marketplace. Low interest rates have made deals easier to finance.
Investors on both continents continue to pour money into equities due to
demographic needs to fund retirement.
A COMPARISON OF EUROPEAN AND U.S. MARKET OUTLOOKS
U.S. equities face several difficult hurdles, however. The strong dollar has
made U.S. products less competitive with the rest of the world. Due to Asian
devaluation and the consequent recessions there, the traded goods sector of the
U.S. economy will come under greater attack. Profit margins are already at very
high levels while wage pressures build due to low unemployment levels. Finally,
valuations look particularly excessive given the anemic profit outlook for most
U.S. companies.
The portfolio remains heavily overweighted toward European equities due to
several factors. Corporate restructuring in Europe is at a much earlier stage
than in the U.S., so profitability levels have room for substantial expansion.
Unlike the U.S. investors, individuals in Europe are only now discovering equity
investing. The flow of funds argument is much stronger in Europe as equities in
the region gain market share from other asset groups. Although valuation levels
are also high, European profits should grow at a much faster rate than U.S.
profits.
OTHER WORLD MARKETS
Japan continues to struggle as government policy remains inadequate to address
deep structural problems. The Japanese economy is currently in recession with
weakness throughout the rest of Asia intensifying Japanese problems. Stocks
there now look cheap on both a price-to-book value and a cash flow basis. Until
the government and corporations move toward a more shareholder-friendly system,
the economy and equities will continue to struggle. China is clearly taking a
leadership role in southeast Asia. Strong Chinese leadership is a bright spot in
the region and China appears unlikely to devalue its currency. Restructuring
within China is also creating exciting long-term opportunities.
In other emerging regions, Latin America is suffering from Asian fallout. Weak
commodity prices have pressured Latin economies and currencies, forcing
6
<PAGE>
MANAGER'S COMMENTARY (continued)
SECURITY EQUITY FUND - GLOBAL SERIES
May 15, 1998
interest rates higher while fiscal policy is tightened. Greece, with its entry
into the European monetary union, provides an early stage investment
opportunity. If the Greek government holds its resolve and privatizes industry
while controlling spending, Greek equities should shine.
PORTFOLIO PLANS FOR THE COMING PERIOD
The Global Series continues to emphasize European equities with a heavily
overweighted position. European stocks should provide strong profit growth due
to management refocus on shareholder value. Japanese equities currently
represent a small percentage of the portfolio, but could offer great
opportunities in the future if managements begin to restructure and focus on
profits and shareholder interests. Latin American equities are avoided due to a
weakening profit outlook and difficult macroeconomic conditions. Finally, Greek
equities may be added if the government continues to show its resolve in
fighting the unions. Interest rates are likely to fall sharply in Greece, and
equities are substantially cheaper than other European stocks.
Richard Saler
Portfolio Manager
Alan Wapnick
Portfolio Manager
(1)Performance figures are based on Class A shares and do not reflect deduction
of the sales charge.
Investing in foreign countries may involve risks, such as currency fluctuations
and political instability, not associated with investing exclusively in the U.S.
--PERFORMANCE--
TOP 5 HOLDINGS**
% of
net assets
----------
Imax Corporation ADR 2.4%
Whitbred PLC 1.9%
Elan Corporation PLC ADR 1.8%
Foster's Brewing Group, Ltd. 1.8%
Teva Pharmaceutical
Industries, Ltd. 1.7%
**At March 31, 1998
AVERAGE ANNUAL RETURNS
As of March 31, 1998
1 year Since Inception
------ ---------------
A Shares 20.4% 12.0%
(10-1-93)
A Shares with sales charge 13.4% 10.6%
(10-1-93)
B Shares 19.1% 11.2%
(10-19-93)
B Shares with CDSC 14.1% 10.7%
(10-19-93)
The performance data above represents past performance which is not predictive
of future results. The investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The figures above do not reflect
deduction of the maximum front-end sales charge of 5.75% for Class A shares or
contingent deferred sales charge of 5% for Class B shares, as applicable, except
where noted. Such figures would be lower if the maximum sales charge were
deducted.
7
<PAGE>
MANAGER'S COMMENTARY
SECURITY EQUITY FUND - ASSET ALLOCATION SERIES
May 15, 1998
[LOGO] MERIDIAN
INVESTMENT
MANAGEMENT
Subadvisor: Meridian Investment Management Corporation
To Our Shareholders:
Global equity markets, after bouncing back from a rapid October decline, raced
to new highs as the first quarter of 1998 ended. Already this year many of these
markets have posted returns far in excess of annual norms. The favorable
investing environment has been fueled by solid economic growth and low
inflation. The Asset Allocation Series was up 10.52% in the first quarter of
this year following a weak fourth quarter of 1997, posting a 3.63% total return
for the six month period ended March 31, 1998.1 The Lipper peer group average
rose 8.72% in the 1998 first quarter and 5.39% over the six months.
FOREIGN MARKETS HAVE BECOME STRONG PERFORMERS
The U.S. stock market's well-publicized advance has been overshadowed by the
performance of many foreign markets. Because of attractive valuations abroad,
the Series has maintained about 40% of its assets in foreign stocks for much of
the last two years. Four of the portfolio's five country holdings outpaced the
U.S. market in the last six months. Italian stocks led the global advance,
rallying nearly 60% over the period. Returns in Germany, Belgium, and Denmark
have been approximately 20% each, outpacing the S&P 500's 17% move. Thus far,
the performance of the Japanese market has been disappointing. With valuations
at historic lows and investor sentiment unanimously poor, a market bottom should
be near. We believe that the Japanese market will contribute positively to
performance in 1998.
U.S. STOCK MARKET ALLOCATION
Currently approximately 35% of portfolio assets are invested in the U.S. stock
market. Sectors of concentration include Leisure, Technology, and Health Care.
Within the Leisure sector the cable, entertainment, and restaurant industries
all were strong performers the last six months. Such household names as The Walt
Disney Company and McDonald's Corporation were significant contributors to the
Series' performance. Leisure stocks remain good values and will likely be
emphasized in the portfolio throughout 1998. The technology sector, hit hard in
the fourth quarter of 1997, has bounced back. Large capitalization stocks within
the communications equipment and computer peripheral industries led the first
quarter rally. The Series benefited from the technology rebound by owning stocks
within these industries, along with networking and equipment semiconductor
stocks. Health care stocks, also, participated in the first quarter rally.
OTHER SECTOR ALLOCATIONS
Our 20% weighting in U.S. bonds added to performance over the last six months as
well. The strength in the domestic bond market, as evidenced by the yield on the
thirty-year bond falling well below 6%, appears likely to continue. With
inflation near historic lows and real yields above their long term norms, our
outlook for the U.S. bond market is favorable. We believe it could garner
additional investors' attention should equity markets rise to levels
8
<PAGE>
MANAGER'S COMMENTARY (continued)
SECURITY EQUITY FUND - ASSET ALLOCATION SERIES
May 15, 1998
not justified by valuations. Then, additional bond investments could be used as
a temporary defensive position.
We have maintained a 5% investment in gold stocks and a 5% exposure to real
estate in the portfolio. These investments aided portfolio diversification and
contributed positively to performance thus far in 1998.
The Asset Allocation Series continues to emphasize foreign and domestic stocks.
Much of the equity exposure that suffered in the fourth quarter of 1997 has
bounced back and led the market in 1998. With the Series up 10.52% in the first
quarter, we will remain diligent in trying to preserve gains and capitalize on
new opportunities.
Patrick Boyle
Portfolio Manager
(1)Performance figures are based on Class A shares and do not reflect deduction
of the sales charge. Management fee waivers reduced Fund expenses during the
period covered by this report and in the absence of such waiver the performance
quoted would be reduced.
Investing in foreign countries may involve risks, such as currency fluctuations
and political instability, not associated with investing exclusively in the U.S.
--PERFORMANCE--
TOP 5 EQUITY HOLDINGS**
% of
net assets
----------
Bayerische Motoren
Werke (BMW) AG 1.5%
Allianz AG 1.5%
Telecom Italia
Mobile SPA 1.4%
Assicurazioni Gererali 1.0%
Tele-Communications, Inc. 1.0%
**March 31, 1998
AVERAGE ANNUAL RETURNS
As of March 31, 1998
1 year Since Inception
------ ---------------
A Shares 16.5% 13.5%
(6-1-95)
A Shares with sales charge 9.8% 11.1%
(6-1-95)
B Shares 15.5% 12.4%
(6-1-95)
B Shares with CDSC 10.5% 11.3%
(6-1-95)
The performance data above represents past performance which is not predictive
of future results. The investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The figures above do not reflect
deduction of the maximum front-end sales charge of 5.75% for Class A shares or
contingent deferred sales charge of 5% for Class B shares, as applicable, except
where noted. In addition, the investment manager waived a portion of the
management fee for the Series for the period ended January 31, 1998 and began
charging management fees February 1, 1998. Performance figures would be lower if
the maximum sales charge and advisory fee were deducted.
9
<PAGE>
MANAGER'S COMMENTARY
SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES
May 15, 1998
To Our Shareholders:
The Social Awareness Series performed well compared with its peer group of
funds, returning 15.46% over the first half of the fiscal year versus the peer
group average 11.55%.(1) In the fourth quarter of 1997 (the first quarter of the
fiscal year) the stock markets were weak because of concerns about the effect
that the southeast Asian economic crisis would have on stocks. The first quarter
of 1998 saw a reversal of this negative outlook, as earnings reports came fairly
in line with estimates. Investors became more optimistic with the passage of
time, deciding that the Asian situation might have a less negative impact than
originally believed.
AREAS OF STRONG PERFORMANCE
Early in the fourth quarter of 1997 we increased our position in communications
services, concentrating particularly on the regional Bell operating companies
(RBOCs) and long distance providers. These include names such as AT&T
Corporation, Sprint Corporation, Ameritech Corporation, BellSouth Corporation,
Bell Atlantic Corporation, and SBC Communications, Inc. The sector held less
than a 2% position in the portfolio prior to the beginning of the fiscal year in
October, and was built up to approximately 9% by the end of March.
Communications Services has proven to be a defensive sector during the turmoil
generated by the Asian crisis because of its domestic orientation.
Various portions of the financial sector also performed well because of the
continuing decline in interest rates. The Social Awareness Series portfolio has
representation in diversified financial companies such as mortgage lenders
Federal National Mortgage Association ("Fannie Mae") and Federal Home Loan
Mortgage Company ("Freddie Mac"). Another strong performer in the sector was
H.F. Ahmanson and Company, a savings and loan institution which announced its
intentions to merge with financial services company, Washington Mutual, Inc. We
also hold regional banking companies Bank of New York Company, Inc., and
Northern Trust Corporation, which have very limited exposure to Asian events. On
average over the first half of the fiscal year the financial sector has been
close to 20% of the total portfolio.
A SOCIAL INVESTMENT NEWS UPDATE
As many socially-oriented investors are aware, last September the Securities and
Exchange Commission (SEC) proposed new rules which would have made it much more
difficult for shareholders to place resolutions on proxy ballots. A large
coalition of over 400 socially concerned businesses, investment companies,
religious organizations, and other groups formed a coalition to protest these
proposed rules. We are pleased to report that the two top advisers on
shareholder issues appointed to make recommendations to the SEC on the proposals
essentially sided with the coalition and recommended reverting to the existing
rules. It is widely expected that the SEC will adopt these recommendations in
the near future.
10
<PAGE>
MANAGER'S COMMENTARY (continued)
SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES
May 15, 1998
THE OUTLOOK FOR THE SECOND HALF OF THE FISCAL YEAR
Along with other portfolio managers at Security Management Company, LLC, we
expect corporate profits to slow in the next two quarters. Since stock prices
are currently at high valuation levels, earnings surprises could have strong
negative impact on share prices. Believing caution to be the safest avenue, we
plan to further diversify the portfolio by adding more names and keeping the
sizes of holdings in any one company relatively small.
Cindy Shields
Portfolio Manager
(1)Performance figures are based on Class A shares and do not reflect deduction
of the sales charge. Management fee waivers reduced Fund expenses during the
period covered by this report and in the absence of such waiver the performance
quoted would be reduced.
--PERFORMANCE--
TOP 5 HOLDINGS**
% of
net assets
----------
Microsoft Corporation 3.0%
Coca-Cola Company 3.0%
Merck & Company, Inc. 2.6%
Intel Corporation 2.2%
Johnson & Johnson 2.2%
**At March 31, 1998
AVERAGE ANNUAL RETURNS
As of March 31, 1998
1 year Since Inception
------ ---------------
A Shares 44.9% 25.9%
(11-1-96)
A Shares with sales charge 36.6% 20.7%
(11-1-96)
B Shares 43.1% 24.5%
(11-1-96)
B Shares with CDSC 38.1% 21.9%
(11-1-96)
The performance data above represents past performance which is not predictive
of future results. The investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The figures above do not reflect
deduction of the maximum front-end sales charge of 5.75% for Class A shares or
contingent deferred sales charge of 5% for Class B shares, as applicable, except
where noted. In addition, the investment manager waived the management fee for
the Series for the period ended January 31, 1998 and began charging management
fees February 1, 1998. Performance figures would be lower if the maximum sales
charge and advisory fee were deducted.
11
<PAGE>
MANAGER'S COMMENTARY
SECURITY EQUITY FUND - VALUE SERIES
May 15, 1998
To Our Shareholders:
The Value Series continues the excellent performance that has occurred since its
inception in May 1997. For the six months concluded March 31, 1998 the Series
returned 14.56% versus its Lipper peer group average of 12.49%.(1) Its
benchmark, the S&P 500/Barra Value Index, rose 12.92% over the same period.
PRIMARY CONTRIBUTORS TO STRONG PERFORMANCE
During the first quarter of 1998, the total return of the portfolio was enhanced
by the selection of stocks in the technology sector. Our choices of companies
have been geared toward the computer services portion of the sector, an area
benefiting from stable earnings growth. The companies in this category have in
general been less susceptible to earnings announcement surprises than other
technology areas. In addition, computer services are perceived by investors to
have added strategic value in light of the takeover bid for Computer Sciences by
Computer Associates.
Comverse Technology, Inc., a provider of value-added hardware and software for
multimedia communications and voice processing applications, rose over 38% after
reporting record earnings in the last quarter of 1997. Electronics for Imaging,
Inc., which develops products and technologies that enable digital color
printing over computer networks, also rose over 30% after being recommended
highly by industry analysts.
OTHER AREAS OF STRENGTH
Other strong performers during the period included energy stocks Quaker State
Corporation and Tesoro Petroleum Corporation. Quaker State's share price rose
late in the period on buyout speculation, while Tesoro increased after receiving
favorable recommendations from several Wall Street analysts. In communications,
Metromedia International Group, Inc., has been a strong performer in part
because of its ownership of cellular licenses in emerging markets where
communication structures are in the early stages of expansion.
In some cases the portfolio benefited from what it didn't own. Sectors which
were underweighted relative to the benchmark index include utilities, banks, and
other economically sensitive sectors. These areas underperformed in general when
compared with the broad market returns, and our underweighting boosted our
performance versus other funds in the peer group.
STRATEGIES FOR FUTURE PURCHASES
The Value Series ideally seeks to capitalize on two types of investment
opportunities. The first is an early-stage growth company which possesses
internal dynamics that may reduce its dependency overall economic conditions. We
would purchase these stocks at no more than very modest premiums to general
market valuation levels in order to avoid those "high expectations" stocks
generally owned by
12
<PAGE>
MANAGER'S COMMENTARY (continued)
SECURITY EQUITY FUND - VALUE SERIES
May 15, 1998
aggressive, short-term oriented investors. Stocks in this category which can
still be purchased at attractive prices may be clouded by some negative issue or
concern, or perceived as broken growth stocks because the sector is experiencing
a temporary difficulty.
The second opportunity lies in companies which have historically been
underachievers but have the potential to significantly improve their
performance. Such companies may be in the early stages of a restructuring or
reorganization process that can provide the basis for sustained earnings
acceleration. They would ideally have an attractive franchise value that could
induce outsiders to consider improving the company if current management is
unable to accomplish its goals.
Many of these opportunities are present today predominantly in the small-cap and
midcap market sectors. I expect the Value Series to focus on these areas as we
move through the second half of the fiscal year.
Jim Schier
Portfolio Manager
(1)Performance figures are based on Class A shares and do not reflect deduction
of the sales charge. Management fee waivers reduced Fund expenses during the
period covered by this report and in the absence of such waiver the performance
quoted would be reduced.
--PERFORMANCE--
TOP 5 HOLDINGS**
% of
net assets
----------
Mylan Laboratories, Inc. 3.9%
Comverse Technology, Inc. 3.8%
Computer Sciences Corporation 3.1%
Hasbro, Inc. 3.0%
Angelica Corporation 2.8%
** At March 31, 1998
AVERAGE ANNUAL RETURNS
As of March 31, 1998
Since Inception
---------------
A Shares 48.4%
(5-1-97)
A Shares with sales charge 39.8%
(5-1-97)
B Shares 47.2%
(5-1-97)
B Shares with CDSC 42.2%
(5-1-97)
The performance data above represents past performance which is not predictive
of future results. The returns have been calculated from May 1, 1997 (date of
inception) to March 31, 1998, and are not annualized. The investment return and
principal value of an investment in the fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The figures above do not reflect deduction of the maximum front-end sales
charge of 5.75% for Class A shares or contingent deferred sales charge of 5% for
Class B shares, as applicable, except where noted. In addition, the investment
manager waived the management fee for the Series for the period ended January
31, 1998 and began charging management fees February 1, 1998. Performance
figures would be lower if the maximum sales charge and advisory fee were
deducted.
13
<PAGE>
MANAGER'S COMMENTARY
SECURITY EQUITY FUND - SMALL COMPANY SERIES
May 15, 1998
[LOGO] STRONG CAPITAL MANAGEMENT, INC.
To Our Shareholders:
The Small Company Series began operations on October 15, 1997. For the period
since inception the Series returned 7.47%.(1) For the similar period the
benchmark Russell 2000 Index of small-cap stocks gained 4.21%, and the Lipper
peer group of small company funds rose 4.46%.
ECONOMIC ENVIRONMENT DURING THE PERIOD
The concerns of late 1997 carried over to the new year, and January saw cautious
investors, leery of the effects of the Asian slowdown, create softness in equity
prices. When fourth quarter earnings reports generally met expectations, buyers
returned to the market and propelled the major indexes to all-time highs.
Worries about profit margin squeezes continued to abound in an environment of
full employment and expectations of price competition from Asian imports.
However, these concerns were offset by strong cash flows into equities and the
absence of inflation at both the producer and consumer levels.
The market generally shrugged off a deceleration of corporate earnings growth,
resulting in further expansion of valuation measures. Flush with cash flows and
discounting fears of impending global financial collapse, investors continued
their affection for the liquidity of large-cap stocks. Newfound enthusiasm for
sectors which were oversold in late 1997, such as technology, gave rise to a
healthy broadening of the market in February and March.
SECTOR PERFORMANCE IN THE PORTFOLIO
Strong performance from the overweight retail and technology sectors and
commercial services group helped the portfolio outperform its benchmark for the
first quarter. Gains were slightly offset by weakness in oil service stocks and
the soft financial sector, in which the portfolio's real estate holdings fared
poorly. Healthcare and media holdings were solid, if unspectacular, contributors
to overall positive returns. Stellar performers were quite diverse, including an
aerospace and defense stock (Orbital Sciences Corporation), a food company
(American Italian Pasta Company), a diversified drug firm (Biovail, Inc.), and a
regional airline (Midwest Express Holdings, Inc.).
During the quarter, holdings of consumer cyclicals and oil service stocks were
trimmed and financials, particularly real estate stocks, were significantly
reduced. We used proceeds and inflows to the portfolio to expand holdings in the
commercial service and computer service groups, diversify the portfolio's health
care stocks, and increase weighting to the retail sector. We also initiated
positions in two companies in the basic material sector.
14
<PAGE>
MANAGER'S COMMENTARY (continued)
SECURITY EQUITY FUND - SMALL COMPANY SERIES
May 15, 1998
OUR THOUGHTS ABOUT THE COMING MONTHS
A gradual broadening of the market to secondary issues is a healthy and
important force propelling the ongoing bull market. However, equity valuations
are at very lofty levels, by all commonly accepted measures. We must continue to
closely monitor the Asian situation for negative effects on corporate earnings,
as well as the potential overheating of the domestic economy. We remain
committed to investing in premier smaller long-term growth companies with sound
managements, selling at reasonable valuations.
Ron Ognar
Portfolio Manager
(1)Performance figures are based on Class A shares and do not reflect deduction
of the sales charge. Management fee waivers reduced Fund expenses during the
period covered by this report and in the absence of such waiver the performance
quoted would be reduced.
--PERFORMANCE--
TOP 5 HOLDINGS**
% of
net assets
----------
Lamar Advertising Company 3.3%
Romac International, Inc. 2.8%
Information Management
Resources, Inc. 2.6%
Sinclair Broadcast Group, Inc. 2.4%
Biovail Corporation International 2.4%
** At March 31, 1998
AVERAGE ANNUAL RETURNS
As of March 31, 1998
Since Inception
---------------
A Shares 7.5%
(10-15-97)
A Shares with sales charge 1.3%
(10-15-97)
B Shares 7.1%
(10-15-97)
B Shares with CDSC 2.1%
(10-15-97)
The performance data above represents past performance which is not predictive
of future results. The returns have been calculated from October 15, 1997 (date
of inception) to March 31, 1998, and are not annualized. The investment return
and principal value of an investment in the fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The figures above do not reflect deduction of the maximum front-end sales
charge of 5.75% for Class A shares or contingent deferred sales charge of 5% for
Class B shares, as applicable, except where noted. In addition, the investment
manager waived the management fee for the Series for the period ended March 31,
1998 and has agreed to continue waiving its fee until September 30, 1998.
Performance figures would be lower if the maximum sales charge and advisory fee
were deducted.
15
<PAGE>
MANAGER'S COMMENTARY
SECURITY ULTRA FUND
May 15, 1998
To Our Shareholders:
The Security Ultra Fund got off to a slow start in the first half of the current
fiscal year with a 7.24% total return, compared with 8.22% for its Lipper peer
group.1 With a change in portfolio managers in mid-December came a planned
restructuring which we believe will position the Fund for improved performance
in the months ahead. In general, we have shifted out of some lower-growth
companies into those with a higher growth potential. The capital goods and
finance sectors have been reduced, while health care and technology have been
increased.
STRONG PERFORMERS IN THE FIRST HALF
The greatest contributor to positive performance in recent months occurred in a
financial sector holding. Insurance company AFLAC, Inc., gained investor favor
after its management made positive comments about its earnings prospects. The
financial sector overall, however, was a weak performer after the Asian economic
crisis unfolded. Because we had a smaller weighting in financials than that of
the benchmark index, the impact on our total return was less.
The energy sector benefited from an increase in oil prices. Our shares in Quaker
State Corporation rose in value on buyout speculation. Another energy holding,
Tesoro Petroleum Corporation, increased after receiving favorable
recommendations from several Wall Street analysts.
AREAS OF WEAKER PERFORMANCE
Earnings disappointments played a large part in the underperformance of Ultra
Fund. ADC Telecommunications, Inc., a manufacturer of transmission and
networking systems, announced in January that its earnings were held back by
slower-than-expected demand. Dura Pharmaceuticals, Inc., dropped 37% in value
after announcing in late February that its earnings and sales would not meet
expectations. A third company, CompUSA, which retails and resells personal
computers, also said earnings would fail to meet expectations as personal
computer prices continued to fall.
PLANS FOR THE COMING MONTHS
As we enter the second half of the fiscal year we plan to keep our technology
sector weighting high, focusing on areas such as computer services, software,
and telecommunications. We avoid heavy concentrations in personal computer
stocks, hardware manufacturers, and peripherals because of the potential for
slowing earnings growth, anticipated profit margin problems, and current high
valuations.
16
<PAGE>
MANAGER'S COMMENTARY (continued)
SECURITY ULTRA FUND
May 15, 1998
Health care will also be a large weighting, with emphasis on less well-known
companies whose prices are at smaller premiums than their big-name
pharmaceutical counterparts. We prefer manufacturers who are in the early stages
of new product introductions, and whose stock prices may be penalized simply
because of their smaller sizes.
We are anticipating a more difficult stock market environment for the next few
months. Valuations are historically very high now, making it difficult to find
attractive issues for purchase. Profitability levels are high as well, and may
come under pressure because of slowing revenue growth and higher costs from
items such as wage inflation. We will continue to search for reasonably priced
growth issues.
Jim Schier
Portfolio Manager
(1)Performance figures are based on Class A shares and do not reflect deduction
of the sales charge.
--PERFORMANCE--
TOP 5 HOLDINGS**
% of
net assets
----------
Comverse Technology, Inc. 4.6%
Mylan Laboratories, Inc. 4.3%
AFLAC, Inc. 2.7%
American Management
Systems, Inc. 2.4%
Northern Trust Corporation 2.0%
**At March 31, 1998
AVERAGE ANNUAL RETURNS
As of March 31, 1998
1 year 5 years 10 years
------ ------- --------
A Shares 41.2% 13.3% 11.0%
A Shares with sales charge 33.0% 11.9% 10.4%
B Shares 39.9% 12.1% N/A
(10-19-93)
(since inception)
B Shares with CDSC 34.9% 11.7% N/A
(10-19-93)
(since inception)
The performance data above represents past performance which is not predictive
of future results. The investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The figures above do not reflect
deduction of the maximum front-end sales charge of 5.75% for Class A shares or
contingent deferred sales charge of 5% for Class B shares, as applicable, except
where noted. Such figures would be lower if the maximum sales charge were
deducted.
17
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY GROWTH AND INCOME FUND
PRINCIPAL
AMOUNT OR
NUMBER OF MARKET
PREFERRED STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
BANKING AND CREDIT - 0.6%
California Federal Bank, 9.125% .................... 17,050 $ 468,875
California Federal Bank, 11.50% .................... 1,875 212,344
------------
681,219
COMMUNICATIONS - 0.2%
CSC Holdings, Inc. ................................. 1,788 204,771
ENTERTAINMENT - 0.3%
Time Warner, Inc. .................................. 278 311,012
PUBLISHING & PRINTING - 0.3%
K-III Communications Corporation ................... 2,500 266,250
------------
Total preferred stocks - 1.4% ...................... 1,463,252
TRUST PREFERRED SECURITIES(1)
- -----------------------------
FINANCE - 0.4%
S I Financing Inc., 9.5% - 2026 .................... 7,500 202,031
IBJ Preferred Capital Company, LLC,
8.79% - 2049 ..................................... $ 200,000 193,500
------------
395,531
CORPORATE BONDS
- ---------------
AEROSPACE & DEFENSE - 0.1%
Burke Industries, Inc., 10.0% - 2007 ............... $ 100,000 106,375
BANKING & CREDIT - 0.5%
BF Saul REIT, 11.625% - 2002 ....................... $ 200,000 212,250
BF Saul REIT, 9.75% - 2008 ......................... $ 100,000 101,000
Bay View Capital Corporation,
9.125% - 2007 .................................... $ 100,000 105,000
FCB/NC Capital Trust, Inc.,
8.05% - 2028 ..................................... $ 125,000 126,250
------------
544,500
BROADCAST MEDIA - 0.2%
Allbritton Communications Company,
9.75% - 2007 ..................................... $ 125,000 132,188
Allbritton Communications, Inc.,
8.875% - 2008 .................................... $ 50,000 50,625
------------
182,813
CABLE SYSTEMS - 0.4%
Adelphia Communications, Inc.,
8.375% - 2008 .................................... $ 125,000 125,313
Diamond Holdings, Inc.,
9.125% - 2008 .................................... $ 125,000 128,750
Jones Intercable, Inc., 7.625% - 2008 .............. $ 100,000 98,625
------------
352,688
CHEMICALS - 0.1%
Envirodyne Industries, Inc.,
12.00% -2000 ..................................... $ 100,000 106,875
PRINCIPAL MARKET
CORPORATE BONDS (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
COMMUNICATIONS - 1.2%
Century Communications Corporation,
9.50% - 2005 ..................................... $ 100,000 $ 107,125
Century Communications Corporation,
8.75% - 2007 ..................................... 100,000 101,750
CF Cable TV, Inc., 11.625% - 2005 .................. 150,000 170,625
Comcast Corporation, 9.125% - 2006 ................. 75,000 79,969
CSC Holdings, Inc., 7.875% - 2007 .................. 75,000 76,875
CSC Holdings, Inc., 7.875% - 2018 .................. 25,000 24,750
Heritage Media Corporation,
8.75% - 2006 ..................................... 100,000 107,000
Lenfest Communications, Inc.,
10.50% -2006 ..................................... 125,000 142,500
Rogers Cablesystems Ltd.,
9.625% - 2002 .................................... 175,000 187,687
Rogers Communications, Inc.,
9.125% - 2006 .................................... 200,000 204,500
------------
1,202,781
CONSUMER GOODS & SERVICES - 0.1%
Chattem, Inc., 8.875% - 2008 ....................... 150,000 151,875
COSMETICS - 0.2%
Revlon Consumer Products,
8.125% - 2006 .................................... 175,000 177,187
DIVERSIFIED - 0.2%
Sequa Corporation, 9.375% - 2003 ................... 250,000 258,750
ELECTRIC & GAS COMPANIES - 0.3%
AES Corporation, 10.25% - 2006 ..................... 200,000 220,500
Cal Energy Company, Inc.,
9.50% - 2006 ..................................... 100,000 108,375
------------
328,875
FINANCE - 0.5%
Dollar Financial Group, Inc.,
10.875% - 2006 ................................... 300,000 328,500
Homeside, Inc., 11.25% - 2003 ...................... 121,000 143,385
------------
471,885
FOOD & BEVERAGE TRADE - 0.2%
Delta Beverage Group,
9.75% - 2003 ..................................... 200,000 210,000
GAMING - 0.7%
Hard Rock Hotel, Inc.,
9.25% - 2005 ..................................... 75,000 76,500
Harrah's Operating, Inc.,
8.75% - 2000 ..................................... 350,000 363,125
MGM Grand, Inc., 6.625% - 2005 ..................... 125,000 122,500
Mirage Resorts, Inc.,
6.625% - 2005 .................................... 125,000 123,281
------------
685,406
See accompanying notes.
18
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY GROWTH AND INCOME FUND (continued)
PRINCIPAL MARKET
CORPORATE BONDS (continued) AMOUNT VALUE
- --------------------------------------------------------------------------------
HEALTH CARE - SERVICES - 0.3%
Genesis Eldercare Acq,
9.0% - 2007 ...................................... $ 200,000 $ 206,250
Prime Medical Services,
8.75% - 2008 ..................................... 75,000 75,375
------------
281,625
HOSPITAL MANAGEMENT - 0.1%
Tenet Healthcare Corporation,
10.125% - 2005 ................................... 100,000 109,750
HOUSING-HOME BUILDING - 0.3%
Hovnanian Enterprise,
9.75% - 2005 ..................................... 100,000 101,500
Toll Corporation, 7.75% - 2007 ..................... 250,000 253,438
------------
354,938
INDUSTRIAL PRODUCT - 0.2%
Shop Vac Corporation,
10.625% - 2003 ................................... 200,000 218,500
MACHINERY - 0.1%
Columbus McKinnon Corporation,
8.5% - 2008 ...................................... 150,000 150,750
MANUFACTURING - 0.1%
AGCO Corporation,
8.50% - 2006 ..................................... 100,000 103,750
METALS & MINERALS - 0.1%
Simcala, Inc., 9.625% - 2006 ....................... 75,000 75,750
OIL & GAS COMPANIES - 0.1%
Seagull Energy Corporation,
8.625% - 2005 .................................... 100,000 103,500
PUBLISHING & PRINTING - 0.2%
Golden Books Publishing, Inc.,
7.65% - 2002 ..................................... 200,000 193,000
REFINERY - 0.2%
Crown Central Petroleum Corporation,
10.875% - 2005 ................................... 200,000 213,500
RESTAURANTS - 0.4%
Carrols Corporation,
11.50% - 2003 .................................... 425,000 450,500
RETAIL - APPAREL - 0.1%
Specialty Retailers, Inc.,
8.50% - 2005 ..................................... 125,000 128,125
RETAIL - SPECIALTY - 0.1%
Zale's Corporation,
8.50% - 2007 ..................................... 100,000 102,250
PRINCIPAL
AMOUNT OR
NUMBER OF MARKET
CORPORATE BONDS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
STEEL & METAL PRODUCTS - 0.4%
AK Steel Corporation,
9.125% - 2006 .................................... $ 125,000 $ 134,062
Ameristeel Corporation,
8.75% - 2008 ..................................... $ 100,000 101,250
WHX Corporation,
10.5% - 2005 ..................................... $ 75,000 76,500
Wheeling-Pittsburg Corporation,
9.25% - 2007 ..................................... $ 100,000 101,500
------------
413,312
TELECOMMUNICATIONS - 1.1%
Comcast Cellular Holdings, Inc.,
9.5% - 2007 ...................................... $ 200,000 210,500
Intermedia Communications,
8.5% - 2008 ...................................... $ 250,000 261,875
Mastec, Inc., 7.75% - 2008 ......................... $ 75,000 75,188
Mcleodusa, Inc.,
8.375% - 2008 .................................... $ 175,000 181,125
RCN Corporation, 10.0% - 2007 ...................... $ 225,000 240,187
Satelites Mexicanos, Inc.,
10.125% - 2004 ................................... $ 200,000 205,500
------------
1,174,375
TEXTILES - 0.3%
Delta Mills, Inc., 9.625% - 2007 ................... $ 100,000 104,000
Westpoint Stevens, Inc.,
9.375% - 2005 .................................... $ 200,000 211,500
------------
315,500
------------
Total corporate bonds - 8.8% ..................................... 9,169,135
COMMON STOCKS
- -------------
AGRICULTURAL PRODUCTS - 1.3%
Archer-Daniels-Midland Company ..................... 60,000 1,316,250
ALUMINUM - 0.8%
Aluminum Company of America ........................ 10,000 688,125
AUTO PARTS & EQUIPMENT - 1.1%
TRW, Inc. .......................................... 20,000 1,102,500
AUTOMOBILES - 1.3%
General Motors Corporation ......................... 20,000 1,348,750
BANKS - MAJOR REGIONAL - 2.3%
Bank of New York Company, Inc. ..................... 5,000 314,062
Wells Fargo & Company .............................. 5,800 1,921,250
------------
2,235,312
BANKS - MONEY CENTER - 0.3%
Chase Manhattan Corporation ........................ 2,200 296,725
See accompanying notes.
19
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY GROWTH AND INCOME FUND (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
BEVERAGES - ALCOHOLIC - 0.9%
Anheuser-Busch Companies, Inc ...................... 20,000 $ 926,250
BEVERAGES - SOFT DRINK - 1.2%
PepsiCo, Inc. ...................................... 30,000 1,280,625
CHEMICALS-BASIC - 1.2%
Praxair, Inc. ...................................... 25,000 1,285,938
CHEMICALS-SPECIALTY - 1.8%
Dexter Corporation ................................. 20,000 827,500
Materials Sciences Corporation* .................... 30,000 328,125
Minerals Technologies, Inc. ........................ 15,000 755,625
------------
1,911,250
COMMUNICATION EQUIPMENT - 2.6%
ANTEC Corporation* ................................. 50,000 750,000
Ciena Corporation* ................................. 10,000 426,250
Harris Corporation ................................. 25,000 1,515,625
------------
2,691,875
COMPUTER SOFTWARE/SERVICES - 0.6%
Computer Sciences Corporation ...................... 12,000 660,000
CONTAINERS & PACKAGING - 0.9%
Bemis Company, Inc. ................................ 6,000 270,750
Sealright Company, Inc.* .......................... 5,400 74,250
Union Camp Corporation ............................. 10,000 597,500
------------
942,500
ELECTRIC COMPANIES - 4.9%
Allegheny Energy, Inc. ............................. 13,000 436,313
American Electric Power
Company, Inc. .................................... 15,000 753,750
Kansas City Power & Light
Company .......................................... 30,000 945,000
LG&E Energy Corporation ............................ 10,000 258,125
Peco Energy Company ................................ 40,000 885,000
Potomac Electric Power Company ..................... 20,000 501,250
Public Service Enterprise Group,Inc ................ 13,000 492,375
Texas Utilities Company ............................ 20,000 786,250
------------
5,058,063
ELECTRICAL EQUIPMENT - 2.8%
AMP, Inc. .......................................... 20,000 876,250
Emerson Electric Company ........................... 6,000 391,125
General Electric Company ........................... 10,000 861,875
Hubbell, Inc. (Cl.B) ............................... 15,000 755,625
------------
2,884,875
ELECTRONICS - DEFENSE - 1.1%
Raytheon Company (Cl.B) ............................ 20,000 1,167,500
ELECTRONICS - INSTRUMENTATION - 1.2%
E G & G, Inc. ...................................... 22,000 639,375
Sawtek, Inc.* ...................................... 24,000 609,000
------------
1,248,375
FINANCIAL-DIVERSE - 0.9%
Fannie Mae ......................................... 15,000 948,750
FOODS - 3.0%
Chiquita Brands International, Inc. ................ 105,000 1,437,188
ConAgra, Inc. ...................................... 30,000 963,750
General Mills, Inc. ................................ 10,000 760,000
------------
3,160,938
FOOTWEAR - 0.2%
Nike, Inc. (Cl.B) .................................. 4,000 177,000
GAMING - 0.8%
Circus Circus Enterprises, Inc.* ................... 38,000 798,000
GOLD & PRECIOUS METALS MINING - 0.9%
Barrick Gold Corporation ........................... 45,000 973,125
HEALTH CARE - LONG TERM CARE - 0.8%
Integrated Health Services, Inc. ................... 20,000 786,250
HEALTH CARE - MANAGED CARE - 1.1%
Humana, Inc.* ...................................... 20,000 496,250
United Healthcare Corporation ...................... 10,000 647,500
------------
1,143,750
HOUSEHOLD FURNISHINGS & APPLIANCES -1.8%
Meadowcraft, Inc.* ................................. 87,500 1,279,687
Whirlpool Corporation .............................. 9,000 617,063
------------
1,896,750
INSURANCE - PROPERTY - 3.8%
Allstate Corporation ............................... 5,000 459,687
Leucadia National Corporation ...................... 30,000 1,181,250
SAFECO Corporation ................................. 10,000 546,563
St. Paul Companies, Inc. ........................... 20,000 1,782,500
------------
3,970,000
IRON & STEEL - 0.8%
Cleveland-Cliffs, Inc. ............................. 15,000 806,250
LEISURE TIME PRODUCTS - 0.3%
Hasbro, Inc. ....................................... 10,000 353,125
LODGING - HOTELS - 0.4%
La Quinta Inns, Inc. ............................... 20,000 420,000
MANUFACTURING-DIVERSIFIED - 3.2%
AlliedSignal, Inc. ................................. 50,000 2,100,000
Tenneco, Inc. ...................................... 28,000 1,195,250
------------
3,295,250
MEDICAL PRODUCTS & SUPPLIES - 2.9%
Baxter International, Inc. ......................... 20,000 1,102,500
Stryker Corporation ................................ 20,000 937,500
See accompanying notes.
20
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY GROWTH AND INCOME FUND (continued)
NUMBER MARKET
COMMON STOCKS (continued) OF SHARES VALUE
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES (continued)
Sunrise Medical, Inc.* ............................. 60,000 $ 956,250
------------
2,996,250
NATURAL GAS - 4.7%
Consolidated Natural Gas Company ................... 15,000 865,312
Equitable Resources, Inc. .......................... 86,200 2,866,150
People's Energy Corporation ........................ 30,000 1,091,250
------------
4,822,712
OFFICE EQUIPMENT & SUPPLIES - 1.2%
Corporate Express, Inc. ............................ 120,000 1,196,250
OIL - DOMESTIC - 0.6%
Unocal Corporation ................................. 15,000 580,312
OIL - INTERNATIONAL - 4.2%
Chevron Corporation ................................ 13,000 1,044,063
Mobil Corporation .................................. 20,000 1,532,500
Texaco, Inc. ....................................... 30,000 1,807,500
------------
4,384,063
OIL & GAS - DRILLING & EQUIPMENT - 0.8%
Halliburton Company ................................ 10,000 501,875
Schlumberger, Ltd. ................................. 5,000 378,750
------------
880,625
OIL & GAS - EXPLORATION & PRODUCTION - 4.2%
Enron Oil & Gas Company ............................ 40,000 917,500
Forcenergy, Inc.* .................................. 40,000 1,060,000
Kerr-McGee Corporation ............................. 10,000 695,625
YPF Sociedad Anomima ADR ........................... 50,000 1,700,000
------------
4,373,125
OIL & GAS - REFINING & MARKETING -1.7%
Ultramar Diamond Shamrock
Corporation ...................................... 50,000 1,762,500
PAPER & FOREST PRODUCTS - 4.1%
Boise Cascade Corporation .......................... 20,000 721,250
Champion International Corporation ................. 10,000 543,125
International Paper Company ........................ 30,000 1,404,375
Louisiana-Pacific Corporation ...................... 50,000 1,162,500
Rayonier, Inc. ..................................... 10,000 456,875
------------
4,288,125
PHARMACEUTICALS - 2.1%
Mylan Laboratories, Inc. ........................... 40,000 920,000
Teva Pharmaceutical Industries,
Ltd., ADR ........................................ 30,000 1,282,500
------------
2,202,500
PHOTOGRAPHY - IMAGING - 0.6%
Eastman Kodak Company .............................. 10,000 648,750
PUBLISHING - NEWSPAPER - 1.0%
News Corporation, Ltd. ADR ......................... 45,000 1,035,000
RAILROADS - 1.9%
Canadian Pacific, Ltd. ............................. 40,000 1,180,000
Norfolk Southern Corporation ....................... 10,000 373,750
RailAmerica, Inc.* ................................. 60,000 401,250
------------
1,955,000
REAL ESTATE INVESTMENT TRUSTS - 3.2%
Camden Property Trust .............................. 20,000 592,500
Health & Retirement Property Trust ................. 20,000 402,500
Highwoods Properties, Inc. ......................... 10,000 353,125
Hospitality Properties Trust ....................... 20,000 708,750
Liberty Property Trust ............................. 16,000 430,000
Simon Debartolo Group, Inc.* ....................... 12,000 411,000
United Dominion Realty Trust, Inc. ................. 30,000 435,000
------------
3,332,875
RESTAURANTS - 2.9%
The Cheesecake Factory* ............................ 30,000 999,375
McDonald's Corporation ............................. 23,000 1,380,000
Wendy's International, Inc. ........................ 30,000 669,375
------------
3,048,750
RETAIL - DEPARTMENT STORES - 0.7%
Dillard's Inc. ..................................... 20,000 738,750
RETAIL - FOOD CHAINS - 0.6%
Giant Food, Inc. ................................... 15,000 579,375
RETAIL - SPECIALTY - 1.5%
Toys "R" Us, Inc.* ................................. 20,000 601,250
Woolworth Corporation* ............................ 40,000 1,000,000
------------
1,601,250
SERVICES - ADVERTISING/MARKETING -1.7%
Acxiom Corporation* ................................ 50,000 1,281,250
Omnicom Group, Inc. ................................ 10,000 470,625
------------
1,751,875
SERVICES - COMMERCIAL & CONSUMER -1.2%
Angelica Corporation ............................... 53,000 1,222,313
SERVICES - DATA PROCESSING - 0.9%
First Data Corporation ............................. 30,000 975,000
TOBACCO - 0.6%
Philip Morris Companies, Inc. ...................... 15,000 625,312
WASTE MANAGEMENT - 1.1%
Browning-Ferris Industries ......................... 15,000 489,375
Waste Management, Inc. ............................. 20,000 616,250
------------
1,105,625
------------
Total common stocks - 88.7% ...................................... 91,880,438
------------
Total investments - 99.3% 102,908,356
Cash and other assets, less liabilities - 0.7% ................... 729,714
------------
Total net assets - 100.0%......................................... $103,638,070
============
See accompanying notes.
21
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - EQUITY SERIES
NUMBER OF MARKET
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
AUTOMOBILES - 1.0%
Chrysler Corporation ............................... 230,000 $ 9,559,375
BANKS - MAJOR REGIONAL - 3.9%
Bank of New York Company, Inc. ..................... 200,000 12,562,500
Northern Trust Corporation ......................... 200,000 14,950,000
Norwest Corporation ................................ 240,000 9,975,000
------------
37,487,500
BANKS - MONEY CENTER - 2.2%
BankAmerica Corporation ............................ 80,000 6,610,000
Chase Manhattan Corporation ........................ 110,000 14,836,250
------------
21,446,250
BEVERAGES - SOFT DRINK - 1.2%
PepsiCo, Inc. ...................................... 260,000 11,098,750
BROADCAST MEDIA - 0.7%
Chancellor Media Corporation* ...................... 150,000 6,881,250
CHEMICALS - BASIC - 1.9%
Imperial Chemical Industries PLC ADR ............... 115,000 8,265,625
Praxair, Inc. ...................................... 200,000 10,287,500
------------
18,553,125
CHEMICALS - DIVERSIFIED - 1.1%
B.F. Goodrich Company .............................. 200,000 10,212,500
COMMUNICATION EQUIPMENT - 0.7%
Lucent Technologies, Inc. .......................... 50,000 6,393,750
COMPUTER HARDWARE - 1.3%
Compaq Computer Corporation ........................ 80,000 2,070,000
International Business Machines
Corporation ...................................... 100,000 10,387,500
------------
12,457,500
COMPUTERS - NETWORKING - 1.1%
Cisco Systems, Inc.* ............................... 150,000 10,256,250
COMPUTER SOFTWARE/SERVICES - 3.6%
BMC Software, Inc.* ................................ 135,000 11,314,688
Computer Sciences Corporation* ..................... 120,000 6,600,000
Microsoft Corporation* ............................. 180,000 16,110,000
Wang Laboratories, Inc. Warrants ................... 2,369 30,501
------------
34,055,189
ELECTRICAL EQUIPMENT - 3.4%
Emerson Electric Company ........................... 150,000 9,778,125
General Electric Company ........................... 200,000 17,237,500
Honeywell, Inc. .................................... 65,000 5,374,687
------------
32,390,312
ELECTRONICS - SEMICONDUCTORS - 0.7%
Intel Corporation .................................. 90,000 7,025,625
ENTERTAINMENT - 0.8%
Time Warner, Inc. .................................. 100,000 7,200,000
FINANCIAL - DIVERSE - 3.5%
American General Corporation ....................... 100,000 6,468,750
Fannie Mae ......................................... 230,000 14,547,500
Federal Home Loan Mortgage
Corporation ...................................... 270,000 12,808,125
------------
33,824,375
FOODS - 3.4%
Bestfoods .......................................... 120,000 14,025,000
ConAgra, Inc. ...................................... 320,000 10,280,000
Ralston-Purina Group ............................... 75,000 7,950,000
------------
32,255,000
GAMING & LOTTERY - 0.1 %
Circus Circus Enterprises, Inc.* ................... 53,000 1,113,000
HARDWARE & TOOLS - 0.3%
Black & Decker Corporation ......................... 50,000 2,653,125
HEALTH CARE - DIVERSE - 3.1%
American Home Products Corporation ................. 150,000 14,306,250
Bristol-Myers Squibb Company ....................... 150,000 15,646,875
------------
29,953,125
HOUSEHOLD FURNISHINGS & APPLIANCES - 2.2%
Leggett & Platt, Inc. .............................. 230,500 11,856,344
Sunbeam Corporation ................................ 200,000 8,812,500
------------
20,668,844
HOUSEHOLD PRODUCTS - 3.8%
Colgate-Palmolive Company .......................... 150,000 12,993,750
Fort James Corporation ............................. 225,000 10,307,812
Procter & Gamble Company ........................... 150,000 12,656,250
------------
35,957,812
INSURANCE - MULTI-LINE - 3.8%
American International Group, Inc. ................. 110,000 13,853,125
Hartford Financial Services Group,Inc .............. 100,000 10,850,000
Lincoln National Corporation ....................... 135,000 11,458,125
------------
36,161,250
INSURANCE - PROPERTY - 2.5%
Allstate Corporation ............................... 145,000 13,330,938
Chubb Corporation .................................. 140,000 10,972,500
------------
24,303,438
LODGING - HOTELS - 1.5%
Carnival Corporation (Cl. A) ....................... 200,000 13,950,000
MACHINERY - DIVERSE - 0.8%
Cooper Industries, Inc. ............................ 120,000 7,132,500
MANUFACTURING - DIVERSIFIED - 7.7%
AlliedSignal, Inc. ................................. 320,000 13,440,000
Crane Company ...................................... 200,000 10,600,000
Textron, Inc. ...................................... 105,000 8,085,000
See accompanying notes.
22
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - EQUITY SERIES (continued)
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
MANUFACTURING - DIVERSIFIED (continued)
Tyco International, Ltd. ........................... 315,000 $ 17,206,875
U.S. Industries, Inc. .............................. 470,000 14,129,375
United Technologies Corporation ...................... 115,000 10,615,937
------------
74,077,187
MEDICAL PRODUCTS & SUPPLIES - 3.6%
Baxter International, Inc. ......................... 200,000 11,025,000
Becton, Dickinson & Company ........................ 200,000 13,612,500
Medtronic, Inc. .................................... 200,000 10,375,000
------------
35,012,500
NATURAL GAS - 2.0%
Coastal Corporation ................................ 170,000 11,071,250
MCN Energy Group, Inc. ............................. 150,000 5,606,250
Williams Companies, Inc. ........................... 70,000 2,240,000
------------
18,917,500
OIL - DOMESTIC - 0.4%
USX Marathon Group ................................. 100,000 3,762,500
OIL - INTERNATIONAL - 4.2%
Chevron Corporation ................................ 90,000 7,228,125
Mobil Corporation .................................. 140,000 10,727,500
Royal Dutch Petroleum Company ...................... 200,000 11,362,500
Texaco, Inc. ....................................... 180,000 10,845,000
------------
40,163,125
OIL & GAS - DRILLING & EQUIPMENT - 0.6%
Schlumberger, Ltd. ................................. 70,000 5,302,500
OIL & GAS - EXPLORATION & PRODUCTION - 1.8%
Burlington Resources, Inc. ......................... 250,000 11,984,375
YPF Sociedad Anonima ADR ........................... 150,000 5,100,000
------------
17,084,375
PAPER & FOREST PRODUCTS - 0.8%
Bowater, Inc. ...................................... 140,000 7,901,250
PERSONAL CARE - 1.2%
Gillette Company ................................... 100,000 11,868,750
PHARMACEUTICALS - 3.0%
Schering-Plough Corporation ........................ 200,000 16,337,500
SmithKline Beecham PLC ADR ......................... 200,000 12,512,500
------------
28,850,000
PHOTOGRAPHY/IMAGING - 1.3%
Xerox Corporation .................................. 120,000 12,772,500
PUBLISHING - 0.9%
McGraw-Hill Companies, Inc. ........................ 110,000 8,366,875
PUBLISHING - NEWSPAPER - 2.4%
Gannett Company, Inc. .............................. 160,000 11,500,000
Tribune Company .................................... 165,000 11,632,500
------------
23,132,500
RAILROADS - 1.2%
Canadian Pacific, Ltd. ............................. 400,000 11,800,000
RETAIL - APPAREL - 1.0%
TJX Companies, Inc. ................................ 220,000 9,955,000
RETAIL - BUILDING SUPPLIES - 1.6%
Home Depot, Inc. ................................... 45,000 3,034,687
Sherwin-Williams Company ........................... 350,000 12,425,000
------------
15,459,687
RETAIL - DEPARTMENT STORES - 2.2%
Federated Department Stores, Inc.* ................. 200,000 10,362,500
Proffitt's, Inc.* .................................. 300,000 10,875,000
------------
21,237,500
RETAIL - DRUG STORES - 2.3%
Rite Aid Corporation ............................... 340,000 11,645,000
Walgreen Company ................................... 300,000 10,556,250
------------
22,201,250
RETAIL - FOOD CHAINS - 2.1%
Kroger Company* .................................... 175,000 8,082,813
Safeway, Inc.* ..................................... 340,000 12,558,750
------------
20,641,563
RETAIL - GENERAL MERCHANDISE - 0.5%
Dayton Hudson Corporation .......................... 60,000 5,280,000
RETAIL - SPECIALTY - 2.1%
Payless ShoeSource, Inc.* .......................... 225,000 16,931,250
Woolworth Corporation* ............................ 120,000 3,000,000
------------
19,931,250
SERVICES - ADVERTISING/MARKETING - 1.7%
Omnicom Group, Inc. ................................ 340,000 16,001,250
SERVICES - COMMERCIAL & CONSUMER - 1.1%
Viad Corporation ................................... 450,000 10,912,500
TELECOMMUNICATIONS - LONG DISTANCE - 1.1%
WorldCom, Inc.* .................................... 250,000 10,765,625
WASTE MANAGEMENT - 0.7%
U.S.A. Waste Service, Inc.* ........................ 160,000 7,130,000
------------
Total common stocks - 96.1% ...................................... 921,517,032
Cash and other assets, less liabilities - 3.9% ................... 37,331,498
------------
Total net assets - 100% .......................................... $958,848,530
============
See accompanying notes.
23
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - GLOBAL SERIES
NUMBER OF MARKET
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
AUSTRALIA - 3.8%
Foster's Brewing Group, Ltd. ....................... 281,600 $ 614,390
QBE Insurance Group, Ltd. .......................... 60,031 262,745
Telestra Corporation, Ltd.* ........................ 170,000 438,545
------------
1,315,680
AUSTRIA - 1.6%
Boehler-Uddeholm AG ................................ 3,300 223,707
Wienerberger Baustoffindustrie AG .................. 1,530 314,920
------------
538,627
BELGIUM - 1.0%
Electrabel S.A ..................................... 1,370 349,064
CANADA - 5.9%
Bombardier, Inc. "B" ............................... 13,100 322,864
Chapters, Inc.* .................................... 800 17,917
Hudson's Bay Company ............................... 7,800 164,542
Imax Corporation ADR* .............................. 28,800 817,200
Tarragon Oil and Gas, Ltd.* ........................ 24,600 167,790
Yogen Fruz World-Wide Inc.* ........................ 76,230 541,387
------------
2,031,700
CHILE - 0.5%
Banco Santander ADR ................................ 11,100 156,094
FRANCE - 6.5%
Alcatel Alsthom .................................... 2,070 388,562
AXA-UAP ............................................ 3,400 350,114
Banque Nationale De Paris .......................... 4,500 349,719
Elf Aquitaine S.A. ADR ............................. 8,500 550,375
Sidel S.A .......................................... 3,720 270,188
Societe Generale-A ................................. 1,700 340,237
------------
2,249,195
GERMANY - 3.6%
Allianz AG ......................................... 1,170 351,442
Allianz AG Rights .................................. 1,850 9,153
Deutsche Bank AG ................................... 7,700 577,291
Hoechst AG ......................................... 2,500 97,400
Rofin-Sinar Technologies
Inc. ADR* ........................................ 11,300 217,525
------------
1,252,811
GREECE - 1.0%
Ergo Bank S.A ...................................... 4,800 343,747
HONG KONG - 1.6%
China Resources Enterprises, Ltd. .................. 66,000 133,737
China Telecommunications, Ltd.* .................... 132,000 267,473
JCG Holdings, Ltd. ................................. 320,000 164,170
------------
565,380
HUNGARY - 0.3%
Zalakeramia Rt ..................................... 1,800 88,608
IRELAND - 3.8%
Allied Irish Banks PLC ............................. 31,700 388,961
Elan Corporation PLC ADR ........................... 9,600 620,400
Ryanair Holdings PLC ............................... 41,900 310,292
------------
1,319,653
ITALY - 1.1%
Telecom Italia SpA ................................. 47,100 371,168
JAPAN - 5.9%
Acom Company, Ltd. ................................. 3,500 174,539
Amway Japan, Ltd. .................................. 7,300 109,485
Asahi Diamond Industry
Company, Ltd. .................................... 22,000 105,586
Benesse Corporation ................................ 5,000 139,856
Bunka Shutter Company Ltd. ......................... 44,000 130,992
Daiwa House Industry
Company, Ltd. .................................... 23,000 168,165
Doutor Coffee Company, Ltd. ........................ 6,500 153,542
Maruko Company, Ltd. ............................... 2,200 12,703
Mos Food Service Inc. .............................. 18,000 233,519
National House Industrial
Company, Ltd. .................................... 14,000 118,634
Paris Miki Inc. .................................... 3,600 51,023
Snow Brand Milk Products
Company, Ltd. .................................... 48,000 160,179
Sony Corporation ................................... 2,300 194,899
Tiemco, Ltd. ....................................... 3,300 43,307
York-Benimaru Company,
Ltd .............................................. 12,000 220,471
------------
2,016,900
MALAYSIA - 2.2%
Austral Enterprises Berhad ......................... 119,000 147,773
Kuala Lumpur Kepong Berhad ......................... 71,000 170,677
Leader Universal Holdings Berhad ................... 107,000 49,680
Magnum Corporation Berhad .......................... 451,000 386,580
------------
754,710
NETHERLANDS - 0.2%
Koninklijke Ahrend Group N.V ....................... 1,600 56,642
NORWAY - 1.4%
Saga Petroleum ASA "A" ............................. 27,800 494,083
PHILIPPINES - 0.5%
C&P Homes, Inc. .................................... 1,397,450 125,369
Ionics Circuit, Inc. ............................... 111,800 58,261
------------
183,630
See accompanying notes.
24
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - GLOBAL SERIES (continued)
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
SINGAPORE - 1.0%
Cerebos Pacific, Ltd. .............................. 68,000 $ 160,847
Keppek Fels, Ltd. .................................. 47,000 131,546
Mandarin Oriental International,
Ltd .............................................. 60,000 48,000
------------
340,393
SPAIN - 0.5%
Adolfo Dominguez S.A.* ............................. 5,400 183,313
SWEDEN - 4.9%
Castellum AB* ...................................... 45,900 479,424
Fastighets AB Hufvudstaden "A" ..................... 52,400 209,095
Industrial & Financial
Systems "B"* ..................................... 41,500 342,621
Skandinaviska Enskilda Banken ...................... 13,700 199,649
Swedish Match AB ................................... 134,200 446,535
------------
1,677,324
SWITZERLAND - 4.3%
Nestle S.A ......................................... 186 355,411
Novartis AG ........................................ 184 325,640
Saurer AG .......................................... 440 455,446
Schweizerische
Lebensversicherungs-und
Rentenstalt ...................................... 410 346,668
------------
1,483,165
UNITED KINGDOM, - 16.6%
Aegis Group PLC .................................... 222,500 314,847
Beazer Group PLC ................................... 15,300 53,292
Cadbury Schweppes PLC .............................. 25,000 341,200
Capita Group PLC ................................... 41,900 315,395
D.F.S. Furniture Company PLC ....................... 29,600 172,745
George Wimpey PLC .................................. 212,000 457,970
Glaxo Wellcome PLC ................................. 10,700 284,183
Harvey Nichols PLC ................................. 22,800 91,252
J.D. Wetherspoon PLC ............................... 36,800 207,677
Oriflame International S.A ......................... 12,000 86,811
PizzaExpress PLC ................................... 19,900 275,094
Polypipe PLC ....................................... 83,700 236,877
Provident Financial PLC ............................ 29,600 469,163
Regent Inns PLC .................................... 61,500 384,145
Rio Tinto PLC ...................................... 13,800 185,569
Royal Bank of Scotland Group PLC ................... 21,700 336,316
Tomkins PLC ........................................ 69,000 419,148
Vodafone Group PLC ................................. 41,800 435,739
Whitbread PLC ...................................... 34,900 648,723
------------
5,716,146
UNITED STATES - 25.0%
Ace Ltd. ........................................... 3,900 146,981
AlliedSignal, Inc. ................................. 3,100 130,200
B.J. Services Company* ............................. 3,800 138,463
Bell Atlantic Corporation .......................... 1,300 133,250
Bristol-Myers Squibb Company ....................... 1,000 104,312
Burlington Northern Santa Fe
Corporation ...................................... 1,500 156,000
Caribiner International Inc.* ...................... 3,700 142,450
Case Corporation ................................... 2,400 163,500
Cit Group Inc., The ................................ 4,200 137,025
Computer Associates
International, Inc. .............................. 2,800 161,700
Conseco, Inc. ...................................... 1,800 101,925
Costco Companies, Inc.* ............................ 2,300 123,050
Cymer, Inc.* ....................................... 4,500 90,844
Dana Corporation ................................... 3,300 192,019
Data General Corporation* .......................... 7,400 130,887
Dover Corporation .................................. 2,800 106,400
EMC Corporation* ................................... 3,600 136,125
Emerson Electric Company ........................... 2,000 130,375
Equity Residential Properties Trust ................ 2,600 130,650
Espirito Santo Financial Group ..................... 10,300 269,731
EXEL, Ltd. ......................................... 1,800 139,500
Fannie Mae ......................................... 2,000 126,500
Fort James Corporation ............................. 2,800 128,275
Gap, Inc. .......................................... 2,950 132,750
General Electric Company ........................... 2,300 198,231
Global Industries, Ltd.* .......................... 9,700 197,638
GTE Corporation .................................... 2,600 155,675
Ingersoll-Rand Company ............................. 3,250 155,797
J.P. Foodservice, Inc.* ............................ 4,700 173,019
Marsh and Mclennan
Companies, Inc. .................................. 1,500 130,969
Mobil Corporation .................................. 1,800 137,925
Nabisco Holdings Cl.A .............................. 3,000 140,625
NAC Re Corporation ................................. 3,000 157,313
NationsBank Corporation ............................ 1,900 138,581
Oxford Health Plans, Inc.* ......................... 6,500 97,094
Pepsico, Inc. ...................................... 3,900 166,481
Perkin-Elmer Corporation ........................... 2,000 144,625
Pfizer, Inc. ....................................... 2,100 209,344
Pharmacia & Upjohn, Inc. ........................... 4,200 183,750
Procter & Gamble Company, The ...................... 2,000 168,750
Rite Aid Corporation ............................... 4,700 160,975
Safeway, Inc.* ..................................... 4,800 177,300
See accompanying notes.
25
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - GLOBAL SERIES (continued)
PRINCIPAL
AMOUNT OR
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
UNITED STATES, (continued)
Structural Dynamics
Research Corporation* ............................ 6,000 $ 149,250
Sungard Data Systems, Inc.* ........................ 4,800 176,700
Teva Pharmaceutical
Industries, Ltd. ................................. 14,100 602,776
Texaco, Inc. ....................................... 2,800 168,700
TJX Companies, Inc. ................................ 3,300 149,325
Tyco International, Ltd. ........................... 2,800 152,950
Union Planters Corporation ......................... 2,600 161,688
United Healthcare Corporation ...................... 1,800 116,550
Valero Energy Corporation* ......................... 4,900 163,538
Walt Disney Company, The ........................... 1,200 128,100
Warner-Lambert Company ............................. 900 153,281
Williams Companies, Inc., The ...................... 4,800 153,600
Zale's Corporation* ................................ 4,500 129,938
------------
8,653,400
------------
Total common stocks - 93.2% ...................................... 32,141,433
PREFERRED STOCKS
- ----------------
GERMANY - 0.8%
Sto Ag Vorzug ...................................... 758 278,716
U.S. GOVERNMENT SECURITIES
- --------------------------
U.S. TREASURY STRIPS - 4.5%
0.00% - 2023 ..................................... $ 7,000,000 1,562,610
------------
Total investments - 98.5% ........................................ 33,982,759
Cash and other assets, less
liabilities - 1.5% ............................................. 508,285
------------
Total net assets - 100% .......................................... $ 34,491,044
============
INVESTMENT CONCENTRATION
- ------------------------
At March 31, 1998, Global Series' investment concentration, by
industry, was as follows:
Banking....................................................... 10.0%
Capital Equipment ............................................ 8.7%
Construction and Housing ..................................... 7.0%
Consumer Durables ............................................ 6.7%
Consumer Nondurables ......................................... 8.2%
Electrical and Electronics ................................... 6.6%
Energy Sources ............................................... 7.5%
Financial Services ........................................... 9.1%
Healthcare ................................................... 6.2%
Materials .................................................... 5.6%
Merchandising ................................................ 6.5%
Multi-Industry ............................................... 0.8%
Real Estate .................................................. 2.4%
Services ..................................................... 2.9%
Telecommunications ........................................... 6.9%
Trade ........................................................ 2.0%
Transportation ............................................... 1.4%
Cash and other assets, less liabilities ...................... 1.5%
-----
100.0%
=====
SECURITY EQUITY FUND - ASSET ALLOCATION SERIES
PRINCIPAL MARKET
CORPORATE BONDS AMOUNT VALUE
- --------------------------------------------------------------------------------
BANKING - 0.6%
Abbey National Place, 6.69% - 2005 ................. $ 25,000 $ 25,562
Bank of New York, 6.50% - 2003 ..................... 25,000 25,250
------------
50,812
BROKERAGE - 0.4%
Merrill Lynch & Company, Inc.,
8.00% - 2007 ..................................... 25,000 27,750
CONSUMER CYCLICAL - 2.7%
Lowe's Companies, Inc.,
6.70% - 2007 ..................................... 25,000 25,500
MGM Grand, Inc., 6.95% - 2005 ...................... 10,000 9,800
Mirage Resorts, Inc., 6.625% - 2005 ................ 10,000 9,863
News American Holdings,
8.625% - 2003 .................................... 25,000 27,375
Rite Aid Corporation, 6.70% - 2001 ................. 125,000 127,031
------------
199,569
CONSUMER NONCYCLICAL - 0.7%
Archer-Daniels-Midland Company,
8.875% - 2011 .................................... 25,000 30,313
Cargill, Inc., 6.15% - 2008 ........................ 25,000 24,656
------------
54,969
INSURANCE - 0.4%
Hartford Life, Inc., 7.10% - 2007 .................. 25,000 25,781
NATURAL GAS - 0.3%
MCN Investment Corporation,
6.32% - 2003 ..................................... 25,000 24,938
TELECOMMUNICATIONS - 0.4%
Southwestern Bell,
6.625% - 2003 .................................... 25,000 25,594
TRANSPORTATION - 2.1%
Hertz Corporation, 7.00% - 2004 ................... 150,000 153,937
------------
Total corporate bonds - 7.6% ..................................... 563,350
See accompanying notes.
26
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - ASSET ALLOCATION SERIES (continued)
PRINCIPAL
AMOUNT OR
NUMBER OF MARKET
TRUST PREFERRED SECURITIES(1) SHARES VALUE
- --------------------------------------------------------------------------------
BANKING - 0.4%
Washington Mutual Capital,
8.375% - 2027 .................................... $ 25,000 $ 27,125
FINANCE - 0.3%
SI Financing Trust I, 9.50% - 2026 ................ 910 24,513
------------
Total trust preferred securities - 0.7% .......................... 51,638
COMMON STOCKS
- -------------
ALUMINUM - 1.1%
Alcan Aluminum, Ltd. ............................... 600 18,750
Alumax, Inc. ....................................... 600 27,113
Aluminum Company of America ........................ 300 20,644
Reynolds Metals Company ............................ 300 18,431
------------
84,938
BIOTECHNOLOGY - 1.8%
Amgen, Inc.* ....................................... 600 36,525
Centocor, Inc.* .................................... 700 31,237
Chiron Corporation* ................................ 1,600 33,500
Genome Therapeutics Corporation* ................... 3,500 30,188
------------
131,450
BROADCAST MEDIA - 2.0%
TCI Satellite Entertainment, Inc.* ................. 240 1,710
Tele-Communications, Inc.* ......................... 2,400 74,625
U.S. West Media Group* ............................. 2,000 69,500
------------
145,835
COMMUNICATION EQUIPMENT - 2.2%
ADC Telecommunications, Inc.* ...................... 800 22,050
Allen Telecom, Inc.* ............................... 900 14,175
Andrew Corporation* ................................ 700 13,869
Lucent Technologies, Inc. .......................... 200 25,575
Motorola, Inc. ..................................... 400 24,250
Northern Telecom, Ltd. ............................. 400 25,850
QUALCOMM, Inc.* .................................... 300 16,050
Tellabs, Inc.* ..................................... 300 20,137
------------
161,956
COMPUTERS-NETWORKING - 2.0%
Bay Networks, Inc.* ................................ 1,500 40,688
Cabletron Systems, Inc.* .......................... 1,500 21,844
Cisco Systems, Inc.* ............................... 750 51,281
3Com Corporation* .................................. 1,000 35,937
------------
149,750
COMPUTERS-PERIPHERALS - 2.4%
EMC Corporation* ................................... 1,000 37,813
Iomega Corporation* ................................ 2,000 13,750
Lexmark International Group, Inc.* ................. 800 36,100
Quantum Corporation* ............................... 800 17,050
Read-Rite Corporation* ............................. 700 9,669
Seagate Technology, Inc.* .......................... 800 20,200
Storage Technology Corporation* .................... 600 45,637
------------
180,219
CONSUMER FINANCE - 1.7%
Capital One Financial Corporation .................. 200 15,775
Contifinancial Corporation* ........................ 800 24,400
Greentree Financial Corporation .................... 900 25,594
Household International, Inc. ...................... 200 27,550
MBNA Corporation ................................... 900 32,231
------------
125,550
ENTERTAINMENT - 1.3%
Time Warner, Inc. .................................. 600 43,200
Viacom, Inc.* ...................................... 600 31,875
The Walt Disney Company ............................ 200 21,350
------------
96,425
EQUIPMENT-SEMICONDUCTORS - 1.4%
Applied Materials, Inc.* .......................... 700 24,719
KLA-Tencor Corporation* ............................ 600 22,950
Novellus Systems, Inc.* ............................ 700 30,275
Teradyne, Inc.* .................................... 600 24,037
------------
101,981
FOOTWEAR - 1.2%
Nike, Inc. ......................................... 500 22,125
Nine West Group, Inc.* ............................. 800 19,700
Reebok International, Ltd.* ........................ 800 24,400
Wolverine World Wide, Inc. ......................... 900 25,425
------------
91,650
GAMING & LOTTERY - 2.4%
Circus Circus Enterprises, Inc.* ................... 1,400 29,400
Harrah's Entertainment, Inc.* ...................... 2,100 51,581
International Game Technology ...................... 2,300 57,500
Mirage Resorts, Inc.* .............................. 1,750 42,547
------------
181,028
GOLD COMPANIES - 4.1%
Barrick Gold Corporation ........................... 2,400 51,900
Battle Mountain Gold Company ....................... 8,200 52,275
Hecla Mining Company* .............................. 3,600 23,850
Homestake Mining Company ........................... 5,000 54,375
Newmont Mining Corporation ......................... 1,800 55,012
Placer Dome, Inc. .................................. 3,800 50,113
Stillwater Mining Company* ......................... 700 17,719
------------
305,244
See accompanying notes.
27
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - ASSET ALLOCATION SERIES (continued)
PRINCIPAL
AMOUNT OR
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
LONG-TERM HEALTH CARE - 2.2%
Beverly Enterprises, Inc.* ......................... 1,100 $ 14,644
Genesis Health Ventures, Inc.* ..................... 1,000 28,125
HEALTHSOUTH Corporation* .......................... 1,551 43,525
Health Care and Retirements
Corporation* ..................................... 500 21,469
Integrated Health Services, Inc. ................... 700 27,519
Mariner Health Group, Inc.* ........................ 1,450 24,831
------------
160,113
MANAGED HEALTH CARE - 1.6%
Express Scripts, Inc.* ............................. 500 42,391
First Health Group Corporation* .................... 500 27,125
Oxford Health Plans* ............................... 350 5,228
Pacificare Health Systems, Inc.* ................... 250 18,812
United Healthcare Corporation ...................... 400 25,900
------------
119,456
LEISURE TIME PRODUCTS - 0.8%
Brunswick Corporation .............................. 1,200 41,850
Callaway Golf Company .............................. 700 20,300
------------
62,150
RESTAURANTS - 1.8%
Applebees International, Inc. ...................... 600 13,875
Brinker International, Inc.* ....................... 900 19,688
CKE Restaurants, Inc. .............................. 470 17,272
Cracker Barrel Old Country Store,
Inc .............................................. 600 24,000
McDonald's Corporation ............................. 400 24,000
Outback Steakhouse, Inc.* .......................... 400 15,650
Wendy's International, Inc. ........................ 1,000 22,313
------------
136,798
RETAIL - SPECIALTY - 2.5%
AutoZone, Inc.* .................................... 900 30,487
Claire's Stores .................................... 1,300 29,819
OfficeMax, Inc.* ................................... 1,700 30,387
The Pep Boys - Manny, Moe & Jack ................... 900 20,869
Staples, Inc.* ..................................... 1,350 31,303
Toys "R" Us, Inc.* ................................. 700 21,044
Viking Office Products, Inc.* ...................... 1,000 23,250
------------
187,159
TELECOMMUNICATIONS - 0.9%
Ameritech Corporation .............................. 300 14,831
Bell Atlantic Corporation .......................... 107 10,968
Bellsouth Corporation .............................. 200 13,512
GTE Corporation .................................... 200 11,975
SBC Communication, Inc. ............................ 384 16,752
------------
68,038
TRUCKING - 2.1%
FDX Corporation* ................................... 560 39,830
Rollins Truck Leasing Corporation .................. 2,250 31,078
Ryder System, Inc. ................................. 650 24,700
USFreightways Corporation .......................... 800 28,800
Werner Enterprises, Inc. ........................... 1,100 28,050
------------
152,458
------------
Total common stocks - 35.5% ...................................... 2,642,198
U.S. GOVERNMENT AGENCIES
- ------------------------
FEDERAL HOME LOAN MORTGAGES - 2.0%
7.00% - 2020 ..................................... $ 100,000 100,465
7.00% - 2021 ..................................... $ 50,000 50,024
------------
150,489
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.0%
6.50% - 2018 ..................................... $ 50,000 49,572
6.95% - 2020 ..................................... $ 130,000 129,714
7.50% - 2020 ..................................... $ 40,000 40,702
------------
219,988
U.S. TREASURY NOTE - 4.6%
6.50% - 2006 ..................................... $ 325,000 340,831
U.S. TREASURY BOND - 1.3%
6.00% - 2026 ..................................... $ 100,000 99,929
------------
Total U.S. government & government
agencies - 10.9% ............................................... 811,237
REAL ESTATE INVESTMENT TRUSTS
- -----------------------------
American Health Properties, Inc. ................... 700 18,550
Avalon Properties, Inc. ............................ 600 17,400
CBL & Associates Properties, Inc. .................. 700 17,150
Duke Realty Investments, Inc. ...................... 900 21,937
Equity Residential Properties Trust ................ 400 20,100
Federal Realty Investment Trust .................... 650 15,966
General Growth Property, Inc. ...................... 550 20,281
Glimcher Realty Trust .............................. 850 18,594
Health Care Property Investors, Inc. ............... 500 18,469
Kimco Realty Corporation ........................... 600 21,225
Merry Land & Investment Company .................... 800 17,900
New Plan Realty Trust .............................. 800 20,100
Post Properties, Inc. .............................. 450 17,972
Public Storage, Inc. ............................... 600 18,525
Security Capital Pacific Trust ..................... 800 19,250
Security Capital Pacific Trust,
Warrants - 1998 .................................. 42 139
Simon Debartolo Group, Inc. ........................ 600 20,550
Spieker Properties, Inc. ........................... 500 20,625
United Realty Trust Dominion ....................... 1,200 17,400
See accompanying notes.
