SECURITY EQUITY FUND, 497, 2000-02-02

SECURITY EQUITY FUND
497, 2000-02-02

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SECURITY FUNDS
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PROSPECTUS

FEBRUARY 1, 2000

* Security Growth and Income Fund
* Security Equity Fund
* Security Global Fund
* Security Total Return Fund
* Security Value Fund
* Security Small Company Fund
* Security Enhanced Index Fund
* Security International Fund
* Security Select 25 Fund
* Security Ultra Fund

-----------------------------------
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.
-----------------------------------

[SDI LOGO]
SECURITY DISTRIBUTORS, INC.
A Member of The Security Benefit
Group of Companies
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FUNDS' OBJECTIVES........................................................... 2
Security Growth and Income Fund......................................... 2
Security Equity Fund.................................................... 2
Security Global Fund.................................................... 2
Security Total Return 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 Total Return Fund.............................................. 3
Security Value Fund..................................................... 4
Security Small Company Fund............................................. 4
Security Enhanced Index Fund............................................ 4
Security International Fund............................................. 5
Security Select 25 Fund................................................. 5
Security Ultra Fund..................................................... 6
MAIN RISKS.................................................................. 6
Market Risk............................................................. 6
Smaller Companies....................................................... 6
Value Stocks............................................................ 6
Growth Stocks........................................................... 6
Foreign Securities...................................................... 6
Emerging Markets........................................................ 7
Options and Futures..................................................... 7
Fixed-Income Securities................................................. 7
Diversification......................................................... 7
Investment in Investment Companies...................................... 7
Active Trading.......................................................... 7
Additional Information.................................................. 8
PAST PERFORMANCE............................................................ 9
FEES AND EXPENSES OF THE FUNDS.............................................. 14
INVESTMENT MANAGER.......................................................... 17
Management Fees......................................................... 18
Portfolio Managers...................................................... 19
BUYING SHARES............................................................... 20
Class A Shares.......................................................... 21
Class A Distribution Plan............................................... 21
Class B Shares.......................................................... 21
Class B Distribution Plan............................................... 21
Class C Shares.......................................................... 22
Class C Distribution Plan............................................... 22
Brokerage Enhancement Plan.............................................. 22
Waiver of Deferred Sales Charge......................................... 22
Confirmations and Statements............................................ 23
SELLING SHARES.............................................................. 23
By Mail................................................................. 23
By Telephone............................................................ 23
By Broker............................................................... 24
Payment of Redemption Proceeds.......................................... 24
DIVIDENDS AND TAXES......................................................... 24
Tax on Distributions.................................................... 24
Taxes on Sales or Exchanges............................................. 24
Backup Withholding...................................................... 24
DETERMINATION OF NET ASSET VALUE............................................ 25
SHAREHOLDER SERVICES........................................................ 25
Accumulation Plan....................................................... 25
Systematic Withdrawal Program........................................... 25
Exchange Privilege...................................................... 25
Retirement Plans........................................................ 26
INVESTMENT POLICIES AND MANAGEMENT PRACTICES................................ 26
Foreign Securities...................................................... 26
Emerging Markets........................................................ 27
Smaller Companies....................................................... 27
Convertible Securities and Warrants..................................... 27
Restricted Securities................................................... 27
Lower Rate Debt Securities.............................................. 27
Cash Reserves........................................................... 28
Borrowing............................................................... 28
Futures and Options..................................................... 28
Swaps, Caps, Floors and Collars......................................... 28
Shares of Other Investment Companies.................................... 28
When-Issued Securities and Forward Commitment Contracts................. 29
GENERAL INFORMATION......................................................... 29
Shareholder Inquiries................................................... 29
FINANCIAL HIGHLIGHTS........................................................ 30
APPENDIX A - REDUCED SALES CHARGES.......................................... 46
Class A Shares.......................................................... 46
Rights of Accumulation.................................................. 46
Statement of Intention.................................................. 46
Reinstatement Privilege................................................. 46
<PAGE>
FUNDS' OBJECTIVES

Described below are the investment objectives for each of the Funds. Each Fund's
Board of Directors may change their investment objectives without shareholder
approval. As with any investment, there can be no guarantee the Funds will
achieve their investment objectives.

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 in foreign countries and
the United States.

SECURITY TOTAL RETURN FUND -- The Total Return Fund seeks high total return,
consisting of capital appreciation and current income.

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
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,
under normal circumstances, in a well-diversified portfolio of stocks that the
Investment Manager, Security Management Company, LLC, 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 Fund also may invest a portion of its assets in futures contracts. Futures
may be used to hedge the Fund's portfolio, to increase returns, or to maintain
exposure to the equity markets.

The Investment Manager uses a value-oriented strategy to choose stocks. The
Investment Manager identifies stocks that are undervalued in terms of price or
other financial measurements with above average growth potential. The Fund
typically invests in the common stock of companies whose total market value is
$5 billion or greater at the time of purchase.

To manage risk in declining or volatile markets, the Investment Manager may
invest more in cash, fixed-income securities and stocks that provide income.
Fixed-income securities may include U.S. government securities, high yield
securities (also referred to as "junk bonds") and other corporate debt
securities.

The Fund typically sells an investment when the reasons for buying no longer
apply, or when the company or issuer begins to show deteriorating fundamentals
or, when a stock has met the price objective set by the Investment Manager.

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, 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.

SECURITY EQUITY FUND -- The Fund pursues its objective by investing, under
normal circumstances, 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 attempt 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.

The Fund also may invest a portion of its assets in futures contracts. Futures
may be used to hedge the Fund's portfolio, to maintain exposure to the equity
markets or to increase returns.

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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 growth 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.

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.

SECURITY GLOBAL FUND -- The Fund pursues its objective by investing, under
normal circumstances, 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 when market conditions
are uncertain. The Fund also may invest some assets in options, futures
contracts and foreign currencies, which may be used to hedge the Fund's
portfolio, to increase returns or to maintain exposure to the equity markets.

The Sub-Adviser, OppenheimerFunds, Inc., uses a disciplined theme approach to
choose securities in foreign and U.S. markets. By identifying key worldwide
trends, OppenheimerFunds focuses 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 needs.

OppenheimerFunds 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,
OppenheimerFunds generally 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 issuers and the U.S. and foreign governments.
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.

SECURITY TOTAL RETURN FUND -- 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.

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
contracts which may be used to hedge the Fund's portfolio, to increase returns
or to maintain exposure to the equity markets.

SECURITY VALUE FUND -- The Fund pursues its objective by investing, under normal
circumstances, 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 typically consist of small and mid-sized companies.

The Fund may sell a stock if it is no longer considered undervalued or when the
company begins to show deteriorating fundamentals.

SECURITY SMALL COMPANY FUND -- The Fund pursues its investment objective by
investing under normal circumstances, at least 65% of its assets in equity
securities of domestic and foreign companies with market capitalizations
substantially similar to that of the companies in the Russell 2000 Growth Index
at the time of purchase. The Fund may also invest in securities of emerging
growth companies. Emerging growth companies include 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, but it is not required to do so.

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, 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.

SECURITY ENHANCED INDEX FUND -- The Fund pursues its objective by investing,
under normal circumstances in a portfolio of stocks representative of the
holdings in the S&P 500 Index. The stocks are analyzed using a set of
quantitative criteria that is designed to indicate whether a 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. Under normal market conditions, the Fund will
invest at least 80% of its assets in equity securities of companies in the index
and futures contracts representative of the stocks which make up 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. These companies are 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 New York Stock
Exchange.
- --------------------------------------------------------------------------------

The Fund also may invest a portion of its assets in options and futures
contracts which may be used to hedge the Fund's portfolio, to increase returns
or to maintain exposure to the equity markets.

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 underdeveloped 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, under normal circumstances, be invested in the
securities of issuers based in at least 3 countries other than the United
States.

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EQUITY SECURITIES may 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).
- --------------------------------------------------------------------------------

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

* 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 identify 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

* 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 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.

The Fund typically sells an investment when the reasons for buying it no longer
apply, or when the issuer begins to show deteriorating fundamentals or poor
relative performance.

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 what it believes to be premier growth companies as the core position for
the Fund. The Investment Manager uses a "bottom-up" approach in selecting growth
stocks. Portfolio holdings will be replaced when one or more of a company's
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 primarily analyzes the
fundamentals of individual companies rather than focusing on broader market or
sector themes. Some of the factors which the Investment Manager looks at when
analyzing individual companies include relative earnings growth, profitability
trends, the company's financial strength, valuation analysis and strength of
management.
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SECURITY ULTRA FUND -- The Fund pursues its objective by investing, under normal
circumstances, 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 may include securities of
smaller and less mature companies which have unique proprietary products or
profitable market niches and the potential to grow very rapidly.

The Fund also may invest a portion of its assets in futures contracts. Futures
may be used to hedge the Fund's portfolio, to increase returns or to maintain
exposure to the equity markets.

The Fund may invest in a variety of investment companies, including those that
seek to track the composition and performance of a specific index. The Fund may
use these index-based investments as a way of managing its cash position, to
gain exposure to the equity markets, or a particular sector of the equity
market, while maintaining liquidity.

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INDEX-BASED INVESTMENTS, such as S&P Depositary Receipts (SPDRs), hold
substantially all of their assets in securities representing a specific index.
In the case of SPDRs the index represented is the S&P 500.
- --------------------------------------------------------------------------------

The Fund typically sells a stock if its growth prospects diminish, or if better
opportunities become available.

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. The value of an investment in the Funds will go up and down, which means
investors could lose money.
- --------------------------------------------------------------------------------

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.

SMALLER COMPANIES -- While potentially offering greater opportunities for
capital growth than larger, more established companies, the stocks of smaller
companies may be particularly volatile, especially during periods of economic
uncertainty. Securities of smaller companies may present additional risks
because their earnings are less predictable, their share prices tend to be more
volatile and their securities often are less liquid than larger, more
established companies, among other reasons. By virtue of their investment
strategies, Value Fund, Small Company Fund and Ultra Fund may be particularly
susceptible to the risks posed by investing in smaller companies.

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 and Income Fund, Equity Fund, Total Return Fund, Value Fund
and Ultra Fund in particular offer the potential rewards, and risks, of a
value-oriented investment strategy.

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. Equity Fund, Total Return Fund, Global Fund, Small Company Fund,
Enhanced Index Fund, International Fund, Select 25 Fund and Ultra Fund feature
an investment strategy that emphasizes investment in growth stocks.

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. These risks may be
particularly acute in underdeveloped capital markets.

RISKS OF CONVERSION TO EURO. On January 1, 1999, eleven countries in the
European Monetary Union adopted the euro as their official currency. However,
their current currencies (for example, the franc, the mark, and the lira) 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
provide 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 the vendors 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 has upgraded 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 historically 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, Total Return Fund, Enhanced Index Fund and
International Fund may invest some of their assets in options and futures.
Growth and Income Fund, Security Equity Fund and Ultra Fund also may invest some
of their assets in futures. These practices may be used to hedge a Fund's
portfolio, to increase returns or to maintain exposure to the equity markets .
However, there is the risk that such practices sometimes may reduce returns or
increase volatility. These practices also entail transactional expenses.

FIXED-INCOME SECURITIES -- Growth and Income Fund and, to a lesser extent, the
Total Return 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.

DIVERSIFICATION -- Select 25 Fund may invest in the securities of a limited
number of issuers. The use of a focused investment strategy may increase the
volatility of the Fund's investment performance, as the Fund may be more
susceptible to risks associated with a single economic, political or regulatory
event than a more diversified portfolio. If the securities in which the Fund
invests perform poorly, the Fund could incur greater losses than it would have
had it been invested in a greater number of securities.

INVESTMENT IN INVESTMENT COMPANIES -- Each of the Funds may invest in other
investment companies, which may include index-based investments such as SPDRs
(based on the S&P 500), MidCap SPDRs (based on the S&P MidCap 400 Index), Select
Sector SPDRs (based on sectors or industries of the S&P 500 Index) and DIAMONDS
(based on the Dow Jones Industrial Average). To the extent a Fund invests in
other investment companies, it will incur its pro rata share of the underlying
investment companies' expenses. In addition, a Fund will be subject to the
effects of business and regulatory developments that affect an underlying
investment company or the investment company industry generally.

ACTIVE TRADING -- The Global, 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.

ADDITIONAL INFORMATION -- For more information about the Funds' investment
program, including additional information about the risks of certain types of
investments, please see the "Investment Policies and Management Practices"
section of the prospectus.

PAST PERFORMANCE

The charts and tables below and on the following pages provide some indication
of risks of investing in the Funds by showing changes in the Funds' Class A
share performance from year to year and by showing how the Funds' average annual
returns have compared to those of broad measures of market performance.
Performance information for the Enhanced Index, International, and Select 25
Funds and all of the Funds' Class C shares are not included since they had less
than one year of operating history. The tables also show how the Funds' average
annual total returns for the periods indicated compare to those of broad
measures of market performance. In addition, some Funds may make a comparison to
a narrower index that more closely mirrors that Fund. As with all mutual funds,
past performance is not a prediction of future results.

