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SECURITY EQUITY FUND
ASSET ALLOCATION SERIES
MEMBERS OF THE SECURITY BENEFIT GROUP OF COMPANIES
700 HARRISON, TOPEKA, KANSAS 66636-0001
SUPPLEMENT DATED MAY 14, 1999
TO PROSPECTUS DATED FEBRUARY 1, 1999
The Board of Directors of Security Equity Fund, Asset Allocation Series
terminated Meridian Investment Management Corporation ("Meridian") as
sub-advisor to the Asset Allocation Series effective as of the close of business
on May 14, 1999. Accordingly, all references to Meridian are hereby deleted. The
Board also approved a change in the name of Asset Allocation Series to Total
Return Series.
The Investment Manager, Security Management Company, LLC, will begin providing
investment advisory services to the Total Return Series (the "Fund") effective
May 15, 1999. The investment objective of the Fund will not change following the
Investment Manager's assumption of investment advisory services to the Fund.
However, the Board has approved certain changes to the non-fundamental
investment policies of the Fund as described below.
"PRINCIPAL INVESTMENT STRATEGIES" on page 2 is deleted in its entirety and
replaced with the following:
PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by investing, under normal circumstances, in a
well-diversified portfolio of stocks of U.S. companies in different
capitalization ranges. The Fund may also invest in stocks offering the potential
for current income and in fixed income securities (including restricted
securities eligible for resale to qualified institutional buyers under Rule
144A) in any rating category.
To choose stocks, the Investment Manager uses a blended approach, investing in
growth stocks and in value stocks. The Investment Manager typically chooses
larger, growth-oriented companies. The Investment Manager will also invest in
value-oriented stocks to attempt to reduce the Fund's potential volatility and
possibly add to current income. 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 are
believed to have above average price appreciation potential.
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The Fund typically sells a stock when the reasons for buying it no longer apply,
or when the company begins to show deteriorating fundamentals or poor relative
performance.
The Fund also may invest a portion of its assets in options and futures, which
are primarily used to hedge the Fund's portfolio but may be used to increase
returns and to maintain exposure to the equity markets.
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, the Fund may be unable to pursue its investment
objective during that time, and it could reduce the benefit from any upswing in
the market.
"MAIN RISKS" on page 3 is deleted in its entirety and replaced with the
following:
MAIN RISKS
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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. The value of an investment in the Fund will go up and down, which means
investors could lose money.
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MARKET RISK -- While stocks have historically been a leading choice of long-term
investors, they do fluctuate in price. Their prices tend to fluctuate more
dramatically over the shorter term than do the prices of other asset classes.
These movements may result from factors affecting individual companies, or from
broader influences like changes in interest rates, market conditions, investor
confidence or announcements of economic, political or financial information.
VALUE STOCKS -- Investments in value stocks are subject to the risk that their
intrinsic values may never be realized by the market, or that their prices may
go down. While the Funds' investments in value stocks may limit downside risk
over time, a Fund may, as a trade-off, produce more modest gains than riskier
stock funds.
GROWTH STOCKS -- While potentially offering greater or more rapid capital
appreciation potential than value stocks, investments in growth stocks may lack
the dividend yield that can cushion stock prices in market downturns. Growth
companies often are expected to increase their earnings at a certain rate. If
expectations are not met, investors can punish the stocks, even if earnings do
increase.
OPTIONS AND FUTURES -- The Fund may invest a portion of its 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. These practices also entail
transactional expenses.
FIXED-INCOME SECURITIES -- The Fund may invest a portion of its assets in
fixed-income securities. Fixed-income investing may present risks because the
market value of fixed-income investments generally are affected by changes in
interest rates. When interest rates rise, the market value of a fixed-income
security 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. Investments in higher yielding, high risk
debt securities may present additional risk because these securities may be less
liquid than investment grade bonds. They also 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.
"PORTFOLIO MANAGERS" on page 7 is deleted in its entirety and replaced with the
following:
PORTFOLIO MANAGERS -- TERRY A. MILBERGER, Senior Portfolio Manager of the
Investment Manager, has been lead manager of the Fund since May 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 an M.B.A. from the University of Kansas and is
a Chartered Financial Analyst.
FRANK WHITSELL, Research Analyst of the Investment Manager, has co-managed the
Fund since May 1999. He joined the Investment Manager in 1994. Mr. Whitsell
graduated from Washburn University with a bachelor of business administration
degree, majoring in accounting and finance, and an MBA. He is a candidate in the
Chartered Financial Analyst program and has completed Level II.