28
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - ASSET ALLOCATION SERIES (continued)
NUMBER OF MARKET
REAL ESTATE INVESTMENT TRUSTS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
Washington Real Estate Investment Trust ............ 1,000 $ 17,188
Weingarten Realty Investors ........................ 400 17,900
------------
Total real estate investment trusts - 5.1% ....................... 377,221
FOREIGN STOCKS
- --------------
BELGIUM - 4.1%
Cementbedrijven Cimenteries ........................ 200 19,345
Delhaize-Le Lion ................................... 300 19,266
Electrabel ......................................... 150 38,219
Fortis AG .......................................... 200 55,572
Gevaert NV ......................................... 200 11,193
Gevaert NV, Warrants - 2000 ........................ 400 3,009
Petrofina SA ....................................... 150 54,163
Royale Belgium ..................................... 130 45,578
Solvay SA .......................................... 800 60,605
------------
306,950
DENMARK - 4.2%
A/S Dampskibsselskabet Svendborg ................... 1 68,018
A/S Forsikringsselskabet Codan ..................... 45 7,979
Akieselskabet Potagua .............................. 140 4,389
Bang & Olufsen Holding A/S ......................... 82 5,176
BG Bank A/S ........................................ 133 8,113
Carlsberg A/S ...................................... 197 12,756
Cheminova Holding A/S .............................. 214 5,403
D/S Norden A/S ..................................... 35 3,830
Danisco A/S ........................................ 244 16,025
Danske Traelast .................................... 54 5,362
Den Danske Bank .................................... 245 32,021
Finansierings Instituttet for Industri
og Handvaerk A/S ................................. 189 4,413
Finansieringsselskabet Gefion A/S .................. 240 4,732
FLS Industries A/S ................................. 212 6,015
ISS International Service System A/S* .............. 148 7,075
J. Lauritzen Holdings A/S* ......................... 89 9,216
Jyske Bank A/S ..................................... 61 7,052
Korn-OG Foderstof Kompagniet A/S ................... 153 4,015
Novo Nordisk A/S ................................... 263 44,768
Radiometer A/S ..................................... 94 4,667
Ratin A/S* ......................................... 88 15,604
Sophus Berendsen A/S* .............................. 88 3,420
Sydbank A/S ........................................ 108 5,362
Tele Danmark A/S ................................... 94 8,534
Topdanmark A/S* .................................... 30 5,320
Tryg-Baltica Forsikring A/S ........................ 128 10,064
------------
309,329
GERMANY - 10.1%
Allianz AG ......................................... 360 108,136
Allianz AG, Rights - 1998 .......................... 360 1,781
BASF AG ............................................ 1,081 47,815
Bayer AG ........................................... 735 33,445
Bayerische Motoren Werke
(BMW) AG ......................................... 100 112,581
Continental AG ..................................... 202 5,150
Daimler-Benz AG .................................... 450 41,415
Degussa AG ......................................... 140 7,949
Deutsche Bank AG ................................... 692 51,881
Deutsche Telekom AG ................................ 2,900 63,431
Dresdner Bank AG ................................... 611 27,885
Friedrich Grohe AG- Vorzugsak ...................... 7 1,987
Heidelberger Zement AG ............................. 86 6,696
Hochtief AG ........................................ 180 7,329
Linde AG ........................................... 14 10,099
Merck KGAA ......................................... 187 7,897
Muenchener Rueckversicherungs-
Gesellschaft AG .................................. 70 30,205
Preussag AG ........................................ 72 24,644
SAP AG ............................................. 122 48,554
Siemens AG ......................................... 1,038 69,206
Veba AG ............................................ 634 45,202
------------
753,288
ITALY - 8.1%
Assicurazioni Gererali ............................. 2,475 76,305
Banco Commerciale Italiane ......................... 11,000 54,883
Edison SPA ......................................... 4,000 33,672
ENI SPA ............................................ 5,100 34,749
Fiat SPA ........................................... 7,700 32,124
Ina - Instituto Naz Assicuraz ...................... 16,638 53,943
Instituto Mobiliare Italiano ....................... 3,208 52,092
Mediobanca ......................................... 3,500 51,073
Montedison SPA ..................................... 29,600 43,599
Telecom Italia Mobile SPA .......................... 18,821 101,133
Telecom Italia- SPA ................................ 8,330 65,644
------------
599,217
JAPAN - 9.9%
All Nippon Airways Company, Ltd. ................... 2,000 10,634
Asahi Glass Company, Ltd. .......................... 2,000 11,068
Bank of Tokyo-Mitsubishi, Ltd. ..................... 3,000 36,445
Chubu Electric Power Company, Inc. ................. 400 5,969
Fuji Bank, Ltd. .................................... 1,000 5,999
Fujitsu, Ltd. ...................................... 2,000 20,847
Hitachi, Ltd. ...................................... 3,000 21,822
Industrial Bank of Japan, Ltd. ..................... 2,000 13,648
Kansai Electric Power Company ...................... 1,400 23,517
See accompanying notes.
29
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - ASSET ALLOCATION SERIES (continued)
NUMBER OF MARKET
FOREIGN STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
JAPAN (continued)
Kawasaki Heavy Industries .......................... 4,000 $ 8,009
Kawasaki Steel Corporation ......................... 5,000 7,349
Kinki Nippon Railway Company, Ltd. ................. 2,000 10,919
Kirin Brewery Company, Ltd. ........................ 1,000 8,924
Kyocera Corporation ................................ 100 5,249
Marubeni Corporation ............................... 3,000 7,896
Marui Company, Ltd. ................................ 1,000 15,373
Matsushita Electric Industrial
Company, Ltd. .................................... 2,000 32,096
Mitsubishi Corporation ............................. 4,000 32,696
Mitsubishi Estate Company, Ltd. .................... 1,000 9,749
Mitsubishi Heavy
Industrial, Ltd. ................................. 4,000 15,208
Mitsubishi Motors Corporation ...................... 2,000 5,549
Mitsubishi Trust & Banking
Corporation ...................................... 1,000 9,824
Mitsui Fudosan Company, Ltd. ....................... 1,000 9,524
NEC Corporation .................................... 2,000 20,097
Nippon Steel Corporation ........................... 6,000 9,629
Nissan Motor Company, Ltd. ......................... 2,000 7,649
Normura Securities Company, Ltd. ................... 2,000 23,547
NSK, Ltd. .......................................... 4,000 15,748
Sekisui House, Ltd. ................................ 4,000 32,696
Sharp Corporation .................................. 2,000 13,648
Shin-Etsu Chemical Company ......................... 1,000 19,797
Sony Corporation ................................... 100 8,474
Sumitomo Bank, Ltd. ................................ 4,000 40,795
Sumitomo Chemical Company .......................... 6,000 17,278
Tokio Marine & Fire
Insurance Company ................................ 2,000 22,347
Tokyo Electric Power Company ....................... 2,700 51,023
Tokyu Corporation .................................. 4,000 16,198
Toshiba Corporation ................................ 3,000 12,148
Toyoda Automatic Loom Works, Ltd. .................. 1,000 17,098
Toyota Motor Corporation ........................... 3,000 79,864
------------
736,350
------------
Total foreign stocks - 36.4% ................................... 2,705,134
TEMPORARY CASH INVESTMENTS
- --------------------------
MONEY MARKET FUND - 0.2%
Chase Master Note Program .......................... 12,000 12,000
------------
Total investments - 96.4% ........................................ 7,162,778
Cash and other assets, less
liabilities - 3.6% ............................................. 263,922
------------
Total net assets - 100% .......................................... $ 7,426,700
============
SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES
NUMBER OF MARKET
COMMON STOCKS SHARES VALUE
- --------------------------------------------------------------------------------
AIR FREIGHT - 0.3%
FDX Corporation* ................................... 500 $ 35,563
AUTO PARTS & EQUIPMENT - 1.1%
Snap-On, Inc. ...................................... 2,900 132,312
BANKS - MAJOR REGIONAL - 5.2%
Banc One Corporation ............................... 2,640 166,980
Bank of New York Company, Inc. ..................... 2,900 182,156
Northern Trust Corporation ......................... 2,600 194,350
Wachovia Corporation ............................... 1,300 110,256
------------
653,742
BANKS - MONEY CENTER - 1.1%
First Chicago NBD Corporation ...................... 1,500 132,188
BEVERAGES - SOFT DRINK - 4.2%
Coca-Cola Company .................................. 4,800 371,700
PepsiCo, Inc. ...................................... 3,600 153,675
------------
525,375
BROADCAST MEDIA - 1.4%
Comcast Corporation ................................ 2,500 88,281
Tele-Communications, Inc.* ......................... 2,900 90,172
------------
178,453
CHEMICALS - BASIC - 0.9%
Praxair, Inc. ...................................... 2,200 113,163
CHEMICALS - SPECIALTY - 0.8%
H.B. Fuller Company ................................ 900 53,888
Nalco Chemical Company ............................. 1,200 48,675
------------
102,563
COMMUNICATIONS EQUIPMENT - 0.9%
Tellabs, Inc.* ..................................... 1,700 114,112
COMPUTER HARDWARE - 2.7%
Compaq Computer Corporation ........................ 2,000 51,750
Hewlett-Packard Corporation ........................ 2,000 126,750
International Business
Machines Corporation ............................. 1,500 155,812
------------
334,312
COMPUTER SOFTWARE/SERVICES - 5.6%
BMC Software, Inc.* ................................ 1,900 159,244
Microsoft Corporation* ............................. 4,200 375,900
PeopleSoft, Inc.* .................................. 3,200 168,600
------------
703,744
CONTAINERS - METAL/GLASS - 0.9%
Crown Cork & Seal Company, Inc. .................... 2,100 112,350
See accompanying notes.
30
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES (continued)
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
DATA PROCESSING SERVICES - 1.8%
Automatic Data Processing, Inc. .................... 1,600 $ 108,900
First Data Corporation ............................. 3,500 113,750
------------
222,650
DISTRIBUTION - FOOD & HEALTH - 0.9%
Cardinal Health, Inc. .............................. 1,350 119,053
ELECTRIC COMPANIES - 0.4%
New Century Energies, Inc. ......................... 1,000 50,375
ELECTRICAL EQUIPMENT - 0.6%
Hubbell, Inc. ...................................... 1,500 75,563
ELECTRONICS - SEMICONDUCTORS - 3.1%
Analog Devices, Inc.* .............................. 3,200 106,400
Intel Corporation .................................. 3,600 281,025
------------
387,425
ENTERTAINMENT - 2.1%
Time Warner, Inc. .................................. 1,700 122,400
Viacom, Inc.* ...................................... 2,600 139,750
------------
262,150
FINANCIAL-DIVERSE - 7.5%
American Express Company ........................... 1,600 146,900
American General Corporation ....................... 2,500 161,719
Fannie Mae ......................................... 2,600 164,450
Federal Home Loan
Mortgage Corporation ............................. 3,500 166,031
FINOVA Group, Inc. ................................. 2,800 164,850
SunAmerica, Inc. ................................... 3,000 143,625
------------
947,575
FOODS - 3.0%
Campbell Soup Company .............................. 2,000 113,500
Interstate Bakeries Corporation .................... 4,000 129,250
Ralston-Purina Group ............................... 1,200 127,200
Vlasic Foods International, Inc.* .................. 200 5,112
------------
375,062
HARDWARE & TOOLS - 0.5%
Black & Decker Corporation ......................... 1,200 63,675
HEALTH CARE - DIVERSE - 2.2%
Johnson & Johnson, Inc. ............................ 3,700 271,256
HOUSEHOLD FURNISHINGS & APPLIANCES - 1.4%
Leggett & Platt, Inc. .............................. 3,400 174,888
HOUSEHOLD PRODUCTS - 5.3%
Clorox Company ..................................... 1,800 154,238
Colgate-Palmolive Company .......................... 1,800 155,925
Kimberly-Clark Corporation ......................... 2,000 100,250
Procter & Gamble Company ........................... 3,000 253,125
------------
663,538
INSURANCE - LIFE/HEALTH - 1.2%
UNUM Corporation ................................... 2,800 154,525
INSURANCE - MULTI-LINE - 1.8%
American International Group, Inc. ................. 1,800 226,687
INSURANCE-PROPERTY - 1.2%
Chubb Corporation .................................. 2,000 156,750
LEISURE TIME PRODUCTS - 0.9%
Mattel, Inc. ....................................... 2,700 106,988
MACHINERY - DIVERSE - 1.1%
Deere & Company .................................... 2,200 136,263
MANUFACTURING - DIVERSIFIED - 1.0%
Illinois Tool Works, Inc. .......................... 1,900 123,025
MEDICAL PRODUCTS & SUPPLIES - 1.5%
ATL Ultrasound, Inc.* .............................. 1,100 55,963
Guidant Corporation ................................ 1,800 132,075
------------
188,038
NATURAL GAS - 0.5%
Consolidated Natural Gas Company ................... 1,100 63,456
NETWORKING - 1.4%
Cisco Systems, Inc.* ............................... 2,550 174,356
OIL - INTERNATIONAL - 0.7%
Amoco Corporation .................................. 1,000 86,375
OIL & GAS - EXPLORATION/PRODUCTION - 1.5%
Anadarko Petroleum Corporation ..................... 1,400 96,600
Apache Corporation ................................. 2,600 95,550
------------
192,150
PAPER & FOREST PRODUCTS - 0.2%
Mead Corporation ................................... 800 28,650
PHARMACEUTICALS - 5.0%
Forest Laboratories, Inc. * ........................ 1,800 67,500
Merck & Company, Inc. .............................. 2,500 320,938
Schering-Plough Corporation ........................ 3,000 245,063
------------
633,501
PHOTOGRAPHY/IMAGING - 0.8%
Xerox Corporation .................................. 900 95,794
RAILROADS - 0.5%
Norfolk Southern Corporation ....................... 1,700 63,537
See accompanying notes.
31
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - SOCIAL AWARENESS SERIES (continued)
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
RESTAURANTS - 0.9%
McDonald's Corporation ............................. 1,800 $ 108,000
RETAIL - APPAREL - 1.2%
TJX Companies, Inc. ................................ 3,400 153,850
RETAIL - DEPARTMENT STORES - 2.2%
Kohl's Corporation* ................................ 1,500 122,625
Profitt's, Inc.* ................................... 4,400 159,500
------------
282,125
RETAIL - DISCOUNTERS - 1.7%
Dayton Hudson Corporation .......................... 2,400 211,200
RETAIL - DRUG STORES - 1.3%
Walgreen Company ................................... 4,800 168,900
RETAIL - FOOD CHAINS - 1.8%
American Stores Company ............................ 3,500 91,000
Kroger Company* .................................... 3,000 138,562
------------
229,562
RETAIL - GENERAL MERCHANDISE - 0.8%
Consolidated Stores Corporation* ................... 2,200 94,462
RETAIL - SPECIALTY - 0.7%
Woolworth Corporation* ............................. 3,500 87,500
SAVINGS & LOAN - 0.6%
H.F. Ahmanson & Company ............................ 1,000 77,500
SERVICES - ADVERTISING/MARKETING - 1.5%
Omnicom Group, Inc. ................................ 4,000 188,250
SERVICES - COMMERCIAL & CONSUMER - 1.6%
Apollo Group, Inc.* ................................ 1,200 57,750
Service Corporation International .................. 1,900 80,631
Sylvan Learning Systems, Inc.* ..................... 1,450 68,331
------------
206,712
SERVICES - COMPUTER SYSTEMS - 1.0%
SunGard Data Systems, Inc.* ........................ 3,500 128,844
TELECOMMUNICATION - LONG DISTANCE - 3.7%
AT&T Corporation ................................... 3,400 223,125
Sprint Corporation ................................. 1,100 74,456
WorldCom, Inc.* .................................... 4,000 172,250
------------
469,831
TELEPHONE - 5.2%
Ameritech Corporation .............................. 3,000 148,312
Bell Atlantic Corporation .......................... 1,200 123,000
BellSouth Corporation .............................. 2,700 182,419
SBC Communications, Inc. ........................... 4,600 200,675
------------
654,406
TRUCKING - 0.3%
Consolidated Freightways Corporation* .............. 2,500 $ 42,500
------------
Total common stocks - 97.7% ...................................... 12,284,824
Cash and other assets, less
liabilities - 2.3% ............................................. 283,197
------------
Total net assets - 100% .......................................... $ 12,568,021
============
SECURITY EQUITY FUND - VALUE SERIES
PREFERRED STOCKS
- ----------------
COMPUTER SOFTWARE - 2.1%
Unisys Corporation ................................. 7,000 $ 329,875
COMMON STOCKS
- -------------
AIR FREIGHT - 3.1%
Monaco Coach Corporation* .......................... 8,500 333,625
Old Dominion Freight Line, Inc.* ................... 8,500 145,562
------------
479,187
ALUMINUM - 0.6%
Easco, Inc. ........................................ 6,000 91,500
BANKS - MAJOR REGIONAL - 0.8%
Northern Trust Corporation ......................... 1,600 119,600
BUILDING MATERIALS - 0.9%
American Standard Companies,
Inc.* ............................................ 3,000 137,625
CHEMICALS - SPECIALTY - 0.6%
Material Sciences Corporation* ..................... 9,000 98,437
COMMUNICATION EQUIPMENT - 6.4%
Antec Corporation* ................................. 16,200 243,000
Comverse Technology, Inc.* ......................... 12,000 586,500
Transcrypt International, Inc.* 15,000 ............. 164,062
------------
993,562
COMPUTER HARDWARE - 1.2%
CHS Electronics, Inc.* ............................. 10,250 192,187
COMPUTER SOFTWARE/SERVICES - 10.7%
American Management
Systems, Inc.* ................................... 12,000 330,000
Computer Sciences Corporation* ..................... 8,800 484,000
DST Systems, Inc.* ................................. 5,400 283,837
Electronics For Imaging, Inc.* ..................... 11,100 288,600
Rational Software Corporation* ..................... 20,000 260,000
------------
1,646,437
See accompanying notes.
32
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - VALUE SERIES (continued)
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
CONTAINERS - PACKAGING - 2.3%
Bemis Company, Inc. ................................ 3,100 $ 139,887
Sealright Company, Inc.* .......................... 15,600 214,500
------------
354,387
ELECTRICAL EQUIPMENT - 3.5%
AMP, Inc. .......................................... 4,400 192,775
Honeywell, Inc. .................................... 1,700 140,569
Hubbell, Inc. (Cl. B) .............................. 4,200 211,575
------------
544,919
ELECTRONICS - INSTRUMENTATION - 1.8%
E G & G, Inc. ...................................... 9,700 281,906
ENTERTAINMENT - 1.3%
Metromedia International Group, Inc. ............... 13,000 197,437
FOODS - 4.1%
Chiquita Brands International, Inc. ................ 24,000 328,500
Hormel Foods Corporation ........................... 8,000 310,500
------------
639,000
GAMING & LOTTERY - 1.4%
Circus Circus Enterprises, Inc.* ................... 10,000 210,000
HEALTH CARE - LONG TERM CARE - 2.5%
Integrated Health Services, Inc. ................... 10,000 393,125
HEALTH CARE - SPECIALIZED SERVICES - 1.3%
Allegiance Corporation ............................. 5,000 197,813
HOUSEHOLD FURNISHINGS & APPLIANCES - 4.7%
Leggett & Platt, Inc. .............................. 1,400 72,013
Meadowcraft, Inc.* ................................. 11,000 160,875
O'Sullivan Industries
Holdings, Inc.* .................................. 33,000 420,750
The Rival Company .................................. 4,000 69,000
------------
722,638
HOUSEHOLD PRODUCTS - 1.5%
Kimberly-Clark Corporation ......................... 4,500 225,563
INSURANCE - LIFE/HEALTH - 4.4%
AFLAC, Inc. ........................................ 6,000 379,500
John Alden Financial Corporation ................... 3,100 66,844
Unum Corporation ................................... 4,100 226,269
------------
672,613
INSURANCE - PROPERTY - 0.8%
Leucadia National Corporation ...................... 3,000 118,125
IRON & STEEL - 1.7%
Cleveland-Cliffs, Inc. ............................. 5,000 268,750
LEISURE TIME PRODUCTS - 4.5%
Callaway Golf Company .............................. 8,200 237,800
Hasbro, Inc. ....................................... 13,000 459,063
------------
696,863
MANUFACTURING - DIVERSIFIED - 1.0%
AEP Industries, Inc.* .............................. 4,500 154,125
MEDICAL PRODUCTS & SUPPLIES - 2.6%
ATL Ultrasound, Inc.* .............................. 3,700 188,238
Sunrise Medical, Inc.* ............................. 13,500 215,156
------------
403,394
NATURAL GAS - 2.6%
Equitable Resources, Inc. .......................... 12,000 399,000
OFFICE EQUIPMENT & SUPPLIES - 1.3%
Corporate Express, Inc.* .......................... 20,700 206,353
OIL - INTERNATIONAL - 2.7%
Tesoro Petroleum Corporation* ...................... 23,000 411,125
OIL & GAS - EXPLORATION & PRODUCTION - 6.1%
Apache Corporation ................................. 6,000 220,500
Forcenergy, Inc.* .................................. 12,800 339,200
YPF Sociedad Anonima ADR ........................... 11,000 374,000
------------
933,700
OIL & GAS - REFINING & MARKETING - 1.0%
Quaker State Corporation ........................... 8,000 150,500
PHARMACEUTICALS - 5.7%
Dura Pharmaceuticals, Inc.* ........................ 4,800 118,200
Mylan Laboratories, Inc. ........................... 26,000 598,000
Teva Pharmaceutical Industries,
Ltd. ADR ......................................... 3,800 162,450
------------
878,650
PUBLISHING - NEWSPAPER - 4.3%
E.W. Scripps Company ............................... 7,000 387,188
News Corporation, Ltd. ADR ......................... 10,000 269,375
------------
656,563
RAILROADS - 1.2%
RailAmerica, Inc.* ................................. 27,000 180,563
RESTAURANTS - 2.4%
The Cheesecake Factory* ............................ 11,000 366,438
RETAIL - APPAREL - 1.4%
Talbots, Inc. ...................................... 11,000 214,500
RETAIL - SPECIALTY - 0.8%
Payless ShoeSource, Inc.* .......................... 1,600 120,400
See accompanying notes.
33
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - VALUE SERIES (continued)
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
SERVICES - COMMERCIAL & CONSUMER - 2.8%
Angelica Corporation ............................... 18,500 $ 426,656
TRUCKS & PARTS - 0.7%
Titan International, Inc. .......................... 6,000 115,500
------------
Total common stocks - 96.7% ...................................... 14,899,141
------------
Total investments - 98.8% ........................................ 15,229,016
Cash and other assets, less
liabilities - 1.2% ............................................. 189,692
------------
Total net assets - 100.0%......................................... $ 15,418,708
============
SECURITY EQUITY FUND - SMALL COMPANY SERIES
COMMON STOCKS
- -------------
AEROSPACE & DEFENSE - 0.8%
Orbital Sciences Corporation* ...................... 700 $ 31,413
AIRLINES - 2.1%
Midwest Express Holdings, Inc.* .................... 1,600 78,400
BIOTECHNOLOGY - 1.0%
Incyte Pharmaceuticals, Inc.* ...................... 800 37,400
BROADCAST MEDIA - 4.8%
Cox Radio, Inc.* ................................... 1,600 77,600
Heftel Broadcasting Corporation* ................... 300 13,425
Sinclair Broadcast Group, Inc.* .................... 1,600 92,200
------------
183,225
COMMUNICATION EQUIPMENT - 1.0%
DSET Corporation* .................................. 1,000 18,687
Omnipoint Corporation* ............................. 700 20,650
------------
39,337
COMPUTER SOFTWARE/SERVICES - 7.3%
CBT Group PLC ADR* ................................. 700 36,225
Documentum, Inc.* .................................. 800 43,300
Information Management
Resources, Inc.* ................................. 1,700 100,087
Legato Systems, Inc.* .............................. 600 35,625
Sykes Enterprises, Inc.* .......................... 600 12,600
Systems & Computer Technology
Corporation* ..................................... 500 20,625
Visio Corporation* ................................. 700 30,100
------------
278,562
DISTRIBUTION - FOOD & HEALTH - 2.2%
Hain Food Group, Inc.* ............................. 1,200 22,350
Suiza Foods Corporation* .......................... 1,000 61,500
------------
83,850
ELECTRICAL EQUIPMENT - 2.2%
Chicago Miniature Lamp, Inc.* ...................... 2,150 83,581
ELECTRONICS-SEMICONDUCTORS - 1.3%
Sipex Corporation* ................................. 1,100 36,300
Uniphase Corporation* .............................. 300 12,619
------------
48,919
FOODS - 2.2%
American Italian Pasta
Company (Cl.A)* .................................. 2,300 83,088
HEALTH CARE - LONG TERM CARE - 1.1%
Hanger Orthopedic Group, Inc.* ..................... 2,600 43,712
HEALTH CARE - MANAGED CARE - 1.2%
United Wisconsin Services, Inc. .................... 1,400 46,463
HEALTH CARE - SPECIALIZED SERVICES - 5.7%
ABR Information Services, Inc.* .................... 1,700 47,812
Advance Paradigm, Inc.* ............................ 1,800 71,325
Parexel International* ............................. 700 21,875
Physician Reliance Network, Inc.* .................. 2,800 38,500
Renal Care Group, Inc.* ............................ 1,000 38,000
------------
217,512
HOMEBUILDING - 1.6%
Centex Construction Products, Inc. ................. 1,700 61,944
HOUSEHOLD PRODUCTS - 0.5%
Central Garden & Pet Company* ...................... 500 19,531
INSURANCE-PROPERTY - 1.1%
Executive Risk, Inc. ............................... 600 42,750
IRON & STEEL - 1.4%
Oregon Steel Mills, Inc. ........................... 2,500 55,000
LEISURE TIME PRODUCTS - 0.9%
Speedway Motorsports, Inc.* ........................ 1,300 34,856
MANUFACTURING - DIVERSIFIED - 1.7%
MSC Industrial Direct Company,
Inc. (Cl.A)* ..................................... 1,200 65,025
MEDICAL PRODUCTS & SUPPLIES - 1.9%
Henry Schein, Inc.* ................................ 1,200 49,800
Ventana Medical Systems, Inc.* ..................... 900 23,963
------------
73,763
PHARMACEUTICALS - 2.9%
Amerisource Health Corporation* .................... 300 18,037
Biovail Corporation International* ................. 1,900 91,675
------------
109,712
See accompanying notes.
34
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY EQUITY FUND - SMALL COMPANY SERIES (continued)
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 2.5%
Glenborough Realty Trust, Inc. ..................... 700 $ 20,388
Laser Mortgage Management, Inc. .................... 3,800 61,987
Patriot American Hospitality, Inc. ................. 500 13,500
------------
95,875
RESTAURANTS - 1.9%
Landry's Seafood Restaurants, Inc.* ................ 1,100 33,825
Papa John's International, Inc.* ................... 500 19,188
Schlotzsky's, Inc.* ................................ 900 21,037
------------
74,050
RETAIL APPAREL - 1.1%
Stage Stores, Inc.* ................................ 800 41,300
RETAIL - FOOD CHAINS - 4.3%
Dominick's Supermarkets, Inc.* ..................... 2,000 91,000
Wild Oats Market, Inc.* ............................ 2,100 74,813
------------
165,813
RETAIL - GENERAL MERCHANDISE - 2.0%
Linens 'N Things, Inc.* ............................ 1,400 76,912
RETAIL - SPECIALTY - 1.3%
Michaels Stores, Inc.* ............................. 1,300 48,588
SAVINGS & LOANS - 1.0%
Sterling Financial Corporation* .................... 1,500 39,000
SERVICES - ADVERTISING/MARKETING - 8.2%
Acxiom Corporation* ................................ 2,600 66,625
Boron, Lepore & Associates, Inc.* .................. 1,100 36,437
Lamar Advertising Company* ......................... 3,600 126,000
Metris Companies, Inc. ............................. 600 26,100
Universal Outdoor Holdings, Inc.* .................. 900 58,050
------------
313,212
SERVICES - COMMERCIAL & CONSUMER - 15.4%
CCC Information Services
Group, Inc.* ..................................... 1,200 33,000
CSG Systems International, Inc.* ................... 500 22,625
Data Processing Resources
Corporation* ..................................... 1,200 37,275
Integrated Electrical Services, Inc.* .............. 3,800 75,525
International Telecommunication
Data Systems, Inc.* .............................. 2,250 58,781
Lamalie Associates, Inc.* .......................... 1,600 35,600
Personnel Group of America, Inc.* .................. 2,800 63,700
Profit Recovery Group
International, Inc.* ............................. 2,400 51,900
Rent-Way, Inc.* .................................... 2,500 59,375
Romac International, Inc.* ......................... 3,900 107,250
Sylvan Learnings Systems, Inc.* .................... 900 42,413
------------
587,444
SERVICES - DATA PROCESSING - 3.9%
Billing Information Concepts
Corporation* ..................................... 3,000 77,812
Envoy Corporation* ................................. 1,700 73,100
------------
150,912
TELECOMMUNICATION - LONG DISTANCE - 6.4%
IDT Corporation* ................................... 1,200 45,000
IXC Communications, Inc.* .......................... 400 22,825
Metromedia Fiber Network,
Inc. (Cl.A)* ..................................... 2,000 67,250
Premiere Technologies, Inc.* ....................... 700 24,238
Saville Systems Ireland PLC ADR* ................... 1,200 61,500
Telegroup, Inc.* ................................... 1,200 24,300
------------
245,113
TEXTILES - APPAREL - 0.6%
Columbia Sportswear Company* ....................... 1,100 23,238
WASTE MANAGEMENT - 2.0%
Superior Services, Inc.* .......................... 2,400 74,850
------------
Total common stocks - 95.5% ...................................... 3,654,350
Cash and other assets, less
liabilities - 4.5% ............................................. 172,143
------------
Total net assets - 100.0% ........................................ $ 3,826,493
============
SECURITY ULTRA FUND
COMMON STOCKS
- -------------
AIR FREIGHT - 1.5%
Expeditors International of
Washington, Inc. ................................. 34,000 $ 1,457,750
BANKS - MAJOR REGIONAL - 3.1%
Northern Trust Corporation ......................... 26,000 1,943,500
State Street Corporation ........................... 15,500 1,054,969
------------
2,998,469
BIOTECHNOLOGY - 0.7%
Centocor, Inc.* .................................... 16,000 714,000
CHEMICALS - BASIC - 1.9%
Praxair, Inc. ...................................... 21,000 1,080,187
Solutia, Inc. ...................................... 23,900 711,025
------------
1,791,212
CHEMICALS - SPECIALTY - 1.7%
BetzDearborn, Inc. ................................. 6,000 338,625
See accompanying notes.
35
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY ULTRA FUND (continued)
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
CHEMICALS - SPECIALTY (CONTINUED)
M.A. Hanna Company ................................. 14,800 $ 361,675
Sigma-Aldrich Corporation .......................... 26,000 968,500
------------
1,668,800
COMMUNICATION EQUIPMENT - 5.7%
Comverse Technology, Inc.* ......................... 90,000 4,398,750
Transcrypt International, Inc.* .................... 100,000 1,093,750
------------
5,492,500
COMPUTER HARDWARE - 1.3%
CHS Electronics, Inc.* ............................. 68,500 1,284,375
COMPUTER SOFTWARE/SERVICES - 11.0%
America OnLine, Inc.* .............................. 22,800 1,557,525
American Management
Systems, Inc.* ................................... 83,000 2,282,500
Cambridge Technology Partners,
Inc.* ............................................ 26,000 1,288,625
Computer Sciences Corporation ...................... 22,000 1,210,000
Electronics for Imaging, Inc.* ..................... 36,000 936,000
Network Associates, Inc.* .......................... 23,000 1,523,750
Rational Software Corporation* ..................... 140,000 1,820,000
------------
10,618,400
COMPUTER SYSTEMS - SERVICES - 0.6%
Sungard Data Systems, Inc.* ........................ 17,000 625,812
CONTAINERS - METAL/GLASS - 1.8%
Crown Cork & Seal Company, Inc. .................... 32,000 1,712,000
CONTAINERS & PACKAGING - 0.6%
Bemis Company, Inc. ................................ 12,800 577,600
DATA PROCESSING - SERVICES - 1.4%
Paychex, Inc. ...................................... 23,400 1,349,888
DISTRIBUTION - FOOD & HEALTH - 1.6%
Cardinal Health, Inc. .............................. 17,500 1,543,281
ELECTRICAL EQUIPMENT - 1.6%
Maxwell Technologies, Inc.* ........................ 52,100 1,509,272
ELECTRONIC EQUIPMENT - 1.1%
SCI Systems, Inc.* ................................. 30,000 1,068,750
ELECTRONICS - INSTRUMENTATION - 3.0%
E G & G, Inc. ...................................... 44,000 1,278,750
Perkin-Elmer Corporation ........................... 7,300 527,881
Sawtek, Inc.* ...................................... 42,000 1,065,750
------------
2,872,381
ELECTRONICS - SEMICONDUCTORS - 2.9%
Analog Devices, Inc.* .............................. 34,666 1,152,645
Linear Technology Corporation ...................... 16,000 1,104,000
Xilinx, Inc.* ...................................... 15,000 561,563
------------
2,818,208
ENTERTAINMENT - 1.3%
Metromedia International
Group, Inc.* ..................................... 80,000 1,215,000
FOODS - 2.5%
Chiquita Brands International, Inc. ................ 132,000 1,806,750
Dole Food Company, Inc. ............................ 12,800 619,200
------------
2,425,950
GAMING & LOTTERY - 1.3%
Circus Circus Enterprises, Inc.* ................... 60,000 1,260,000
HEALTH CARE - LONG TERM CARE - 1.9%
Integrated Health Services, Inc. ................... 46,000 1,808,375
HOSPITAL MANAGEMENT - 1.5%
Vencor, Inc.* ...................................... 48,000 1,437,000
HOUSEHOLD FURNISHINGS & APPLIANCES - 3.0%
Leggett & Platt, Inc. .............................. 19,900 1,023,606
Meadowcraft, Inc.* ................................. 70,000 1,023,750
O'Sullivan Industries
Holdings, Inc.* .................................. 70,000 892,500
------------
2,939,856
HOUSEHOLD PRODUCTS - 0.5%
Dial Corporation ................................... 22,000 526,625
INSURANCE - LIFE/HEALTH - 3.2%
AFLAC, Inc. ........................................ 41,000 2,593,250
John Alden Financial Corporation ................... 21,000 452,812
------------
3,046,062
INVESTMENT MANAGEMENT - 1.5%
Franklin Resources, Inc. ........................... 28,000 1,484,000
LEISURE TIME PRODUCTS - 2.8%
Callaway Golf Company .............................. 48,000 1,392,000
Hasbro, Inc. ....................................... 38,000 1,341,875
------------
2,733,875
LODGING - HOTELS - 0.8%
La Quinta Inns, Inc. ............................... 37,500 787,500
MANUFACTURING - DIVERSIFIED - 0.3%
Carlisle Companies, Inc. ........................... 6,100 299,662
See accompanying notes.
36
<PAGE>
SCHEDULE OF INVESTMENTS
March 31, 1998
(Unaudited)
SECURITY ULTRA FUND (continued)
NUMBER OF MARKET
COMMON STOCKS (continued) SHARES VALUE
- --------------------------------------------------------------------------------
MANUFACTURING - SPECIALIZED - 2.1%
Ionics, Inc.* ...................................... 21,000 $ 904,312
Sealed Air Corporation* ............................ 17,000 1,113,500
------------
2,017,812
MEDICAL PRODUCTS & SUPPLIES - 4.6%
ATL Ultrasound, Inc.* .............................. 29,000 1,475,375
DePuy, Inc. ........................................ 47,000 1,424,688
Stryker Corporation ................................ 22,000 1,031,250
Sunrise Medical, Inc.* ............................. 30,000 478,125
------------
4,409,438
NATURAL GAS - 0.7%
Sonat, Inc. ........................................ 16,500 717,750
OFFICE EQUIPMENT & SUPPLIES - 2.1%
Corporate Express, Inc.* .......................... 137,000 1,365,719
Herman Miller, Inc. ................................ 19,000 637,094
------------
2,002,813
OIL - INTERNATIONAL - 1.5%
Tesoro Petroleum Corporation* ...................... 80,100 1,431,787
OIL & GAS - EXPLORATION & PRODUCTION - 3.8%
Apache Corporation ................................. 52,000 1,911,000
Forcenergy, Inc.* .................................. 68,000 1,802,000
------------
3,713,000
OIL & GAS - REFINING & MARKETING - 0.9%
Quaker State Corporation ........................... 45,000 846,562
PHARMACEUTICALS - 8.4%
Dura Pharmaceuticals, Inc.* ........................ 42,700 1,051,488
Forest Laboratories, Inc.* ......................... 11,800 442,500
Mylan Laboratories, Inc. ........................... 180,000 4,140,000
R.P. Scherer Corporation* .......................... 18,000 1,215,000
Teva Pharmaceuticals
Industries, Ltd. ................................. 30,000 1,282,500
------------
8,131,488
RAILROADS - 0.8%
RailAmerica, Inc.* ................................. 110,000 735,625
RESTAURANTS - 1.0%
The Cheesecake Factory* ............................ 28,000 932,750
RETAIL - APPAREL - 0.9%
Stage Stores, Inc.* ................................ 16,000 826,000
RETAIL - DISCOUNTERS - 1.5%
Consolidated Stores Corporation* ................... 24,000 1,030,500
Family Dollar Stores, Inc. ......................... 10,500 399,000
------------
1,429,500
SPECIALTY - 1.3%
Payless ShoeSource, Inc.* .......................... 11,000 $ 827,750
Tiffany & Company .................................. 8,000 389,500
------------
1,217,250
SERVICES - ADVERTISING/MARKETING - 3.5%
Acxiom Corporation* ................................ 63,300 1,622,063
Omnicom Group, Inc. ................................ 38,000 1,788,375
------------
3,410,438
SERVICES - COMMERCIAL & CONSUMER - 1.2%
Angelica Corporation ............................... 20,000 461,250
Manpower, Inc. ..................................... 17,000 686,375
------------
1,147,625
SPECIALIZED SERVICES - 1.1%
Quintiles Transnational Corporation* ............... 22,200 1,069,763
TELECOMMUNICATION - LONG DISTANCE - 1.3%
LCI International, Inc.* .......................... 32,300 1,243,550
------------
Total common stocks - 98.8% ...................................... 95,349,754
Cash and other assets, less
liabilities - 1.2% ............................................. 1,152,703
------------
Total net assets - 100.0% ........................................ $ 96,502,457
============
The identified cost of investments owned at March 31, 1998, was the same for
federal income tax and financial statement purposes.
* Securities on which no cash dividend was paid during the preceding twelve
months.
ADR (American Depository Receipt)
(1) Trust preferred securities -- securities issued by financial institutions to
augment their Tier 1 capital base. Issue on a subordinate basis relative to
senior notes or debentures. Institutions may defer cash payments for up to 10
pay periods.
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
March 31, 1998
(Unaudited)
Security Equity Fund
-------------------------------------------
Security Asset
Growth and Equity Global Allocation
Income Fund Series Series Series
----------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (identified
cost $93,089,306, $528,568,458,
$28,369,253 and $6,360,779 respectively) ...................... $102,908,356 $921,517,032 $ 33,982,759 $ 7,162,778
Cash .................................................................. 719,070 38,625,152 150,337 409
Receivables:
Fund shares sold .............................................. 80,846 414,301 1,166 349
Securities sold ............................................... 1,692,394 2,211,700 915,618 244,461
Interest ...................................................... 180,535 127,159 5,678 23,879
Dividends ..................................................... 135,087 1,056,889 83,828 6,989
Foreign taxes recoverable ..................................... -- -- 32,864 1,426
Prepaid expenses ...................................................... -- -- -- 9,777
------------ ------------ ------------ -----------
Total assets .......................................... $105,716,288 $963,952,233 $ 35,172,250 $ 7,450,068
============ ============ ============ ===========
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased .......................................... $ 1,902,746 $ 3,793,277 $ 604,003 $ --
Fund shares redeemed .......................................... 60,894 380,764 2,405 4,196
Forward foreign exchange contracts ............................ -- -- 4,513 --
Other Liabilities:
Management fees ............................................... 106,756 838,853 59,523 6,449
Custodian fees ................................................ -- -- -- 1,199
Transfer and administration fees .............................. -- -- -- 6,357
Professional fees ............................................. -- -- -- 1,006
12b-1 distribution plan fees .................................. 7,822 90,809 10,762 3,157
Other payables ................................................ -- -- -- 1,004
------------ ------------ ------------ -----------
Total liabilities ..................................... 2,078,218 5,103,703 681,206 23,368
Net Assets:
Paid in capital ....................................................... 78,786,774 528,564,419 28,366,555 6,471,957
Undistributed net investment
income (loss) ................................................. 153,677 1,229,462 (198,729) (25,147)
Accumulated undistributed net realized gain
on sale of investments, futures and foreign
currency transactions ......................................... 14,878,569 36,106,075 706,463 178,103
Net unrealized appreciation in value
of investments, futures and translation of assets and
liabilities in foreign currency ............................... 9,819,050 392,948,574 5,616,755 801,787
------------ ------------ ------------ -----------
Net assets ............................................ 103,638,070 958,848,530 34,491,044 7,426,700
------------ ------------ ------------ -----------
Total liabilities and net assets ...................... $105,716,288 $963,952,233 $ 35,172,250 $ 7,450,068
============ ============ ============ ===========
CLASS "A" SHARES
Capital shares outstanding ............................................ 10,301,798 87,895,000 1,694,517 319,150
Net assets ............................................................ $ 94,259,946 $851,243,697 $ 21,960,053 $ 3,823,059
Net asset value per share (net assets divided by
shares outstanding) ........................................... $ 9.15 $ 9.68 $ 12.96 $ 11.98
Add: Selling commission (5.75% of the offering price) ................. 0.56 0.59 0.79 0.73
------------ ------------ ------------ -----------
Offering price per share (net asset
value divided by 94.25%) ...................................... $ 9.71 $ 10.27 $ 13.75 $ 12.71
============ ============ ============ ===========
CLASS "B" SHARES
Capital shares outstanding ............................................ 1,045,432 11,504,206 992,254 302,583
Net assets ............................................................ $ 9,378,124 $107,604,833 $ 12,530,991 $ 3,603,641
Net asset value per share (net assets divided by
shares outstanding) .......................................... $ 8.97 $ 9.35 $ 12.63 $ 11.91
============ ============ ============ ===========
See accompanying notes.
38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
March 31, 1998
(Unaudited)
Security Equity Fund
----------------------------------------------
Social Security
Awareness Value Small Company Ultra
Series Series Series Fund
---------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments, at value (identified
cost $9,273,672, $12,934,186,
$3,073,151 and $74,059,091 respectively) ................ $ 12,284,824 $ 15,229,016 $ 3,654,350 $ 95,349,754
Cash ............................................................ 324,588 368,402 144,666 1,116,296
Receivables:
Fund shares sold ........................................ 11,102 88,590 8,354 785
Securities sold ......................................... -- 84,755 79,325 974,181
Interest ................................................ 1,538 1,994 1,182 7,805
Dividends ............................................... 9,875 16,458 2,013 35,626
Prepaid expenses ................................................ 16,877 16,163 15,349 --
------------ ------------ ----------- ------------
Total assets .................................... $ 12,648,804 $ 15,805,378 $ 3,905,239 $ 97,484,447
============ ============ =========== ============
LIABILITIES AND NET ASSETS
Liabilities:
Payable for:
Securities purchased .................................... $ -- $ 355,490 $ 73,652 $ 849,228
Fund shares redeemed .................................... 62,203 -- -- 25,377
Other Liabilities:
Management fees ......................................... 10,721 12,760 -- 100,588
Custodian fees .......................................... -- -- 715 --
Transfer and administration fees ........................ 2,204 3,038 792 --
Professional fees ....................................... 1,041 9,943 1,474 --
12b-1 distribution plan fees ............................ 4,025 4,843 1,451 6,797
Other payables .......................................... 589 596 662 --
------------ ------------ ----------- ------------
Total liabilities ....................................... 80,783 386,670 78,746 981,990
Net Assets:
Paid in capital ................................................. 9,490,652 12,855,078 3,541,938 62,167,986
Undistributed net investment loss ............................... (11,720) (23,120) (5,644) (306,673)
Accumulated undistributed net realized gain (loss)
on sale of investments and futures .................... 77,937 291,920 (291,000) 13,350,481
Net unrealized appreciation in value
of investments and futures .............................. 3,011,152 2,294,830 581,199 21,290,663
------------ ------------ ----------- ------------
Net assets ...................................... 12,568,021 15,418,708 3,826,493 96,502,457
------------ ------------ ----------- ------------
Total liabilities and net assets ........ $ 12,648,804 $ 15,805,378 $ 3,905,239 $ 97,484,447
============ ============ =========== ============
CLASS "A" SHARES
Capital shares outstanding ...................................... 378,524 666,825 197,339 9,454,842
Net assets ...................................................... $ 7,847,080 $ 9,636,168 $ 2,120,141 $ 88,573,969
Net asset value per share (net assets divided by
shares outstanding) ..................................... $ 20.73 $ 14.45 $ 10.74 $ 9.37
Add: Selling commission (5.75% of the offering price) ........... 1.26 0.88 _0.66 0.57
------------ ------------ ----------- ------------
Offering price per share (net asset
value divided by 94.25%) ................................ $ 21.99 $ 15.33 $ 11.40 $ 9.94
============ ============ =========== ============
CLASS "B" SHARES
Capital shares outstanding ...................................... 230,840 401,961 159,355 884,580
Net assets ...................................................... $ 4,720,941 $ 5,782,540 $ 1,706,352 $ 7,928,488
Net asset value per share (net assets divided by
shares outstanding) .................................... $ 20.45 $ 14.39 $ 10.71 $ 8.96
============ ============ =========== ============
See accompanying notes.
39
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 1998
(Unaudited)
Security Equity Fund
----------------------------------------
Security Asset
Growth and Equity Global Allocation
Income Fund Series Series Series
----------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ....................................................... $ 710,265 $ 5,023,407 $ 222,509 $ 28,020
Interest ........................................................ 387,003 1,131,725 52,075 55,913
------------ ------------ ----------- ---------
1,097,268 6,155,132 274,584 83,933
Less foreign tax expense ................................ -- -- (22,144) (1,019)
------------ ------------ ----------- ---------
Total investment income ................................. 1,097,268 6,155,132 252,440 82,914
EXPENSES:
Management fees ................................................. 582,975 4,385,673 344,800 36,271
Custodian fees .................................................. -- -- -- 2,177
Transfer/maintenance fees ....................................... -- -- -- 6,565
Administration fees ............................................. -- -- -- 31,632
Directors' fees ................................................. -- -- -- 62
Professional fees ............................................... -- -- -- 1,643
Reports to shareholders ......................................... -- -- -- 642
Registration fees ............................................... -- -- -- 10,502
Other expenses .................................................. -- -- -- 34
12b-1 distribution plan fees (Class B) .......................... 38,107 460,957 62,173 18,079
Reimbursement of expenses ....................................... -- -- -- (18,705)
------------ ------------ ----------- ---------
Total expenses .......................................... 621,082 4,846,630 406,973 88,902
------------ ------------ ----------- ---------
Net investment income (loss) .................... 476,186 1,308,502 (154,533) (5,988)
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain during the period on:
Investments ............................................. 16,422,248 45,961,813 596,638 179,799
Foreign currency transactions ........................... -- -- 115,101 263
------------ ------------ ----------- ---------
Net realized gain ....................................... 16,422,248 45,961,813 711,739 180,062
Net change in unrealized appreciation
(depreciation) during the period on:
Investments ............................................. (8,853,464) 93,509,864 1,095,121 56,079
Translation of assets and liabilities in
foreign currencies .............................. -- -- (65,209) (128)
------------ ------------ ----------- ---------
Net unrealized appreciation (depreciation) .............. (8,853,464) 93,509,864 1,029,912 55,951
------------ ------------ ----------- ---------
Net gain ........................................ 7,568,784 139,471,677 1,741,651 236,013
------------ ------------ ----------- ---------
Net increase in net assets resulting from
operations .............................. $ 8,044,970 $140,780,179 $ 1,587,118 $ 230,025
============ ============ =========== =========
See accompanying notes.
40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 1998
(Unaudited)
Security Equity Fund
----------------------------------------------
Social Security
Awareness Value Small Company Ultra
Series Series Series Fund
---------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ........................................... $ 49,102 $ 68,768 $ 6,516 $ 167,969
Interest ............................................ 13,038 7,079 13,310 87,795
----------- ----------- --------- ------------
Total investment income ..................... 62,140 75,847 19,826 255,764
EXPENSES:
Management fees ..................................... 53,567 57,533 14,437 531,811
Custodian fees ...................................... 456 1,247 3,556 --
Transfer/maintenance fees ........................... 6,166 7,911 1,611 --
Administration fees ................................. 4,821 5,178 1,299 --
Directors' fees ..................................... (178) 77 81 --
Professional fees ................................... 3,240 15,951 1,824 --
Reports to shareholders ............................. 470 27 90 --
Registration fees ................................... 12,085 10,141 9,097 --
Other expenses ...................................... (66) 547 544 --
12b-1 distribution plan fees (Class B) .............. 19,935 22,899 6,302 30,626
Reimbursement of expenses ........................... (34,388) (35,151) (14,437) --
----------- ----------- --------- ------------
Total expenses .............................. 66,108 86,360 24,404 562,437
----------- ----------- --------- ------------
Net investment loss ................. (3,968) (10,513) (4,578) (306,673)
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) during the
period on investments ....................... 282,795 432,803 (291,000) 15,700,320
Net change in unrealized appreciation
(depreciation) during the period on
investments ........................... 1,370,547 1,437,861 581,199 (9,020,020)
----------- ----------- --------- ------------
Net gain .................................... 1,653,342 1,870,664 290,199 6,680,300
----------- ----------- --------- ------------
Net increase in net assets resulting
from operations ............. $ 1,649,374 $ 1,860,151 $ 285,621 $ 6,373,627
=========== =========== ========= ============
* Period October 15, 1997 (inception) through March 31, 1998.
See accompanying notes
41
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended March 31, 1998
(Unaudited)
Security Equity Fund
-------------------------------------------
Security Asset
Growth and Equity Global Allocation
Income Fund Series Series Series
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) .............................. $ 476,186 $ 1,308,502 $ (154,533) $ (5,988)
Net realized gain ......................................... 16,422,248 45,961,813 711,739 180,062
Unrealized appreciation (depreciation)
during the period ................................. (8,853,464) 93,509,864 1,029,912 55,951
------------- ------------- ------------ -----------
Net increase in net assets
resulting from operations ......... 8,044,970 140,780,179 1,587,118 230,025
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ........................................... (413,683) (2,345,323) (149,980) (58,958)
Class B ........................................... (5,181) -- -- (28,115)
Net realized gain
Class A ........................................... (20,855,491) (64,375,168) (1,839,563) (224,701)
Class B ........................................... (1,779,726) (7,895,826) (1,085,885) (230,748)
------------- ------------- ------------ -----------
Total distributions to shareholders ....... (23,054,081) (74,616,317) (3,075,428) (542,522)
CAPITAL SHARE TRANSACTIONS (a):
Proceeds from sale of shares
Class A ........................................... 4,531,435 70,130,505 2,563,556 183,650
Class B ........................................... 3,590,927 38,211,592 1,579,494 73,182
Dividends reinvested
Class A ........................................... 19,700,352 62,157,961 1,937,568 281,349
Class B ........................................... 1,768,638 7,737,663 1,817,695 257,505
Shares redeemed
Class A ........................................... (7,339,627) (97,705,153) (5,751,450) (393,826)
Class B ........................................... (1,592,972) (34,704,139) (3,422,008) (420,043)
------------- ------------- ------------ -----------
Net increase (decrease) from capital
share transactions ........................ 20,658,753 45,828,429 (1,275,145) (18,183)
------------- ------------- ------------ -----------
Total increase (decrease)
in net assets ............................. 5,649,642 111,992,291 (2,763,455) (330,680)
NET ASSETS:
Beginning of period ....................................... 97,988,428 846,856,239 37,254,499 7,757,380
------------- ------------- ------------ -----------
End of period ............................................. $ 103,638,070 $ 958,848,530 $ 34,491,044 $ 7,426,700
============= ============= ============ ===========
Undistributed net investment
income (loss) at end of period .................... $ 153,677 $ 1,229,462 ($ 198,729) ($ 25,147)
============= ============= ============ ===========
(a) Shares issued and redeemed
Shares sold
Class A ................................... 482,377 7,867,508 203,929 15,546
Class B ................................... 380,372 4,417,720 191,262 6,312
Dividends reinvested
Class A ................................... 2,399,216 7,659,638 178,897 26,302
Class B ................................... 219,859 983,935 101,172 24,152
Shares redeemed
Class A ................................... (770,466) (10,942,879) (472,462) (33,177)
Class B ................................... (167,851) (4,022,808) (287,924) (37,095)
------------- ------------- ------------ -----------
Net increase (decrease) ................... 2,543,507 5,963,114 (85,126) 2,040
============= ============= ============ ===========
See accompanying notes.
42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended March 31, 1998
(Unaudited)
Security Equity Fund
------------------------------------------------
Social Security
Awareness Value Small Company Ultra
Series Series Series* Fund
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment loss ......................................... $ (3,968) $ (10,513) $ (4,578) $ (306,673)
Net realized gain (loss) .................................... 282,795 432,803 (291,000) 15,700,320
Unrealized appreciation (depreciation)
during the period ................................... 1,370,547 1,437,861 581,199 (9,020,020)
------------ ------------ ----------- ------------
Net increase in net assets
resulting from operations ................... 1,649,374 1,860,151 285,621 6,373,627
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ............................................. (13,294) (23,796) (1,066) --
Class B ............................................. -- -- -- --
Net realized gain
Class A ............................................. -- (148,593) -- (4,076,977)
Class B ............................................. -- (99,378) -- (303,175)
------------ ------------ ----------- ------------
Total distributions to shareholders ......... (13,294) (271,767) (1,066) (4,380,152)
CAPITAL SHARE TRANSACTIONS (a):
Proceeds from sale of shares
Class A ............................................. 765,837 4,126,805 2,066,613 6,911,023
Class B ............................................. 527,743 2,055,039 1,595,376 2,854,425
Dividends reinvested
Class A ............................................. 12,614 169,270 1,049 3,906,269
Class B ............................................. -- 87,953 -- 296,782
Shares redeemed
Class A ............................................. (171,533) (259,417) (111,100) (8,538,821)
Class B ............................................. (52,664) (551,917) (10,000) (1,387,967)
------------ ------------ ----------- ------------
Net increase from capital share transactions ........ 1,081,997 5,627,733 3,541,938 4,041,711
------------ ------------ ----------- ------------
Total increase in net assets ........................ 2,718,077 7,216,117 3,826,493 6,035,186
NET ASSETS:
Beginning of period ......................................... 9,849,944 8,202,591 -- 90,467,271
------------ ------------ ----------- ------------
End of period ............................................... $ 12,568,021 $ 15,418,708 $ 3,826,493 $ 96,502,457
------------ ------------ ----------- ------------
Undistributed net investment income at end of period ........ $ (11,720) $ (23,120) $ (5,644) $ (306,673)
============ ============ =========== ============
(a) Shares issued and redeemed
Shares sold
Class A ............................. 41,488 315,140 208,166 805,876
Class B ............................. 29,194 161,774 160,360 341,420
Dividends reinvested
Class A ............................. 705 13,859 113 479,768
Class B ............................. -- 7,210 -- 37,991
Shares redeemed
Class A ............................. (8,797) (19,698) (10,940) (980,114)
Class B ............................. (2,720) (43,596) (1,005) (164,757)
------------ ------------ ----------- ------------
Net increase ........................ 59,870 434,689 356,694 520,184
============ ============ =========== ============
*Period October 15, 1997 (inception) through March 31, 1998
See accompanying notes
43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended September 30, 1997
Security Equity Fund
------------------------------------------------
Security Asset
Growth and Equity Global Allocation
Income Fund Series Series Series
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) ............................... $ 1,221,015 $ 2,692,742 $ (77,044) $ 70,250
Net realized gain .......................................... 21,245,450 70,480,807 3,427,527 461,093
Unrealized appreciation
during the period .................................. 3,450,512 126,763,115 2,563,891 619,758
------------ ------------- ------------ -----------
Net increase in net assets resulting
from operations ............................ 25,916,977 199,936,664 5,914,374 1,151,101
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ............................................ (1,278,257) (3,155,322) (597,023) (63,009)
Class B ............................................ (29,101) -- (199,976) (52,830)
Net realized gain
Class A ............................................ (5,648,284) (49,869,431) (1,243,269) (61,070)
Class B ............................................ (232,550) (4,463,901) (515,069) (73,554)
------------ ------------- ------------ -----------
Total distributions to shareholders ........ (7,188,192) (57,488,654) (2,555,337) (250,463)
CAPITAL SHARE TRANSACTIONS (a):
Proceeds from sales of shares
Class A ............................................ 5,721,292 221,241,550 6,304,969 1,478,803
Class B ............................................ 3,688,134 110,104,405 6,613,460 1,009,991
Dividends reinvested
Class A ............................................ 6,351,214 49,656,213 1,808,607 122,613
Class B ............................................ 253,502 4,431,044 714,502 124,004
Shares redeemed
Class A ............................................ (11,732,659) (219,339,034) (5,834,526) (595,393)
Class B ............................................ (542,134) (76,188,625) (2,640,062) (513,448)
------------ ------------- ------------ -----------
Net increase from capital share transactions ....... 3,739,349 89,905,553 6,966,950 1,626,570
------------ ------------- ------------ -----------
Total increase in net assets ............... 22,468,134 232,353,563 10,325,987 2,527,208
NET ASSETS:
Beginning of year .................................. 75,520,294 614,502,676 26,928,512 5,230,172
------------ ------------- ------------ -----------
End of year ........................................ $ 97,988,428 $ 846,856,239 $ 37,254,499 $ 7,757,380
============ ============= ============ ===========
Undistributed net investment income
at end of year ..................................... $ 96,355 $ 2,266,283 $ 105,784 $ 67,914
============ ============= ============ ===========
(a) Shares issued and redeemed
Shares sold
Class A ............................ 602,485 27,937,552 503,842 128,634
Class B ............................ 388,324 14,249,362 537,435 89,049
Dividends reinvested
Class A ............................ 721,721 6,886,178 157,805 11,078
Class B ............................ 29,373 628,340 63,438 11,246
Shares redeemed
Class A ............................ (1,232,959) (27,902,983) (459,717) (50,647)
Class B ............................ (56,091) (10,027,869) (211,371) (44,492)
------------ ------------- ------------ -----------
Net increase ....................... 452,853 11,770,580 591,432 144,868
============ ============= ============ ===========
See accompanying notes.
44
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended September 30, 1997
Security Equity Fund
---------------------------------
Social Security
Awareness Value Ultra
Series* Series** Fund
-------------------------------------------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) ....................................... $ 5,542 $ 11,189 $ (832,436)
Net realized gain (loss) ........................................... (204,858) 107,088 2,802,288
Unrealized appreciation
during the period .......................................... 1,640,605 856,969 13,191,840
----------- ----------- ------------
Net increase in net assets resulting
from operations .................................... 1,441,289 975,246 15,161,692
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A .................................................... -- -- --
Class B .................................................... -- -- --
Net realized gain
Class A .................................................... -- -- (5,180,781)
Class B .................................................... -- -- (326,156)
----------- ----------- ------------
Total distributions to shareholders ..................... -- -- (5,506,937)
CAPITAL SHARE TRANSACTIONS (a):
Proceeds from sales of shares
Class A .................................................... 5,535,748 4,177,778 22,311,821
Class B .................................................... 3,185,475 3,087,104 6,072,670
Dividends reinvested
Class A .................................................... -- -- 4,973,701
Class B .................................................... -- -- 326,142
Shares redeemed
Class A .................................................... (306,673) (23,359) (26,312,322)
Class B .................................................... (5,895) (14,178) (3,487,931)
----------- ----------- ------------
Net increase from capital share
transactions ........................................... 8,408,655 7,227,345 3,884,081
----------- ----------- ------------
Total increase in net assets ....................... 9,849,944 8,202,591 13,538,836
NET ASSETS:
Beginning of period ........................................ -- -- 76,928,435
----------- ----------- ------------
End of period .............................................. $ 9,849,944 $ 8,202,591 $ 90,467,271
----------- ----------- ------------
Undistributed net investment income
at end of period ........................................... $ 5,542 $ 11,189 $ --
=========== =========== ============
(a) Shares issued and redeemed
Shares sold
Class A .................................... 363,334 359,432 2,872,813
Class B .................................... 204,698 277,836 766,245
Dividends reinvested
Class A .................................... -- -- 656,941
Class B .................................... -- -- 44,428
Shares redeemed
Class A .................................... (18,206) (1,908) (3,375,134)
Class B .................................... (332) (1,263) (476,747)
----------- ----------- ------------
Net increase ............................... 549,494 634,097 488,546
=========== =========== ============
* Period November 1, 1996 (inception) through September 30,1997.
** Period May 1, 1997 (inception) through September 30,1997.
See accompanying notes
45
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each period
SECURITY GROWTH AND INCOME FUND (CLASS A)(b)
<TABLE>
<CAPTION>
Fiscal Period Ended September 30
------------------------------------------------------------------------------------------
1998(g)(m) 1997(g) 1996(g) 1995(g) 1994(c) 1993
---------- ------------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .. $ 11.14 $ 9.05 $ 7.93 $ 6.96 $ 7.84 $ 7.13
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................ 0.05 0.15 0.18 0.16 0.13 0.21
Net Gain (Loss) on Securities
(realized and unrealized) .... 0.58 2.81 1.37 1.18 (0.71) 0.88
---------- ------------ ------------ ---------- ---------- ------------
Total from Investment Operations ..... 0.63 2.96 1.55 1.34 (0.58) 1.09
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) (0.03) (0.16) (0.16) (0.16) (0.13) (0.22)
Distributions (from Capital Gains) ... (2.59) (0.71) (0.27) (0.21) (0.17) (0.16)
---------- ------------ ------------ ---------- ---------- ------------
Total Distributions .......... (2.62) (0.87) (0.43) (0.37) (0.30) (0.38)
---------- ------------ ------------ ---------- ---------- ------------
NET ASSET VALUE END OF PERIOD ........ $ 9.15 $ 11.14 $ 9.05 $ 7.93 $ 6.96 $ 7.84
========== ============ ============ ========== ========== ============
TOTAL RETURN(a) ...................... 8.55% 35.31% 20.31% 20.25% (7.6%) 15.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) . $ 94,260 $ 91,252 $ 73,273 $ 67,430 $ 65,328 $ 81,982
Ratio of Expenses to Average Net
Assets ....................... 1.21% 1.24% 1.29% 1.31% 1.28% 1.26%
Ratio of Net Investment Income (Loss)
to Average Net Assets ........ 1.06% 1.53% 2.09% 2.21% 1.70% 2.80%
Portfolio Turnover Rate .............. 176% 124% 69% 130% 163% 135%
Average Commission Paid Per Equity
Share Traded(j) .............. $ 0.0600 $ 0.0600 $ 0.0625 -- -- --
SECURITY GROWTH AND INCOME FUND (CLASS B)
Fiscal Period Ended September 30
------------------------------------------------------------------------------
1998(g)(m) 1997(g) 1996(g) 1995(g) 1994(c)
---------- ----------- ----------- ---------- ----------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............. $ 10.99 $ 8.94 $ 7.85 $ 6.90 $ 7.83
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ........................... -- 0.05 0.09 0.08 0.05
Net Gain (Loss) on Securities
(realized and unrealized) ............... 0.57 2.77 1.35 1.18 (0.69)
---------- ----------- ----------- ---------- ----------
Total from Investment Operations ................ 0.57 2.82 1.44 1.26 (0.64)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .......... -- (0.06) (0.08) (0.09) (0.12)
Distributions (from Capital Gains) .............. (2.59) (0.71) (0.27) (0.22) (0.17)
---------- ----------- ----------- ---------- ----------
Total Distributions ..................... (2.59) (0.77) (0.35) (0.31) (0.29)
---------- ----------- ----------- ---------- ----------
NET ASSET VALUE END OF PERIOD ................... $ 8.97 $ 10.99 $ 8.94 $ 7.85 $ 6.90
========== =========== =========== ========== ==========
TOTAL RETURN(a) ................................. 7.95% 34.01% 19.01% 19.07% (8.0%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ............ $ 9,378 $ 6,737 $ 2,247 $ 1,130 $ 668
Ratio of Expenses to Average Net
Assets .................................. 2.21% 2.24% 2.29% 2.31% 2.27%
Ratio of Net Investment Income (Loss)
to Average Net Assets ................... 0.06% 0.53% 1.09% 1.21% 1.03%
Portfolio Turnover Rate ......................... 176% 124% 69% 130% 178%
Average Commission Paid Per Equity
Share Traded(j) ......................... $ 0.0600 $ 0.0600 $ 0.0625 -- --
See accompanying notes.
46
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each period
SECURITY EQUITY SERIES (CLASS A)
<TABLE>
<CAPTION>
Fiscal Period Ended September 30
-----------------------------------------------------------------------------------------
1998(g)(m) 1997(g) 1996(g) 1995(g) 1994(c) 1993
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .. $ 9.09 $ 7.54 $ 6.55 $ 5.54 $ 6.73 $ 5.86
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................ 0.02 0.04 0.05 0.04 0.05 0.12
Net Gain (Loss) on Securities
(realized and unrealized) .... 1.40 2.20 1.48 1.38 0.09 1.17
------------ ------------ ------------ ------------ ------------ -------------
Total from Investment Operations ..... 1.42 2.24 1.53 1.42 0.14 1.29
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) (0.03) (0.04) (0.06) -- (0.12) (0.06)
Distributions (from Capital Gains) ... (0.80) (0.65) (0.48) (0.41) (1.21) (0.36)
------------ ------------ ------------ ------------ ------------ -------------
Total Distributions .......... (0.83) (0.69) (0.54) (0.41) (1.33) (0.42)
------------ ------------ ------------ ------------ ------------ -------------
NET ASSET VALUE END OF PERIOD ........ $ 9.68 $ 9.09 $ 7.54 $ 6.55 $ 5.54 $ 6.73
============ ============ ============ ============ ============ =============
TOTAL RETURN(a) ...................... 17.32% 32.08% 24.90% 27.77% 1.95% 22.70%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) . $ 851,244 $ 757,520 $ 575,680 $ 440,339 $ 358,237 $ 375,565
Ratio of Expenses to Average Net
Assets ....................... 1.02% 1.03% 1.04% 1.05% 1.06% 1.06%
Ratio of Net Investment Income (Loss)
to Average Net Assets ........ 0.41% 0.46% 0.75% 0.87% 0.86% 1.95%
Portfolio Turnover Rate .............. 57% 66% 64% 95% 79% 95%
Average Commission Paid Per Equity
Share Traded(j) .............. $ 0.0600 $ 0.0600 $ 0.0609 -- -- --
SECURITY EQUITY SERIES (CLASS B)
Fiscal Period Ended September 30
--------------------------------------------------------------------------
1998(g)(m) 1997(g) 1996(g) 1995(g) 1994(c)
----------- ----------- ----------- ----------- -----------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .......... $ 8.82 $ 7.36 $ 6.43 $ 5.49 $ 6.81
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) ................. (0.02) (0.04) (0.02) (0.01) 0.01
Net Gain (Loss) on Securities
(realized and unrealized) ............ 1.35 2.15 1.45 1.36 --
----------- ----------- ----------- ----------- -----------
Total from Investment Operations ............. 1.33 2.11 1.43 1.35 0.01
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ....... -- -- (0.02) -- (0.12)
Distributions (from Capital Gains) ........... (0.80) (0.65) (0.48) (0.41) (1.21)
----------- ----------- ----------- ----------- -----------
Total Distributions .................. (0.80) (0.65) (0.50) (0.41) (1.33)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE END OF PERIOD ................ $ 9.35 $ 8.82 $ 7.36 $ 6.43 $ 5.49
=========== =========== =========== =========== ===========
TOTAL RETURN(a) .............................. 16.74% 30.85% 23.57% 26.69% (0.15%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ......... $ 107,605 $ 89,336 $ 38,822 $ 19,288 $ 7,452
Ratio of Expenses to Average Net
Assets ............................... 2.02% 2.03% 2.04% 2.05% 2.07%
Ratio of Net Investment Income (Loss)
to Average Net Assets ................ (0.59%) (0.54%) (0.25%) (0.13%) (0.01%)
Portfolio Turnover Rate ...................... 57% 66% 64% 95% 80%
Average Commission Paid Per Equity
Share Traded(j) ...................... $ 0.0600 $ 0.0600 $ 0.0609 -- --
See accompanying notes.
47
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each period
SECURITY GLOBAL SERIES (CLASS A)
Fiscal Period Ended September 30
-------------------------------------------------------------------------------------
1998(g)(m) 1997(g) 1996(g) 1995(g) 1994(c)(d)
------------- ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ......... $ 13.56 $ 12.42 $ 10.94 $ 10.84 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) ................ (0.03) 0.01 0.01 (0.02) (0.03)
Net Gain (Loss) on Securities
(realized and unrealized) ........... 0.59 2.29 1.87 0.31 0.87
------------ ------------ ------------ ------------ ----------
Total from Investment Operations ............ 0.56 2.30 1.88 0.29 0.84
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ...... (0.09) (0.38) (0.25) -- --
Distributions (from Capital Gains) .......... (1.07) (0.78) (0.15) (0.19) --
------------ ------------ ------------ ------------ ----------
Total Distributions ................. (1.16) (1.16) (0.40) (0.19) --
------------ ------------ ------------ ------------ ----------
NET ASSET VALUE END OF PERIOD ............... $ 12.96 $ 13.56 $ 12.42 $ 10.94 $ 10.84
============ ============ ============ ============ ==========
TOTAL RETURN (a) ............................ 5.63% 20.22% 17.73% 2.80% 8.40%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........ $ 21,960 $ 24,193 $ 19,644 $ 16,261 $ 20,128
Ratio of Expenses to Average Net
Assets .............................. 2.00% 2.00% 2.00% 2.00% 2.00%
Ratio of Net Investment Income (Loss)
to Average Net Assets ............... (0.54%) (0.07%) 0.07% (0.17%) (0.01%)
Portfolio Turnover Rate ..................... 100% 132% 142% 141% 73%
Average Commission Paid Per Equity
Share Traded (j) .................... $ 0.0177 $ 0.0141 $ 0.0338 -- --
SECURITY GLOBAL SERIES (CLASS B)
Fiscal Period Ended September 30
---------------------------------------------------------------------------
1998(g)(m) 1997(g) 1996(g) 1995(g) 1994(c)(d)
----------- ----------- ----------- ----------- -----------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............. $ 13.22 $ 12.18 $ 10.74 $ 10.75 $ 9.96
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ........................... (0.09) (0.11) (0.10) (0.12) (0.12)
Net Gain (Loss) on Securities
(realized and unrealized) ............... 0.57 2.24 1.84 0.30 0.91
----------- ----------- ----------- ----------- -----------
Total from Investment Operations ................ 0.48 2.13 1.74 0.18 0.79
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .......... -- (0.31) (0.14) -- --
Distributions (from Capital Gains) .............. (1.07) (0.78) (0.16) (0.19) --
----------- ----------- ----------- ----------- -----------
Total Distributions ..................... (1.07) (1.09) (0.30) (0.19) --
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE END OF PERIOD ................... $ 12.63 $ 13.22 $ 12.18 $ 10.74 $ 10.75
=========== =========== =========== =========== ===========
TOTAL RETURN(a) ................................. 5.04% 19.01% 16.57% 1.79% 7.90%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ............ $ 12,531 $ 13,061 $ 7,285 $ 5,433 $ 3,960
Ratio of Expenses to Average Net
Assets .................................. 3.00% 3.00% 3.00% 3.00% 3.00%
Ratio of Net Investment Income (Loss)
to Average Net Assets ................... (1.54%) (0.93%) (0.93%) (1.17%) (0.01%)
Portfolio Turnover Rate ......................... 100% 132% 142% 141% 73%
Average Commission Paid Per Equity
Share Traded(j) ......................... $ 0.0177 $ 0.0141 $ 0.0338 -- --
See accompanying notes.
48
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each period
SECURITY ASSET ALLOCATION SERIES (CLASS A)
<TABLE>
<CAPTION>
Fiscal Period Ended September 30
-----------------------------------------------------------------------
1998(f)(g)(m) 1997(f)(g)(k) (1996 (f)(g) 1995(e)(f)(g)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............. $ 12.58 $ 11.06 $ 10.54 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) .................... 0.02 0.17 0.25 0.04
Net Gain (Loss) on Securities
(realized and unrealized) ............... 0.33 1.86 0.77 0.50
----------- ----------- ----------- -----------
Total from Investment Operations ................ 0.35 2.03 1.02 0.54
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .......... (0.20) (0.26) (0.33) --
Distributions (from Capital Gains) .............. (0.75) (0.25) (0.17) --
----------- ----------- ----------- -----------
Total Distributions ..................... (0.95) (0.51) (0.50) --
----------- ----------- ----------- -----------
NET ASSET VALUE END OF PERIOD ................... $ 11.98 $ 12.58 $ 11.06 $ 10.54
=========== =========== =========== ===========
TOTAL RETURN (a) ................................ 3.63% 19.00% 10.01% 5.40%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ............ $ 3,823 $ 3,906 $ 2,449 $ 1,906
Ratio of Expenses to Average Net
Assets .................................. 2.00% 1.68% 2.00% 2.00%
Ratio of Net Investment Income (Loss)
to Average Net Assets ................... 0.29% 1.52% 2.32% 1.33%
Portfolio Turnover Rate ......................... 53% 79% 75% 129%
Average Commission Paid Per Equity
Share Traded (j) ........................ $ 0.0614 $ 0.0409 $ 0.0247 --
SECURITY ASSET ALLOCATION SERIES (CLASS B)
Fiscal Period Ended September 30
-----------------------------------------------------------------------
1998(f)(g)(m) 1997(f)(g)(k) (1996 (f)(g) 1995(e)(f)(g)
----------- ----------- ----------- -----------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .............. $ 12.45 $ 10.97 $ 10.50 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ............................ (0.04) 0.07 0.14 0.01
Net Gain (Loss) on Securities
(realized and unrealized) ................ 0.34 1.84 0.77 0.49
----------- ----------- ----------- -----------
Total from Investment Operations ................. 0.30 1.91 0.91 0.50
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ........... (0.09) (0.18) (0.27) --
Distributions (from Capital Gains) ............... (0.75) (0.25) (0.17) --
----------- ----------- ----------- -----------
Total Distributions ...................... (0.84) (0.43) (0.44) --
----------- ----------- ----------- -----------
NET ASSET VALUE END OF PERIOD .................... $ 11.91 $ 12.45 $ 10.97 $ 10.50
=========== =========== =========== ===========
TOTAL RETURN(a) .................................. 3.18% 17.95% 8.97% 5.00%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ............. $ 3,604 $ 3,851 $ 2,781 $ 1,529
Ratio of Expenses to Average Net
Assets ................................... 2.91% 2.58% 3.00% 3.00%
Ratio of Net Investment Income (Loss)
to Average Net Assets .................... (0.62%) 0.61% 1.32% 0.31%
Portfolio Turnover Rate .......................... 53% 79% 75% 129%
Average Commission Paid Per Equity
Share Traded(j) .......................... $ 0.0614 $ 0.0409 $ 0.0247 --
See accompanying notes.
49
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each period
SECURITY SOCIAL AWARENESS SERIES (CLASS A)
Fiscal Period Ended September 30
----------------------------------
1998(f)(g)(m) 1997(g)(h)
------------- -----------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ...... $ 17.99 $ 15.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) ............. 0.03 0.08
Net Gain (Loss) on Securities
(realized and unrealized) ........ 2.75 2.91
----------- -----------
Total from Investment Operations ......... 2.78 2.99
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ... (0.04) --
Distributions (from Capital Gains) ....... -- --
----------- -----------
Total Distributions .............. (0.04) --
----------- -----------
NET ASSET VALUE END OF PERIOD ............ $ 20.73 $ 17.99
=========== ===========
TOTAL RETURN (a) ......................... 15.46% 19.93%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ..... $ 7,847 $ 6,209
Ratio of Expenses to Average Net
Assets ........................... 0.81% 0.67%
Ratio of Net Investment Income (Loss)
to Average Net Assets ............ 0.35% 0.57%
Portfolio Turnover Rate .................. 54% 38%
Average Commission Paid Per Equity
Share Traded (j) ................. $ 0.0600 $ 0.0600
SECURITY SOCIAL AWARENESS SERIES (CLASS B)
Fiscal Period Ended September 30
------------------------------------
1998(f)(g)(m) 1997(f)(g)(h)
-------------- -------------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ...... $ 17.81 $ 15.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .................... (0.07) (0.08)
Net Gain (Loss) on Securities
(realized and unrealized) ........ 2.71 2.89
----------- -----------
Total from Investment Operations ......... 2.64 2.81
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ... -- --
Distributions (from Capital Gains) ....... -- --
----------- -----------
Total Distributions .............. -- --
----------- -----------
NET ASSET VALUE END OF PERIOD ............ $ 20.45 $ 17.81
=========== ===========
TOTAL RETURN(a) .......................... 14.82% 18.73%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ..... $ 4,721 $ 3,641
Ratio of Expenses to Average Net
Assets ........................... 1.95% 1.84%
Ratio of Net Investment Income (Loss)
to Average Net Assets ............ (0.79%) (0.60%)
Portfolio Turnover Rate .................. 54% 38%
Average Commission Paid Per Equity
Share Traded(j) .................. $ 0.0600 $ 0.0600
See accompaniying notes.