The bar charts do not reflect the sales charges applicable to Class A shares
which, if reflected, would lower the returns shown. Average annual total returns
for each Fund's Class A shares include deduction of the 5.75% front-end sales
charge and for Class B shares include the appropriate deferred sales charge,
which is 5% in the first year declining to 0% in the sixth and later years. The
average annual total returns also assume that Class B shareholders redeem all
their shares at the end of the period indicated.

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SECURITY GROWTH AND INCOME FUND - CLASS A
- --------------------------------------------------------------------------------

[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
20.5% -3.0% 21.8% 4.8% 8.2% -7.9% 27.8% 12.0% 31.7% -0.3% 2.5%

The total return for the Fund's Class A shares for the period January 1, 1999 to
December 31, 1999 was 2.50%.

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HIGHEST AND LOWEST RETURNS (QUARTERLY 1990-1999)
---------------------------------------------------------------
QUARTER ENDED
Highest 15.50% September 30, 1997
Lowest -12.32% September 30, 1998
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---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1999)
---------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
Class A 3.33% 14.09% 9.10%
Class B 3.50% 14.06% 9.44%*
S&P 500 21.02% 28.55% 18.20%*
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*For the period beginning October 19, 1993 (date of inception)
to December 31, 1999. Index performance information is only
available to the Fund at the beginning of each month. The
performance of the index for the period October 1, 1993 to
December 31, 1999 was 22.95%.
---------------------------------------------------------------

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SECURITY EQUITY FUND - CLASS A
- --------------------------------------------------------------------------------

[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
30.7% -4.6% 35.2% 10.7% 14.6% -2.5% 38.4% 22.7% 29.6% 26.5% 11.0%

The total return for the Fund's Class A shares for the period January 1, 1999 to
December 31, 1999 was 10.99%.

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HIGHEST AND LOWEST RETURNS (QUARTERLY 1990-1999)
---------------------------------------------------------------
QUARTER ENDED
Highest 20.90% December 31, 1998
Lowest -15.29% September 30, 1990
---------------------------------------------------------------

---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1999)
---------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
Class A 4.59% 23.82% 16.59%
Class B 4.90% 23.83% 18.58%*
S&P 500 21.02% 28.55% 18.20%*
---------------------------------------------------------------
*For the period beginning October 19, 1993 (date of inception)
to December 31, 1999. Index performance information is only
available to the Fund at the beginning of each month. The
performance of the index for the period October 1, 1993 to
December 31, 1999 was 22.95%.
---------------------------------------------------------------

- --------------------------------------------------------------------------------
SECURITY GLOBAL FUND - CLASS A
- --------------------------------------------------------------------------------

[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]

1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
1.3% 10.4% 17.1% 6.9% 19.2% 54.8%

The total return for the Fund's Class A shares for the period January 1, 1999 to
December 31, 1999 was 54.82%.

------------------------------------------------------------------
HIGHEST AND LOWEST RETURNS (QUARTERLY 1994-1999)
------------------------------------------------------------------
QUARTER ENDED
Highest 37.45% September 30, 1999
Lowest -11.44% September 30, 1998
------------------------------------------------------------------

------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1999)
------------------------------------------------------------------
LIFE OF FUND
PAST 1 YEAR PAST 5 YEARS (SINCE 10/1/93)
Class A 45.90% 19.16% 15.88%
Class B 48.45% 19.21% 16.07%*
MSCI 25.27% 20.23% 17.21%*
------------------------------------------------------------------
*For the period beginning October 19, 1993 (date of inception)
to December 31, 1999. Performance information for the index is
only available to the Fund at the beginning of each month.
MSCI performance is for the period October 1, 1993 to December
31, 1999.
------------------------------------------------------------------

- --------------------------------------------------------------------------------
SECURITY TOTAL RETURN FUND - CLASS A
- --------------------------------------------------------------------------------

[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]

1995 1996 1997 1998 1999
---- ---- ---- ---- ----
7.8% 13.2% 6.1% 12.1% 15.9%

The total return for the Fund's Class A shares for the period January 1, 1999 to
December 31, 1999 was 15.92%.

---------------------------------------------------------------
HIGHEST AND LOWEST RETURNS (QUARTERLY 1996-1999)
---------------------------------------------------------------
QUARTER ENDED
Highest 13.20% December 31, 1998
Lowest -11.47% September 30, 1998
---------------------------------------------------------------

---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1999)
---------------------------------------------------------------
PAST LIFE OF FUND
1 YEAR (SINCE JUNE 1, 1995)
Class A 9.21% 10.55%
Class B 9.82% 10.62%
S&P 500 21.02% 26.98%
---------------------------------------------------------------

- --------------------------------------------------------------------------------
SECURITY VALUE FUND - CLASS A
- --------------------------------------------------------------------------------

[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]

1998 1999
---- ----
16.1% 21.8%

The total return for the Fund's Class A shares for the period January 1, 1999 to
December 31, 1999 was 21.82%.

---------------------------------------------------------------
HIGHEST AND LOWEST RETURNS (QUARTERLY 1998-1999)
---------------------------------------------------------------
QUARTER ENDED
Highest 21.34% December 31, 1998
Lowest -16.06% September 30, 1998
---------------------------------------------------------------

---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1999)
---------------------------------------------------------------
LIFE OF FUND
PAST 1 YEAR (SINCE 5/1/97)
Class A 14.81% 22.68%
Class B 15.57% 23.39%
S&P 500 21.02% 27.37%
BARRA Value Index 12.71% 18.32%
---------------------------------------------------------------

- --------------------------------------------------------------------------------
SECURITY SMALL COMPANY FUND - CLASS A
- --------------------------------------------------------------------------------

[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]

1998 1999
---- ----
10.4% 87.2%

The total return for the Fund's Class A shares for the period January 1, 1999 to
December 31, 1999 was 87.17%.

---------------------------------------------------------------
HIGHEST AND LOWEST RETURNS (QUARTERLY 1998-1999)
---------------------------------------------------------------
QUARTER ENDED
Highest 53.00% December 31, 1999
Lowest -17.30% September 30, 1998
---------------------------------------------------------------

---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1999)
---------------------------------------------------------------
LIFE OF FUND
PAST 1 YEAR** (SINCE 10/15/97)
Class A 76.36% 32.77%
Class B 79.54% 33.82%
Russell 2000 Index 24.36% 5.63%*
---------------------------------------------------------------
*Index performance information is only available to the Fund
at the beginning of each month. The Russell 2000 Index is for
the period October 1, 1997 to December 31, 9.

**The Small Company Fund participates in the initial public
offering ("IPO") market and approximately 20% of the Fund's
one-year return at NAV is attributable to its investment in
IPOs. There can be no assurance that IPOs will continue to
have the same impact on the Fund's performance in the future,
especially if the Fund's assets grow.
---------------------------------------------------------------

- --------------------------------------------------------------------------------
SECURITY ULTRA FUND - CLASS A
- --------------------------------------------------------------------------------

[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
11.9% -27.4% 59.7% 7.7% 9.9% -6.6% 19.3% 18.0% 17.8% 16.7% 59.7%

The total return for the Fund's Class A shares for the period January 1, 1999 to
December 31, 1999 was 59.67%.

---------------------------------------------------------------
HIGHEST AND LOWEST RETURNS (QUARTERLY 1990-1999)
---------------------------------------------------------------
QUARTER ENDED
Highest 37.08% December 31, 1999
Lowest -41.16% September 30, 1990
---------------------------------------------------------------

---------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1999)
---------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
Class A 50.51% 23.85% 14.08%
Class B 53.02% 23.86% 17.80%*
S&P Midcap 400 14.72% 23.05% 17.32%*
---------------------------------------------------------------
*For the period beginning October 19, 1993 (date of inception)
to December 31, 1999. Index performance information is only
available to the Fund at the beginning of each month. The
performance of the index for the period October 1, 1993 to
December 31, 1999 was 17.85%.
---------------------------------------------------------------

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 FUNDS.

- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL
ESTIMATED TOTAL TOTAL FUND OPERATING
BROKERAGE PLAN ANNUAL FUND WAIVERS EXPENSES WITH
MANAGEMENT DISTRIBUTION DISTRIBUTION OTHER OPERATING AND WAIVERS AND
FEES (12B-1) FEES (12B-1) FEES(5) EXPENSES EXPENSES REDUCTIONS REDUCTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund 1.22% None 0.03% 0.00% 1.25% 0.00% 0.00%
Equity Fund 1.02% None 0.01% 0.00% 1.03% 0.00% 0.00%
Global Fund 2.00% None 0.00% 0.00% 2.00% 0.00% 0.00%
Total Return Fund 0.75% None 0.02% 1.35% 2.12%(6) 0.00% 0.00%
Value Fund 1.00% None 0.04% 0.33% 1.37% 0.00% 0.00%
Small Company Fund 1.00% 0.25% 0.00% 0.49% 1.74%(6) 0.00% 0.00%
Enhanced Index Fund 0.75% 0.25% 0.00% 0.48% 1.48% 0.00% 0.00%
International Fund 1.10% 0.25% 0.00% 3.34% 4.69% 2.19% 2.50%(7)
Select 25 Fund 0.75% 0.25% 0.01% 0.48% 1.49% 0.00% 0.00%
Ultra Fund 1.21% None 0.01% 0.00% 1.22% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
5. Amounts included as distribution expenses under this caption are estimates of the amounts to be received by the Fund's
distributor under the Brokerage Plan in the current fiscal year in connection with the purchase or sale of securities held by
the Fund.

6. Total Return and Small Company Fund's total annual operating expenses for the most recent fiscal year were less than the amount
shown because of voluntary fee waivers and/or reimbursement of expenses by the Funds' Investment Manager. These voluntary
waivers and reimbursements may be eliminated at any time without notice to shareholders. With the fee waiver and/or
reimbursement, the Total Return and Small Company Funds' actual total annual fund operating expenses for the year ended
September 30, 1999, were as follows: Total Return Fund - 2.83%, Small Company Fund - 1.47%.

7. The Investment Manager has contractually agreed to limit the total annual expenses of the International Fund to 2.25% of its
average daily net assets, exclusive of interest, taxes, extraordinary expenses, brokerage fees and commissions and 12b-1 fees.
</FN>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
--------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL
ESTIMATED TOTAL TOTAL FUND OPERATING
BROKERAGE PLAN ANNUAL FUND WAIVERS EXPENSES WITH
MANAGEMENT DISTRIBUTION DISTRIBUTION OTHER OPERATING AND WAIVERS AND
FEES (12B-1) FEES (12B-1) FEES(1) EXPENSES EXPENSES REDUCTIONS REDUCTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund 1.22% 1.00% 0.03% 0.00% 2.25% 0.00% 0.00%
Equity Fund 1.02% 1.00% 0.01% 0.00% 2.03% 0.00% 0.00%
Global Fund 2.00% 1.00% 0.00% 0.00% 3.00% 0.00% 0.00%
Total Return Fund 0.75% 1.00% 0.02% 1.30% 3.07%(3) 0.00% 0.00%
Value Fund 1.00% 1.00% 0.04% 0.37% 2.41% 0.00% 0.00%
Small Company Fund 1.00% 1.00% 0.00% 0.94% 2.94%(2) 0.00% 0.00%
Enhanced Index Fund 0.75% 1.00% 0.00% 0.45% 2.20% 0.00% 0.00%
International Fund 1.10% 1.00% 0.00% 3.27% 5.37% 2.19% 3.19%(3)
Select 25 Fund 0.75% 1.00% 0.01% 0.44% 2.20% 0.00% 0.00%
Ultra Fund 1.21% 1.00% 0.01% 0.00% 2.22% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1. Amounts included as distribution expenses under this caption are estimates of the amounts to be received by the Fund's
distributor under the Brokerage Plan in the current fiscal year in connection with the purchase or sale of securities held by
the Fund.

2. Total Return and Small Company Fund's total annual operating expenses for the most recent fiscal year were less than the amount
shown because of voluntary fee waivers and/or reimbursement of expenses by the Funds' Investment Manager. These voluntary
waivers and reimbursements may be eliminated at any time without notice to shareholders. With the fee waiver and/or
reimbursement, the Total Return and Small Company Funds' actual total annual fund operating expenses for the year ended
September 30, 1999, were as follows: Total Return Fund - 2.83%, Small Company Fund - 1.47%.