50
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each period
SECURITY VALUE SERIES (CLASS A)
Fiscal Period Ended September 30
-----------------------------------
1998(f)(g)(m) 1997(f)(g)(i)
------------- -------------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ....... $ 12.95 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) .............. 0.01 0.05
Net Gain (Loss) on Securities
(realized and unrealized) ......... 1.82 2.90
----------- -----------
Total from Investment Operations .......... 1.83 2.95
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .... (0.05) --
Distributions (from Capital Gains) ........ (0.28) --
----------- -----------
Total Distributions ............... (0.33) --
----------- -----------
NET ASSET VALUE END OF PERIOD ............. $ 14.45 $ 12.95
=========== ===========
TOTAL RETURN (a) .......................... 14.56% 29.50%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ...... $ 9,636 $ 4,631
Ratio of Expenses to Average Net
Assets ............................ 1.09% 1.10%
Ratio of Net Investment Income (Loss)
to Average Net Assets ............. 0.23% 1.43%
Portfolio Turnover Rate ................... 103% 35%
Average Commission Paid Per Equity
Share Traded (j) .................. $ 0.0600 $ 0.0600
SECURITY VALUE SERIES (CLASS B)
Fiscal Period Ended September 30
----------------------------------
1998(f)(g)(m) 1997(f)(g)(i)
------------- -------------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ....... $ 12.91 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ..................... (0.05) 0.01
Net Gain (Loss) on Securities
(realized and unrealized) ......... 1.81 2.90
----------- -----------
Total from Investment Operations .......... 1.76 2.91
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .... -- --
Distributions (from Capital Gains) ........ (0.28) --
----------- -----------
Total Distributions ............... (0.28) --
----------- -----------
NET ASSET VALUE END OF PERIOD ............. $ 14.39 $ 12.91
=========== ===========
TOTAL RETURN(a) ........................... 14.03% 29.10%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ...... $ 5,783 $ 3,572
Ratio of Expenses to Average Net
Assets ............................ 2.13% 2.26%
Ratio of Net Investment Income (Loss)
to Average Net Assets ............. (0.81%) 0.27%
Portfolio Turnover Rate ................... 103% 35%
Average Commission Paid Per Equity
Share Traded(j) ................... $ 0.0600 $ 0.0600
See accompanying notes.
51
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each period
SECURITY SMALL COMPANY SERIES (CLASS A)
Fiscal Period Ended September 30
--------------------------------
1998(f)(g)(l)(m)
----------------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .......................$ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) .............................. 0.01
Net Gain (Loss) on Securities
(realized and unrealized) ......................... 0.74
-----------
Total from Investment Operations .......................... 0.75
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .................... (0.01)
Distributions (from Capital Gains) ........................ --
-----------
Total Distributions ............................... (0.01)
-----------
NET ASSET VALUE END OF PERIOD .............................$ 10.74
===========
TOTAL RETURN (a) .......................................... 7.47%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ......................$ 2,120
Ratio of Expenses to Average Net
Assets ............................................ 1.34%
Ratio of Net Investment Income (Loss)
to Average Net Assets ............................. 0.14%
Portfolio Turnover Rate ................................... 341%
Average Commission Paid Per Equity
Share Traded (j) ..................................$ 0.0672
SECURITY SMALL COMPANY SERIES (CLASS B)
Fiscal Period Ended September 30
--------------------------------
1998(f)(g)(l)(m)
----------------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .......................$ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ..................................... (0.04)
Net Gain (Loss) on Securities
(realized and unrealized) ......................... 0.75
-----------
Total from Investment Operations .......................... 0.71
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .................... --
Distributions (from Capital Gains) ........................ --
-----------
Total Distributions ............................... --
-----------
NET ASSET VALUE END OF PERIOD .............................$ 10.71
===========
TOTAL RETURN(a) ........................................... 7.10%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ......................$ 1,706
Ratio of Expenses to Average Net
Assets ............................................ 2.46%
Ratio of Net Investment Income (Loss)
to Average Net Assets ............................. (0.97%)
Portfolio Turnover Rate ................................... 341%
Average Commission Paid Per Equity
Share Traded(j) ...................................$ 0.0672
See accompanying notes.
52
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each period
SECURITY ULTRA FUND (CLASS A)
<TABLE>
<CAPTION>
Fiscal Period Ended September 30
------------------------------------------------------------------------------------------
1998(g)(m) 1997(g) 1996(g) 1995(g) 1994(c) 1993
----------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD .. $ 9.24 $ 8.25 $ 8.20 $ 6.82 $ 8.13 $ 6.66
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ................ (0.03) (0.08) (0.05) (0.02) (0.05) (0.03)
Net Gain (Loss) on Securities
(realized and unrealized) .... 0.63 1.65 1.10 1.54 (0.19) 1.79
---------- ----------- ------------ ----------- ----------- -----------
Total from Investment Operations ..... 0.60 1.57 1.05 1.52 (0.24) 1.76
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) -- -- -- -- -- --
Distributions (from Capital Gains) ... (0.47) (0.58) (1.00) (0.14) (1.07) (0.29)
---------- ----------- ------------ ----------- ----------- -----------
Total Distributions .......... (0.47) (0.58) (1.00) (0.14) (1.07) (0.29)
---------- ----------- ------------ ----------- ----------- -----------
NET ASSET VALUE END OF PERIOD ........ $ 9.37 $ 9.24 $ 8.25 $ 8.20 $ 6.82 $ 8.13
========== =========== ============ =========== =========== ===========
TOTAL RETURN(a) ...................... 7.24% 20.57% 15.36% 22.69% (3.6%) 26.80%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) . $ 88,574 $ 84,504 $ 74,230 $ 66,052 $ 60,695 $ 71,056
Ratio of Expenses to Average Net
Assets ....................... 1.23% 1.71% 1.31% 1.32% 1.33% 1.30%
Ratio of Net Investment Income (Loss)
to Average Net Assets ........ (0.64%) (1.01%) (.61%) (.31%) (.80%) (.50%)
Portfolio Turnover Rate .............. 139% 68% 161% 180% 111% 101%
Average Commission Paid Per Equity
Share Traded(j) .............. $ 0.0592 $ 0.0600 $ 0.0606 -- -- --
SECURITY ULTRA FUND (CLASS B)
Fiscal Period Ended September 30
-------------------------------------------------------------------------------
1998(g)(m) 1997(g) 1996(g) 1995(g) 1994(c)
----------- ------------ ----------- ------------ ----------
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............ $ 8.90 $ 8.03 $ 8.11 $ 6.81 $ 8.30
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .......................... (0.07) (0.15) (0.13) (0.09) (0.10)
Net Gain (Loss) on Securities
(realized and unrealized) .............. 0.60 1.60 1.05 1.53 (0.32)
---------- ----------- ---------- ----------- ----------
Total from Investment Operations ............... 0.53 1.45 0.92 1.44 (0.42)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) ......... -- -- -- -- --
Distributions (from Capital Gains) ............. (0.47) (0.58) (1.00) (0.14) (1.07)
---------- ----------- ---------- ----------- ----------
Total Distributions .................... (0.47) (0.58) (1.00) (0.14) (1.07)
---------- ----------- ---------- ----------- ----------
NET ASSET VALUE END OF PERIOD .................. $ 8.96 $ 8.90 $ 8.03 $ 8.11 $ 6.81
========== =========== ========== =========== ==========
TOTAL RETURN(a) ................................ 6.71% 19.58% 13.81% 21.53% (5.70%)
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ........... $ 7,928 $ 5,964 $ 2,698 $ 5,428 $ 1,254
Ratio of Expenses to Average Net
Assets ................................. 2.23% 2.71% 2.31% 2.32% 2.36%
Ratio of Net Investment Income (Loss)
to Average Net Assets .................. (1.64%) (2.01%) (1.61%) (1.31%) (1.76%)
Portfolio Turnover Rate ........................ 139% 68% 161% 180% 110%
Average Commission Paid Per Equity
Share Traded(j) ........................ $ 0.0592 $ 0.0600 $ 0.0606 -- --
</TABLE>
See accompanying notes.
53
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for each share of capital stock outstanding throughout each period
(a) Total return information does not reflect deduction of any sales charges
imposed at the time of purchase for Class A shares or upon redemption for
Class B shares.
(b) Effective July 6, 1993, Security Growth and Income Fund changed its
investment objective from investing for income with secondary emphasis on
long-term capital growth to long-term capital growth with secondary
emphasis on income. Effective the same date the fund changed its name from
Security Investment Fund to Security Growth and Income Fund.
(c) Class "B" Shares were initially capitalized on October 19, 1993. Percentage
amounts for the period, except total return, have been annualized. Per
share data has been calculated using the average month-end shares
outstanding.
(d) Security Global Series was initially capitalized on October 1, 1993, with a
net asset value of $10 per share. Percentage amounts for the period, except
for total return, have been annualized.
(e) Security Asset Allocation Series was initially capitalized on June 1, 1995,
with a net asset value of $10 per share. Percentage amounts for the period
have been annualized, except for total return. Per share data has been
calculated using average month-end shares outstanding.
(f) Fund expenses were reduced by the Investment Manager during the period and
expense ratios absent such reimbursement would have been as follows:
1995 1996 1997 1998
---- ---- ---- ----
Asset Allocation Series Class A 3.6% 3.1% 2.4% 2.5%
Class B 4.7% 3.9% 3.3% 3.4%
Social Awareness Series Class A N/A N/A 1.7% 1.5%
Class B N/A N/A 2.8% 2.6%
Value Series Class A N/A N/A 1.9% 1.7%
Class B N/A N/A 2.8% 2.8%
Small Company Series Class A N/A N/A N/A 2.4%
Class B N/A N/A N/A 3.5%
(g) Net investment income (loss) was computed using average shares outstanding
throughout the period.
(h) Security Social Awareness Series was initially capitalized on November 1,
1996, with a net asset value of $15 per share. Percentage amounts for the
period, except for total return, have been annualized.
(i) Security Value Series was initially capitalized on May 1, 1997, with a net
asset value of $10 per share. Percentage amounts for the period, except for
total return, have been annualized.
(j) Brokerage commissions paid on portfolio transactions increase the cost of
securities purchased or reduce the proceeds of securities sold and are not
reflected in the Fund's statement of operations. Shares traded on a
principal basis, such as most over-the-counter and fixed-income
transctions, pay a "spread" or "mark-up" rather than a commission and are
therefore excluded from this calculation. Generally, non-U.S. commissions
are lower than U.S. commissions when expressed as cents per share but
higher when expressed as a percentage of transactions because of the lower
per-share prices of many non-U.S. Securities. Prior to 1996, average
commission information was not required to be disclosed.
(k) Meridian Investment Management Corporation (Meridian) became the
sub-advisor of Asset Allocation Series effective August 1, 1997. Prior to
August 1, 1997 SMC paid Templeton/Franklin Investment Services, Inc. and
Meridian for research services provided to Asset Allocation Series.
(l) Security Small Company Series was initially capitalized on October 15,
1997, with a net asset of value of $10 per share. Percentage amounts for
the period, except for total return, have been annualized.
(m) Unaudited figures for the six months ended March 31, 1998. Percentage
amounts for the period, except total return, have been annualized.
See accompanying notes.
54
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
March 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Security Growth and Income, Equity and Ultra Funds (the Funds) are
registered under the Investment Company Act of 1940, as amended, as diversified
open-end management investment companies. The shares of Security Equity Fund are
currently issued in six Series, the Equity Series, the Global Series, the Asset
Allocation Series, the Social Awareness Series, Value Series and the Small
Company Series with each Series, in effect representing a separate Fund. 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. The Funds began offering
an additional class of shares ("B"shares) to the public on October 19, 1993. The
shares are offered without a front-end sales charge but incur additional class -
specific expenses. Redemptions of the shares within five years of acquisition
incur a contingent deferred sales charge. The following is a summary of the
significant accounting policies followed by the Funds in the preparation of
their financial statements. These policies are in conformity with generally
accepted accounting principles.
A. SECURITY VALUATION -- Valuations of the Funds' securities are supplied by
a pricing service 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. If a security is traded on multiple exchanges, its
value will be based on prices from the principal exchange where it is traded.
All other securities for which market quotations are available are valued on the
basis of the current bid price. If there is no bid price or if the bid price is
deemed to be unsatisfactory by the Board of Directors or 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 market value. The Funds
generally will value short-term debt securities at prices based on market
quotations for securities of similar type, yield, quality and duration, except
those securities purchased with 60 days or less to maturity are valued on the
basis of amortized cost which approximates market value.
Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of the New York Exchange. The
values of foreign securities are determined as of the close of such foreign
markets or the close of the New York Exchange, if earlier. All investments
quoted in foreign currency are valued in U.S. dollars on the basis of the
foreign currency exchange rates prevailing at the close of business. The Global
Series' and Asset Allocation Series' investments in foreign securities may
involve risks not present in domestic investments. Since foreign securities may
be denominated in a foreign currency and involve settlement and pay interest or
dividends in foreign currencies, changes in the relationship of these foreign
currencies to the U.S. dollar can significantly affect the value of the
investments and earnings of the Funds. Foreign investments may also subject the
Global Series and Asset Allocation Series to foreign government exchange
restrictions, expropriation, taxation or other political, social or economic
developments, all of which could affect the market and/or credit risk of the
investments.
B. FOREIGN CURRENCY TRANSACTIONS -- The accounting records of the Funds are
maintained in U.S. dollars. All assets and liabilities initially expressed in
foreign currencies are converted into U.S. dollars at prevailing exchange rates.
Purchases and sales of investment securities, dividend and interest income, and
certain expenses are translated at the rates of exchange prevailing on the
respective dates of such transactions.
The Funds do not isolate that portion of the results of operations resulting
from changes in the foreign exchange rates on investments from the fluctuations
arising from changes in the market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of portfolio
securities, sales of foreign currencies, and the difference between asset and
liability amounts initially stated in foreign currencies and the U.S. dollars
value of the amounts actually received or paid. Net unrealized foreign exchange
gains or losses arise from changes in the value of portfolio securities and
other assets and liabilities at the end of the reporting period, resulting from
changes in the exchange rates.
C. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- Global Series and Asset
Allocation Series may enter into forward foreign exchange contracts in order to
manage against foreign currency risk from purchase or sale of securities
denominated in foreign currency. Global Series and Asset Allocation Series may
also enter into such contracts to manage changes in foreign currency exchange
rates on portfolio positions. These contracts are marked to market daily, by
recognizing the difference between the contract exchange rate and the current
market rate as unrealized gains or losses. Realized gains or losses are
recognized when contracts are settled and are reflected in the statement of
operations. These contracts involve market risk in excess of the amount
reflected in the balance sheet. The face or contract amount in U.S. dollars
reflects the total exposure the Global Series and Asset Allocation Series have
in that particular currency contract. Losses may arise due to changes in the
value of the foreign currency or if the counterparty does not perform under the
contract.
D. FUTURES -- Growth & Income Fund, Asset Allocation Series, Social
Awareness Series and Ultra Fund utilize futures contracts to a limited extent,
with the objectives of maintaining full exposure to the underlying stock market,
enhancing returns, maintaining liquidity, and minimizing transaction costs.
Growth & Income Fund, Asset Allocation Series, Social
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Awareness Series and Ultra Fund may purchase futures contracts to immediately
position incoming cash in the market, thereby simulating a fully invested
position in the underlying index while maintaining a cash balance for liquidity.
In the event the redemptions, the Growth & Income Fund, Asset Allocation Series,
Social Awareness Series and Ultra Fund may pay departing shareholders from its
cash balances and reduce their futures positions accordingly. Returns may be
enhanced by purchasing futures contracts instead of the underlying securities
when futures are believed to be priced more attractively than the underlying
securities. The primary risks associated with the use of futures contracts are
imperfect correlation between changes in market values of stocks contained in
the indexes and the prices of futures contracts, and the possibility of an
illiquid market. Futures contracts are valued based upon their quoted daily
settlement prices. Upon entering into a futures contract, the Funds are required
to deposit either cash or securities, representing the initial margin, equal to
a certain percentage of the contract value. Subsequent changes in the value of
the contract, or variation margin, are recorded as unrealized gains or losses.
The variation margin is paid or received in cash daily by the Funds. The Funds
realize a gain or loss when the contract is closed or expires. There were no
futures contracts held by the Funds at March 31, 1998.
E. 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. Dividend income less
foreign taxes withheld (if any) plus foreign taxes recoverable (if any) are
recorded on the ex-dividend date. Interest income is recognized on the accrual
basis. Premium and discounts (except original issue discounts) on debt
securities are not amortized.
F. 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 differing treatments relating to the expiration of net
operating losses and the recharacterization of foreign currency gains and
losses.
G. 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 inocme tax is required.
2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under terms of the investment advisory contract, Security Management
Company, LLC (SMC) agrees to provide, or arrange for others to provide, all the
services required by the Funds for a single fee (except for the Asset
Allocation, Social Awareness, Value and Small Company Series of Security Equity
Fund), including investment advisory services, transfer agent services and
certain other administrative services. For Growth and Income Fund, Equity Series
and Ultra Fund this fee is equal to 2% of the first $10 million of the average
daily closing value of each Fund's net assets, 1 1/2% of the next $20 million,
and 1% of the remaining net assets of the Fund for the fiscal year. For Global
Series this fee is equal to 2% of the first $70 million of the average daily
closing value of the Series' net assets and 1 1/2% of the remaining average net
assets of the Series for the fiscal year. Additionally, SMC agrees to assume all
of the Funds' expenses, except for its fee and the expenses of interest, taxes,
brokerage commissions and extraordinary items and Class B distribution fees. SMC
also serves as Investment Advisor to the Asset Allocation, Social Awareness,
Value Series and Small Company Series, and accordingly receives a fee equal to
1% of the average net assets of these Series.
SMC also acts as the administrative agent and transfer agent for the Asset
Allocation, Social Awareness, Value and Small Company Series, and as such
performs administrative functions, transfer agency and dividend disbursing
services, and the bookkeeping, accounting and pricing functions for each Series.
For these services, the Investment Manager receives, from Asset Allocation
Series, an administrative fee equal to .045% of the average daily net assets of
the Series plus, the greater of .10% of its average net assets or $60,000. For
administrative services provided to the Social Awareness Series, Value Series
and the Small Company Series, SMC receives an administrative fee equal to .09%
of the average daily net assets of each Series. For transfer agent services, SMC
is paid an annual fixed charge per account as well as a transaction fee for all
shareholder and dividend payments.
SMC pays a Sub-Advisor, Lexington Management Corporation (LMC), an annual
fee in an amount equal to .50% of the average daily net assets of Global Series,
for investment advisory and certain administrative services provided to the
Global Series. SMC pays Meridian Investment Management Corporation for
subadvisory services provided to the asset Allocation Series, an annual fee
equal to the following schedule:
AVERAGE DAILY NET ASSETS OF THE SERIES ANNUAL FEES
- -------------------------------------- -----------
Less Than $100 Million................................... .40%, plus
$100 Million but less than $200 Million.................. .35%, plus
$200 Million but less than $400 Million.................. .30%, plus
$400 Million or more..................................... .25%
SMC pays Strong Capital Management, Inc. ("Strong") with respect to Small
Company Series, an annual fee based on the combined average net assets of the
Series and another fund within the Security Funds for which Strong provides
advisory services. The fee is equal to .50% of the combined average net assets
under $150,000,000, .45% of the combined average net assets at or above
$150,000,000 but less than $500,000,000, and .40% of the combined average net
assets at or above $500,000,000.
SMC has agreed to limit the total expenses of the Asset Allocation Series,
Social Awareness Series, Value Series and the Small Company Series to 2% of the
average net assets, excluding 12b-1 fees. SMC waived management fees on the
Asset Allocation Series, Social Awareness Series and Value Series until February
1, 1998. SMC has also agreed to waive the management fees for the Small Company
Series until September 30, 1998.
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
The Funds have adopted Distribution Plans related to the offering of Class B
shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The
Plans provide for payments at an annual rate of 1.0% of the average net assets
of each Fund's Class B shares.
Security Distributors, Inc. (SDI), a wholly-owned subsidiary of SMC and the
national distributor of the Funds, received net underwriting commissions on
sales of Class A shares and contingent deferred sales charges on redemptions
occurring within 5 years of the date of purchase of Class B shares after
allowances to brokers and dealers in the amounts presented in the following
table:
SDI BROKER/ BROKER/
UNDERWRITING CDSC DEALER DEALER
(CLASS A) (CLASS B) (CLASS A) (CLASS B)
---------- ------- -------- --------
Growth & Income Fund $10,454 $7,249 $87,688 $86,005
Equity Series $117,403 $60,299 $585,441 $498,012
Global Series $1,347 $16,236 $7,533 $21,565
Asset Allocation Series $821 $6,858 $4,361 $2,740
Social Awareness Series $4,023 $560 $23,900 $9,735
Value Series $4,239 $2,374 $72,478 $77,666
Small Company Series $0 $0 $14,410 $6,738
Ultra Fund $3,133 $3,989 $14,212 $9,271
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
For federal income tax purposes, the amounts of unrealized appreciation
(depreciation) at March 31, 1998, were as follows:
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------
Growth & Income Fund $ 11,109,339 $(1,290,289) $ 9,819,050
Equity Series 393,135,718 (187,144) 392,948,574
Global Series 7,106,893 (1,490,138) 5,616,755
Asset Allocation Series 1,231,577 (429,790) 801,787
Social Awareness Series 3,047,159 (36,007) 3,011,152
Value Series 2,474,928 (180,098) 2,294,830
Small Company Series 595,145 (13,946) 581,199
Ultra Fund 22,855,646 (1,564,983) 21,290,663
4. INVESTMENT TRANSACTIONS
Investment transactions for the period ended March 31, 1998, (excluding
overnight investments and short-term commercial paper) are as follows:
PROCEEDS
PURCHASES FROM SALES
--------- ---------
Growth & Income Fund $ 84,535,621 $ 87,038,836
Equity Series 232,973,941 245,131,110
Global Series 16,134,048 19,325,909
Asset Allocation Series 1,869,710 2,155,734
Social Awareness Series 4,177,762 2,769,227
Value Series 11,073,295 5,861,546
Small Company Series 7,887,160 2,885,104
Ultra Fund 60,978,475 57,845,787
5. FORWARD FOREIGN EXCHANGE CONTRACTS
At March 31, 1998, Global Series had the following open forward foreign
exchange contracts to sell currency (excluding foreign currency contracts used
for purchase and sale settlements):
SETTLEMENT FOREIGN U.S. UNREALIZED
CURRENCY TYPE DATE AMOUNT AMOUNT GAIN (LOSS)
- -------- ---- ------- ---------- --------- -----------
Australian Dollar Sell 5/4/98 $1,305,170 $917,600 $53,525
Canadian Dollar Sell 6/1/98 1,472,878 1,042,008 2,207
Canadian Dollar Buy 6/1/98 145,359 102,071 548
German Deutsche Mark Sell 10/1/98 1,902,027 1,039,984 (1)
British Pound Sell 4/1/98 1,161,148 1,857,430 (87,028)
British Pound Buy 4/1/98 1,161,148 1,934,519 9,940
Japanese Yen Sell 7/8/98 176,720,700 1,356,000 10,825
Japanese Yen Buy 7/8/98 176,720,700 1,406,116 (60,942)
New Zealand Dollar Sell 4/6/98 917,017 584,919 78,302
New Zealand Dollar Buy 4/6/98 917,017 521,736 (15,119)
Swedish Krona Sell 10/1/98 5,481,412 693,323 3,230
--------
($4,513)
========
<PAGE>
The Security Group of Mutual Funds
Security Growth and Income Fund
Security Equity Fund
o Equity Series
o Global Series
o Asset Allocation Series
o Social Awareness Series
o Value Series
o Small Company Series
Security Ultra Fund
Security Income Fund
o Corporate Bond Series
o U.S. Government Series
o Limited Maturity Bond Series
o High Yield Series
Security Municipal Bond Fund
Security Cash Fund
This report is submitted for the general information of the shareholders of the
Funds. The report is not authorized for distribution to prospective investors in
the Funds unless preceded or accompanied by an effective prospectus which
contains details concerning the sales charges and other pertinent information.
SECURITY FUNDS
OFFICERS AND DIRECTORS
DIRECTORS
Donald A. Chubb, Jr.
John D. Cleland
Donald L. Hardesty
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
Mark E. Young, Vice President
Steven M. Bowser, Vice President, Equity Fund
David Eshnaur, Vice President, Equity Fund
Terry A. Milberger, Vice President, Equity Fund
Michael A. Petersen, Vice President, Growth and Income Fund
James P. Schier, Vice President, Equity Fund
Cindy L. Shields, Vice President, Ultra and Equity Fund
Jane A. Tedder, Vice President, Equity Fund
Amy J. Lee, Secretary
Christopher D. Swickard, Assistant Secretary
Brenda M. Harwood, Treasurer
Security Distributors, Inc.
700 SW Harrison St.
Topeka, KS 66636-0001
(785) 431-3127
(800) 888-2461
<PAGE>
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Articles of Incorporation
(b) Bylaws(1)
(c) Specimen copy of share certificates for Fund's shares of capital stock
(d) (1) Investment Management and Services Agreement
(2) Sub-Advisory Contract - Oppenheimer
(3) Sub-Advisory Contract - Meridian(2)
(4) Sub-Advisory Contract - Strong(3)
(5) Form of Sub-Advisory Contract - Bankers Trust
(e) (1) Distribution Agreement
(2) Class B Distribution Agreement
(3) Form of Class C Distribution Agreement
(4) Underwriter-Dealer Agreement*
(f) Not applicable
(g) (1) Custodian Agreement - UMB Bank
(2) Form of Custodian Agreement - Chase Manhattan Bank
(h) Not applicable
(i) Legal Opinion
(j) Consent of Independent Auditors
(k) Not applicable
(l) Not applicable
(m) (1) Class A Distribution Plan
(2) Class B Distribution Plan(1)
(3) Form of Class C Distribution Plan
(n) Financial Data Schedules
(o) Multiple Class Plan
(1) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 72 to Registration Statement
2-19458 (June 1, 1995).
(2) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 79 to Registration Statement
2-19458 (October 15, 1997).
(3) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 80 to Registration Statement
2-19458 (October 15, 1997).
*To be filed by amendment.
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH FUND.
Not applicable.
ITEM 25. INDEMNIFICATION.
A policy of insurance covering Security Management Company, LLC, its affiliate
Security Distributors, Inc., and all of the registered investment companies
advised by Security Management Company, LLC insures the Registrant's directors
and officers against liability arising by reason of an alleged breach of duty
caused by any negligent act, error or accidental omission in the scope of their
duties.
Article Tenth of Registrant's Articles of Incorporation provides in relevant
part as follows:
"(5) Each director and officer (and his heirs, executors and administrators)
shall be indemnified by the Corporation against reasonable costs and
expenses incurred by him in connection with any action, suit or proceeding
to which he is made a party by reason of his being or having been a
Director or officer of the Corporation, except in relation to any action,
suit or proceeding in which he has been adjudged liable because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. In the absence of an
adjudication which expressly absolves the Director or officer of liability
to the Corporation or its stockholders for willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office, or in the event of a settlement, each Director and
officer (and his heirs, executors and administrators) shall be indemnified
by the Corporation against payment made, including reasonable costs and
expenses, provided that such indemnity shall be conditioned upon a written
opinion of independent counsel that the Director or officer has no
liability by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office. The
indemnity provided herein shall, in the event of settlement of any such
action, suit or proceeding, not exceed the costs and expenses (including
attorneys' fees) which would reasonably have been incurred if such action,
suit or proceeding had been litigated to a final conclusion. Such a
determination by independent counsel and the payment of amounts by the
Corporation on the basis thereof shall not prevent a stockholder from
challenging such indemnification by appropriate legal proceeding on the
grounds that the officer or Director was liable because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The foregoing rights and
indemnification shall not be exclusive of any other rights to which the
officers and Directors may be entitled according to law."
Article Sixteenth of Registrant's Articles of Incorporation, as amended December
10, 1987, provides as follows:
"A director shall not be personally liable to the corporation or to its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that this sentence shall not eliminate nor limit the liability of a
director:
A. for any breach of his or her duty of loyalty to the corporation or to its
stockholders;
B. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
C. for an unlawful dividend, stock purchase or redemption under the provisions
of Kansas Statutes Annotated (K.S.A.) 17-6424 and amendments thereto; or
D. for any transaction from which the director derived an improper personal
benefit."
Item Thirty of Registrant's Bylaws, dated February 3, 1995, provides, in
relevant part, as follows:
"Each person who is or was a Director or officer of the Corporation or is or was
serving at the request of the Corporation as a Director or officer of another
corporation (including the heirs, executors, administrators and estate of such
person) shall be indemnified by the Corporation as of right to the full extent
permitted or authorized by the laws of the State of Kansas, as now in effect and
is hereafter amended, against any liability, judgment, fine, amount paid in
settlement, cost and expense (including attorneys' fees) asserted or threatened
against and incurred by such person in his/her capacity as or arising out of
his/her status as a Director or officer of the Corporation or, if serving at the
request of the Corporation, as a Director or officer of another corporation. The
indemnification provided by this bylaw provision shall not be exclusive of any
other rights to which those indemnified may be entitled under the Articles of
Incorporation, under any other bylaw or under any agreement, vote of
stockholders or disinterested directors or otherwise, and shall not limit in any
way any right which the Corporation may have to make different or further
indemnification with respect to the same or different persons or classes of
persons.
No person shall be liable to the Corporation for any loss, damage, liability or
expense suffered by it on account of any action taken or omitted to be taken by
him/her as a Director or officer of the Corporation or of any other corporation
which (s)he serves as a Director or officer at the request of the Corporation,
if such person (a) exercised the same degree of care and skill as a prudent
person would have exercised under the circumstances in the conduct of his/her
own affairs, or (b) took or omitted to take such action in reliance upon advice
of counsel for the Corporation, or for such other corporation, or upon statement
made or information furnished by Directors, officers, employees or agents of the
Corporation, or of such other corporation, which (s)he had no reasonable grounds
to disbelieve.
In the event any provision of this section 30 shall be in violation of the
Investment Company Act of 1940, as amended, or of the rules and regulations
promulgated thereunder, such provisions shall be void to the extent of such
violations."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 26. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER
Security Management Company, LLC also acts as investment manager to Corporate
Bond, Limited Maturity Bond, U.S. Government and High Yield Series of Security
Income Fund, SBL Fund, Security Cash Fund, Security Growth and Income Fund,
Security Municipal Bond Fund, and Security Ultra Fund.
NAME, BUSINESS* AND OTHER CONNECTIONS OF THE EXECUTIVE OFFICERS AND DIRECTORS OF
REGISTRANT'S ADVISER
JAMES R. SCHMANK
- ----------------
PRESIDENT AND MANAGING MEMBER REPRESENTATIVE--Security Management Company, LLC
SENIOR VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit
Group, Inc.
VICE PRESIDENT AND DIRECTOR--Security Distributors, Inc.; Security Growth and
Income Fund; Security Cash Fund; Security Municipal Bond Fund; Security
Ultra Fund; Security Equity Fund; SBL Fund; Advisor's Fund
VICE PRESIDENT--Security Income Fund DIRECTOR--MFR Advisors, Inc., One Liberty
Plaza, 46th Floor, New York, New York 10006; The Parkstone Advantage Fund,
3435 Stelzer Road, Columbus, Ohio 43219; Stormont-Vail Foundation, 1500 SW
10th, Topeka, Kansas 66604
PRESIDENT AND DIRECTOR--Auburn-Washburn Public Schools Foundation, 5928 SW 53rd,
Topeka, Kansas 66610
TRUSTEE--Eugene P. Mitchell Charitable Remainder Unit Trust (Family Trust)
JOHN D. CLELAND
- ---------------
SENIOR VICE PRESIDENT AND MANAGING MEMBER REPRESENTATIVE--Security Management
Company, LLC
PRESIDENT AND DIRECTOR--Security Cash Fund; Security Income Fund; Security
Municipal Bond Fund; SBL Fund; Security Growth and Income Fund; Security
Equity Fund; Security Ultra Fund; Advisor's Fund
SENIOR VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit
Group, Inc.
VICE PRESIDENT AND DIRECTOR- -Security Distributors, Inc.
TRUSTEE AND TREASURER--Mount Hope Cemetery Corporation, 4700 SW 17th, Topeka,
Kansas
TRUSTEE AND INVESTMENT COMMITTEE CHAIRMAN--Topeka Community Foundation, 5100 SW
10th, Topeka, Kansas
MARK E. YOUNG
- -------------
VICE PRESIDENT--Security Growth and Income Fund; Security Income Fund; Security
Cash Fund; Security Municipal Bond Fund; Security Ultra Fund; Security
Equity Fund; SBL Fund; Security Management Company, LLC
SECOND VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit
Group, Inc.
ASSISTANT VICE PRESIDENT--First Security Benefit Life Insurance and Annuity
Company of New York
VICE PRESIDENT AND DIRECTOR--Security Distributors, Inc.
TRUSTEE--Topeka Zoological Foundation, Topeka, Kansas
TERRY A. MILBERGER
- ------------------
SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER--Security Management Company,
LLC
SENIOR VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit
Group, Inc.
VICE PRESIDENT--Security Equity Fund; SBL Fund
MICHAEL A. PETERSEN
- -------------------
VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER--Security Management Company, LLC
VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit Group,
Inc.; SBL Fund; Security Growth and Income Fund
JANE A. TEDDER
- --------------
VICE PRESIDENT AND SENIOR ECONOMIST--Security Management Company, LLC
VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit Group,
Inc.; SBL Fund
AMY J. LEE
- ----------
VICE PRESIDENT, ASSOCIATE GENERAL COUNSEL AND ASSISTANT SECRETARY--Security
Benefit Life Insurance Company; Security Benefit Group, Inc.
SECRETARY--Security Management Company, LLC; Security Distributors, Inc.;
Security Cash Fund; Security Equity Fund; Security Municipal Bond Fund;
Security Ultra Fund; SBL Fund; Security Growth and Income Fund; Security
Income Fund; Advisor's Fund
DIRECTOR--Midland Hospice Care, Inc., 200 SW Frazier Court, Topeka, Kansas 66606
BRENDA M. HARWOOD
- -----------------
ASSISTANT VICE PRESIDENT AND TREASURER--Security Management Company, LLC
TREASURER--Security Equity Fund; Security Ultra Fund; Security Growth and Income
Fund; Security Income Fund; Security Cash Fund; SBL Fund; Security
Municipal Bond Fund; Advisor's Fund; Security Distributors, Inc.
ASSISTANT VICE PRESIDENT--Security Benefit Life Insurance Company; Security
Benefit Group, Inc.
DIRECTOR--The Parkstone Advantage Fund, 3435 Stelzer Road, Columbus, Ohio 43219
STEVEN M. BOWSER
- ----------------
SECOND VICE PRESIDENT AND PORTFOLIO MANAGER--Security Management Company, LLC
SECOND VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit
Group, Inc.
VICE PRESIDENT--Security Income Fund; Security Equity Fund; SBL Fund
THOMAS A. SWANK
- ---------------
VICE PRESIDENT AND PORTFOLIO MANAGER--Security Management Company, LLC
VICE PRESIDENT AND CHIEF INVESTMENT OFFICER--Security Benefit Life Insurance
Company; Security Benefit Group, Inc.
VICE PRESIDENT--SBL Fund; Security Income Fund
CINDY L. SHIELDS
- ----------------
ASSISTANT VICE PRESIDENT AND PORTFOLIO MANAGER--Security Management Company, LLC
ASSISTANT VICE PRESIDENT--Security Benefit Life Insurance Company; Security
Benefit Group, Inc.
VICE PRESIDENT--SBL Fund; Security Equity Fund
LARRY L. VALENCIA
- -----------------
ASSISTANT VICE PRESIDENT AND SENIOR RESEARCH ANALYST--Security Management
Company, LLC
JAMES P. SCHIER
- ---------------
ASSISTANT VICE PRESIDENT AND PORTFOLIO MANAGER--Security Management Company, LLC
ASSISTANT VICE PRESIDENT--Security Benefit Life Insurance Company; Security
Benefit Group, Inc.
VICE PRESIDENT--SBL Fund; Security Equity Fund; Security Ultra Fund
DAVID ESHNAUR
- -------------
ASSISTANT VICE PRESIDENT AND PORTFOLIO MANAGER--Security Management Company, LLC
ASSISTANT VICE PRESIDENT--Security Benefit Life Insurance Company; Security
Benefit Group, Inc.
VICE PRESIDENT--SBL Fund; Security Income Fund; Security Equity Fund
MARTHA L. SUTHERLAND
- --------------------
SECOND VICE PRESIDENT--Security Management Company, LLC
VICE PRESIDENT--Security Benefit Life Insurance Company; Security Benefit Group,
Inc.
CHRISTOPHER D. SWICKARD
- -----------------------
ASSISTANT SECRETARY--Security Management Company, LLC; Security Cash Fund;
Security Equity Fund; Security Municipal Bond Fund; Security Ultra Fund;
SBL Fund; Security Growth and Income Fund; Security Income Fund; Advisor's
Fund
ASSISTANT VICE PRESIDENT AND ASSISTANT COUNSEL--Security Benefit Life Insurance
Company; Security Benefit Group, Inc.
*Located at 700 Harrison, Topeka, Kansas 66636-0001
OPPENHEIMERFUNDS, INC.:
OppenheimerFunds, Inc., sub-adviser to Global Series, currently manages
investment companies other than the Registrant with assets of more than $85
billion.
For information as to the business, profession, vocation or employment of a
substantial nature of each director, officer or partner of OppenheimerFunds,
Inc., reference is made to Schedule A and D of Form ADV filed by
OppenheimerFunds, Inc. under the Investment Advisers Act of 1940 (SEC File No.
801-8253) which is incorporated by reference.
MERIDIAN INVESTMENT MANAGEMENT CORPORATION
Meridian Investment Management Corporation, sub-adviser to Asset Allocation
Series, serves as an investment adviser, sub-adviser and provider of investment
research to mutual funds and private accounts representing assets over $650
million.
For information as to the business, profession, vocation or employment of a
substantial nature of each director, officer or partner of Meridian Investment
Management Corporation, reference is made to Schedule A and D of Form ADV filed
by Meridian Investment Management Corporation under the Investment Advisers Act
of 1940 (SEC File No. 801-38868) which is incorporated by reference.
STRONG CAPITAL MANAGEMENT, INC.
Strong Capital Management, Inc., sub-adviser to Small Company Series, serves as
investment adviser to the Strong Funds and provides investment management
services for mutual funds and other investment portfolios representing assets
over $27 billion.
For information as to the business, profession, vocation or employment of a
substantial nature of each director, officer or partner of Strong Capital
Management, Inc., reference is made to Schedule A and D of Form ADV filed by
Strong Capital Management, Inc. under the Investment Advisers Act of 1940 (SEC
File No. 801-10724) which is incorporated by reference.
BANKERS TRUST COMPANY
Bankers Trust Company ("Bankers Trust") serves as sub-adviser to Enhanced Index
Series and International Series. Bankers Trust, a New York banking corporation,
is a wholly-owned subsidiary of Bankers Trust New York Corporation. Bankers
Trust conducts a variety of commercial banking and trust activities and is a
major wholesale supplier of financial services to the international
institutional market.
To the knowledge of the Fund, none of the directors or officers of Bankers
Trust, except those set forth below, is engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
directors and officers also hold various positions with and engage in business
for Bankers Trust New York Corporation. Set forth below are the names and
principal businesses of the directors and officers of Bankers Trust who are
engaged in any other business, profession, vocation or employment of a
substantial nature.
NAME AND PRINCIPAL BUSINESS ADDRESS, PRINCIPAL OCCUPATION AND OTHER INFORMATION
GEORGE B. BEITZEL
- -----------------
International Business Machines Corporation, Old Orchard Road, Armonk, New York
10504.
DIRECTOR--Bankers Trust Company; Computer Task Group; Phillips Petroleum
Company; Caliber Systems, Inc. (formerly Roadway Services Inc.); Rohm and
Haas Company; TIG Holdings
RETIRED SENIOR VICE PRESIDENT AND DIRECTOR--International Business Machines
Corporation
CHAIRMAN EMERITUS--Amherst College
CHAIRMAN--Colonial Williamsburg Foundation
RICHARD H. DANIEL
- -----------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER--Bankers Trust Company; Bankers Trust
New York Corporation
BENEFICIAL OWNER, GENERAL PARTNER--Daniel Brothers; Daniel Lingo & Assoc.;
Daniel Pelt & Assoc.
BENEFICIAL OWNER--Rhea C. Daniel Trust
PHILIP A. GRIFFITHS
- -------------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
DIRECTOR--Institute for Advanced Study; Bankers Trust Company
CHAIRMAN--Committee on Science, Engineering and Public Policy of the National
Academies of Sciences and Engineering and the Institute of Medicine
CHAIRMAN AND MEMBER--Nominations Committee; Committee on Science and Engineering
Indicators; National Science Board
TRUSTEE--North Carolina School of Science and Mathematics; the Woodward Academy
WILLIAM R. HOWELL
- -----------------
J. C. Penney Company, Inc., P.O. Box 10001, Plano, Texas 75301-0001.
CHAIRMAN EMERITUS--J. C. Penney Company, Inc.
DIRECTOR--Bankers Trust Company; Exxon Corporation; Halliburton Company;
Warner-Lambert Corporation; The Williams Companies, Inc.; National Retail
Federation
VERNON E. JORDAN, JR.
- ---------------------
Akin,Gump, Strauss, Hauer & Feld, LLP, 1333 New Hampshire Avenue, NW,
Washington, District of Columbia 20036.
DIRECTOR--Bankers Trust Company; American Express Company; Dow-Jones, Inc.; J.
C. Penney Company, Inc.; Revlon Group Incorporated; Ryder System, Inc.;
Sara Lee Corporation; Union Carbide Corporation; Xerox Corporation
TRUSTEE--Brookings Institution; The Ford Foundation; Howard University
DAVID MARSHALL
- --------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
CHIEFINFORMATION OFFICER AND EXECUTIVE VICE PRESIDENT--Bankers Trust New York
Corporation
SENIOR MANAGING DIRECTOR--Bankers Trust Company
HAMISH MAXWELL
- --------------
Philip Morris Companies, Inc., 120 Park Avenue, New York, New York 10006.
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER--Philip Morris Companies, Inc.
DIRECTOR--Bankers Trust Company; The News Corporation Limited; Sola
International Inc.
CHAIRMAN--WWP Group pic
FRANK N. NEWMAN
- ---------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT--Bankers Trust New
York Corporation; Bankers Trust Company
DIRECTOR--Bankers Trust Company; Dow-Jones, Inc.; Carnegie Hall
N. J. NICHOLAS, JR.
- -------------------
745 Fifth Avenue, New York, New York 10020.
DIRECTOR--Bankers Trust Company; Boston Scientific Corporation; Xerox
Corporation
RUSSELL E. PALMER
- -----------------
The Palmer Group, 3600 Market Street, Suite 530, Philadelphia, Pennsylvania
19104.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER--The Palmer Group
DIRECTOR--Bankers Trust Company; Allied-Signal Inc.; Federal Home Loan Mortgage
Corporation; GTE Corporation; The May Department Stores Company; Safeguard
Scientifics, Inc.
TRUSTEE--University of Pennsylvania
DONALD L. STAHELI
- -----------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER--Continental Grain Company
DIRECTOR--Bankers Trust Company; ContiFinancial Corporation; Prudential Life
Insurance Company of America; Fresenius Medical Care, A.g.; America-China
Society; National Committee on United States-China Relations; New York City
Partnership
CHAIRMAN--U.S. China Business Council; Council on Foreign Relations; National
Advisor Council of Brigham Young University's Marriott School of Management
VICE CHAIRMAN--The Points of Light Foundation
TRUSTEE--American Graduate School of International Management.
PATRICIA CARRY STEWART
- ----------------------
c/o Office of the Secretary, 130 Liberty Street, New York, New York 10006.
DIRECTOR--Bankers Trust Company; CVS Corporation; Community Foundation for Palm
Beach and Martin Counties
TRUSTEE EMERITA--Cornell University
GEORGE J. VOJTA
- ---------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
VICE CHAIRMAN--Bankers Trust New York Corporation; Bankers Trust Company
DIRECTOR--Bankers Trust Company; Alicorp S.A.; Northwest Airlines; Private
Export Funding Corp.; New York State Banking Board; St. Lukes-Roosevelt
Hospital Center
PARTNER--New York City Partnership
CHAIRMAN--Wharton Financial Services Center
PAUL A. VOLCKER
- ---------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
DIRECTOR--Bankers Trust Company; American Stock Exchange; Nestle S.A.;
Prudential Insurance Company; UAL Corporation; American Council on Germany;
Aspen Institute; Council on Foreign Relations; The Japan Society
CHAIRMAN--Group of 30
NORTH AMERICAN CHAIRMAN--Trilateral Commission
CO-CHAIRMAN--U.S./Hong Kong Economic Cooperation Committee
TRUSTEE--The American Assembly
MELVIN A. YELLIN
- ----------------
Bankers Trust Company, 130 Liberty Street, New York, New York 10006.
SENIOR MANAGING DIRECTOR AND GENERAL COUNSEL--Bankers Trust New York
Corporation; Bankers Trust Company
DIRECTOR--1136 Tenants Corporation; ABA Securities Association
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Security Ultra Fund
Security Income Fund
Security Growth & Income Fund
Security Municipal Bond Fund
Variflex Separate Account (Variflex)
Variflex Separate Account (Variflex ES)
Varilife Variable Annuity Account
Security Varilife Separate Account
Variable Annuity Account VIII (Variflex LS)
Variable Annuity Account VIII (Variflex Signature)
Parkstone Variable Annuity Account
(b) (1) (2) (3)
Name and Principal Position and Offices Position and Offices
Business Address* with Underwriter with Registrant
------------------ -------------------- --------------------
Richard K Ryan President and Director None
John D. Cleland Vice President and Director President and Director
James R. Schmank Vice President and Director Vice President and Treasurer
Mark E. Young Vice President and Director Vice President
Donald E. Caum Director None
Amy J. Lee Secretary Secretary
Brenda M. Harwood Treasurer Treasurer
William G. Mancuso Regional Vice President None
Susan L. Tully Regional Vice President None
*700 Harrison, Topeka, Kansas 66636-0001
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Certain accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the rules promulgated thereunder are maintained by
Security Management Company, LLC, 700 Harrison, Topeka, Kansas 66636-0001;
Lexington Management Corporation, Park 80 West, Plaza Two, Saddle Brook, New
Jersey 07663; Meridian Investment Management Corporation, 12835 East Arapahoe
Road, Tower II, 7th Floor, Englewood, Colorado, 80112; Strong Capital
Management, Inc., 100 Heritage Reserve, Menomonee Falls, Wisconsin, 53051;
Templeton/Franklin Investment Services, Inc., 777 Mariners Island Boulevard, San
Mateo, California 94404; OppenheimerFunds, Inc. Two World Trade Center, New
York, New York 10048 and Bankers Trust Company, One Bankers Trust Plaza, New
York, New York 10006. Records relating to the duties of the Registrant's
custodian are maintained by UMB Bank, N.A., 928 Grand Avenue, Kansas City,
Missouri 64106 and Chase Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, New
York 11245.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company
Act, the Fund has duly caused this registration statement to be signed on its
behalf by the undersigned, duly authorized, in the City of Topeka, and State of
Kansas on the 6th day of November, 1998.
SECURITY EQUITY FUND
(The Fund)
By: JOHN D. CLELAND
--------------------------
John D. Cleland, President
Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed below by the following persons in the capacities and on the date
indicated:
Date: November 6, 1998
------------------------
DONALD A. CHUBB, JR. Director
- ------------------------------------
Donald A. Chubb, Jr.
JOHN D. CLELAND President and Director
- ------------------------------------
John D. Cleland
PENNY A. LUMPKIN Director
- ------------------------------------
Penny A. Lumpkin
MARK L. MORRIS, JR. Director
- ------------------------------------
Mark L. Morris, Jr.
JAMES R. SCHMANK Director
- ------------------------------------
James R. Schmank
MAYNARD OLIVERIUS Director
- ------------------------------------
Maynard Oliverius
BRENDA M. HARWOOD Treasurer (Principal Financial Officer)
- ------------------------------------
Brenda M. Harwood
<PAGE>
ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
We, the undersigned incorporators, hereby associate ourselves together
to form and establish a corporation for profit under the laws of the State of
Kansas.
FIRST: The name of the corporation (hereinafter called the
Corporation) is SECURITY EQUITY FUND, INC.
SECOND: The location of its registered office in Kansas is Security
Benefit Life Building, 700 Harrison Street, Topeka, Kansas.
THIRD: The name and address of its registered agent in Kansas is Dean
L. Smith, Security Benefit Life Building, 700 Harrison Street, Topeka, Kansas.
FOURTH: The purposes for which the corporation is formed are as
follows:
(1) To engage in the business of an investment company and to hold,
invest and reinvest its funds, and in connection therewith to hold part or
all of its funds in cash, and to purchase or otherwise acquire, hold for
investment or otherwise, sell, assign, negotiate, transfer, exchange or
otherwise dispose of or turn to account or realize upon, securities (which
term "securities" shall for the purposes of this Article, without
limitation of the generality thereof, be deemed to include any stocks,
shares, bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets) created or issued by any persons, firms, associations,
corporations, syndicates, combinations, organizations, governments or
subdivisions thereof; and to exercise, as owner or holder of any
securities, all rights, powers and privileges in respect thereof; and to do
any and all acts and things for the preservation, protection, improvement
and enhancement in value of any and all such securities; provided, however,
that the Corporation shall not:
(a) purchase any securities on margin except such short-term
credits as are necessary for the clearance of transactions;
(b) effect any short sales of securities;
(c) purchase the securities of any person, firm, association,
corporation, syndicate, combination or organization for the purpose of
gaining or exercising control or management of such person, firm,
association, corporation, syndicate, combination or organization;
(d) purchase the securities of any person, firm, association,
corporation, syndicate, combination, organization, government (other than
the United States of America) or any subdivision thereof, if, immediately
after and as a result of such purchase, more than five percent of its total
assets, determined in such manner as may be approved by the Board of
Directors of the Corporation and applied on a consistent basis, would
consist of the securities of such person, firm, association, corporation,
syndicate, combination, organization, government or subdivision;
(e) lend any of its funds or other assets other than through the
purchase of publicly distributed bonds, debentures, notes and other
evidences of indebtedness as herein authorized;
(f) purchase the securities of any person, firm, association,
corporation, syndicate, combination, organization, government or any
subdivision thereof, if, upon such purchase, the Corporation would own more
than ten percent of any class of the outstanding securities of such person,
firm, association, corporation, syndicate, combination, organization,
government or subdivision. For the purposes of this restriction, all kinds
of securities of a company representing debt shall be deemed to constitute
a single class, regardless of relative priorities, maturities, conversion
rights and other differences, and all kinds of stock of a company preferred
over the common stock as to dividends or in liquidation shall be deemed to
constitute a single class regardless of relative priorities, series
designations, conversion rights and other differences;
(g) purchase the securities of any investment company or
investment trust (as such terms may reasonably be understood by the
Corporation), other than the Corporation;
(h) underwrite the sale of, or participate in any underwriting or
selling group in connection with the public distribution of, any securities
(other than the capital stock of the Corporation), provided, however, that
this provision shall not be construed to prevent or limit in any manner the
right of the Corporation to purchase securities for investment purposes;
(i) purchase or sell any real estate or any commodities or
commodity contracts; or
(j) enter into any loan transaction as borrower unless such
borrowing is undertaken only as a temporary measure for extraordinary and
emergency purposes and then only if, immediately after and as a result of
such transaction, the total loans outstanding against the Corporation shall
be not more than ten percent of its total assets, determined in such manner
as may be approved by the Board of Directors of the Corporation and applied
on a consistent basis.
(2) To issue and sell shares of its own capital stock in such amounts
and on such terms and conditions, for such purposes and for such amount or
kind of consideration (including, without limitation thereof, securities)
now or hereafter permitted by the laws of Kansas, by these Articles of
Incorporation and the Bylaws of the Corporation, as its Board of Directors
may determine.
(3) To purchase or otherwise acquire, hold, dispose of, resell,
transfer, or reissue (all without any vote or consent of stockholders of
the Corporation) shares of its capital stock, in any manner and to the
extent now or hereafter permitted by the laws of the State of Kansas, by
these Articles of Incorporation and by the Bylaws of the Corporation.
(4) To conduct its business in all its branches at one or more offices
in Kansas and elsewhere in any part of the world, without restriction or
limit as to extent.
(5) To carry out all or any of the foregoing purposes as principal or
agent, and alone or with associates or, to the extent now or hereafter
permitted by the laws of Kansas, as a member of, or as the owner or holder
of any stock of, or shares of interest in, any firm, association,
corporation, trust or syndicate; and in connection therewith to make or
enter into such deeds or contracts with any persons, firms, associations,
corporations, syndicates, governments or subdivisions thereof, and to do
such acts and things and to exercise such powers, as a natural person could
lawfully make, enter into, do or exercise.
(6) To do any and all such further acts and things and to exercise any
and all such further powers as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes.
It is the intention that each of the purposes, specified in each of the
paragraphs of this Article FOURTH, shall be in no wise limited or restricted by
reference to or inference from the terms of any other paragraph, but that the
purposes specified in each of the paragraphs of this Article FOURTH shall be
regarded as independent objects, purposes and powers. The enumeration of the
specific purposes of this Article FOURTH shall not be construed to restrict in
any manner the general objects, purposes and powers of this corporation, nor
shall the expression of one thing be deemed to exclude another, although it be
of like nature. The enumeration of purposes herein shall not be deemed to
exclude or in any way limit by inference any objects, purposes or powers which
this corporation has power to exercise, whether expressly or by force of the
laws of the State of Kansas, now or hereafter in effect, or impliedly by any
reasonable construction of such laws.
FIFTH: The aggregate number of shares which the Corporation shall have
authority to issue shall be 1,000,000 shares of capital stock of the par value
of $1.00 per share.
The following provisions are hereby adopted for the purpose of setting
forth the powers, rights, qualifications, limitations or restrictions of the
capital stock of the Corporation:
(1) At all meetings of stockholders each stockholder of the
Corporation shall be entitled to one vote on each matter submitted to a vote at
such meeting for each share of stock standing in his name on the books of the
Corporation on the date, fixed in accordance with the Bylaws, for determination
of stockholders entitled to vote at such meeting. At all elections of directors
each stockholder shall be entitled to as many votes as shall equal the number of
shares of stock multiplied by the number of directors to be elected, and
stockholders may cast all of such votes for a single director or may distribute
them among the number to be voted for, or any two or more of them as they may
see fit.
(2) (a) Each holder of capital stock of the corporation, upon
request to the Corporation accompanied by surrender of the appropriate stock
certificate or certificates in proper form for transfer, shall be entitled to
require the Corporation to repurchase all or any part of the shares of capital
stock standing in the name of such holder on the books of the Corporation, at
the net asset value of such shares, less a charge, not to exceed one percent of
such net asset value, if and as fixed by resolution of the Board of Directors of
the Corporation from time to time. The method of computing such net asset value,
the time as of which such net asset value shall be computed and the time within
which the Corporation shall make payment therefor shall be determined as
hereinafter provided in Article TENTH of these Articles of Incorporation.
Notwithstanding the foregoing, the Board of Directors of the Corporation may
suspend the right of the holders of the capital stock of the Corporation to
require the Corporation to redeem shares of such capital stock:
(i) for any period (A) during which the New York Stock
Exchange is closed other than customary weekend and holiday closings,
or (B) during which trading on the New York Stock Exchange is
restricted;
(ii) for any period during which an emergency, as defined by
rules of the Securities and Exchange Commission or any successor
thereto, exists as a result of which (A) disposal by the Corporation
of securities owned by it is not reasonably practicable or (B) it is
not reasonably practicable for the Corporation fairly to determine the
value of its net assets; or
(iii) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of security holders of the Corporation.
(b) From and after the close of business on the day when the
shares are properly tendered for repurchase the owner shall, with respect of
said shares, cease to be a stockholder of the Corporation and shall have only
the right to receive the repurchase price in accordance with the provisions
hereof. The shares so repurchased may, as the Board of Directors determines, be
held in the treasury of the Corporation and may be resold, or, if the laws of
Kansas shall permit, may be retired. Repurchase of shares is conditional upon
the Corporation having funds or property legally available therefor.
(3) No holder of stock of the Corporation shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation of any class or series which it may issue or sell (whether out of
the number of shares authorized by these Articles of Incorporation, or out of
any shares of the capital stock of the Corporation acquired by it after the
issue thereof, or otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
(4) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of these Articles of Incorporation.
SIXTH: The minimum amount of capital with which the Corporation will
commence business is One Thousand Dollars.
SEVENTH: The names and places of residence of each of the
incorporators are as follows:
NAMES PLACES OF RESIDENCE
Herbert F. Laing 915 Buchanan
Topeka, Kansas
Dean L. Smith 1800 W. 26th
Topeka, Kansas
Robert E. Jacoby 5026 W. 23rd Terrace
Topeka, Kansas
EIGHTH: The duration of corporate existence of the Corporation is one
hundred years.
NINTH: The number of Directors of the Corporation shall be seven.
Unless otherwise provided by the Bylaws of the Corporation, the Directors of the
Corporation need not be stockholders therein.
TENTH: (1) Except as may be otherwise specifically provided by (i)
statute, (ii) the Articles of Incorporation of the corporation as from time to
time amended or (iii) bylaw provisions adopted from time to time by the
stockholders or directors of the corporation, all powers of management,
direction and control of the corporation shall be, and hereby are, vested in the
board of directors.
(2) If the bylaws so provide, the board of directors, by
resolution adopted by a majority of the whole board, may designate two or more
directors to constitute an executive committee, which committee, to the extent
provided in said resolution or in the bylaws of the corporation, shall have and
exercise all of the authority of the board of directors in the management of the
corporation.
(3) Shares of stock in other corporations shall be voted by
the President or a Vice President, or such officer or officers of the
Corporation as the Board of Directors shall from time to time designate for the
purpose, or by a proxy or proxies thereunto duly authorized by the Board of
Directors, except as otherwise ordered by vote of the holders of a majority of
the shares of the capital stock of the Corporation outstanding and entitled to
vote in respect thereto.
(4) Subject only to the provisions of the federal Investment
Company Act of 1940, any Director, officer or employee individually, or any
partnership of which any Director, officer or employee may be a member, or any
corporation or association of which any Director, officer or employee may be an
officer, director, trustee, employee or stockholder, may be a party to, or may
be pecuniarily or otherwise interested in, any contract or transaction of the
Corporation, and in the absence of fraud no contract or other transaction shall
be thereby affected or invalidated; provided that in case a Director, or a
partnership, corporation or association of which a Director is a member,
officer, director, trustee, employee or stockholder is so interested, such fact
shall be disclosed or shall have been known to the Board of Directors or a
majority thereof; and any Director of the Corporation who is so interested, or
who is also a director, officer, trustee, employee or stockholder of such other
corporation or association or a member of such partnership which is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize any
such contract or transaction, and may vote thereat to authorize any such
contract or transaction, with like force and effect as if he were not such
director, officer, trustee, employee or stockholder of such other corporation or
association or not so interested or a member of a partnership so interested.
(5) Each Director and officer (and his heirs, executors and
administrators) shall be indemnified by the Corporation against reasonable costs
and expenses incurred by him in connection with any action, suit or proceeding
to which he is made a party by reason of his being or having been a Director or
officer of the Corporation, except in relation to any action, suit or proceeding
in which he has been adjudged liable because of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. In the absence of an adjudication which expressly absolves the
Director or officer of liability to the Corporation or its stockholders for
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, or in the event of a settlement,
each Director and officer (and his heirs, executors and administrators) shall be
indemnified by the Corporation against payment made, including reasonable costs
and expenses, provided that such indemnity shall be conditioned upon a written
opinion of independent counsel that the Director or officer has no liability by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. The indemnity provided
herein shall, in the event of the settlement of any such action, suit or
proceeding, not exceed the costs and expenses (including attorney's fees) which
would reasonably have been incurred if such action, suit or proceeding had been
litigated to a final conclusion. Such a determination by independent counsel and
the payment of amounts by the Corporation on the basis thereof shall not prevent
a stockholder from challenging such indemnification by appropriate legal
proceeding on the grounds that the officer or Director was liable because of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The foregoing rights and
indemnifications shall not be exclusive of any other right to which the officers
and Directors may be entitled according to law.
(6) The Board of Directors is hereby empowered to authorize
the issuance and sale, from time to time, of shares of the capital stock of the
Corporation, whether for cash at not less than the par value thereof or for such
other consideration including securities as the Board of Directors may deem
advisable, in the manner and to the extent now or hereafter permitted by the
Bylaws of the Corporation and by the laws of Kansas; provided, however, that the
consideration per share to be received by the Corporation upon the sale of any
shares of its capital stock shall not be less than the net asset value per share
of such capital stock outstanding at the time as of which the computation of
such net asset value shall be made. For purposes of the computation of net asset
value, as in these Articles of Incorporation referred to, the following rules
shall apply:
(a) The net asset value of each share of capital stock of the
Corporation surrendered to the Corporation for repurchase
pursuant to the provisions of paragraph (2)(a) of Article FIFTH
of these Articles of Incorporation shall be determined as of the
close of business on the last full business day on which the New
York Stock Exchange is open next succeeding the date on which
such capital stock is so surrendered.
(b) the net asset value of each share of capital stock of the
Corporation for the purpose of issue of such capital stock shall
be determined either as of the close of business on the last
business day on which the New York Stock Exchange was open next
preceding the date on which a subscription to such stock was
accepted, or in accordance with any provision of the Investment
Company Act of 1940, or any rule or regulation thereunder, or any
rule or regulation made or adopted by any securities association
registered under the Securities Exchange Act of 1934.
(c) The net asset value of each share of capital stock of the
Corporation, as of the close of business on any day, shall be the
quotient obtained by dividing the value, as at such close, of the
net assets of the Corporation (i.e., the value of the assets of
the Corporation less its liabilities exclusive of capital stock
and surplus) by the total number of shares of capital stock
outstanding at such close. The assets and liabilities of the
Corporation shall be determined in accordance with generally
accepted accounting principles; provided, however, that in
determining the value of the assets of the Corporation for the
purpose of obtaining the net asset value, each security listed on
the New York Stock Exchange shall be valued on the basis of the
closing sale thereof on the New York Stock Exchange on the
business day as of which such value is being determined. If there
be no such sale on such day, then the security shall be valued on
the basis of the mean between the closing and asked prices upon
such day. If no bid and asked prices are quoted for such day,
then the security shall be valued by such method as the Board of
Directors shall deem to reflect its fair market value. Securities
not listed on the New York Stock Exchange shall be valued in like
manner on the basis of quotations on any other stock exchange
which the Board of Directors may from time to time approve for
that purpose, or by such other method as the Board of Directors
shall deem to reflect their fair market value, and all other
assets of the Corporation shall be valued by such method as they
shall deem to reflect their fair market value.
For the purposes hereof
(A) Capital stock subscribed for shall be deemed to be
outstanding as of the time of acceptance of any subscription and
the entry thereof in the books of the Corporation and the net
price thereof shall be deemed to be an asset of the Corporation;
and
(B) Capital stock surrendered for repurchase by the Corporation
pursuant to the provisions of paragraph (2)(a) of Article FIFTH
of these Articles of Incorporation shall be deemed to be
outstanding until the close of business on the date as of which
such value is being determined as provided in paragraph 6(a) of
this Article TENTH and thereupon and until paid the price thereof
shall be deemed to be a liability of the Corporation.
(d) The net asset value of each share of the capital stock of
the Corporation, as of any time other than the close of
business on any day, may be determined by applying to the
net asset value as of the close of business on the
preceding business day, computed as provided in paragraph
6(c) of this Article TENTH, such adjustments as are
authorized by or pursuant to the directions of the Board
of Directors and designed reasonably to reflect any
material changes in the market value of securities and
other assets held and any other material changes in the
assets or liabilities of the Corporation and in the
number of its outstanding shares which shall have taken
place since the close of business on such preceding
business day.
(e) In addition to the foregoing, the Board of Directors is
empowered, in its absolute discretion, to establish other
bases or times, or both, for determining the net asset
value of each share of capital stock of the Corporation.
(f) Payment of the net asset value of capital stock of the
Corporation surrendered to it for repurchase pursuant to
the provisions of paragraph 2(a) of Article FIFTH of the
Articles of Incorporation shall be made by the
Corporation within seven days after surrender of such
stock to the Corporation for such purposes, to the extent
permitted by law. Any such payment may be made in
portfolio securities of the Corporation or in cash, or in
both portfolio securities and cash, as the Board of
Directors, shall deem advisable, and no stockholder shall
have a right, other than as determined by the Board of
Directors to have his shares repurchased in kind. For the
purpose of determining the amount of any payment to be
made, pursuant to paragraph 2(a) of Article FIFTH, in
portfolio securities, such securities shall be valued as
provided in subdivision (c) of paragraph 6 of this
Article TENTH.
ELEVENTH: The private property of the stockholders shall not be
subject to the payment of the debts of the Corporation.
TWELFTH: The Board of Directors shall have power to make, and from
time to time alter, amend and repeal the Bylaws of the Corporation; provided,
however, that the paramount power to make, alter, amend and repeal the Bylaws,
or any provision thereof, or to adopt new Bylaws, shall always be vested in the
stockholders, which power may be exercised by the affirmative vote of the
holders of a majority of the outstanding shares of stock of the Corporation
entitled to vote, at any annual or special meeting of the stockholders;
provided, further, that thereafter the directors shall have the power to
suspend, repeal, amend or otherwise alter the Bylaws or any portion thereof so
enacted by the stockholders, unless the stockholders in enacting such Bylaws or
portion thereof shall otherwise provide.
THIRTEENTH: In so far as permitted under the laws of Kansas, the
stockholders and directors shall have power to hold their meetings, if the
bylaws so provide, and to keep the books and records of the corporation outside
of the State of Kansas, and to have one or more offices, within or without the
State of Kansas, at such places as may be from time to time designated in the
bylaws or by resolution of the stockholders or directors.
FOURTEENTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them, secured or unsecured,
or between this Corporation and its stockholders, or any class of them, any
court, state or federal, of competent jurisdiction within the State of Kansas
may on the application in a summary way of this corporation, or of any creditor,
secured or unsecured, or stockholders thereof, or on the application of trustees
in dissolution, or on the application of any receiver or receivers appointed for
this corporation by any court, state or federal of competent jurisdiction, order
a meeting of the creditors or class of creditors secured or unsecured or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as said court directs. If a majority in number
representing three fourths in value of the creditors or class of creditors, or
of the stockholders, or class of stockholders of this corporation, as the case
may be, agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
FIFTEENTH: This corporation reserves the right to alter, amend or
repeal any provision contained in these Articles of Incorporation in the manner
now or hereafter prescribed by the statutes of Kansas, and all rights and powers
conferred herein are granted subject to this reservation; and, in particular,
the corporation reserves the right and privilege to amend its Articles of
Incorporation from time to time so as to authorize other or additional classes
of shares of stock, to increase or decrease the number of shares of stock of any
class now or hereafter authorized and to vary the preferences, qualifications,
limitations, restrictions and the special or relative rights or other
characteristics in respect of the shares of each class, in the manner and upon
such minimum vote of the stockholders entitled to vote thereon as may at the
time be prescribed or be permitted by the laws of Kansas, or such larger vote as
may then be required by the Articles of Incorporation of the corporation.
IN WITNESS WHEREOF, we have hereunto subscribed our names this 27th
day of November, 1961.
HERBERT F. LAING
------------------------------
Herbert F. Laing
DEAN L. SMITH
------------------------------
Dean L. Smith
ROBERT E. JACOBY
------------------------------
Robert E. Jacoby
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Personally appeared before me, a notary public in and for Shawnee County,
Kansas, the above named HERBERT F. LAING, DEAN L. SMITH and ROBERT E. JACOBY,
who are personally known to me to be the same persons who executed the foregoing
instrument of writing, and such persons duly acknowledged the execution of the
same.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal this 27th day of November, 1961.
GERALDINE SKINNER
------------------------------
Notary Public
(Notarial Seal)
My commission expires: December 31, 1961.
<PAGE>
Topeka, Kansas November 27, 1961
------------------------------
Date
OFFICE OF SECRETARY OF STATE
RECEIVED OF SECURITY EQUITY FUND, INC.
and deposited in the State Treasury, fees on these Articles of Incorporation as
follows:
Application Fee $25.00
Filing and Recording Fee $2.50
Capitalization Fee $550.00
PAUL R. SHANAHAN
------------------------------
Secretary of State
By: JAMES L. GALBE
------------------------------
Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND, INC.
We, DEAN L. SMITH, President, and WILLIAM J. MILLER, JR., Secretary,
of Security Equity Fund, Inc., a corporation organized and existing under the
laws of the State of Kansas, ( hereinafter sometimes for convenience called the
"Company"), with its principal office in the City of Topeka, Shawnee County,
Kansas, do hereby certify as follows:
FIRST: That the board of directors of the Company at a meeting held on
October 16, 1962, duly adopted the following amendment to the Articles of
Incorporation of the Company, and declared the advisability of said amendment,
said resolution reading as follows:
RESOLVED, that the Articles of Incorporation of Security Equity Fund,
Inc. be amended by deleting the present Article NINTH of said Articles of
Incorporation and inserting in lieu thereof the following Article NINTH:
NINTH: Directors of the corporation shall be nine. Unless otherwise
provided by the Bylaws of the corporation, the directors of the corporation need
not be stockholders therein.
SECOND: That the board of directors of the Company also duly adopted
the following amendment to the Articles of Incorporation of the Company and
declared the advisability of said amendment, said resolution reading as follows:
RESOLVED that the Articles of Incorporation of Security Equity Fund,
Inc. be amended by deleting the present subdivision (a) of paragraph (6) of
Article TENTH of said Articles of Incorporation and inserting in lieu thereof
the following subdivision (a) of paragraph (6) of Article TENTH:
(a) The net asset value of each share of capital stock of the
corporation surrendered to the corporation for repurchase pursuant to the
provisions of paragraph (2)(a) of Article FIFTH of these Articles of
Incorporation shall be determined as of the close of business on the first
full business day on which the New York Stock Exchange is open next
succeeding the date on which such capital stock is so surrendered.
THIRD: That thereafter on the 4th day of December, 1962, upon notice
duly given as provided by law and the bylaws of the Company to each holder of
shares of Capital Stock of the Company entitled to vote on the proposed
amendments of the Articles of Incorporation, the annual meeting of said
stockholders was held and there were present at such meeting in person or by
proxy the holders of more than a majority of the voting stock of the Company.
FOURTH: That at said annual meeting of the stockholders of the
Company, the aforesaid resolutions, set forth in Division FIRST and Division
SECOND hereof, amending the Articles of Incorporation of the Company, were
presented for consideration and a vote of the stockholders present at said
meeting in person and by proxy was taken by ballot for and against each of the
proposed resolutions, which vote was conducted by two Judges, appointed for that
purpose by the officer presiding at such meeting; that the said Judges decided
upon the qualifications of the voters and accepted their votes and when the
voting was completed said Judges counted and ascertained the number of shares
voted respectively for and against each of the proposed amendments to the
Articles of Incorporation and declared that the persons holding a majority of
the Capital Stock of the Company had voted for each of the proposed amendments;
and the said Judges made out a certificate accordingly that the number of shares
of Capital Stock issued and outstanding and entitled to vote on said resolutions
was 23,732 shares of Capital Stock, that 23,533 shares of said stock were voted
for and 100 shares of said stock were voted against the proposed amendment set
forth in Division FIRST hereof, that 23,633 shares of said stock were voted for
and 0 shares of said stock were voted against the proposed amendment set forth
in Division SECOND hereof, and the said Judges subscribed and delivered the said
certificate to the Secretary of the Company.
FIFTH: That a certificate of said Judges having been made, subscribed
and delivered as aforesaid and it appearing by said certificate of the Judges
that the holders of more than a majority of the Capital Stock of the Company
entitled to vote thereon had voted in favor of each of the amendments to the
Articles of Incorporation set forth in Division FIRST and Division SECOND
hereof, the said amendments were declared duly adopted.
SIXTH: That, accordingly, the amendments to Articles NINTH and TENTH
of the Articles of Incorporation of Security Equity Fund, Inc., as heretofore
set forth in Division FIRST and Division SECOND of this certificate, have been
duly adopted in accordance with Article 42 of the General Corporation Code of
Kansas.
SEVENTH: That the capital of the Company will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF we, Dean L. Smith, President, and William J. Miller,
Jr., Secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 4th day of December, 1962.
DEAN L. SMITH
---------------------------------
Dean L. Smith, President
WILLIAM J. MILLER, JR.
---------------------------------
William J. Miller, Jr., Secretary
[Corporate Seal]
<PAGE>
STATE OF KANSAS )
) SS.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 4th day of December, 1962, before me, a
Notary Public in and for the county and state aforesaid, came Dean L. Smith, and
William J. Miller, Jr., President and Secretary respectively, of Security Equity
Fund, Inc., a Kansas corporation, who are personally known to me to be the
President and Secretary, respectively, of said corporation and the same persons
who executed the foregoing instrument and they duly acknowledged the execution
of the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
FLORENCE MCKINSEY
------------------------------
Notary Public
My commission expires: November 21, 1965.
OFFICE OF SECRETARY OF STATE
Topeka, Kansas December 4, 1962
RECEIVED OF SECURITY EQUITY FUND, INC.
Two and fifty/100-------------------------------------------------------Dollars,
fee for filing the within Certificate of Amendment.
PAUL R. SHANAHAN
------------------------------
Secretary of State
By: Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND, INC.
We, DEAN L. SMITH, President, and WILL J. MILLER, JR., Secretary, of
Security Equity Fund, Inc., a corporation organized and existing under the laws
of the State of Kansas, [hereinafter sometimes for convenience called the
"Company"], with its principal office in the City of Topeka, Shawnee County,
Kansas, do hereby certify as follows:
FIRST: That the board of directors of the Company at a meeting held on
December 2, 1963, duly adopted the following amendment to the Articles of
Incorporation of the Company, and declared the advisability of said amendment,
said resolution to read as follows:
FURTHER RESOLVED, That the Articles of Incorporation of the Fund be
amended by deleting the present subdivision (a) of paragraph (6) of Article
TENTH of said Articles of Incorporation and inserting in lieu thereof the
following subdivision (a) of paragraph (6) of Article TENTH:
(a) The net asset value of each share of capital stock of the
Corporation tendered to the Corporation for repurchase pursuant to the
provisions of paragraph (2)(a) of Article FIFTH of these Articles of
Incorporation shall be determined as of the close of business on the
date to which such capital stock is so tendered.
SECOND: That the board of directors of the Company also duly adopted
the following amendment to the Articles of Incorporation of the Company, and
declared the advisability of said amendment, said resolution reading as follows:
FURTHER RESOLVED, That the Articles of Incorporation of Security
Equity Fund, Inc., be amended by deleting the first paragraph only of the
present subdivision (c) of paragraph (6) of Article TENTH of said Articles
of Incorporation and inserting in lieu thereof the following first
paragraph of subdivision (c) of paragraph (6) of Article TENTH:
(c) The net asset value of each share of capital stock of the
Corporation, as of the close of business on any day, shall be the
quotient obtained by dividing the value, as at such close, of the net
assets of the Corporation (i.e., the value of the assets of the
Corporation less its liabilities exclusive of capital stock and
surplus) by the total number of shares of capital stock outstanding at
such close. The assets and liabilities of the Corporation shall be
determined in accordance with generally accepted accounting
principles; provided, however, that in determining the value of the
assets of the Corporation for the purpose of obtaining the net asset
value, each security listed on the New York Stock Exchange shall be
valued on the basis of the closing sale thereof on the New York Stock
Exchange on the business day as of which such value is being
determined. If there be no such sale on such day, then the security
shall be valued on the basis of the closing bid price upon such day.