3. The Investment Manager has contractually agreed to limit the total annual expenses of the International Fund to 2.25% of its
average daily net assets, exclusive of interest, taxes, extraordinary expenses, brokerage fees and commissions and 12b-1 fees.
</FN>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
--------------------------------------------------------------------------------------------------------------
TOTAL ANNUAL
ESTIMATED TOTAL TOTAL FUND OPERATING
BROKERAGE PLAN ANNUAL FUND WAIVERS EXPENSES WITH
MANAGEMENT DISTRIBUTION DISTRIBUTION OTHER OPERATING AND WAIVERS AND
FEES (12B-1) FEES (12B-1) FEES(1) EXPENSES EXPENSES REDUCTIONS REDUCTIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund 1.22% 1.00% 0.03% 0.00% 2.25% 0.00% 0.00%
Equity Fund 1.02% 1.00% 0.01% 0.00% 2.03% 0.00% 0.00%
Global Fund 2.00% 1.00% 0.00% 0.00% 3.00% 0.00% 0.00%
Total Return Fund 0.75% 1.00% 0.02% 1.18% 2.95%(2) 0.00% 0.00%
Value Fund 1.00% 1.00% 0.04% 0.38% 2.42% 0.00% 0.00%
Small Company Fund 1.00% 1.00% 0.00% 0.47% 2.47%(2) 0.00% 0.00%
Enhanced Index Fund 0.75% 1.00% 0.00% 0.30% 2.05% 0.00% 0.00%
International Fund 1.10% 1.00% 0.00% 2.87% 4.97% 2.19% 2.78%(3)
Select 25 Fund 0.75% 1.00% 0.01% 0.32% 2.08% 0.00% 0.00%
Ultra Fund 1.21% 1.00% 0.01% 0.00% 2.22% 0.00% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1. Amounts included as distribution expenses under this caption are estimates of the amounts to be received by the Fund's
distributor under the Brokerage Plan in the current fiscal year in connection with the purchase or sale of securities held by
the Fund.

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. Each Example assumes that you
invest $10,000 in a Fund for the time periods indicated. Each Example also
assumes that your investment has a 5% return each year and that the Funds'
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:

You would pay the following expenses if you redeemed your shares at the end of
each period.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------- ------------------------ ------------------------ ------------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C A B C A B C A B C
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund $ 695 $ 728 $328 $ 949 $1,003 $ 703 $1,222 $1,405 $1,205 $1,999 $2,333 $2,585
Equity Fund .......... 674 706 306 884 937 637 1,111 1,293 1,093 1,762 2,101 2,358
Global Fund .......... 766 803 403 1,166 1,227 927 1,591 1,777 1,577 2,768 3,083 3,318
Total Return Fund .... 778 810 398 1,201 1,248 913 1,649 1,811 1,552 2,886 3,162 3,271
Value Fund ........... 706 744 345 984 1,051 755 1,282 1,485 1,291 2,127 2,488 2,756
Small Company Fund ... 742 797 350 1,091 1,210 770 1,464 1,748 1,316 2,509 2,978 2,806
Enhanced Index Fund .. 717 723 308 1,016 988 643 --- --- --- --- --- ---
International Fund ... 1,018 1,036 597 1,907 1,602 1,492 --- --- --- --- --- ---
Select 25 Fund ....... 718 723 311 1,019 988 652 --- --- --- --- --- ---
Ultra Fund ........... 692 725 325 940 994 694 1,207 1,390 1,190 1,967 2,301 2,554
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

You would pay the following expenses if you did not redeem your shares.

INVESTMENT MANAGER

Security Management Company, LLC (the "Investment Manager"), 700 SW Harrison
Street, Topeka, Kansas 66636, is the Funds' investment manager. On September 30,
1999, the aggregate assets of all of the mutual funds under the investment
management of the Investment Manager were approximately $5.7 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. OppenheimerFunds, Inc. has operated as an investment advisor since
January 1960. As of November 30, 1999, OppenheimerFunds, Inc. (including
subsidiaries and affiliates) managed assets of more than $112 billion, including
investment companies having more than 5 million shareholder accounts.
OppenheimerFunds 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., 100 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, 1999, manages over $35 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. Bankers Trust was founded in 1903
and manages over $300 billion in assets.

Prior to June 4, 1999, Bankers Trust Company was a wholly owned subsidiary of
Bankers Trust Corporation. On June 4, 1999, Bankers Trust Corporation merged
with and into a subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major
global banking institution that is engaged in a wide range of financial
services, including investment management, mutual funds, retail and commercial
banking, investment banking and insurance.

On March 11, 1999, Bankers Trust announced that it had reached an agreement with
the United States Attorney's Office in the Southern District of New York to
resolve an investigation concerning inappropriate transfers of unclaimed funds
and related record-keeping problems that occurred between 1994 and early 1996.
These past events led to a guilty plea by Bankers Trust, but did not arise out
of the investment advisory or mutual fund management activities of Bankers Trust
or its affiliates.

Pursuant to its agreement with the U.S. Attorney's Office, Bankers Trust pleaded
guilty to misstating entries in the bank's books and records and agreed to pay a
$60 million fine to federal authorities. Separately, Bankers Trust agreed to pay
a $3.5 million fine to the State of New York.

The SEC has granted a temporary order to permit Bankers Trust and its affiliates
to continue to provide investment advisory services to registered investment
companies. There is no assurance that the SEC will grant a permanent order. As a
result of the plea, absent an order from the SEC, Bankers Trust would not be
able to continue to provide investment advisory services to the Enhanced Index
Fund and the International Fund.

The Investment Manager and the Funds have received from the Securities and
Exchange Commission an exemptive order for a multi-manager structure that allows
the Investment Manager to hire, replace or terminate sub-advisors without the
approval of shareholders. The order also allows the Investment Manager to revise
a sub-advisory agreement with the approval of Fund Directors, but without
shareholder approval. If a new sub-advisor is hired, shareholders will receive
information about the new sub-advisor within 90 days of the change. The order
allows the Funds to operate more efficiently and with greater flexibility. The
Investment Manager provides the following oversight and evaluation services to
the Funds which use a sub-advisor:

* performing initial due diligence on prospective sub-advisors for the Funds

* monitoring the performance of the sub-advisors

* communicating performance expectations to the sub-advisors

* ultimately recommending to the Board of Directors whether a sub-advisor's
contract should be renewed, modified or terminated.

The Investment Manager does not expect to recommend frequent changes of
sub-advisors. Although the Investment Manager will monitor the performance of
the sub-advisors, there is no certainty that any sub-advisor or Fund will obtain
favorable results at any given time.

MANAGEMENT FEES -- The following chart shows the investment management fees paid
by each Fund during the last fiscal year, except as otherwise indicated.

-------------------------------------------------------
MANAGEMENT FEES
(expressed as a percentage of average net assets)
-------------------------------------------------------
Growth and Income Fund......................... 1.22%
Equity Fund.................................... 1.02%
Global Fund.................................... 2.00%
Total Return Fund.............................. 0.75%
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..................................... 1.21%
-------------------------------------------------------
*These Funds were not available until January 31, 1999.
-------------------------------------------------------

The Investment Manager may waive some or all of its management fee to limit the
total operating expenses of a Fund to a specified level. The Investment Manager
also may reimburse expenses of a 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 14.

PORTFOLIO MANAGERS -- DEAN S. BARR, Managing Director and Head of Global
Quantitative Index Strategies, has been co-manager of Enhanced Index Fund since
he joined Bankers Trust in September 1999. Prior to joining Bankers Trust, he
was Chief Investment Officer of Active Quantitative Strategies at State Street
Global Advisors. He has a bachelor's degree from Cornell University and an MBA
in finance from New York University Graduate School of Business.

MANISH KESHIVE, Vice President Bankers Trust, has been co-manager of Enhanced
Index Fund since September, 1999. He joined Bankers Trust in 1996. Prior to
joining Bankers Trust, he was a student earning a B.S. degree in Technology from
the Indian Institute of Technology in 1993 and an M.S. degree from the
Massachusetts Institute of Technology in 1995.

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 28 years of business experience, of which 18 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. He has been the lead manager of Select 25
Fund since its inception in January 1999 and of Total Return 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.

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 30 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 16 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, Managing Director 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 assisted 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.

FRANK WHITSELL, Research Analyst of the Investment Manager, has co-managed Total
Return Fund since May 1999 and has co-managed Select 25 Fund since February
2000. 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.

WILLIAM L. WILBY, Senior Vice President and Director of International Equities
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 Harriman & 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.

JONN WULLSCHLEGER, Research Analyst of the Investment Manager, has co-managed
Select 25 Fund since its inception in January 1999. He has 8 years of experience
in the investment field and is a Chartered Financial Analyst. Prior to joining
the Investment Manager in 1997, Mr. Wullschleger was a Research Analyst at
National City Corporation from 1994 to 1996. From 1993 to 1994, he was employed
at Liberty National Bank as an Equity Research Analyst. Prior to 1993, Mr.
Wullschleger was employed as a Trust Investment Representative at Merchants
Bank. He earned a B.S. degree and an M.B.A. from Rockhurst College.

BUYING SHARES

Shares of the Funds are available through broker/dealers, banks, and other
financial intermediaries that have an agreement with the Funds' Distributor,
Security Distributors, Inc.

There are three different ways to buy shares of the Funds--Class A shares, Class
B shares or Class C shares. The different classes of a Fund differ primarily
with respect to the sales charges and Rule 12b-1 distribution fees to which they
are subject. 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 a Fund's net asset value
per share (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
AMOUNT OF ORDER OF OFFERING PRICE NET AMOUNT 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.
-------------------------------------------------------------------

Please see Appendix A for options that are available for reducing the sales
charge applicable to purchases of Class A shares.

CLASS A DISTRIBUTION PLAN -- The Small Company, International, Enhanced Index
and Select 25 Funds have adopted Class A Distribution Plans that allow each of
these Funds to pay distribution fees to the Funds' Distributor. 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 redeemed 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 SINCE PURCHASE DEFERRED 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," page 22.

CLASS B DISTRIBUTION PLAN -- The Funds have adopted Class B Distribution Plans
that allow each of 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 to such shareholders 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 a 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 redeemed
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" on page
19.

CLASS C DISTRIBUTION PLAN -- The Funds have adopted Class C Distribution Plans
that allow each of 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.

BROKERAGE ENHANCEMENT PLAN -- The Funds have adopted, in accordance with the
provisions of Rule 12b-1 under the Investment Company Act of 1940, a Brokerage
Enhancement Plan (the "Plan"). The Plan uses available brokerage commissions to
promote the sale and distribution of Fund shares.

Under the Plan, the Funds may direct the Investment Manager or a sub-advisor to
use certain broker-dealers for securities transactions. (The duty of best price
and execution still applies to these transactions.) These are broker-dealers
that have agreed either (1) to pay a portion of their commission from the sale
and purchase of securities to the Distributor or other introducing brokers
("Brokerage Payments"), or (2) to provide brokerage credits, benefits or
services ("Brokerage Credits"). The Distributor will use all Brokerage Payments
and Credits (other than a minimal amount to defray its legal and administrative
costs) used to finance activities that are meant to result in the sale of the
Funds' shares, including:

* holding or participating in seminars and sales meetings promoting the sale of
the Funds' shares

* paying marketing fees requested by broker-dealers who sell the Funds

* training sales personnel

* creating and mailing advertising and sales literature

* financing any other activity that is intended to result in the sale of the
Funds' shares.

The Plan permits the Brokerage Payments and Credits generated by securities
transactions from one Series of a Fund to inure to the benefit of other Series
as well. The Plan is not expected to increase the brokerage costs of the Funds.
For more information about the Plan, please read the "Allocation of Portfolio
Brokerage" section of the Statement of Additional Information.

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 Internal Revenue 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.
However, 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 shareholder may sell shares at any time. Shares will be
redeemed at the NAV next determined after the order is accepted by the Fund's
transfer agent, less any applicable deferred sales charge. A Fund's NAV is
generally calculated as of the close of trading on every day the New York Stock
Exchange is open. Any share certificates representing Fund shares being sold
must be returned with a request to sell the shares.

When redeeming 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 certified resolution dated
within six months of the date of receipt, 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 Individual Retirement Account
("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.

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.

BY CHECK. Redemption proceeds will be sent to the shareholder(s) of record at
the address on our records generally 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.

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.

TAX ON 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.

In addition to federal tax, dividends and distributions may be subject to state
and local taxes. If a Fund declares a dividend or distribution in October,
November or December but pays it in January, you may be taxed on that dividend
or distribution as if you received it in the previous year. In general,
dividends and distributions from the Funds are taxable as follows:

- --------------------------------------------------------------------------------
TAX RATE FOR 28%
TYPE OF DISTRIBUTION TAX RATE FOR 15% BRACKET BRACKET OR ABOVE
- --------------------------------------------------------------------------------
Income dividends Ordinary Income rate Ordinary Income rate
Short-term capital gains Ordinary Income rate Ordinary Income rate
Long-term capital gains 10% 20%
- --------------------------------------------------------------------------------

Tax-deferred retirement accounts generally do not generate a tax liability
unless you are taking a distribution or making a withdrawal.