If no bid price is quoted for such day, then the security shall be
valued by such method as the Board of Directors shall deem to reflect
its fair market value. Securities not listed on the New York Stock
Exchange shall be valued in like manner on the basis of quotations on
any other stock exchange which the Board of Directors may from time to
time approve for that purpose, or by such other method as the Board of
Directors shall deem to reflect their fair market value, and all other
assets of the Corporation shall be valued by such method as they shall
deem to reflect their fair market value.
THIRD: That thereafter on the 20th day of December, 1963, upon notice
duly given as provided by law and the bylaws of the Company to each holder of
shares of Capital Stock of the Company entitled to vote on the proposed
amendments of the Articles of Incorporation, the deferred annual meeting of said
stockholders was held and there were present at such meeting in person or by
proxy the holders of more than a majority of the voting stock of the Company.
FOURTH: That at said deferred annual meeting of the stockholders of
the Company, the aforesaid resolutions, set forth in Division FIRST and Division
SECOND hereof, amending the Articles of Incorporation of the Company, were
presented for consideration and a vote of the stockholders present at said
meeting in person and by proxy was taken by ballot for and against each of the
proposed resolutions, which vote was conducted by two Judges appointed for that
purpose by the officer presiding at such meeting; that the said Judges decided
upon the qualifications of the voters and accepted their votes and when the
voting was completed said Judges counted and ascertained the number of shares
voted respectively for and against each of the proposed amendments to the
Articles of Incorporation and declared that the persons holding a majority of
the Capital Stock of the Company had voted for each of the proposed amendments;
and the said Judges made out a certificate accordingly that the number of shares
of Capital Stock issued and outstanding and entitled to vote on said resolutions
was 41,213 shares of Capital Stock, that 30,185 shares of said stock were voted
for and 0 shares of said stock were voted against the proposed amendments set
forth in Division FIRST hereof, that 30,185 shares of said stock were voted for
and 30,18 shares of said stock were voted against the proposed amendment set
forth in DIVISION SECOND hereof, and the said Judges subscribed and delivered
the said certificate to the Secretary of the Company.
FIFTH: That a certificate of said Judges having been made, subscribed
and delivered as aforesaid and it appearing by said certificate of the Judges
that the holders of more than a majority of the Capital Stock of the Company
entitled to vote thereon had voted in favor of each of the amendments to the
Articles of Incorporation set forth in Division FIRST and Division SECOND
hereof, the said amendments were declared adopted.
SIXTH: That, accordingly, the amendments to Article TENTH of the
Articles of Incorporation of Security Equity Fund, Inc., as heretofore set forth
in Division FIRST and Division SECOND of this certificate, have been duly
adopted in accordance with Article 42 of the General Corporation Code of Kansas.
SEVENTH: That the capital of the Company will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, we, Dean L. Smith, President, and Will J. Miller,
Jr., Secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 20th day of December, 1963.
[Corporate Seal]
DEAN L. SMITH
------------------------------
Dean L. Smith, President
WILL J. MILLER, JR.
------------------------------
Will J. Miller, Jr., Secretary
<PAGE>
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 20th day of December, 1963, before me,
a Notary Public in and for the county and state aforesaid, came Dean L. Smith,
and Will J. Miller, Jr., President and Secretary, respectively, of Security
Equity Fund, Inc. a Kansas corporation, who are personally known to me to be the
President and Secretary, respectively, of said corporation, and the same persons
who executed the foregoing instrument and they duly acknowledged the execution
of the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal on the day and year last above written.
AMELIA F. LETUKS
------------------------------
Notary Public
My commission expires: June 4, 1967
OFFICE OF SECRETARY OF STATE
Topeka, Kansas December 20, 1963
RECEIVED OF SECURITY EQUITY FUND, INC.
Two and fifty/100-------------------------------------------------------Dollars,
fee for filing the within Certificate of Amendment.
PAUL R. SHANAHAN
------------------------------
SECRETARY OF STATE
By: WILLIAM R. STURS
------------------------------
Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND, INC.
We, DEAN L. SMITH, President, and WILL J. MILLER, JR., Secretary, of
Security Equity Fund, Inc., a corporation organized and existing under the laws
of the State of Kansas, (hereinafter sometimes for convenience called the
"Company"), with its principal office in the City of Topeka, Shawnee County,
Kansas, do hereby certify as follows:
FIRST: That the board of directors of the Company at a meeting held on
April 7, 1966, duly adopted the following amendment to the Articles of
Incorporation of the Company, and declared the advisability of said amendment,
said resolution reading as follows:
"RESOLVED, That the Articles of Incorporation of Security Equity Fund,
Inc., as heretofore amended, be further amended by deleting the first
paragraph of the Article Fifth and by inserting in lieu thereof the
following paragraph:
"The aggregate number of shares which the Corporation shall have
authority to issue shall be 5,000,000 shares of capital stock of
the par value of $1.00 per share.""
SECOND: That thereafter on the 9th day of June, 1966, upon notice duly
given as provided by law and the bylaws of the Company to each holder of shares
of Capital Stock of the Company entitled to vote on the proposed amendment of
the Articles of Incorporation, the special meeting of said stockholders was held
and there were present at such meeting in person or by proxy the holders of more
than a majority of the voting stock of the Company.
THIRD: That at the special meeting of the stockholders of the Company,
the aforesaid resolution, set forth in division FIRST hereof, amending the
Articles of Incorporation of the Company, was presented for consideration and a
vote of the stockholders present at said meeting in person and by proxy was
taken by ballot for and against each of the proposed resolution, which vote was
conducted by two Judges appointed for that purpose by the officer presiding at
such meeting; that the said Judges decided upon the qualifications of the voters
and accepted their votes and when the voting was completed said Judges counted
and ascertained the number of shares votes respectively for and against the
proposed amendment to the Articles of Incorporation and declared that the
persons holding a majority of the Capital Stock of the Company had voted for the
proposed amendment; and the said Judges made out a certificate accordingly that
the number of shares of Capital Stock issued and outstanding and entitled to
vote on said resolution was 578,333 shares of Capital Stock, that 335,865 shares
of stock were voted for and 4,199 shares of stock were voted against the
proposed amendment set forth in Division FIRST hereof, and the said Judges
subscribed and delivered the said certificate to the Secretary of the Company.
FOURTH: That a certificate of said Judges having been made, subscribed
and delivered as aforesaid and it appearing by said certificate of the Judges
that the holders of more than a majority of the Capital Stock of the Company
entitled to vote thereon had voted in favor of the amendment to the Articles of
Incorporation set forth in Division FIFTH hereof, the said amendment was
declared duly adopted.
FIFTH: That, accordingly, the amendment to Article FIFTH of the
Articles of Incorporation of Security Equity Fund, Inc., as heretofore set forth
in Division FIRST of this certificate, have been duly adopted in accordance with
Article 42 of the General Corporation Code of Kansas.
SIXTH: That the capital of the Company will not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, we, Dean L. Smith, President, and Will J. Miller
Jr., Secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 9th day of June, 1966.
DEAN L. SMITH
------------------------------
Dean L. Smith, President
WILL J. MILLER, JR.
------------------------------
Secretary
(Corporate Seal)
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 9th day of June, 1966, before me, a Notary
Public in and for the County and State aforesaid, came Dean L. Smith and Will J.
Miller, Jr., President and Secretary, respectively of Security Equity Fund,
Inc., a Kansas corporation, who are personally known to me to be the President
and Secretary, respectively, of said corporation, and the same persons who
executed the foregoing instrument and they duly acknowledged the execution of
the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
LOIS J. HEDRICK
------------------------------
Notary Public
My commission expires January 8, 1968.
OFFICE OF SECRETARY OF STATE
Topeka, Kansas June 13, 1966
RECEIVED OF SECURITY EQUITY FUND, INC.
Two Thousand Fifty Two and fifty/100-----------------------------------Dollars,
fee for filing the within Certificate of Amendment.
Elwill M. Shanahan
------------------------------
Secretary of State
By: William A. Stewart
Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND, INC.
We, DEAN L. SMITH, President, and WILL J. MILLER, JR., Secretary, of
Security Equity Fund, Inc., a corporation organized and existing under the laws
of the State of Kansas, (hereinafter sometimes for convenience called the
"Company"), with its principal office in the City of Topeka, Shawnee County,
Kansas, do hereby certify as follows:
FIRST: That the board of directors of the Company at a meeting held on
July 6, 1967, duly adopted the following amendment to the Articles of
Incorporation of the Company, and declared the advisability of said amendment,
said resolution reading as follows:
"RESOLVED, That the Articles of Incorporation of Security Equity Fund,
Inc., as heretofore amended, be further amended by deleting the first
paragraph of the Article Fifth and by inserting in lieu thereof the
following paragraph:
"The aggregate number of shares which the Corporation shall have
authority to issue shall be 15,000,000 shares of capital stock of
the par value of $1.00 per share.""
SECOND: That thereafter on the 30th day of August, 1967, upon notice
duly given as provided by law and the bylaws of the Company to each holder of
shares of Capital Stock of the Company entitled to vote on the proposed
amendment of the Articles of Incorporation, the special meeting of said
stockholders was held and there were present at such meeting in person or by
proxy the holders of more than a majority of the voting stock of the Company.
THIRD: That at the special meeting of the stockholders of the Company,
the aforesaid resolution, set forth in division FIRST hereof, amending the
Articles of Incorporation of the Company, was presented for consideration and a
vote of the stockholders present at said meeting in person and by proxy was
taken by ballot for and against the proposed resolution, which vote was
conducted by two Judges appointed for that purpose by the officer presiding at
such meeting; that the said Judges decided upon the qualifications of the voters
and accepted their votes and when the voting was completed said Judges counted
and ascertained the number of shares votes respectively for and against the
proposed amendment to the Articles of Incorporation and declared that the
persons holding a majority of the Capital Stock of the Company had voted for the
proposed amendment; and the said Judges made out a certificate accordingly that
the number of shares of Capital Stock issued and outstanding and entitled to
vote on said resolution was 3,118,651 shares of Capital Stock, that 1,613,533
shares of stock were voted for and 45,071 shares of stock were voted against the
proposed amendment set forth in division FIRST hereof, and the said Judges
subscribed and delivered the said certificate to the Secretary of the Company.
FOURTH: That a certificate of said Judges having been made, subscribed
and delivered as aforesaid and it appearing by said certificate of the Judges
that the holders of more than a majority of the Capital Stock of the Company
entitled to vote thereon had voted in favor of the amendment to the Articles of
Incorporation set forth in division FIRST hereof, the said amendment was
declared duly adopted.
FIFTH: That, accordingly, the amendment to Article Fifth of the
Articles of Incorporation of Security Equity Fund, Inc., as heretofore set forth
in Division FIRST of this certificate, have been duly adopted in accordance with
Article 42 of the General Corporation Code of Kansas.
SIXTH: That the capital of the Company will not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, we, Dean L. Smith, President, and Will J. Miller
Jr., Secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 30th day of August, 1967.
DEAN L. SMITH
------------------------------
Dean L. Smith, President
WILL J. MILLER, JR.
------------------------------
Secretary
(Corporate Seal)
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 30th day of August, 1967, before me, a
Notary Public in and for the County and State aforesaid, came Dean L. Smith, and
Will J. Miller, Jr., President and Secretary, respectively, of Security Equity
Fund, Inc., a Kansas corporation, who are personally known to me to be the
President and Secretary, respectively, of said corporation, and the same persons
who executed the foregoing instrument and they duly acknowledged the execution
of the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial
seal on the day and year last above written.
LOIS J. HEDRICK
------------------------------
Notary Public
My commission expires: January 8, 1968
OFFICE OF SECRETARY OF STATE
Topeka, Kansas August 30, 1967
RECEIVED OF SECURITY EQUITY FUND, INC.
Five Thousand Fifty Two and fifty/100----------------------------------Dollars,
Fee for filing the within Amendment.
ELWILL M. SHANAHAN
------------------------------
Secretary of State
By: WILLIAM A. STEWART
------------------------------
Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
We, DEAN L. SMITH, President, and WILL J. MILLER, JR., Secretary, of
Security Equity Fund, Inc., a corporation organized and existing under the laws
of the State of Kansas, (hereinafter sometimes for convenience called the
"Company"), with its principal office in the City of Topeka, Shawnee County,
Kansas, do hereby certify as follows:
FIRST: That the board of directors of the Company at a meeting held on
October 10, 1968, duly adopted the following amendment to the Articles of
Incorporation of the Company, and declared the advisability of said amendment,
said resolution reading as follows:
"RESOLVED, That the Articles of Incorporation of Security Equity
Fund, Inc., as heretofore amended, be further amended deleting the
first paragraph of the Article FIFTH and by inserting in lieu thereof
the following paragraph:
"The aggregate number of shares which the Corporation shall
have the authority to issue shall be 100,000,000 shares of
capital stock of the par value of $0.25 (twenty-five cents)
per share. Upon the effectiveness of this amendment:
(a) Each share of capital stock, par value $1.00 per share,
heretofore issued by the Corporation and presently
outstanding shall, without further act or deed, be deemed to
be changed and converted into four shares of capital stock
of the par value of $0.25 each; and
(b) Each stock certificate for shares of capital stock of
the par value of $1.00 per share issued and outstanding
immediately prior to this amendment evidencing shares or
capital stock, par value $1.00 per share, shall be deemed to
evidence an identical number of shares of capital stock of
the par value of $0.25 each."
SECOND: That thereafter on the 12th day of December, 1968 upon notice
duly given as provided by the law and the bylaws of the Company to each holder
of shares of Capital Stock of the Company entitled to vote on the proposed
amendment of the Articles of Incorporation, the annual meeting of said
stockholders was held and there were present at such meeting in person or by
proxy the holders of more than a majority of the voting stock of the Company.
THIRD: That at said annual meeting of the stockholders of the Company,
the foresaid resolution, set forth in division FIRST hereof, amending the
Articles of Incorporation of the Company, was presented for consideration and a
vote of the stockholders present at said meeting in person and by proxy was
taken by ballot for and against the proposed resolution, which vote was
conducted by two Judges appointed for that purpose by the officer presiding at
such meeting; that the said Judges decided upon the qualifications of the voters
and accepted their votes and when the voting was completed said Judges counted
and ascertained the number of shares votes respectively for and against the
proposed amendment to the Articles of Incorporation and declared that the
persons holding a majority of the Capital Stock of the Company had voted for the
proposed amendment; and the said Judges made out a certificate accordingly that
the number of shares of Capital Stock issued and outstanding and entitled to
vote on said resolution was 7,683,768 shares of Capital Stock, that 4,391,182
shares of stock were voted for, and 214,740 shares of stock were voted against
the proposed amendment set forth in division FIRST hereof, and the said Judges
subscribed and delivered the said certificate to the Secretary of the Company.
FOURTH: That a certificate of said Judges having been made, subscribed
and delivered as aforesaid and it appearing by said certificate of the Judges
that the holders of more than a majority of the Capital Stock of the Company
entitled to vote thereon had voted in favor of the amendment to the Articles of
Incorporation set forth in division FIRST hereof, the said amendment was
declared duly adopted.
FIFTH: That, accordingly, the amendment to Article Fifth of the
Articles of Incorporation of Security Equity Fund, Inc., as heretofore set forth
in Division FIRST of this certificate, have been duly adopted in accordance with
Article 42 of the General Corporation Code of Kansas.
SIXTH: That the capital of the Company will not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, we, Dean L. Smith, President, and Will J. Miller
Jr., Secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 31st day of December, 1968.
DEAN L. SMITH
------------------------------
Dean L. Smith, President
WILL J. MILLER, JR.
------------------------------
Secretary
(Corporate Seal)
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 31st day of December, 1968, before me,
a Notary Public in and for the County and State aforesaid, came Dean L. Smith,
and Will J. Miller, Jr., President and Secretary, respectively, of Security
Equity Fund, Inc., a Kansas corporation, who are personally known to me to be
the President and Secretary, respectively, of said corporation, and the same
persons who executed the foregoing instrument and they duly acknowledged the
execution of the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal on the day and year last above written.
Lois J. Hedrick
------------------------------
Notary Public
My commission expires: January 8, 1972
<PAGE>
OFFICE OF SECRETARY OF STATE
Topeka, Kansas December 31, 1968
RECEIVED OF SECURITY EQUITY FUND, INC.
Five Thousand fifty-two and 50/100------------------------------------Dollars,
fee for filing the within Amendment.
ELWILL M. SHANAHAN
------------------------------
Secretary of State
By: HART WORKMAN
------------------------------------------
Hart Workman, Assistant Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
We, Dean L. Smith, president, and Will J. Miller, Jr., secretary of
Security Equity Fund, Inc., a corporation organized and existing under the laws
of the State of Kansas, (hereinafter called the "Corporation"), do hereby
certify as follows:
FIRST: That on October 30, 1969, the board of directors of the
Corporation duly adopted the following resolution setting forth the following
proposed amendment to the Articles of Incorporation of the Corporation, and
declared the advisability of said amendment, said resolution reading as follows:
"RESOLVED, that the Articles of Incorporation of Security Equity
Fund, Inc., a Kansas corporation, be amended by deleting the present
first sentence of subparagraph (a) of paragraph (2) of Article FIFTH
thereof in its entirety and substituting in lieu thereof the following
new first sentence of subparagraph (a) of paragraph (2) of Article
FIFTH:
(2)(a) Each holder of capital stock of the Corporation, upon
request to the Corporation accompanied by surrender of the
appropriate stock certificate or certificates in proper form for
transfer, shall be entitled to require the Corporation to
repurchase all or any part of the shares of capital stock
standing in the name of such holder on the books of the
Corporation, at the net asset value of such shares.
SECOND: That on October 30, 1969, the board of directors of the
Corporation also duly adopted the following resolution setting forth the
following proposed amendment to the Articles of Incorporation of the
Corporation, and declared the advisability of said amendment, said resolution
reading as follows:
RESOLVED, that the Articles of Incorporation of Security Equity
Fund, Inc., a Kansas corporation, be amended by deleting the present
first paragraph and subparagraphs (a) and (b) of paragraph (6) of
Article TENTH thereof in their entirety and substituting in lieu
thereof the following new first paragraph and new subparagraphs (a)
and (b) of paragraph (6) of Article TENTH:
(6) The Board of Directors is hereby empowered to authorize
the issuance and sale, from time to time, of shares of the capital
stock of the Corporation, whether for cash at not less than the par
value thereof or for such other consideration including securities as
the Board of Directors may deem advisable, in the manner and to the
extent now or hereafter permitted by the Bylaws of the Corporation and
by the laws of Kansas; provided, however, that the consideration per
share to be received by the Corporation upon the sale of any shares of
its capital stock shall not be less than the net asset value per share
of such capital stock outstanding at the time as of which the
computation of such net asset value shall be made. For the purposes of
the computation of net asset value, as in these Articles of
Incorporation referred to, such computation shall be computed as
provided in the Investment Company Act of 1940 or in any other statute
administered by the Securities and Exchange Commission or any
successor thereto, or in any rule, regulation or order issued under
any such statute and, except as so provided, shall be computed in
accordance with the following rules:
(a) the net asset value of each share of capital stock of
the Corporation surrendered to the Corporation for repurchase pursuant
to the provisions of paragraph (2)(a) of Article FIFTH of these
Articles of Incorporation shall be the net asset value next computed
after the time such share is tendered for redemption.
(b) the net asset value of each share of capital stock of
the Corporation for the purpose of issue of such capital stock shall
be determined at the close of business on the New York Stock Exchange
(the "Exchange") on each day on which the Exchange is open with
respect to all orders accepted prior to such close of business of the
Exchange on that day. Orders accepted after the close of business of
the Exchange will be filled on the basis of the offering price
determined as of the close of business on the Exchange on the next day
on which the Exchange is open.
THIRD: That on December 30, 1969, at the annual meeting of the
stockholders of the Corporation, notice of which annual meeting was duly given
as provided by law and the bylaws of the Corporation to each holder of shares of
capital stock of the Corporation entitled to vote on the proposed amendments of
the Articles of Incorporation, the aforesaid resolutions set forth in Division
FIRST and Division SECOND, amending the Articles of Incorporation of the
Corporation, were presented for consideration, and a vote of the stockholders
present at said meeting in person and by proxy was taken by ballot for and
against each of the proposed resolutions, which votes were conducted by two
judges appointed for that purpose by the officer presiding at such meeting; that
the said judges decided upon the qualifications of the voters and accepted their
votes and when the voting was completed said Judges counted and ascertained the
number of shares votes respectively for and against each of the proposed
amendments to the Articles of Incorporation and declared that the persons
holding a majority of the capital stock of the Corporation had voted for each of
the proposed amendments; and the said judges made out a certificate accordingly
that the number of shares of capital stock issued and outstanding and entitled
to vote on said resolution was 21,222,857 shares of capital stock, that
20,919,065 shares of stock were voted for and 281,869 shares of stock were voted
against the proposed amendment set forth in Division FIRST hereof, that
20,976,162 shares of said stock were voted for and 224,772 shares of said stock
were voted against the proposed amendment set forth in Division SECOND hereof,
and the said judges subscribed and delivered the said certificate to the
secretary of the Corporation.
FOURTH: That the certificate of said judges having been made,
subscribed and delivered as aforesaid, and it appearing by said certificate of
the judges that the holders of more than a majority of the capital stock of the
Corporation entitled to vote thereon had voted in favor of the amendments to the
Articles of Incorporation set forth in Division FIRST and Division SECOND
thereof, the said amendments were declared duly adopted.
FIFTH: That, accordingly, the amendments of the Articles of
Incorporation of the Corporation, as heretofore set forth in Division FIRST and
Division SECOND of this certificate, have been duly adopted in accordance with
Article 42 of the General Corporation Code of Kansas.
SIXTH: That the capital of the Company will not be reduced under or by
reason of said amendments.
IN WITNESS WHEREOF, we, Dean L. Smith, president, and Will J. Miller
Jr., secretary, have hereunto severally set our hands and caused the corporate
seal of the Company to be hereto affixed this 30th day of December, 1969.
DEAN L. SMITH
------------------------------
Dean L. Smith, President
WILL J. MILLER, JR.
------------------------------
Secretary
(Corporate Seal)
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that on this 30th day of December, 1969, before me,
a notary public in and for the County and State aforesaid, came DEAN L. SMITH,
President, and WILL J. MILLER, JR., Secretary, of Security Equity Fund, Inc., a
Kansas corporation, who are personally known to me to be the President and
Secretary, respectively, of said Corporation, and the same persons who executed
the foregoing instrument and they duly acknowledged the execution of the same.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal on the day and year last above written.
LOIS J. HEDRICK
------------------------------
Notary Public
My commission expires: January 8, 1972
<PAGE>
OFFICE OF SECRETARY OF STATE
Topeka, Kansas DECEMBER 30, 1969
Received of SECURITY EQUITY FUND, INC.
Two and 50/100----------------------------------------------------------Dollars,
fee for filing the within Amendment.
ELWILL M. SHANAHAN
------------------------------
Secretary of State
By: HART WORKMAN
------------------------------
Assistant Secretary of State
<PAGE>
CHANGE OF LOCATION OF REGISTERED OFFICE
AND/OR
CHANGE OF RESIDENT AGENT
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, Dean L. Smith, President and Larry D. Armel, Secretary of Security
Equity Fund, Inc., a corporation organized and existing under and by virtue of
the laws of the State of Kansas, do hereby certify that a regular meeting of the
Board of Directors of said corporation held on the 9th day of July, 1975, the
following resolution was duly adopted.
Be it further resolved that the RESIDENT AGENT of said corporation in the
State of Kansas be changed from Dean L. Smith, Security Benefit Life Bldg., 700
Harrison Street, Topeka, Shawnee, Kansas the same being of record in the office
of Secretary of State of Kansas to Security Management Company, Inc., Security
Benefit Life Bldg., 700 Harrison Street, Topeka, Shawnee, Kansas 66636. The
President and Secretary are hereby authorized to file and record the same in the
manner as required by law:
DEAN L. SMITH
------------------------------
Dean L. Smith, President
LARRY D. ARMEL
------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered that before me Lois J. Hedrick a Notary Public in and for
the County and State aforesaid, came Dean L. Smith President, and Larry D.
Armel, Secretary, of Security Equity Fund, Inc. a corporation, personally known
to me to be the persons who executed the foregoing instrument of writing as
president and secretary respectively, and duly acknowledged the execution of the
same this 9th day of July, 1975.
LOIS J. HEDRICK
------------------------------
Notary Public
My commission expires January 8, 1976
NOTE: This form must be filed in duplicate.
Address of Resident Agent and Registered Office, as set forth above,
must be the same.
The statutory fee for filing is $20.00 and must accompany this form.
<PAGE>
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
STATE OF KANSAS )
) ss.
COUNTY OF Shawnee)
We, Everett S. Gille, President , and Larry D. Armel, Secretary of Security
Equity Fund, Inc., a corporation organized and existing under the laws of the
State of Kansas, and whose registered office is Security Benefit Life Bldg., 700
Harrison Street, Topeka, Shawnee, Kansas do hereby certify that at the regular
meeting of the Board of Directors of said corporation, held on the 13th day of
October, 1976, said board adopted a resolution setting forth the following
amendment to the Articles of Incorporation and declaring its advisability, to
wit:
RESOLVED, that the Articles of Incorporation of Security Equity Fund, Inc.,
a Kansas corporation, be amended by adding the following new subparagraph
(2)(c) to Article FIFTH thereof, such new subparagraph (2)(c) to be
inserted immediately following subparagraph (2)(b) and immediately before
paragraph (3) thereof:
(c) The Corporation, pursuant to a resolution by the Board of
Directors and without the vote or consent of stockholders of the
Corporation, shall have the right to redeem at net asset value
all shares of capital stock of the Corporation in any stockholder
account in which there has been no investment (other than the
reinvestment of income dividends or capital gains distributions)
for at least six months and in which there are fewer than 25
shares or such fewer shares as shall be specified in such
resolution. Such resolution shall set forth that redemption of
shares in such accounts has been determined to be in the economic
best interests of the Corporation or necessary to reduce
disproportionally burdensome expenses in servicing stockholder
accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such
redemption of shares, and that the stockholder will have six
months (or such longer period as specified in the resolution)
from the date of the notice to avoid such redemption by
increasing his account to at least 25 shares, or such fewer
shares as is specified in the resolution.
That thereafter, pursuant to said resolution and in accordance with the
by-laws and the laws of the State of Kansas, said directors called a meeting of
stockholders for the consideration of said amendment, and thereafter, pursuant
to said notice and in accordance with the statutes of the State of Kansas, on
the 9th day of December, 1976, said stockholders met and convened and considered
said proposed amendment.
That at said meeting the stockholders entitled to vote did vote upon said
amendment, and the majority of voting stockholders of the corporation had voted
for the proposed amendment certifying that the votes were 16,855,355 (common)
shares in favor of the proposed amendment and 442,958 (common) shares against
the amendment.
That said amendment was duly adopted in accordance with the provisions of
K.S.A. 17-6602.
That the capital of said corporation will not be reduced under or by reason
of said amendment.
IN WITNESS WHEREOF, we have hereunto set out hands and affixed the seal of
said corporation this 23rd day of December, 1976.
EVERETT S. GILLE
------------------------------
Everett S. Gille, President
LARRY D. ARMEL
------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF Shawnee)
Be it remembered, that before me, Lois J. Hedrick a Notary Public in and
for the County and State, aforesaid, came Everett S. Gille, President, and Larry
D. Armel, Secretary, of Security Equity Fund, Inc. a corporation, personally
known to me to be the persons who executed the foregoing instrument of writing
as president and secretary respectively, and duly acknowledged the execution of
the same this 23rd day of December, 1976.
Lois J. Hedrick
------------------------------
Notary Public
My Commission Expires: January 8, 1980
Submit to this office in duplicate.
A fee of $20.00 must accompany this form.
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
- --------------------------------------------------------------------------------
STATE OF KANSAS )
) ss
COUNTY OF Shawnee)
We, Everett S. Gille, President, and Larry D. Armel Secretary of Security
Equity Fund, Inc., a corporation organized and existing under the laws of the
State of Kansas, and whose registered office is Security Benefit Life Building,
700 Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that at
the regular meeting of the Board of Directors of said corporation held on the
12th day of October, 1979, said board adopted a resolution setting forth the
following amendment to the Articles of Incorporation and declared its
advisability, to wit:
RESOLVED, that whereas the board of directors deems it advisable and in the
best interests of the corporation to increase the authorized capitalization
of the corporation, that the articles of incorporation of Security Equity
Fund, Inc. be amended by deleting the first paragraph [including
sub-paragraphs (a) and (b)] of Article FIFTH in its entirety, and by
inserting, in lieu thereof, the following new first paragraph of Article
FIFTH:
The total number of shares which the Corporation shall have authority
to issue shall be 150,000,000 shares of capital stock, each of the par
value of $0.25 (twenty-five cents)."
FURTHER RESOLVED, that the foregoing proposed amendment to the articles of
incorporation of the Fund be presented to the stockholders of the Fund for
consideration at the annual meeting of stockholders to be held on December
13, 1979.
That thereafter, pursuant to said resolution and in accordance with the by-laws
and the laws of the State of Kansas, said directors called a meeting of
stockholders for the consideration of said amendment, and thereafter, pursuant
to said notice and in accordance with the statutes of the State of Kansas, on
the 13th day of December, 1979, said stockholders met and convened and
considered said proposed amendment.
That at said meeting the stockholders entitled to vote did vote upon said
amendment, and the majority of voting stockholders of the corporation had voted
for the proposed amendment certifying that the votes were 11,600,855 (common)
shares in favor of the proposed amendment and 691,585 (common) shares against
the amendment.
That said amendment was duly adopted in accordance with the provisions of K.S.A.
17-6602, as amended.
That the capital of said corporation will not be reduced under or by reason of
said amendment.
IN WITNESS WHEREOF we have hereunto set out hands and affixed the seal of
said corporation this 18th day of December, 1979.
EVERETT S. GILLE
------------------------------
Everett S. Gille, President
LARRY D. ARMEL
------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss
COUNTY OF Shawnee)
Be it remembered, that before me, Lois J. Hedrick a Notary Public in and for the
County and State aforesaid, came Everett S. Gille, President and Larry D. Armel,
Secretary of Security Equity Fund, Inc. a corporation, personally known to me to
be the persons who executed the foregoing instrument of writing as president and
assistant secretary respectively, and duly acknowledged the execution of the
same this 18th day of December, 1979.
LOIS J. HEDRICK
------------------------------
Notary Public
My commission expires: January 8, 1980.
Submit to this office in duplicate.
A fee of $20.00 must accompany this form.
<PAGE>
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND, INC.
- --------------------------------------------------------------------------------
STATE OF KANSAS )
) ss
COUNTY OF SHAWNEE)
We, Everett S. Gille, President, and Larry D. Armel, Secretary of Security
Equity Fund, Inc., a corporation organized and existing under the laws of the
State of Kansas, and whose registered office is Security Benefit Life Building,
700 Harrison Street, Topeka, Kansas, 66636, do hereby certify that at the
regular meeting of the Board of Directors of said corporation held on the 9th
day of October, 1981, said board adopted a resolution setting forth the
following amendment to the Articles of Incorporation and declared its
advisability, to wit:
RESOLVED, that the Articles of Incorporation of Security Equity Fund, Inc.
as heretofore amended, be further amended by deleting Article FIRST in its
entirety and by inserting, in lieu thereof, the following new Article FIRST:
"FIRST: the name of the corporation (hereinafter called the
"Corporation") is SECURITY EQUITY FUND".
FURTHER RESOLVED, that the board of directors of this corporation hereby
declares the advisability of the foregoing amendment to the articles of
incorporation of this corporation and hereby recommends that the stockholders of
this corporation adopt amendment.
FURTHER RESOLVED, that at the annual meeting of the stockholders of this
corporation to be held at the offices of the corporation in Topeka, Kansas, on
December 10, 1981, beginning at 10:00 A.M. on that day, the matter of the
aforesaid proposed amendment to the articles of incorporation of this
corporation shall be submitted to the stockholders entitled to vote thereon.
FURTHER RESOLVED, that in the event the stockholders of this corporation shall
approve and adopt the proposed amendment to the articles of incorporation of
this corporation as heretofore adopted and recommended by this board of
directors, the appropriate officers of this corporation be, and they hereby are
authorized and directed, for and in behalf of this corporation, to make,
execute, verify, acknowledge and file or record in any and all appropriate
governmental offices any and all certificates and other instruments, and to take
any and all other action as may be necessary to effectuate the said proposed
amendment to the articles of incorporation of this corporation".
That thereafter, pursuant to said resolution and in accordance with the by-laws
of the State of Kansas, said directors called a meeting of stockholders for the
consideration of said amendment, and thereafter, pursuant to said notice and in
accordance with the statutes of the State of Kansas, on the 10th day of
December, 1981, said stockholders met and convened and considered said proposed
amendment.
That at said meeting the stockholders entitled to vote did vote upon said
amendment, and the majority of voting stockholders of the corporation had voted
for the proposed amendment certifying that the votes were 15,967,961 (Common
Stock) shares in favor of the proposed amendment and 842,670 (Common Stock)
shares against the amendment.
That said amendment was duly adopted in accordance with the provisions of K.S.A.
17-6602, as amended.
That the capital of said corporation will not be reduced under or by reason of
said amendment.
IN WITNESS WHEREOF we have hereunto set out hands and affixed the seal of said
corporation this 14th day of December, 1981.
EVERETT S. GILLE
------------------------------
Everett S. Gille, President
LARRY D. ARMEL
------------------------------
Larry D. Armel, Secretary
STATE OF KANSAS )
) ss
COUNTY OF SHAWNEE)
Be it remembered, that before me, Lois J. Hedrick a Notary Public in and for the
County and State aforesaid, came Everett S. Gille, President, and Larry D. Armel
Secretary, of Security Equity Fund, Inc. a corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as president
and secretary respectively, and duly acknowledged the execution of the same this
14th day of December, 1981.
Lois J. Hedrick
------------------------------
Notary Public
My commission expires January 8, 1984.
Submit to this office in duplicate.
A fee of $20.00 must accompany this form.
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND
- --------------------------------------------------------------------------------
We, Michael J. Provines, President, and Amy J. Lee, Secretary of the above named
corporation organized and existing under the laws of the State of Kansas, do
hereby certify that at a meeting of the Board of Directors of said corporation,
the board adopted a resolution setting forth the following amendment to the
Articles of Incorporation and declaring its advisability:
RESOLVED, that whereas the Corporation's board of directors deems it
advisable and in the best interest of the corporation to increase the
authorized capitalization of the corporation, that the articles of
incorporation of Security Equity Fund be amended by deleting the first
paragraph of Article FIFTH in its entirety, and by inserting in lieu
thereof, the following new first paragraph of Article FIFTH:
"The total number of shares which the Corporation shall have authority
to issue shall be 300,000,000 shares of capital stock, each of the par
value of $0.25 (twenty-five cents) per share."
We further certify that thereafter, pursuant to said resolution, and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at the meeting a majority of the stockholders
entitled to vote voted in favor of the proposed amendment.
We further certify that said amendment was duly adopted in accordance with
the provisions of K.S.A. 17-6602, as amended.
We further certify that the capital of said corporation will not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF we have hereunto set out hands and affixed the seal of
said corporation this 15th day of July, 1987.
MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
<PAGE>
State of Kansas )
) ss
County of Shawnee)
Be it remembered, that before me, a Notary Public in and for the county and
state personally appeared Michael J. Provines, President and Amy J. Lee,
Secretary of the corporation named in this document, who are known to me to be
the persons who executed the foregoing certificate, and duly acknowledged the
execution of the same this 15th day of July, 1987.
GLENDA J. OVERSTREET
------------------------------
Notary Public
My commission expires: February 1, 1990.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE,
WITH $20 FILING FEE, TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-2236
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND
We, Michael J. Provines, President , and Amy J. Lee, Secretary, of the
above named corporation, a corporation organized and existing under the laws of
the State of Kansas, do hereby certify that at a meeting of the Board of
Directors of said corporation, the board adopted a resolution setting forth the
following amendment to the Articles of Incorporation and declaring its
advisability;
RESOLVED, that whereas the Corporation's board of directors deems it
advisable and in the best interest of the corporation that the Articles of
Incorporation be amended by adopting the following Article Sixteenth:
"A director shall not be personally liable to the corporation or to
its stockholders for monetary damages for breach of fiduciary duty as
a director, provided that this sentence shall not eliminate nor limit
the liability of a director:
A. for any breach of his or her duty of loyalty to the corporation or
to its stockholders;
B. for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
C. for an unlawful dividend, stock purchase or redemption under the
provisions of Kansas Statutes Annotated (K.S.A.) 17-6424 and
amendments thereto; or
D. for any transaction from which the director derived an improper
personal benefit."
We further certify that thereafter, pursuant to said resolution, and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at the meeting a majority of the stockholders entitled
to vote voted in favor of the proposed amendment. We further certify that the
amendment was duly adopted in accordance with the provisions of K.S.A. 17-6602,
as amended.
We further certify that the capital of said corporation will not be reduced
under or by reason of said amendment.
In Witness Whereof, we have hereunto set out hands and affixed the seal of said
corporation this 11th day of December, 1987.
MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
State of Kansas )
) ss.
County of Shawnee)
Be it remembered, that before me, a Notary Public in and for the aforesaid
county and state, personally appeared Michael J. Provines, President, and Amy J.
Lee, Secretary, of the corporation named in this document, who are known to me
to be the same persons who executed the foregoing certificate, and duly
acknowledged the execution of the same this 11th day of December, 1987.
GLENDA J. OVERSTREET
------------------------------
Notary Public
My Commission Expires: February 1, 1990.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE,
WITH $20.00 FILING FEE, TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-2236
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND
We, Michael J. Provines, President , and Amy J. Lee, Secretary, of the above
named corporation, corporation organized and existing under the laws of the
State of Kansas, do hereby certify that at a meeting of the Board of Directors
of said corporation, the board adopted a resolution setting forth the following
amendment to the Articles of Incorporation and declaring its advisability:
See attached amendment
We further certify that thereafter, pursuant to said resolution, and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at a meeting a majority of the stockholders entitled to
vote voted in favor of the proposed amendment.
We further certify that the amendment was duly adopted in accordance with the
provisions of K.S.A. 17-6602, as amended.
IN WITNESS WHEREOF, we have hereunto set out hands and affixed the seal of the
corporation this 27th day of July, 1993.
MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
<PAGE>
STATE OF Kansas )
) ss.
COUNTY OF Shawnee)
Be it remembered that before me, a Notary Public in and for the aforesaid
county and state, personally appeared Michael J. Provines, President, and Amy J.
Lee, Secretary, of the corporation named in this document, who are known to me
to be the same persons who executed the foregoing certificate, and duly
acknowledged the execution of the same this 27th day of July, 1993.
PEGGY S. AVEY
------------------------------
Peggy S. Avey Notary Public
(NOTARIAL SEAL)
My appointment or commission expires: November 21, 1996.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE,
WITH $20 FILING FEE, TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-4564
<PAGE>
SECURITY EQUITY FUND
The Board of Directors of Security Equity Fund recommends that the Articles of
Incorporation be amended by deleting Article Fifth in its entirety and by
inserting, in lieu therefor, the following new Article:
FIFTH: The total number of shares of stock which the corporation shall have
authority to issue shall be 300,000,000 shares of capital stock, each of the par
value of $0.25 (twenty-five cents). The board of directors of the Corporation is
expressly authorized to cause shares of capital stock of the Corporation
authorized herein to be issued in one or more classes or series as may be
established from time to time by setting or changing in one or more respects the
voting powers, rights, qualifications, limitations or restrictions of such
shares of stock and to increase or decrease the number of shares so authorized
to be issued in any such class or series.
The following provisions are hereby adopted for the purpose of setting forth the
powers, rights, qualifications, limitations or restrictions of the capital stock
of the Corporation (unless provided otherwise by the board of directors with
respect to any such additional class or series at the time of establishing and
designating such additional class or series):
(1) At all meetings of stockholders each stockholder of the Corporation of any
class or series shall be entitled to one vote on each matter submitted to a
vote at such meeting for each share of stock standing in his name on the
books of the Corporation on the date, fixed in accordance with the Bylaws,
for determination of stockholders entitled to vote at such meeting. At all
elections of directors each stockholder of any class or series shall be
entitled to as many votes as shall equal the number of shares of stock
multiplied by the number of directors to be elected, and stockholders may
cast all of such votes for a single director or may distribute them among
the number to be voted for, or any two or more of them as they may see fit.
(2) (a) Each holder of capital stock of the Corporation, of any class or
series, upon request to the Corporation accompanied by surrender of
the appropriate stock certificate or certificates in proper form for
transfer, shall be entitled to require the Corporation to repurchase
all or any part of the shares of capital stock standing in the name of
such holder on the books of the Corporation, at the net asset value of
such shares. The method of computing such net asset value, the time as
of which such net asset value shall be computed and the time within
which the Corporation shall make payment therefor shall be determined
as hereinafter provided in Article TENTH of these Articles of
Incorporation. Notwithstanding the foregoing, the Board of Directors
of the Corporation may suspend the right of the holders of the capital
stock of the Corporation to require the Corporation to redeem shares
of such capital stock:
(i) for any period (A) during which the New York Exchange is
closed other than customary weekend and holiday closings,
or (B) during which trading on the New York Stock Exchange
is restricted:
(ii) for any period during which an emergency, as defined by
rules of the Securities and Exchange Commission or any
successor thereto, exists as a result of which (A)
disposal by the Corporation of securities owned by it is
not reasonably practicable or (B) it is not reasonably
practicable for the Corporation fairly to determine the
value of its net assets; or
(iii) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit
for the protection of security holders of the Corporation.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the Corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions thereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the Corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the Corporation having funds
or property legally available therefor.
(c) The Corporation, pursuant to a resolution by the Board of Directors
and without the vote or consent of stockholders of the Corporation,
shall have the right to redeem at net asset value all shares of
capital stock of the Corporation in any stockholder account in which
there has been no investment (other than reinvestment of income
dividends or capital gains distributions) for at least six months and
in which there are fewer than 25 shares or such fewer shares as shall
be specified in such resolution. Such resolution shall set forth that
redemption of shares in such accounts has been determined to be in the
economic best interests of the Corporation or necessary to reduce
disproportionately burdensome expenses in that prior notice of at
least six months shall be given to a stockholder before such
redemption of shares, and that the stockholder will have six months
(or such longer period as specified in the resolution) from the date
of the notice to avoid such redemption by increasing his account to at
least 25 shares, or such fewer shares as is specified in the
resolution
(3) No holder of stock of the Corporation of any class or series shall, as such
holder, have any rights to purchase or subscribe for any shares of the
capital stock of the Corporation of any class or series which it may issue
or sell (whether out of the number of shares authorized by these Articles
of Incorporation, or out of any shares of the capital stock of the
Corporation, acquired by it after the issue thereof, or otherwise) other
than such right, if any, as the Board of Directors, in its discretion, may
determine.
(4) All persons who shall acquire stock in the Corporation shall acquire the
same subject to the provisions of these Articles of Incorporation.
<PAGE>
CERTIFICATE OF DESIGNATION
OF SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, Michael J. Provines, President, and Amy J. Lee, Secretary, of Security
Equity Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee, Kansas, do hereby certify that pursuant to
authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 23rd day of July, 1993,
adopted resolutions setting forth the preferences, rights, privileges and
restrictions of the separate series of stock of Security Equity Fund, which
resolutions are provided in their entirety as follows:
RESOLVED, that, pursuant to the authority vested in the Board of Directors of
Security Equity Fund by its Articles of Incorporation, the officers of the Fund
are hereby directed and authorized to establish four separate series of common
stock of the corporation, effective October 5, 1993. The first such series shall
be known as the Equity Series A and shall consist of that series of stock
currently being issued by the Fund. The other series shall be new series and
shall be known as Equity Series B, Global Series A and Global Series B. The
officers of the Fund are hereby directed and authorized to establish such series
of common stock allocating 265,000,000 $0.25 par value shares of the
corporation's authorized capital stock of 300,000,000 shares to the Equity
Series A; 20,000,000 $0.25 par value shares to the Equity Series B; 7,500,000
$0.25 par value shares to the Global Series A; and the remaining 7,500,000 $0.25
par value shares to the Global Series B.
FURTHER RESOLVED, that the preferences, rights, privileges and restrictions of
the shares of each series of Security Equity Fund shall be as follows:
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset
value thereof, such redemption and the valuation and payment in
connection therewith to be made in compliance with the provisions of
the Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such few shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder shall have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A and B shall represent a
stockholder interest in a particular fund of assets held by the corporation
which fund shall be invested and reinvested in accordance with policies and
objectives established by the Board of Directors for these series.
Outstanding shares of Global Series A and B shall represent a stockholder
interest in a particular fund of assets held by the corporation which fund
shall be invested and reinvested in accordance with policies and objectives
established by the Board of Directors for these series.
(b) All cash and other property received by the corporation from the sale
of shares of Equity Series A and B and Global Series A and B, respectively,
all securities and other property held as a result of the investment and
reinvestment of such cash and other property, all revenues and income
received or receivable with respect to such cash, other property,
investments and reinvestments, and all proceeds derived from the sale,
exchange, liquidation or other disposition of any of the foregoing, shall
be allocated to the Equity Series A and B or Global Series A and B to which
they relate and held for the benefit of the stockholders owning shares of
such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and charged to
the series to which such loss, liability or expense relates. Where any
loss, liability or expense relates to more than one series, the Board of
Directors shall allocate the same between or among such series pro rata
based on the respective net asset values of such series or on such other
basis as the Board of Directors deems appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Equity Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
will be paid at the same dividend rate except that expenses attributable to
Equity Series A or B and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A and B represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate, except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Whenever dividends are declared and paid with
respect to the Equity Series A and B or the Global Series A and B, the
holders of shares of the other series shall have no rights in or to such
dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
or the Global Series B, those shares (except those purchased through the
reinvestment of dividends and other distributions), shall automatically
convert to Equity Series A or Global Series A shares respectively, at the
relative net asset values of each of the series without the imposition of
any sales load, fee or other charge. All shares in a stockholder's account
that were purchased through the reinvestment of dividends and other
distributions paid with respect to Series B shares will be considered to be
held in a separate sub-account. Each time Series B shares are converted to
Series A shares, a pro rata portion of the Series B shares held in the
sub-account will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands this 5th day of October 1993.
MICHAEL J. PROVINES
------------------------------
Michael J. Provines, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
[SEAL]
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Judith M. Ralston a Notary Public in and for
the County and State aforesaid, came Michael J. Provines, President, and Amy J.
Lee, Secretary, of Security Equity Fund, a Kansas corporation, personally known
to me to be the persons who executed the foregoing instrument of writing as
President and Secretary, respectively, and duly acknowledged the execution of
the same this 5th day of October, 1993.
JUDITH M. RALSTON
------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: January 1, 1995.
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
SECURITY EQUITY FUND
We, John D. Cleland, President , and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, do hereby certify that at a meeting of the Board of Directors of said
corporation, the board adopted a resolution setting forth the following
amendment to the Articles of Incorporation and declaring its advisability:
See attached amendment
We further certify that thereafter, pursuant to said resolution, and in
accordance with the by-laws of the corporation and the laws of the State of
Kansas, the Board of Directors called a meeting of stockholders for
consideration of the proposed amendment, and thereafter, pursuant to notice and
in accordance with the statutes of the State of Kansas, the stockholders
convened and considered the proposed amendment.
We further certify that at a meeting a majority of the stockholders entitled to
vote, voted in favor of the proposed amendment.
We further certify that the amendment was duly adopted in accordance with the
provisions of K.S.A. 17-6602, as amended.
IN WITNESS WHEREOF, we have hereunto set out hands and affixed the seal of the
corporation this 21st day of December, 1994.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
<PAGE>
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that before me, a Notary Public in and for the aforesaid
county and state, personally appeared John D. Cleland, President, and Amy J.
Lee, Secretary, of Security Equity Fund, who are known to me to be the same
persons who executed the foregoing certificate, and duly acknowledged the
execution, of the same this 21st day of December, 1994
JUDITH M. RALSTON
------------------------------
Judith M. Ralston, Notary
(NOTARIAL SEAL)
My commission expires: January 1, 1995.
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE, WITH $20 FILING FEE TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-4564
<PAGE>
SECURITY EQUITY FUND
The Board of Directors of Security Equity Fund recommends that the Articles of
Incorporation be amended by deleting the first paragraph of Article Fifth and by
inserting, in lieu thereof, the following new Article:
FIFTH: The total number of shares which this Corporation shall have authority to
issue shall be (5,000,000,000) shares of capital stock, each of the par value of
$0.25 (twenty-five cents). The board of directors of the Corporation is
expressly authorized to cause shares of capital stock in the Corporation
authorized herein to be issued in one or more classes or series as may be
established from time to time by setting or changing in one or more respects the
voting powers, rights, qualifications, limitations or restrictions of such
shares of stock and to increase or decrease the number of shares so authorized
to be issued in any such class or series.
<PAGE>
CERTIFICATE OF
CHANGE OF DESIGNATION
OF COMMON STOCK OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security
Equity Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to the authority expressly vested in the Board of Directors by the provisions of
the corporation's Articles of Incorporation, the Board of Directors of said
corporation at its regular meeting duly convened and held on the 22nd day of
July, 1994, adopted resolutions reallocating the number of existing shares
authorized to be issued in the four separate series of common stock of the
corporation. Resolutions were also adopted which reaffirmed the preferences,
rights, privileges and restrictions of the separate series of stock of Security
Equity Fund, which resolutions are provided in their entirety as follows:
WHEREAS Security Equity Fund issues its common stock in four separate
series designated as Equity Series A, Equity Series B, Global Series A and
Global Series B.
WHEREAS, the Board of Directors wishes to reallocate the 300,000,000,
shares of authorized capital stock among the series.
NOW, THEREFORE, BE IT RESOLVED, that the officers of the corporation are
hereby directed and authorized to allocate the Fund's existing authorized
capital stock of 300,000,000 shares as follows: 290,000,000 $0.25 par value
shares to Equity Series A, 5,000,000 $0.25 par value shares to the Equity
Series B; 3,000,000 $0.25 par value shares to the Global Series A; and the
remaining 2,000,000 $0.25 par value shares to the Global Series B.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the corporation's series of common
stock, as set forth in the minutes of the July 23, 1993, meeting of this
Board of Directors, are hereby reaffirmed and incorporated by reference
into the minutes of this meeting.
FURTHER RESOLVED, that, the appropriate officers of the corporation be, and
they hereby are, authorized and directed to take such action as may be
necessary under the laws of the State of Kansas or as they deem appropriate
to cause the foregoing resolutions to become effective.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 22nd day of July, 1994.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, Judith M. Ralston, a Notary Public in and
for the County and State aforesaid, came JOHN D CLELAND, President, and AMY J.
LEE, Secretary, of Security Equity Fund, a Kansas corporation, personally known
to me to be the persons who executed the foregoing instrument of writing as
President and Secretary, respectively, and duly acknowledged the execution of
the same this 22nd day of July, 1994.
JUDITH M. RALSTON
--------------------------------
Judith M. Ralston, Notary Public
(NOTARIAL SEAL)
My commission expires: January 1, 1995.
<PAGE>
CERTIFICATE OF CHANGE OF
DESIGNATION OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee, Kansas, do hereby certify that pursuant to
authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 3rd day of April 1995,
adopted resolutions (i) establishing two new series of common stock in addition
to those four series of common stock currently being issued by the corporation,
and (ii) allocating the corporation's authorized capital stock among the six
series of common stock of the corporation. Resolutions were also adopted which
reaffirmed the preferences, rights, privileges and restrictions of the separate
series of stock of Security Equity Fund, which resolutions are provided in their
entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of two new
series of common stock of Security Equity Fund in addition to the four
separate series of common stock presently issued by the fund designated as
Equity Series A, Equity Series B, Global Series A and Global Series B;
WHEREAS, the Board of Directors wishes to reallocate the 5,000,000,000
shares of authorized capital stock among the series.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation are
hereby directed and authorized to establish two new series of the Security
Equity Fund designated as Asset Allocation Series A and Asset Allocation
Series B.
FURTHER RESOLVED, that, the officers of the corporation are hereby directed
and authorized to allocate the corporation's authorized capital stock of
5,000,000,000 shares as follows: 1,500,000,000 $0.25 par value shares of
the corporation's authorized capital stock to the Equity Series A;
500,000,000 $0.25 par value shares to the Equity Series B; 750,000,000
$0.25 par value shares to each of the Global Series A and Asset Allocation
Series A; 250,000,000 $0.25 par value shares to each of the Global Series B
and Asset Allocation Series B; and 1,000,000,00 shares shall remain
unallocated.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the series of Security Equity Fund
shall be as follows.
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders, each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset
value thereof, such redemption and the valuation and payment in
connection therewith to be made in compliance with the provisions of
the Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such few shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder will have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these series. Outstanding shares of Global Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these series. Outstanding shares of Asset Allocation
Series A and B shall represent a stockholder interest in a particular
fund of assets held by the corporation which fund shall be invested
and reinvested in accordance with policies and objectives established
by the Board of Directors for these series.
(b) All cash and other property received by the corporation from the sale
of shares of the Equity Series A and B, Global Series A and B, and
Asset Allocation Series A and B, respectively, all securities and
other property held as a result of the investment and reinvestment of
such cash and other property, all revenues and income received or
receivable with respect to such cash, other property, investments and
reinvestments, and all proceeds derived from the sale, exchange,
liquidation or other disposition of any of the foregoing, shall be
allocated to the Equity Series A and B, Global Series A and B, or
Asset Allocation Series A and B, to which they relate and held for the
benefit of the stockholders owning shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and
charged to the series to which such loss, liability or expense
relates. Where any loss, liability or expense relates to more than one
series, the Board of Directors shall allocate the same between or
among such series pro rata based on the respective net asset values of
such series or on such other basis as the Board of Directors deems
appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Global Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
will be paid at the same dividend rate except that expenses attributable to
Equity Series A or B and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A and B represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate, except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Asset Allocation Series A and B represent
a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Asset
Allocation Series. Stockholders of the Asset Allocation Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Whenever dividends are
declared and paid with respect to the Equity Series A and B, the Global
Series A and B, or the Asset Allocation Series A and B, the holders of
shares of the other series shall have no rights in or to such dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
the Global Series B, or Asset Allocation Series B, those shares (except
those purchased through the reinvestment of dividends and other
distributions) shall automatically convert to Equity Series A, Global
Series A, or Asset Allocation Series A shares, respectively, at the
relative net asset values of each of the series without the imposition of
any sales load, fee or other charge. All shares in a stockholder's account
that were purchased through the reinvestment of dividends and other
distributions paid with respect to Series B shares will be considered to be
held in a separate sub-account. Each time Series B shares are converted to
Series A shares, a pro rata portion of the Series B shares held in the
sub-account will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 3rd day of April, 1995.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
<PAGE>
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Connie Brungardt, a Notary Public in and for
the County and State aforesaid, came John D. Cleland, President, and Amy J. Lee,
Secretary, of Security Equity Fund, a Kansas corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as President
and Secretary, respectively, and duly acknowledged the execution of the same
this 3rd day of April, 1995.
CONNIE BRUNGARDT
------------------------------
Notary Public
(NOTARIAL SEAL)
My commission expires: November 30, 1998.
<PAGE>
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
SECURITY EQUITY FUND
We, John D. Cleland, President , and Amy J. Lee, Secretary of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, do hereby certify that at a regular meeting of the Board of Directors of
said corporation, held on the 2nd day of February, 1996, the board adopted a
resolution setting forth the following amendment to the Articles of
Incorporation and declaring its advisability:
RESOLVED
The Board of Directors of Security Equity Fund recommends that the Articles of
Incorporation be amended by deleting the first paragraph of Article Fifth in its
entirety and by inserting, in lieu thereof, the following new Article:
FIFTH: The corporation shall have authority to issue an indefinite number of
shares of common stock, of the par value of twenty-five cents ($0.25) per share.
The board of directors of the Corporation is expressly authorized to cause
shares of capital stock of the Corporation authorized herein to be issued in one
or more series as may be established from time to time by setting or changing in
one or more respects the voting powers, rights, qualifications, limitations or
restrictions of such shares of stock and to increase or decrease the number of
shares so authorized to be issued in any such series.
We further certify that the amendment was duly adopted in accordance with the
provisions of K.S.A. 17-6602, as amended.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of said
corporation this 2nd day of February, 1996.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
[SEAL]
<PAGE>
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
BE IT REMEMBERED, that before me, L. Charmaine Lucas, a Notary Public in and for
the aforesaid county and state, personally appeared John D. Cleland, President,
and Amy J. Lee, Secretary, of Security Equity Fund, who are known to me to be
the same persons who executed the foregoing certificate and duly acknowledged
the execution of the same this 2nd day of February, 1996.
L. CHARMAINE LUCAS
------------------------------
L. Charmaine Lucas, Notary
(NOTARIAL SEAL)
My commission expires: April 1, 1998
PLEASE SUBMIT THIS DOCUMENT IN DUPLICATE, WITH $20 FILING FEE TO:
Secretary of State
2nd Floor, State Capitol
Topeka, KS 66612-1594
(913) 296-4564
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 2nd day of February,
1996, adopted resolutions authorizing the corporation to issue an indefinite
number of shares of capital stock of each of the six series of common stock of
the corporation. Resolutions were also adopted which reaffirmed the preferences,
rights, privileges and restrictions of separate series of stock of Security
Equity Fund, which resolutions are provided in their entirety as follows:
WHEREAS, K.S.A. 17-6602 has been amended to allow the board of directors of
a corporation that is registered as an open-end investment company under
the Investment Company Act of 1940 (the "1940 Act") to approve, by
resolution, an amendment of the corporation's Articles of Incorporation, to
allow the issuance of an indefinite number of shares of the capital stock
of the corporation;
WHEREAS, the corporation is registered as an open-end investment company
under the 1940 Act; and
WHEREAS, the Board of Directors desire to authorize the issuance of an
indefinite number of shares of capital stock of each of the six series of
common stock of the corporation;
NOW THEREFORE BE IT RESOLVED, that, the officers of the corporation are
hereby directed and authorized to issue an indefinite number of $0.25 par
value shares of capital stock of each series of the corporation, which
consist of Equity Series A; Equity Series B; Global Series A; Global Series
B; Asset Allocation Series A; and Asset Allocation Series B.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the corporation's series of common
stock, as set forth in the minutes of the April 3, 1995, meeting of this
Board of Directors, are hereby reaffirmed and incorporated by reference
into the minutes of this meeting; and
FURTHER RESOLVED, that, the appropriate officers of the corporation be, and
they hereby are, authorized and directed to take such action as may be
necessary under the laws of the State of Kansas or as they deem appropriate
to cause the foregoing resolutions to become effective.
The undersigned do hereby certify that the foregoing amendment to the
corporation's Articles of Incorporation has been duly adopted in accordance with
the provisions of K.S.A. 17-6602.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 2nd day of February, 1996.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
[SEAL]
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me, L. Charmaine Lucas, a Notary Public in and for
the aforesaid County and State aforesaid, came John D. Cleland, President, and
Amy J. Lee, Secretary, of Security Equity Fund, a Kansas corporation, personally
known to me to be the same persons who executed the foregoing instrument of
writing as President and Secretary, respectively, and duly acknowledged the
execution of the same this 2nd day of February, 1996.
L. CHARMAINE LUCAS
---------------------------------
L. Charmaine Lucas, Notary Public
(NOTARIAL SEAL)
My commission expires: April 1, 1998
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 26th day of July, 1996,
adopted resolutions (i) establishing two new series of common stock in addition
to those six series of common stock currently being issued by the corporation,
and (ii) allocating the corporation's authorized capital stock among the eight
series of common stock of the corporation. Resolutions were also adopted which
reaffirmed the preferences, rights, privileges and restrictions of the separate
series of stock of Security Equity Fund, which resolutions are provided in their
entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of two new
series of common stock of Security Equity Fund in addition to the six
separate series of common stock presently issued by the fund designated as
Equity Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A and Asset Allocation Series B;
WHEREAS, the Board of Directors desire to authorize the issuance of an
indefinite number of shares of capital stock of each of the eight series of
common stock of the corporation.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation are
hereby directed and authorized to establish two new series of the Security
Equity Fund designated as Social Awareness Series A and Social Awareness
Series B.
FURTHER RESOLVED, that, the officers of the corporation are hereby directed
and authorized to issue an indefinite number of $0.25 par value shares of
capital stock of each series of the corporation, which consist of Equity
Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A, Asset Allocation Series B, Social Awareness Series A
and Social Awareness Series B.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the series of Security Equity Fund
shall be as follows.
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders, each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset
value thereof, such redemption and the valuation and payment in
connection therewith to be made in compliance with the provisions of
the Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such few shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder will have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these series. Outstanding shares of Global Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these series. Outstanding shares of Asset Allocation
Series A and B shall represent a stockholder interest in a particular
fund of assets held by the corporation which fund shall be invested
and reinvested in accordance with policies and objectives established
by the Board of Directors for these series. Outstanding shares of
Social Awareness Series A and B shall represent a stockholder interest
in a particular fund of assets held by the corporation which fund
shall be invested and reinvested in accordance with policies and
objectives established by the Board of Directors for these Series.
(b) All cash and other property received by the corporation from the sale
of shares of the Equity Series A and B, Global Series A and B, Asset
Allocation Series A and B, and Social Awareness Series A and B,
respectively, all securities and other property held as a result of
the investment and reinvestment of such cash and other property, all
revenues and income received or receivable with respect to such cash,
other property, investments and reinvestments, and all proceeds
derived from the sale, exchange, liquidation or other disposition of
any of the foregoing, shall be allocated to the Equity Series A and B,
Global Series A and B, Asset Allocation Series A and B, or Social
Awareness Series A and B, to which they relate and held for the
benefit of the stockholders owning shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and
charged to the series to which such loss, liability or expense
relates. Where any loss, liability or expense relates to more than one
series, the Board of Directors shall allocate the same between or
among such series pro rata based on the respective net asset values of
such series or on such other basis as the Board of Directors deems
appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Equity Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A and B represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Asset Allocation Series A and B represent
a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Asset
Allocation Series. Stockholders of the Asset Allocation Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Shares of Social Awareness
Series A and B represent a stockholder interest in a particular fund of
assets held by the corporation and, accordingly, dividends shall be
calculated and declared for these series in the same manner, at the same
time, on the same day, and shall be paid at the same dividend rate, except
that expenses attributable to a particular series and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be borne
exclusively by the affected Social Awareness Series. Stockholders of the
Social Awareness Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Whenever dividends are declared and paid with respect to the Equity
Series A and B, the Global Series A and B, the Asset Allocation Series A
and B, or the Social Awareness Series A and B, the holders of shares of the
other series shall have no rights in or to such dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
the Global Series B, the Asset Allocation Series B, or the Social Awareness
Series B, those shares (except those purchased through the reinvestment of
dividends and other distributions) shall automatically convert to Equity
Series A, Global Series A, Asset Allocation Series A or Social Awareness
Series A shares respectively, at the relative net asset values of each of
the series without the imposition of any sales load, fee or other charge.
All shares in a stockholder's account that were purchased through the
reinvestment of dividends and other distributions paid with respect to
Series B shares will be considered to be held in a separate sub-account.
Each time Series B shares are converted to Series A shares, a pro rata
portion of the Series B shares held in the sub-account will also convert to
Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 1st day of August, 1996.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Jana R. Selley, a Notary Public in and for the
County and State aforesaid, came John D. Cleland, President, and Amy J. Lee,
Secretary, of Security Equity Fund, a Kansas corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as President
and Secretary, respectively, and duly acknowledged the execution of the same
this 1st day of August, 1996.
JANA SELLEY
------------------------------
Notary Public
My commission expires: June 14, 2000
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 7th day of February,
1997, adopted resolutions (i) establishing two new series of common stock in
addition to those eight series of common stock currently being issued by the
corporation, and (ii) allocating the corporation's authorized capital stock
among the ten series of common stock of the corporation. Resolutions were also
adopted which reaffirmed the preferences, rights, privileges and restrictions of
the separate series of stock of Security Equity Fund, which resolutions are
provided in their entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of two
new series of common stock of Security Equity Fund in addition to the eight
separate series of common stock presently issued by the fund designated as
Equity Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A, Asset Allocation Series B, Social Awareness Series A
and Social Awareness Series B;
WHEREAS, the Board of Directors desires to authorize the issuance of
an indefinite number of shares of capital stock of each of the ten series
of common stock of the corporation.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation
are hereby directed and authorized to establish two new series of the
Security Equity Fund designated as Value Series A and Value Series B.
FURTHER RESOLVED, that, the officers of the corporation are hereby
directed and authorized to issue an indefinite number of $0.25 par value
shares of capital stock of each series of the corporation, which consist of
Equity Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A, Asset Allocation Series B, Social Awareness Series A,
Social Awareness Series B, Value Series A and Value Series B.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the series of Security Equity Fund
shall be as follows.
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders, each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset
value thereof, such redemption and the valuation and payment in
connection therewith to be made in compliance with the provisions of
the Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such fewer shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder will have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these series. Outstanding shares of Global Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these series. Outstanding shares of Asset Allocation
Series A and B shall represent a stockholder interest in a particular
fund of assets held by the corporation which fund shall be invested
and reinvested in accordance with policies and objectives established
by the Board of Directors for these series. Outstanding shares of
Social Awareness Series A and B shall represent a stockholder interest
in a particular fund of assets held by the corporation which fund
shall be invested and reinvested in accordance with policies and
objectives established by the Board of Directors for these Series.
Outstanding shares of Values Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these Series.
(b) All cash and other property received by the corporation from the sale
of shares of the Equity Series A and B, Global Series A and B, Asset
Allocation Series A and B, Social Awareness Series A and B, and Value
Series A and B, respectively, all securities and other property held
as a result of the investment and reinvestment of such cash and other
property, all revenues and income received or receivable with respect
to such cash, other property, investments and reinvestments, and all
proceeds derived from the sale, exchange, liquidation or other
disposition of any of the foregoing, shall be allocated to the Equity
Series A and B, Global Series A and B, Asset Allocation Series A and
B, Social Awareness Series A and B, or Value Series A and B, to which
they relate and held for the benefit of the stockholders owning shares
of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and
charged to the series to which such loss, liability or expense
relates. Where any loss, liability or expense relates to more than one
series, the Board of Directors shall allocate the same between or
among such series pro rata based on the respective net asset values of
such series or on such other basis as the Board of Directors deems
appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Equity Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A and B represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Asset Allocation Series A and B represent
a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Asset
Allocation Series. Stockholders of the Asset Allocation Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Shares of Social Awareness
Series A and B represent a stockholder interest in a particular fund of
assets held by the corporation and, accordingly, dividends shall be
calculated and declared for these series in the same manner, at the same
time, on the same day, and shall be paid at the same dividend rate, except
that expenses attributable to a particular series and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be borne
exclusively by the affected Social Awareness Series. Stockholders of the
Social Awareness Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Shares of Value Series A and B represent a stockholder interest in
a particular fund of assets held by the corporation and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and shall be paid at the same
dividend rate, except that expenses attributable to a particular series and
payments made pursuant to a 12b-1 Plan or Shareholder Services Plan shall
be borne exclusively by the affected Value Series. Stockholders of the
Value Series shall share in dividends declared and paid with respect to
such series pro rata based on their ownership of shares of such series.
Whenever dividends are declared and paid with respect to the Equity Series
A and B, the Global Series A and B, the Asset Allocation Series A and B,
the Social Awareness Series A and B, or the Value Series A and B, the
holders of shares of the other series shall have no rights in or to such
dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
the Global Series B, the Asset Allocation Series B, the Social Awareness
Series B, or the Value Series B, those shares (except those purchased
through the reinvestment of dividends and other distributions) shall
automatically convert to Equity Series A, Global Series A, Asset Allocation
Series A, Social Awareness Series A, or Value Series A shares respectively,
at the relative net asset values of each of the series without the
imposition of any sales load, fee or other charge. All shares in a
stockholder's account that were purchased through the reinvestment of
dividends and other distributions paid with respect to Series B shares will
be considered to be held in a separate sub-account. Each time Series B
shares are converted to Series A shares, a pro rata portion of the Series B
shares held in the sub-account will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 12th day of March, 1997.
JOHN D. CLELAND
------------------------------
John D. Cleland, President
AMY J. LEE
------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me L. Charmaine Lucas, a Notary Public in and for
the County and State aforesaid, came John D. Cleland, President, and Amy J. Lee,
Secretary, of Security Equity Fund, a Kansas corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as President
and Secretary, respectively, and duly acknowledged the execution of the same
this 12th day of March, 1997.
L. CHARMAINE LUCAS
------------------------------
Notary Public
My commission expires: April 1, 1998
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 25th day of July, 1997,
adopted resolutions (i) establishing two new series of common stock in addition
to those ten series of common stock currently being issued by the corporation,
and (ii) allocating the corporation's authorized capital stock among the twelve
series of common stock of the corporation. Resolutions were also adopted which
reaffirmed the preferences, rights, privileges and restrictions of the separate
series of stock of Security Equity Fund, which resolutions are provided in their
entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of two
new series of common stock of Security Equity Fund in addition to the ten
separate series of common stock presently issued by the fund designated as
Equity Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A, Asset Allocation Series B, Social Awareness Series A,
Social Awareness Series B, Value Series A and Value Series B;
WHEREAS, the Board of Directors desires to authorize the issuance of
an indefinite number of shares of capital stock of each of the twelve
series of common stock of the corporation.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation
are hereby directed and authorized to establish two new series of the
Security Equity Fund designated as Small Company Series A and Small Company
Series B.
FURTHER RESOLVED, that, the officers of the corporation are hereby
directed and authorized to issue an indefinite number of $0.25 par value
shares of capital stock of each series of the corporation, which consist of
Equity Series A, Equity Series B, Global Series A, Global Series B, Asset
Allocation Series A, Asset Allocation Series B, Social Awareness Series A,
Social Awareness Series B, Value Series A, Value Series B, Small Company
Series A and Small Company Series B.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the series of Security Equity Fund
shall be as follows.
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders, each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset
value thereof, such redemption and the valuation and payment in
connection therewith to be made in compliance with the provisions of
the Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such fewer shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder will have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these series. Outstanding shares of Global Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these series. Outstanding shares of Asset Allocation
Series A and B shall represent a stockholder interest in a particular
fund of assets held by the corporation which fund shall be invested
and reinvested in accordance with policies and objectives established
by the Board of Directors for these series. Outstanding shares of
Social Awareness Series A and B shall represent a stockholder interest
in a particular fund of assets held by the corporation which fund
shall be invested and reinvested in accordance with policies and
objectives established by the Board of Directors for these Series.
Outstanding shares of Values Series A and B shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these Series. Outstanding shares of Small Company Series A and B shall
represent a stockholder interest in a particular fund of assets held
by the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these Series
(b) All cash and other property received by the corporation from the sale
of shares of the Equity Series A and B, Global Series A and B, Asset
Allocation Series A and B, Social Awareness Series A and B, Value
Series A and B, and Small Company Series A and B, respectively, all
securities and other property held as a result of the investment and
reinvestment of such cash and other property, all revenues and income
received or receivable with respect to such cash, other property,
investments and reinvestments, and all proceeds derived from the sale,
exchange, liquidation or other disposition of any of the foregoing,
shall be allocated to the Equity Series A and B, Global Series A and
B, Asset Allocation Series A and B, Social Awareness Series A and B,
Value Series A and B, or Small Company Series A and B, to which they
relate and held for the benefit of the stockholders owning shares of
such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and
charged to the series to which such loss, liability or expense
relates. Where any loss, liability or expense relates to more than one
series, the Board of Directors shall allocate the same between or
among such series pro rata based on the respective net asset values of
such series or on such other basis as the Board of Directors deems
appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Equity Series A and B
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A and B represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Asset Allocation Series A and B represent
a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Asset
Allocation Series. Stockholders of the Asset Allocation Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Shares of Social Awareness
Series A and B represent a stockholder interest in a particular fund of
assets held by the corporation and, accordingly, dividends shall be
calculated and declared for these series in the same manner, at the same
time, on the same day, and shall be paid at the same dividend rate, except
that expenses attributable to a particular series and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be borne
exclusively by the affected Social Awareness Series. Stockholders of the
Social Awareness Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Shares of Value Series A and B represent a stockholder interest in
a particular fund of assets held by the corporation and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and shall be paid at the same
dividend rate, except that expenses attributable to a particular series and
payments made pursuant to a 12b-1 Plan or Shareholder Services Plan shall
be borne exclusively by the affected Value Series. Stockholders of the
Value Series shall share in dividends declared and paid with respect to
such series pro rata based on their ownership of shares of such series.
Shares of Small Company Series A and B represent a stockholder interest in
a particular fund of assets held by the corporation and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and shall be paid at the same
dividend rate, except that expenses attributable to a particular series and
payments made pursuant to a 12b-1 Plan or Shareholder Services Plan shall
be borne exclusively by the affected Small Company Series. Stockholders of
the Small Company Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Whenever dividends are declared and paid with respect to the Equity
Series A and B, the Global Series A and B, the Asset Allocation Series A
and B, the Social Awareness Series A and B, the Value Series A and B, or
the Small Company Series A and B, the holders of shares of the other series
shall have no rights in or to such dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
the Global Series B, the Asset Allocation Series B, the Social Awareness
Series B, the Value Series B, or the Small Company Series B, those shares
(except those purchased through the reinvestment of dividends and other
distributions) shall automatically convert to Equity Series A, Global
Series A, Asset Allocation Series A, Social Awareness Series A, Value
Series A or Small Company Series A shares respectively, at the relative net
asset values of each of the series without the imposition of any sales
load, fee or other charge. All shares in a stockholder's account that were
purchased through the reinvestment of dividends and other distributions
paid with respect to Series B shares will be considered to be held in a
separate sub-account. Each time Series B shares are converted to Series A
shares, a pro rata portion of the Series B shares held in the sub-account
will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this 15th day of September, 1997.
JOHN D. CLELAND
----------------------------------
John D. Cleland, President
AMY J. LEE
----------------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
Be it remembered, that before me Jana R. Selley, a Notary Public in and for the
County and State aforesaid, came John D. Cleland, President, and Amy J. Lee,
Secretary, of Security Equity Fund, a Kansas corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as President
and Secretary, respectively, and duly acknowledged the execution of the same
this 15th day of September, 1997.
JANA R. SELLEY
----------------------------------
Notary Public
My commission expires: June 14, 2000
<PAGE>
CERTIFICATE OF DESIGNATION OF
SERIES AND CLASSES OF COMMON STOCK
OF
SECURITY EQUITY FUND
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
We, John D. Cleland, President, and Amy J. Lee, Secretary, of Security Equity
Fund, a corporation organized and existing under the laws of the State of
Kansas, and whose registered office is Security Benefit Life Building, 700
Harrison Street, Topeka, Shawnee County, Kansas, do hereby certify that pursuant
to authority expressly vested in the Board of Directors by the provisions of the
corporation's Articles of Incorporation, the Board of Directors of said
corporation at a meeting duly convened and held on the 6th day of November 1998,
adopted resolutions establishing fifteen new series of common stock in addition
to those twelve series of common stock currently being issued by the
corporation. Resolutions were also adopted which reaffirmed the preferences,
rights, privileges and restrictions of the separate series of stock of Security
Equity Fund, which resolutions are provided in their entirety as follows:
WHEREAS, the Board of Directors has approved the establishment of
fifteen new series of common stock of Security Equity Fund in addition to
the twelve separate series of common stock presently issued by the fund
designated as Equity Series A, Equity Series B, Global Series A, Global
Series B, Asset Allocation Series A, Asset Allocation Series B, Social
Awareness Series A, Social Awareness Series B, Value Series A, Value Series
B, Small Company Series A and Small Company Series B;
WHEREAS, the Board of Directors desires to authorize the issuance of an
indefinite number of shares of capital stock of each of the twenty-seven
series of common stock of the corporation.