The Fund has "short-term capital gains" when it sells shares within 12 months
after buying them. The Fund has "long-term capital gains" when it sells shares
that it has owned for more than 12 months. The Funds expect that their
distributions will consist primarily of net long-term capital gains.

The Fund will mail you information concerning the tax status of the
distributions for each calendar year on or before January 31 of the following
year.

TAXES ON SALES OR EXCHANGES -- You may be taxed on any sale or exchange of Fund
shares. The amount of gain or loss will depend primarily upon how much you pay
for the shares, how much you sell them for, and how long you hold them.

The previous table 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 one year after buying them. "Long-term capital
gains" applies to shares held for more than one year.

BACKUP WITHHOLDING -- As with all mutual funds, a Fund may be required to
withhold U.S. federal income tax at the rate of 31% of all taxable distributions
payable to you if you fail to provide the Fund with your correct taxpayer
identification number or to make required certifications, or if you have been
notified by the Internal Revenue Service that you are subject to backup
withholding. Backup withholding is not an additional tax; rather, it is a way in
which the Internal Revenue Service ensures it will collect taxes otherwise due.
Any amounts withheld may be credited against your U.S. federal income tax
liability.

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 (NAV) 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 observation of the following holidays: New Year's Day, Martin
Luther King, Jr. 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 prices are not available, the fair value of
securities is determined using procedures approved by each 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 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 also choose to use "Secur-O-Matic" (automatic bank draft) to make
Fund purchases. There is no additional charge for choosing to use Secur-O-Matic.
Withdrawals from your bank account may occur up to 3 business days before the
date scheduled to purchase Fund shares. An application for Secur-O-Matic may be
obtained from the Funds.

SYSTEMATIC WITHDRAWAL PROGRAM -- Shareholders who wish to receive regular
monthly, quarterly, semiannual, or annual payments of $25 or more may establish
a Systematic Withdrawal Program. A shareholder 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 aggregate net asset value of $5,000 or more are deposited with
the Investment Manager, which will act as agent for the shareholder 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 redeemed from the account.

A shareholder 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
"Waiver of Deferred Sales Charges," page 22. A Systematic Withdrawal form may be
obtained from the Funds.

EXCHANGE PRIVILEGE -- Shareholders 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 per share. The other funds currently distributed by the Distributor
include Security Social Awareness, Corporate Bond, Limited Maturity Bond, U.S.
Government, 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 or sales charge 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, Capital Preservation 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
shareholder exercising this privilege.

To exchange shares by telephone, a shareholder 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 shareholder may exchange shares by telephone by
calling the Funds at 1-800-888-2461, 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. 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 shareholders.

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.

INVESTMENT POLICIES AND MANAGEMENT PRACTICES

This section takes a detailed look at some of the types of securities the Funds
may hold in its portfolio and the various kinds of management practices that may
be used in the portfolio. The Funds' holdings of certain types of investments
cannot exceed a maximum percentage of net assets. These percentage limitations
are set forth in the Statement of Additional Information. While the percentage
limitations provide a useful level of detail about the Funds' investment
program, they should not be viewed as an accurate gauge of the potential risk of
the investment. For example, in a given period, a 5% investment in futures
contracts could have significantly more of an impact on Fund's share price than
its weighting in the portfolio. The net effect of a particular investment
depends on its volatility and the size of its overall return in relation to the
performance of all the Fund's other investments. The Portfolio Managers of the
Funds have considerable leeway in choosing investment strategies and selecting
securities they believe will help the Fund achieve its objective. In seeking to
meet its investment objective, the Funds may invest in any type of security or
instrument whose investment characteristics are consistent with that Fund's
investment program.

The Funds are subject to certain investment policy limitations referred to as
"fundamental policies." The fundamental policies cannot be changed without
shareholder approval. Some of the more important fundamental policies are that
the Funds will not:

* with respect to 75% of their respective assets invest more than 5% of the
value of their assets in any one issuer other than the U.S. Government or its
instrumentalities

* with respect to 75% of their respective assets purchase more than 10% of the
outstanding voting securities of any one issuer

* invest 25% or more of its total assets in any one industry.

The following pages describe some of the investments which may be made by the
Funds, as well as some of the management practices of the Funds.

FOREIGN SECURITIES -- The Global, International and Small Company Funds may
invest in foreign securities. Foreign investments involve certain special risks,
including, but not limited to, (i) unfavorable changes in currency exchange
rates; (ii) adverse political and economic developments; (iii) unreliable or
untimely information; (iv) limited legal recourse; (v) limited markets; and (vi)
higher operational expenses. Each of the other Funds may invest in foreign
securities denominated in U.S. dollars.

Foreign investments are normally issued and traded in foreign currencies. As a
result, their values may be affected by changes in the exchange rates between
particular foreign currencies and the U.S. dollar. Foreign investments may be
subject to the risks of seizure by a foreign government, imposition of
restrictions on the exchange or transport of foreign currency, and tax
increases. There may also be less information publicly available about a foreign
company than about most U.S. companies, and foreign companies are usually not
subject to accounting, auditing and financial reporting standards and practices
comparable to those in the United States. The legal remedies for investors in
foreign investments may be more limited than those available in the United
States. Certain foreign investments may be less liquid (harder to buy and sell)
and more volatile than domestic investments, which means a Fund may at times be
unable to sell its foreign investments at desirable prices. For the same reason,
a Fund may at times find it difficult to value its foreign investments.
Brokerage commissions and other fees are generally higher for foreign
investments than for domestic investments. The procedures and rules for settling
foreign transactions may also involve delays in payment, delivery or recovery of
money or investments. Foreign withholding taxes may reduce the amount of income
available to distribute to shareholders of the Funds.

EMERGING MARKETS -- The Global, International and Small Company Funds may invest
in emerging markets foreign securities. The risks associated with foreign
investments are typically increased in less developed and developing countries,
which are sometimes referred to as emerging markets. For example, political and
economic structures in these countries may be young and developing rapidly,
which can cause instability. These countries are also more likely to experience
high levels of inflation, deflation or currency devaluation, which could hurt
their economies and securities markets. For these and other reasons, investments
in emerging markets are often considered speculative.

SMALLER COMPANIES -- Each of the Funds may invest in small- or medium-sized
companies. These companies are more likely than larger companies to have limited
product lines, markets or financial resources, or to depend on a small,
inexperienced management group. Stocks of these companies may trade less
frequently and in limited volume, and their prices may fluctuate more than
stocks of other companies. Stocks of these companies may therefore be more
vulnerable to adverse developments than those of larger companies.

CONVERTIBLE SECURITIES AND WARRANTS -- Each of the Funds may invest in debt or
preferred equity securities convertible into, or exchangeable for, equity
securities. Traditionally, convertible securities have paid dividends or
interest at rates higher than common stocks but lower than nonconvertible
securities. They generally participate in the appreciation or depreciation of
the underlying stock into which they are convertible, but to a lesser degree. In
recent years, convertible securities have been developed which combine higher or
lower current income with options and other features. Warrants are options to
buy a stated number of shares of common stock at a specified price anytime
during the life of the warrants (generally, two or more years).

RESTRICTED SECURITIES -- Each of the Funds may invest in restricted securities
including those that are eligible for resale under Rule 144A of the Securities
Act of 1933. Restricted securities are sold directly to a small number of
investors, usually institutions. Unlike public offerings, restricted securities
are not registered with the SEC. Although restricted securities which are
eligible for resale under Rule 144A may be readily sold to qualified buyers,
there may not always be a market for them and their sale may involve substantial
delays and additional costs.

LOWER RATE DEBT SECURITIES -- The Growth and Income, Global, International,
Small Company and Total Return Funds may invest in higher yielding debt
securities in the lower rating (higher risk) categories of the recognized rating
services (commonly referred to as "junk bonds"). The total return and yield of
junk bonds can be expected to fluctuate more than the total return and yield of
higher-quality bonds. Junk bonds (those rated below BBB or in default) are
regarded as predominantly speculative with respect to the issuer's continuing
ability to meet principal and interest payments. Successful investment in
lower-medium- and low-quality bonds involves greater investment risk and is
highly dependent on the Investment Manager's credit analysis. A real or
perceived economic downturn or higher interest rates could cause a decline in
high-yield bond prices by lessening the ability of issuers to make principal and
interest payments. These bonds are often thinly traded and can be more difficult
to sell and value accurately than high-quality bonds. Because objective pricing
data may be less available, judgment may play a greater role in the valuation
process. In addition, the entire junk bond market can experience sudden and
sharp price swings due to a variety of factors, including changes in economic
forecasts, stock market activity, large or sustained sales by major investors, a
high-profile default, or just a change in the market's psychology. This type of
volatility is usually associated more with stocks than bonds, but junk bond
investors should be prepared for it.

Some of the management practices of the Funds include:

CASH RESERVES -- The Funds may establish and maintain reserves as the Investment
Manager or Sub-Adviser believes is advisable to facilitate the Fund's cash flow
needs (e.g., redemptions, expenses and purchases of portfolio securities) or for
temporary, defensive purposes. Such reserves may include various types of money
market instruments, certificates of deposit, bank demand accounts and repurchase
agreements.

BORROWING -- Each Fund may borrow money from banks for emergency or temporary
purposes. Such borrowings may be collateralized with Fund assets. To the extent
that a Fund purchases securities while it has outstanding borrowings, it is
using leverage, i.e., using borrowed funds for investment. Leveraging will
exaggerate the effect on net asset value of any increase or decrease in the
market value of the Fund's portfolio. Money borrowed for leveraging will be
subject to interest costs that may or may not be recovered by appreciation of
the securities purchased; in certain cases, interest costs may exceed the return
received on the securities purchased. A Fund also may be required to maintain
minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.

FUTURES AND OPTIONS -- Each of the Funds may utilize futures contracts and
options on futures and may purchase call and put options and write call and put
options on a "covered" basis. Futures (a type of potentially high-risk
derivative) are often used to manage or hedge risk because they enable the
investor to buy or sell an asset in the future at an agreed-upon price. Options
(another type of potentially high-risk derivative) give the investor the right
(where the investor purchases the options), or the obligation (where the
investor writes (sells) the options), to buy or sell an asset at a predetermined
price in the future. Global, International and Small Company Funds may also
engage in forward foreign currency transactions. The instruments listed above
may be bought or sold for any number of reasons, including: to manage exposure
to changes in securities prices and foreign currencies, to manage exposure to
changes in interest rates and bond prices, as an efficient means of adjusting
overall exposure to certain markets, in an effort to enhance income, to protect
the value of portfolio securities, and to adjust portfolio duration. Futures
contracts and options may not always be successful hedges; their prices can be
highly volatile. Using them could lower a Fund's total return, and the potential
loss from the use of futures can exceed the Fund's initial investment in such
contracts.

SWAPS, CAPS, FLOORS AND COLLARS -- The Small Company Fund may enter into
interest rate and/or index swaps, and the purchase or sale of related caps,
floors and collars. The Small Company Fund would enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio as a technique for managing the portfolio's duration (i.e. the
price sensitivity to changes in interest rates) or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. To the extent the Fund enters into these types of transactions, it will be
done to hedge and not as a speculative investment. In addition, the Fund will
not sell interest rate caps or floors if it does not own securities or other
instruments providing the income the Fund may be obligated to pay. Interest rate
swaps involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest on a notional amount of principal. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments on a notional principal amount
from the party selling the floor to the extent that a specified index falls
below a predetermined interest rate or amount. A collar is a combination of a
cap and a floor that preserves a certain return within a predetermined range of
interest rates or values.

SHARES OF OTHER INVESTMENT COMPANIES -- Each of the Funds may invest in shares
of other investment companies. A Fund's investment in shares of other investment
companies may not exceed immediately after purchase 10% of the Fund's total
assets and no more than 5% 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.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENT CONTRACTS -- Each of the Funds may
purchase and sell securities on a "when issued," "forward commitment" or
"delayed delivery" basis. The price of these securities is fixed at the time of
the commitment to buy, but delivery and payment can take place a month or more
later. During the interim period, the market value of the securities can
fluctuate, and no interest accrues to the purchaser. At the time of delivery,
the value of the securities may be more or less than the purchase or sale price.
When a Fund purchases securities on this basis, there is a risk that the
securities may not be delivered and that the Fund may incur a loss.

GENERAL INFORMATION

SHAREHOLDER INQUIRIES -- Shareholders 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.

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand certain of the
Funds' financial performance for their Class A shares and Class B shares during
the past five years or, the period since commencement of a Fund. Financial
performance for Class C shares is for the period January 29, 1999 to September
30, 1999. 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 reports.