NOW, THEREFORE, BE IT RESOLVED, that, the officers of the corporation
are hereby directed and authorized to establish fifteen new series of the
Security Equity Fund designated as Equity Series C, Global Series C, Asset
Allocation Series C, Social Awareness Series C, Value Series C, Small
Company Series C, Enhanced Index Series A, Enhanced Index Series B,
Enhanced Index Series C, International Series A, International Series B,
International Series C, Select 25 Series A, Select 25 Series B and Select
25 Series C.
FURTHER RESOLVED, that, the officers of the corporation are hereby
directed and authorized to issue an indefinite number of $0.25 par value
shares of capital stock of each series of the corporation, which consist of
Equity Series A, Equity Series B, Equity Series C, Global Series A, Global
Series B, Global Series C, Asset Allocation Series A, Asset Allocation
Series B, Asset Allocation Series C, Social Awareness Series A, Social
Awareness Series B, Social Awareness Series C, Value Series A, Value Series
B, Value Series C, Small Company Series A, Small Company Series B, Small
Company Series C, Enhanced Index Series A, Enhanced Index Series B,
Enhanced Index Series C, International Series A, International Series B,
International Series C, Select 25 Series A, Select 25 Series B and Select
25 Series C.
FURTHER RESOLVED, that, the preferences, rights, privileges and
restrictions of the shares of each of the series of Security Equity Fund
shall be as follows.
1. Except as set forth below and as may be hereafter established by the Board
of Directors of the corporation all shares of the corporation, regardless
of series, shall be equal.
2. At all meetings of stockholders, each stockholder of the corporation shall
be entitled to one vote in person or by proxy on each matter submitted to a
vote at such meeting for each share of common stock standing in his or her
name on the books of the corporation on the date, fixed in accordance with
the bylaws, for determination of stockholders entitled to vote at such
meeting. At all elections of directors each stockholder shall be entitled
to as many votes as shall equal the number of shares of stock multiplied by
the number of directors to be elected, and he or she may cast all of such
votes for a single director or may distribute them among the number to be
voted for, or any two or more of them as he or she may see fit.
Notwithstanding the foregoing, (i) if any matter is submitted to the
stockholders which does not affect the interests of all series, then only
stockholders of the affected series shall be entitled to vote and (ii) in
the event the Investment Company Act of 1940, as amended, or the rules and
regulations promulgated thereunder shall require a greater or different
vote than would otherwise be required herein or by the Articles of
Incorporation of the corporation, such greater or different voting
requirement shall also be satisfied.
3. (a) The corporation shall redeem any of its shares for which it has
received payment in full that may be presented to the corporation on
any date after the issue date of any such shares at the net asset value
thereof, such redemption and the valuation and payment in connection
therewith to be made in compliance with the provisions of the
Investment Company Act of 1940 and the Rules and Regulations
promulgated thereunder and with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as from time to time
amended.
(b) From and after the close of business on the day when the shares are
properly tendered for repurchase the owner shall, with respect of said
shares, cease to be a stockholder of the corporation and shall have
only the right to receive the repurchase price in accordance with the
provisions hereof. The shares so repurchased may, as the Board of
Directors determines, be held in the treasury of the corporation and
may be resold, or, if the laws of Kansas shall permit, may be retired.
Repurchase of shares is conditional upon the corporation having funds
or property legally available therefor.
4. The corporation, pursuant to a resolution by the Board of Directors and
without the vote or consent of stockholders of the corporation, shall have
the right to redeem at net asset value all shares of capital stock of the
corporation in any stockholder account in which there has been no
investment (other than the reinvestment of income dividend or capital gains
distributions) for at least six months and in which there are fewer than 25
shares or such fewer shares as shall be specified in such resolution. Such
resolution shall set forth that redemption of shares in such accounts has
been determined to be in the economic best interests of the corporation or
necessary to reduce disproportionately burdensome expenses in servicing
stockholder accounts. Such resolution shall provide that prior notice of at
least six months shall be given to a stockholder before such redemption of
shares, and that the stockholder will have six months (or such longer
period as specified in the resolution) from the date of the notice to avoid
such redemption by increasing his or her account to at least 25 shares, or
such fewer shares as is specified in the resolution.
5. All shares of the corporation, upon issuance and sale, shall be fully paid,
nonassessable and redeemable. Within the respective series of the
corporation, all shares have equal voting, participation and liquidation
rights, but have no subscription or preemptive rights.
6. (a) Outstanding shares of Equity Series A, B and C shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these series. Outstanding shares of Global Series A, B and C shall
represent a stockholder interest in a particular fund of assets held by
the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these series. Outstanding shares of Asset Allocation
Series A, B and C shall represent a stockholder interest in a
particular fund of assets held by the corporation which fund shall be
invested and reinvested in accordance with policies and objectives
established by the Board of Directors for these series. Outstanding
shares of Social Awareness Series A, B and C shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these Series. Outstanding shares of Values Series A, B and C shall
represent a stockholder interest in a particular fund of assets held by
the corporation which fund shall be invested and reinvested in
accordance with policies and objectives established by the Board of
Directors for these Series. Outstanding shares of Small Company Series
A, B and C shall represent a stockholder interest in a particular fund
of assets held by the corporation which fund shall be invested and
reinvested in accordance with policies and objectives established by
the Board of Directors for these Series. Outstanding shares of Enhanced
Index Series A, B and C shall represent a stockholder interest in a
particular fund of assets held by the corporation which fund shall be
invested and reinvested in accordance with policies and objectives
established by the Board of Directors for these series. Outstanding
shares of International Series A, B and C shall repsent a stockholder
interest in a particular fund of assets held by the corporation which
fund shall be invested and reinvested in accordance with policies and
objectives established by the Board of Directors for these Series.
Outstanding shares of Select 25 Series A, B and C shall represent a
stockholder interest in a particular fund of assets held by the
corporation which fund shall be invested and reinvested in accordance
with policies and objectives established by the Board of Directors for
these Series.
(b) All cash and other property received by the corporation from the sale
of shares of the Equity Series A, B and C, Global Series A, B and C,
Asset Allocation Series A, B and C, Social Awareness Series A, B and C,
Value Series A, B and C, Small Company Series A, B and C, Enhanced
Index Series A, B and C, International Series A, B and C, and Select 25
Series A, B and C, respectively, all securities and other property held
as a result of the investment and reinvestment of such cash and other
property, all revenues and income received or receivable with respect
to such cash, other property, investments and reinvestments, and all
proceeds derived from the sale, exchange, liquidation or other
disposition of any of the foregoing, shall be allocated to the Equity
Series A, B and C, Global Series A, B and C, Asset Allocation Series A,
B and C, Social Awareness Series A, B and C, Value Series A, B and C,
Small Company Series A, B and C, Enhanced Index Series A, B and C,
International Series A, B and C or Select 25 Series A, B and C, to
which they relate and held for the benefit of the stockholders owning
shares of such series.
(c) All losses, liabilities and expenses of the corporation (including
accrued liabilities and expenses and such reserves as the Board of
Directors may determine are appropriate) shall be allocated and charged
to the series to which such loss, liability or expense relates. Where
any loss, liability or expense relates to more than one series, the
Board of Directors shall allocate the same between or among such series
pro rata based on the respective net asset values of such series or on
such other basis as the Board of Directors deems appropriate.
(d) All allocations made hereunder by the Board of Directors shall be
conclusive and binding upon all stockholders and upon the corporation.
7. Each share of stock of a series shall have the same preferences, rights,
privileges and restrictions as each other share of stock of that series.
Each fractional share of stock of a series proportionately shall have the
same preferences, rights, privileges and restrictions as a whole share.
8. Dividends may be paid when, as and if declared by the Board of Directors
out of funds legally available therefor. Shares of Equity Series A, B and C
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Equity
Series. Stockholders of the Equity Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Global Series A, B and C represent a
stockholder interest in a particular fund of assets held by the corporation
and, accordingly, dividends shall be calculated and declared for these
series in the same manner, at the same time, on the same day, and shall be
paid at the same dividend rate except that expenses attributable to a
particular series and payments made pursuant to a 12b-1 Plan or Shareholder
Services Plan shall be borne exclusively by the affected Global Series.
Stockholders of the Global Series shall share in dividends declared and
paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of Asset Allocation Series A, B and C
represent a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected Asset
Allocation Series. Stockholders of the Asset Allocation Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Shares of Social Awareness
Series A, B and C represent a stockholder interest in a particular fund of
assets held by the corporation and, accordingly, dividends shall be
calculated and declared for these series in the same manner, at the same
time, on the same day, and shall be paid at the same dividend rate, except
that expenses attributable to a particular series and payments made
pursuant to a 12b-1 Plan or Shareholder Services Plan shall be borne
exclusively by the affected Social Awareness Series. Stockholders of the
Social Awareness Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Shares of Value Series A, B and C represent a stockholder interest
in a particular fund of assets held by the corporation and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and shall be paid at the same
dividend rate, except that expenses attributable to a particular series and
payments made pursuant to a 12b-1 Plan or Shareholder Services Plan shall
be borne exclusively by the affected Value Series. Stockholders of the
Value Series shall share in dividends declared and paid with respect to
such series pro rata based on their ownership of shares of such series.
Shares of Small Company Series A, B and C represent a stockholder interest
in a particular fund of assets held by the corporation and, accordingly,
dividends shall be calculated and declared for these series in the same
manner, at the same time, on the same day, and shall be paid at the same
dividend rate, except that expenses attributable to a particular series and
payments made pursuant to a 12b-1 Plan or Shareholder Services Plan shall
be borne exclusively by the affected Small Company Series. Stockholders of
the Small Company Series shall share in dividends declared and paid with
respect to such series pro rata based on their ownership of shares of such
series. Shares of Enhanced Index Series A, B and C represent a stockholder
interest in a particular fund of assets held by the corporation and,
accordingly, dividends shall be calculated and declared for these series in
the same manner, at the same time, on the same day, and shall be paid at
the same dividend rate, except that expenses attributable to a particular
series and payments made pursuant to a 12b-1 Plan or Shareholder Services
Plan shall be borne exclusively by the affected Enhanced Index Series.
Stockholders of the Enhanced Index Series shall share in dividends declared
and paid with respect to such series pro rata based on their ownership of
shares of such series. Shares of International Series A, B and C represent
a stockholder interest in a particular fund of assets held by the
corporation and, accordingly, dividends shall be calculated and declared
for these series in the same manner, at the same time, on the same day, and
shall be paid at the same dividend rate, except that expenses attributable
to a particular series and payments made pursuant to a 12b-1 Plan or
Shareholder Services Plan shall be borne exclusively by the affected
International Series. Stockholders of the International Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Shares of Select 25 Series A,
B and C represent a stockholder interest in a particular fund of assets
held by the corporation and, accordingly, dividends shall be calculated and
declared for these series in the same manner, at the same time, on the same
day, and shall be paid at the same dividend rate, except that expenses
attributable to a particular series and payments made pursuant to a 12b-1
Plan or Shareholder Services Plan shall be borne exclusively by the
affected Select 25 Series. Stockholders of the Select 25 Series shall share
in dividends declared and paid with respect to such series pro rata based
on their ownership of shares of such series. Whenever dividends are
declared and paid with respect to the Equity Series A, B and C, the Global
Series A, B and C, the Asset Allocation Series A, B and C, the Social
Awareness Series A, B and C, the Value Series A, B and C, the Small Company
Series A, B and C, the Enhanced Index Series A, B and C, the International
Series A, B and C, or the Select 25 Series A, B and C, the holders of
shares of the other series shall have no rights in or to such dividends.
9. In the event of liquidation, stockholders of each series shall be entitled
to share in the assets of the corporation that are allocated to such series
and that are available for distribution to the stockholders of such series.
Liquidating distributions shall be made to the stockholders of each series
pro rata based on their share ownership of such series.
10. On the eighth anniversary of the purchase of shares of the Equity Series B,
the Global Series B, the Asset Allocation Series B, the Social Awareness
Series B, the Value Series B, the Small Company Series B, the Enhanced
Index Series B, the International Series B or the Select 25 Series B, those
shares (except those purchased through the reinvestment of dividends and
other distributions) shall automatically convert to Equity Series A, Global
Series A, Asset Allocation Series A, Social Awareness Series A, Value
Series A, Small Company Series A, Enhanced Index Series A, International
Series A or Select 25 Series A shares respectively, at the relative net
asset values of each of the series without the imposition of any sales
load, fee or other charge. All shares in a stockholder's account that were
purchased through the reinvestment of dividends and other distributions
paid with respect to Series B shares will be considered to be held in a
separate sub-account. Each time Series B shares are converted to Series A
shares, a pro rata portion of the Series B shares held in the sub-account
will also convert to Series A shares.
IN WITNESS WHEREOF, we have hereunto set our hands and affixed the seal of the
corporation this ______ day of ____________, 1999.
-----------------------------
John D. Cleland, President
-----------------------------
Amy J. Lee, Secretary
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE )
Be it remembered, that before me __________________, a Notary Public in and for
the County and State aforesaid, came John D. Cleland, President, and Amy J. Lee,
Secretary, of Security Equity Fund, a Kansas corporation, personally known to me
to be the persons who executed the foregoing instrument of writing as President
and Secretary, respectively, and duly acknowledged the execution of the same
this ______ day of ____________, 1999.
----------------------------
Notary Public
My commission expires:
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
EQUITY SERIES
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS Total
Authorized Shares:
5,000,000,000 Shares of Capital Stock of Security Equity Fund
with a Par Value of $0.25 Each
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Common Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
GLOBAL SERIES
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS Total
Authorized Shares:
5,000,000,000 Shares of Capital Stock of Security Equity Fund
with a Par Value of $0.25 Each
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Common Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
ASSET ALLOCATION SERIES
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS Total
Authorized Shares:
5,000,000,000 Shares of Capital Stock of Security Equity Fund
with a Par Value of $0.25 Each
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Common Stock, each of the par value of
$0.25 per share, of SECURITY EQUITY FUND, transferable on the books of the
corporation by the holder hereof in person or by attorney, upon surrender of
this certificate duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an unlimited number of shares.
SOCIAL AWARENESS
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Common Stock, each of the par value of
$0.25, of SECURITY EQUITY FUND, transferable on the books of the corporation by
the holder hereof in person or by attorney, upon surrender of this certificate
duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an unlimited number of shares.
VALUE
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Common Stock, each of the par value of
$0.25, of SECURITY EQUITY FUND, transferable on the books of the corporation by
the holder hereof in person or by attorney, upon surrender of this certificate
duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an unlimited number of shares.
SMALL COMPANY SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Common Stock, each of the par value of
$0.25, of SECURITY EQUITY FUND, transferable on the books of the corporation by
the holder hereof in person or by attorney, upon surrender of this certificate
duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an unlimited number of shares.
ENHANCED INDEX SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Common Stock, each of the par value of
$0.25, of SECURITY EQUITY FUND, transferable on the books of the corporation by
the holder hereof in person or by attorney, upon surrender of this certificate
duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an unlimited number of shares.
INTERNATIONAL SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Common Stock, each of the par value of
$0.25, of SECURITY EQUITY FUND, transferable on the books of the corporation by
the holder hereof in person or by attorney, upon surrender of this certificate
duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
<PAGE>
No. SHARES _______________
SECURITY EQUITY FUND
INCORPORATED UNDER THE LAWS OF THE STATE OF KANSAS
The company is authorized to issue an unlimited number of shares.
SELECT 25 SERIES
THIS CERTIFIES THAT
is the owner of
fully paid and non-assessable shares of Common Stock, each of the par value of
$0.25, of SECURITY EQUITY FUND, transferable on the books of the corporation by
the holder hereof in person or by attorney, upon surrender of this certificate
duly endorsed or assigned.
This certificate and the shares represented hereby are subject to the laws of
the State of Kansas and to the Articles of Incorporation and the Bylaws of the
corporation as from time to time amended.
IN WITNESS WHEREOF, SECURITY EQUITY FUND, has caused this certificate to be
signed by its duly authorized officers and to be sealed with the seal of the
corporation.
Dated Account No.
- ----------------------------------- -----------------------------------
SECRETARY-ASSISTANT SECRETARY PRESIDENT-VICE PRESIDENT
(SEAL)
<PAGE>
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
This Agreement, made and entered into this 8th day of December, 1988, by
and between SECURITY EQUITY FUND, a Kansas corporation (hereinafter referred to
as the "Fund"), and SECURITY MANAGEMENT COMPANY, a Kansas corporation
(hereinafter referred to as "SMC");
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end, management
investment company registered under the Investment Company Act of 1940 ("1940
Act"); and
WHERE, SMC is willing to provide investment research and advice, general
administrative, fund accounting, transfer agency, and dividend disbursing
services to the Fund on the terms and conditions hereinafter set forth and to
arrange for the provision of all other services (except for those services
specifically excluded in this Agreement) required by the Fund, including
custodial, legal, auditing and printing;
NOW, THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties agree as follows:
1. EMPLOYMENT OF SMC. The Fund hereby employs SMC to (a) act as investment
adviser to the Fund with respect to the investment of its assets and to
supervise and arrange the purchase of securities for the Fund and the sale
of securities held in the portfolio of the Fund, subject always to the
supervision of the Board of Directors of the Fund (or a duly appointed
committee thereof), during the period and upon and subject to the terms and
conditions described herein; (b) to provide the Fund with general
administrative, fund accounting, transfer agency, and dividend disbursing
services described and set forth in Schedule A attached hereto and made a
part of this Agreement by reference; and (c) to arrange for, monitor, and
bear the expense of, the provision to the Fund of all other services
required by the Fund, including but not limited to services of independent
accountants, legal counsel, custodial services and printing. SMC may, in
accordance with all applicable legal requirements, engage the services of
other persons or entities, regardless of any affiliation with SMC, to
provide services to the Fund under this Agreement. SMC agrees to maintain
sufficient trained personnel and equipment and supplies to perform its
responsibilities under this Agreement and in conformity with the current
Prospectus of the Fund and such other reasonable standards of performance
as the Fund may from time to time specify and shall use reasonable care in
selecting and monitoring the performance of third parties, who perform
services for the Fund. SMC shall not guarantee the performance of such
persons.
SMC hereby accepts such employment and agrees to perform the services
required by this Agreement for the compensation herein provided.
2. ALLOCATION OF EXPENSES AND CHARGES.
(A) EXPENSES OF SMC. SMC shall pay all expenses in connection with the
performance of its services under this Agreement, including all fees
and charges of third parties providing services to the Fund, whether
or not such expenses are billed to SMC or the Fund, except as
otherwise provided herein.
(B) EXPENSES OF THE FUND. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay, or reimburse SMC for the payment
of, the following described expenses of the Fund whether or not billed
to the Fund, SMC or any related entity;
(i) brokerage fees and commissions;
(ii) taxes;
(iii) interest expenses; and
(iv) any extraordinary expenses approved by the Board of Directors
of the Fund.
3. COMPENSATION OF SMC.
(a) In consideration of the services to be rendered by SMC pursuant to
this Agreement, the Fund shall pay SMC an annual fee equal to 2% of
the first $10 million of the average net assets of the Fund, and 1
1/2% of the next $20 million of the average net assets, and 1% of the
remaining average net assets of the Fund for any fiscal year,
determined and payable monthly. If this Agreement shall be effective
for only a portion of a year in which a fee is owed, then SMC's
compensation for the year shall be prorated for such portion. For
purposes of this Section 3, the value of the net assets of the Fund
shall be computed in the same manner as the value of such net assets
is computed in connection with the determination of the net asset
value of the shares of the Fund as described in the Fund's Prospectus
and Statement of Additional Information.
(b) For each of the Fund's full fiscal years during which this Agreement
remains in force, SMC agrees that if the total annual expenses of the
Fund, exclusive of those expenses listed in paragraph 2(b) of this
Agreement, but inclusive of SMC's compensation, exceed any expense
limitation imposed by state securities law or regulation in any state
in which shares of the Fund are then qualified for sale, as such
regulations may be amended from time to time, SMC will contribute to
the Fund such funds or waive that portion of its fee on a monthly
basis as may be necessary to insure that its total expenses will not
exceed any state limitation. If this paragraph of the Agreement shall
be effective for only a portion of one of the Fund's fiscal years,
then the maximum annual expenses shall be prorated for such portion.
4. INVESTMENT ADVISORY DUTIES.
(A) INVESTMENT ADVICE. SMC shall regularly provide the Fund with
investment research, advice and supervision, continuously furnish an
investment program, recommend which securities shall be purchased and
sold and what portion of the assets of the Fund shall be held
uninvested and arrange for the purchase of securities and other
investments for the Fund and the sale of securities and other
investments held in the portfolio of the Fund. All investment advice
furnished by SMC to the Fund under this paragraph 4 shall at all times
conform to any requirements imposed by the provisions of the Fund's
Articles of Incorporation and Bylaws, the 1940 Act, the Investment
Advisors Act of 1940 and the rules and regulations promulgated
thereunder, and other applicable provisions of law, and the terms of
the registration statements of the Fund under the Securities Act of
1933 ("1933 Act") and/or the 1940 Act, as may be applicable at the
time, all as from time to time amended. SMC shall advise and assist
the officers or other agents of the Fund in taking such steps as are
necessary or appropriate to carry out the decisions of the Board of
Directors of the Fund (and any duly appointed committee thereof) with
regard to the foregoing matters and the general account of the Fund's
business.
(B) PORTFOLIO TRANSACTIONS AND BROKERAGE.
(i) Transactions in portfolio securities shall be effected by SMC,
through brokers or otherwise, in the manner permitted in this
paragraph 4 and in such manner as SMC shall deem to be in the
best interests of the Fund after consideration is given to all
relevant factors.
(ii) In reaching a judgment relative to the qualification of a
broker to obtain the best execution of a particular
transaction, SMC may take into account all relevant factors and
circumstances, including the size of any contemporaneous market
in such securities; the importance to the Fund of speed and
efficiency of execution; whether the particular transaction is
part of a larger intended change of portfolio position in the
same securities; the execution capabilities required by the
circumstances of the particular transaction; the capital
required by the transaction; the overall capital strength of
the broker; the broker's apparent knowledge of or familiarity
with sources from or to whom such securities may be purchased
or sold; as well as the efficiency, reliability and
confidentiality with which the broker has handled the execution
of prior similar transactions.
(iii) Subject to any statements concerning the allocation of
brokerage contained in the Fund's Prospectus or Statement of
Additional Information, SMC is authorized to direct the
execution of portfolio transactions for the Fund to brokers who
furnish investment information or research service to the SMC.
Such allocations shall be in such amounts and proportions as
SMC may determine. If the transaction is directed to a broker
providing brokerage and research services to SMC, the
commission paid for such transactions may be in excess of the
commission another broker would have charged for effecting that
transaction, if SMC shall have determined in good faith that
the commission is reasonable in relation to the value of the
brokerage and research services provided, viewed in terms of
either that particular transaction or the overall
responsibilities of SMC with respect to all accounts as to
which it now or hereafter exercises investment discretion. For
purposes of the immediately preceding sentence, "providing
brokerage and research services" shall have the meaning
generally given such terms or similar terms under Section
28(e)(3) of the Securities Exchange Act of 1934, as amended.
(iv) In the selection of a broker for the execution of any
transaction not subject to fixed commission rates, SMC shall
have no duty or obligation to seek advance competitive bidding
for the most favorable negotiated commission rate to be
applicable to such transaction, or to select any broker solely
on the basis of its purported or "posted" commission rates.
(v) In connection with transactions on markets other than national
or regional securities exchanges, the Fund will deal directly
with the selling principal or market maker without incurring
charges for the services of a broker on its behalf unless, in
the best judgment of SMC, better price or execution can be
obtained by utilizing the services of a broker.
(C) SMC NOT TO RECEIVE COMMISSIONS. In connection with the purchase or
sale of portfolio securities for the account of the Fund, neither SMC
nor any officer or director of SMC shall act as principal or receive
any compensation from the Fund other than its compensation as provided
for in Section 3 above. If SMC, or any "affiliated person" (as defined
in the 1940 Act) receives any cash, credits, commissions or tender
fees from any person in connection with transactions in portfolio
securities of the Fund (including but not limited to the tender or
delivery of any securities held in such portfolio), SMC shall
immediately pay such amount to the Fund in cash or as a credit against
any then earned but unpaid management fees due by the Fund to SMC.
(D) LIMITATION OF LIABILITY OF SMC WITH RESPECT TO RENDERING INVESTMENT
ADVISORY SERVICES. So long as SMC shall give the Fund the benefit of
its best judgment and effort in rendering investment advisory services
hereunder, SMC shall not be liable for any errors of judgment or
mistake of law, or for any loss sustained by reason of the adoption of
any investment policy or the purchase, sale or retention of any
security on its recommendation shall have been based upon its own
investigation and research or upon investigation and research made by
any other individual, firm or corporation, if such recommendation
shall have been made and such other individual, firm or corporation
shall have been selected with due care and in good faith. Nothing
herein contained shall, however, be construed to protect SMC against
any liability to the Fund or its shareholders by reason of willful
misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties under this paragraph 4. As used in this paragraph 4, "SMC"
shall include directors, officers and employees of SMC, as well as
that corporation itself.
5. ADMINISTRATIVE AND TRANSFER AGENCY SERVICES.
(A) RESPONSIBILITIES OF SMC. SMC will provide the Fund with general
administrative, fund accounting, transfer agency, and dividend
disbursing services described and set forth in Schedule A attached
hereto and made a part of this Agreement by reference. SMC agrees to
maintain sufficient trained personnel and equipment and supplies to
perform such services in conformity with the current Prospectus of the
Fund and such other reasonable standards of performance as the Fund
may from time to time specify, and otherwise perform such services in
an accurate, timely, and efficient manner.
(B) INSURANCE. The Fund and SMC agree to procure and maintain, separately
or as joint insureds with themselves, their directors, employees,
agents and others, and other investment companies for which SMC acts
as investment adviser and transfer agent, a policy or policies of
insurance against loss arising from breaches of trust, errors and
omissions, and a fidelity bond meeting the requirements of the 1940
Act, in the amounts and with such deductibles as may be agreed upon
from time to time. SMC shall be solely responsible for the payment of
premiums due for such policies.
(C) REGISTRATION AND COMPLIANCE.
(i) SMC represents that as of the date of this Agreement it is
registered as a transfer agent with the Securities and Exchange
Commission ("SEC") pursuant to Subsection 17A of the Securities
and Exchange Act of 1934 and the rules and regulations
thereunder, and agrees to maintain said registration and comply
with all of the requirements of said Act, rules and regulations
so long as this Agreement remains in force.
(ii) The Fund represents that it is a diversified management
investment company registered with the SEC in accordance with
the 1940 Act and the rules and regulations thereunder, and
authorized to sell its shares pursuant to said Act, the 1933 Act
and the rules and regulations thereunder.
(D) LIABILITY AND INDEMNIFICATION WITH RESPECT TO RENDERING ADMINISTRATIVE
AND TRANSFER AGENCY SERVICES. SMC shall be liable for any actual
losses, claims, damages or expenses (including any reasonable counsel
fees and expenses) resulting from SMC's bad faith, willful
misfeasance, reckless disregard of its obligations and duties,
negligence or failure to properly perform any of its responsibilities
or duties under this Section 5. SMC shall not be liable and shall be
indemnified and held harmless by the Fund, for any claim, demand or
action brought against it arising out of or in connection with:
(i) The bad faith, willful misfeasance, reckless disregard of its
duties or negligence by the Board of Directors of the Fund, or
SMC's acting upon any instructions properly executed or and
authorized by the Board of Directors of the Fund;
(ii) SMC acting in reliance upon advice given by independent counsel
retained by the Board of Directors of the Fund.
In the event that SMC requests the Fund to indemnify or hold it
harmless hereunder, SMC shall use its best efforts to inform the Fund
of the relevant facts concerning the matter in question. SMC shall use
reasonable care to identify and promptly notify the Fund concerning
any matter which presents, or appears likely to present, a claim for
indemnification against the Fund.
The Fund shall have the election of defending SMC against any claim
which may be the subject of indemnification hereunder. In the event
the Fund so elects, it will so notify SMC and thereupon the Fund shall
take over defenses of the claim, and if so requested by the Fund, SMC
shall incur no further legal or other claims related thereto for which
it would be entitled to indemnity hereunder provided, however, that
nothing herein contained shall prevent SMC from retaining, at its own
expense, counsel to defend any claim. Except with the Fund's prior
consent, SMC shall in no event confess any claim or make any
compromise in any matter in which the Fund will be asked to indemnify
or hold SMC harmless hereunder.
PUNITIVE DAMAGES. SMC shall not be liable to the Fund, or any
third party, for punitive, exemplary, indirect, special or
consequential damages (even if SMC has been advised of the
possibility of such damage) arising from its obligations and the
services provided under this paragraph 5, including but not
limited to loss of profits, loss of use of the shareholder
accounting system, cost of capital and expenses of substitute
facilities, programs or services.
FORCE MAJEURE. Anything in this paragraph 5 to the contrary
notwithstanding, SMC shall not be liable for delays or errors
occurring by reason of circumstances beyond its control,
including but not limited to acts of civil or military authority,
national emergencies, work stoppages, fire, flood, catastrophe,
earthquake, acts of God, insurrection, war, riot, failure of
communication or interruption.
(E) DELEGATION OF DUTIES. SMC may, at its discretion, delegate, assign, or
subcontract any of the duties, responsibilities and services governed
by this paragraph 5, to its parent company, Security Benefit Group,
Inc. or any of its affiliates, whether or not by formal written
agreement. SMC shall, however, retain ultimate responsibility to the
Fund, and shall implement such reasonable procedures as may be
necessary, for assuring that any duties, responsibilities or services
so assigned, subcontracted or delegated are performed in conformity
with the terms and conditions of this Agreement.
6. OTHER ACTIVITIES NOT RESTRICTED. Nothing in this Agreement shall prevent
SMC or any officer thereof from acting as investment adviser, administrator
or transfer agent for any other person, firm or corporation, nor shall it
in any way limit or restrict SMC or any of its directors, officers,
stockholders or employees from buying, selling, or trading any securities
for its own accounts or for the accounts of others for whom it may be
acting; provided, however, that SMC expressly represents that it will
undertake no activities which, in its judgment, will conflict with the
performance of its obligations to the Fund under this Agreement. The Fund
acknowledges that SMC acts as investment adviser, administrator and
transfer agent to other investment companies, and it expressly consents to
SMC acting as such; provided, however, that if in the opinion of SMC,
particular securities are consistent with the investment objectives of, and
desirable purchases or sales for the portfolios of one or more of such
other investment companies or series of such companies at approximately the
same time, such purchases or sales will be made on a proportionate basis if
feasible, and if not feasible, then on a rotating or other equitable basis.
7. AMENDMENT. This Agreement and the schedules forming a part hereof may be
amended at any time, without shareholder approval to the extent permitted
by applicable law, by a writing signed by each of the parties hereto. Any
change in the Fund's registration statements or other documents of
compliance or in the forms relating to any plan, program or service offered
by its current Prospectus which would require a change in SMC's obligations
hereunder shall be subject to SMC's approval, which shall not be
unreasonably withheld.
8. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective on January 31, 1989, provided that on December 8, 1988, it is
approved by a majority of the holders of the outstanding voting securities
of the Fund. This Agreement shall continue in effect until January 1, 1990,
and for successive 12-month periods thereafter, unless terminated, provided
that each such continuance is specifically approved at least annually by
(a) the vote of a majority of the entire Board of Directors of the Fund,
and the vote of the majority of those directors who are not parties to this
Agreement or interested persons (as such terms are defined in the 1940 Act)
of any such party cast in person at a meeting called for the purpose of
voting on such approval, or (b) by the vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act).
Upon this Agreement becoming effective, any previous Agreement between the
Fund and SMC providing for investment advisory, administrative or transfer
agency services shall concurrently terminate, except that such termination
shall not affect any fees accrued and guarantees of expenses with respect
to any period prior to termination.
This Agreement may be terminated at any time without payment of any
penalty, by the Fund upon the vote of a majority of the Fund's Board of
Directors or, by a majority of the outstanding voting securities of the
Fund, or by SMC, in each case on sixty (60) days' written notice to the
other party. This Agreement shall automatically terminate in the event of
its assignment (as such term is defined in the 1940 Act).
9. SEVERABILITY. If any clause or provision of this Agreement is determined to
be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, then such clause or provision shall be considered
severed herefrom and the remainder of this Agreement shall continue in full
force and effect.
10. APPLICABLE LAW. This Agreement shall be subject to and construed in
accordance with the laws of the State of Kansas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereto duly authorized on the day,
month and year first above written.
SECURITY EQUITY FUND
By Michael J. Provines
-------------------------
President
(Corporate Seal)
ATTEST:
Amy J. Lee
- -------------------------
Secretary
SECURITY MANAGEMENT COMPANY
By Michael J. Provines
-------------------------
President
(Corporate Seal)
ATTEST:
Amy J. Lee
- -------------------------
Secretary
<PAGE>
SCHEDULE A
INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES
AND TRANSFER AGENCY AGREEMENT
SCHEDULE OF ADMINISTRATIVE AND FUND ACCOUNTING FACILITIES AND SERVICES
Security Management Company agrees to provide the Fund the following
administrative facilities and services.
1. FUND AND PORTFOLIO ACCOUNTING
a. Maintenance of Fund General Ledger and Journal.
b. Preparing and recording disbursements for direct Fund expenses.
c. Preparing daily money transfers.
d. Reconciliation of all Fund bank and custodian accounts.
e. Assisting Fund independent auditors as appropriate.
f. Prepare daily projection of available cash balances.
g. Record trading activity for purposes of determining net asset values
and daily dividend.
h. Prepare daily portfolio evaluation report to value portfolio securities
and determine daily accrued income.
i. Determine the daily net asset value per share.
j. Determine the daily, monthly, quarterly, semiannual or annual dividend
per share.
k. Prepare monthly, quarterly, semiannual and annual financial statements.
l. Provide financial information for reports to the Securities and
Exchange Commission in compliance with the provisions of the Investment
Company Act of 1940 and the Securities Act of 1933, the Internal
Revenue Service and any other regulatory agencies as required.
m. Provide financial, yield, net asset value, etc. information to NASD and
other survey and statistical agencies as instructed by the Fund.
n. Reports to the Audit Committee of the Board of Directors, if
applicable.
2. LEGAL
a. Provide registration and other administrative services necessary to
qualify the shares of the Fund for sale in those jurisdictions
determined from time to time by the Fund's Board of Directors (commonly
known as "Blue Sky Registration").
b. Provide registration with and reports to the Securities and Exchange
Commission in compliance with the provisions of the Investment Company
Act of 1940 and the Securities Act of 1933.
c. Prepare and review Fund Prospectus and Statement of Additional
Information.
d. Prepare proxy statements and oversee proxy tabulation for annual
meetings.
e. Prepare Board materials and maintain minutes of the Board meetings.
f. Draft, review and maintain contractual agreements between Fund and
Investment Adviser, Custodian, Distributor and Transfer Agent.
g. Oversee printing of proxy statements, financial reports to
shareholders, prospectus and Statements of Additional Information.
h. Provide legal advice and oversight regarding shareholder transactions,
administrative services, compliance with contractual agreements and the
provisions of the 1940 and 1933 Acts.
SCHEDULE OF SHARE TRANSFER AND DIVIDEND DISBURSING SERVICES
Security Management Company agrees to provide the Fund the following
transfer agency and dividend disbursing service.
1. Maintenance of shareholder accounts, including processing of new accounts.
2. Posting address changes and other file maintenance for shareholder
accounts.
3. Posting all transactions to the shareholder file, including:
a. Direct purchases.
b. Wire order purchases.
c. Direct redemptions.
d. Wire order redemptions.
e. Draft redemptions.
f. Direct exchanges.
g. Transfers.
h. Certificate issuances.
i. Certificate deposits.
4. Monitor fiduciary processing, insuring accuracy and deduction of fees.
5. Prepare daily reconciliation's of shareholder processing to money movement
instructions.
6. Handle bounced check collections. Immediately liquidate shares purchased
and return to the shareholder the check and confirmation of the
transaction.
7. Issuing all checks and stopping and replacing lost checks.
8. Draft clearing services.
a. Maintenance of signature cards and appropriate corporate resolutions.
b. Comparison of the signature on the check to the signatures on the
signature card for the purpose of paying the face amount of the check
only.
c. Receiving checks presented for payment and liquidating shares after
verifying account balance.
d. Ordering checks in quantity specified by the Fund for the shareholder.
9. Mailing confirmations, checks and/or certificates resulting from
transaction requests to shareholders.
10. Performing all of the Fund's other mailings, including:
a. Dividend and capital gain distributions.
b. Semiannual and annual reports.
c. 1099/year-end shareholder reporting.
d. Systematic withdrawal plan payments.
e. Daily confirmations.
11. Answering all service related telephone inquiries from shareholders and
others, including:
a. General and policy inquiries (research and resolve problems).
b. Fund yield inquiries.
c. Taking shareholder processing requests and account maintenance changes
by telephone as described above.
d. Submit pending requests to correspondence.
e. Monitor on-line statistical performance of unit.
f. Develop reports on telephone activity.
12. Respond to written inquiries (research and resolve problems), including:
a. Initiate shareholder account reconciliation proceeding when
appropriate.
b. Notify shareholder of bounced investment checks.
c. Respond to financial institutions regarding verification of deposit.
d. Initiate proceedings regarding lost certificates.
e. Respond to complaints and log activities.
f. Correspondence control.
13. Maintaining and retrieving all required past history for shareholders and
provide research capabilities as follows:
a. Daily monitoring of all processing activity to verify back-up
documentation.
b. Provide exception reports.
c. Microfilming.
d. Storage, retrieval and archive.
14. Prepare materials for annual meetings.
a. Address and mail annual proxy and related material.
b. Prepare and submit to Fund an affidavit of mailing.
c. Furnish certified list of shareholders (hard copy or microfilm) and
inspectors of elections.
15. Report and remit as necessary for state escheat requirements.
Approved: Fund M. J. PROVINES SMC M. J. PROVINES
------------------------------- ----------------------
<PAGE>
AMENDMENT TO INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Management Company
("SMC") are parties to an Investment Management and Services Agreement dated
December 8, 1988 (the "Agreement"), under which SMC agrees to provide investment
research and advice, general administrative, fund accounting, transfer agency
and dividend disbursing services to the Fund in return for the compensation
specified in the Agreement;
WHEREAS, on July 23, 1993, the Board of Directors of the Fund authorized the
Fund to offer shares of the Fund in two separate series, the Equity Series and
the Global Series, with each series representing separate interests in a
separate portfolio of securities and other assets;
WHEREAS, on July 23, 1993, the Board of Directors of the Fund further authorized
the Fund to offer its shares in two classes, Class A shares and Class B shares;
WHEREAS, the Fund had previously issued shares, now designated as Class A shares
of the Equity Series, with respect to which SMC had previously provided the
services set forth in this Agreement;
WHEREAS, on July 23, 1993, the Board of Directors of the Fund voted to amend
this Agreement to provide that SMC would provide services to the Global Series
of the Fund pursuant to this Agreement;
WHEREAS, the Fund has adopted a Distribution Plan with respect to its Class B
shares and, as a result, such shares are subject to distribution fees to which
Class A shares are not subject;
WHEREAS, the distribution fees associated with Class B shares require the
amendment of the Agreement relative to that class of shares;
WHEREAS, the changes to the Agreement which are contemplated by this Amendment
do not affect the interests of Class A shareholders of the Equity Series; and
WHEREAS, on October 1, 1993, the initial shareholder of Class B shares of the
Equity Series and Class A and Class B shares of the Global Series approved such
amendment to this Agreement;
NOW, THEREFORE, the Fund and SMC hereby amend the Investment Management and
Services Agreement, dated December 8, 1988, effective October 1, 1993, as
follows:
A. SMC agrees to provide investment research and advice, general
administrative, fund accounting, transfer agency and dividend disbursing
services to the Global Series of the Fund pursuant to the terms and
conditions set forth in the Agreement, as amended in sections B and C below.
B. Paragraph 2(b) shall be deleted in its entirety and the following paragraph
inserted in lieu thereof:
(b) EXPENSES OF THE FUND. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay, or reimburse SMC for the payment
of, the following described expenses of the Fund whether or not billed
to the Fund, SMC or any related entity;
(i) brokerage fees and commissions;
(ii) taxes;
(iii) interest expenses;
(iv) any extraordinary expenses approved by the Board of Directors
of the Fund; and
(v) distribution fees paid under the Fund's Class B Distribution
Plan.
C. Paragraph 3(a) and (b) shall be deleted in their entirety and the following
paragraphs inserted in lieu thereof:
3. COMPENSATION OF SMC
(a) As compensation for the services to be rendered by SMC as provided
for herein, for each of the years this Agreement is in effect, the
Fund shall pay SMC an annual fee equal to 2 percent of the first
$10 million of the average net assets, 1 1/2percent of the next
$20 million of the average net assets, and 1 percent of the
remaining average net assets of the Equity Series of the Fund for
any fiscal year, and 2 percent of the first $70 million of the
average net assets and 1 1/2 percent of the remaining average net
assets of the Global Series of the Fund for any fiscal year. Such
fees shall be determined and payable monthly. If this Agreement
shall be effective for only a portion of a year, then SMC's
compensation for said year shall be prorated for such portion. For
purposes of this Section 3, the value of the net assets of each
such Series shall be computed in the same manner at the end of the
business day as the value of such net assets is computed in
connection with the determination of the net asset value of the
Fund's shares as described in the Fund's prospectus.
(b) For each of the Fund's fiscal years this Agreement remains in
force, SMC agrees that if total annual expenses of any Series of
the Fund, exclusive of interest and taxes, extraordinary expenses
(such as litigation) and distribution fees paid under the Fund's
Class B Distribution Plan, but inclusive of SMC's compensation,
exceed any expense limitation imposed by state securities law or
regulation in any state in which shares of such Series of the Fund
are then qualified for sale, as such regulations may be amended
from time to time, SMC will contribute to such Series such funds
or waive such portion of its fee, adjusted monthly, as may be
requisite to insure that such annual expenses will not exceed any
such limitation. If this Agreement shall be effective for only a
portion of any Series' fiscal years, then the maximum annual
expenses shall be prorated for such portion. Brokerage fees and
commissions incurred in connection with the purchase or sale of
any securities by a Series shall not be deemed to be expenses
within the meaning of this paragraph (b).
D. Paragraph 5(e) shall be deleted in its entirety and the following inserted
in lieu thereof:
5. (e) DELEGATION OF DUTIES
SMC may, at its discretion, delegate, assign or subcontract any of
the duties, responsibilities and services governed by this
agreement, to its parent company, Security Benefit Group, Inc.,
whether or not by formal written agreement, or to any third party,
provided that such arrangement with a third party has been
approved by the Board of Directors of the Fund. SMC shall,
however, retain ultimate responsibility to the Fund and shall
implement such reasonable procedures as may be necessary for
assuring that any duties, responsibilities or services so
assigned, subcontracted or delegated are performed in conformity
with the terms and conditions of this agreement.
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Investment Management and Services Agreement this 1st day of October 1993.
SECURITY EQUITY FUND
ATTEST: By: M. J. PROVINES
-------------------------
Amy J. Lee
- -------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY
By: M. J. PROVINES
-------------------------
ATTEST:
Amy J. Lee
- -------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Management Company
("SMC") are parties to an Investment Management and Services Agreement, dated
December 8, 1988, as amended (the "Agreement"), under which SMC agrees to
provide investment research and advice, general administrative, fund accounting,
transfer agency and dividend disbursing services to the Fund in return for the
compensation specified in the Agreement;
WHEREAS, on April 3, 1995, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Asset
Allocation Series, in addition to its presently offered series of common stock
of Equity Series and Global Series, with each series representing separate
interests in a separate portfolio of securities and other assets;
WHEREAS, on April 3, 1995, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Asset Allocation Series in two classes,
designated Class A shares and Class B shares;
WHEREAS, on April 3, 1995, the Board of Directors of the Fund approved the
amendment of the Agreement to provide that SMC would provide investment advisory
and business management services to each class of common stock of the Asset
Allocation Series of the Fund under the terms and conditions of the Agreement;
and
WHEREAS, on April 18, 1995, the initial shareholder of the Asset Allocation
Series approved such amendment to the Agreement;
NOW, THEREFORE BE IT RESOLVED, that the Fund and SMC hereby amend the Agreement,
effective June 1, 1995, to provide that SMC shall provide all investment
advisory services, general administrative, fund accounting, transfer agency and
dividend disbursing services to the Asset Allocation Series of the Fund pursuant
to the terms set forth in the Agreement, as amended on October 1, 1993 and as
follows.
Paragraph 1 is deleted in its entirety and the following paragraph inserted in
lieu thereof:
1. EMPLOYMENT OF SMC.
The Fund hereby employs SMC to (a) act as investment adviser to the Fund
with respect to the investment of its assets and to supervise and arrange
the purchase of securities for the Fund and the sales of securities held in
the portfolio of the Fund, subject always to the supervision of the Board
of Directors of the Fund (or a duly appointed committee thereof), during
the period and upon and subject to the terms and conditions described
herein; (b) to provide the Fund with general administrative, fund
accounting, transfer agency, and dividend disbursing services described and
set forth in Schedule A attached hereto and made a part of this Agreement
by reference; and (c) to arrange for, and monitor, the provision to the
Fund of all other services required by the Fund, including but not limited
to services of independent accountants, legal counsel, custodial services
and printing. SMC may, in accordance with all applicable legal
requirements, engage the services of other persons or entities, regardless
of any affiliation with SMC, to provide services to the Fund under this
Agreement. SMC shall bear the expense of providing such other services to
the Equity and Global Series. Asset Allocation Series shall bear the
expense of such other services and all other expenses of the Series. SMC
agrees to maintain sufficient trained personnel and equipment and supplies
to perform its responsibilities under this Agreement and in conformity with
the current Prospectus of the Fund and such other reasonable standards of
performance as the Fund may from time to time specify and shall use
reasonable care in selecting and monitoring the performance of third
parties, who perform services for the Fund. SMC shall not guarantee the
performance of such persons.
Paragraphs 2(a) and (b) shall be deleted in their entirety and the following
paragraphs shall be inserted in lieu thereof:
(a) EXPENSES OF SMC. SMC shall pay all expenses in connection with the
performance of its services under this Agreement, including with
respect to the Equity and Global Series, all fees and charges of third
parties providing services to the Fund, whether or not such expenses
are billed to SMC or the Fund, except as provided otherwise herein.
(b) EXPENSES OF THE FUND. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse SMC for the payment
of the following described expenses of the Fund whether or not billed
to the Fund, SMC or any related entity:
(i) brokerage fees and commissions;
(ii) taxes;
(iii) interest expenses;
(iv) any extraordinary expenses approved by the Board of
Directors of the Fund; and
(v) distribution fees paid under the Fund's Class B
Distribution Plan;
and, in addition to those expenses set forth above, Asset Allocation
Series shall pay all expenses of the Series whether or not billed to
the Fund, SMC or any related entity, including, but not limited to the
following: Board of Directors' fees; legal, auditing and accounting
expenses; insurance premiums; broker's commissions; taxes and
governmental fees and any membership dues; fees of custodian; expenses
of obtaining quotations on the Fund's portfolio securities and pricing
of the Fund's shares; costs and expenses in connection with the
registration of the Fund's capital stock under the Securities Act of
1933 and qualification of the Fund's capital stock under the Blue Sky
laws of the states where such stock is offered; costs and expenses in
connection with the registration of the Fund under the Investment
Company Act of 1940 and all periodic and other reports required
thereunder; expenses of preparing, printing and distributing reports,
proxy statements, prospectuses, statements of additional information,
notices and distributions to stockholders; costs of stockholder and
other meetings; and expenses of maintaining the Fund's corporate
existence.
Paragraph 3(a) shall be deleted in its entirety and the following paragraph
inserted in lieu thereof:
3. COMPENSATION OF SMC.
(a) As compensation for the services to be rendered by SMC to Equity Series
and Global Series as provided for herein, for each of the years this
Agreement is in effect, the Fund shall pay SMC an annual fee equal to (1) 2
percent of the first $10 million of the average daily net assets, 1 1/2
percent of the next $20 million of the average daily net assets, and 1
percent of the remaining average daily net assets of the Equity Series of
the Fund for any fiscal year, and (2) 2 percent of the first $70 million of
the average daily net assets and 1 1/2 percent of the remaining average
daily net assets of the Global Series of the Fund for any fiscal year. Such
fees shall be determined daily and payable monthly. As compensation for the
investment advisory services to be rendered by SMC to Asset Allocation
Series, for each of the years this agreement is in effect, the Asset
Allocation Series shall pay SMC an annual fee equal to 1% of the average
daily net assets of the Asset Allocation Series. As compensation for the
administrative services to be rendered by SMC to Asset Allocation Series,
the Asset Allocation Series shall pay SMC an annual fee equal to .045% of
the average daily net assets of Asset Allocation Series, plus the greater
of .10% of its average daily net assets or (i) $30,000 in the year ending
April 29, 1996; (ii) $45,000 in the year ending April 29, 1997, and (iii)
$60,000 thereafter. Such fees shall be calculated daily and payable
monthly. If this Agreement shall be effective for only a portion of a year,
then SMC's compensation for said year shall be prorated for such portion.
For purposes of this Section 3, the value of the net assets of each Series
shall be computed in the same manner at the end of the business day as the
value of such net assets is computed in connection with the determination
of the net asset value of the Fund's shares as described in the Fund's
prospectus.
For transfer agency services provided by SMC to Asset Allocation Series,
Asset Allocation Series shall pay a Maintenance Fee of $8.00 per account, a
Transaction Fee of $1.00 per account and a Dividend Fee of $1.00 per
account.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Investment Management and Services Agreement this 28th day of April, 1995.
SECURITY EQUITY FUND
By: John D. Cleland
------------------------------
John D. Cleland, President
ATTEST:
Amy J. Lee
- -------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY
By: Jeffrey B. Pantages
------------------------------
Jeffrey B. Pantages, President
ATTEST:
Amy J. Lee
- -------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Management Company
("SMC") are parties to an Investment Management and Services Agreement, dated
December 8, 1988, as amended (the "Agreement"), under which SMC agrees to
provide investment research and advice, general administrative, fund accounting,
transfer agency and dividend disbursing services to the Fund in return for the
compensation specified in the Agreement;
WHEREAS, on July 26, 1996, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Social
Awareness Series, in addition to its presently offered series of common stock of
Equity Series, Global Series, and Asset Allocation Series, with each series
representing separate interests in a separate portfolio of securities and other
assets;
WHEREAS, on July 26, 1996, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Social Awareness Series in two classes,
designated Class A shares and Class B shares;
WHEREAS, on July 26, 1996, the Board of Directors of the Fund approved the
amendment of the Agreement to provide that SMC would provide investment advisory
and business management services to each class of common stock of the Social
Awareness Series of the Fund under the terms and conditions of the Agreement;
and
WHEREAS, this amendment to the Agreement is subject to the approval of the
initial shareholder of the Social Awareness Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and SMC hereby amend the Agreement,
effective October 30, 1996, to provide that SMC shall provide all investment
advisory services, general administrative, fund accounting, transfer agency and
dividend disbursing services to the Social Awareness Series of the Fund pursuant
to the terms set forth in the Agreement, as amended and as follows.
Paragraph 1 is deleted in its entirety and the following paragraph inserted in
lieu thereof:
1. EMPLOYMENT OF SMC.
The Fund hereby employs SMC to (a) act as investment adviser to the Fund with
respect to the investment of its assets and to supervise and arrange the
purchase of securities for the Fund and the sales of securities held in the
portfolio of the Fund, subject always to the supervision of the Board of
Directors of the Fund (or a duly appointed committee thereof), during the period
and upon and subject to the terms and conditions described herein; (b) to
provide the Fund with general administrative, fund accounting, transfer agency,
and dividend disbursing services described and set forth in Schedule A attached
hereto and made a part of this Agreement by reference; and (c) to arrange for,
and monitor, the provision to the Fund of all other services required by the
Fund, including but not limited to services of independent accountants, legal
counsel, custodial services and printing. SMC may, in accordance with all
applicable legal requirements, engage the services of other persons or entities,
regardless of any affiliation with SMC, to provide services to the Fund under
this Agreement. SMC shall bear the expense of providing such other services to
the Equity and Global Series. Asset Allocation Series and Social Awareness
Series shall bear the expense of such other services and all other expenses of
the Series. SMC agrees to maintain sufficient trained personnel and equipment
and supplies to perform its responsibilities under this Agreement and in
conformity with the current Prospectus of the Fund and such other reasonable
standards of performance as the Fund may from time to time specify and shall use
reasonable care in selecting and monitoring the performance of third parties,
who perform services for the Fund. SMC shall not guarantee the performance of
such persons.
Paragraphs 2(a) and (b) shall be deleted in their entirety and the following
paragraphs shall be inserted in lieu thereof:
(a) EXPENSES OF SMC. SMC shall pay all expenses in connection with the
performance of its services under this Agreement, including with respect to
the Equity and Global Series, all fees and charges of third parties
providing services to the Fund, whether or not such expenses are billed to
SMC or the Fund, except as provided otherwise herein.
(b) EXPENSES OF THE FUND. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse SMC for the payment of the
following described expenses of the Fund whether or not billed to the Fund,
SMC or any related entity:
(i) brokerage fees and commissions;
(ii) taxes;
(iii) interest expenses;
(iv) any extraordinary expenses approved by the Board of directors of the
Fund; and
(v) distribution fees paid under the Fund's Class B Distribution Plan;
and, in addition to those expenses set forth above, Asset Allocation Series
and Social Awareness Series shall pay all expenses of the Series whether or
not billed to the Fund, SMC or any related entity, including, but not
limited to the following: Board of Directors' fees; legal, auditing and
accounting expenses; insurance premiums; broker's commissions; taxes and
governmental fees and any membership dues; fees of custodian; expenses of
obtaining quotations on the Fund's portfolio securities and pricing of the
Fund's shares; costs and expenses in connection with the registration of
the Fund's capital stock under the Securities Act of 1933 and qualification
of the Fund's capital stock under the Blue Sky laws of the states where
such stock is offered; costs and expenses in connection with the
registration of the Fund under the Investment Company Act of 1940 and all
periodic and other reports required thereunder; expenses of preparing,
printing and distributing reports, proxy statements, prospectuses,
statements of additional information, notices and distributions to
stockholders; costs of stockholder and other meetings; and expenses of
maintaining the Fund's corporate existence.
Paragraph 3(a) shall be deleted in its entirety and the following paragraph
inserted in lieu thereof:
3. COMPENSATION OF SMC.
(a) As compensation for the services to be rendered by SMC to Equity Series
and Global Series as provided for herein, for each of the years this
Agreement is in effect, the Fund shall pay SMC an annual fee equal to (1) 2
percent of the first $10 million of the average daily net assets, 1 1/2
percent of the next $20 million of the average daily net assets, and 1
percent of the remaining average daily net assets of the Equity Series of
the Fund for any fiscal year, and (2) 2 percent of the first $70 million of
the average daily net assets and 1 1/2 percent of the remaining average
daily net assets of the Global Series of the Fund for any fiscal year. Such
fees shall be determined daily and payable monthly. As compensation for the
investment advisory services to be rendered by SMC to Asset Allocation
Series and to Social Awareness Series, for each of the years this agreement
is in effect, each of the Asset Allocation Series and Social Awareness
Series shall pay SMC an annual fee equal to 1% of their respective average
daily net assets. Such fee shall be calculated daily and payable monthly.
As compensation for the administrative services to be rendered by SMC to
Asset Allocation Series, the Asset Allocation Series shall pay SMC an
annual fee equal to .045% of the average daily net assets of Asset
Allocation Series, plus the greater of .10% of its average daily net assets
or (i) $30,000 in the year ending April 29, 1996; (ii) $45,000 in the year
ending April 29, 1997, and (iii) $60,000 thereafter. Such fee shall be
calculated daily and payable monthly. As compensation for the
administrative services to be rendered by SMC to Social Awareness Series,
the Social Awareness Series shall pay SMC an annual fee equal to .09% of
the average daily net assets of the Social Awareness Series. Such fee shall
be calculated daily and payable monthly. If this Agreement shall be
effective for only a portion of a year, then SMC's compensation for said
year shall be prorated for such portion. For purposes of this Section 3,
the value of the net assets of each Series shall be computed in the same
manner at the end of the business day as the value of such net assets is
computed in connection with the determination of the net asset value of the
Fund's shares as described in the Fund's prospectus. For transfer agency
services provided by SMC to Asset Allocation Series and to Social Awareness
Series, each such Series shall pay a Maintenance Fee of $8.00 per account,
a Transaction Fee of $1.00 per account and a Dividend Fee of $1.00 per
account.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Investment Management and Services Agreement this 1st day of August, 1996.
SECURITY EQUITY FUND
By: John D. Cleland
---------------------------
John D. Cleland, President
ATTEST:
By: Amy J. Lee
-------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY
By: James R. Schmank
---------------------------
James R. Schmank, President
ATTEST:
By: Amy J. Lee
-------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Management Company
("SMC") are parties to an Investment Management and Services Agreement, dated
December 8, 1988, as amended (the "Agreement"), under which SMC agrees to
provide investment research and advice, general administrative, fund accounting,
transfer agency and dividend disbursing services to the Fund in return for the
compensation specified in the Agreement;
WHEREAS, on October 31, 1996, the operations of SMC, a Kansas corporation, will
be transferred to Security Management Company, LLC ("SMC, LLC"), a Kansas
limited liability company; and
WHEREAS, SMC, LLC desires to assume all rights, duties and obligations of SMC
under the Agreement.
NOW THEREFORE, in consideration of the premises and mutual agreements made
herein, the parties hereto agree as follows:
1. The Agreement is hereby amended to substitute SMC, LLC for SMC, with the
same effect as though SMC, LLC were the originally named management
company, effective November 1, 1996;
2. SMC, LLC agrees to assume the rights, duties and obligations of SMC
pursuant to the terms of the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Investment Management and Services Agreement this 1st day of November, 1996.
SECURITY EQUITY FUND SECURITY MANAGEMENT COMPANY, LLC
By: JOHN D. CLELAND By: JAMES R. SCHMANK
------------------------------ --------------------------------
John D. Cleland, President James R. Schmank, President
ATTEST: ATTEST:
AMY J. LEE AMY J. LEE
- ------------------------------------ -------------------------------------
Amy J. Lee, Secretary Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Management Company, LLC
("SMC, LLC") are parties to an Investment Management and Services Agreement,
dated December 8, 1988, as amended (the "Agreement"), under which SMC, LLC
agrees to provide investment research and advice, general administrative, fund
accounting, transfer agency and dividend disbursing services to the Fund in
return for the compensation specified in the Agreement;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Value Series,
in addition to its presently offered series of common stock of Equity Series,
Global Series, Asset Allocation Series, and Social Awareness Series, with each
series representing separate interests in a separate portfolio of securities and
other assets;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Value Series in two classes,
designated Class A shares and Class B shares;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund approved the
amendment of the Agreement to provide that SMC, LLC would provide investment
advisory and business management services to each class of common stock of the
Value Series of the Fund under the terms and conditions of the Agreement; and
WHEREAS, this amendment to the Agreement is subject to the approval of the
initial shareholder of the Value Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and SMC, LLC hereby amend the
Agreement, effective April 30, 1997, to provide that SMC, LLC shall provide all
investment advisory services, general administrative, fund accounting, transfer
agency and dividend disbursing services to the Value Series of the Fund pursuant
to the terms set forth in the Agreement, as amended and as follows.
Paragraph 1 is deleted in its entirety and the following paragraph inserted in
lieu thereof:
1. EMPLOYMENT OF SMC, LLC.
The Fund hereby employs SMC, LLC to (a) act as investment adviser to the Fund
with respect to the investment of its assets and to supervise and arrange the
purchase of securities for the Fund and the sales of securities held in the
portfolio of the Fund, subject always to the supervision of the Board of
Directors of the Fund (or a duly appointed committee thereof), during the period
and upon and subject to the terms and conditions described herein; (b) provide
the Fund with general administrative, fund accounting, transfer agency, and
dividend disbursing services described and set forth in Schedule A attached
hereto and made a part of this Agreement by reference; and (c) arrange for, and
monitor, the provision to the Fund of all other services required by the Fund,
including but not limited to services of independent accountants, legal counsel,
custodial services and printing. SMC, LLC may, in accordance with all applicable
legal requirements, engage the services of other persons or entities, regardless
of any affiliation with SMC, LLC, to provide services to the Fund under this
Agreement. SMC, LLC shall bear the expense of providing such other services to
the Equity and Global Series. Asset Allocation Series, Social Awareness Series
and Value Series shall bear the expense of such other services and all other
expenses of the Series. SMC, LLC agrees to maintain sufficient trained personnel
and equipment and supplies to perform its responsibilities under this Agreement
and in conformity with the current Prospectus of the Fund and such other
reasonable standards of performance as the Fund may from time to time specify
and shall use reasonable care in selecting and monitoring the performance of
third parties, who perform services for the Fund. SMC, LLC shall not guarantee
the performance of such persons.
Paragraphs 2(a) and (b) shall be deleted in their entirety and the following
paragraphs shall be inserted in lieu thereof:
(a) EXPENSES OF SMC, LLC. SMC, LLC shall pay all expenses in connection
with the performance of its services under this Agreement, including with
respect to the Equity and Global Series, all fees and charges of third
parties providing services to the Fund, whether or not such expenses are
billed to SMC, LLC or the Fund, except as provided otherwise herein.
(b) EXPENSES OF THE FUND. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse SMC, LLC for the payment
of the following described expenses of the Fund whether or not billed to
the Fund, SMC, LLC or any related entity:
(i) brokerage fees and commissions;
(ii) taxes;
(iii) interest expenses;
(iv) any extraordinary expenses approved by the Board of Directors of the
Fund; and
(v) distribution fees paid under the Fund's Class B Distribution Plan;
and, in addition to those expenses set forth above, Asset Allocation
Series, Social Awareness Series and Value Series shall pay all expenses of
the Series whether or not billed to the Fund, SMC, LLC or any related
entity, including, but not limited to the following: Board of Directors'
fees; legal, auditing and accounting expenses; insurance premiums; broker's
commissions; taxes and governmental fees and any membership dues; fees of
custodian; expenses of obtaining quotations on the Fund's portfolio
securities and pricing of the Fund's shares; costs and expenses in
connection with the registration of the Fund's capital stock under the
Securities Act of 1933 and qualification of the Fund's capital stock under
the Blue Sky laws of the states where such stock is offered; costs and
expenses in connection with the registration of the Fund under the
Investment Company Act of 1940 and all periodic and other reports required
thereunder; expenses of preparing, printing and distributing reports, proxy
statements, prospectuses, statements of additional information, notices and
distributions to stockholders; costs of stockholder and other meetings; and
expenses of maintaining the Fund's corporate existence.
Paragraph 3(a) shall be deleted in its entirety and the following paragraph
inserted in lieu thereof:
3. COMPENSATION OF SMC, LLC.
(a) As compensation for the services to be rendered by SMC, LLC to Equity
Series and Global Series as provided for herein, for each of the years this
Agreement is in effect, the Fund shall pay SMC, LLC an annual fee equal to
(1) 2 percent of the first $10 million of the average daily net assets, 1
1/2 percent of the next $20 million of the average daily net assets, and 1
percent of the remaining average daily net assets of the Equity Series of
the Fund for any fiscal year, and (2) 2 percent of the first $70 million of
the average daily net assets and 1 1/2 percent of the remaining average
daily net assets of the Global Series of the Fund for any fiscal year. Such
fees shall be determined daily and payable monthly. As compensation for the
investment advisory services to be rendered by SMC, LLC to Asset Allocation
Series, Social Awareness Series and Value Series, for each of the years
this agreement is in effect, the Asset Allocation Series, Social Awareness
Series and Value Series shall each pay SMC, LLC an annual fee equal to 1%
of their respective average daily net assets. Such fee shall be calculated
daily and payable monthly. As compensation for the administrative services
to be rendered by SMC, LLC to Asset Allocation Series, the Asset Allocation
Series shall pay SMC, LLC an annual fee equal to .045% of the average daily
net assets of Asset Allocation Series, plus the greater of .10% of its
average daily net assets or (i) $30,000 in the year ended April 29, 1996;
(ii) $45,000 in the year ending April 29, 1997, and (iii) $60,000
thereafter. Such fees shall be calculated daily and payable monthly. As
compensation for the administrative services to be rendered by SMC, LLC to
Social Awareness Series and Value Series, each such Series shall pay SMC,
LLC an annual fee equal to .09% of their respective average daily net
assets. Such fees shall be calculated daily and payable monthly. If this
Agreement shall be effective for only a portion of a year, then SMC, LLC's
compensation for said year shall be prorated for such portion. For purposes
of this Section 3, the value of the net assets of each Series shall be
computed in the same manner at the end of the business day as the value of
such net assets is computed in connection with the determination of the net
asset value of the Fund's shares as described in the Fund's prospectus. For
transfer agency services provided by SMC, LCC to Asset Allocation Series,
Social Awareness Series, and Value Series, each such Series shall pay a
Maintenance Fee of $8.00 per account, a Transaction Fee of $1.00 per
account and a Dividend Fee of $1.00 per account.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Investment Management and Services Agreement this 12th day of March, 1997.
SECURITY EQUITY FUND
By: John D. Cleland
------------------------------
John D. Cleland, President
ATTEST:
By: Amy J. Lee
------------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY, LLC
By: James R. Schmank
------------------------------
James R. Schmank, President
ATTEST:
By: Amy J. Lee
------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Management Company, LLC
("SMC, LLC") are parties to an Investment Management and Services Agreement,
dated December 8, 1988, as amended (the "Agreement"), under which SMC, LLC
agrees to provide investment research and advice, general administrative, fund
accounting, transfer agency and dividend disbursing services to the Fund in
return for the compensation specified in the Agreement;
WHEREAS, on July 25, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Small Company
Series, in addition to its presently offered series of common stock of Equity
Series, Global Series, Asset Allocation Series, Social Awareness Series, and
Value Series, with each series representing separate interests in a separate
portfolio of securities and other assets;
WHEREAS, on July 25, 1997, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Small Company Series in two classes, designated
Class A shares and Class B shares;
WHEREAS, on July 25, 1997, the Board of Directors of the Fund approved the
amendment of the Agreement to provide that SMC, LLC would provide investment
advisory and business management services to each class of common stock of the
Small Company Series of the Fund under the terms and conditions of the
Agreement; and
WHEREAS, this amendment to the Agreement is subject to the approval of the
initial shareholder of the Small Company Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and SMC, LLC hereby amend the
Agreement, effective October 15, 1997, to provide that SMC, LLC shall provide
all investment advisory services, general administrative, fund accounting,
transfer agency and dividend disbursing services to the Small Company Series of
the Fund pursuant to the terms set forth in the Agreement, as amended and as
follows.
Paragraph 1 is deleted in its entirety and the following paragraph inserted in
lieu thereof:
1. EMPLOYMENT OF SMC, LLC.
The Fund hereby employs SMC, LLC to (a) act as investment adviser to the Fund
with respect to the investment of its assets and to supervise and arrange for
the purchase of securities of the Fund and the sales of securities held in the
portfolio of the Fund, subject always to the supervision of the Board of
Directors of the Fund (or a duly appointed committee thereof), during the period
and upon and subject to the terms and conditions described herein; (b) provide
the Fund with general administrative, fund accounting, transfer agency, and
dividend disbursing services described and set forth in Schedule A attached
hereto and made a part of this Agreement by reference; and (c) arrange for, and
monitor, the provision to the Fund of all other services required by the Fund,
including but not limited to services of independent accountants, legal counsel,
custodial services and printing. SMC, LLC may, in accordance with all applicable
legal requirements, engage the services of other persons or entities, regardless
of any affiliation with SMC, LLC, to provide services to the Fund under this
Agreement. SMC, LLC shall bear the expense of providing such other services to
the Equity and Global Series. Asset Allocation Series, Social Awareness Series,
Value Series and Small Company Series shall bear the expense of such other
services and all other expenses of the Series. SMC, LLC agrees to maintain
sufficient trained personnel and equipment and supplies to perform its
responsibilities under this Agreement and in conformity with the current
Prospectus of the Fund and such other reasonable standards of performance as the
Fund may from time to time specify and shall use reasonable care in selecting
and monitoring the performance of third parties, who perform services for the
Fund. SMC, LLC shall not guarantee the performance of such persons.
Paragraphs 2(a) and (b) shall be deleted in their entirety and the following
paragraphs shall be inserted in lieu thereof:
(a) EXPENSES OF SMC, LLC. SMC, LLC shall pay all expenses in connection
with the performance of its services under this Agreement, including
with respect to the Equity and Global Series, all fees and charges of
third parties providing services to the Fund, whether or not such
expenses are billed to SMC, LLC or the Fund, except as provided
otherwise herein.
(b) EXPENSES OF THE FUND. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse SMC, LLC for the
payment of the following described expenses of the Fund whether or not
billed to the Fund, SMC, LLC or any related entity:
(i) brokerage fees and commissions;
(ii) taxes;
(iii) interest expenses;
(iv) any extraordinary expenses approved by the Board of Directors
of the Fund; and
(v) distribution fees paid under the Fund's Class B Distribution
Plan;
and, in addition to those expenses set forth above, Asset Allocation
Series, Social Awareness Series, Value Series and Small Company Series
shall pay all expenses of the Series whether or not billed to the
Fund, SMC, LLC or any related entity, including, but not limited to
the following: Board of Directors' fees; legal, auditing and
accounting expenses; insurance premiums; broker's commissions; taxes
and governmental fees and any membership dues; fees of custodian;
expenses of obtaining quotations on the Fund's portfolio securities
and pricing of the Fund's shares; costs and expenses in connection
with the registration of the Fund's capital stock under the Securities
Act of 1933 and qualification of the Fund's capital stock under the
Blue Sky laws of the states where such stock is offered; costs and
expenses in connection with the registration of the Fund under the
Investment Company Act of 1940 and all periodic and other reports
required thereunder; expenses of preparing, printing and distributing
reports, proxy statements, prospectuses, statements of additional
information, notices and distributions to stockholders; costs of
stockholder and other meetings; and expenses of maintaining the Fund's
corporate existence.
Paragraph 3(a) shall be deleted in its entirety and the following paragraph
inserted in lieu thereof:
3. COMPENSATION OF SMC, LLC.
(a) As compensation for the services to be rendered by SMC, LLC to Equity
Series and Global Series as provided for herein, for each of the years this
Agreement is in effect, the Fund shall pay SMC, LLC an annual fee equal to
(1) 2 percent of the first $10 million of the average daily net assets, 1
1/2 percent of the next $20 million of the average daily net assets, and 1
percent of the remaining average daily net assets of the Equity Series of
the Fund for any fiscal year, and (2) 2 percent of the first $70 million of
the average daily net assets and 1 1/2 percent of the remaining average
daily net assets of the Global Series of the Fund for any fiscal year. Such
fees shall be determined daily and payable monthly. As compensation for the
investment advisory services to be rendered by SMC, LLC to Asset Allocation
Series, Social Awareness Series, Value Series and Small Company Series, for
each of the years this agreement is in effect, the Asset Allocation Series,
Social Awareness Series, Value Series and Small Company Series shall each
pay SMC, LLC an annual fee equal to 1% of their respective average daily
net assets. Such fee shall be calculated daily and payable monthly. As
compensation for the administrative services to be rendered by SMC, LLC to
Asset Allocation Series, the Asset Allocation Series shall pay SMC, LLC an
annual fee equal to .045% of the average daily net assets of Asset
Allocation Series, plus the greater of .10% of its average daily net assets
or (i) $30,000 in the year ended April 29, 1996; (ii) $45,000 in the year
ending April 29, 1997, and (iii) $60,000 thereafter. Such fees shall be
calculated daily and payable monthly. As compensation for the
administrative services to be rendered by SMC, LLC to Social Awareness
Series, Value Series and Small Company Series, each such Series shall pay
SMC, LLC an annual fee equal to .09% of their respective average daily net
assets. Such fees shall be calculated daily and payable monthly. If this
Agreement shall be effective for only a portion of a year, then SMC, LLC's
compensation for said year shall be prorated for such portion. For purposes
of this Section 3, the value of the net assets of each Series shall be
computed in the same manner at the end of the business day as the value of
such net assets is computed in connection with the determination of the net
asset value of the Fund's shares as described in the Fund's prospectus.
For transfer agency services provided by SMC, LCC to Asset Allocation
Series, Social Awareness Series, Value Series, and Small Company Series,
each such Series shall pay a Maintenance Fee of $8.00 per account, a
Transaction Fee of $1.00 per account and a Dividend Fee of $1.00 per
account.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Investment Management and Services Agreement this 15th day of September, 1997.
SECURITY EQUITY FUND
By: JOHN D. CLELAND
-----------------------------------
John D. Cleland, President
ATTEST:
By: AMY J. LEE
----------------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY, LLC
By: JEFFREY B. PANTAGES
-----------------------------------
Jeffrey B. Pantages, President
ATTEST:
By: AMY J. LEE
----------------------------------
Amy J. Lee, Secretary
<PAGE>
FORM OF
AMENDMENT TO
INVESTMENT MANAGEMENT AND SERVICES AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Management Company, LLC
("SMC, LLC") are parties to an Investment Management and Services Agreement,
dated December 8, 1988, as amended (the "Agreement"), under which SMC, LLC
agrees to provide investment research and advice, general administrative, fund
accounting, transfer agency and dividend disbursing services to the Fund in
return for the compensation specified in the Agreement;
WHEREAS, on November 6, 1998, the Board of Directors of the Fund authorized the
Fund to offer its common stock in three new series designated as the
International Series, Enhanced Index Series and Select 25 Series, in addition to
its presently offered series of common stock of Equity Series, Global Series,
Asset Allocation Series, Social Awareness Series, Value Series and Small Company
Series, with each series representing separate interests in a separate portfolio
of securities and other assets;
WHEREAS, on November 6, 1998, the Board of Directors of the Fund further
authorized the Fund to offer shares of the International Series, Enhanced Index
Series and Select 25 Series in three classes, designated Class A shares, Class B
shares, and Class C shares;
WHEREAS, on November 6, 1998, the Board of Directors of the Fund approved the
amendment of the Agreement to provide that SMC, LLC would provide investment
advisory and business management services to each class of common stock of the
International Series, Enhanced Index Series and Select 25 Series of the Fund
under the terms and conditions of the Agreement; and
WHEREAS, on November 6, 1998, the Board of Directors of the Fund authorized the
Fund to offer shares of the Equity Series, Global Series, Asset Allocation
Series, Social Awareness Series, Value Series and Small Company Series in a new
class of shares designated as Class C shares; and
WHEREAS, this amendment to the Agreement is subject to the approval of the
initial shareholder of the International Series, Enhanced Index Series and
Select 25 Series and the initial shareholder of the Class C shares of the Equity
Series, Global Series, Asset Allocation Series, Social Awareness Series, Value
Series and Small Company Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and SMC, LLC hereby amend the
Agreement, effective January 31, 1999, to provide that SMC, LLC shall provide
all investment advisory services, general administrative, fund accounting,
transfer agency and dividend disbursing services to the International Series,
Enhanced Index Series and Select 25 Series of the Fund pursuant to the terms set
forth in the Agreement, as amended and as follows.
Paragraph 1 is deleted in its entirety and the following paragraph inserted in
lieu thereof:
1. EMPLOYMENT OF SMC, LLC.
The Fund hereby employs SMC, LLC to (a) act as investment adviser to the Fund
with respect to the investment of its assets and to supervise and arrange for
the purchase of securities of the Fund and the sales of securities held in the
portfolio of the Fund, subject always to the supervision of the Board of
Directors of the Fund (or a duly appointed committee thereof), during the period
and upon and subject to the terms and conditions described herein; (b) provide
the Fund with general administrative, fund accounting, transfer agency, and
dividend disbursing services described and set forth in Schedule A attached
hereto and made a part of this Agreement by reference; and (c) arrange for, and
monitor, the provision to the Fund of all other services required by the Fund,
including but not limited to services of independent accountants, legal counsel,
custodial services and printing. SMC, LLC may, in accordance with all applicable
legal requirements, engage the services of other persons or entities, regardless
of any affiliation with SMC, LLC, to provide services to the Fund under this
Agreement. SMC, LLC shall bear the expense of providing such other services to
the Equity and Global Series. Asset Allocation Series, Social Awareness Series,
Value Series, Small Company Series, International Series, Enhanced Index Series
and Select 25 Series shall bear the expense of such other services and all other
expenses of the Series. SMC, LLC agrees to maintain sufficient trained personnel
and equipment and supplies to perform its responsibilities under this Agreement
and in conformity with the current Prospectus of the Fund and such other
reasonable standards of performance as the Fund may from time to time specify
and shall use reasonable care in selecting and monitoring the performance of
third parties, who perform services for the Fund. SMC, LLC shall not guarantee
the performance of such persons.