<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
SECURITY GROWTH AND INCOME FUND (CLASS A)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
-------------------------------------------------------
1999(B) 1998(B) 1997(B) 1996(B) 1995(B)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $ 7.68 $11.14 $ 9.05 $ 7.93 $ 6.96

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... 0.12 0.13 0.15 0.18 0.16
Net gain (loss) on securities (realized & unrealized)............ 0.75 (0.87) 2.81 1.37 1.18
----- ----- ----- ----- -----
Total from investment operations................................. 0.87 (0.74) 2.96 1.55 1.34

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... (0.04) (0.13) (0.16) (0.16) (0.16)
Distributions (from realized gains).............................. (1.34) (2.59) (0.71) (0.27) (0.21)
----- ----- ----- ----- -----
Total distributions.............................................. (1.38) (2.72) (0.87) (0.43) (0.37)
----- ----- ----- ----- -----
Net asset value end of period.................................... $ 7.17 $ 7.68 $11.14 $ 9.05 $ 7.93
===== ===== ===== ===== =====
Total return (a)................................................. 12.00% (7.95)% 35.31% 20.31% 20.25%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $74,796 $76,371 $91,252 $73,273 $67,430
Ratio of expenses to average net assets.......................... 1.22% 1.21% 1.24% 1.29% 1.31%
Ratio of net investment income (loss) to average net assets...... 1.63% 1.49% 1.53% 2.09% 2.21%
Portfolio turnover rate.......................................... 98% 144% 124% 69% 130%
</TABLE>

<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
SECURITY GROWTH AND INCOME FUND (CLASS B)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
-------------------------------------------------------
1999(B) 1998(B) 1997(B) 1996(B) 1995(B)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $ 7.54 $10.99 $ 8.94 $ 7.85 $ 6.90

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... 0.05 0.05 0.05 0.09 0.08
Net gain (loss) on securities (realized & unrealized)............ 0.73 (0.88) 2.77 1.35 1.18
----- ----- ----- ----- -----
Total from investment operations................................. 0.78 (0.83) 2.82 1.44 1.26

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... (0.03) (0.03) (0.06) (0.08) (0.09)
Distributions (from realized gains).............................. (1.34) (2.59) (0.71) (0.27) (0.22)
----- ----- ----- ----- -----
Total distributions.............................................. (1.37) (2.62) (0.77) (0.35) (0.31)
----- ----- ----- ----- -----
Net asset value end of period.................................... $ 6.95 $ 7.54 $10.99 $ 8.94 $ 7.85
===== ===== ===== ===== =====
Total return (a)................................................. 10.93% (8.95)% 34.01% 19.01% 19.07%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $9,829 $9,257 $6,737 $2,247 $1,130
Ratio of expenses to average net assets.......................... 2.22% 2.21% 2.24% 2.29% 2.31%
Ratio of net investment income (loss) to average net assets...... 0.63% 0.59% 0.53% 1.09% 1.21%
Portfolio turnover rate.......................................... 98% 144% 124% 69% 130%
</TABLE>

- --------------------------------------------------------------------------------
SECURITY GROWTH AND INCOME FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999(B)(G)
PER SHARE DATA
Net asset value beginning of period.............................. $6.87

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... 0.03
Net gain (loss) on securities (realized & unrealized)............ 0.21
----
Total from investment operations................................. 0.24

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
----
Total distributions.............................................. ---
----
Net asset value end of period.................................... $7.11
====
Total return (a)................................................. 3.49%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $297
Ratio of expenses to average net assets.......................... 2.22%
Ratio of net investment income (loss) to average net assets...... 0.62%
Portfolio turnover rate.......................................... 90%

<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY FUND (CLASS A)
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
------------------------------------------------------------
1999(B) 1998(B) 1997(B) 1996(B) 1995(B)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $ 8.86 $ 9.09 $ 7.54 $ 6.55 $ 5.54

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... 0.02 0.04 0.04 0.05 0.04
Net gain (loss) on securities (realized & unrealized)............ 1.80 0.56 2.20 1.48 1.38
----- ----- ----- ----- -----
Total from investment operations................................. 1.82 0.60 2.24 1.53 1.42

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... (0.04) (0.03) (0.04) (0.06) ---
Distributions (from realized gains).............................. (0.68) (0.80) (0.65) (0.48) (0.41)
----- ----- ----- ----- -----
Total distributions.............................................. (0.72) (0.83) (0.69) (0.54) (0.41)
----- ----- ----- ----- -----
Net asset value end of period.................................... $ 9.96 $ 8.86 $ 9.09 $ 7.54 $ 6.55
===== ===== ===== ===== =====
Total return (a)................................................. 20.66% 7.38% 32.08% 24.90% 27.77%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $917,179 $773,606 $757,520 $575,680 $440,339
Ratio of expenses to average net assets.......................... 1.02% 1.02% 1.03% 1.04% 1.05%
Ratio of net investment income (loss) to average net assets...... 0.19% 0.39% 0.46% 0.75% 0.87%
Portfolio turnover rate.......................................... 36% 47% 66% 64% 95%
</TABLE>

<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
SECURITY EQUITY FUND (CLASS B)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------------------------------
1999(B) 1998(B) 1997(B) 1996(B) 1995(B)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $ 8.52 $ 8.82 $ 7.36 $ 6.43 $ 5.49

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.08) (0.05) (0.04) (0.02) (0.01)
Net gain (loss) on securities (realized & unrealized)............ 1.71 0.55 2.15 1.45 1.36
----- ----- ----- ----- -----
Total from investment operations................................. 1.63 0.50 2.11 1.43 1.35

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... --- --- --- (0.02) ---
Distributions (from realized gains).............................. (0.68) (0.80) (0.65) (0.48) (0.41)
----- ----- ----- ----- -----
Total distributions.............................................. (0.68) (0.80) (0.65) (0.50) (0.41)
----- ----- ----- ----- -----
Net asset value end of period.................................... $ 9.47 $ 8.52 $ 8.82 $ 7.36 $ 6.43
===== ===== ===== ====== =====
Total return (a)................................................. 19.23% 6.38% 30.85% 23.57% 26.69%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $159,872 $112,978 $89,336 $38,822 $19,288
Ratio of expenses to average net assets.......................... 2.02% 2.02% 2.03% 2.04% 2.05%
Ratio of net investment income (loss) to average net assets...... (0.82)% (0.61)% (0.54)% (0.25)% (0.13)%
Portfolio turnover rate.......................................... 36% 47% 66% 64% 95%
</TABLE>

- --------------------------------------------------------------------------------
SECURITY EQUITY FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999(B)(G)
PER SHARE DATA
Net asset value beginning of period.............................. $10.13

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.05)
Net gain (loss) on securities (realized & unrealized)............ (0.19)
-----
Total from investment operations................................. (0.24)

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $ 9.89
=====
Total return (a)................................................. (2.37)%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $4,507
Ratio of expenses to average net assets.......................... 2.02%
Ratio of net investment income (loss) to average net assets...... (0.89)%
Portfolio turnover rate.......................................... 45%

<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
SECURITY GLOBAL FUND (CLASS A)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
-------------------------------------------------------
1999(B) 1998(B) 1997(B) 1996(B) 1995(B)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $11.23 $13.56 $12.42 $10.94 $10.84

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... 0.01 0.02 0.01 0.01 (0.02)
Net gain on securities (realized & unrealized)................... 3.71 (1.19) 2.29 1.87 0.31
----- ----- ----- ----- -----
Total from investment operations................................. 3.72 (1.17) 2.30 1.88 0.29

LESS DISTRIBUTIONS
Dividends (from net investment income)........................... (0.01) (0.09) (0.38) (0.25) ---
In excess of net investment income............................... (0.04) --- --- --- ---
Distributions (from capital gains)............................... (0.91) (1.07) (0.78) (0.15) (0.19)
----- ----- ----- ----- -----
Total distributions.............................................. (0.96) (1.16) (1.16) (0.40) (0.19)
----- ----- ----- ----- -----
Net asset value end of period.................................... $13.99 $11.23 $13.56 $12.42 $10.94
===== ===== ===== ===== =====
Total return (a)................................................. 34.39% (8.47)% 20.22% 17.73% 2.80%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $28,292 $18,941 $24,193 $19,644 $16,261
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...... 0.11% 0.15% 0.07% 0.07% (0.17)%
Portfolio turnover rate.......................................... 141% 122% 132% 142% 141%
</TABLE>

<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
SECURITY GLOBAL FUND (CLASS B)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
-------------------------------------------------------
1999(B) 1998(B) 1997(B) 1996(B) 1995(B)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $10.89 $13.22 $12.18 $10.74 $10.75

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.11) (0.10) (0.11) (0.10) (0.12)
Net gain on securities (realized & unrealized)................... 3.58 (1.16) 2.24 1.84 0.30
----- ----- ----- ----- -----
Total from investment operations................................. 3.47 (1.26) 2.13 1.74 0.18

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... --- --- (0.31) (0.14) ---
Distributions (from realized gains).............................. (0.91) (1.07) (0.78) (0.16) (0.19)
----- ----- ----- ----- -----
Total distributions.............................................. (0.91) (1.07) (1.09) (0.30) (0.19)
----- ----- ----- ----- -----
Net asset value end of period.................................... $13.45 $10.89 $13.22 $12.18 $10.74
===== ===== ===== ===== =====
Total return (a)................................................. 33.04% (9.43)% 19.01% 16.57% 1.79%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $20,591 $12,619 $13,061 $7,285 $5,433
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...... (0.87)% (0.85)% (0.93)% (0.93)% (1.17)%
Portfolio turnover rate.......................................... 141% 122% 132% 142% 141%
</TABLE>

- --------------------------------------------------------------------------------
SECURITY GLOBAL FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999(B)(G)
PER SHARE DATA
Net asset value beginning of period.............................. $12.68

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.03)
Net gain (loss) on securities (realized & unrealized)............ 1.25
-----
Total from investment operations................................. 1.22

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
------
Total distributions.............................................. ---
------
Net asset value end of period.................................... $13.90
=====
Total return (a)................................................. 9.62%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $202
Ratio of expenses to average net assets.......................... 3.00%
Ratio of net investment income (loss) to average net assets...... (0.49)%
Portfolio turnover rate.......................................... 90%

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURITY TOTAL RETURN FUND (CLASS A)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL PERIOD ENDED SEPTEMBER 30
-----------------------------------------------------------------
1999(B)(D) 1998(B)(D) 1997(B)(D) 1996(B)(D) 1995(B)(D)(F)
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $10.73 $12.58 $11.06 $10.54 $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.03) 0.08 0.17 0.25 0.04
Net gain (loss) on securities (realized & unrealized)............ 1.90 (0.98) 1.86 0.77 0.50
----- ----- ----- ----- -----
Total from investment operations................................. 1.87 (0.90) 2.03 1.02 0.54

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... (0.16) (0.20) (0.26) (0.33) ---
Distributions (from realized gains).............................. (0.75) (0.75) (0.25) (0.17) ---
----- ----- ----- ----- -----
Total distributions.............................................. (0.91) (0.95) (0.51) (0.50) ---
----- ----- ----- ----- -----
Net asset value end of period.................................... $11.69 $10.73 $12.58 $11.06 $10.54
===== ===== ===== ===== =====
Total return (a)................................................. 17.84% (7.19)% 19.00% 10.01% 5.40%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $3,587 $3,294 $3,906 $2,449 $1,906
Ratio of expenses to average net assets.......................... 2.00% 2.00% 1.68% 2.00% 2.00%
Ratio of net investment income (loss) to average net assets...... (0.29)% 0.65% 1.52% 2.32% 1.33%
Portfolio turnover rate.......................................... 121% 45% 79% 75% 129%
</TABLE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
SECURITY TOTAL RETURN FUND (CLASS B)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL PERIOD ENDED SEPTEMBER 30
-----------------------------------------------------------------
1999(B)(D) 1998(B)(D) 1997(B)(D) 1996(B)(D) 1995(B)(D)(F)
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $10.62 $12.45 $10.97 $10.50 $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.14) (0.03) 0.07 0.14 0.01
Net gain (loss) on securities (realized & unrealized)............ 1.88 (0.96) 1.84 0.77 0.49
----- ----- ----- ----- -----
Total from investment operations................................. 1.74 (0.99) 1.91 0.91 0.50

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... (0.05) (0.09) (0.18) (0.27) ---
Distributions (from realized gains).............................. (0.75) (0.75) (0.25) (0.17) ---
----- ----- ----- ----- -----
Total distributions.............................................. (0.80) (0.84) (0.43) (0.44) ---
----- ----- ----- ----- -----
Net asset value end of period.................................... $11.56 $10.62 $12.45 $10.97 $10.50
===== ===== ===== ===== =====
Total return (a)................................................. 16.68% (7.99)% 17.95% 8.97% 5.00%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $3,652 $3,304 $3,851 $2,781 $1,529
Ratio of expenses to average net assets.......................... 2.94% 2.94% 2.58% 3.00% 3.00%
Ratio of net investment income (loss) to average net assets...... (1.23)% (0.29)% 0.61% 1.32% 0.31%
Portfolio turnover rate.......................................... 121% 45% 79% 75% 129%
</TABLE>

- --------------------------------------------------------------------------------
SECURITY TOTAL RETURN FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
-------------
1999(B)(D)(G)
PER SHARE DATA
Net asset value beginning of period.............................. $11.48

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.11)
Net gain (loss) on securities (realized & unrealized)............ 0.21
-----
Total from investment operations................................. 0.10

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $11.58
=====
Total return (a)................................................. 0.87%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $8
Ratio of expenses to average net assets.......................... 2.93%
Ratio of net investment income (loss) to average net assets...... (1.84)%
Portfolio turnover rate.......................................... 149%

<TABLE>
- ------------------------------------------------------------------------------------------------------------
SECURITY VALUE FUND (CLASS A)
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL PERIOD ENDED SEPTEMBER 30
----------------------------------------
1999(B) 1998(B)(D) 1997(B)(C)(D)
------- ---------- -------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $12.07 $12.95 $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.07) (0.02) 0.05
Net gain (loss) on securities (realized & unrealized)............ 4.65 (0.53) 2.90
----- ----- -----
Total from investment operations................................. 4.58 (0.55) 2.95

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... --- (0.05) ---
Distributions (from realized gains).............................. (0.05) (0.28) ---
----- ----- -----
Total distributions.............................................. (0.05) (0.33) ---
----- ----- -----
Net asset value end of period.................................... $16.60 $12.07 $12.95
====== ===== =====
Total return (a)................................................. 38.06% (4.31)% 29.50%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $22,804 $10,901 $4,631
Ratio of expenses to average net assets.......................... 1.33% 1.27% 1.10%
Ratio of net investment income (loss) to average net assets...... (0.44)% (0.13)% 1.43%
Portfolio turnover rate.......................................... 79% 98% 35%
</TABLE>

<TABLE>
- ------------------------------------------------------------------------------------------------------------
SECURITY VALUE FUND (CLASS B)
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL PERIOD ENDED SEPTEMBER 30
----------------------------------------
1999(B) 1998(B)(D) 1997(B)(C)(D)
------- ---------- -------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $11.94 $12.91 $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.22) (0.15) 0.01
Net gain (loss) on securities (realized & unrealized)............ 4.59 (0.54) 2.90
----- ----- -----
Total from investment operations................................. 4.37 (0.69) 2.91

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... --- --- ---
Distributions (from realized gains).............................. (0.05) (0.28) ---
----- ----- -----
Total distributions.............................................. (0.05) (0.28) ---
----- ----- -----
Net asset value end of period.................................... $16.26 $11.94 $12.91
===== ===== =====
Total return (a)................................................. 36.71% (5.38)% 29.10%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $9,682 $6,615 $3,572
Ratio of expenses to average net assets.......................... 2.37% 2.33% 2.26%
Ratio of net investment income (loss) to average net assets...... (1.50)% (1.19)% 0.27%
Portfolio turnover rate.......................................... 79% 98% 35%
</TABLE>

- --------------------------------------------------------------------------------
SECURITY VALUE FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999(B)(G)
PER SHARE DATA
Net asset value beginning of period.............................. $14.54

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.13)
Net gain (loss) on securities (realized & unrealized)............ 2.10
-----
Total from investment operations................................. 1.97

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $16.51
=====
Total return (a)................................................. 13.55%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $1,138
Ratio of expenses to average net assets.......................... 2.38%
Ratio of net investment income (loss) to average net assets...... (1.36)%
Portfolio turnover rate.......................................... 92%

<TABLE>
- ----------------------------------------------------------------------------------------------------
SECURITY SMALL COMPANY FUND (CLASS A)
- ----------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL PERIOD ENDED SEPTEMBER 30
--------------------------------
1999(B)(D) 1998(B)(D)(E)
<S> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $ 8.70 $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... --- (0.03)
Net gain (loss) on securities (realized & unrealized)............ 4.28 (1.26)
----- -----
Total from investment operations................................. 4.28 (1.29)

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... --- (0.01)
Distributions (from realized gains).............................. --- ---
----- -----
Total distributions.............................................. --- (0.01)
----- -----
Net asset value end of period.................................... $12.98 $ 8.70
===== =====
Total return (a)................................................. 49.20% (12.95)%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $16,877 $2,677
Ratio of expenses to average net assets.......................... 0.49% 1.39%
Ratio of net investment income (loss) to average net assets...... 0.03% (0.35)%
Portfolio turnover rate.......................................... 361% 366%
</TABLE>

<TABLE>
- ----------------------------------------------------------------------------------------------------
SECURITY SMALL COMPANY FUND (CLASS B)
- ----------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL PERIOD ENDED SEPTEMBER 30
--------------------------------
1999(B)(D) 1998(B)(D)(E)
<S> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $ 8.63 $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.14) (0.13)
Net gain (loss) on securities (realized & unrealized)............ 4.20 (1.24)
----- -----
Total from investment operations................................. 4.06 (1.37)

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... --- ---
Distributions (from realized gains).............................. --- ---
----- -----
Total distributions.............................................. --- ---
----- -----
Net asset value end of period.................................... $12.69 $ 8.63
===== =====
Total return (a)................................................. 47.05% (13.70)%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $2,430 $1,504
Ratio of expenses to average net assets.......................... 1.94% 2.38%
Ratio of net investment income (loss) to average net assets...... (1.41)% (1.34)%
Portfolio turnover rate.......................................... 361% 366%
</TABLE>

- --------------------------------------------------------------------------------
SECURITY SMALL COMPANY FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
-------------
1999(B)(D)(G)
PER SHARE DATA
Net asset value beginning of period.............................. $11.16

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.07)
Net gain (loss) on securities (realized & unrealized)............ 1.77
-----
Total from investment operations................................. 1.70

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $12.86
=====
Total return (a)................................................. 15.23%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $890
Ratio of expenses to average net assets.......................... 1.47%
Ratio of net investment income (loss) to average net assets...... (0.95)%
Portfolio turnover rate.......................................... 374%

- --------------------------------------------------------------------------------
ENHANCED INDEX FUND (CLASS A)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999(B)(H)
PER SHARE DATA
Net asset value beginning of period.............................. $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... 0.03
Net gain (loss) on securities (realized & unrealized)............ 0.01
-----
Total from investment operations................................. 0.04

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $10.04
=====
Total return (a)................................................. 0.40%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $7,589
Ratio of expenses to average net assets.......................... 1.48%
Ratio of net investment income (loss) to average net assets...... 0.39%
Portfolio turnover rate.......................................... 68%

- --------------------------------------------------------------------------------
ENHANCED INDEX FUND (CLASS B)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999(B)(H)
PER SHARE DATA
Net asset value beginning of period.............................. $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.02)
Net gain (loss) on securities (realized & unrealized)............ 0.01
-----
Total from investment operations................................. (0.01)

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $ 9.99
=====
Total return (a)................................................. (0.10)%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $9,591
Ratio of expenses to average net assets.......................... 2.20%
Ratio of net investment income (loss) to average net assets...... (0.33)%
Portfolio turnover rate.......................................... 68%

- --------------------------------------------------------------------------------
ENHANCED INDEX FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
-------------
1999(B)(G)(H)
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 & unrealized)............ 0.01
-----
Total from investment operations................................. 0.00

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $10.00
=====
Total return (a)................................................. 0.00%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $5,205
Ratio of expenses to average net assets.......................... 2.05%
Ratio of net investment income (loss) to average net assets...... (0.18)%
Portfolio turnover rate.......................................... 68%

- --------------------------------------------------------------------------------
INTERNATIONAL FUND (CLASS A)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
-------------
1999(B)(D)(H)
PER SHARE DATA
Net asset value beginning of period.............................. $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.03)
Net gain (loss) on securities (realized & unrealized)............ (0.28)
-----
Total from investment operations................................. (0.31)

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $ 9.69
=====
Total return (a)................................................. (3.10)%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $2,928
Ratio of expenses to average net assets.......................... 2.50%
Ratio of net investment income (loss) to average net assets...... (0.41)%
Portfolio turnover rate.......................................... 115%

- --------------------------------------------------------------------------------
INTERNATIONAL FUND (CLASS B)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
-------------
1999(B)(D)(H)
PER SHARE DATA
Net asset value beginning of period.............................. $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.07)
Net gain (loss) on securities (realized & unrealized)............ (0.28)
-----
Total from investment operations................................. (0.35)

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $ 9.65
=====
Total return (a)................................................. (3.50)%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $2,028
Ratio of expenses to average net assets.......................... 3.19%
Ratio of net investment income (loss) to average net assets...... (1.09)%
Portfolio turnover rate.......................................... 115%

- --------------------------------------------------------------------------------
INTERNATIONAL FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
----------------
1999(B)(D)(G)(H)
PER SHARE DATA
Net asset value beginning of period.......................... $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................. (0.04)
Net gain (loss) on securities (realized & unrealized)........ (0.28)
-----
Total from investment operations............................. (0.32)

LESS DISTRIBUTIONS:
Dividends (from net investment income)....................... ---
Distributions (from realized gains).......................... ---
-----
Total distributions.......................................... ---
-----
Net asset value end of period................................ $ 9.68
=====
Total return (a)............................................. (3.20)%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)......................... $2,493
Ratio of expenses to average net assets...................... 2.78%
Ratio of net investment income (loss) to average net assets.. (0.71)%
Portfolio turnover rate...................................... 115%

- --------------------------------------------------------------------------------
SELECT 25 FUND (CLASS A)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999(B)(H)
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 & unrealized)............ 0.58
-----
Total from investment operations................................. 0.53

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $10.53
=====
Total return (a)................................................. 5.30%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $13,975
Ratio of expenses to average net assets.......................... 1.48%
Ratio of net investment income (loss) to average net assets...... (0.75)%
Portfolio turnover rate.......................................... 14%

- --------------------------------------------------------------------------------
SELECT 25 FUND (CLASS B)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999(B)(H)
PER SHARE DATA
Net asset value beginning of period.............................. $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.09)
Net gain (loss) on securities (realized & unrealized)............ 0.61
-----
Total from investment operations................................. 0.52

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $10.52
=====
Total return (a)................................................. 5.20%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $12,938
Ratio of expenses to average net assets.......................... 2.19%
Ratio of net investment income (loss) to average net assets...... (1.47)%
Portfolio turnover rate.......................................... 14%

- --------------------------------------------------------------------------------
SELECT 25 FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
-------------
1999(B)(G)(H)
PER SHARE DATA
Net asset value beginning of period.............................. $10.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.09)
Net gain (loss) on securities (realized & unrealized)............ 0.64
-----
Total from investment operations................................. 0.55

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $10.55
=====
Total return (a)................................................. 5.50%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $4,442
Ratio of expenses to average net assets.......................... 2.07%
Ratio of net investment income (loss) to average net assets...... (1.34)%
Portfolio turnover rate.......................................... 14%

<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
SECURITY ULTRA FUND (CLASS A)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
--------------------------------------------------------
1999(B) 1998(B) 1997(B) 1996(B) 1995(B)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $ 7.65 $ 9.24 $ 8.25 $ 8.20 $ 6.82

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.06) (0.06) (0.08) (0.05) (0.02)
Net gain (loss) on securities (realized & unrealized)............ 3.51 (1.06) 1.65 1.10 1.54
----- ----- ----- ----- -----
Total from investment operations................................. 3.45 (1.12) 1.57 1.05 1.52

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... --- --- --- --- ---
Distributions (from realized gains).............................. (1.91) (0.47) (0.58) (1.00) (0.14)
----- ----- ----- ----- -----
Total distributions.............................................. (1.91) (0.47) (0.58) (1.00) (0.14)
----- ----- ----- ----- -----
Net asset value end of period.................................... $ 9.19 $ 7.65 $ 9.24 $ 8.25 $ 8.20
===== ===== ===== ===== =====
Total return (a)................................................. 50.91% (12.45)% 20.57% 15.36% 22.69%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $96,238 $67,554 $84,504 $74,230 $66,052
Ratio of expenses to average net assets.......................... 1.21% 1.23% 1.71% 1.31% 1.32%
Ratio of net investment income (loss) to average net assets...... (0.77)% (0.64)% (1.01)% (0.61)% (0.31)%
Portfolio turnover rate.......................................... 54% 116% 68% 161% 180%
</TABLE>

<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
SECURITY ULTRA FUND (CLASS B)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------------------------------
1999(B) 1998(B) 1997(B) 1996(B) 1995(B)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period.............................. $ 7.28 $ 8.90 $ 8.03 $ 8.11 $ 6.81

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.14) (0.14) (0.15) (0.13) (0.09)
Net gain (loss) on securities (realized & unrealized)............ 3.31 (1.01) 1.60 1.05 1.53
----- ----- ----- ----- -----
Total from investment operations................................. 3.17 (1.15) 1.45 0.92 1.44

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... --- --- --- --- ---
Distributions (from realized gains).............................. (1.91) (0.47) (0.58) (1.00) (0.14)
----- ----- ----- ----- -----
Total distributions.............................................. (1.91) (0.47) (0.58) (1.00) (0.14)
----- ----- ----- ----- -----
Net asset value end of period.................................... $ 8.54 $ 7.28 $ 8.90 $ 8.03 $ 8.11
===== ===== ===== ===== =====
Total return (a)................................................. 49.39% (13.30)% 19.58% 13.81% 21.53%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $7,818 $5,610 $5,964 $2,698 $5,428
Ratio of expenses to average net assets.......................... 2.21% 2.23% 2.71% 2.31% 2.32%
Ratio of net investment income (loss) to average net assets...... (1.77)% (1.64)% (2.01)% (1.61)% (1.3 1)%
Portfolio turnover rate.......................................... 54% 116% 68% 161% 180%
</TABLE>

- --------------------------------------------------------------------------------
SECURITY ULTRA FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL
PERIOD ENDED
SEPTEMBER 30
------------
1999(B)(G)
PER SHARE DATA
Net asset value beginning of period.............................. $ 8.20

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................................... (0.07)
Net gain (loss) on securities (realized & unrealized)............ 0.98
-----
Total from investment operations................................. 0.91

LESS DISTRIBUTIONS:
Dividends (from net investment income)........................... ---
Distributions (from realized gains).............................. ---
-----
Total distributions.............................................. ---
-----
Net asset value end of period.................................... $ 9.11
=====
Total return (a)................................................. 11.10%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................. $95
Ratio of expenses to average net assets.......................... 2.21%
Ratio of net investment income (loss) to average net assets...... (1.75)%
Portfolio turnover rate.......................................... 54%
- --------------------------------------------------------------------------------

(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 or Class
C shares.