Paragraphs 2(a) and (b) shall be deleted in their entirety and the following
paragraphs shall be inserted in lieu thereof:
(a) EXPENSES OF SMC, LLC. SMC, LLC shall pay all expenses in connection
with the performance of its services under this Agreement, including with
respect to the Equity and Global Series, all fees and charges of third
parties providing services to the Fund, whether or not such expenses are
billed to SMC, LLC or the Fund, except as provided otherwise herein.
(b) EXPENSES OF THE FUND. Anything in this Agreement to the contrary
notwithstanding, the Fund shall pay or reimburse SMC, LLC for the payment
of the following described expenses of the Fund whether or not billed to
the Fund, SMC, LLC or any related entity:
(i) brokerage fees and commissions;
(ii) taxes;
(iii) interest expenses;
(iv) any extraordinary expenses approved by the Board of Directors of the
Fund; and
(v) distribution fees paid under the Fund's Class A, Class B and Class C
Distribution Plans;
and, in addition to those expenses set forth above, Asset Allocation
Series, Social Awareness Series, Value Series, Small Company Series,
International Series, Enhanced Index Series and Select 25 Series shall pay
all expenses of the Series whether or not billed to the Fund, SMC, LLC or
any related entity, including, but not limited to the following: Board of
Directors' fees; legal, auditing and accounting expenses; insurance
premiums; broker's commissions; taxes and governmental fees and any
membership dues; fees of custodian; expenses of obtaining quotations on the
Fund's portfolio securities and pricing of the Fund's shares; costs and
expenses in connection with the registration of the Fund's capital stock
under the Securities Act of 1933 and qualification of the Fund's capital
stock under the Blue Sky laws of the states where such stock is offered;
costs and expenses in connection with the registration of the Fund under
the Investment Company Act of 1940 and all periodic and other reports
required thereunder; expenses of preparing, printing and distributing
reports, proxy statements, prospectuses, statements of additional
information, notices and distributions to stockholders; costs of
stockholder and other meetings; and expenses of maintaining the Fund's
corporate existence. Notwithstanding the foregoing, SMC, LLC shall pay all
expenses related to the initial registration and qualification of the Class
C shares of Asset Allocation Series, Social Awareness Series, Value Series,
Small Company Series, International Series, Enhanced Index Series and
Select 25 Series, under the Blue Sky laws of the states where such class of
stock is offered.
A new paragraph 2(c) shall be added to the Agreement as follows:
(c) EXPENSE CAP. For each of the Fund's full fiscal year this Agreement
remains in force, SMC, LLC agrees that if total annual expenses of each
Series of the Fund identified below, exclusive of interest, taxes,
extraordinary expenses (such as litigation), brokerage fees and
commissions, and 12b-1 fees paid under a Fund's Class A, Class B or Class C
Distribution Plans, but inclusive of SMC LLC's compensation, exceeds the
amount set forth below (the "Expense Cap"), SMC, LLC will contribute to
such Series such funds or waive such portion of its fee, adjusted monthly,
as may be required to insure that the total annual expenses of the Series
will not exceed the Expense Cap. If this Agreement shall be effective for
only a portion of a Series' fiscal year, then the maximum annual expenses
shall be prorated for such portion.
Expense Cap
International Series, Class A, B and C shares - 2.25%
Enhanced Index Series, Class A, B and C shares - 1.75%
Select 25 Series, Class A, B and C shares - 1.75%
Paragraph 3(a) and 3(b) shall be deleted in their entirety and the following
paragraphs inserted in lieu thereof:
3. COMPENSATION OF SMC, LLC.
(a) As compensation for the services to be rendered by SMC, LLC to Equity
Series and Global Series as provided for herein, for each of the years this
Agreement is in effect, the Fund shall pay SMC, LLC an annual fee equal to
(1) 2 percent of the first $10 million of the average daily net assets, 1
1/2 percent of the next $20 million of the average daily net assets, and 1
percent of the remaining average daily net assets of the Equity Series of
the Fund for any fiscal year, and (2) 2 percent of the first $70 million of
the average daily net assets and 1 1/2 percent of the remaining average
daily net assets of the Global Series of the Fund for any fiscal year. Such
fees shall be determined daily and payable monthly. As compensation for the
investment advisory services to be rendered by SMC, LLC to Asset Allocation
Series, Social Awareness Series, Value Series and Small Company Series, for
each of the years this Agreement is in effect, the Asset Allocation Series,
Social Awareness Series, Value Series and Small Company Series shall each
pay SMC, LLC an annual fee equal to 1% of their respective average daily
net assets. Such fee shall be calculated daily and payable monthly. As
compensation for the investment advisory services to be rendered by SMC,
LLC to International Series for each of the years this Agreement is in
effect, the International Series shall pay SMC, LLC an annual fee equal to
1.10% of its average daily net assets. Such fee shall be calculated daily
and payable monthly. As compensation for the investment advisory services
to be rendered by SMC, LLC to Enhanced Index Series and Select 25 Series
for each of the years this Agreement is in effect, the Enhanced Index
Series and Select 25 Series shall each pay SMC, LLC an annual fee equal to
.75% of their respective average daily net assets. Such fee shall be
calculated daily and payable monthly. As compensation for the
administrative services to be rendered by SMC, LLC to Asset Allocation
Series, the Asset Allocation Series shall pay SMC, LLC an annual fee equal
to .045% of the average daily net assets of Asset Allocation Series, plus
the greater of .10% of its average daily net assets or $60,000. As
compensation for the administrative services to be rendered by SMC, LLC to
International Series, the International Series shall pay SMC, LLC an annual
fee equal to .05% of the average daily net assets of International Series,
plus the greater of .10% of its average daily net assets or (i) $30,000 in
the year ended January 31, 2000; (ii) $45,000 in the year ending January
31, 2001 and (iii) $60,000 thereafter. Such fees shall be calculated daily
and payable monthly. As compensation for the administrative services to be
rendered by SMC, LLC to Social Awareness Series, Value Series, Small
Company Series, Enhanced Index Series and Select 25 Series, each such
Series shall pay SMC, LLC an annual fee equal to .09% of their respective
average daily net assets. Such fees shall be calculated daily and payable
monthly. If this Agreement shall be effective for only a portion of a year,
then SMC, LLC's compensation for said year shall be prorated for such
portion. For purposes of this Section 3, the value of the net assets of
each Series shall be computed in the same manner at the end of the business
day as the value of such net assets is computed in connection with the
determination of the net asset value of the Fund's shares as described in
the Fund's prospectus.
For transfer agency services provided by SMC, LCC to Asset Allocation
Series, Social Awareness Series, Value Series, Small Company Series,
International Series, Enhanced Index Series, and Select 25 Series, each
such Series shall pay a Maintenance Fee of $8.00 per account, a Transaction
Fee of $1.00 per account and a Dividend Fee of $1.00 per account.
(b) For each of the Fund's fiscal years this Agreement remains in force,
SMC agrees that if total annual expenses of any Series of the Fund,
exclusive of interest and taxes, extraordinary expenses (such as
litigation) and distribution fees paid under the Fund's Class A, Class B
and Class C Distribution Plans, but inclusive of SMC's compensation, exceed
any expense limitation imposed by state securities law or regulation in any
state in which shares of such Series of the Fund are then qualified for
sale, as such regulations may be amended from time to time, SMC will
contribute to such Series such funds or waive such portion of its fee,
adjusted monthly, as may be requisite to insure that such annual expenses
will not exceed any such limitation. If this Agreement shall be effective
for only a portion of any Series' fiscal year, then the maximum annual
expenses shall be prorated for such portion. Brokerage fees and commissions
incurred in connection with the purchase or sale of any securities by a
Series shall not be deemed to be expenses within the meaning of this
paragraph (b).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Investment Management and Services Agreement this _____ day of ___________,
1999.
SECURITY EQUITY FUND
By:
-------------------------------------
John D. Cleland, President
ATTEST:
By:
-------------------------------
Amy J. Lee, Secretary
SECURITY MANAGEMENT COMPANY, LLC
By:
-------------------------------------
James R. Schmank, President
ATTEST:
By:
-------------------------------
Amy J. Lee, Secretary
<PAGE>
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into on this 23rd day of October, 1998
between SECURITY MANAGEMENT COMPANY, LLC (the "Adviser"), a Kansas limited
liability company, registered under the Investment Advisers Act of 1940, as
amended (the "Investment Advisers Act"), and OPPENHEIMERFUNDS, INC. (the
"Subadviser"), a Colorado corporation registered under the Investment Advisers
Act.
WITNESSETH:
WHEREAS, Security Equity Fund (the "Fund"), a Kansas corporation, is
registered with the Securities and Exchange Commission (the "Commission") as an
open-end management investment company under the Investment Company Act of 1940,
as amended (the "Investment Company Act");
WHEREAS, Security Equity Fund has, pursuant to an Advisory Agreement with
the Adviser (the "Advisory Agreement"), retained the Adviser to act as
investment adviser for and to manage its assets;
WHEREAS, the Advisory Agreement permits the Adviser to delegate certain of
its duties under the Advisory Agreement to other investment advisers, subject to
the requirements of the Investment Company Act; and
WHEREAS, the Adviser desires to retain the Subadviser as subadviser for the
Global Series (the "Fund") to act as investment adviser for and to manage the
Fund's Investments (as defined below) and the Subadviser desires to render such
services.
NOW, THEREFORE, the Adviser and Subadviser do mutually agree and promise as
follows:
1. APPOINTMENT AS SUBADVISER. The Adviser hereby retains the Subadviser to
act as investment adviser for and to manage certain assets of the Fund subject
to the supervision of the Adviser and the Board of Directors of the Fund and
subject to the terms of this Agreement; and the Subadviser hereby accepts such
employment. In such capacity, the Subadviser shall be responsible for the Fund's
Investments. The Subadviser shall not be responsible for any services to the
Fund or to bear any expenses other than those delineated in this Agreement.
2. DUTIES OF SUBADVISER.
(a) INVESTMENTS. The Subadviser is hereby authorized and directed and
hereby agrees, subject to the stated investment policies and restrictions
of the Fund as set forth in its prospectus and statement of additional
information as currently in effect and as supplemented or amended from time
to time (collectively referred to hereinafter as the "Prospectus") and
subject to the directions of the Adviser and the Fund's Board to purchase,
hold and sell investments for the account of the Fund (hereinafter
"Investments") and to monitor on a continuous basis the performance of such
Investments. The Subadviser shall give the Fund the benefit of its best
efforts in rendering its services as Subadviser. The Subadviser may
contract with or consult with such banks, other securities firms, brokers
or other parties, without additional expense to the Fund, as it may deem
appropriate regarding investment advice, research and statistical data,
clerical assistance or otherwise.
(b) BROKERAGE. The Subadviser is authorized, subject to the supervision
of the Adviser and the Fund's Board to establish and maintain accounts on
behalf of the Fund with, and place orders for the purchase and sale of the
Fund's Investments with or through, such persons, brokers or dealers as
Subadviser may select which may include, to the extent permitted by the
Adviser and Security Equity Fund, brokers or dealers affiliated with the
Subadviser, and negotiate commissions to be paid on such transactions. The
Subadviser agrees that in placing such orders it shall attempt to obtain
best execution, provided that, the Subadviser may, on behalf of the Fund,
pay brokerage commissions to a broker which provides brokerage and research
services to the Subadviser in excess of the amount another broker would
have charged for effecting the transaction, provided (i) the Subadviser
determines in good faith that the amount is reasonable in relation to the
value of the brokerage and research services provided by the executing
broker in terms of the particular transaction or in terms of the
Subadviser's overall responsibilities with respect to the Fund and the
accounts as to which the Subadviser exercises investment discretion, (ii)
such payment is made in compliance with Section 28(e) of the Securities
Exchange Act of 1934, as amended, and any other applicable laws and
regulations, and (iii) in the opinion of the Subadviser, the total
commissions paid by the Fund will be reasonable in relation to the benefits
to the Fund over the long term. In reaching such determination, the
Subadviser will not be required to place or attempt to place a specific
dollar value on the brokerage and/or research services provided or being
provided by such broker. It is recognized that the services provided by
such brokers may be useful to the Subadviser in connection with the
Subadviser's services to other clients. On occasions when the Subadviser
deems the purchase or sale of a security to be in the best interests of a
Fund as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be sold or purchased in
order to obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of securities so sold or
purchased, as well as the expenses incurred in the transaction, will be
made by the Subadviser in the manner the Subadviser considers to be the
most equitable and consistent with its fiduciary obligations to the Fund
and to such other clients. The Subadviser will report on such allocations
at the request of the Adviser, the Fund or the Fund's Board providing such
information as the number of aggregated trades to which the Fund was a
party, the broker(s) to whom such trades were directed and the basis of the
allocation for the aggregated trades. Subject to the foregoing provisions
of this subsection 2(b), the Subadviser may also consider sales of fund
shares and shares of other investment companies managed by the Subadviser
or its affiliates as a factor in the selection of brokers or dealers for
the Fund's portfolio transactions.
(c) SECURITIES TRANSACTIONS. The Subadviser and any affiliated person of
the Subadviser will not purchase securities or other instruments from or
sell securities or other instruments to the Fund ("Principal
Transactions"); PROVIDED, HOWEVER, the Subadviser may enter into a
Principal Transaction with the Fund if (i) the transaction is permissible
under applicable laws and regulations, including, without limitation, the
Investment Company Act and the Investment Advisers Act and the rules and
regulations promulgated thereunder, and (ii) the transaction or category of
transactions receives the express written approval of the Adviser.
The Subadviser agrees to observe and comply with Rule 17j-1 under
the Investment Company Act and its Code of Ethics, as the same may be
amended from time to time. The Subadviser agrees to provide the Adviser and
the Fund with a copy of such Code of Ethics.
(d) BOOKS AND RECORDS. The Subadviser will maintain all books and
records required to be maintained pursuant to the Investment Company Act
and the rules and regulations promulgated thereunder solely with respect to
transactions made by it on behalf of the Fund including, without
limitation, the books and records required by Subsections (b)(1), (5), (6),
(7), (9), (10) and (11) and Subsection (f) of Rule 31a-1 under the
Investment Company Act and shall timely furnish to the Adviser all
information relating to the Subadviser's services hereunder needed by the
Adviser to keep such other books and records of the Fund required by Rule
31a-1 under the Investment Company Act. The Subadviser will also preserve
all such books and records for the periods prescribed in part (e) of Rule
31a-2 under the Investment Company Act, and agrees that such books and
records shall remain the sole property of the Fund and shall be immediately
surrendered to the Fund upon request. The Subadviser further agrees that
all books and records maintained hereunder shall be made available to the
Fund or the Adviser at any time upon reasonable request and notice,
including telecopy, during any business day.
(e) INFORMATION CONCERNING INVESTMENTS AND SUBADVISER. From time to time
as the Adviser or the Fund may request, the Subadviser will furnish the
requesting party reports on portfolio transactions and reports on
Investments held in the portfolio, all in such detail as the Adviser or the
Fund may reasonably request. The Subadviser will make available its
officers and employees to meet with the Fund's Board of Directors at the
Fund's principal place of business on due notice (but no more than once in
any 12-month period) to review the Investments of the Fund.
The Subadviser will also provide such information as is customarily
provided by a subadviser and may be required for the Fund or the Adviser to
comply with their respective obligations under applicable laws, including,
without limitation, the Internal Revenue Code of 1986, as amended (the
"Code"), the Investment Company Act, the Investment Advisers Act, the
Securities Act of 1933, as amended (the "Securities Act") and any state
securities laws, and any rule or regulation thereunder.
(f) CUSTODY ARRANGEMENTS. The Subadviser shall provide the Fund's
custodian, on each business day with information relating to all
transactions concerning the Fund's assets.
(g) COMPLIANCE WITH APPLICABLE LAWS AND GOVERNING DOCUMENTS. In all
matters relating to the performance of this Agreement, the Subadviser and
its directors, officers, partners, employees and interested persons shall
act in conformity with the Fund's Articles of Incorporation, By-Laws, and
currently effective registration statement and with the written
instructions and directions of the Fund's Board and the Adviser, and shall
comply with the requirements of the Investment Company Act, the Investment
Advisers Act, the Commodity Exchange Act, the rules thereunder, and all
other applicable federal and state laws and regulations.
In carrying out its obligations under this Agreement, the
Subadviser shall ensure that the Fund complies with all applicable statutes
and regulations necessary to qualify the Fund as a Regulated Investment
Company under Subchapter M of the Code (or any successor provision), and
shall notify the Adviser immediately upon having a reasonable basis for
believing that the Fund has ceased to so qualify or that it might not so
qualify in the future.
The Adviser has furnished the Subadviser with copies of each of the
following documents and will furnish the Subadviser at its principal office
all future amendments and supplements to such documents, if any, as soon as
practicable after such documents become available: (i) the Articles of
Incorporation of the Fund, (ii) the By-Laws of the Fund, (iii) the Fund's
registration statement under the Investment Company Act and the Securities
Act of 1933, as amended, as filed with the Commission, and (iv) any written
instructions of the Security Equity Fund Board and the Adviser.
(h) VOTING OF PROXIES. The Subadviser shall direct the custodian as to
how to vote such proxies as may be necessary or advisable in connection
with any matters submitted to a vote of shareholders of securities held by
the Fund.
3. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder, the
Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Fund or the Adviser in any way or
otherwise be deemed an agent of the Fund or the Adviser.
4. COMPENSATION. The Adviser shall pay to the Subadviser, for the services
rendered hereunder, an annual fee equal to a percentage of the average daily
closing value of the combined net assets of the Fund and Series D of SBL Fund,
computed on a daily basis and payable monthly, as follows: 0.35 percent of such
assets up to $300 million, plus 0.30 percent of such assets over $300 million up
to $750 million and 0.25 percent of such assets over $750 million. If this
Agreement shall be effective for only a portion of a year, then the Subadviser's
compensation for said year shall be prorated for such portion. For purposes of
this paragraph 4, the value of the net assets of the Fund shall be computed in
the same manner at the end of the business day as the value of such net assets
is computed in connection with the determination of the net asset value of the
Fund's shares as described in the Fund's Prospectus. Payment of the Subadviser's
compensation for the preceding month shall be made as promptly as possible after
the end of each month.
5. EXPENSES. The Subadviser shall bear all expenses incurred by it in
connection with its services under this Agreement and will, from time to time,
at its sole expense employ or associate itself with such persons as it believes
to be particularly fitted to assist it in the execution of its duties hereunder.
However, the Subadviser shall not assign or delegate any of its investment
management duties under this Agreement without the approval of the Adviser and
the Fund's Board.
6. REPRESENTATIONS AND WARRANTIES OF SUBADVISER. The Subadviser represents
and warrants to the Adviser and the Fund as follows:
(a) The Subadviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Subadviser will immediately notify the Adviser of the occurrence
of any event that would disqualify the Subadviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the
Investment Company Act;
(c) The Subadviser has registered as a commodities trading advisor under
the CEA with the Commodity Futures Trading Commission (the "CFTC");
(d) The Subadviser is a corporation duly organized and validly existing
under the laws of the State of Colorado with the power to own and possess
its assets and carry on its business as it is now being conducted;
(e) The execution, delivery and performance by the Subadviser of this
Agreement are within the Subadviser's powers and have been duly authorized
by all necessary action on the part of its shareholders, and no action by
or in respect of, or filing with, any governmental body, agency or official
is required on the part of the Subadviser for the execution, delivery and
performance by the Subadviser of this Agreement, and the execution,
delivery and performance by the Subadviser of this Agreement do not
contravene or constitute a default under (i) any provision of applicable
law, rule or regulation, (ii) the Subadviser's governing instruments, or
(iii) any agreement, judgment, injunction, order, decree or other
instrument binding upon the Subadviser;
(f) This Agreement is a valid and binding agreement of the Subadviser;
(g) The Form ADV of the Subadviser previously provided to the Adviser is
a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date, and does not omit to state any material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
7. NON-EXCLUSIVITY. The services of the Subadviser with respect to the Fund
are not deemed to be exclusive, and the Subadviser and its officers shall be
free to render investment advisory and administrative or other services to
others (including other investment companies) and to engage in other activities.
8. REPRESENTATIONS AND WARRANTIES OF ADVISER. The Adviser represents and
warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Adviser has filed a notice of exemption pursuant to Rule 4.14
under the CEA with the Commodity Futures Trading Commission (the "CFTC")
and the National Futures Association;
(c) The Adviser is a limited liability company duly organized and
validly existing under the laws of the State of Kansas with the power to
own and possess its assets and carry on its business as it is now being
conducted;
(d) The execution, delivery and performance by the Adviser of this
Agreement and the Advisory Agreement are within the Adviser's powers and
have been duly authorized by all necessary action on the part of its
members, and no action by or in respect of, or filing with, any
governmental body, agency or official is required on the part of the
Adviser for the execution, delivery and performance by the Adviser of this
Agreement, and the execution, delivery and performance by the Adviser of
this Agreement do not contravene or constitute a default under (i) any
provision of applicable law, rule or regulation, (ii) the Adviser's
governing instruments, or (iii) any agreement, judgment, injunction, order,
decree or other instrument binding upon the Adviser;
(e) This Agreement and the Advisory Agreement are valid and binding
agreements of the Adviser;
(f) The Form ADV of the Adviser previously provided to the Subadviser is
a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects as of its filing date and does not omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading;
(g) The Adviser acknowledges that it received a copy of the Subadviser's
Form ADV at least 48 hours prior to the execution of this Agreement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE INFORMATION.
All representations and warranties made by the Subadviser and the Adviser
pursuant to Sections 6 and 8 hereof shall survive for the duration of this
Agreement and the parties hereto shall promptly notify each other in writing
upon becoming aware that any of the foregoing representations and warranties are
no longer true.
10. LIABILITY AND INDEMNIFICATION.
(a) LIABILITY. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Subadviser or a breach of its duties
hereunder, the Subadviser shall not be subject to any liability to the
Adviser, Security Equity Fund, or the Fund or any of the Fund's
shareholders, and, in the absence of willful misfeasance, bad faith or
gross negligence on the part of the Adviser or a breach of its duties
hereunder, the Adviser shall not be subject to any liability to the
Subadviser, for any act or omission in the case of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of Investments; PROVIDED, HOWEVER, that nothing
herein shall relieve the Adviser and the Subadviser from any of their
respective obligations under applicable law, including, without limitation,
the federal and state securities laws and the CEA. The Subadviser shall not
be liable to the Adviser, Security Equity Fund or the Fund for any losses
that may be sustained as a result of delays in or inaccuracy of information
about the Fund provided to the Subadviser by or on behalf of the Adviser or
the Fund's Custodian.
(b) INDEMNIFICATION. The Subadviser shall indemnify the Adviser,
Security Equity Fund and the Fund, and their respective officers and
directors, for any liability and expenses, including attorneys' fees, which
may be sustained by the Adviser, Security Equity Fund or the Fund, as a
result of the Subadviser's willful misfeasance, bad faith, gross
negligence, breach of its duties hereunder or violation of applicable law,
including, without limitation, the federal and state securities laws or the
CEA. The Adviser shall indemnify the Subadviser and its officers and
directors, for any liability and expenses, including attorneys' fees, which
may be sustained as a result of the Adviser's, Security Equity Fund's or
the Fund's willful misfeasance, bad faith, gross negligence, breach of its
duties hereunder or violation of applicable law, including, without
limitation, the federal and state securities laws or the CEA.
11. DURATION AND TERMINATION.
(a) DURATION. This Agreement shall become effective upon the date first
above written, provided that this Agreement shall not take effect with
respect to Security Equity Fund unless it has first been approved (i) by a
vote of a majority of those directors of Security Equity Fund who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and
(ii) by vote of a majority of Security Equity Fund's outstanding voting
securities. This Agreement shall continue in effect for a period of two
years from the date hereof, subject thereafter to being continued in force
and effect from year to year with respect to the Fund if specifically
approved each year by either (i) the Board of Directors of Security Equity
Fund, or (ii) by the affirmative vote of a majority of the Fund's
outstanding voting securities. In addition to the foregoing, each renewal
of this Agreement with respect to the Fund must be approved by the vote of
a majority of Security Equity Fund's directors who are not parties to this
Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval. Prior to voting
on the renewal of this Agreement, the Board of Directors of the Fund may
request and evaluate, and the Subadviser shall furnish, such information as
may reasonably be necessary to enable the Fund's Board of Directors to
evaluate the terms of this Agreement.
(b) TERMINATION. Notwithstanding whatever may be provided herein to the
contrary, this Agreement may be terminated at any time, without payment of
any penalty:
(i) By vote of a majority of the Board of Directors of Security
Equity Fund, or by vote of a majority of the outstanding voting
securities of the Fund, or by the Adviser, in each case, upon sixty (60)
days' written notice to the Subadviser;
(ii) By the Adviser upon breach by the Subadviser of any
representation or warranty contained in Section 6 hereof, which shall
not have been cured during the notice period, upon twenty (20) days
written notice;
(iii) By the Adviser immediately upon written notice to the
Subadviser if the Subadviser becomes unable to discharge its duties and
obligations under this Agreement; or
(iv) By the Subadviser upon 180 days written notice to the Adviser
and the Fund.
This Agreement shall not be assigned (as such term is defined in
the Investment Company Act) without the prior written consent of the
parties hereto. This Agreement shall terminate automatically in the event
of its assignment without such consent or upon the termination of the
Advisory Agreement.
12. DUTIES OF THE ADVISER. The Adviser shall continue to have
responsibility for all services to be provided to the Fund pursuant to the
Advisory Agreement and shall oversee and review the Subadviser's performance of
its duties under this Agreement. The Adviser shall remain responsible for, among
other things, providing the following services with respect to the Fund:
(a) The Adviser shall provide the Subadviser, or shall cause the Fund's
Custodian to provide to the Subadviser, on each business day as of time
deadline to be mutually agreed upon, a report or a computer download in a
mutually acceptable software program and format, detailing the Fund's
portfolio holdings, uninvested cash, current valuations and other
information requested by the Subadviser to assist it in carrying out its
duties under this Agreement, as of the close of the prior business day. In
performing its obligations under this Agreement, the Subadviser may rely
upon the information provided to it by or on behalf of the Adviser or the
Fund's Custodian.
(b) Composition of periodic reports with respect to the Fund's
operations for shareholders of the Fund, composition of proxy materials for
meetings of the Fund's shareholders and the composition of such
registration statements as may be required by Federal and state securities
laws for the continuous public offering and sale of shares of the Fund, as
well as the determination of the net asset value of shares of the Fund.
13. AMENDMENT. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment with respect to the Fund
shall be approved by the Board of Directors of the Fund or by a vote of a
majority of the outstanding voting securities of the Fund.
14. NOTICE. Any notice that is required to be given by the parties to each
other (or to the Fund) under the terms of this Agreement shall be in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Attention: Andrew J. Donohue
Facsimile: (212) 321-1159
(b) Copy to:
OppenheimerFunds, Inc.
6801 Tucson Way
Englewood, CO 80112
Attention: Treasurer
Facsimile: (303) 768-2849
(c) If to the Adviser:
Security Management Company, LLC
700 SW Harrison
Topeka, Kansas 66636-0001
Attention: James R. Schmank, President
Facsimile: (785) 431-3080
(d) If to Security Equity Fund:
Security Equity Fund
700 SW Harrison
Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 431-3080
15. GOVERNING LAW; JURISDICTION. Except as indicated in section 19(b) of
this Agreement, this Agreement shall be governed by and construed in accordance
with the internal laws of the State of Kansas.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the same
instrument.
17. CAPTIONS. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
18. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and effect.
19. CERTAIN DEFINITIONS.
(a) "BUSINESS DAY." As used herein, business day means any customary
business day in the United States on which the New York Stock Exchange is
open.
(b) MISCELLANEOUS. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the Investment Company Act shall be resolved by
reference to such term or provision of the Investment Company Act and to
interpretations thereof, if any, by the U.S. courts or, in the absence of
any controlling decisions of any such court, by rules, regulation or order
of the Commission validly issued pursuant to the Investment Company Act.
Specifically, as used herein, "investment company," "affiliated person,"
"interested person," "assignment," "broker," "dealer" and "affirmative vote
of the majority of the Fund's outstanding voting securities" shall all have
such meaning as such terms have in the Investment Company Act. The term
"investment adviser" shall have such meaning as such term has in the
Investment Advisers Act and the Investment Company Act, and in the event of
a conflict between such Acts, the most expansive definition shall control.
In addition, where the effect of a requirement of the Investment Company
Act reflected in any provision of this Agreement is relaxed by a rule,
regulation or order of the Commission, whether of special or general
application, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
SECURITY MANAGEMENT COMPANY, LLC
By: JAMES R. SCHMANK
-----------------------------------
Name: James R. Schmank
Title: President
Attest: AMY J. LEE
-----------------------------------
Name: Amy J. Lee
Title: Secretary
OPPENHEIMERFUNDS, INC.
By: ROBERT G. ZACK
-----------------------------------
Name: Robert G. Zack
Title: Senior Vice President
Attest: MITCHELL J. LINDAUER
-----------------------------------
Name: Mitchell J. Lindauer
Title: Vice President
<PAGE>
Pursuant to the agreement (the "Agreement") dated October 23, 1998 by and
between Security Management Company LLC (the "Advisor") and OppenheimerFunds,
Inc. (the "Subadvisor"), the Advisor notifies the Subadvisor as follows:
1. The Subadvisor's appointment as subadvisor for Security Equity Fund, Global
Fund Series (the "Fund") pursuant to the Agreement takes effect as of the close
of business on October 30, 1998.
2. The Advisor shall provide to the Subadvisor, from October 30, 1998 to June
30, 1999, with reports of daily trades in the form attached hereto as Exhibit A,
and the other reports on Exhibit B, for the Fund's portfolio. Such reports shall
be provided following the close of each business day, and other reports shall be
provided on a periodic basis as reasonably requested by the Subadvisor.
SECURITY MANAGEMENT COMPANY, LLC
By: BRENDA M. HARWOOD
-----------------------------------
Name: Brenda M. Harwood
Title: Treasurer
Accepted on behalf of
OPPENHEIMERFUNDS, INC.
By: MITCHELL J. LINDAUER
-----------------------------------
Name: Mitchell J. Lindauer
Title: Vice President
<PAGE>
EXHIBIT A
DAILY TRADES SECURITY EQUITY GLOBAL
10/27/98 thru 10/28/98
<TABLE>
<CAPTION>
OUTSTANDING
ISSUER SECURITY NUMBER SECURITY DESCRIPTION COUNTRY OF RISK INCOME/EXPENSE SHARES/PAR ASSET GROUP CATEGORY LEVEL 1
------ --------------- -------------------- --------------- -------------- -------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BUY
308251 308251306 CONOCO, INC. UNITED STATES OIL - DOMESTIC 191,456,000.00 COMMON STOCK COMMON STOCKS
</TABLE>
<PAGE>
EXHIBIT B
REPORT FREQUENCY
Trades Report every business day
Invest One Parm 4% Report Monday of every week
Invest One Spectra 25% Report Monday of every week
Invest One Spectra 65% Report 1st business day of every month
Invest One Spectra Portfolio Holdings Report 1st business day of every month
<PAGE>
FORM OF
SUBADVISORY AGREEMENT
THIS AGREEMENT is made and entered into on this ___ day of ______________
between SECURITY MANAGEMENT COMPANY, LLC (the "Adviser"), a Kansas limited
liability company, registered under the Investment Advisers Act of 1940, as
amended (the "Investment Advisers Act"), and BANKERS TRUST COMPANY (the
"Subadviser"), a New York corporation.
WITNESSETH:
WHEREAS, SBL Fund and Security Equity Fund, Kansas corporations, are
registered with the Securities and Exchange Commission (the "Commission") as
open-end management investment companies under the Investment Company Act of
1940, as amended (the "Investment Company Act");
WHEREAS, the Subadviser is a bank within the meaning of Section 2(a)(5) of
the Investment Company Act and Section 202(a)(2) of the Investment Advisers Act;
WHEREAS, SBL Fund is authorized to issue shares of Series I, a separate
series of SBL Fund and Security Equity Fund is authorized to issue shares of the
International Series and the Enhanced Index Series, each a separate series of
Security Equity Fund (each series referred to herein individually as a "Fund"
and collectively as the "Funds");
WHEREAS, each of SBL Fund and Security Equity Fund has, pursuant to an
Advisory Agreement with the Adviser (the "Advisory Agreements"), retained the
Adviser to act as investment adviser for and to manage each Fund's assets;
WHEREAS, the Advisory Agreements permit the Adviser to delegate certain of
its duties under the Advisory Agreements to other investment advisers, subject
to the requirements of the Investment Company Act; and
WHEREAS, the Adviser desires to retain the Subadviser as subadviser for the
Funds to act as investment adviser for and to manage each Fund's Investments (as
defined below) and the Subadviser desires to render such services.
NOW, THEREFORE, the Adviser and Subadviser do mutually agree and promise as
follows:
1. APPOINTMENT AS SUBADVISER. The Adviser hereby retains the Subadviser to
act as investment adviser for and to manage certain assets of the Funds subject
to the supervision of the Adviser and the respective Boards of Directors of SBL
Fund and Security Equity Fund and subject to the terms of this Agreement; and
the Subadviser hereby accepts such employment. In such capacity, the Subadviser
shall be responsible for each Fund's Investments.
2. DUTIES OF SUBADVISER.
(a) INVESTMENTS. The Subadviser is hereby authorized and directed and
hereby agrees, subject to the stated investment policies and restrictions of
the Funds as set forth in each Fund's current prospectus and statement of
additional information as currently in effect and as supplemented or amended
from time to time (collectively referred to hereinafter as the "Prospectus")
and subject to the directions of the Adviser and the respective Fund's Board
to purchase, hold and sell investments for the account of the Funds
(hereinafter "Investments") and to monitor on a continuous basis the
performance of such Investments. The Subadviser shall give the Funds the
benefit of its best efforts in rendering its services as Subadviser.
(b) BROKERAGE. The Subadviser is authorized, subject to the supervision
of the Adviser and the respective Fund's Board to establish and maintain
accounts on behalf of each Fund with, and place orders for the purchase and
sale of the Fund's Investments with or through, such persons, brokers or
dealers as Subadviser may select and negotiate commissions to be paid on such
transactions. The Subadviser agrees that in placing such orders it shall
attempt to obtain best execution, provided that, the Subadviser may, on
behalf of a Fund, pay brokerage commissions to a broker which provides
brokerage and research services to the Subadviser in excess of the amount
another broker would have charged for effecting the transaction, provided (i)
the Subadviser determines in good faith that the amount is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker in terms of the particular transaction or in terms of the
Subadviser's overall responsibilities with respect to the Fund and the
accounts as to which the Subadviser exercises investment discretion, (ii)
such payment is made in compliance with Section 28(e) of the Securities
Exchange Act of 1934, as amended, and any other applicable laws and
regulations, and (iii) in the opinion of the Subadviser, the total
commissions paid by the Fund will be reasonable in relation to the benefits
to the Fund over the long term. It is recognized that the services provided
by such brokers may be useful to the Subadviser in connection with the
Subadviser's services to other clients. On occasions when the Subadviser
deems the purchase or sale of a security to be in the best interests of a
Fund as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be sold or purchased in order
to obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of securities so sold or
purchased, as well as the expenses incurred in the transaction, will be made
by the Subadviser in the manner the Subadviser considers to be the most
equitable and consistent with its fiduciary obligations to the Funds and to
such other clients. The Subadviser will report on such allocations at the
request of the Adviser, the Funds or the respective Fund's Board providing
such information as the number of aggregated trades to which the Fund was a
party, the broker(s) to whom such trades were directed and the basis of the
allocation for the aggregated trades.
(c) SECURITIES TRANSACTIONS. The Subadviser and any affiliated person of
the Subadviser will not purchase securities or other instruments from or sell
securities or other instruments to a Fund ("Principal Transactions");
PROVIDED, HOWEVER, the Subadviser may enter into a Principal Transaction with
a Fund if (i) the transaction is permissible under applicable laws and
regulations, including, without limitation, the Investment Company Act and
the Investment Advisers Act and the rules and regulations promulgated
thereunder, and (ii) the transaction receives the express written approval of
the Adviser.
The Subadviser agrees to observe and comply with Rule 17j-1 under the
Investment Company Act and its Code of Ethics, as the same may be amended
from time to time. The Subadviser agrees to provide the Adviser and the Funds
with a copy of such Code of Ethics.
(d) BOOKS AND RECORDS. The Subadviser will maintain all books and records
required to be maintained pursuant to the Investment Company Act and the
rules and regulations promulgated thereunder with respect to transactions
made by it on behalf of the Funds including, without limitation, the books
and records required by Subsections (b)(1), (5), (6), (7), (9), (10) and (11)
and Subsection (f) of Rule 31a-1 under the Investment Company Act and shall
timely furnish to the Adviser all information relating to the Subadviser's
services hereunder needed by the Adviser to keep such other books and records
of the Funds required by Rule 31a-1 under the Investment Company Act. The
Subadviser will also preserve all such books and records for the periods
prescribed in Rule 31a-2 under the Investment Company Act, and agrees that
such books and records shall remain the sole property of the respective Fund
and shall be immediately surrendered to a Fund upon request. The Subadviser
further agrees that all books and records maintained hereunder shall be made
available to the Funds or the Adviser at any time upon reasonable request,
including telecopy, during any business day.
(e) INFORMATION CONCERNING INVESTMENTS AND SUBADVISER. From time to time
as the Adviser or the Funds may request, the Subadviser will furnish the
requesting party reports on portfolio transactions and reports on Investments
held in the portfolio, all in such detail as the Adviser or the Funds may
reasonably request. The Subadviser will make available its officers and
employees to meet with the respective Fund's Board of Directors at the Funds'
principal place of business on due notice to review the Investments of the
Funds.
The Subadviser will also provide such information or perform such
additional acts as are customarily performed by a subadviser and may be
required for the Funds or the Adviser to comply with their respective
obligations under applicable laws, including, without limitation, the
Internal Revenue Code of 1986, as amended (the "Code"), the Investment
Company Act, the Investment Advisers Act, the Securities Act of 1933, as
amended (the "Securities Act") and any state securities laws, and any rule or
regulation thereunder.
(f) CUSTODY ARRANGEMENTS. The Subadviser shall provide the Funds'
custodian, on each business day with information relating to all transactions
concerning each Fund's assets.
(g) COMPLIANCE WITH APPLICABLE LAWS AND GOVERNING DOCUMENTS. In all
matters relating to the performance of this Agreement, the Subadviser and its
directors, officers, partners, employees and interested persons shall act in
conformity with each Fund's Articles of Incorporation, By-Laws, and currently
effective registration statement and with the written instructions and
directions of the respective Fund's Board and the Adviser, and shall comply
with the requirements of the Investment Company Act, the Investment Advisers
Act, the Commodity Exchange Act (the "CEA"), the rules thereunder, and all
other applicable federal and state laws and regulations.
In carrying out its obligations under this Agreement, the Subadviser
shall, solely with regard to those matters within its control, ensure that
each Fund complies with all applicable statutes and regulations necessary to
qualify the Fund as a Regulated Investment Company under Subchapter M of the
Code (or any successor provision), and shall notify the Adviser immediately
upon having a reasonable basis for believing that a Fund has ceased to so
qualify or that it might not so qualify in the future.
In carrying out its obligations under this Agreement, the Subadviser
shall invest the assets of Series I in such a manner as to ensure that the
Fund complies with the diversification provisions of Section 817(h) of the
Code (or any successor provision) and the regulations issued thereunder
relating to the diversification requirements for variable insurance contracts
and any prospective amendments or other modifications to Section 817 or
regulations thereunder. Subadviser shall notify the Adviser immediately upon
having a reasonable basis for believing that the Fund has ceased to comply
and will take all reasonable steps to adequately diversify the Fund so as to
achieve compliance within the grace period afforded by Regulation 1.817-5.
The Adviser has furnished the Subadviser with copies of each of the
following documents and will furnish the Subadviser at its principal office
all future amendments and supplements to such documents, if any, as soon as
practicable after such documents become available: (i) the Articles of
Incorporation of each Fund, (ii) the By-Laws of each Fund and (iii) each
Fund's registration statement under the Investment Company Act and the
Securities Act of 1933, as amended, as filed with the Commission.
(h) VOTING OF PROXIES. The Subadviser shall direct the custodian as to
how to vote such proxies as may be necessary or advisable in connection with
any matters submitted to a vote of shareholders of securities held by the
Funds.
3. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder, the
Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Funds or the Adviser in any way or
otherwise be deemed an agent of the Funds or the Adviser.
4. COMPENSATION. The Adviser shall pay to the Subadviser, for the services
rendered hereunder, the fees set forth in Exhibit A attached hereto.
5. EXPENSES. The Subadviser shall bear all expenses incurred by it in
connection with its services under this Agreement and will, from time to time,
at its sole expense employ or associate itself with such persons as it believes
to be particularly fitted to assist it in the execution of its duties hereunder.
However, the Subadviser shall not assign or delegate any of its duties under
this Agreement without the approval of the Adviser and the respective Fund's
Board.
6. REPRESENTATIONS AND WARRANTIES OF SUBADVISER. The Subadviser represents
and warrants to the Adviser and the Funds as follows:
(a) The Subadviser is a bank within the meaning of Section 2(a)(5) of the
Investment Company Act and Section 202(a)(2) of the Investment Advisers Act;
(b) The Subadviser will immediately notify the Adviser of the occurrence
of any event that would disqualify the Subadviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the
Investment Company Act;
(c) The Subadviser is not required to register with the Commodity Futures
Trading Commission (the "CFTC") as a commodity trading advisor pursuant to
Section 1a(5)(B) or 4m of the CEA;
(d) The Subadviser is a corporation duly organized and validly existing
under the laws of the State of New York with the power to own and possess its
assets and carry on its business as it is now being conducted;
(e) The execution, delivery and performance by the Subadviser of this
Agreement are within the Subadviser's powers and have been duly authorized by
all necessary action on the part of its shareholders, and no action by or in
respect of, or filing with, any governmental body, agency or official is
required on the part of the Subadviser for the execution, delivery and
performance by the Subadviser of this Agreement, and the execution, delivery
and performance by the Subadviser of this Agreement do not contravene or
constitute a default under (i) any provision of applicable law, rule or
regulation, (ii) the Subadviser's governing instruments, or (iii) any
agreement, judgment, injunction, order, decree or other instrument binding
upon the Subadviser;
(f) This Agreement is a valid and binding agreement of the Subadviser;
7. REPRESENTATIONS AND WARRANTIES OF ADVISER. The Adviser represents and
warrants to the Subadviser as follows:
(a) The Adviser is registered as an investment adviser under the
Investment Advisers Act;
(b) The Adviser has filed a notice of exemption pursuant to Rule 4.14
under the CEA with the CFTC and the National Futures Association;
(c) The Adviser is a limited liability company duly organized and validly
existing under the laws of the State of Kansas with the power to own and
possess its assets and carry on its business as it is now being conducted;
(d) The execution, delivery and performance by the Adviser of this
Agreement are within the Adviser's powers and have been duly authorized by
all necessary action on the part of its members, and no action by or in
respect of, or filing with, any governmental body, agency or official is
required on the part of the Adviser for the execution, delivery and
performance by the Adviser of this Agreement, and the execution, delivery and
performance by the Adviser of this Agreement do not contravene or constitute
a default under (i) any provision of applicable law, rule or regulation, (ii)
the Adviser's governing instruments, or (iii) any agreement, judgment,
injunction, order, decree or other instrument binding upon the Adviser;
(e) This Agreement is a valid and binding agreement of the Adviser;
(f) The Form ADV of the Adviser previously provided to the Subadviser is
a true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects and does not omit to state any material fact necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading;
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE INFORMATION.
All representations and warranties made by the Subadviser and the Adviser
pursuant to Sections 6 and 7 hereof shall survive for the duration of this
Agreement and the parties hereto shall promptly notify each other in writing
upon becoming aware that any of the foregoing representations and warranties are
no longer true.
9. LIABILITY AND INDEMNIFICATION.
(a) LIABILITY. In the absence of willful misfeasance, bad faith or
negligence on the part of the Subadviser or a breach of its duties hereunder,
the Subadviser shall not be subject to any liability to the Adviser or the
Funds or any of the Funds' shareholders, and, in the absence of willful
misfeasance, bad faith or negligence on the part of the Adviser or a breach
of its duties hereunder, the Adviser shall not be subject to any liability to
the Subadviser, for any act or omission in the case of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of Investments; PROVIDED, HOWEVER, that nothing
herein shall relieve the Adviser and the Subadviser from any of their
obligations under applicable law, including, without limitation, the federal
and state securities laws and the CEA.
(b) INDEMNIFICATION. The Subadviser shall indemnify the Adviser and the
Funds, and their respective officers and directors, for any liability and
expenses, including reasonable attorneys' fees, which may be sustained as a
result of the Subadviser's willful misfeasance, bad faith, negligence, breach
of its duties hereunder or violation of applicable law, including, without
limitation, the federal and state securities laws or the CEA. The Adviser
shall indemnify the Subadviser and its officers and directors, for any
liability and expenses, including reasonable attorneys' fees, which may be
sustained as a result of the Adviser's willful misfeasance, bad faith,
negligence, breach of its duties hereunder or violation of applicable law,
including, without limitation, the federal and state securities laws or the
CEA.
10. DURATION AND TERMINATION.
(a) DURATION. This Agreement shall become effective upon the date first
above written, provided that this Agreement shall not take effect with
respect to a Fund unless it has first been approved (i) by a vote of a
majority of those directors of the Fund who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by vote of a majority of
the Fund's outstanding voting securities. This Agreement shall continue in
effect for a period of two years from the date hereof, subject thereafter to
being continued in force and effect from year to year with respect to each
Fund if specifically approved each year by either (i) the Board of Directors
of the Fund, or (ii) by the affirmative vote of a majority of the Fund's
outstanding voting securities. In addition to the foregoing, each renewal of
this Agreement with respect to a Fund must be approved by the vote of a
majority of the Fund's directors who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. Prior to voting on the renewal of
this Agreement, the Board of Directors of each Fund may request and evaluate,
and the Subadviser shall furnish, such information as may reasonably be
necessary to enable the Fund's Board of Directors to evaluate the terms of
this Agreement.
(b) TERMINATION. Notwithstanding whatever may be provided herein to the
contrary, this Agreement may be terminated at any time, without payment of
any penalty:
(i) By vote of a majority of the Board of Directors of a Fund with
respect to that Fund, or by vote of a majority of the outstanding voting
securities of the Fund, or by the Adviser, in each case, upon sixty (60)
days' written notice to the Subadviser;
(ii) By the Adviser upon breach by the Subadviser of any
representation or warranty contained in Section 6 hereof, which shall not
have been cured during the notice period, upon twenty (20) days written
notice;
(iii) By the Adviser immediately upon written notice to the
Subadviser if the Subadviser becomes unable to discharge its duties and
obligations under this Agreement; or
(iv) By the Subadviser upon 120 days written notice to the Adviser
and the Fund.
This Agreement shall not be assigned (as such term is defined in the
Investment Company Act) without the prior written consent of the parties
hereto. This Agreement shall terminate automatically in the event of its
assignment without such consent or upon the termination of the Advisory
Agreement.
11. DUTIES OF THE ADVISER. The Adviser shall continue to have responsibility
for all services to be provided to the Funds pursuant to the Advisory Agreements
and shall oversee and review the Subadviser's performance of its duties under
this Agreement.
12. AMENDMENT. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment with respect to a Fund
shall be approved by the Board of Directors of the Fund or by a vote of a
majority of the outstanding voting securities of the Fund.
13. CONFIDENTIALITY. Subject to the duties of the Adviser, the Funds and the
Subadviser to comply with applicable law, including any demand of any regulatory
or taxing authority having jurisdiction, the parties hereto shall treat as
confidential all information pertaining to the Funds and the actions of the
Subadviser, the Adviser and the Funds in respect thereof.
14. NOTICE. Any notice that is required to be given by the parties to each
other (or to the Funds) under the terms of this Agreement shall be in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Bankers Trust Company
One Bankers Trust Plaza
Mail Stop 2355
New York, New York 10006
Attention: Vinay Mendiratta, Vice President
Facsimile: (212) 250-1026
(b) If to the Adviser:
Security Management Company, LLC
700 SW Harrison
Topeka, Kansas 66636-0001
Attention: James R. Schmank, President
Facsimile: (785) 431-3080
(c) If to Security Equity Fund:
Security Equity Fund
700 SW Harrison
Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 431-3080
(d) If to SBL Fund:
SBL Fund
700 SW Harrison
Topeka, Kansas 66636-0001
Attention: Amy J. Lee, Secretary
Facsimile: (785) 431-3080
15. INSTRUCTIONS. The Subadviser is authorized to honor and act on any
notice, instruction or confirmation given by the Adviser in writing signed or
sent by one of the persons whose names, addresses and specimen signatures will
be provided by the Adviser from time to time.
16. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Kansas.
17. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
all of which shall together constitute one and the same instrument.
18. CAPTIONS. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof.
19. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision or applicable law, the remainder of the Agreement
shall not be affected adversely and shall remain in full force and effect.
20. CERTAIN DEFINITIONS.
(a) "BUSINESS DAY." As used herein, business day means any customary
business day in the United States on which the New York Stock Exchange is
open.
(b) MISCELLANEOUS. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the Investment Company Act shall be resolved by
reference to such term or provision of the Investment Company Act and to
interpretations thereof, if any, by the U.S. courts or, in the absence of any
controlling decisions of any such court, by rules, regulation or order of the
Commission validly issued pursuant to the Investment Company Act.
Specifically, as used herein, "investment company," "affiliated person,"
"interested person," "assignment," "broker," "dealer" and "affirmative vote
of the majority of the Fund's outstanding voting securities" shall all have
such meaning as such terms have in the Investment Company Act. The term
"investment adviser" shall have such meaning as such term has in the
Investment Advisers Act and the Investment Company Act, and in the event of a
conflict between such Acts, the most expansive definition shall control. In
addition, where the effect of a requirement of the Investment Company Act
reflected in any provision of this Agreement is relaxed by a rule, regulation
or order of the Commission, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule, regulation
or order.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
SECURITY MANAGEMENT COMPANY, LLC
By:
------------------------------
Name: James R. Schmank
Title: President
Attest:
------------------------------
Name: Amy J. Lee
Title: Secretary
BANKERS TRUST COMPANY
By:
------------------------------
Name:
Title:
Attest:
------------------------------
Name:
Title:
<PAGE>
Exhibit A
SUBADVISORY FEE
1. INTERNATIONAL FUNDS
For all services rendered to the International Series of Security Equity Fund
and Series I of SBL Fund (collectively referred to herein as the "International
Funds") by the Subadviser hereunder, Adviser shall pay to Subadviser an annual
fee (the "Subadvisory Fee"), as follows:
An annual rate of .60% of the combined average daily net assets of the
International Funds of $200 million or less; and
An annual rate of .55% of the combined average daily net assets of the
International Funds of more than $200 million.
The Subadvisory Fee shall be accrued for each calendar day the Subadviser
renders subadvisory services hereunder and the sum of the daily fee accruals
shall be paid monthly to the Subadviser as soon as practicable following the
last day of each month, by wire transfer if so requested by the Subadviser, but
no later than fifteen (15) calendar days thereafter. If this Agreement shall be
effective for only a portion of a year, then the Subadviser's fee for said year
shall be prorated for such portion. For purposes of calculating the fee
hereunder, the value of the net assets of the International Funds shall be
computed in the same manner at the end of the business day as the value of such
net assets are computed in connection with the determination of the net asset
value of the International Funds' shares as described in the applicable current
Prospectus.
2. ENHANCED INDEX FUNDS
The parties agree that the fee paid by the Adviser to the Subadviser for the
services rendered by the Subadviser to the Enhanced Index Series of Security
Equity Fund (the "Enhanced Index Series") shall be based on the combined average
daily net assets of the Enhanced Index Series and a future series of SBL Fund
with the same investment objective as the Enhanced Index Series. The parties
further agree that the combining of assets for purposes of calculating the fee
owed by the Adviser to the Subadviser hereunder shall only apply if the
following conditions are met (i) the anticipated future series of SBL Fund with
the same investment objective as the Enhanced Index Series is actually formed by
appropriate action of the directors of SBL Fund and (ii) the Subadviser is
engaged by the Adviser to act as investment adviser for such series of SBL Fund
and such engagement is approved by the requisite vote of the directors and
shareholders of SBL Fund. The Enhanced Index Series and the future series of SBL
Fund referenced above are collectively referred to herein as the "Enhanced Index
Funds."
For all services rendered to the Enhanced Index Series by the Subadviser
hereunder, Adviser shall pay to Subadviser an annual fee (the "Subadvisory
Fee"), as follows:
An annual rate of .20% of the combined average daily net assets of the
Enhanced Index Funds of $100 million or less; and
An annual rate of .15% of the combined average daily net assets of the
Enhanced Index Funds of more than $100 million but less than $300 million; and
An annual rate of .13% of the combined average daily net assets of the
Enhanced Index Funds of more than $300 million.
The Subadvisory Fee shall be accrued for each calendar day the Subadviser
renders subadvisory services hereunder and the sum of the daily fee accruals
shall be paid monthly to the Subadviser as soon as practicable following the
last day of each month, by wire transfer if so requested by the Subadviser, but
no later than fifteen (15) calendar days thereafter. If this Agreement shall be
effective for only a portion of a year, then the Subadviser's fee for said year
shall be prorated for such portion. For purposes of calculating the fee
hereunder, the value of the net assets of the Enhanced Index Funds shall be
computed in the same manner at the end of the business day as the value of such
net assets are computed in connection with the determination of the net asset
value of the Enhanced Index Funds' shares as described in the applicable current
Prospectus.
3. INDEX FUNDS' MINIMUM FEES
The schedule in 2 above is subject to the following minimum fees: (i) in the
first year from the date the Enhanced Index Series of Security Equity Fund is
seeded (the "Seeding Date"), no minimum fee; (ii) in the second year from the
Seeding Date, $100,000 minimum and (iii) in the third year from the Seeding Date
and each year thereafter, $200,000 minimum. If at the end of the second year
from the Seeding Date, the total amount of the fees paid by the Adviser to the
Subadviser for services to the Enhanced Index Funds is collectively less than
$100,000, then the Adviser will pay any such difference in a lump-sum to the
Subadviser. If at the end of the third year from the Seeding Date, and each year
thereafter that this Agreement is in effect, the total amount of the fees paid
by the Adviser to the Subadviser for services to the Enhanced Index Funds is
collectively less than $200,000, then the Adviser will pay any such difference
in a lump-sum to the Subadviser.
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT, dated as of 1 January 1964, between SECURITY EQUITY FUND,
INC., a Kansas corporation with offices in Topeka, Kansas, Party of the First
Part (hereinafter sometimes called the "Company"), and SECURITY DISTRIBUTORS,
INC., a Kansas corporation with offices in Topeka, Kansas, Party of the Second
Part (hereinafter sometimes called the "Distributor").
WITNESSETH:
1. The Company hereby covenants and agrees that during the term of this
Agreement, and any renewal or extension thereof, or until any prior termination
thereof, the Distributor shall have the exclusive right to offer for sale and to
distribute any and all shares of capital stock issued or to be issued by the
Company.
2. The Distributor hereby covenants and agrees to act as the distributor of
the shares issued or to be issued by the Company during the period this
Agreement is in effect and agrees during such period to offer for sale such
shares as long as such shares remain available for sale, unless the Distributor
is unable legally to make such offer for sale as the result of any governmental
law or regulation.
3. Prior to the issuance of any shares by the Company pursuant to any
subscription tendered by or through the Distributor and confirmed for sale to or
through the Distributor, the Distributor shall pay or cause to be paid to the
Custodian of the Company in cash, an amount equal to the net asset value of such
shares at the time of acceptance of each such subscription and confirmation by
the Company of the sale of such shares. The Distributor shall be entitled to
charge a commission on each such sale of shares in the amount set forth in the
prospectus of the Company, such commission to be an amount equal to the
difference between the net asset value and the offering price of the shares, as
such offering price may from time to time be determined by the board of
directors of the Company. All shares of the Company shall be sold to the public
only at their public offering price at the time of such sale, and the Company
shall receive not less than the full net asset value thereof.
4. The Distributor agrees that, during the period this Agreement is in
effect and to the extent hereinafter in this Section 4 provided, it will
reimburse the Company for or pay -
(a) All Costs, expenses and fees incurred in connection with the
registration and qualification of the Company's shares under the Federal
Securities Act of 1933 and under the applicable "Blue Sky" laws of the
states in which the Company wishes to distribute its shares;
(b) All costs and expenses of all prospectuses, advertising material, sales
literature, circulars and other material used or to be used in connection
with the offering for sale of the shares of the Company;
(c) All costs, expenses and fees in connection with the printing of
application and confirmation forms; and
(d) All clerical and administrative costs in processing the applications
for and in connection with the sale of shares of the Company.
The Distributor agrees to submit to the Company for its prior approval all
advertising material, sales literature, circulars and any other material which
the Distributor proposes to use in connection with the offering for sale of the
Company's shares.
5. Notwithstanding any other provisions of this Agreement, it is understood
and agreed that the Distributor may act as a broker, on behalf of the Company,
in the purchase and sale of securities not effected on a securities exchange,
provided that any such transactions and any commission paid in connection
herewith shall comply in every respect with the requirements of the Federal
Investment Company Act of 1940 and in particular with Section 17(e) of said
statute and the Rules and Regulations of the Securities and Exchange Commission
promulgated thereunder.
6. The parties hereto agree that all provisions of this Agreement will be
performed in strict accordance with the requirements of the Investment Company
Act of 1940, the Securities Act of 1933, the Securities Exchange Act of 1934,
and the rules and regulations of the Securities and Exchange Commission under
said statutes, in strict accordance with all applicable state "Blue Sky" laws
and the rules and regulations thereunder, and in strict accordance with the
provisions of the Articles of Incorporation and Bylaws of the Company.
7. This Agreement shall become effective on January 1, 1964, or as soon
thereafter as an amendment to the Company's prospectus, reflecting the
underwriting arrangements provided by this Agreement, shall become effective
under the Securities Act of 1933.
8. Upon becoming effective as provided in the preceding Section 7, this
Agreement shall continue in effect until the close of business on December 31,
1964, and thereafter from year to year, provided that such continuance for each
successive year after December 31, 1964, is specifically approved in advance at
least annually by the board of directors (including approval by a majority of
the directors who are not parties to the Agreement or affiliated persons of any
such party) or by the vote of a majority of the outstanding voting securities of
the Company. Written notice of any such approval by the board of directors or by
the holders of a majority of the outstanding voting securities of the Company
shall be given promptly to the Distributor.
9. This Agreement may be terminated by the Company at any time by giving
the Distributor at least sixty (60) days previous written notice of such
intention to terminate. This Agreement may be terminated by the Distributor at
any time by giving the Company at least sixty (60) days previous written notice
of such intention to terminate.
This Agreement shall terminate automatically in the event of its assignment
by the Distributor. As used in the preceding sentence, the word "assignment"
shall have the meaning set forth in Section 2(a) (4) of the Investment Company
Act of 1940.
10. No provision of this Agreement is intended to or shall be construed as
protecting the Distributor against any liability to the Company or to the
Company's security holders to which the Distributor would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of the Distributor's reckless disregard
of its obligations and duties under this Agreement.
11. Terms or words used in this Agreement, which also occur in the Articles
of Incorporation or Bylaws of the Company, shall have the same meaning herein as
given to such terms or words in Articles of Incorporation or Bylaws of the
Company.
12. The Distributor shall be deemed to be an independent contractor and,
except as expressly provided or authorized by the Company, shall have no
authority to act for or represent the Company.
13. Any notice required or permitted to be given hereunder to either of the
parties hereto shall be deemed to have been given if mailed by certified mail in
a postage prepaid envelope addressed to the respective party as follows, unless
any such party has notified the other party hereto that notices thereafter
intended for such party shall be mailed to some other address, in which event
notices thereafter shall be addressed to such party at the address designated in
such request:
Security Equity Fund, Inc.
Security Benefit Life Building
700 Harrison Street
Topeka, Kansas
Security Distributors, Inc.
Security Benefit Life Building
700 Harrison Street
Topeka, Kansas
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
SECURITY EQUITY FUND, INC.
By: Dean L. Smith
-------------------------
President
ATTEST:
Will J. Miller, Jr.
- -------------------------
Secretary
(SEAL)
SECURITY DISTRIBUTORS, INC.
By: Robert E. Jacoby
-------------------------
President
ATTEST:
Will J. Miller, Jr.
- -------------------------
Secretary
(SEAL)
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund, Inc. (the "Company") and Security
Distributors, Inc. (the "Distributor") are parties to a Distribution Agreement
dated as of January 1, 1964, (the "Distribution Agreement") under which the
Distributor agrees to act as principal underwriter in connection with sales of
the shares of the Company's capital stock; and
WHEREAS, certain provisions of the Federal Investment Company Act of 1940
have been amended, and those amendments have an effect upon the relationship
between the Company and the Distributor, and the Distribution Agreement; and
WHEREAS, the Company and the Distributor wish to amend the Distribution
Agreement to conform to the requirements of the Federal Investment Company Act
of 1940, as amended;
NOW, THEREFORE, the Company and Distributor hereby amend the Distribution
Agreement, effective immediately, as follows:
1. Section 8 of the Distribution Agreement is amended to provide as
follows:
"8. Upon becoming effective as provided in the preceding Section 7,
this Agreement shall continue in effect until the close of business on
December 31, 1964, and thereafter from year to year, provided that such
continuance for each successive year after December 31, 1964, is
specifically approved in advance at least annually by the vote of the board
of directors (including approval by the vote of a majority of the directors
of the Company who are not parties to the Agreement or interested persons
of any such party) cast in person at a meeting called for the purpose of
voting upon such approval, or by the vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding voting securities of the
Company and by such a vote of the board of directors. As used in the
preceding sentence, the words "interested persons" shall have the meaning
set forth in Section 2(a) (19) of the Investment Company Act of 1940.
Written notice of any such approval by the board of directors or by the
holders of a majority of the outstanding voting securities of the Company
shall be given promptly to the Distributor."
2. The second paragraph of Section 9 of the Distribution Agreement is
amended to provide as follows:
"This Agreement shall terminate automatically in the event of its
assignment. As used in the preceding sentence, the word "assignment" shall
have the meaning set forth in Section 2(a) (4) of the Investment Company
Act of 1940."
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Distribution Agreement this 9th day of December, 1971.
SECURITY EQUITY FUND, INC.
By: Dean L. Smith
---------------------------
Dean L. Smith, President
ATTEST:
Will J. Miller, Jr.
- -------------------------
Will J. Miller, Jr., Secretary
(SEAL)
SECURITY DISTRIBUTORS, INC.
By: Dave E. Davidson
---------------------------
Dave E. Davidson, President
ATTEST:
Will J. Miller, Jr.
- -------------------------
Will J. Miller, Jr., Secretary
<PAGE>
AMENDMENT NO. 2 TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund, Inc., a Kansas corporation (the "Company"),
and Security Distributors, Inc., a Kansas corporation (the "Distributor"), are
parties to a Distribution Agreement dated as of January 1, 1964, under which the
Distributor has agreed to act as principal underwriter in connection with sales
of shares of the Company's stock, which Distribution Agreement has heretofore
been amended on December 9, 1971; and
WHEREAS the Company and the Distributor wish to further amend the
Distribution Agreement to omit the provision that the Distributor shall
reimburse the Company for or pay all costs, expenses and fees incurred in
connection with the registration of the Company's shares under the Securities
Act of 1933;
NOW, THEREFORE, the Company and the Distributor hereby amend Section 4(a)
of the Distribution Agreement as follows:
"4. The Distributor agrees that, during the period this Agreement is
in effect and to the extent hereinafter in this Section 4
provided, it will reimburse the Company for or pay -
(a) All costs, expenses and fees incurred in connection with the
registration and qualification of the Company's shares under
the applicable "Blue Sky" laws of the states in which the
Company wishes to distribute its shares;"
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
the Distribution Agreement to be duly executed this 9th day of October, 1974.
(Corporate Seal)
SECURITY EQUITY FUND, INC.
By: Dean L. Smith
------------------------------
Dean L. Smith, President
ATTEST:
Will J. Miller, Jr.
- ------------------------------
Will J. Miller, Jr., Secretary
(Corporate Seal)
SECURITY DISTRIBUTORS, INC.
By: Dave E. Davidson
------------------------------
Dave E. Davidson, President
ATTEST:
Will J. Miller, Jr.
- ------------------------------
Will J. Miller, Jr., Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Company") and Security Distributors,
Inc. (the "Distributor") are parties to a Distribution Agreement dated as of
January 1, 1964 and amended as of December 9, 1971 and October 9, 1974, (the
"Distribution Agreement") under which the Distributor agrees to act as principal
underwriter in connection with sales of the shares of the Company's capital
stock; and,
WHEREAS, The Company and the Distributor wish to amend Section 4 of the
Distribution Agreement pertaining to the allocation of expenses and charges.
NOW, THEREFORE, The Company and Distributor hereby amend said Section 4 of
the Distribution Agreement, effective as of January 31, 1984, as follows:
4. During the period this Agreement is in effect, the Company shall pay
all costs and expenses in connection with the registration of shares
under the Securities Act of 1933, including all expenses in connection
with the preparation and printing of any registration statements and
prospectuses necessary for registration thereunder but excluding any
additional costs and expenses incurred in furnishing the Distributor
with prospectuses.
The company will also pay all costs, expenses and fees incurred in
connection with the qualification of the shares under the applicable
Blue Sky laws of the states in which the shares are offered.
During the period this agreement is in effect the Distributor
will pay or reimburse the Company for:
(a) All costs and expenses of printing and mailing prospectuses
(other than to existing shareholders) and confirmations, and all
costs and expenses of preparing, printing and mailing advertising
material sales literature, circulars, applications, and other
materials used or to be used in connection with the offering for
sale and the sale of shares; and
(b) All clerical and administrative costs in processing the
application for and in connection with the sale of shares.
The Distributor agrees to submit to the Company for its prior
approval all advertising material, sales literature, circulars and any
other material which the Distributor proposes to use in connection
with the offering for sale of shares.
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Distribution Agreement this 31st day of January, 1984.
SECURITY EQUITY FUND, INC.
By: Everett S. Gille
-------------------------------
Everett S. Gille, President
ATTEST:
Tad Patton
- -------------------------------
Tad Patton, Assistant Secretary
(SEAL)
SECURITY DISTRIBUTORS, INC.
By: Gordon Evans
-------------------------------
Gordon Evans, President
ATTEST:
Tad Patton
- -------------------------------
Tad Patton, Assistant Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Company") and Security Distributors, Inc.
(the "Distributor") are parties to a Distribution Agreement dated January 1,
1964, as amended (the "Distribution Agreement"), under which the Distributor has
agreed to act as principal underwriter in connection with sales of the shares of
the Company's capital stock; and
WHEREAS, the Company expects to receive an exemptive order from the Securities
and Exchange Commission allowing the Company to issue and offer for sale two or
more classes of the Company's capital stock; and
WHEREAS, the Company and the Distributor wish to amend the Distribution
Agreement to clarify that the Distribution Agreement applies only to the sale of
Class A shares of the capital stock of the Equity Series and Global Series of
the Company and the Class A shares of all other Series subsequently established
by the Company:
NOW THEREFORE, the Company and Distributor hereby amend the Distribution
Agreement, effective immediately, as follows:
1. The term "Shares" as referred to in the Distribution Agreement shall refer
to the Class A Shares of the Company's $.25 par value stock.
IN WITNESS WHEREOF, the parties hereto have made this Amendment to the
Distribution Agreement this 1st day of October, 1993.
SECURITY EQUITY FUND
By: M. J. Provines
-------------------------------
President
ATTEST:
By: Amy J. Lee
-------------------------------
Secretary
(SEAL)
SECURITY DISTRIBUTORS, INC.
By: Howard R. Fricke
-------------------------------
President
ATTEST:
By: Amy J. Lee
-------------------------------
Secretary
(SEAL)
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated January 1, 1964, as
amended (the "Distribution Agreement"), under which the Distributor has agreed
to act as principal underwriter in connection with sales of the shares of the
Fund's Class A common stock;
WHEREAS, on April 3, 1995, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Asset
Allocation Series, in addition to its presently offered series of common stock
of Equity Series and Global Series;
WHEREAS, on April 3, 1995, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Asset Allocation Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on April 3, 1995, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Asset Allocation Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Distribution Agreement to include the sale of Class A shares of the Asset
Allocation Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 18th day of April, 1995.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated January 1, 1964, as
amended (the "Distribution Agreement"), under which the Distributor has agreed
to act as principal underwriter in connection with sales of the shares of the
Fund's Class A common stock;
WHEREAS, on July 26, 1996, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Social
Awareness Series, in addition to its presently offered series of common stock of
Equity Series, Global Series and Asset Allocation Series;
WHEREAS, on July 26, 1996, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Social Awareness Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on July 26, 1996, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Social Awareness Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Distribution Agreement to include the sale of Class A shares of the Social
Awareness Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 1st day of August, 1996.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated January 1, 1964, as
amended (the "Distribution Agreement"), under which the Distributor has agreed
to act as principal underwriter in connection with sales of the shares of the
Fund's Class A common stock;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Value Series,
in addition to its presently offered series of common stock of Equity Series,
Global Series, Asset Allocation Series and Social Awareness Series;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Value Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on February 7, 1997, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Value Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Distribution Agreement to include the sale of Class A shares of the Value Series
of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 12th day of March, 1997.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
-------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated January 1, 1964, as
amended (the "Distribution Agreement"), under which the Distributor has agreed
to act as principal underwriter in connection with sales of the shares of the
Fund's Class A common stock;
WHEREAS, on July 25, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Small Company
Series, in addition to its presently offered series of common stock of Equity
Series, Global Series, Asset Allocation Series, Social Awareness Series and
Value Series;
WHEREAS, on July 25, 1997, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Small Company Series in two classes, designated
Class A shares and Class B shares; and
WHEREAS, on July 25, 1997, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the Small Company Series.
WHEREAS, on July 25, 1997, the Board of Directors of the Fund approved a Class A
Distribution Plan (the "Class A Plan") with respect to the Small Company Series
pursuant to Rule 12b-1 under the Investment Company Act of 1940, the provisions
of which have an effect upon the relationship between the Fund and the
Distributor, and the Distribution Agreement; and
WHEREAS, the Fund and Distributor wish to amend the Distribution Agreement to
incorporate the necessary provisions of the Class A Plan into the Agreement.
NOW, THEREFORE, the Fund and Distributor hereby amend the Distribution Agreement
to include the sale of Class A shares of the Small Company Series of the Fund.
The Fund and Distributor hereby further amend the Distribution Agreement,
effective October 15, 1997, by adding new Section 5A, which provides as follows:
5A. (a) Pursuant to a Class A Distribution Plan adopted by the Fund
with respect to the Small Company Series (the "Series"), the Fund
agrees to make monthly payments to the Distributor in an amount
computed at an annual rate of .25 of 1% of the Series' average daily
net assets, to finance activities undertaken by the Distributor for
the purpose of distributing the Series' shares to investors. The
Distributor is obligated to and hereby agrees to use the entire amount
of said fee to finance the following distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus
and Statement of Additional Information and any supplement
thereto used in connection with the offering of the
Series' shares to the public;
(ii) Printing of additional copies for use by the Distributor
as sales literature, of reports and other communications
which were prepared by the Fund for distribution to
existing shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of the
Series' shares to the public;
(iv) Expenses incurred in advertising, promoting and selling
shares of the Series to the public;
(v) Any fees paid by the Distributor to securities dealers who
have executed a Dealer's Distribution Agreement with the
Distributor for account maintenance and personal service
to shareholders of the Series (a "Service Fee");
(vi) Commissions to sales personnel for selling shares of the
Series and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the
Series by securities dealers, including the costs of
preparation of materials for presentations, travel
expenses, costs of entertainment, and other expenses
incurred in connection with promoting sales of the Series
shares by dealers.
(b) All payments to the Distributor pursuant to this paragraph are
subject to the following conditions being met by the Distributor.
The Distributor shall furnish the Fund with quarterly reports of
its expenditures and such other information relating to
expenditures or to the other distribution-related activities
undertaken or proposed to be undertaken by the Distributor during
such fiscal year under its Distribution Agreement with the Fund
as the Fund may reasonably request;
(c) The Dealer's Distribution Agreement (the "Agreement")
contemplated by paragraph 5A(a)(v) above shall permit payments to
securities dealers by the Distributor only in accordance with the
provisions of this paragraph and shall have the approval of the
majority of the Board of Directors of the Fund including a
majority of the directors who are not interested persons of the
Fund as required by the Rule. The Distributor may pay to the
other party to any Dealer's Distribution Agreement a quarterly
fee for distribution and marketing services provided by such
other party. Such quarterly fee shall be payable in arrears in an
amount equal to such percentage (not in excess of .000685% per
day) of the aggregate net asset value of the Series' shares held
by such other party's customers or clients at the close of
business each day as determined from time to time by the
Distributor. The distribution and marketing services contemplated
hereby shall include, but are not limited to, answering inquiries
regarding the Series, account designations and addresses,
maintaining the investment of such other party's customers or
clients in the Series and similar services. In determining the
extent of such other party's assistance in maintaining such
investment by its customers or clients, the Distributor may take
into account the possibility that the shares held by such
customer or client would be redeemed in the absence of such
quarterly fee.
(d) The provisions of the Distribution Plan approved by the Board of
Directors of the Fund on July 25, 1997, are fully incorporated
herein by reference. In the event the Class A Distribution Plan
is terminated by the Board of Directors or Shareholders of the
Series as provided therein, this paragraph shall no longer be
effective.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this 15th day of September, 1997.
SECURITY EQUITY FUND
By: JAMES R. SCHMANK
-------------------------------------
James R. Schmank,
Vice President and Treasurer
ATTEST:
By: AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: RICHARD K RYAN
-------------------------------------
Richard K Ryan, President
ATTEST:
By: AMY J. LEE
-----------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Distribution Agreement dated January 1, 1964, as
amended (the "Distribution Agreement"), under which the Distributor has agreed
to act as principal underwriter in connection with sales of the shares of the
Fund's Class A common stock;
WHEREAS, on November 6, 1998, the Board of Directors of the Fund authorized the
Fund to offer its common stock in three new series designated as the
International Series, Enhanced Index Series and Select 25 Series, in addition to
its presently offered series of common stock of Equity Series, Global Series,
Asset Allocation Series, Social Awareness Series, Value Series, and Small
Company Series;
WHEREAS, on November 6, 1998, the Board of Directors of the Fund further
authorized the Fund to offer shares of the International Series, Enhanced Index
Series and Select 25 Series in three classes, designated Class A shares, Class B
shares, and Class C shares; and
WHEREAS, on November 6, 1998, the Board of Directors of the Fund approved an
amendment to the Distribution Agreement between the Fund and the Distributor to
include the sale of Class A shares of the International Series, Enhanced Index
Series and Select 25 Series.
WHEREAS, on November 6, 1998, the Board of Directors of the Fund approved a
Class A Distribution Plan (the"Class A Plan") with respect to the International
Series, Enhanced Index Series and Select 25 Series pursuant to Rule 12b-1 under
the Investment Company Act of 1940 (the "Rule"), the provisions of which have an
effect upon the relationship between the Fund and the Distributor, and the
Distribution Agreement; and
WHEREAS, the Fund and Distributor wish to amend the Distribution Agreement to
incorporate the necessary provisions of the Class A Plan into the Distribution
Agreement.
NOW, THEREFORE, the Fund and Distributor hereby amend the Distribution Agreement
to include the sale of Class A shares of the International Series, Enhanced
Index Series and Select 25 Series of the Fund.
The Fund and Distributor hereby further amend the Distribution Agreement,
effective January 31, 1999, by deleting Section 5A in its entirety and replacing
it with the following new Section 5A:
5A. (a) Pursuant to a Class A Distribution Plan adopted by the Fund with
respect to the Small Company Series, International Series, Enhanced Index
Series and Select 25 Series (the "Series"), the Fund agrees to make monthly
payments to the Distributor in an amount computed at an annual rate of .25
of 1% of each Series' average daily net assets, to finance activities
undertaken by the Distributor for the purpose of distributing the Series'
shares to investors. The Distributor is obligated to and hereby agrees to
use the entire amount of said fee to finance the following
distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus and
Statement of Additional Information and any supplement thereto
used in connection with the offering of the Series' shares to
the public;
(ii) Printing of additional copies for use by the Distributor as
sales literature, of reports and other communications which
were prepared by the Fund for distribution to existing
shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of the Series'
shares to the public;
(iv) Expenses incurred in advertising, promoting and selling shares
of the Series to the public;
(v) Any fees paid by the Distributor to securities dealers who have
executed a Dealer's Distribution Agreement with the Distributor
for account maintenance and personal service to shareholders of
the Series (a "Service Fee");
(vi) Commissions to sales personnel for selling shares of the Series
and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the Series by
securities dealers, including the costs of preparation of
materials for presentations, travel expenses, costs of
entertainment, and other expenses incurred in connection with
promoting sales of the Series shares by dealers.