(b) Net investment income (loss) was computed using average shares outstanding
throughout the period.

(c) Security Value Fund was initially capitalized on May 1, 1997, with a net
asset value of $10 per share. Percentage amounts have been annualized,
except for total return.

(d) Fund expenses were reduced by the Investment Manager during the period, and
expense ratios absent such reimbursement would have been as follows:

(e) 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.

(f) Security Total Return 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.

(g) Class "C" Shares were initially offered for sale on January 29, 1999.
Percentage amounts for the period, except total return, have been
annualized.

(h) Security Enhanced Index Fund, Security International Fund and Security
Select 25 Fund were initially capitalized on January 29, 1999, with a net
asset value of $10 per share. Percentage amounts for the period, except for
total return, have been annualized.
<PAGE>
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 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. Shares equal to five percent (5%) of the amount specified in the
Statement of Intention will be held in escrow 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 -- Shareholders 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 shareholder must provide written notice
and a check in the amount of the reinvestment within thirty days after the
redemption request; the reinstatement will be made at the net asset value on the
date received by the Fund or the Security Funds, as appropriate.
<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: On the EDGAR Database at 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 1-202-942-8090. Copies may be obtained, upon payment of a duplicating fee, by
electronic request at the following e-mail address: [email protected] or by
writing the Public Reference Section of the Commission, Washington, DC
20549-0102.

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

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 reports, you will find a discussion of the market conditions
and investment strategies that significantly affected each Fund's performance
during its last fiscal year.

STATEMENT OF ADDITIONAL INFORMATION -- The Funds' Statement of Additional
Information and the Funds' annual or semi-annual reports 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 FUNDS
================================================================================
PROSPECTUS

FEBRUARY 1, 2000

* Security Social
Awareness Fund

----------------------------------------
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.
----------------------------------------

[SBG LOGO]
SECURITY DISTRIBUTORS, INC.
A Member of The Security Benefit
Group of Companies

<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------

OBJECTIVE................................................................... 2

PRINCIPAL INVESTMENT STRATEGIES............................................. 2

MAIN RISKS.................................................................. 3
Market Risk............................................................. 3
Social Investing........................................................ 3
Value Stocks............................................................ 4
Growth Stocks........................................................... 4
Additional Information.................................................. 4

PAST PERFORMANCE............................................................ 4

FEES AND EXPENSES OF THE FUND............................................... 6

INVESTMENT MANAGER.......................................................... 7
Management Fees......................................................... 8
Portfolio Managers...................................................... 8

BUYING SHARES............................................................... 8
Class A Shares.......................................................... 8
Class B Shares.......................................................... 9
Class B Distribution Plan............................................... 9
Class C Shares.......................................................... 10
Class C Distribution Plan............................................... 10
Brokerage Enhancement Plan.............................................. 10
Waiver of Deferred Sales Charge......................................... 11
Confirmations and Statements............................................ 11

SELLING SHARES.............................................................. 11
By Mail................................................................. 12
By Telephone............................................................ 12
By Broker............................................................... 13
Payment of Redemption Proceeds.......................................... 13

DIVIDENDS AND TAXES......................................................... 13
Tax on Distributions.................................................... 13
Taxes on Sales or Exchanges............................................. 14
Backup Withholding...................................................... 14

DETERMINATION OF NET ASSET VALUE............................................ 14

SHAREHOLDER SERVICES........................................................ 14
Accumulation Plan....................................................... 14
Systematic Withdrawal Program........................................... 15
Exchange Privilege...................................................... 15
Retirement Plans........................................................ 16

GENERAL INFORMATION......................................................... 16
Shareholder Inquiries................................................... 16

INVESTMENT POLICIES AND MANAGEMENT PRACTICES................................ 16
Foreign Securities...................................................... 17
Smaller Companies....................................................... 17
Convertible Securities and Warrants..................................... 17
Restricted Securities................................................... 18
Cash Reserves........................................................... 18
Borrowing............................................................... 18
Futures and Options..................................................... 18
When-Issued Securities and Forward Commitment Contracts................. 19

FINANCIAL HIGHLIGHTS........................................................ 20

APPENDIX A -
REDUCED SALES CHARGES....................................................... 23
Class A Shares.......................................................... 23
Rights of Accumulation.................................................. 23
Statement of Intention.................................................. 23
Reinstatement Privilege................................................. 23
<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. As with any investment, there can be no guarantee the Fund
will achieve its investment objective.

The Security Social Awareness Fund seeks capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The Fund pursues its objective by investing, under normal circumstances, in a
well-diversified portfolio of stocks that the Investment Manager, Security
Management Company, LLC, believes have above-average earnings potential and
which meet certain established social criteria. Under normal circumstances the
Fund will invest all of its assets in issuers that meet its social criteria and
that offer investment potential. The Fund also may invest in companies that are
included in the Domini 400 Social IndexSM, which companies will be deemed to
comply with Fund's social criteria.

- --------------------------------------------------------------------------------
The DOMINI 400 SOCIAL INDEXSM (DSI) is a market capitalization-weighted common
stock index. It monitors the performance of 400 U.S. corporations that pass
multiple, broad-based social screens. The DSI 400 consists of approximately 250
companies included in the Standard & Poor's 500 Index, approximately 100
additional large companies not included in the S&P but providing industry
representation, and approximately 50 additional companies with particularly
strong social characteristics. The DSI is maintained by Kinder, Lydenberg,
Domini & Co., Inc.
- --------------------------------------------------------------------------------

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 $5 billion or greater at
the time of purchase.

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

* 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

* 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

* 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 a security held by the Fund does not
comply with its social criteria, the security is sold within a reasonable time.

Under adverse market conditions, the Fund could invest some or all of its assets
in cash and 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

- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------

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 a security held by the Fund does 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 their
intrinsic values may never be realized by the market, or that 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.

ADDITIONAL INFORMATION -- For more information about the Fund's investment
program, including additional information about the risks of certain types of
investments, please see the "Investment Policies and Management Practices"
section of the prospectus.

PAST PERFORMANCE

The chart and table on the following page provide some indication of the risks
of investing in the Fund by showing changes in the Fund's performance from year
to year and by showing how the Fund's average annual total returns have compared
to those of a broad measure of market performance. In addition, the table
compares the Fund to a narrower index that more closely mirrors the Fund. As
with all mutual funds, past performance is not a prediction of future results.

The bar chart does not reflect the sales charge applicable to Class A shares,
which if reflected, would lower the returns shown. Average annual total returns
for the Fund's Class A shares include deduction of the 5.75% front-end sales
charge and for Class B shares include the appropriate deferred sales charge,
which is 5% in the first year declining to 0% in the sixth and later years. The
average annual total returns also assume that Class B shareholders redeem all
their shares at the end of the period indicated. Performance information for
Class C shares is not included as that share class has less than one year of
operating history.

- --------------------------------------------------------------------------------
SECURITY SOCIAL AWARENESS FUND - CLASS A
- --------------------------------------------------------------------------------

[BAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1997 1998 1999
----- ----- -----
22.3% 30.4% 15.5%

The total return for the Fund's Class A shares for the period January 1, 1999 to
December 31, 1999 was 15.53%.

---------------------------------------------------
HIGHEST AND LOWEST RETURNS
(QUARTERLY 1997-1999)
---------------------------------------------------
QUARTER ENDED
Highest 23.50% December 31, 1998
Lowest -8.59% September 30, 1998
---------------------------------------------------

---------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(THROUGH DECEMBER 31, 1999)
---------------------------------------------------
PAST LIFE OF FUND
1 YEAR (SINCE 11/4/96)
Class A 8.87% 19.10%
Class B 9.27% 19.40%
S&P 500 21.02% 28.07%*
Domini Social Index 24.49% 32.60%*
---------------------------------------------------
*Index performance information is only available to
the Fund at the beginning of each month. The S&P
500 and the Domini Social Index are for the period
November 1, 1996 to December 31, 1999.
---------------------------------------------------
<PAGE>
FEES AND EXPENSES OF THE FUND

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 5.75% None None
(as a percentage of offering price)

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.
- --------------------------------------------------------------------------------

<TABLE>
- --------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------------------------------
<CAPTION>
MANAGEMENT DISTRIBUTION ESTIMATED BROKERAGE PLAN OTHER TOTAL ANNUAL FUND
FEES (12B-1) FEES DISTRIBUTION (12B-1) FEES(5) EXPENSES OPERATING EXPENSES
<S> <C> <C> <C> <C> <C>
Class A 1.00% None 0.01% 0.42% 1.43%
Class B 1.00% 1.00% 0.01% 0.51% 2.52%
Class C 1.00% 1.00% 0.01% 0.66% 2.67%
- --------------------------------------------------------------------------------------------------------
<FN>
5 Amounts included under this caption are the estimated amount of expenses that the Fund is expected to
incur under the Brokerage Enhancement Plan in the current fiscal year.
</FN>
- --------------------------------------------------------------------------------------------------------
</TABLE>

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
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. 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:

You would pay the following expenses if you redeemed your shares at the end of
each period.

<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
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$712 $755 $370 $1,001 $1,085 $829 $1,312 $1,540 $1,415 $2,190 $2,588 $3,003
- ----------------------------------------------------------------------------------------------------------------------------
</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
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$712 $255 $270 $1,001 $785 $829 $1,312 $1,340 $1,415 $2,190 $2,588 $3,003
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

INVESTMENT MANAGER

Security Management Company, LLC (the "Investment Manager"), 700 SW Harrison
Street, Topeka, Kansas 66636, is the Fund's investment manager. On September 30,
1999, the aggregate assets of all of the Funds under the investment management
of the Investment Manager were approximately $5.7 billion.

Although the Fund has no current plans to use the services of a sub-advisor, it
may wish to do so in the future. Accordingly, the Investment Manager and the
Fund have received from the Securities and Exchange Commission an exemptive
order for a multi-manager structure that allows the Investment Manager to hire,
replace or terminate sub-advisors without the approval of shareholders. The
order also allows the Investment Manager to revise a sub-advisory agreement with
the approval of Fund Directors, but without shareholder approval. If a new
sub-advisor is hired, shareholders will receive information about the new
sub-advisor within 90 days of the change. The order allows the Fund to operate
more efficiently and with greater flexibility. Should the Fund use the service
of a sub-advisor in the future, the Investment Manager would anticipate
providing the following oversight and evaluation services to the Fund:

* performing initial due diligence on prospective sub-advisors for the Fund

* monitoring the performance of the sub-advisor(s)

* communicating performance expectations to the sub-advisor(s)

* ultimately recommending to the Board of Directors whether a sub-advisor's
contract should be renewed, modified or terminated.

The Investment Manager does not expect it would recommend frequent changes of
sub-advisors.

MANAGEMENT FEES -- The investment management fees paid by the Fund during the
last fiscal year were equal to 1.00% of the Fund's average net assets.

The Investment Manager may waive some or all of its management fee to limit the
total operating expenses of the 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.

PORTFOLIO MANAGER -- CINDY SHIELDs, Second 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 ten years of investment experience.