(b) All payments to the Distributor pursuant to this paragraph are subject
to the following conditions being met by the Distributor. The
Distributor shall furnish the Fund with quarterly reports of its
expenditures and such other information relating to expenditures or to
the other distribution-related activities undertaken or proposed to be
undertaken by the Distributor during such fiscal year under its
Distribution Agreement with the Fund as the Fund may reasonably
request;
(c) The Dealer's Distribution Agreement (the "Agreement") contemplated by
paragraph 5A(a)(v) above shall permit payments to securities dealers by
the Distributor only in accordance with the provisions of this
paragraph and shall have the approval of the majority of the Board of
Directors of the Fund including a majority of the directors who are not
interested persons of the Fund as required by the Rule. The Distributor
may pay to the other party to any Dealer's Distribution Agreement a
quarterly fee for distribution and marketing services provided by such
other party. Such quarterly fee shall be payable in arrears in an
amount equal to such percentage (not in excess of .000685% per day) of
the aggregate net asset value of the Series' shares held by such other
party's customers or clients at the close of business each day as
determined from time to time by the Distributor. The distribution and
marketing services contemplated hereby shall include, but are not
limited to, answering inquiries regarding the Series, account
designations and addresses, maintaining the investment of such other
party's customers or clients in the Series and similar services. In
determining the extent of such other party's assistance in maintaining
such investment by its customers or clients, the Distributor may take
into account the possibility that the shares held by such customer or
client would be redeemed in the absence of such quarterly fee.
(d) The provisions of the Distribution Plan approved by the Board of
Directors of the Fund on November 6, 1998, are fully incorporated
herein by reference. In the event the Class A Distribution Plan is
terminated by the Board of Directors or Shareholders of the Series as
provided therein, this paragraph shall no longer be effective.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Distribution Agreement this ______ day of ____________, 1999.
SECURITY EQUITY FUND
By:
----------------------------------
James R. Schmank,
Vice President and Treasurer
ATTEST:
By:
---------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By:
----------------------------------
Richard K Ryan, President
ATTEST:
By:
---------------------------
Amy J. Lee, Secretary
<PAGE>
CLASS B
DISTRIBUTION AGREEMENT
THIS AGREEMENT, made this 1st day of October 1993, between Security Equity Fund,
a Kansas corporation (hereinafter referred to as the "Company"), and Security
Distributors, Inc., a Kansas corporation (hereinafter referred to as the
"Distributor").
WITNESSETH:
WHEREAS, the Company is engaged in business as an open-end, management
investment company registered under the federal Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, the Distributor is willing to act as principal underwriter for the
Company to offer for sale, sell and deliver after sale, the Class B Shares of
the Company's $.25 par value common stock (hereinafter referred to as the
"Shares") on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
set forth, the parties hereto agree as follows:
1. EMPLOYMENT OF DISTRIBUTOR. The Company hereby employs the Distributor to
act as principal underwriter for the Company with respect to its Class B Shares
and hereby agrees that during the term of this Agreement, and any renewal or
extension thereof, or until any prior termination thereof, the Distributor shall
have the exclusive right to offer for sale and to distribute any and all of its
Class B Shares issued or to be issued by the Company. The Distributor hereby
accepts such employment and agrees to act as the distributor of the Class B
Shares issued or to be issued by the Company during the period this Agreement is
in effect and agrees during such period to offer for sale such Shares as long as
such Shares remain available for sale, unless the Distributor is unable legally
to make such offer for sale as the result of any law or governmental regulation.
2. OFFERING PRICE AND COMMISSIONS. Prior to the issuance of any Shares by
the Company pursuant to any subscription tendered by or through the Distributor
and confirmed for sale to or through the Distributor, the Distributor shall pay
or cause to be paid to the custodian of the Company in cash, an amount equal to
the net asset value of such Shares at the time of acceptance of each such
subscription and confirmation by the Company of the sale of such Shares. All
Shares shall be sold to the public only at their public offering price at the
time of such sale, and the Company shall receive not less than the full net
asset value thereof.
3. ALLOCATION OF EXPENSES AND CHARGES. During this period this Agreement is
in effect, the Company shall pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933 (the "1933 Act"),
including all expenses in connection with the preparation and printing of any
registration statements and prospectuses necessary for registration thereunder
but excluding any additional costs and expenses incurred in furnishing the
Distributor with prospectuses.
The Company will also pay all costs, expenses and fees incurred in connection
with the qualification of the Shares under the applicable Blue Sky laws of the
states in which the Shares are offered.
During the period this Agreement is in effect, the Distributor will pay or
reimburse the Company for:
(a) All costs and expenses of printing and mailing prospectuses (other
than to existing shareholders) and confirmations, and all costs and
expenses of preparing, printing and mailing advertising material,
sales literature, circulars, applications, and other materials used or
to be used in connection with the offering for sale and the sale of
Shares; and
(b) All clerical and administrative costs in processing the applications
for and in connection with the sale of Shares.
The Distributor agrees to submit to the Company for its prior approval all
advertising material, sales literature, circulars and any other material which
the Distributor proposes to use in connection with the offering for sale of
Shares.
4. REDEMPTION OF SHARES. The Distributor, as agent of and for the account
of the Fund, may redeem Shares of the Fund offered for resale to it at the net
asset value of such Shares (determined as provided in the Articles of
Incorporation or Bylaws) and not in excess of such maximum amounts as may be
fixed from time to time by an officer of the Fund. Whenever the officers of the
Fund deem it advisable for the protection of the shareholders of the Fund, they
may suspend or cancel such authority.
5. SALES CHARGES. A contingent deferred sales charge shall be retained by
the Distributor from the net asset value of Shares of the Fund that it has
redeemed, it being understood that such amounts will not be in excess of that
set forth in the then-current registration statement of the Fund. Furthermore,
the Distributor may retain any amounts authorized for payment to it under the
Fund's Distribution Plan.
6. DISTRIBUTOR MAY ACT AS BROKER AND RECEIVE COMMISSIONS. Notwithstanding
any other provisions of this Agreement, it is understood and agreed that the
Distributor may act as a broker, on behalf of the Company, in the purchase and
sale of securities not effected on a securities exchange, provided that any such
transactions and any commission paid in connection therewith shall comply in
every respect with the requirements of the 1940 Act and in particular with
Section 17(e) of that Act and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
7. AGREEMENTS SUBJECT TO APPLICABLE LAW AND REGULATIONS. The parties hereto
agree that all provisions of this Agreement will be performed in strict
accordance with the requirements of: the 1940 Act, the 1933 Act, the Securities
Exchange Act of 1934, the rules and regulations of the Securities and Exchange
Commission under said statutes, all applicable state Blue Sky laws and the rules
and regulations thereunder, the rules of the National Association of Securities
Dealers, Inc., and, in strict accordance with, the provisions of the Articles of
Incorporation and Bylaws of the Company.
8. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective at the date and time that the Company's prospectus, reflecting the
underwriting arrangements provided by this Agreement, shall become effective
under the 1933 Act, and shall, unless terminated as provided herein, continue in
force for two years from that date, and from year to year thereafter, provided
that such continuance for each successive year is specifically approved in
advance at least annually by either the Board of Directors or by the vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities of
the Company and, in either event, by the vote of a majority of the directors of
the Company who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting upon
such approval. As used in the preceding sentence, the words "interested persons"
shall have the meaning set forth in Section 2(a)(19) of the 1940 Act. Written
notice of any such approval by the Board of Directors or by the holders of a
majority of the outstanding voting securities of the Company and by the
directors who are not such interested persons shall be given promptly to the
Distributor.
This Agreement may be terminated at any time without the payment of any penalty
by the Company by giving the Distributor at least sixty (60) days' previous
written notice of such intention to terminate. This Agreement must be terminated
by the Distributor at any time by giving the Company at least sixty (60) days'
previous written notice of such intention to terminate.
This Agreement shall terminate automatically in the event of its assignment. As
used in the preceding sentence, the word "assignment" shall have the meaning set
forth in Section 2(a)(4) of the 1940 Act.
9. CONSTRUCTION OF AGREEMENT. No provision of this Agreement is intended to
or shall be construed as protecting the Distributor against any liability to the
Company or to the Company's security holders to which the Distributor would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties under this Agreement.
Terms or words used in the Agreement, which also occur in the Articles of
Incorporation or Bylaws of the Company, shall have the same meaning herein as
given to such terms or words in the Articles of Incorporation or Bylaws of the
Company.
10. DISTRIBUTOR AN INDEPENDENT CONTRACTOR. The Distributor shall be deemed
to be an independent contractor and, except as expressly provided or authorized
by the Company, shall have no authority to act for or represent the Company.
11. NOTICE. Any notice required or permitted to be given hereunder to
either of the parties hereto shall be deemed to have been given if mailed by
certified mail in a postage-prepaid envelope addressed to the respective party
as follows, unless any such party has notified the other party hereto that
notices thereafter intended for such party shall be mailed to some other
address, in which event notices thereafter shall be addressed to such party at
the address designated in such request:
Security Equity Fund
Security Benefit Group Building
700 Harrison
Topeka, Kansas
Security Distributors, Inc.
Security Benefit Group Building
700 Harrison
Topeka, Kansas
12. AMENDMENT OF AGREEMENT. No amendment to this Agreement shall be
effective until approved by (a) a majority of the Board of Directors of the
Company and a majority of the directors of the Company who are not parties to
this Agreement or affiliated persons of any such party, or (B) a vote of the
holders of a majority of the outstanding voting securities of the Company.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective corporate officers thereto duly authorized on the day, month
and year first above written.
SECURITY EQUITY FUND
By: M. J. Provines
-------------------------
President
ATTEST:
Amy J. Lee
- -------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Howard R. Fricke
-------------------------
President
ATTEST:
Amy J. Lee
- -------------------------
Secretary
(SEAL)
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
WHEREAS, on April 3, 1995, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Asset
Allocation Series, in addition to its presently offered series of common stock
of Equity Series and Global Series;
WHEREAS, on April 3, 1995, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Asset Allocation Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on April 3, 1995, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the Asset Allocation
Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
Asset Allocation Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 18th day of April, 1995.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
-------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
-------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
WHEREAS, on July 26, 1996, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Social
Awareness Series, in addition to its presently offered series of common stock of
Equity Series, Global Series and Asset Allocation Series;
WHEREAS, on July 26, 1996, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Social Awareness Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on July 26, 1996, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the Social Awareness
Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
Social Awareness Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 1st day of August, 1996.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
--------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
--------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Value Series,
in addition to its presently offered series of common stock of Equity Series,
Global Series, Asset Allocation Series and Social Awareness Series;
WHEREAS, on February 7, 1997, the Board of Directors of the Fund further
authorized the Fund to offer shares of the Value Series in two classes,
designated Class A shares and Class B shares; and
WHEREAS, on February 7, 1997, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the Value Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
Value Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 12th day of March, 1997.
SECURITY EQUITY FUND
By: James R. Schmank
--------------------------------
James R. Schmank, Vice President
and Treasurer
ATTEST:
By: Amy J. Lee
--------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: Richard K Ryan
--------------------------------
Richard K Ryan, President
ATTEST:
By: Amy J. Lee
--------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
WHEREAS, on July 25, 1997, the Board of Directors of the Fund authorized the
Fund to offer its common stock in a new series designated as the Small Company
Series, in addition to its presently offered series of common stock of Equity
Series, Global Series, Asset Allocation Series, Social Awareness Series and
Value Series;
WHEREAS, on July 25, 1997, the Board of Directors of the Fund further authorized
the Fund to offer shares of the Small Company Series in two classes, designated
Class A shares and Class B shares; and
WHEREAS, on July 25, 1997, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the Small Company Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
Small Company Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this 15th day of September, 1997.
SECURITY EQUITY FUND
By: JAMES R. SCHMANK
------------------------------------
James R. Schmank,
Vice President and Treasurer
ATTEST:
By: AMY J. LEE
------------------------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By: RICHARD K RYAN
------------------------------------
Richard K Ryan, President
ATTEST:
By: AMY J. LEE
------------------------------------
Amy J. Lee, Secretary
<PAGE>
AMENDMENT TO CLASS B DISTRIBUTION AGREEMENT
WHEREAS, Security Equity Fund (the "Fund") and Security Distributors, Inc. (the
"Distributor") are parties to a Class B Distribution Agreement dated October 1,
1993 (the "Distribution Agreement"), under which the Distributor has agreed to
act as principal underwriter in connection with sales of the shares of the
Fund's Class B common stock;
WHEREAS, on November 6, 1998, the Board of Directors of the Fund authorized the
Fund to offer its common stock in three new series designated as the
International Series, Enhanced Index Series and Select 25 Series, in addition to
its presently offered series of common stock of Equity Series, Global Series,
Asset Allocation Series, Social Awareness Series, Value Series and Small Company
Series; and
WHEREAS, on November 6, 1998, the Board of Directors of the Fund further
authorized the Fund to offer shares of the International Series, Enhanced Index
Series and Select 25 Series in three classes, designated Class A shares, Class B
shares, and Class C shares; and
WHEREAS, on November 6, 1998, the Board of Directors of the Fund approved an
amendment to the Class B Distribution Agreement between the Fund and the
Distributor to include the sale of Class B shares of the International Series,
Enhanced Index Series and Select 25 Series;
NOW, THEREFORE BE IT RESOLVED, that the Fund and Distributor hereby amend the
Class B Distribution Agreement to include the sale of Class B shares of the
International Series, Enhanced Index Series and Select 25 Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the Class
B Distribution Agreement this ______ day of ____________, 1999.
SECURITY EQUITY FUND
By:
------------------------------------------
James R. Schmank,
Vice President and Treasurer
ATTEST:
By:
-----------------------
Amy J. Lee, Secretary
SECURITY DISTRIBUTORS, INC.
By:
------------------------------------------
Richard K Ryan, President
ATTEST:
By:
-----------------------
Amy J. Lee, Secretary
<PAGE>
FORM OF
CLASS C
DISTRIBUTION AGREEMENT
THIS AGREEMENT, made this ___ day of ________, 1998, between Security Equity
Fund, a Kansas corporation (hereinafter referred to as the "Company"), and
Security Distributors, Inc., a Kansas corporation (hereinafter referred to as
the "Distributor").
WITNESSETH:
WHEREAS, the Company is engaged in business as an open-end, management
investment company registered under the federal Investment Company Act of 1940
(the "1940 Act");
WHEREAS, the Company issues its stock in several series; and
WHEREAS, the Distributor is willing to act as principal underwriter for the
Company to offer for sale, sell and deliver after sale, the Class C Shares of
each of the Company's Series of common stock (hereinafter referred to as the
"Shares") on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
set forth, the parties hereto agree as follows:
1. EMPLOYMENT OF DISTRIBUTOR. The Company hereby employs the Distributor to
act as principal underwriter for the Company with respect to its Class C
Shares and hereby agrees that during the term of this Agreement, and any
renewal or extension thereof, or until any prior termination thereof, the
Distributor shall have the exclusive right to offer for sale and to
distribute any and all of the Class C Shares issued or to be issued by the
Company. The Distributor hereby accepts such employment and agrees to act
as the distributor of the Class C Shares issued or to be issued by the
Company during the period this Agreement is in effect and agrees during
such period to offer for sale such Shares as long as such Shares remain
available for sale, unless the Distributor is unable legally to make such
offer for sale as the result of any law or governmental regulation.
2. OFFERING PRICE AND COMMISSIONS. Prior to the issuance of any Shares by the
Company pursuant to any subscription tendered by or through the Distributor
and confirmed for sale to or through the Distributor, the Distributor shall
pay or cause to be paid to the custodian of the Company in cash, an amount
equal to the net asset value of such Shares at the time of acceptance of
each such subscription and confirmation by the Company of the sale of such
Shares. All Shares shall be sold to the public only at their public
offering price at the time of such sale, and the Company shall receive not
less than the full net asset value thereof.
3. ALLOCATION OF EXPENSES AND CHARGES. During the period this Agreement is in
effect, the Company shall pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933 (the "1933 Act"),
including all expenses in connection with the preparation and printing of
any registration statements and prospectuses necessary for registration
thereunder but excluding any additional costs and expenses incurred in
furnishing the Distributor with prospectuses.
The Company also will pay all costs, expenses and fees incurred in
connection with the qualification of the Shares under the applicable Blue
Sky laws of the states in which the Shares are offered.
During the period this Agreement is in effect, the Distributor will pay or
reimburse the Company for:
(a) All costs and expenses of printing and mailing prospectuses (other
than to existing shareholders) and confirmations, and all costs and
expenses of preparing, printing and mailing advertising material,
sales literature, circulars, applications, and other materials used
or to be used in connection with the offering for sale and the sale
of Shares; and
(b) All clerical and administrative costs in processing the
applications for and in connection with the sale of Shares.
The Distributor agrees to submit to the Company for its prior approval all
advertising material, sales literature, circulars and any other material
which the Distributor proposes to use in connection with the offering for
sale of Shares.
4. REDEMPTION OF SHARES. The Distributor, as agent of and for the account of
the Fund, may redeem Shares of the Fund offered for resale to it at the net
asset value of such Shares (determined as provided in the then-current
registration statement of the Fund) and not in excess of such maximum
amounts as may be fixed from time to time by an officer of the Fund.
Whenever the officers of the Fund deem it advisable for the protection of
the shareholders of the Fund, they may suspend or cancel such authority.
5. SALES CHARGES. A contingent deferred sales charge shall be retained by the
Distributor from the net asset value of Shares of the Fund that it has
redeemed, it being understood that such amounts will not be in excess of
that set forth in the then-current registration statement of the Fund.
Furthermore, the Distributor may retain any amounts authorized for payment
to it under the Fund's Distribution Plan.
6. DISTRIBUTOR MAY ACT AS BROKER AND RECEIVE COMMISSIONS. Notwithstanding any
other provisions of this Agreement, it is understood and agreed that the
Distributor may act as a broker, on behalf of the Company, in the purchase
and sale of securities not effected on a securities exchange, provided that
any such transactions and any commission paid in connection therewith shall
comply in every respect with the requirements of the 1940 Act and in
particular with Section 17(e) of that Act and the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
7. AGREEMENTS SUBJECT TO APPLICABLE LAW AND REGULATIONS. The parties hereto
agree that all provisions of this Agreement will be performed in strict
accordance with the requirements of: the 1940 Act, the 1933 Act, the
Securities Exchange Act of 1934, the rules and regulations of the
Securities and Exchange Commission under said statutes, all applicable
state Blue Sky laws and the rules and regulations thereunder, the rules of
the National Association of Securities Dealers, Inc., and, in strict
accordance with, the provisions of the Articles of Incorporation and Bylaws
of the Company.
8. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective at the date and time that the Company's prospectus, reflecting
the underwriting arrangements provided by this Agreement, shall become
effective under the 1933 Act, and shall, unless terminated as provided
herein, continue in force for two years from that date, and from year to
year thereafter, provided that such continuance for each successive year is
specifically approved in advance at least annually by either the Board of
Directors or by the vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Class C shares of the Series and, in
either event, by the vote of a majority of the directors of the Company who
are not parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting upon such
approval. As used in the preceding sentence, the words "interested persons"
shall have the meaning set forth in Section 2(a)(19) of the 1940 Act.
This Agreement may be terminated at any time without the payment of any
penalty by the Company by giving the Distributor at least sixty (60) days'
previous written notice of such intention to terminate. This Agreement may
be terminated by the Distributor at any time by giving the Company at least
sixty (60) days' previous written notice of such intention to terminate.
This Agreement shall terminate automatically in the event of its
assignment. As used in the preceding sentence, the word "assignment" shall
have the meaning set forth in Section 2(a)(4) of the 1940 Act.
9. CONSTRUCTION OF AGREEMENT. No provision of this Agreement is intended to or
shall be construed as protecting the Distributor against any liability to
the Company or to the Company's security holders to which the Distributor
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties under this Agreement.
Terms or words used in the Agreement, which also occur in the Articles of
Incorporation or Bylaws of the Company, shall have the same meaning herein
as given to such terms or words in the Articles of Incorporation or Bylaws
of the Company.
10. DISTRIBUTOR AN INDEPENDENT CONTRACTOR. The Distributor shall be deemed to
be an independent contractor and, except as expressly provided or
authorized by the Company, shall have no authority to act for or represent
the Company.
11. NOTICE. Any notice required or permitted to be given hereunder to either of
the parties hereto shall be deemed to have been given if mailed by
certified mail in a postage-prepaid envelope addressed to the respective
party as follows, unless any such party has notified the other party hereto
that notices thereafter intended for such party shall be mailed to some
other address, in which event notices thereafter shall be addressed to such
party at the address designated in such request:
Security Equity Fund
Security Benefit Group Building
700 Harrison
Topeka, Kansas
Security Distributors, Inc.
Security Benefit Group Building
700 Harrison
Topeka, Kansas
12. AMENDMENT OF AGREEMENT. No amendment to this Agreement shall be effective
until approved by (a) a majority of the Board of Directors of the Company
and a majority of the directors of the Company who are not parties to this
Agreement or affiliated persons of any such party, or (b) a vote of the
holders of a majority of the outstanding voting securities of the Class C
shares of the Series.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective corporate officers thereto duly authorized on the day, month
and year first above written.
SECURITY EQUITY FUND
BY:
-------------------------------------
President
ATTEST:
- -----------------------------------
Secretary
SECURITY DISTRIBUTORS, INC.
BY:
-------------------------------------
Richard K Ryan, President
ATTEST:
- -----------------------------------
Secretary
<PAGE>
CUSTODY AGREEMENT
Dated January 1, 1995
As amended September 24, 1998
Between
UMB BANK, N.A.
and
THE SECURITY FUNDS
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. Appointment of Custodian 1
2. Definitions 1
(a) Securities 1
(b) Assets 1
(c) Instructions and Special Instructions 1
3. Delivery of Corporate Documents 2
4. Powers and Duties of Custodian and Domestic Subcustodian 2
(a) Safekeeping 3
(b) Manner of Holding Securities 3
(c) Free Delivery of Assets 4
(d) Exchange of Securities 4
(e) Purchases of Assets 5
(f) Sales of Assets 5
(g) Options 6
(h) Futures Contracts 6
(i) Segregated Accounts 6
(j) Depositary Receipts 7
(k) Corporate Actions, Put Bonds, Called Bonds, Etc. 7
(l) Interest Bearing Deposits 7
(m) Foreign Exchange Transactions 8
(n) Pledges or Loans of Securities 8
(o) Stock Dividends, Rights, Etc. 9
(p) Routine Dealings 9
(q) Collections 9
(r) Bank Accounts 9
(s) Dividends, Distributions and Redemptions 9
(t) Proceeds from Shares Sold 10
(u) Proxies and Notices; Compliance with the Shareholders 10
Communication Act of 1985
(v) Books and Records 10
(w) Opinion of Fund's Independent Certified Public 10
Accountants
(x) Reports by Independent Certified Public Accountants 10
(y) Bills and Others Disbursements 11
5. Subcustodians 11
(a) Domestic Subcustodians 11
(b) Foreign Subcustodians 11
(c) Interim Subcustodians 12
(d) Special Subcustodians 12
(e) Termination of a Subcustodian 12
(f) Certification Regarding Foreign Subcustodians 12
6. Standard of Care 12
(a) General Standard of Care 12
(b) Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Armed Conflict, Sovereign Risk, etc. 12
(c) Liability for Past Records 13
(d) Advice of Counsel 13
(e) Advice of the Fund and Others 13
(f) Instructions Appearing to be Genuine 13
(g) Exceptions from Liability 13
7. Liability of the Custodian for Actions of Others 14
(a) Domestic Subcustodians 14
(b) Liability for Acts and Omissions of Foreign 14
Subcustodians
(c) Securities Systems, Interim Subcustodians, Special
Subcustodians, Securities Depositories and Clearing 14
Agencies
(d) Defaults or Insolvency's of Brokers, Banks, Etc. 14
(e) Reimbursement of Expenses 14
8. Indemnification 14
(a) Indemnification by Fund 14
(b) Indemnification by Custodian 15
9. Advances 15
10. Liens 15
11. Compensation 16
12. Powers of Attorney 16
13. Termination and Assignment 16
14. Additional Funds 16
15. Notices 16
16. Miscellaneous 17
<PAGE>
CUSTODY AGREEMENT
This agreement made as of this 1st day of January, 1995, as amended
September 24, 1998, between UMB Bank, n.a., a national banking association with
its principal place of business located in Kansas City, Missouri (hereinafter
"Custodian"), and each of the Funds which have executed the signature page
hereof, together with such additional Funds which shall be made parties to this
Agreement by the execution of a separate signature page hereto (individually, a
"Fund" and collectively, the "Funds").
WITNESSETH:
WHEREAS, each Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, each Fund desires to appoint Custodian as its custodian for the
custody of Assets (as hereinafter defined) owned by such Fund which Assets are
to be held in such accounts as such Fund may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto, intending to be legally bound, mutually covenant and agree
as follows:
1. APPOINTMENT OF CUSTODIAN.
Each Fund hereby constitutes and appoints the Custodian as custodian of
Assets belonging to each such Fund which have been or may be from time to time
deposited with the Custodian. Custodian accepts such appointment as a custodian
and agrees to perform the duties and responsibilities of Custodian as set forth
herein on the conditions set forth herein.
2. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings so indicated:
(a) "Security" or "Securities" shall mean stocks, bonds, bills, rights,
script, warrants, interim certificates, registered investment company shares and
all negotiable or nonnegotiable paper commonly known as Securities and other
instruments or obligations.
(b) "Assets" shall mean Securities, monies and other property held by the
Custodian for the benefit of a Fund.
(c)(1) "Instructions", as used herein, shall mean: (i) a tested telex, a
written (including, without limitation, facsimile transmission) request,
direction, instruction or certification signed or initialed by or on behalf of a
Fund by an Authorized Person; (ii) a telephonic or other oral communication from
a person the Custodian reasonably believes to be an Authorized Person; or (iii)
a communication effected directly between an electro-mechanical or electronic
device or system (including, without limitation, computers) on behalf of a Fund.
Instructions in the form of oral communications shall be confirmed by the
appropriate Fund by tested telex or in writing in the manner set forth in clause
(i) above, but the lack of such confirmation shall in no way affect any action
taken by the Custodian in reliance upon such oral Instructions prior to the
Custodian's receipt of such confirmation. Each Fund authorizes the Custodian to
record any and all telephonic or other oral Instructions communicated to the
Custodian.
(c)(2) "Special Instructions", as used herein, shall mean Instructions
countersigned or confirmed in writing by the Treasurer or any Assistant
Treasurer of a Fund or any other person designated by the Treasurer of such Fund
in writing, which countersignature or confirmation shall be included on the same
instrument containing the Instructions or on a separate instrument relating
thereto.
(c)(3) Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, facsimile transmission or telex
number agreed upon from time to time by the Custodian and each Fund.
(c)(4) Where appropriate, Instructions and Special Instructions shall
be continuing instructions.
3. DELIVERY OF CORPORATE DOCUMENTS.
Each of the parties to this Agreement represents that its execution does
not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
action to authorize the execution and delivery of this Agreement has been taken.
Each Fund has furnished the Custodian with copies, properly certified or
authenticated, with all amendments or supplements thereto, of the following
documents:
(a) Certificate of Incorporation (or equivalent document) of the Fund
as in effect on the date hereof;
(b) By-Laws of the Fund as in effect on the date hereof;
(c) Resolutions of the Board of Directors of the Fund appointing the
Custodian and approving the form of this Agreement; and
(d) The Fund's current prospectus and statements of additional
information.
Each Fund shall promptly furnish the Custodian with copies of any updates,
amendments or supplements to the foregoing documents.
In addition, each Fund has delivered or will promptly deliver to the
Custodian, copies of the Resolution(s) of its Board of Directors or Trustees and
all amendments or supplements thereto, properly certified or authenticated,
designating certain officers or employees of each such Fund who will have
continuing authority to certify to the Custodian: (a) the names, titles,
signatures and scope of authority of all persons authorized to give Instructions
or any other notice, request, direction, instruction, certificate or instrument
on behalf of each Fund, and (b) the names, titles and signatures of those
persons authorized to countersign or confirm Special Instructions on behalf of
each Fund (in both cases collectively, the "Authorized Persons" and
individually, an "Authorized Person"). Such Resolutions and certificates may be
accepted and relied upon by the Custodian as conclusive evidence of the facts
set forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar Resolution or certificate to the
contrary. Upon delivery of a certificate which deletes or does not include the
name(s) of a person previously authorized to give Instructions or to countersign
or confirm Special Instructions, such persons shall no longer be considered an
Authorized Person authorized to give Instructions or to countersign or confirm
Special Instructions. Unless the certificate specifically requires that the
approval of anyone else will first have been obtained, the Custodian will be
under no obligation to inquire into the right of the person giving such
Instructions or Special Instructions to do so. Notwithstanding any of the
foregoing, no Instructions or Special Instructions received by the Custodian
from a Fund will be deemed to authorize or permit any director, trustee,
officer, employee, or agent of such Fund to withdraw any of the Assets of such
Fund upon the mere receipt of such authorization, Special Instructions or
Instructions from such director, trustee, officer, employee or agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.
Except for Assets held by any Subcustodian appointed pursuant to Sections
5(b), (c), or (d) of this Agreement, the Custodian shall have and perform the
powers and duties hereinafter set forth in this Section 4. For purposes of this
Section 4 all references to powers and duties of the "Custodian" shall also
refer to any Domestic Subcustodian appointed pursuant to Section 5(a).
(a) Safekeeping.
The Custodian will keep safely the Assets of each Fund which are delivered
to it from time to time. The Custodian shall not be responsible for any property
of a Fund held or received by such Fund and not delivered to the Custodian.
(b) Manner of Holding Securities.
(1) The Custodian shall at all times hold Securities of each Fund
either: (i) by physical possession of the share certificates or other
instruments representing such Securities in registered or bearer form; (ii) in
book-entry form by a Securities System (as hereinafter defined) in accordance
with the provisions of sub-paragraph (3) below; or (iii) with the transfer
agents for other registered investment companies (in the case of registered
investment company shares owned by a Fund) in accordance with the provisions of
sub-paragraph (4) below.
(2) The Custodian may hold registrable portfolio Securities which have
been delivered to it in physical form, by registering the same in the name of
the appropriate Fund or its nominee, or in the name of the Custodian or its
nominee, for whose actions such Fund and Custodian, respectively, shall be fully
responsible. Upon the receipt of Instructions, the Custodian shall hold such
Securities in street certificate form, so called, with or without any indication
of fiduciary capacity. However, unless it receives Instructions to the contrary,
the Custodian will register all such portfolio Securities in the name of the
Custodian's authorized nominee. All such Securities shall be held in an account
of the Custodian containing only assets of the appropriate Fund or only assets
held by the Custodian as a fiduciary, provided that the records of the Custodian
shall indicate at all times the Fund or other customer for which such Securities
are held in such accounts and the respective interests therein.
(3) The Custodian may deposit and/or maintain domestic Securities
owned by a Fund in, and each Fund hereby approves use of: (a) The Depository
Trust Company; (b) The Participants Trust Company; and (c) any book-entry system
as provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii)
Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or
(iii) the book-entry regulations of federal agencies substantially in the form
of 31 CFR 306.115. Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by a Fund in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred to in
this Agreement as a "Securities System", and all such Securities Systems shall
be listed on the attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
(i) The Custodian may deposit the Securities directly or through
one or more agents or Subcustodians which are also qualified to act as
custodians for investment companies.
(ii) The Custodian shall deposit and/or maintain the Securities
in a Securities System, provided that such Securities are represented in an
account ("Account") of the Custodian in the Securities System that includes only
assets held by the Custodian as a fiduciary, custodian or otherwise for
customers.
(iii) The books and records of the Custodian shall at all times
identify those Securities belonging to any one or more Funds which are
maintained in a Securities System.
(iv) The Custodian shall pay for Securities purchased for the
account of a Fund only upon (a) receipt of advice from the Securities System
that such Securities have been transferred to the Account of the Custodian in
accordance with the rules of the Securities System, and (b) the making of an
entry on the records of the Custodian to reflect such payment and transfer for
the account of such Fund. The Custodian shall transfer Securities sold for the
account of a Fund only upon (a) receipt of advice from the Securities System
that payment for such Securities has been transferred to the Account of the
Custodian in accordance with the rules of the Securities System, and (b) the
making of an entry on the records of the Custodian to reflect such transfer and
payment for the account of such Fund. Copies of all advices from the Securities
System relating to transfers of Securities for the account of a Fund shall be
maintained for such Fund by the Custodian. The Custodian shall deliver to a Fund
on the next succeeding business day, daily transaction reports that shall
include each day's transactions in the Securities System for the account of such
Fund. Such transaction reports shall be delivered to such Fund or any agent
designated by such Fund pursuant to Instructions, by computer or in such other
manner as such Fund and Custodian may agree.
(v) The Custodian shall, if requested by a Fund pursuant to
Instructions, provide such Fund with reports obtained by the Custodian or any
Subcustodian with respect to a Securities System's accounting system, internal
accounting control and procedures for safeguarding Securities deposited in the
Securities System.
(vi) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any Securities System on behalf of a Fund as promptly as
practicable and shall take all actions reasonably practicable to safeguard the
Securities of such Fund maintained with such Securities System.
(4) The Custodian may hold shares of other registered investment
companies ("Underlying Funds") which are owned by a Fund with the transfer
agents for such Underlying Funds. In maintaining shares of Underlying Funds with
such transfer agents, each Fund investing in such shares and the Custodian shall
adhere to the following procedures designed to comply with the requirements of
Rule 17f-4 of the 1940 Act:
(i) The Custodian may deposit the shares directly or through one
or more agents or Subcustodians which are also qualified to act as custodians
for investment companies.
(ii) The Custodian shall hold the shares in accounts with the
transfer agents of the Underlying Funds, provided such accounts are maintained
by such transfer agents as segregated accounts containing only assets held for
the Custodian as Custodian of a Fund.
(iii) The books and records of the Custodian shall at all times
identify those shares of Underlying Funds belonging to one or more Funds which
are held by the transfer agents of such Underlying Funds.
(iv) The Custodian shall provide notice to the Funds of all
transfers to or from the account of a Fund held at the transfer agent of an
Underlying Fund.
(v) The Custodian shall, if reasonably requested by a Fund
pursuant to Instructions, provide such Fund with reports obtained by the
Custodian or any Subcustodian with respect to the internal accounting control
maintained by the transfer agent for an Underlying Fund.
(c) Free Delivery of Assets.
Notwithstanding any other provision of this Agreement and except as
provided in Sections 3 and 4 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with a Fund's transactions and
to transfer such Assets to such broker, dealer, Subcustodian, bank, agent,
Securities System or otherwise as specified in such Special Instructions.
(d) Exchange of Securities.
Upon receipt of Instructions, the Custodian will exchange portfolio
Securities held by it for a Fund for other Securities or cash paid in connection
with any reorganization, recapitalization, merger, consolidation, or conversion
of convertible Securities, and will deposit any such Securities in accordance
with the terms of any reorganization or protective plan.
Without Instructions, the Custodian is authorized to exchange Securities
held by it in temporary form for Securities in definitive form, to surrender
Securities for transfer into a name or nominee name as permitted in Section
4(b)(2), to effect an exchange of shares in a stock split or when the par value
of the stock is changed, to sell any fractional shares, and, upon receiving
payment therefor, to surrender bonds or other Securities held by it at maturity
or call.
(e) Purchases of Assets.
(1) Securities Purchases. In accordance with Instructions, the
Custodian shall, with respect to a purchase of Securities, pay for such
Securities out of monies held for a Fund's account for which the purchase was
made, but only insofar as monies are available therein for such purpose, and
receive the portfolio Securities so purchased. Unless the Custodian has received
Special Instructions to the contrary, such payment will be made only upon
receipt of Securities by the Custodian, a clearing corporation of a national
Securities exchange of which the Custodian is a member, or a Securities System
in accordance with the provisions of Section 4(b)(3) hereof. Notwithstanding the
foregoing, upon receipt of Instructions: (i) in connection with a repurchase
agreement, the Custodian may release funds to a Securities System prior to the
receipt of advice from the Securities System that the Securities underlying such
repurchase agreement have been transferred by book-entry into the Account
maintained with such Securities System by the Custodian, provided that the
Custodian's instructions to the Securities System require that the Securities
System may make payment of such funds to the other party to the repurchase
agreement only upon transfer by book-entry of the Securities underlying the
repurchase agreement into such Account; (ii) in the case of Interest Bearing
Deposits, currency deposits, and other deposits, foreign exchange transactions,
futures contracts or options, pursuant to Sections 4(g), 4(h), 4(l), and 4(m)
hereof, the Custodian may make payment therefor before receipt of an advice of
transaction; (iii) in the case of Securities as to which payment for the
Security and receipt of the instrument evidencing the Security are under
generally accepted trade practice or the terms of the instrument representing
the Security expected to take place in different locations or through separate
parties, such as commercial paper which is indexed to foreign currency exchange
rates, derivatives and similar Securities, the Custodian may make payment for
such Securities prior to delivery thereof in accordance with such generally
accepted trade practice or the terms of the instrument representing such
Security; and (iv) in the case of shares of Underlying Funds maintained with
transfer agents for such Underlying Funds pursuant to Section 4(b)(4) hereof,
payment for shares purchased shall be in accordance with the procedures of such
transfer agent.
(2) Other Assets Purchased. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall pay for and receive other Assets
for the account of a Fund as provided in Instructions.
(f) Sales of Assets.
(1) Securities Sold. In accordance with Instructions, the Custodian
will, with respect to a sale, deliver or cause to be delivered the Securities
thus designated as sold to the broker or other person specified in the
Instructions relating to such sale. Unless the Custodian has received Special
Instructions to the contrary, such delivery shall be made only upon receipt of
payment therefor in the form of: (a) cash, certified check, bank cashier's
check, bank credit, or bank wire transfer; (b) credit to the account of the
Custodian with a clearing corporation of a national Securities exchange of which
the Custodian is a member; or (c) credit to the Account of the Custodian with a
Securities System, in accordance with the provisions of Section 4(b)(3) hereof.
Notwithstanding the foregoing: (i) Securities held in physical form may be
delivered and paid for in accordance with "street delivery custom" to a broker
or its clearing agent, against delivery to the Custodian of a receipt for such
Securities, provided that the Custodian shall have taken reasonable steps to
ensure prompt collection of the payment for, or return of, such Securities by
the broker or its clearing agent, and provided further that the Custodian shall
not be responsible for the selection of or the failure or inability to perform
of such broker or its clearing agent or for any related loss arising from
delivery or custody of such Securities prior to receiving payment therefor; and
(ii) in the case of shares of Underlying Funds maintained with transfer agents
for such Underlying Funds pursuant to Section 4(b)(4) hereof, delivery of shares
sold shall be in accordance with the procedures of such transfer agent.
(2) Other Assets Sold. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall receive payment for and deliver
other Assets for the account of a Fund as provided in Instructions.
(g) Options.
(1) Upon receipt of Instructions relating to the purchase of an option
or sale of a covered call option, the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the purchase or writing of
the option by a Fund; (b) if the transaction involves the sale of a covered call
option, deposit and maintain in a segregated account the Securities (either
physically or by book-entry in a Securities System) subject to the covered call
option written on behalf of such Fund; and (c) pay, release and/or transfer such
Securities, cash or other Assets in accordance with any notices or other
communications evidencing the expiration, termination or exercise of such
options which are furnished to the Custodian by the Options Clearing Corporation
(the "OCC"), the securities or options exchanges on which such options were
traded, or such other organization as may be responsible for handling such
option transactions.
(2) Upon receipt of Instructions relating to the sale of a naked
option (including stock index and commodity options), the Custodian, the
appropriate Fund and the broker-dealer shall enter into an agreement to comply
with the rules of the OCC or of any registered national securities exchange or
similar organizations(s). Pursuant to that agreement and such Fund's
Instructions, the Custodian shall: (a) receive and retain confirmations or other
documents, if any, evidencing the writing of the option; (b) deposit and
maintain in a segregated account, Securities (either physically or by book-entry
in a Securities System), cash and/or other Assets; and (c) pay, release and/or
transfer such Securities, cash or other Assets in accordance with any such
agreement and with any notices or other communications evidencing the
expiration, termination or exercise of such option which are furnished to the
Custodian by the OCC, the securities or options exchanges on which such options
were traded, or such other organization as may be responsible for handling such
option transactions. The appropriate Fund and the broker-dealer shall be
responsible for determining the quality and quantity of assets held in any
segregated account established in compliance with applicable margin maintenance
requirements and the performance of other terms of any option contract.
(h) Futures Contracts.
Upon receipt of Instructions, the Custodian shall enter into a futures
margin procedural agreement among the appropriate Fund, the Custodian and the
designated futures commission merchant (a "Procedural Agreement"). Under the
Procedural Agreement the Custodian shall: (a) receive and retain confirmations,
if any, evidencing the purchase or sale of a futures contract or an option on a
futures contract by such Fund; (b) deposit and maintain in a segregated account
cash, Securities and/or other Assets designated as initial, maintenance or
variation "margin" deposits intended to secure such Fund's performance of its
obligations under any futures contracts purchased or sold, or any options on
futures contracts written by such Fund, in accordance with the provisions of any
Procedural Agreement designed to comply with the provisions of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s), regarding
such margin deposits; and (c) release Assets from and/or transfer Assets into
such margin accounts only in accordance with any such Procedural Agreements. The
appropriate Fund and such futures commission merchant shall be responsible for
determining the type and amount of Assets held in the segregated account or paid
to the broker-dealer in compliance with applicable margin maintenance
requirements and the performance of any futures contract or option on a futures
contract in accordance with its terms.
(i) Segregated Accounts.
Upon receipt of Instructions, the Custodian shall establish and maintain
on its books a segregated account or accounts for and on behalf of a Fund, into
which account or accounts may be transferred Assets of such Fund, including
Securities maintained by the Custodian in a Securities System pursuant to
Paragraph (b)(3) of this Section 4 and shares maintained by the Custodian with
the transfer agents for Underlying Funds pursuant to Paragraph (b)(4) of this
Section 4, said account or accounts to be maintained (i) for the purposes set
forth in Sections 4(g), 4(h) and 4(n) and (ii) for the purpose of compliance by
such Fund with the procedures required by the SEC Investment Company Act Release
Number 10666 or any subsequent release or releases relating to the maintenance
of segregated accounts by registered investment companies, or (iii) for such
other purposes as may be set forth, from time to time, in Special Instructions.
The Custodian shall not be responsible for the determination of the type or
amount of Assets to be held in any segregated account referred to in this
paragraph, or for compliance by the Fund with required procedures noted in (ii)
above.
(j) Depositary Receipts.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered Securities to the depositary used for such Securities by an issuer
of American Depositary Receipts or International Depositary Receipts
(hereinafter referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the organization surrendering the same that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such Securities in the
name of the Custodian or a nominee of the Custodian, for delivery in accordance
with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the organization surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
Securities underlying such ADRs in accordance with such instructions.
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
Upon receipt of Instructions, the Custodian shall: (a) deliver warrants,
puts, calls, rights or similar Securities to the issuer or trustee thereof (or
to the agent of such issuer or trustee) for the purpose of exercise or sale,
provided that the new Securities, cash or other Assets, if any, acquired as a
result of such actions are to be delivered to the Custodian; and (b) deposit
Securities upon invitations for tenders thereof, provided that the consideration
for such Securities is to be paid or delivered to the Custodian, or the tendered
Securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Instructions, to comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall notify the appropriate Fund of such action in writing by
facsimile transmission or in such other manner as such Fund and Custodian may
agree in writing.
The Fund agrees that if it gives an Instruction for the performance of an
act on the last permissible date of a period established by any optional offer
or on the last permissible date for the performance of such act, the Fund shall
hold the Bank harmless from any adverse consequences in connection with acting
upon or failing to act upon such Instructions.
(l) Interest Bearing Deposits.
Upon receipt of Instructions directing the Custodian to purchase interest
bearing fixed term and call deposits (hereinafter referred to, collectively, as
"Interest Bearing Deposits") for the account of a Fund, the Custodian shall
purchase such Interest Bearing Deposits in the name of such Fund with such banks
or trust companies, including the Custodian, any Subcustodian or any subsidiary
or affiliate of the Custodian (hereinafter referred to as "Banking
Institutions"), and in such amounts as such Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in U.S. dollars
or other currencies, as such Fund may determine and direct pursuant to
Instructions. The responsibilities of the Custodian to a Fund for Interest
Bearing Deposits issued by the Custodian shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than those
issued by the Custodian, (a) the Custodian shall be responsible for the
collection of income and the transmission of cash to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or for the failure of such Banking Institution to pay upon
demand.
(m) Foreign Exchange Transactions.
(l) Each Fund may from time to time appoint the Custodian as its agent
in the execution of currency exchange transactions. The Custodian agrees to
provide exchange rate and U.S. Dollar information, electronically or in writing,
to the Funds prior to the value date of said foreign exchange transaction. The
Fund agrees to provide the Custodian with information necessary to complete the
foreign exchange transaction two business days prior to the value date of said
transaction.
(2) Upon receipt of Instructions, the Custodian shall settle foreign
exchange contracts or options to purchase and sell foreign currencies for spot
and future delivery on behalf of and for the account of a Fund with such
currency brokers or Banking Institutions as such Fund may determine and direct
pursuant to Instructions. If, in its Instructions, a Fund does not direct the
Custodian to utilize a particular currency broker or Banking Institution, the
Custodian is authorized to select such currency broker or Banking Institution as
it deems appropriate to execute the Fund's foreign currency transaction.
(3) Each Fund accepts full responsibility for its use of third party
foreign exchange brokers and for execution of said foreign exchange contracts
and understands that the Fund shall be responsible for any and all costs and
interest charges which may be incurred as a result of the failure or delay of
its third party broker to deliver foreign exchange. The Custodian shall have no
responsibility or liability with respect to the selection of the currency
brokers or Banking Institutions with which a Fund deals or the performance of
such brokers or Banking Institutions.
(4) Notwithstanding anything to the contrary contained herein, upon
receipt of Instructions the Custodian may, in connection with a foreign exchange
contract, make free outgoing payments of cash in the form of U.S. Dollars or
foreign currency prior to receipt of confirmation of such foreign exchange
contract or confirmation that the countervalue currency completing such contract
has been delivered or received.
(5) The Custodian shall not be obligated to enter into foreign
exchange transactions as principal. However, if the Custodian has made available
to a Fund its services as a principal in foreign exchange transactions and
subject to any separate agreement between the parties relating to such
transactions, the Custodian shall enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of the Fund, with the Custodian as principal.
(n) Pledges or Loans of Securities.
(1) Upon receipt of Instructions from a Fund, the Custodian will
release or cause to be released Securities held in custody to the pledgees
designated in such Instructions by way of pledge or hypothecation to secure
loans incurred by such Fund with various lenders including but not limited to
UMB Bank, n.a.; provided, however, that the Securities shall be released only
upon payment to the Custodian of the monies borrowed, except that in cases where
additional collateral is required to secure existing borrowings, further
Securities may be released or delivered, or caused to be released or delivered
for that purpose upon receipt of Instructions. Upon receipt of Instructions, the
Custodian will pay, but only from funds available for such purpose, any such
loan upon re-delivery to it of the Securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing such loan. In lieu of
delivering collateral to a pledgee, the Custodian, on the receipt of
Instructions, shall transfer the pledged Securities to a segregated account for
the benefit of the pledgee.
(2) Upon receipt of Special Instructions, and execution of a separate
Securities Lending Agreement, the Custodian will release Securities held in
custody to the borrower designated in such Instructions and may, except as
otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the appropriate Fund to the borrower
thereof only upon receipt of the collateral for such borrowing. The Custodian
shall have no responsibility or liability for any loss arising from the delivery
of Securities prior to the receipt of collateral. Upon receipt of Instructions
and the loaned Securities, the Custodian will release the collateral to the
borrower.
(o) Stock Dividends, Rights, Etc.
The Custodian shall receive and collect all stock dividends, rights, and
other items of like nature and, upon receipt of Instructions, take action with
respect to the same as directed in such Instructions.
(p) Routine Dealings.
The Custodian will, in general, attend to all routine and mechanical
matters in accordance with industry standards in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings with Securities or
other property of each Fund except as may be otherwise provided in this
Agreement or directed from time to time by Instructions from any particular
Fund. The Custodian may also make payments to itself or others from the Assets
for disbursements and out-of-pocket expenses incidental to handling Securities
or other similar items relating to its duties under this Agreement, provided
that all such payments shall be accounted for to the appropriate Fund.
(q) Collections.
The Custodian shall (a) collect amounts due and payable to each Fund with
respect to portfolio Securities and other Assets; (b) promptly credit to the
account of each Fund all income and other payments relating to portfolio
Securities and other Assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in writing by the
Custodian and any particular Fund; (c) promptly endorse and deliver any
instruments required to effect such collection; and (d) promptly execute
ownership and other certificates and affidavits for all federal, state, local
and foreign tax purposes in connection with receipt of income or other payments
with respect to portfolio Securities and other Assets, or in connection with the
transfer of such Securities or other Assets; provided, however, that with
respect to portfolio Securities registered in so-called street name, or physical
Securities with variable interest rates, the Custodian shall use its best
efforts to collect amounts due and payable to any such Fund. The Custodian shall
notify a Fund in writing by facsimile transmission or in such other manner as
such Fund and Custodian may agree in writing if any amount payable with respect
to portfolio Securities or other Assets is not received by the Custodian when
due. The Custodian shall not be responsible for the collection of amounts due
and payable with respect to portfolio Securities or other Assets that are in
default.
(r) Bank Accounts.
Upon Instructions, the Custodian shall open and operate a bank account or
accounts on the books of the Custodian; provided that such bank account(s) shall
be in the name of the Custodian or a nominee thereof, for the account of one or
more Funds, and shall be subject only to draft or order of the Custodian. The
responsibilities of the Custodian to any one or more such Funds for deposits
accepted on the Custodian's books shall be that of a U.S.
bank for a similar deposit.
(s) Dividends, Distributions and Redemptions.
To enable each Fund to pay dividends or other distributions to
shareholders of each such Fund and to make payment to shareholders who have
requested repurchase or redemption of their shares of each such Fund
(collectively, the "Shares"), the Custodian shall release cash or Securities
insofar as available. In the case of cash, the Custodian shall, upon the receipt
of Instructions, transfer such funds by check or wire transfer to any account at
any bank or trust company designated by each such Fund in such Instructions. In
the case of Securities, the Custodian shall, upon the receipt of Special
Instructions, make such transfer to any entity or account designated by each
such Fund in such Special Instructions.
(t) Proceeds from Shares Sold.
The Custodian shall receive funds representing cash payments received for
shares issued or sold from time to time by each Fund, and shall credit such
funds to the account of the appropriate Fund. The Custodian shall notify the
appropriate Fund of Custodian's receipt of cash in payment for shares issued by
such Fund by facsimile transmission or in such other manner as such Fund and the
Custodian shall agree. Upon receipt of Instructions, the Custodian shall: (a)
deliver all federal funds received by the Custodian in payment for shares as may
be set forth in such Instructions and at a time agreed upon between the
Custodian and such Fund; and (b) make federal funds available to a Fund as of
specified times agreed upon from time to time by such Fund and the Custodian, in
the amount of checks received in payment for shares which are deposited to the
accounts of such Fund.
(u) Proxies and Notices; Compliance with the Shareholders Communication
Act of 1985.
The Custodian shall deliver or cause to be delivered to the appropriate
Fund all forms of proxies, all notices of meetings, and any other notices or
announcements affecting or relating to Securities owned by such Fund that are
received by the Custodian, any Subcustodian, or any nominee of either of them,
and, upon receipt of Instructions, the Custodian shall execute and deliver, or
cause such Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Instructions,
neither the Custodian nor any Subcustodian or nominee shall vote upon any such
Securities, or execute any proxy to vote thereon, or give any consent or take
any other action with respect thereto.
The Custodian will not release the identity of any Fund to an issuer which
requests such information pursuant to the Shareholder Communications Act of 1985
for the specific purpose of direct communications between such issuer and any
such Fund unless a particular Fund directs the Custodian otherwise in writing.
(v) Books and Records.
The Custodian shall maintain such records relating to its activities under
this Agreement as are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 ("the 1940 Act") and to preserve them for the
periods prescribed in Rule 31a-2 under the 1940 Act. These records shall be open
for inspection by duly authorized officers, employees or agents (including
independent public accountants) of the appropriate Fund during normal business
hours of the Custodian.
The Custodian shall provide accountings relating to its activities under
this Agreement as shall be agreed upon by each Fund and the Custodian.
(w) Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as each Fund may request to
obtain from year to year favorable opinions from each such Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder and in connection with the preparation of each such Fund's periodic
reports to the SEC and with respect to any other requirements of the SEC.
(x) Reports by Independent Certified Public Accountants.
At the request of a Fund, the Custodian shall deliver to such Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, Securities and
other Assets, including cash, Securities and other Assets deposited and/or
maintained in a Securities System, with a transfer agent for an Underlying Fund
or with a Subcustodian. Such report shall be of sufficient scope and in
sufficient detail as may reasonably be required by such Fund and as may
reasonably be obtained by the Custodian.
(y) Bills and Other Disbursements.
Upon receipt of Instructions, the Custodian shall pay, or cause to be
paid, all bills, statements, or other obligations of a Fund.
5. SUBCUSTODIANS.
From time to time, in accordance with the relevant provisions of this
Agreement, the Custodian may appoint one or more Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians, or Interim Subcustodians (as each are
hereinafter defined) to act on behalf of any one or more Funds. A Domestic
Subcustodian, in accordance with the provisions of this Agreement, may also
appoint a Foreign Subcustodian, Special Subcustodian, or Interim Subcustodian to
act on behalf of any one or more Funds. For purposes of this Agreement, all
Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians and Interim
Subcustodians shall be referred to collectively as "Subcustodians".
(a) Domestic Subcustodians.
The Custodian may, at any time and from time to time, appoint any bank as
defined in Section 2(a)(5) of the 1940 Act or any trust company or other entity,
any of which meet the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder, to act for the Custodian on
behalf of any one or more Funds as a subcustodian for purposes of holding Assets
of such Fund(s) and performing other functions of the Custodian within the
United States (a "Domestic Subcustodian"). Each Fund shall approve in writing
the appointment of the proposed Domestic Subcustodian; and the Custodian's
appointment of any such Domestic Subcustodian shall not be effective without
such prior written approval of the Fund(s). Each such duly approved Domestic
Subcustodian shall be listed on Appendix A attached hereto, as it may be
amended, from time to time.
(b) Foreign Subcustodians.
The Custodian may at any time appoint, or cause a Domestic Subcustodian to
appoint, any bank, trust company or other entity meeting the requirements of an
"eligible foreign custodian" under Section 17(f) of the 1940 Act and the rules
and regulations thereunder to act for the Custodian on behalf of any one or more
Funds as a subcustodian or sub-subcustodian (if appointed by a Domestic
Subcustodian) for purposes of holding Assets of the Fund(s) and performing other
functions of the Custodian in countries other than the United States of America
(hereinafter referred to as a "Foreign Subcustodian" in the context of either a
subcustodian or a sub-subcustodian); provided that the Custodian shall have
obtained written confirmation from each Fund of the approval of the Board of
Directors or other governing body of each such Fund (which approval may be
withheld in the sole discretion of such Board of Directors or other governing
body or entity) with respect to (i) the identity of any proposed Foreign
Subcustodian (including branch designation), (ii) the country or countries in
which, and the securities depositories or clearing agencies (hereinafter
"Securities Depositories and Clearing Agencies"), if any, through which, the
Custodian or any proposed Foreign Subcustodian is authorized to hold Securities
and other Assets of each such Fund, and (iii) the form and terms of the
subcustodian agreement to be entered into with such proposed Foreign
Subcustodian. Each such duly approved Foreign Subcustodian and the countries
where and the Securities Depositories and Clearing Agencies through which they
may hold Securities and other Assets of the Fund(s) shall be listed on Appendix
A attached hereto, as it may be amended, from time to time. Each Fund shall be
responsible for informing the Custodian sufficiently in advance of a proposed
investment which is to be held in a country in which no Foreign Subcustodian is
authorized to act, in order that there shall be sufficient time for the
Custodian, or any Domestic Subcustodian, to effect the appropriate arrangements
with a proposed Foreign Subcustodian, including obtaining approval as provided
in this Section 5(b). In connection with the appointment of any Foreign
Subcustodian, the Custodian shall, or shall cause the Domestic Subcustodian to,
enter into a subcustodian agreement with the Foreign Subcustodian in form and
substance approved by each such Fund. The Custodian shall not consent to the
amendment of, and shall cause any Domestic Subcustodian not to consent to the
amendment of, any agreement entered into with a Foreign Subcustodian, which
materially affects any Fund's rights under such agreement, except upon prior
written approval of such Fund pursuant to Special Instructions.
(c) Interim Subcustodians.
Notwithstanding the foregoing, in the event that a Fund shall invest in an
Asset to be held in a country in which no Foreign Subcustodian is authorized to
act, the Custodian shall notify such Fund in writing by facsimile transmission
or in such other manner as such Fund and the Custodian shall agree in writing of
the unavailability of an approved Foreign Subcustodian in such country; and upon
the receipt of Special Instructions from such Fund, the Custodian shall, or
shall cause its Domestic Subcustodian to, appoint or approve an entity (referred
to herein as an "Interim Subcustodian") designated in such Special Instructions
to hold such Security or other Asset.
(d) Special Subcustodians.
Upon receipt of Special Instructions, the Custodian shall, on behalf of a
Fund, appoint one or more banks, trust companies or other entities designated in
such Special Instructions to act for the Custodian on behalf of such Fund as a
subcustodian for purposes of: (i) effecting third-party repurchase transactions
with banks, brokers, dealers or other entities through the use of a common
custodian or subcustodian; (ii) providing depository and clearing agency
services with respect to certain variable rate demand note Securities, (iii)
providing depository and clearing agency services with respect to dollar
denominated Securities, and (iv) effecting any other transactions designated by
such Fund in such Special Instructions. Each such designated subcustodian
(hereinafter referred to as a "Special Subcustodian") shall be listed on
Appendix A attached hereto, as it may be amended from time to time. In
connection with the appointment of any Special Subcustodian, the Custodian shall
enter into a subcustodian agreement with the Special Subcustodian in form and
substance approved by the appropriate Fund in Special Instructions. The
Custodian shall not amend any subcustodian agreement entered into with a Special
Subcustodian, or waive any rights under such agreement, except upon prior
approval pursuant to Special Instructions.
(e) Termination of a Subcustodian.
The Custodian may, at any time in its discretion upon notification to the
appropriate Fund(s), terminate any Subcustodian of such Fund(s) in accordance
with the termination provisions under the applicable subcustodian agreement, and
upon the receipt of Special Instructions, the Custodian will terminate any
Subcustodian in accordance with the termination provisions under the applicable
subcustodian agreement.
(f) Certification Regarding Foreign Subcustodians.
Upon request of a Fund, the Custodian shall deliver to such Fund a
certificate stating: (i) the identity of each Foreign Subcustodian then acting
on behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agencies through which each such Foreign Subcustodian
is then holding cash, Securities and other Assets of such Fund; and (iii) such
other information as may be requested by such Fund, and as the Custodian shall
be reasonably able to obtain, to evidence compliance with rules and regulations
under the 1940 Act.
6. STANDARD OF CARE.
(a) General Standard of Care.
The Custodian shall be liable to a Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by such Fund resulting from
the negligence or willful misfeasance of the Custodian; provided, however, in no
event shall the Custodian be liable for special, indirect or consequential
damages arising under or in connection with this Agreement.
(b) Actions Prohibited by Applicable Law, Events Beyond Custodian's
Control, Sovereign Risk, Etc.
In no event shall the Custodian or any Domestic Subcustodian incur
liability hereunder (i) if the Custodian or any Subcustodian or Securities
System, or any subcustodian, transfer agent, Securities System, Securities
Depository or Clearing Agency utilized by the Custodian or any such
Subcustodian, or any nominee of the Custodian or any Subcustodian (individually,
a "Person") is prevented, forbidden or delayed from performing, or omits to
perform, any act or thing which this Agreement provides shall be performed or
omitted to be performed, by reason of: (a) any provision of any present or
future law or regulation or order of the United States of America, or any state
thereof, or of any foreign country, or political subdivision thereof or of any
court of competent jurisdiction (and neither the Custodian nor any other Person
shall be obligated to take any action contrary thereto); or (b) any event beyond
the control of the Custodian or other Person such as armed conflict, riots,
strikes, lockouts, labor disputes, equipment or transmission failures, natural
disasters, or failure of the mails, transportation, communications or power
supply; or (ii) for any loss, damage, cost or expense resulting from "Sovereign
Risk." A "Sovereign Risk" shall mean nationalization, expropriation, currency
devaluation, revaluation or fluctuation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting a Fund's Assets; or acts of armed conflict,
terrorism, insurrection or revolution; or any other act or event beyond the
Custodian's or such other Person's control.
(c) Liability for Past Records.
Neither the Custodian nor any Domestic Subcustodian shall have any
liability in respect of any loss, damage or expense suffered by a Fund, insofar
as such loss, damage or expense arises from the performance of the Custodian or
any Domestic Subcustodian in reliance upon records that were maintained for such
Fund by entities other than the Custodian or any Domestic Subcustodian prior to
the Custodian's employment hereunder.
(d) Advice of Counsel.
The Custodian and all Domestic Subcustodians shall be entitled to receive
and act upon advice of counsel of its own choosing on all matters. The Custodian
and all Domestic Subcustodians shall be without liability for any actions taken
or omitted in good faith pursuant to the advice of counsel.
(e) Advice of the Fund and Others.
The Custodian and any Domestic Subcustodian may rely upon the advice of
any Fund and upon statements of such Fund's accountants and other persons
believed by it in good faith to be expert in matters upon which they are
consulted, and neither the Custodian nor any Domestic Subcustodian shall be
liable for any actions taken or omitted, in good faith, pursuant to such advice
or statements.
(f) Instructions Appearing to be Genuine.
The Custodian and all Domestic Subcustodians shall be fully protected and
indemnified in acting as a custodian hereunder upon any Resolutions of the Board
of Directors or Trustees, Instructions, Special Instructions, advice, notice,
request, consent, certificate, instrument or paper appearing to it to be genuine
and to have been properly executed and shall, unless otherwise specifically
provided herein, be entitled to receive as conclusive proof of any fact or
matter required to be ascertained from any Fund hereunder a certificate signed
by any officer of such Fund authorized to countersign or confirm Special
Instructions.
(g) Exceptions from Liability.
Without limiting the generality of any other provisions hereof, neither
the Custodian nor any Domestic Subcustodian shall be under any duty or
obligation to inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased by or for
any Fund, the legality of the purchase thereof or evidence of ownership required
to be received by any such Fund, or the propriety of the decision to purchase or
amount paid therefor;
(ii) the legality of the sale of any Securities by or for any Fund,
or the propriety of the amount for which the same were sold; or
(iii) any other expenditures, encumbrances of Securities, borrowings
or similar actions with respect to any Fund's Assets;
and may, until notified to the contrary, presume that all Instructions or
Special Instructions received by it are not in conflict with or in any way
contrary to any provisions of any such Fund's Declaration of Trust, Partnership
Agreement, Articles of Incorporation or By-Laws or votes or proceedings of the
shareholders, trustees, partners or directors of any such Fund, or any such
Fund's currently effective Registration Statement on file with the SEC.
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.
(a) Domestic Subcustodians
The Custodian shall be liable for the acts or omissions of any Domestic
Subcustodian to the same extent as if such actions or omissions were performed
by the Custodian itself.
(b) Liability for Acts and Omissions of Foreign Subcustodians.
The Custodian shall be liable to a Fund for any loss or damage to such
Fund caused by or resulting from the acts or omissions of any Foreign
Subcustodian to the extent that, under the terms set forth in the subcustodian
agreement between the Custodian or a Domestic Subcustodian and such Foreign
Subcustodian, the Foreign Subcustodian has failed to perform in accordance with
the standard of conduct imposed under such subcustodian agreement and the
Custodian or Domestic Subcustodian recovers from the Foreign Subcustodian under
the applicable subcustodian agreement.
(c) Securities Systems, Transfer Agents for Underlying funds, Interim
Subcustodians, Special Subcustodians, Securities Depositories and Clearing
Agencies.
The Custodian shall not be liable to any Fund for any loss, damage or
expense suffered or incurred by such Fund resulting from or occasioned by the
actions or omissions of a Securities System, transfer agent for an Underlying
Fund, Interim Subcustodian, Special Subcustodian, or Securities Depository and
Clearing Agency unless such loss, damage or expense is caused by, or results
from, the negligence or willful misfeasance of the Custodian.
(d) Defaults or Insolvency's of Brokers, Banks, Etc.
The Custodian shall not be liable for any loss, damage or expense suffered
or incurred by any Fund resulting from or occasioned by the actions, omissions,
neglects, defaults or insolvency of any broker, bank, trust company or any other
person with whom the Custodian may deal (other than any of such entities acting
as a Subcustodian, Securities System or Securities Depository and Clearing
Agency, for whose actions the liability of the Custodian is set out elsewhere in
this Agreement) unless such loss, damage or expense is caused by, or results
from, the negligence or willful misfeasance of the Custodian.
(e) Reimbursement of Expenses.
Each Fund agrees to reimburse the Custodian for all out-of-pocket expenses
incurred by the Custodian in connection with this Agreement, but excluding
salaries and usual overhead expenses.
8. INDEMNIFICATION.
(a) Indemnification by Fund.
Subject to the limitations set forth in this Agreement, each Fund agrees
to indemnify and hold harmless the Custodian and its nominees from all losses,
damages and expenses (including attorneys' fees) suffered or incurred by the
Custodian or its nominee caused by or arising from actions taken by the
Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement; provided, however, that such indemnity shall not apply
to the extent the Custodian is liable under Sections 6 or 7 hereof.
If any Fund requires the Custodian to take any action with respect to
Securities, which action involves the payment of money or which may, in the
opinion of the Custodian, result in the Custodian or its nominee assigned to
such Fund being liable for the payment of money or incurring liability of some
other form, such Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
(b) Indemnification by Custodian.
Subject to the limitations set forth in this Agreement and in addition to
the obligations provided in Sections 6 and 7, the Custodian agrees to indemnify
and hold harmless each Fund from all losses, damages and expenses suffered or
incurred by each such Fund caused by the negligence or willful misfeasance of
the Custodian.
9. ADVANCES.
In the event that, pursuant to Instructions, the Custodian or any
Subcustodian, Securities System, transfer agent for an Underlying Fund, or
Securities Depository or Clearing Agency acting either directly or indirectly
under agreement with the Custodian (each of which for purposes of this Section 9
shall be referred to as "Custodian"), makes any payment or transfer of funds on
behalf of any Fund as to which there would be, at the close of business on the
date of such payment or transfer, insufficient funds held by the Custodian on
behalf of any such Fund, the Custodian may, in its discretion without further
Instructions, provide an advance ("Advance") to any such Fund in an amount
sufficient to allow the completion of the transaction by reason of which such
payment or transfer of funds is to be made. In addition, in the event the
Custodian is directed by Instructions to make any payment or transfer of funds
on behalf of any Fund as to which it is subsequently determined that such Fund
has overdrawn its cash account with the Custodian as of the close of business on
the date of such payment or transfer, said overdraft shall constitute an
Advance. Any Advance shall be payable by the Fund on behalf of which the Advance
was made on demand by Custodian, unless otherwise agreed by such Fund and the
Custodian, and shall accrue interest from the date of the Advance to the date of
payment by such Fund to the Custodian at a rate agreed upon in writing from time
to time by the Custodian and such Fund. It is understood that any transaction in
respect of which the Custodian shall have made an Advance, including but not
limited to a foreign exchange contract or transaction in respect of which the
Custodian is not acting as a principal, is for the account of and at the risk of
the Fund on behalf of which the Advance was made, and not, by reason of such
Advance, deemed to be a transaction undertaken by the Custodian for its own
account and risk. The Custodian and each of the Funds which are parties to this
Agreement acknowledge that the purpose of Advances is to finance temporarily the
purchase or sale of Securities for prompt delivery in accordance with the
settlement terms of such transactions or to meet emergency expenses not
reasonably foreseeable by a Fund. The Custodian shall promptly notify the
appropriate Fund of any Advance. Such notification shall be sent by facsimile
transmission or in such other manner as such Fund and the Custodian may agree.
10. LIENS.
The Bank shall have a lien on the Property in the Custody Account to
secure payment of fees and expenses for the services rendered under this
Agreement. If the Bank advances cash or securities to the Fund for any purpose
or in the event that the Bank or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of its duties hereunder, except such as may arise from its or
its nominee's negligent action, negligent failure to act or willful misconduct,
any Property at any time held for the Custody Account shall be security therefor
and the Fund hereby grants a security interest therein to the Bank. The Fund
shall promptly reimburse the Bank for any such advance of cash or securities or
any such taxes, charges, expenses, assessments, claims or liabilities upon
request for payment, but should the Fund fail to so reimburse the Bank, the Bank
shall be entitled to dispose of such Property to the extent necessary to obtain
reimbursement. The Bank shall be entitled to debit any account of the Fund with
the Bank including, without limitation, the Custody Account, in connection with
any such advance and any interest on such advance as the Bank deems reasonable.
11. COMPENSATION.
Each Fund will pay to the Custodian such compensation as is agreed to in
writing by the Custodian and each such Fund from time to time. Such
compensation, together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 7(e), shall be billed to each such Fund
and paid in cash to the Custodian.
12. POWERS OF ATTORNEY.
Upon request, each Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
13. TERMINATION AND ASSIGNMENT.
Any Fund or the Custodian may terminate this Agreement by notice in
writing, delivered or mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date upon which such
termination shall take effect. Upon termination of this Agreement, the
appropriate Fund shall pay to the Custodian such fees as may be due the
Custodian hereunder as well as its reimbursable disbursements, costs and
expenses paid or incurred. Upon termination of this Agreement, the Custodian
shall deliver, at the terminating party's expense, all Assets held by it
hereunder to the appropriate Fund or as otherwise designated by such Fund by
Special Instructions. Upon such delivery, the Custodian shall have no further
obligations or liabilities under this Agreement except as to the final
resolution of matters relating to activity occurring prior to the effective date
of termination.
This Agreement may not be assigned by the Custodian or any Fund without
the respective consent of the other, duly authorized by a resolution by its
Board of Directors or Trustees.
14. ADDITIONAL FUNDS.
An additional Fund or Funds may become a party to this Agreement after the
date hereof by an instrument in writing to such effect signed by such Fund or
Funds and the Custodian. If this Agreement is terminated as to one or more of
the Funds (but less than all of the Funds) or if an additional Fund or Funds
shall become a party to this Agreement, there shall be delivered to each party
an Appendix B or an amended Appendix B, signed by each of the additional Funds
(if any) and each of the remaining Funds as well as the Custodian, deleting or
adding such Fund or Funds, as the case may be. The termination of this Agreement
as to less than all of the Funds shall not affect the obligations of the
Custodian and the remaining Funds hereunder as set forth on the signature page
hereto and in Appendix B as revised from time to time.
15. NOTICES.
As to each Fund, notices, requests, instructions and other writings
delivered to The Security Benefit Group of Companies, 700 Harrison, Topeka,
Kansas 66636-0001, postage prepaid, or to such other address as any particular
Fund may have designated to the Custodian in writing, shall be deemed to have
been properly delivered or given to a Fund.
Notices, requests, instructions and other writings delivered to the
Securities Administration department of the Custodian at its office at 928 Grand
Blvd., 10th Floor, Attn: Debbie Cadwell, Kansas City, Missouri 64106, or mailed
postage prepaid, to the Custodian's Securities Administration department, Post
Office Box 226, Attn: Debbie Cadwell, Kansas City, Missouri 64141, or to such
other addresses as the Custodian may have designated to each Fund in writing,
shall be deemed to have been properly delivered or given to the Custodian
hereunder; provided, however, that procedures for the delivery of Instructions
and Special Instructions shall be governed by Section 2(c) hereof.
16. MISCELLANEOUS.
(a) This Agreement is executed and delivered in the State of Missouri and
shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement shall be binding
upon, and inure to the benefit of, and be enforceable by the respective
successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended, modified or waived, in
any manner except in writing, properly executed by both parties hereto;
provided, however, Appendix A may be amended from time to time as Domestic
Subcustodians, Foreign Subcustodians, Special Subcustodians, and Securities
Depositories and Clearing Agencies are approved or terminated
according to the terms of this Agreement.
(d) The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(e) This Agreement shall be effective as of the date of execution hereof.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning of this
Agreement, and the definitions thereof are found in the following sections of
the Agreement:
Term Section
---- -------
Account 4(b)(3)(ii)
ADR'S 4(j)
Advance 9
Assets 2(b)
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2(c)(1)
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
Liens 10
OCC 4(g)(1)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2(a)
Securities Depositories and 5(b)
Clearing Agencies
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2(c)(2)
Special Subcustodian 5(d)
Subcustodian 5
1940 Act 4(v)
Underlying Funds 4(b)(4)
(h) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid by any court of competent
jurisdiction, the remaining portion or portions shall be considered severable
and shall not be affected, and the rights and obligations of the parties shall
be construed and enforced as if this Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
(i) This Agreement constitutes the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof, and accordingly
supersedes, as of the effective date of this Agreement, any custodian agreement
heretofore in effect between the Fund and the Custodian.
IN WITNESS WHEREOF, the parties hereto have caused this Custody Agreement
to be executed by their respective duly authorized officers.
SECURITY ULTRA FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY EQUITY FUND
- Equity Series
- Social Awareness Series
- Value Series
- Small Company Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SBL FUND
- Series A, B, C, E, J, P, S, V and X
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY INCOME FUND
- Corporate Bond Series
- U. S. Government Series
- Limited Maturity Bond Series
- High Yield Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY GROWTH AND INCOME FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY MUNICIPAL BOND FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
ADVISOR'S FUND
- PCG Growth Series
- PCG Aggressive Growth Series
- SIM Growth Series
- SIM Conservative Growth Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY MANAGEMENT COMPANY, LLC
(Corporate Account)
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: Senior Vice President
Date: September 24, 1998
SECURITY CASH FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
UMB BANK, N.A.
ATTEST: R. WM. BLOOM By: RALPH R. SANTORO
---------------------------- -------------------------------
Name: Ralph R. Santoro
Title: Senior Vice President
Date: September 24, 1998
<PAGE>
APPENDIX A
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
United Missouri Trust Company of New York
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant Trust Company
SPECIAL SUBCUSTODIANS:
The Bank of New York
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS CLEARING AGENCIES
Euroclear
SECURITY ULTRA FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY EQUITY FUND
- Equity Series
- Social Awareness Series
- Value Series
- Small Company Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SBL FUND
- Series A, B, C, E, J, P, S, V and X
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY INCOME FUND
- Corporate Bond Series
- U. S. Government Series
- Limited Maturity Bond Series
- High Yield Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY GROWTH AND INCOME FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY MUNICIPAL BOND FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY CASH FUND
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
ADVISOR'S FUND
- PCG Growth Series
- PCG Aggressive Growth Series
- SIM Growth Series
- SIM Conservative Growth Series
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: President
Date: September 24, 1998
SECURITY MANAGEMENT COMPANY, LLC
(Corporate Account)
ATTEST: AMY J. LEE By: JOHN D. CLELAND
---------------------------- -------------------------------
Name: John D. Cleland
Title: Senior Vice President
Date: September 24, 1998
UMB BANK, N.A.
ATTEST: R. WM. BLOOM By: RALPH R. SANTOROO
---------------------------- -------------------------------
Name: Ralph R. Santoro
Title: Senior Vice President
Date: September 24, 1998
<PAGE>
[CHASE LOGO]
FORM OF
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective ___________________, 1998, and is between THE CHASE
MANHATTAN BANK ("Bank") and each of the portfolios listed on Exhibit 1 hereto
(each a "Customer").
With respect to any obligations of a particular Customer arising hereunder,
Bank shall look for payment or satisfaction of any such obligation solely to
that Customer and the Assets of such Customer and Customer's Accounts to which
such obligation relates as though that Customer had separately contracted with
Bank by separate written agreement with respect to such Accounts. The rights and
benefits to which a given Customer is entitled hereunder shall be solely those
of such Customer and no other Customer hereunder shall receive such benefits.
1. CUSTOMER ACCOUNTS.
Bank, acting as "Securities Intermediary" (as defined in Section 15(g)
hereof) shall establish and maintain the following accounts ("Accounts"):
(a) a Custody Account (as defined in Section 15(b) hereof) in the name of
Customer for Financial Assets, which shall, except as modified by Section 15(d)
hereof, mean stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property whether certificated or
uncertificated as may be received by Bank or its Subcustodian (as defined in
Section 3 hereof) for the account of Customer, including as an "Entitlement
Holder" as defined in Section 15(c) hereof); and
(b) an account in the name of Customer ("Deposit Account") for any and all
cash in any currency received by Bank or its Subcustodian for the account of
Customer, which cash shall not be subject to withdrawal by draft or check.
Customer warrants its authority to: 1) deposit the cash and Financial Assets
(collectively "Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11 hereof) concerning the Accounts. Bank may deliver
Financial Assets of the same class in place of those deposited in the Custody
Account.
Upon written agreement between Bank and Customer, additional Accounts may be
established and separately accounted for as additional Accounts hereunder.
2. MAINTENANCE OF FINANCIAL ASSETS AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to
Bank:
(a) Financial Assets shall be held in the country or other jurisdiction in
which the principal trading market for such Financial Assets is located, where
such Financial Assets are to be presented for payment or where such Financial
Assets are acquired; and
(b) Cash shall be credited to an account in a country or other jurisdiction
in which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or non-interest
bearing accounts as may be available for the particular currency. To the extent
Instructions are issued and Bank can comply with such Instructions, Bank is
authorized to maintain cash balances on deposit for Customer with itself or one
of its "Affiliates" at such reasonable rates of interest as may from time to
time be paid on such accounts, or in non-interest bearing accounts as Customer
may direct, if acceptable to Bank. For purposes hereof, the term "Affiliate"
shall mean an entity controlling, controlled by, or under common control with,
Bank.
If Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians as defined in Section 3 (or
their securities depositories), such arrangement must be authorized by a written
agreement, signed by Bank and Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Bank may act hereunder through the subcustodians listed in Schedule A hereof
with which Bank has entered into subcustodial agreements ("Subcustodians").
Customer authorizes Bank to hold Assets in the Accounts in accounts which Bank
has established with one or more of its branches or Subcustodians. Bank and
Subcustodians are authorized to hold any of Financial Assets in their account
with any securities depository in which they participate.
Bank reserves the right to add new, replace or remove Subcustodians.
Customer shall be given reasonable notice by Bank of any amendment to Schedule
A. Upon request by Customer, Bank shall identify the name, address and principal
place of business of any Subcustodian of Customer's Assets and the name and
address of the governmental agency or other regulatory authority that supervises
or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) Bank shall identify the Assets on its books as belonging to Customer.
(b) A Subcustodian shall hold such Assets together with assets belonging to
other customers of Bank in accounts identified on such Subcustodian's books as
custody accounts for the exclusive benefit of customers of Bank.
(c) Any Assets in the Accounts held by a Subcustodian shall be subject only
to the instructions of Bank or its agent. Any Financial Assets held in a
securities depository for the account of a Subcustodian shall be subject only to
the instructions of such Subcustodian.
(d) Any agreement Bank enters into with a Subcustodian for holding Bank's
customers' assets shall provide that such assets shall not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets shall be freely transferable without the payment of
money or value other than for safe custody or administration, or, in the case of
cash deposits, except for liens or rights in favor of creditors of the
Subcustodian arising under bankruptcy, insolvency or similar laws. Where
Securities are deposited by a Subcustodian with a securities depository, Bank
shall cause the Subcustodian to identify on its books as belonging to Bank, as
agent, the Securities shown on the Subcustodian's account on the books of such
securities depository. The foregoing shall not apply to the extent of any
special agreement or arrangement made by Customer with any particular
Subcustodian.
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) Bank or its Subcustodians shall make payments from the Deposit Account
upon receipt of Instructions which include all information required by Bank.
(b) In the event that any payment to be made under this Section 5 exceeds
the funds available in the Deposit Account, Bank, in its discretion, may advance
Customer such excess amount which shall be deemed a loan payable on demand,
bearing interest at the rate customarily charged by Bank on similar loans.
(c) If Bank credits the Deposit Account on a payable date, or at any time
prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, Customer shall
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If Customer does not promptly return any
amount upon such notification, Bank shall be entitled, upon oral or written
notification to Customer, to reverse such credit by debiting the Deposit Account
for the amount previously credited. Bank or its Subcustodian shall have no duty
or obligation to institute legal proceedings, file a claim or a proof of claim
in any insolvency proceeding or take any other action with respect to the
collection of such amount, but may act for Customer upon Instructions after
consultation with Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Financial Assets shall be transferred, exchanged or delivered by Bank or
its Subcustodian upon receipt by Bank of Instructions which include all
information required by Bank. Settlement and payment for Financial Assets
received for, and delivery of Financial Assets out of, the Custody Account may
be made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
Financial Assets to a purchaser, dealer or their agents against a receipt with
the expectation of receiving later payment and free delivery. Delivery of
Financial Assets out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to Bank.
(b) Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Financial Assets with respect to any
sale, exchange or purchase of Financial Assets. Otherwise, such transactions
shall be credited or debited to the Accounts on the date cash or Financial
Assets are actually received by Bank and reconciled to the Account.
(i) Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Financial Assets delivered pursuant to this Section 6 are
returned by the recipient thereof, Bank may reverse the credits and debits
of the particular transaction at any time.
7. ACTIONS OF BANK.
Bank shall follow Instructions received regarding Assets held in the
Accounts. However, until it receives Instructions to the contrary, Bank shall:
(a) Present for payment any Financial Assets which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that Bank or Subcustodian is
actually aware of such opportunities.
(b) Execute in the name of Customer such ownership and other certificates as
may be required to obtain payments in respect of Financial Assets.
(c) Exchange interim receipts or temporary Financial Assets for definitive
Financial Assets.
(d) Appoint brokers and agents for any transaction involving the Financial
Assets, including, without limitation, Affiliates of Bank or any Subcustodian.
(e) Issue statements to Customer, at times mutually agreed upon, identifying
the Assets in the Accounts.
Bank shall send Customer an advice or notification of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications shall
indicate the identity of the entity having custody of the Assets. Unless
Customer sends Bank a written exception or objection to any Bank statement
within sixty (60) days of receipt, Customer shall be deemed to have approved
such statement. In such event, or where Customer has otherwise approved any such
statement, Bank shall, to the extent permitted by law, be released, relieved and
discharged with respect to all matters set forth in such statement or reasonably
implied therefrom as though it had been settled by the decree of a court of
competent jurisdiction in an action where Customer and all persons having or
claiming an interest in Customer or Customer's Accounts were parties.
All collections of funds or other property paid or distributed in respect of
Financial Assets in the Custody Account shall be made at the risk of Customer.
Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by Bank or by its Subcustodians of any payment, redemption or
other transaction regarding Financial Assets in the Custody Account in respect
of which Bank has agreed to take any action hereunder.
8. CORPORATE ACTIONS; PROXIES; TAX RECLAIMS.
(a) CORPORATE ACTIONS. Whenever Bank receives information concerning the
Financial Assets which requires discretionary action by the beneficial owner of
the Financial Assets (other than a proxy), such as subscription rights, bonus
issues, stock repurchase plans and rights offerings, or legal notices or other
material intended to be transmitted to securities holders ("Corporate Actions"),
Bank shall give Customer notice of such Corporate Actions to the extent that
Bank's central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, Bank shall endeavor to obtain Instructions from
Customer or its Authorized Person (as defined in Section 10 hereof), but if
Instructions are not received in time for Bank to take timely action, or actual
notice of such Corporate Action was received too late to seek Instructions, Bank
is authorized to sell such rights entitlement or fractional interest and to
credit the Deposit Account with the proceeds or take any other action it deems,
in good faith, to be appropriate in which case it shall be held harmless for any
such action.
(b) PROXY VOTING. Bank shall provide proxy voting services, if elected by
Customer, in accordance with the terms of the proxy voting services rider
hereto. Proxy voting services may be provided by Bank or, in whole or in part,
by one or more third parties appointed by Bank (which may be Affiliates of
Bank).
(c) TAX RECLAIMS.
(i) Subject to the provisions hereof, Bank shall apply for a reduction of
withholding tax and any refund of any tax paid or tax credits which apply in
each applicable market in respect of income payments on Financial Assets for
Customer's benefit which Bank believes may be available to Customer.
(ii) The provision of tax reclaim services by Bank is conditional upon
Bank's receiving from Customer or, to the extent the Financial Assets are
beneficially owned by others, from each beneficial owner, A) a declaration
of the beneficial owner's identity and place of residence and (B) certain
other documentation (PRO FORMA copies of which are available from Bank).
Customer acknowledges that, if Bank does not receive such declarations,
documentation and information Bank shall be unable to provide tax reclaim
services.
(iii) Bank shall not be liable to Customer or any third party for any taxes,
fines or penalties payable by Bank or Customer, and shall be indemnified
accordingly, whether these result from the inaccurate completion of
documents by Customer or any third party, or as a result of the provision to
Bank or any third party of inaccurate or misleading information or the
withholding of material information by Customer or any other third party, or
as a result of any delay of any revenue authority or any other matter beyond
Bank's control.
(iv) Bank shall perform tax reclaim services only with respect to taxation
levied by the revenue authorities of the countries notified to Customer from
time to time and Bank may, by notification in writing, at Bank's absolute
discretion, supplement or amend the markets in which tax reclaim services
are offered. Other than as expressly provided in this sub-clause, Bank shall
have no responsibility with regard to Customer's tax position or status in
any jurisdiction.
(v) Customer confirms that Bank is authorized to disclose any information
requested by any revenue authority or any governmental body in relation to
Customer or the securities and/or cash held for Customer.
(vi) Tax reclaim services may be provided by Bank or, in whole or in part,
by one or more third parties appointed by Bank (which may be Bank's
affiliates); provided that Bank shall be liable for the performance of any
such third party to the same extent as Bank would have been if Bank
performed such services.
(d) TAX OBLIGATIONS.
(i) Customer confirms that Bank is authorized to deduct from any cash
received or credited to the Deposit Account any taxes or levies required by
any revenue or governmental authority for whatever reason in respect of the
Custody Account.
(ii) If Bank does not receive appropriate declarations, documentation and
information that additional United Kingdom taxation shall be deducted from
all income received in respect of the Financial Assets issued outside the
United Kingdom and any applicable United States withholding tax shall be
deducted from income received from the Financial Assets. Customer shall
provide to Bank such documentation and information as Bank may require in
connection with taxation, and warrants that, when given, this information
shall be true and correct in every respect, not misleading in any way, and
contain all material information. Customer undertakes to notify Bank
immediately if any such information requires updating or amendment.
(iii) Customer shall be responsible for the payment of all taxes relating to
the Financial Assets in the Custody Account, and Customer agrees to pay,
indemnify and hold Bank harmless from and against any and all liabilities,
penalties, interest or additions to tax with respect to or resulting from,
any delay in, or failure by, Bank (1) to pay, withhold or report any U.S.
federal, state or local taxes or foreign taxes imposed on, or (2) to report
interest, dividend or other income paid or credited to the Deposit Account,
whether such failure or delay by Bank to pay, withhold or report tax or
income is the result of (x) Customer's failure to comply with the terms of
this paragraph, or (y) Bank's own acts or omissions; provided however,
Customer shall not be liable to Bank for any penalty or additions to tax due
as a result of Bank's failure to pay or withhold tax or to report interest,
dividend or other income paid or credited to the Deposit Account solely as a
result of Bank's negligent acts or omissions.
9. NOMINEES.
Financial Assets which are ordinarily held in registered form may be
registered in a nominee name of Bank, Subcustodian or securities depository, as
the case may be. Bank may without notice to Customer cause any such Financial
Assets to cease to be registered in the name of any such nominee and to be
registered in the name of Customer. In the event that any Financial Assets
registered in a nominee name are called for partial redemption by the issuer,
Bank may allot the called portion to the respective beneficial holders of such
class of security in any manner Bank deems to be fair and equitable. Customer
shall hold Bank, Subcustodians, and their respective nominees harmless from any
liability arising directly or indirectly from their status as a mere record
holder of Financial Assets in the Custody Account.
10. AUTHORIZED PERSONS.
As used herein, the term "Authorized Person" means employees or agents
including investment managers as have been designated by written notice from
Customer or its designated agent to act on behalf of Customer hereunder. Such
persons shall continue to be Authorized Persons until such time as Bank receives
Instructions from Customer or its designated agent that any such employee or
agent is no longer an Authorized Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person received
by Bank, via telephone, telex, facsimile transmission, bank wire or other
teleprocess or electronic instruction or trade information system acceptable to
Bank which Bank believes in good faith to have been given by Authorized Persons
or which are transmitted with proper testing or authentication pursuant to terms
and conditions which Bank may specify. Unless otherwise expressly provided, all
Instructions shall continue in full force and effect until canceled or
superseded. The term "Instructions" includes, without limitation, instructions
to sell, assign, transfer, deliver, purchase or receive for the Custody Account,
any and all stocks, bonds and other Financial Assets or to transfer funds in the
Deposit Account.)
Any Instructions delivered to Bank by telephone shall promptly thereafter be
confirmed in writing by an Authorized Person (which confirmation may bear the
facsimile signature of such Person), but Customer shall hold Bank harmless for
the failure of an Authorized Person to send such confirmation in writing, the
failure of such confirmation to conform to the telephone instructions received
or Bank's failure to produce such confirmation at any subsequent time. Bank may
electronically record any Instructions given by telephone, and any other
telephone discussions with respect to the Custody Account. Customer shall be
responsible for safeguarding any testkeys, identification codes or other
security devices which Bank shall make available to Customer or its Authorized
Persons.
12. STANDARD OF CARE; LIABILITIES.
(a) Bank shall be responsible for the performance of only such duties as are
set forth herein or expressly contained in Instructions which are consistent
with the provisions hereof as follows:
(i) Notwithstanding any other provisions of this Agreement, Bank's
responsibilities shall be limited to the exercise of reasonable care with
respect to its obligations hereunder. Bank shall only be liable to Customer
for any loss which shall occur as the result of the failure of a
Subcustodian to exercise reasonable care with respect to the safekeeping of
such Assets where such loss results directly from the failure by the
Subcustodian to use reasonable care in the provision of custodial services
by it in accordance with the standards prevailing in its local market or
from the willful default of such Subcustodian in the provision of custodial
services by it. In the event of any loss to Customer which is compensable
hereunder (I.E. a loss arising by reason of willful misconduct or the
failure of Bank or its Subcustodian to use reasonable care), Bank shall be
liable to Customer only to the extent of Customer's direct damages, to be
determined based on the market value of the property which is the subject of
the loss at the date of discovery of such loss and without reference to any
special conditions or circumstances. Bank shall have no liability whatsoever
for any consequential, special, indirect or speculative loss or damages
(including, but not limited to, lost profits) suffered by Customer in
connection with the transactions and services contemplated hereby and the
relationship established hereby even if Bank has been advised as to the
possibility of the same and regardless of the form of the action.
(ii) Bank shall not be responsible for the insolvency of any
Subcustodian which is not a branch or Affiliate of Bank. Bank shall not be
responsible for any act, omission, default or the solvency of any broker or
agent which it or a Subcustodian appoints unless such appointment was made
negligently or in bad faith.
(iii) (A) Customer shall indemnify and hold Bank and its directors,
officers, agents and employees (collectively the "Indemnitees") harmless
from and against any and all claims, liabilities, losses, damages, fines,
penalties, and expenses, including out-of-pocket and incidental expenses and
legal fees ("Losses") that may be imposed on, incurred by, or asserted
against, the Indemnitees or any of them for following any instructions or
other directions upon which Bank is authorized to rely pursuant to the terms
of this Agreement. (B) In addition to and not in limitation of the preceding
subparagraph, Customer shall also indemnify and hold the Indemnitees and
each of them harmless from and against any and all Losses that may be
imposed on, incurred by, or asserted against, the Indemnitees or any of them
in connection with or arising out of Bank's performance under this
Agreement, provided the Indemnitees have not acted with negligence or
engaged in willful misconduct. (C) In performing its obligations hereunder,
Bank may rely on the genuineness of any document which it believes in good
faith to have been validly executed.
(iv) Customer shall pay for and hold Bank harmless from any liability or
loss resulting from the imposition or assessment of any taxes or other
governmental charges, and any related expenses with respect to income from
or Assets in the Accounts.
(v) Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice.
(vi) Bank need not maintain any insurance for the benefit of Customer.
(vii) Without limiting the foregoing, Bank shall not be liable for any
loss which results from: 1) the general risk of investing, or 2) investing
or holding Assets in a particular country including, but not limited to,
losses resulting from malfunction, interruption of or error in the
transmission of information caused by any machines or system or interruption
of communication facilities, abnormal operating conditions, nationalization,
expropriation or other governmental actions; regulation of the banking or
securities industry; currency restrictions, devaluations or fluctuations;
and market conditions which prevent the orderly execution of securities
transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war (whether declared or undeclared) or terrorism,
insurrection, revolution, nuclear fusion, fission or radiation, or acts of
God.
(b) Consistent with and without limiting the first paragraph of this Section
12, it is specifically acknowledged that Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Financial Assets;
(iii) advise Customer or an Authorized Person regarding any default in
the payment of principal or income of any security other than as provided in
Section 5(c) hereof;
(iv) evaluate or report to Customer or an Authorized Person regarding
the financial condition of any broker, agent or other party to which
Financial Assets are delivered or payments are made pursuant hereto; and
(v) review or reconcile trade confirmations received from brokers.
Customer or its Authorized Persons issuing Instructions shall bear any
responsibility to review such confirmations against Instructions issued to
and statements issued by Bank.
(c) Customer authorizes Bank to act hereunder notwithstanding that Bank or
any of its divisions or Affiliates may have a material interest in a
transaction, or circumstances are such that Bank may have a potential conflict
of duty or interest including the fact that Bank or any of its Affiliates may
provide brokerage services to other customers, act as financial advisor to the
issuer of Financial Assets, act as a lender to the issuer of Financial Assets,
act in the same transaction as agent for more than one customer, have a material
interest in the issue of Financial Assets, or earn profits from any of the
activities listed herein.
13. FEES AND EXPENSES.
Customer shall pay Bank for its services hereunder the fees set forth in
Schedule B hereto or such other amounts as may be agreed upon in writing,
together with Bank's reasonable out-of-pocket or incidental expenses, including,
but not limited to, legal fees. Bank shall have a lien on and is authorized to
charge any Accounts of Customer for any amount owing to Bank under any provision
hereof
14. MISCELLANEOUS.
(a) FOREIGN EXCHANGE TRANSACTIONS. To facilitate the administration of
Customer's trading and investment activity, when instructed by specific or
standing Instruction, Bank is authorized to enter into spot or forward foreign
exchange contracts with Customer or an Authorized Person for Customer and may
also provide foreign exchange through its subsidiaries, Affiliates or
Subcustodians. Instructions, may be issued with respect to such contracts but
Bank may establish rules or limitations concerning any foreign exchange facility
made available. In all cases where Bank, its subsidiaries, Affiliates or
Subcustodians enter into a separate master foreign exchange contract with
Customer that covers foreign exchange transactions for the Accounts, the terms
and conditions of that foreign exchange contract, and to the extent not
inconsistent, this Agreement, shall apply to such transactions.
(b) CERTIFICATION OF RESIDENCY, ETC. Customer certifies that it is a
resident of the United States and shall notify Bank of any changes in residency.
Bank may rely upon this certification or the certification of such other facts
as may be required to administer Bank's obligations hereunder. Customer shall
indemnify Bank against all losses, liability, claims or demands arising directly
or indirectly from any such certifications.
(c) ACCESS TO RECORDS. Bank shall allow Customer's independent public
accountant reasonable access to the records of Bank relating to the Assets as is
required in connection with their examination of books and records pertaining to
Customer's affairs. Subject to restrictions under applicable law, Bank shall
also obtain an undertaking to permit Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the examination
of Customer's books and records.
(d) GOVERNING LAW; SUCCESSORS AND ASSIGNS, CAPTIONS THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN NEW YORK and shall not be assignable by either party, but
shall bind the successors in interest of Customer and Bank. The captions given
to the sections and subsections of this Agreement are for convenience of
reference only and are not to be used to interpret this Agreement.
(e) ENTIRE AGREEMENT; APPLICABLE RIDERS. Customer represents that the Assets
deposited in the Accounts are (Check one):
__ Investment Company assets subject to certain U.S. Securities and Exchange
Commission rules and regulations;
__ Other (specify)
This Agreement consists exclusively of this document together with Schedules
A and B, Exhibits I - _______ and the following Rider(s) [Check applicable
rider(s)]:
__ INVESTMENT COMPANY
__ PROXY VOTING
__ SPECIAL TERMS AND CONDITIONS
There are no other provisions hereof and this Agreement supersedes any other
agreements, whether written or oral, between the parties. Any amendment hereto
must be in writing, executed by both parties.
(f) SEVERABILITY. In the event that one or more provisions hereof are held
invalid, illegal or unenforceable in any respect on the basis of any particular
circumstances or in any jurisdiction, the validity, legality and enforceability
of such provision or provisions under other circumstances or in other
jurisdictions and of the remaining provisions shall not in any way be affected
or impaired.
(g) WAIVER. Except as otherwise provided herein, no failure or delay on the
part of either party in exercising any power or right hereunder operates as a
waiver, nor does any single or partial exercise of any power or right preclude
any other or further exercise, or the exercise of any other power or right. No
waiver by a party of any provision hereof, or waiver of any breach or default,
is effective unless in writing and signed by the party against whom the waiver
is to be enforced.
(h) REPRESENTATIONS AND WARRANTIES. (i) Customer hereby represents and
warrants to Bank that: (A) it has full authority and power to deposit and
control the Financial Assets and cash deposited in the Accounts; (B) it has all
necessary authority to use Bank as its custodian; (C) this Agreement constitutes
its legal, valid and binding obligation, enforceable in accordance with its
terms; (D) it shall have full authority and power to borrow moneys and enter
into foreign exchange transactions; and (E) it has not relied on any oral or
written representation made by Bank or any person on its behalf, and
acknowledges that this Agreement sets out to the fullest extent the duties of
Bank. (ii) Bank hereby represents and warrants to Customer that: (A) it has the
full power and authority to perform its obligations hereunder, (B) this
Agreement constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms; and (C) that it has taken all necessary action to
authorize the execution and delivery hereof.
(i) NOTICES. All notices hereunder shall be effective when actually
received. Any notices or other communications which may be required hereunder
are to be sent to the parties at the following addresses or such other addresses
as may subsequently be given to the other party in writing: (a) Bank: The Chase
Manhattan Bank, 4 Chase MetroTech Center, Brooklyn, N.Y. 11245, Attention:
Global Investor Services, Investment Management Group; and (b)
Customer:_____________ .
(j) TERMINATION. This Agreement may be terminated by Customer or Bank by
giving sixty (60) days written notice to the other, provided that such notice to
Bank shall specify the names of the persons to whom Bank shall deliver the
Assets in the Accounts. If notice of termination is given by Bank, Customer
shall, within sixty (60) days following receipt of the notice, deliver to Bank
Instructions specifying the names of the persons to whom Bank shall deliver the
Assets. In either case Bank shall deliver the Assets to the persons so
specified, after deducting any amounts which Bank determines in good faith to be
owed to it under Section 13. If within sixty (60) days following receipt of a
notice of termination by Bank, Bank does not receive Instructions from Customer
specifying the names of the persons to whom Bank shall deliver the Assets, Bank,
at its election, may deliver the Assets to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions hereof, or to Authorized Persons, or may continue to hold the Assets
until Instructions are provided to Bank.
(k) MONEY LAUNDERING. Customer warrants and undertakes to Bank for itself
and its agents that all Customer's customers are properly identified in
accordance with U.S. Money Laundering Regulations as in effect from time to
time.
(l) IMPUTATION OF CERTAIN INFORMATION. Bank shall not be held responsible
for and shall not be required to have regard to information held by any person
by imputation or information of which Bank is not aware by virtue of a "Chinese
Wall" arrangement. If Bank becomes aware of confidential information which in
good faith it feels inhibits it from effecting a transaction hereunder Bank may
refrain from effecting it.
15. DEFINITIONS.
As used herein, the following terms shall have the meaning hereinafter
stated:
a) "Certificated Security" shall mean a security that is represented by a
certificate.
b) "Custody Account" means each Securities custody account on Bank's records
to which Financial Assets are or may be credited pursuant hereto.
c) "Entitlement Holder" shall mean the person on the records of a Securities
Intermediary as the person having a Securities Entitlement against the
Securities Intermediary.
d) "Financial Asset" shall mean, as the context requires, either the asset
itself or the means by which a person's claim to it is evidenced, including a
Certificated Security or Uncertificated Security, a security certificate, or a
Securities Entitlement.
e) "Securities" means stocks, bonds, rights, warrants and other negotiable
and non-negotiable paper whether issued as Certificated Securities or
Uncertificated Securities and commonly traded or dealt in on securities
exchanges or financial markets, and other obligations of an issuer, or shares,
participations and interests in an issuer recognized in an area in which it is
issued or dealt in as a medium for investment and any other property as shall be
acceptable to Bank for the Custody Account.
f) "Securities Entitlement" shall mean the rights and property interest of
an Entitlement Holder with respect to a Financial Asset as set forth in Part 5
of the Uniform Commercial Code.
g) "Securities Intermediary" shall mean Bank, a Subcustodian, a securities
depository, and any other financial institution which in the ordinary course of
business maintains custody accounts for others and acts in that capacity.
h) "Uncertificated Security" shall mean a security that is not represented
by a certificate.
i) "Uniform Commercial Code" means Article 8 of the Uniform Commercial Code
of the State of New York, as the same may be amended from time to time.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first-above written.
CUSTOMER
By:__________________________________________
Title:
Date:
THE CHASE MANHATTAN BANK
By:__________________________________________
Title:
Date:
<PAGE>
STATE OF __________)
)ss.
COUNTY OF _________)
On this ____ day of __________, 199__, before me personally came
__________, to me known, who being by me duly sworn, did depose and say that
he/she resides in __________ at __________, that he/she is __________ of
__________, the entity described in and which executed the foregoing instrument;
that he/she knows the seal of said entity, that the seal affixed to said
instrument is such seal, that it was so affixed by order of said entity, and
that he/she signed his/her name thereto by like order.
Sworn to before me this ____ day of __________, 199__.
___________________________
Notary
<PAGE>
STATE OF NEW YORK)
)ss.
COUNTY OF _______)
On this ____ day of __________, 199__, before me personally came
__________, to me known, who being by me duly sworn, did depose and say that
he/she resides in __________ at __________; that he/she is a Vice President of
THE CHASE MANHATTAN BANK, the corporation described in and which executed the
foregoing instrument; that he/she knows the seal of said corporation, that the
seal affixed to said instrument is such corporate seal, that it was so affixed
by order of the Board of Directors of said corporation, and that he/she signed
his/her name thereto by like order.
Sworn to before me this ____ day of __________, 199__.
___________________________
Notary
<PAGE>
Investment Company Rider to Global Custody Agreement
Between The Chase Manhattan Bank and
____________________________________
effective __________________
The following modifications are made to the Agreement:
A. Add a new Section 16 to the Agreement as follows:
"16. COMPLIANCE WITH SEC RULE 17F-5.
(a) Customer's board of directors (or equivalent body) (hereinafter
'Board') hereby delegates to Bank, and, except as to the country or countries as
to which Bank may, from time to time, advise Customer that it does not accept
such delegation, Bank hereby accepts the delegation to it, of the obligation to
perform as Customer's 'Foreign Custody Manager' (as that term is defined in SEC
rule 17f-5(a)(2)), both for the purpose of selecting Eligible Foreign Custodians
(as that term is defined in SEC rule 17f-5(a)(1), and as the same may be amended
from time to time, or that have otherwise been made exempt pursuant to an SEC
exemptive order) to hold Assets and of evaluating the contractual arrangements
with such Eligible Foreign Custodians (as set forth in SEC rule 17f-5(c)(2));
provided that, the term Eligible Foreign Custodian shall not include any
`Compulsory Depository.' A Compulsory Depository shall mean a securities
depository or clearing agency the use of which is compulsory because: (1) its
use is required by law or regulation, (2) securities cannot be withdrawn from
the depository, or (3) maintaining securities outside the depository is not
consistent with prevailing custodial practices in the country which the
depository serves. Compulsory Depositories used by Bank as of the date hereof
are set forth in Appendix 1-A hereto, and as the same may be amended on notice
to Customer from time to time.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports notifying Customer's Board of the placement of
Assets with particular Eligible Foreign Custodians and of any material
change in the arrangements with such Eligible Foreign Custodians, with such
reports to be provided to Customer's Board at such times as the Board deems
reasonable and appropriate based on the circumstances of Customer's foreign
custody arrangements (and until further notice from Customer such reports
shall be provided not less than quarterly with respect to the placement of
Assets with particular Eligible Foreign Custodians and with reasonable
promptness upon the occurrence of any material change in the arrangements
with such Eligible Foreign Custodians);
(ii) exercise such reasonable care, prudence and diligence in performing as
Customer's Foreign Custody Manager as a person having responsibility for
the safekeeping of Assets would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have determined
that Assets placed and maintained in the safekeeping of such Eligible
Foreign Custodian shall be subject to reasonable care, based on the
standards applicable to custodians in the relevant market, after having
considered all factors relevant to the safekeeping of such Assets,
including, without limitation, those factors set forth in SEC rule
17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodians that is a
securities depository or clearing agency, such contract, the rules or
established practices or procedures of the depository, or any combination
of the foregoing) requires that the Eligible Foreign Custodian will provide
reasonable care for Assets based on the standards applicable to custodians
in the relevant market.
(v) have established a system to monitor the continued appropriateness of
maintaining Assets with particular Eligible Foreign Custodians and of the
governing contractual arrangements; it being understood, however, that in
the event that Bank shall have determined that the existing Eligible
Foreign Custodian in a given country would no longer afford Assets
reasonable care and that no other Eligible Foreign Custodian in that
country would afford reasonable care, Bank shall promptly so advise
Customer and shall then act in accordance with the Instructions of Customer
with respect to the disposition of the affected Assets.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Assets on behalf of Customer with Eligible Foreign Custodians pursuant to a
written contract deemed appropriate by Bank.
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Assets hereunder complies with the
rules, regulations, interpretations and exemptive orders promulgated by or under
the authority of the SEC.
(d) Bank represents to Customer that it is a U.S. Bank as defined in Rule
17f-5(a)(7). Customer represents to Bank that: (1) the Assets being placed and
maintained in Bank's custody are subject to the Investment Company Act of 1940,
as amended (the "1940 Act"), as the same may be amended from time to time; (2)
its Board: (i) has determined that it is reasonable to rely on Bank to perform
as Customer's Foreign Custody Manager (ii) or its investment adviser shall have
determined that Customer may maintain Assets in each country in which Customer's
Assets shall be held hereunder and determined to accept the risks arising
therefrom (including, but not limited to, a country's financial infrastructure),
prevailing custody and settlement practices, laws applicable to the safekeeping
and recovery of Assets held in custody, and the likelihood of nationalization,
currency controls and the like) (collectively ("Country Risk")). Nothing
contained herein shall require Bank to make any selection or to engage in any
monitoring on behalf of Customer that would entail consideration of Country
Risk.
(e) Bank shall provide to Customer such information relating to Country
Risk as is specified in Appendix 1-B hereto. Customer hereby acknowledges that:
(i) such information is solely designed to inform Customer of market conditions
and procedures and is not intended as a recommendation to invest or not invest
in particular markets; and (ii) Bank has gathered the information from sources
it considers reliable, but that Bank shall have no responsibility for
inaccuracies or incomplete information.
B. Add the following after the first sentence of Section 3 of the
Agreement: "At the request of Customer, Bank may, but need not, add to Schedule
A an Eligible Foreign Custodian that is either a bank or a non-Compulsory
Depository where Bank has not acted as Foreign Custody Manager with respect to
the selection thereof. Bank shall notify Customer in the event that it elects to
add any such entity."
C. Add the following language to the end of Section 3 of the Agreement:
"The term Subcustodian as used herein shall mean the following:
(a) a 'U.S. Bank,' which shall mean a U.S. bank as defined in SEC rule
17f-5(a)(7);
(b) an 'Eligible Foreign Custodian,' which shall mean (i) a banking
institution or trust company, incorporated or organized under the laws of a
country other than the United States, that is regulated as such by that
country's government or an agency thereof, (ii) a majority-owned direct or
indirect subsidiary of a U.S. bank or bank holding company which subsidiary
is incorporated or organized under the laws of a country other than the
United States; (iii) a securities depository or clearing agency,
incorporated or organized under the laws of a country other than the United
States (other than a Compulsory Depository), that acts as a system for the
central handling of securities or equivalent book-entries in that country
and that is regulated by a foreign financial regulatory authority as
defined under section 2(a)(50) of the 1940 Act, (iv) a securities
depository or clearing agency organized under the laws of a country other
than the United States to the extent acting as a transnational system for
the central handling of securities or equivalent book-entries, and (v) any
other entity that shall have been so qualified by exemptive order, rule or
other appropriate action of the SEC.
For purposes of clarity, it is agreed that as used in Section 12(a)(i), the term
Subcustodian shall not include any Eligible Foreign Custodian as to which Bank
has not acted as Foreign Custody Manager or any "Compulsory Depository."
<PAGE>
Appendix 1-A
COMPULSORY DEPOSITORIES
<PAGE>
Appendix 1-B
INFORMATION REGARDING COUNTRY RISK
1. To aid Customer in its determinations regarding Country Risk, Bank shall
furnish annually and upon the initial placing of Assets into a country the
following information (check items applicable):
A Opinions of local counsel concerning:
___ i. Whether applicable foreign law would restrict the access afforded
Customer's independent public accountants to books and records kept by
an eligible foreign custodian located in that country.
___ ii. Whether applicable foreign law would restrict the Customer's ability
to recover its assets in the event of the bankruptcy of an Eligible
Foreign Custodian located in that country.
___ iii. Whether applicable foreign law would restrict the Customer's ability
to recover assets that are lost while under the control of an Eligible
Foreign Custodian located in the country.
B. Written information concerning:
___ i. The foreseeability of expropriation, nationalization, freezes, or
confiscation of Customer's assets.
___ ii. Whether difficulties in converting Customer's cash and cash
equivalents to U.S. dollars are reasonably foreseeable.
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities settlement and
registration, (v) taxation, and (vi) compulsory depositories (including
depository evaluation).
2. To aid Customer in monitoring Country Risk, Bank shall furnish board
the following additional information:
Market flashes, including with respect to changes in the information in
market reports.
<PAGE>
GLOBAL PROXY SERVICE RIDER
To Global Custody Agreement
Between
THE CHASE MANHATTAN BANK
AND
------------------------------------
dated 199_.
1. Global Proxy Services ("Proxy Services") shall be provided for the
countries listed in the procedures and guidelines ("Procedures") furnished
to Customer, as the same may be amended by Bank from time to time on prior
notice to Customer. The Procedures are incorporated by reference herein and
form a part of this Rider.
2. Proxy Services shall consist of those elements as set forth in the
Procedures, and shall include (a) notifications ("Notifications") by Bank
to Customer of the dates of pending shareholder meetings, resolutions to be
voted upon and the return dates as may be received by Bank or provided to
Bank by its Subcustodians or third parties, and (b) voting by Bank of
proxies based on Customer Instructions. Original proxy materials or copies
thereof shall not be provided. Notifications shall generally be in English
and, where necessary, shall be summarized and translated from such
non-English materials as have been made available to Bank or its
Subcustodian. In this respect Bank's only obligation is to provide
information from sources it believes to be reliable and/or to provide
materials summarized and/or translated in good faith. Bank reserves the
right to provide Notifications, or parts thereof, in the language received.
Upon reasonable advance request by Customer, backup information relative to
Notifications, such as annual reports, explanatory material concerning
resolutions, management recommendations or other material relevant to the
exercise of proxy voting rights shall be provided as available, but without
translation.
3. While Bank shall attempt to provide accurate and complete Notifications,
whether or not translated, Bank shall not be liable for any losses or other
consequences that may result from reliance by Customer upon Notifications
where Bank prepared the same in good faith.
4 Notwithstanding the fact that Bank may act in a fiduciary capacity with
respect to Customer under other agreements or otherwise under the
Agreement, in performing Proxy Services Bank shall be acting solely as the
agent of Customer, and shall not exercise any discretion with regard to
such Proxy Services.
5. Proxy voting may be precluded or restricted in a variety of circumstances,
including, without limitation, where the relevant Financial Assets are: (i)
on loan; (ii) at registrar for registration or reregistration; (iii) the
subject of a conversion or other corporate action; (iv) not held in a name
subject to the control of Bank or its Subcustodian or are otherwise held in
a manner which precludes voting; (v) not capable of being voted on account
of local market regulations or practices or restrictions by the issuer; or
(vi) held in a margin or collateral account.
6 Customer acknowledges that in certain countries Bank may be unable to vote
individual proxies but shall only be able to vote proxies on a net basis
(E.G., a net yes or no vote given the voting instructions received from all
customers).
7. Customer shall not make any use of the information provided hereunder,
except in connection with the funds or plans covered hereby, and shall in
no event sell, license, give or otherwise make the information provided
hereunder available, to any third party, and shall not directly or
indirectly compete with Bank or diminish the market for Proxy Services by
provision of such information, in whole or in part, for compensation or
otherwise, to any third party.
8. The names of Authorized Persons for Proxy Services shall be furnished to
Bank in accordance with ss.10 of the Agreement. Proxy Services fees shall
be as set forth in ss.13 of the Agreement or as separately agreed.
<PAGE>
SPECIAL TERMS AND CONDITIONS RIDER
GLOBAL CUSTODY AGREEMENT
WITH ___________________________________
DATE ___________________________________
<PAGE>
DOMESTIC ONLY
SPECIAL TERMS AND CONDITIONS RIDER
DOMESTIC CORPORATE ACTIONS AND PROXIES
With respect to domestic U.S. and Canadian Financial Assets (the latter if held
in DTC), the following provisions shall apply rather than the provisions of
Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of
Bank's nominee or the nominee of a central depository) and
communications with respect to Financial Assets in the Custody Account
as call for voting or relate to legal proceedings within a reasonable
time after sufficient copies are received by Bank for forwarding to
its customers. In addition, Bank shall follow coupon payments,
redemptions, exchanges or similar matters with respect to Financial
Assets in the Custody Account and advise Customer or the Authorized
Person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Financial Assets, in each
case, of which Bank has received notice from the issuer of the
Financial Assets, or as to which notice is published in publications
routinely utilized by Bank for this purpose.
FEES
The fees referenced in Section 13 hereof cover only domestic and euro-dollar
holdings. There shall be no Schedule A hereto, as there are no foreign assets in
the Accounts.
<PAGE>
DOMESTIC AND GLOBAL
SPECIAL TERMS AND CONDITIONS RIDER
DOMESTIC CORPORATE ACTIONS AND PROXIES
With respect to domestic U.S. and Canadian Financial Assets (the latter if held
in DTC), the following provisions shall apply rather than the pertinent
provisions of Section 8 of the Agreement and the Global Proxy Service rider:
Bank shall send to Customer or the Authorized Person for a Custody
Account, such proxies (signed in blank, if issued in the name of
Bank's nominee or the nominee of a central depository) and
communications with respect to Financial Assets in the Custody Account
as call for voting or relate to legal proceedings within a reasonable
time after sufficient copies are received by Bank for forwarding to
its customers. In addition, Bank shall follow coupon payments,
redemptions, exchanges or similar matters with respect to Financial
Assets in the Custody Account and advise Customer or the Authorized
Person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Financial Assets, in each
case, of which Bank has received notice from the issuer of the
Financial Assets, or as to which notice is published in publications
routinely utilized by Bank for this purpose.
<PAGE>
Exhibit 1
TO CUSTODIAN AGREEMENT
BETWEEN
SBL Fund and The Chase Manhattan Bank
Dated as of
The following is a list of Portfolios for which the Custodian shall serve
under a Custodian Agreement dated as of _______________ (the "Agreement"):
PORTFOLIO NAME: EFFECTIVE AS OF:
Series D
Series I
Series K
Series M
Series N
Series O
<PAGE>
Exhibit 1
TO CUSTODIAN AGREEMENT
BETWEEN
Security Equity Fund and The Chase Manhattan Bank
Dated as of
The following is a list of Portfolios for which the Custodian shall serve
under a Custodian Agreement dated as of _______________ (the "Agreement"):
PORTFOLIO NAME: EFFECTIVE AS OF:
Asset Allocation Fund
Global Series
International Series
<PAGE>
Exhibit 1
TO CUSTODIAN AGREEMENT
BETWEEN
Security Income Fund and The Chase Manhattan Bank
Dated as of
The following is a list of Portfolios for which the Custodian shall serve
under a Custodian Agreement dated as of _______________ (the "Agreement"):
PORTFOLIO NAME: EFFECTIVE AS OF:
Emerging Markets Total Return Series
Global Asset Allocation Series
Global High Yield Series
<PAGE>
[SBG LOGO]
- --------------------------------------------------------------------------------
Security Benefit Life Insurance Company 700 SW Harrison St.
Security Benefit Group, Inc. Topeka, Kansas 66636-0001
Security Distributors, Inc. (785) 431-3000
Security Management Company, LLC
October 10, 1998
Security Equity Fund
700 Harrison Street
Topeka, KS 66636-0001
Dear Sir/Madam:
In connection with the registration under the Securities Act of 1933 of an
indefinite number of shares of common stock of Security Equity Fund (the
"Company"), I have examined such matters as I have deemed necessary to give this
opinion.
On the basis of the foregoing, it is my opinion that the shares have been duly
authorized and, when paid for as contemplated by the Company's Registration
Statement, will be validly issued, fully paid, and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
AMY J. LEE
Amy J. Lee, Esq.
Secretary
Security Equity Fund
<PAGE>
Item 23 Exhibit (j)
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" and "Independent Auditors" and to the incorporation by reference of
our report dated October 31, 1997, in the Post-Effective Amendment No. 83 to the
Registration Statement (Form N-1A) and related Prospectus and Statement of
Additional Information of Security Equity Fund filed with the Securities and
Exchange Commission under the Securities Act of 1933 (Registration No. 2-19458)
and under the Investment Company Act of 1940 (Registration No. 811-1136).
Ernst & Young LLP
Kansas City, Missouri
November 13, 1998
<PAGE>
AMENDED AND RESTATED CLASS A
DISTRIBUTION PLAN
SECURITY EQUITY FUND
WHEREAS, the Security Equity Fund, Small Company Series adopted a Distribution
Plan under Rule 12b-1 of the Investment Company Act of 1940 with respect to its
Class A shares; and
WHEREAS, the Distribution Plan was initially entered into on September 15, 1997;
and
WHEREAS, on November 6, 1998, the Board of Directors of the Security Equity Fund
authorized the issuance of three additional series of Class A common stock of
the Fund, designated as the International Series, Enhanced Index Series and
Select 25 Series; and
WHEREAS, on November 6, 1998, the Board of Directors of the Security Equity Fund
determined that extending the Fund's Class A Distribution Plan to the
International Series, Enhanced Index Series and Select 25 Series was reasonably
likely to benefit each such series and their respective shareholders; and
WHEREAS, in order to extend the Class A Distribution Plan to each such series of
Security Equity Fund, the Board of Directors has determined to amend and restate
the Class A Distribution Plan as follows:
1. THE PLAN. This Distribution Plan (the "Plan"), provides for the financing
by Security Equity Fund (the "Fund") of activities which are, or may be
deemed to be, primarily intended to result in the sale of Class A shares
of the series of the Fund (hereinafter called "distribution-related
activities") set forth in Appendix A to the Plan (collectively referred
to herein as the "Series"). Appendix A, as it may be amended from time to
time is incorporated herein by this reference. The principal purpose of
this Plan is to enable the Fund to supplement expenditures by Security
Distributors, Inc., the Distributor of its shares (the "Distributor") for
distribution-related activities. This Plan is intended to comply with the
requirements of Rule 12b-1 (the "Rule") under the Investment Company Act
of 1940 (the "1940 Act").
The Board of Directors, in considering whether the Fund should implement
the Plan, has requested and evaluated such information as it deemed
necessary to make an informed determination as to whether the Plan should
be implemented and has considered such pertinent factors as it deemed
necessary to form the basis for a decision to use assets of the Fund for
such purposes.
In voting to approve the implementation of the Plan, the Directors have
concluded, in the exercise of their reasonable business judgment and in
light of their respective fiduciary duties, that there is a reasonable
likelihood that the Plan will benefit the Series and their respective
shareholders.
2. COVERED EXPENSES.
(a) The Fund may make payments under this Plan, or any agreement
relating to the implementation of this Plan, in connection with
any activities or expenses primarily intended to result in the
sale of Class A shares of the Fund, including, but not limited to,
the following distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus and
Statement of Additional Information and any supplement
thereto used in connection with the offering of the Series'
shares to the public;
(ii) Printing of additional copies for use by the Distributor as
sales literature, of reports and other communications which
were prepared by the Fund for distribution to existing
shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of the
Series' shares to the public;
(iv) Expenses incurred in advertising, promoting and selling
shares of the Series to the public;
(v) Any fees paid by the Distributor to securities dealers who
have executed a Dealer's Distribution Agreement with the
Distributor for account maintenance and personal service to
shareholders of the Series (a "Service Fee");
(vi) Commissions to sales personnel for selling shares of the
Series and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the Series
by securities dealers, including the costs of preparation of
materials for presentations, travel expenses, costs of
entertainment, and other expenses incurred in connection
with promoting sales of Series shares by dealers.
(b) Any payments for distribution-related activities shall be made
pursuant to an agreement. As required by the Rule, each agreement
relating to the implementation of this Plan shall be in writing
and subject to approval and termination pursuant to the provisions
of Section 7 of this Plan. However, this Plan shall not obligate
the Fund or any other party to enter into such agreement.
3. AGREEMENT WITH DISTRIBUTOR. All payments to the Distributor pursuant to
this Plan shall be subject to and be made in compliance with a written
agreement between the Fund and the Distributor containing a provision
that the Distributor shall furnish the Fund with quarterly written
reports of the amounts expended and the purposes for which such
expenditures were made, and such other information relating to such
expenditures or to the other distribution-related activities undertaken
or proposed to be undertaken by the Distributor during such fiscal year
under its Distribution Agreement with the Fund as the Fund may reasonably
request.
4. DEALER'S DISTRIBUTION AGREEMENT. The Dealer's Distribution Agreement (the
"Agreement") contemplated by Section 2(a)(v) above shall permit payment
of Service Fees to securities dealers by the Distributor only in
accordance with the provisions of this paragraph and shall have the
approval of the majority of the Board of Directors of the Fund, including
the affirmative vote of a majority of those Directors who are not
interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or any agreement related
to the Plan ("Independent Directors"), as required by the Rule. The
Distributor may pay to the other party to any Agreement a Service Fee for
distribution and marketing services provided by such other party. Such
Service Fee shall be payable (a) for the first year, initially, in an
amount equal to .25 percent annually of the aggregate net asset value of
the shares purchased by such other party's customers or clients, and (b)
for each year thereafter, quarterly, in arrears in an amount equal to
such percentage (not in excess of .000685 percent per day or .25 percent
annually) of the aggregate net asset value of the shares held by such
other party's customers or clients at the close of business each day as
determined from time to time by the Distributor. The distribution and
marketing services contemplated hereby shall include, but are not limited
to, answering inquiries regarding the Fund, account designations and
addresses, maintaining the investment of such other party's customers or
clients in the Series and similar services. In determining the extent of
such other party's assistance in maintaining such investment by its
customers or clients, the Distributor may take into account the
possibility that the shares held by such customer or client would be
redeemed in the absence of such fee.
5. LIMITATIONS ON COVERED EXPENSES. The basic limitation on the expenses
incurred by the Fund under Section 2 of this Plan (including Service
Fees) in any fiscal year of the Fund shall be one-quarter of one percent
(.25%) of the Fund's average daily net assets for such fiscal year. The
payments to be paid pursuant to this Plan shall be calculated and accrued
daily and paid monthly or at such other intervals as the Directors shall
determine, subject to any applicable restriction imposed by rules of the
National Association of Securities Dealers, Inc.
6. INDEPENDENT DIRECTORS. While this Plan is in effect, the selection and
nomination of Independent Directors of the Fund shall be committed to the
discretion of the Independent Directors. Nothing herein shall prevent the
involvement of others in such selection and nomination if the final
decision on any such selection and nomination is approved by a majority
of the Independent Directors.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan and
each Agreement relating to the implementation of this Plan shall go into
effect when approved.
(a) By vote of the Fund's Directors, including the affirmative vote of
a majority of the Independent Directors, cast in person at a
meeting called for the purpose of voting on the Plan or the
Agreement;
(b) By a vote of holders of at least a majority of the outstanding
voting securities of each Series; and
(c) Upon the effectiveness of an amendment to the Fund's registration
statement, reflecting this Plan, filed with the Securities and
Exchange Commission under the Securities Act of 1933.
This Plan and any Agreements relating to the implementation of this Plan
shall, unless terminated as hereinafter provided, continue in effect from
year to year only so long as such continuance is specifically approved at
least annually by vote of the Fund's Directors, including the affirmative
vote of a majority of its Independent Directors, cast in person at a
meeting called for the purpose of voting on such continuance. This Plan
and any Agreements relating to the implementation of this Plan may be
terminated, in the case of the Plan, at any time or, in the case of any
agreements upon not more than sixty (60) days' written notice to any
other party to the Agreement by vote of a majority of the Independent
Directors or by the vote of the holders of a majority of the outstanding
voting securities of the Fund. Any Agreement relating to the
implementation of this Plan shall terminate automatically in the event it
is assigned. Any material amendment to this Plan shall require approval
by vote of the Fund's Directors, including the affirmative vote of a
majority of the Independent Directors, cast in person at a meeting called
for the purpose of voting on such amendment and, if such amendment
materially increases the limitations on expenses payable under the Plan,
it shall also require approval by a vote of holders of at least a
majority of the outstanding voting securities of the Fund. As applied to
the Fund the phrase "majority of the outstanding voting securities" shall
have the meaning specified in Section 2(a) of the 1940 Act.
In the event this Plan should be terminated by the shareholders or
Directors of the Fund, the payments paid to the Distributor pursuant to
the Plan up to the date of termination shall be retained by the
Distributor. Any expenses incurred by the Distributor in excess of those
payments will be the sole responsibility of the Distributor.
8. RECORDS. The Fund shall preserve copies of this Plan and any related
Agreements and all reports made pursuant to Section 3 hereof, for a
period of not less than six (6) years from the date of this Plan, any
such Agreement or any such report, as the case may be, the first two
years in an easily accessible place.
SECURITY EQUITY FUND
Date: By:
- --------------------------------- ------------------------------------
Appendix A
1. Small Company Series
2. International Series
3. Enhanced Index Series
4. Select 25 Series
<PAGE>
FORM OF
SECURITY EQUITY FUND
CLASS C
DISTRIBUTION PLAN
1. THE PLAN. This Distribution Plan (the "Plan"), provides for the financing by
Security Equity Fund (the "Fund") of activities which are, or may be deemed
to be, primarily intended to result in the sale of class C shares of the
Series of the Fund (hereinafter called "distribution-related activities").
The Fund's Series are listed on Exhibit A to this Plan. The principal
purpose of this Plan is to enable the Fund to supplement expenditures by
Security Distributors, Inc., the Distributor of its shares (the
"Distributor") for distribution-related activities. This Plan is intended to
comply with the requirements of Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940 (the "1940 Act").
The Board of Directors, in considering whether the Fund should implement the
Plan, has requested and evaluated such information as it deemed necessary to
make an informed determination as to whether the Plan should be implemented
and has considered such pertinent factors as it deemed necessary to form the
basis for a decision to use assets of the Fund for such purposes.
In voting to approve the implementation of the Plan, the Directors have
concluded, in the exercise of their reasonable business judgment and in
light of their respective fiduciary duties, that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
2. COVERED EXPENSES.
(a) The Fund may make payments under this Plan, or any agreement relating
to the implementation of this Plan, in connection with any activities
or expenses primarily intended to result in the sale of class C shares
of the Fund, including, but not limited to, the following
distribution-related activities:
(i) Preparation, printing and distribution of the Prospectus and
Statement of Additional Information and any supplement thereto
used in connection with the offering of Fund shares to the
public;
(ii) Printing of additional copies for use by the Distributor as
sales literature, of reports and other communications which were
prepared by the Fund for distribution to existing shareholders;
(iii) Preparation, printing and distribution of any other sales
literature used in connection with the offering of Fund shares
to the public;
(iv) Expenses incurred in advertising, promoting and selling shares
of the Fund to the public;
(v) Any fees paid by the Distributor to securities dealers who have
executed a Dealer's Distribution Agreement with the Distributor
for account maintenance and personal service to shareholders (a
"Service Fee");
(vi) Commissions to sales personnel for selling shares of the Fund
and interest expenses related thereto; and
(vii) Expenses incurred in promoting sales of shares of the Fund by
securities dealers, including the costs of preparation of
materials for presentations, travel expenses, costs of
entertainment, and other expenses incurred in connection with
promoting sales of Fund shares by dealers.
(b) Any payments for distribution-related activities shall be made pursuant
to an agreement. As required by the Rule, each agreement relating to
the implementation of this Plan shall be in writing and subject to
approval and termination pursuant to the provisions of Section 7 of
this Plan. However, this Plan shall not obligate the Fund or any other
party to enter into such agreement.
3. AGREEMENT WITH DISTRIBUTOR. All payments to the Distributor pursuant to this
Plan shall be subject to and be made in compliance with a written agreement
between the Fund and the Distributor containing a provision that the
Distributor shall furnish the Fund with quarterly written reports of the
amounts expended and the purposes for which such expenditures were made and
such other information relating to such expenditures or to the other
distribution-related activities undertaken or proposed to be undertaken by
the Distributor during such fiscal year under its Distribution Agreement
with the Fund as the Fund may reasonably request.
4. DEALER'S DISTRIBUTION AGREEMENT. The Dealer's Distribution Agreement (the
"Agreement") contemplated by Section 2(a)(v) above shall permit payment of
Service Fees to securities dealers by the Distributor only in accordance
with the provisions of this paragraph and shall have the approval of the
majority of the Board of Directors of the Fund, including the affirmative
vote of a majority of those Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the operation
of the Plan or any agreement related to the Plan ("Independent Directors"),
as required by the Rule. The Distributor may pay to the other party to any
Agreement a Service Fee for account maintenance and shareholder services
provided by such other party. Such Service Fee shall be payable (a) for the
first year, initially, in an amount equal to 0.25 percent annually of the
aggregate net asset value of the shares purchased by such other party's
customers or clients, and (b) for each year thereafter, quarterly, in
arrears in an amount equal to such percentage (not in excess of .000685
percent per day or 0.25 percent annually) of the aggregate net asset value
of the shares held by such other party's customers or clients at the close
of business each day as determined from time to time by the Distributor. The
distribution and marketing services contemplated hereby shall include, but
are not limited to, answering inquiries regarding the Fund, account
designations and addresses, maintaining the investment of such other party's
customers or clients in the Fund and similar services. In determining the
extent of such other party's assistance in maintaining such investment by
its customers or clients, the Distributor may take into account the
possibility that the shares held by such customer or client would be
redeemed in the absence of such fee.
5. LIMITATIONS ON COVERED EXPENSES. The basic limitation on the expenses
incurred by the Fund under Section 2 of this Plan (including Service Fees)
in any fiscal year of the Fund shall be one percent (1.00%) of the Fund's
average daily net assets for such fiscal year. The payments to be paid
pursuant to this Plan shall be calculated and accrued daily and paid monthly
or at such other intervals as the Directors shall determine, subject to any
applicable restriction imposed by rules of the National Association of
Securities Dealers, Inc.
6. INDEPENDENT DIRECTORS. While this Plan is in effect, the selection and
nomination of Independent Directors of the Fund shall be committed to the
discretion of the Independent Directors. Nothing herein shall prevent the
involvement of others in such selection and nomination if the final decision
on any such selection and nomination is approved by a majority of the
Independent Directors.
7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Plan and each
Agreement relating to the implementation of this Plan shall go into effect
when approved.
(a) By vote of the Fund's Directors, including the affirmative vote of a
majority of the Independent Directors, cast in person at a meeting
called for the purpose of voting on the Plan or the Agreement;
(b) By a vote of holders of at least a majority of the outstanding voting
securities of the Series' Class C shares; and
(c) Upon the effectiveness of an amendment to the Fund's registration
statement, reflecting this Plan, filed with the Securities and Exchange
Commission under the Securities Act of 1933.
This Plan and any Agreements relating to the implementation of this Plan
shall, unless terminated as hereinafter provided, continue in effect from
year to year only so long as such continuance is specifically approved at
least annually by vote of the Fund's Directors, including the affirmative
vote of a majority of its Independent Directors, cast in person at a meeting
called for the purpose of voting on such continuance. This Plan and any
Agreements relating to the implementation of this Plan may be terminated, in
the case of the Plan, at any time or, in the case of any Agreements upon not
more than sixty (60) days' written notice to any other party to the
Agreement by vote of a majority of the Independent Directors or by the vote
of the holders of a majority of the outstanding voting securities of the
Series' Class C shares. Any Agreement relating to the implementation of this
Plan shall terminate automatically in the event it is assigned. Any material
amendment to this Plan shall require approval by vote of the Fund's
Directors, including the affirmative vote of a majority of the Independent
Directors, cast in person at a meeting called for the purpose of voting on
such amendment and, if such amendment materially increases the limitations
on expenses payable under the Plan, it shall also require approval by a vote
of holders of at least a majority of the outstanding voting securities of
the Series' Class C shares. As applied to the Fund the phrase "majority of
the outstanding voting securities" shall have the meaning specified in
Section 2(a) of the 1940 Act.
In the event this Plan should be terminated by the shareholders or Directors
of the Fund, the payments paid to the Distributor pursuant to the Plan up to
the date of termination shall be retained by the Distributor. Any expenses
incurred by the Distributor in excess of those payments will be the sole
responsibility of the Distributor.
8. RECORDS. The Fund shall preserve copies of this Plan and any related
Agreements and all reports made pursuant to Section 3 hereof, for a period
of not less than six (6) years from the date of this Plan, any such
Agreement or any such report, as the case may be, the first two years in an
easily accessible place.
SECURITY EQUITY FUND
Date: _______________________ By: ____________________________
EXHIBIT A
Series of Security Equity Fund:
Equity Series
Global Series
Asset Allocation Series
Social Awareness Series
Value Series
Small Company Series
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000088525
<NAME> SECURITY EQUITY FUND
<SERIES>
<NUMBER> 011
<NAME> EQUITY SERIES - CLASS A
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 494,764
<INVESTMENTS-AT-VALUE> 794,203
<RECEIVABLES> 14,123
<ASSETS-OTHER> 41,330
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 849,656
<PAYABLE-FOR-SECURITIES> 1,667
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,133
<TOTAL-LIABILITIES> 2,800
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 482,736
<SHARES-COMMON-STOCK> 83,311
<SHARES-COMMON-PRIOR> 76,390
<ACCUMULATED-NII-CURRENT> 2,266
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 62,415
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 299,439
<NET-ASSETS> 846,856
<DIVIDEND-INCOME> 9,352
<INTEREST-INCOME> 1,348
<OTHER-INCOME> 0
<EXPENSES-NET> 8,007
<NET-INVESTMENT-INCOME> 2,693
<REALIZED-GAINS-CURRENT> 70,481
<APPREC-INCREASE-CURRENT> 126,763
<NET-CHANGE-FROM-OPS> 199,937
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,155
<DISTRIBUTIONS-OF-GAINS> 49,869
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,938
<NUMBER-OF-SHARES-REDEEMED> 27,903
<SHARES-REINVESTED> 6,886
<NET-CHANGE-IN-ASSETS> 181,840
<ACCUMULATED-NII-PRIOR> 2,729
<ACCUMULATED-GAINS-PRIOR> 46,268
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,376
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,007
<AVERAGE-NET-ASSETS> 717,575
<PER-SHARE-NAV-BEGIN> 7.54
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 2.199
<PER-SHARE-DIVIDEND> .041
<PER-SHARE-DISTRIBUTIONS> .648
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.09
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000088525
<NAME> SECURITY EQUITY FUND
<SERIES>
<NUMBER> 012
<NAME> EQUITY SERIES - CLASS B
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 494,764
<INVESTMENTS-AT-VALUE> 794,203
<RECEIVABLES> 14,123
<ASSETS-OTHER> 41,330
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 849,656
<PAYABLE-FOR-SECURITIES> 1,667
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,133
<TOTAL-LIABILITIES> 2,800
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 482,736
<SHARES-COMMON-STOCK> 10,125
<SHARES-COMMON-PRIOR> 5,276
<ACCUMULATED-NII-CURRENT> 2,266
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 62,415
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 299,439
<NET-ASSETS> 846,856
<DIVIDEND-INCOME> 9,352
<INTEREST-INCOME> 1,348
<OTHER-INCOME> 0
<EXPENSES-NET> 8,007
<NET-INVESTMENT-INCOME> 2,693
<REALIZED-GAINS-CURRENT> 70,481
<APPREC-INCREASE-CURRENT> 126,763
<NET-CHANGE-FROM-OPS> 199,937
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 4,464
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,249
<NUMBER-OF-SHARES-REDEEMED> 10,028
<SHARES-REINVESTED> 628
<NET-CHANGE-IN-ASSETS> 50,514
<ACCUMULATED-NII-PRIOR> 2,729
<ACCUMULATED-GAINS-PRIOR> 46,268
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,376
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,007
<AVERAGE-NET-ASSETS> 717,575
<PER-SHARE-NAV-BEGIN> 7.36
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> 2.148
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .648
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.82
<EXPENSE-RATIO> 2.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000088525
<NAME> SECURITY EQUITY FUND
<SERIES>
<NUMBER> 021
<NAME> GLOBAL SERIES - CLASS A
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 30,842
<INVESTMENTS-AT-VALUE> 35,390
<RECEIVABLES> 369
<ASSETS-OTHER> 3,481
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 39,240
<PAYABLE-FOR-SECURITIES> 1,717
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 269
<TOTAL-LIABILITIES> 1,986
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,642
<SHARES-COMMON-STOCK> 1,784
<SHARES-COMMON-PRIOR> 1,582
<ACCUMULATED-NII-CURRENT> 106
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,920
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,587
<NET-ASSETS> 37,255
<DIVIDEND-INCOME> 561
<INTEREST-INCOME> 105
<OTHER-INCOME> 0
<EXPENSES-NET> 743
<NET-INVESTMENT-INCOME> (77)
<REALIZED-GAINS-CURRENT> 3,427
<APPREC-INCREASE-CURRENT> 2,564
<NET-CHANGE-FROM-OPS> 5,914
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 597
<DISTRIBUTIONS-OF-GAINS> 1,243
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 504
<NUMBER-OF-SHARES-REDEEMED> 460
<SHARES-REINVESTED> 158
<NET-CHANGE-IN-ASSETS> 4,549
<ACCUMULATED-NII-PRIOR> 672
<ACCUMULATED-GAINS-PRIOR> 1,559
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 643
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 743
<AVERAGE-NET-ASSETS> 32,204
<PER-SHARE-NAV-BEGIN> 12.42
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> 2.289
<PER-SHARE-DIVIDEND> .376
<PER-SHARE-DISTRIBUTIONS> .783
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.56
<EXPENSE-RATIO> 2.0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000088525
<NAME> SECURITY EQUITY FUND
<SERIES>
<NUMBER> 022
<NAME> GLOBAL SERIES - CLASS B
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 30,842
<INVESTMENTS-AT-VALUE> 35,390
<RECEIVABLES> 369
<ASSETS-OTHER> 3,481
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 39,240
<PAYABLE-FOR-SECURITIES> 1,717
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 269
<TOTAL-LIABILITIES> 1,986
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,642
<SHARES-COMMON-STOCK> 988
<SHARES-COMMON-PRIOR> 598
<ACCUMULATED-NII-CURRENT> 106
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,920
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,587
<NET-ASSETS> 37,255
<DIVIDEND-INCOME> 561
<INTEREST-INCOME> 105
<OTHER-INCOME> 0
<EXPENSES-NET> 743
<NET-INVESTMENT-INCOME> (77)
<REALIZED-GAINS-CURRENT> 3,427
<APPREC-INCREASE-CURRENT> 2,564
<NET-CHANGE-FROM-OPS> 5,914
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 200
<DISTRIBUTIONS-OF-GAINS> 515
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 538
<NUMBER-OF-SHARES-REDEEMED> 211
<SHARES-REINVESTED> 63
<NET-CHANGE-IN-ASSETS> 5,777
<ACCUMULATED-NII-PRIOR> 672
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 743
<AVERAGE-NET-ASSETS> 32,204
<PER-SHARE-NAV-BEGIN> 12.18
<PER-SHARE-NII> (.11)
<PER-SHARE-GAIN-APPREC> 2.237
<PER-SHARE-DIVIDEND> .304
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000088525
<NAME> SECURITY EQUITY FUND
<SERIES>
<NUMBER> 031
<NAME> ASSET ALLOCATION SERIES - CLASS A
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 7,006
<INVESTMENTS-AT-VALUE> 7,752
<RECEIVABLES> 44
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,796
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39
<TOTAL-LIABILITIES> 39
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,490
<SHARES-COMMON-STOCK> 310
<SHARES-COMMON-PRIOR> 221
<ACCUMULATED-NII-CURRENT> 68
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 453
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 746
<NET-ASSETS> 7,757
<DIVIDEND-INCOME> 85
<INTEREST-INCOME> 128
<OTHER-INCOME> 0
<EXPENSES-NET> 143
<NET-INVESTMENT-INCOME> 70
<REALIZED-GAINS-CURRENT> 461
<APPREC-INCREASE-CURRENT> 620
<NET-CHANGE-FROM-OPS> 1,151
<EQUALIZATION> 0
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 129
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<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 1,457
<ACCUMULATED-NII-PRIOR> 113
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 189
<AVERAGE-NET-ASSETS> 6,689
<PER-SHARE-NAV-BEGIN> 11.06
<PER-SHARE-NII> .17
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000088525
<NAME> SECURITY EQUITY FUND
<SERIES>
<NUMBER> 032
<NAME> ASSET ALLOCATION SERIES - CLASS B
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 7,006
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<RECEIVABLES> 44
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,490
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<ACCUMULATED-NII-CURRENT> 68
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<NET-INVESTMENT-INCOME> 70
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 189
<AVERAGE-NET-ASSETS> 6,689
<PER-SHARE-NAV-BEGIN> 10.97
<PER-SHARE-NII> .07
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<PER-SHARE-DIVIDEND> .181
<PER-SHARE-DISTRIBUTIONS> .252
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<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000088525
<NAME> SECURITY EQUITY FUND
<SERIES>
<NUMBER> 041
<NAME> SOCIAL AWARENESS SERIES - CLASS A
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 7,582
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<RECEIVABLES> 323
<ASSETS-OTHER> 614
<OTHER-ITEMS-ASSETS> 0
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 310
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,409
<SHARES-COMMON-STOCK> 345
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (205)
<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 36
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<EXPENSES-NET> 58
<NET-INVESTMENT-INCOME> 5
<REALIZED-GAINS-CURRENT> (205)
<APPREC-INCREASE-CURRENT> 1,641
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 51
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 109
<AVERAGE-NET-ASSETS> 5,628
<PER-SHARE-NAV-BEGIN> 15.00
<PER-SHARE-NII> .08
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000088525
<NAME> SECURITY EQUITY FUND
<SERIES>
<NUMBER> 042
<NAME> SOCIAL AWARENESS SERIES - CLASS B
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 7,582
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<RECEIVABLES> 323
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<PAID-IN-CAPITAL-COMMON> 8,409
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<ACCUMULATED-NII-CURRENT> 5
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<ACCUMULATED-NET-GAINS> (205)
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<ACCUM-APPREC-OR-DEPREC> 1,641
<NET-ASSETS> 9,850
<DIVIDEND-INCOME> 36
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<EXPENSES-NET> 58
<NET-INVESTMENT-INCOME> 5
<REALIZED-GAINS-CURRENT> (205)
<APPREC-INCREASE-CURRENT> 1,641
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<NET-CHANGE-IN-ASSETS> 3,641
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<GROSS-ADVISORY-FEES> 51
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 109
<AVERAGE-NET-ASSETS> 5,628
<PER-SHARE-NAV-BEGIN> 15.00
<PER-SHARE-NII> (.08)
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<PER-SHARE-NAV-END> 17.81
<EXPENSE-RATIO> 1.84
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000088525
<NAME> SECURITY EQUITY FUND
<SERIES>
<NUMBER> 051
<NAME> VALUE SERIES - CLASS A
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 7,290
<INVESTMENTS-AT-VALUE> 8,147
<RECEIVABLES> 165
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<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.95
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<NAME> SECURITY EQUITY FUND
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<NUMBER> 052
<NAME> VALUE SERIES - CLASS B
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
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<PERIOD-START> OCT-01-1996
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<PAGE>
SECURITY FUNDS MULTIPLE CLASS PLAN
NOVEMBER 6, 1998
1. THE PLAN. This Plan is the written multiple class plan for each of the
open-end management investment companies (individually the "Fund" and
collectively the "Funds") named on Exhibit A hereto, which exhibit may be
revised from time to time, for Security Distributors, Inc. (the
"Distributor"), the general distributor of shares of the Funds, and
Security Management Company, LLC (the "Advisor"), the investment advisor of
the Funds. In instances where such investment companies issue shares
representing interests in different portfolios ("Series"), the term "Fund"
and "Funds" shall separately refer to each Series. It is the written plan
contemplated by Rule 18f-3 (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Funds may issue multiple
classes of shares. The terms and provisions of this Plan shall be
interpreted and defined in a manner consistent with the provisions and
definitions contained in the Rule.
2. SIMILARITIES AND DIFFERENCES AMONG CLASSES. Each Fund offering shares of
more than one class agrees that each class of that Fund:
a. (i) shall have a separate service plan or distribution and service plan
("12b-1 Plan"), and shall pay all of the expenses incurred pursuant to
that arrangement; and (ii) may pay a different share of expenses if
such expenses are actually incurred in a different amount by that
class, or if the class receives services of a different kind or to a
different degree than that of other classes.
To the extent the following categories of expenses can reasonably be
identified as relating to a particular class, they will be allocated
solely to such class: (1) transfer agent fees as identified by the
transfer agent as being attributable to a specific class; (2) printing
and postage expenses related to preparing and distributing to the
shareholders of a specific class materials such as shareholder reports,
proxies and the like; (3) Blue Sky registration fees incurred by a
class; (4) SEC registration fees incurred by a class; (5) litigation,
legal, and accounting expenses relating solely to one class other than
legal or accounting expenses for tax return preparation or tax advice;
(6) directors' fees incurred as a result of issues relating to one
class; and (7) 12b-1 Plan fees. These expenses, if allocated to a
particular class, will be referred to herein as Class Expenses.
Because Class Expenses may be accrued at different rates for each class
of a single Fund, dividends distributable to shareholders and net asset
values per share may differ for shares of different classes of the same
Fund.
b. shall have exclusive voting rights on any matters that relate solely to
that class's arrangements, including, without limitation, voting with
respect to a 12b-1 Plan for that class;
c. shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the
interests of any other class; and
d. shall have in all other respects the same rights and obligations as
each other class.
3. ALLOCATIONS OF INCOME AND EXPENSES. The gross income of each Fund, and
expenses of each Fund other than Class Expenses allocated to a particular
class, are allocated among the classes on the basis of the relative net
assets of each class of such Fund.
4. FEE WAIVERS AND REIMBURSEMENTS. The investment advisor may waive or
reimburse its management fee in whole or in part provided that the fee is
waived or reimbursed to all shares of a Fund in proportion to their
relative average daily net asset values.
The investment advisor, or an entity related to the investment advisor, who
charges a fee for a Class Expense may waive or reimburse that fee in whole
or in part only if the revised fee more accurately reflects the relative
costs of providing to each class the service for which the Class Expense is
charged.
A distributor of a Fund may waive or reimburse a Rule 12b-1 Plan fee in
whole or in part.
5. CONVERSIONS OF SHARES. Class B shares automatically convert to Class A
shares on the eighth anniversary of purchase. This is advantageous because
Class A shares are subject to a lower distribution fee than Class B shares.
A pro rata amount of Class B shares purchased through the reinvestment of
dividends or other distributions is also converted to Class A shares each
time that shares purchased directly are converted.
6. DISCLOSURE. The classes of shares to be offered by each Fund, and the
initial, asset-based or contingent deferred sales charges and other
material distribution arrangements with respect to such classes, shall be
disclosed in the prospectus and/or statement of additional information used
to offer that class of shares. Such prospectus or statement of additional
information shall be supplemented or amended to reflect any change(s) in
classes of shares to be offered or in the material distribution
arrangements with respect to such classes.
7. INDEPENDENT AUDIT. The methodology and procedures for calculating the net
asset value, dividends and distributions of each class shall be reviewed by
an independent auditing firm (the "Expert"). At least annually, the Expert,
or an appropriate substitute expert, will render a report to the Funds on
policies and procedures placed in operation and tests of operating
effectiveness as defined and described in SAS 70 of the AICPA.
8. RULE 12B-1 PAYMENTS. The Treasurer of each Fund shall provide to the
Directors of that Fund, and the Directors shall review, at least quarterly,
the written report required by that Fund's distribution and service plan(s)
and/or service plan (the "Plan"), if any, adopted pursuant to 1940 Act Rule
12b-1. The report shall include information on (i) the amounts expended
pursuant to the Plan, (ii) the purposes for which such expenditures were
made and (iii) the amount of the Distributor's unreimbursed distribution
costs (if recovery of such costs in future periods is permitted by that
Plan), taking into account Plan payments and contingent deferred sales
charges paid to the Distributor.
9. CONFLICTS. On an ongoing basis, the Directors of the Funds, pursuant to
their fiduciary responsibilities under the 1940 Act and otherwise, will
monitor the Funds for the existence of any material conflicts among the
interests of the classes. The Advisor and the Distributor will be
responsible for reporting any potential or existing conflicts to the
Directors. In the event a conflict arises, the Directors shall take such
action as they deem appropriate.
10. EFFECTIVENESS AND AMENDMENT. This Plan takes effect as of the date first
shown above. This Plan has been approved by a majority vote of the Board of
each Fund and of each Fund's Board members who are not "interested persons"
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in the operation of the Plan or any agreements relating to the
Plan (the "Independent Directors") of each Fund at a meeting called for the
Security Funds listed on Exhibit A on November 6, 1998. Prior to that vote,
(i) the Board was furnished by Security Distributors, Inc. with information
necessary to permit it to evaluate the Plan, including without limitation
the methodology used for net asset value and dividend and distribution
determinations for the Funds, and (ii) a majority of each Board and its
Independent Directors determined that the Plan as proposed to be adopted,
including the expense allocation, is in the best interests of each Fund as
a whole and to each class of each Fund individually. Prior to any material
amendment to the Plan, each Board shall request and evaluate, and Security
Distributors, Inc. shall furnish, such information as may be reasonably
necessary to evaluate such amendment, and a majority of each Board and its
Independent Directors shall find that the Plan as proposed to be amended,
including the expense allocation, is in the best interests of each class,
each Fund as a whole and each class of each Fund individually.
Adopted by the Boards of the Security Funds on November 6, 1998.
AMY J. LEE
-------------------------------
Amy J. Lee, Secretary
Security Equity Fund
Security Growth and Income Fund
Security Ultra Fund
Security Income Fund
Security Municipal Bond Fund
<PAGE>
EXHIBIT A
SECURITY FUNDS
Security Equity Fund
Security Growth and Income Fund
Security Ultra Fund
Security Income Fund
Security Municipal Bond Fund