BUYING SHARES

Shares of the Fund are available through broker/dealers, banks, and other
financial intermediaries that have an agreement with the Fund's Distributor,
Security Distributors, Inc.

There are three different ways to buy shares of the Fund--Class A shares, Class
B shares or Class C shares. The different classes of a Fund differ primarily
with respect to the sales charges and Rule 12b-1 distribution fees to which they
are subject. 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 per share (NAV), plus the sales charge, set forth in the following table.
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
AMOUNT OF ORDER OF OFFERING PRICE NET AMOUNT 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.
- --------------------------------------------------------------------------------

Please see Appendix A for options that are available for reducing the sales
charge applicable to purchases of Class A shares.

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.

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," page 11.

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 to such shareholders 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 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.

BROKERAGE ENHANCEMENT PLAN -- The Fund has adopted, in accordance with the
provisions of Rule 12b-1 under the Investment Company Act of 1940, a Brokerage
Enhancement Plan (the "Plan"). The Plan uses available brokerage commissions to
promote the sale and distribution of Fund shares.

Under the Plan, the Fund may direct the Investment Manager or a sub-advisor to
use certain broker-dealers for securities transactions. (The duty of best price
and execution still applies to these transactions.) These are broker-dealers
that have agreed either (1) to pay a portion of their commission from the sale
and purchase of securities to the Distributor or other introducing brokers
("Brokerage Payments"), or (2) to provide brokerage credits, benefits or
services ("Brokerage Credits"). The Distributor will use all Brokerage Payments
and Credits (other than a minimal amount to defray its legal and administrative
costs) to finance activities that are meant to result in the sale of the Fund's
shares, including:

* holding or participating in seminars and sales meetings promoting the sale of
the Fund's shares

* paying marketing fees requested by broker-dealers who sell the Fund

* training sales personnel

* creating and mailing advertising and sales literature

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

The Plan permits the Brokerage Payments and Credits generated by securities
transactions from one Series of a Fund to inure to the benefit of other Series
as well. The Plan is not expected to increase the brokerage costs of the Fund.
For more information about the Plan, please read the "Allocation of Portfolio
Brokerage" section of the Statement of Additional Information.

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

* 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 Internal Revenue 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.
However, 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

When redeeming 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.

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:

* 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.

* 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 Individual Retirement Account
("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.

The Fund 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.

DIVIDENDS AND TAXES

In addition to federal tax, dividends and distributions may be subject to state
and local taxes. If the Fund declares a dividend or distribution in October,
November or December but pays it in January, you may be taxed on that dividend
or distribution as if you received it in the previous year. In general,
distributions from the Fund are taxable as follows:

--------------------------------------------------------------------------
TAX RATE FOR TAX RATE FOR 28%
TYPE OF DISTRIBUTION 15% BRACKET BRACKET OR ABOVE
--------------------------------------------------------------------------
Income dividends Ordinary Income rate Ordinary Income rate
Short-term capital gains Ordinary Income rate Ordinary Income rate
Long-term capital gains 10% 20%
--------------------------------------------------------------------------

Tax-deferred retirement accounts generally do not generate a tax liability
unless you are taking a distribution or making a withdrawal.

The Fund has "short-term capital gains" when it sells shares within 12 months
after buying them. The Fund has "long-term capital gains" when it sells shares
that it has owned for more than 12 months. The Fund expects that its
distributions will consist primarily of net long-term capital gains.

The Fund will mail you information concerning the tax status of the
distributions for each calendar year on or before January 31 of the following
year.

DETERMINATION OF NET ASSET VALUE

The net asset value per share (NAV) 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 observation of the following holidays: New Year's Day, Martin
Luther King, Jr. 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 prices are not available, the fair value of
securities is determined using procedures approved by the Fund's Board of
Directors.

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.

A shareholder 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
"Waiver of Deferred Sales Charge," page 11. A Systematic Withdrawal form may be
obtained from the Fund.

EXCHANGE PRIVILEGE -- Shareholders 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 per share. The other mutual
funds currently distributed by the Distributor include Security Equity, Ultra,
Growth and Income, Total Return, Global, Value, Small Company, Enhanced Index,
International, Select 25, Corporate Bond, Limited Maturity Bond, U.S.
Government, High Yield, Municipal Bond and Capital Preservation 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 or sales charge is
presently imposed on such an exchange. Shares of a particular class of the Fund
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 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
shareholder exercising this privilege.

To exchange shares by telephone, a shareholder 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 shareholder may exchange shares by telephone by
calling the Fund at 1-800-888-2461, 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. 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 shareholders.

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

SHAREHOLDER INQUIRIES -- Shareholders 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.

INVESTMENT POLICIES AND MANAGEMENT PRACTICES

This section takes a detailed look at some of the types of securities the Fund
may hold in its portfolio and the various kinds of management practices that may
be used in the portfolio. The Fund's holdings of certain types of investments
cannot exceed a maximum percentage of net assets. These percentage limitations
are set forth in the Statement of Additional Information. While the percentage
limitations provide a useful level of detail about the Fund's investment
program, they should not be viewed as an accurate gauge of the potential risk of
the investment. For example, in a given period, a 5% investment in futures
contracts could have significantly more of an impact on the Fund's share price
than its weighting in the portfolio. The net effect of a particular investment
depends on its volatility and the size of its overall return in relation to the
performance of all the Fund's other investments. The Portfolio Manager of the
Fund has considerable leeway in choosing investment strategies and selecting
securities she believes will help the Fund achieve its objective. In seeking to
meet its investment objective, the Fund may invest in any type of security or
instrument whose investment characteristics are consistent with the Fund's
investment program.

The Fund is subject to certain investment policy limitations referred to as
"fundamental policies." The fundamental policies cannot be changed without
shareholder approval. Some of the more important fundamental policies are that
the Fund will not:

* with respect to 75% of its total assets, invest more than 5% of the value of
its assets in any one issuer other than the U.S. Government or its
instrumentalities

* with respect to 75% of its total assets, purchase more than 10% of the
outstanding voting securities of any one issuer

* invest 25% or more of its total assets in any one industry.

The following pages describe some of the investments which may be made by the
Fund, as well as some of the management practices of the Funds.

FOREIGN SECURITIES -- The Fund may invest in foreign securities denominated in
U.S. dollars. Foreign investments increase a Fund's diversification and may
enhance return, but they also involve some special risks, such as exposure to
potentially adverse local political and economic developments; nationalization
and exchange controls; potentially lower liquidity and higher volatility; and
possible problems arising from accounting, disclosure, settlement and regulatory
practices that differ from U.S. standards. These risks are heightened for
investments in developing countries.

SMALLER COMPANIES -- The Fund may invest in small- or medium-sized companies.
These companies are more likely than larger companies to have limited product
lines, markets or financial resources, or to depend on a small, inexperienced
management group. Stocks of these companies may trade less frequently and in
limited volume, and their prices may fluctuate more than stocks of other
companies. Stocks of these companies may therefore be more vulnerable to adverse
developments than those of larger companies.

CONVERTIBLE SECURITIES AND WARRANTS -- The Fund may invest in debt or preferred
equity securities convertible into, or exchangeable for, equity securities.
Traditionally, convertible securities have paid dividends or interest at rates
higher than common stocks but lower than nonconvertible securities. They
generally participate in the appreciation or depreciation of the underlying
stock into which they are convertible, but to a lesser degree. In recent years,
convertible securities have been developed which combine higher or lower current
income with options and other features. Warrants are options to buy a stated
number of shares of common stock at a specified price anytime during the life of
the warrants (generally, two or more years).

RESTRICTED SECURITIES -- The Fund may invest in restricted securities that are
eligible for resale under Rule 144A of the Securities Act of 1933. These
securities are sold directly to a small number of investors, usually
institutions. Unlike public offerings, restricted securities are not registered
with the SEC. Although restricted securities which are eligible for resale under
Rule 144A may be readily sold to qualified buyers, there may not always be a
market for them and their sale may involve substantial delays and additional
costs.

Some of the management practices of the Fund include:

CASH RESERVES -- The Fund may establish and maintain reserves as the Investment
Manager believes is advisable to facilitate the Fund's cash flow needs (e.g.,
redemptions, expenses and purchases of portfolio securities) or for temporary,
defensive purposes. Such reserves may include various types of money market
instruments, certificates of deposit, bank demand accounts and repurchase
agreements.

BORROWING -- The Fund may borrow money from banks as a temporary measure for
emergency purposes, to facilitate redemption requests, or for other purposes
consistent with the Fund's investment objective and program. Such borrowings may
be collateralized with Fund assets. To the extent that the Fund purchases
securities while it has outstanding borrowings, it is using leverage, i.e.,
using borrowed funds for investment. Leveraging will exaggerate the effect on
net asset value of any increase or decrease in the market value of the Fund's
portfolio. Money borrowed for leveraging will be subject to interest costs that
may or may not be recovered by appreciation of the securities purchased; in
certain cases, interest costs may exceed the return received on the securities
purchased. The Fund also may be required to maintain minimum average balances in
connection with such borrowing or to pay a commitment or other fee to maintain a
line of credit; either of these requirements would increase the cost of
borrowing over the stated interest rate.

FUTURES AND OPTIONS -- The Fund may utilize futures and options on futures, and
may purchase call and put options and write call and put options on a "covered"
basis. Futures (a type of potentially high-risk derivative) are often used to
manage or hedge risk because they enable the investor to buy or sell an asset in
the future at an agreed-upon price. Options (another type of potentially
high-risk derivative) give the investor the right (where the investor purchases
the options), or the obligation (where the investor writes (sells) the options),
to buy or sell an asset at a predetermined price in the future. Futures and
options contracts may be bought or sold for any number of reasons, including: to
hedge the Fund's portfolio, to increase returns, to maintain exposure to the
equity markets to manage exposure to changes in interest rates and bond prices
and in an effort to enhance income. Futures contracts and options may not always
be successful hedges; their prices can be highly volatile. Using them 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.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENT CONTRACTS -- The Fund may purchase
and sell securities on a "when issued," "forward commitment" or "delayed
delivery" basis. The price of these securities is fixed at the time of the
commitment to buy, but delivery and payment can take place a month or more
later. During the interim period, the market value of the securities can
fluctuate, and no interest accrues to the purchaser. At the time of delivery,
the value of the securities may be more or less than the purchase or sale price.
When the Fund purchases securities on this basis, there is a risk that the
securities may not be delivered and that the Fund may incur a loss.
<PAGE>
The financial highlights table is intended to help you understand the Fund's
financial performance for its Class A shares and Class B shares during the past
five years or, the period since commencement of the Fund. Financial performance
for Class C shares is for the period January 29, 1999 to September 30, 1999.
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 Fund's financial statements, are included in the annual
report.

<TABLE>
- --------------------------------------------------------------------------------------------------------
SECURITY SOCIAL AWARENESS FUND (CLASS A)
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL PERIOD ENDED SEPTEMBER 30
----------------------------------------
1999(C) 1998(B)(C) 1997(B)(C)(D)
------- ---------- -------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period................................ $19.37 $17.99 $15.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)....................................... (0.05) --- 0.08
Net gain (loss) on securities (realized & unrealized).............. 5.09 1.42 2.91
----- ----- -----
Total from investment operations................................... 5.04 1.42 2.99

LESS DISTRIBUTIONS:
Dividends (from net investment income)............................. --- (0.04) ---
Distributions (from realized gains)................................ (0.36) --- ---
----- ----- -----
Total distributions................................................ (0.36) (0.04) ---
----- ----- -----
Net asset value end of period...................................... $24.05 $19.37 $17.99
===== ===== =====
Total return (a)................................................... 26.12% 7.89% 19.93%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................... $13,403 $7,619 $6,209
Ratio of expenses to average net assets............................ 1.42% 1.22% 0.67%
Ratio of net investment income (loss) to average net assets........ (0.22)% --- 0.57%
Portfolio turnover rate............................................ 26% 41% 38%
</TABLE>

<TABLE>
- --------------------------------------------------------------------------------------------------------
SECURITY SOCIAL AWARENESS FUND (CLASS B)
- --------------------------------------------------------------------------------------------------------
<CAPTION>
FISCAL PERIOD ENDED SEPTEMBER 30
-----------------------------------
1999(C) 1998(B)(C) 1997(B)(C)(D)
------- ---------- -------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value beginning of period................................ $19.01 $17.81 $15.00

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)....................................... (0.30) (0.19) (0.08)
Net gain (loss) on securities (realized & unrealized).............. 5.00 1.39 2.89
----- ----- -----
Total from investment operations................................... 4.70 1.20 2.81

LESS DISTRIBUTIONS:
Dividends (from net investment income)............................. --- --- ---
Distributions (from realized gains)................................ (0.36) --- ---
----- ----- -----
Total distributions................................................ (0.36) --- ---
----- ----- -----
Net asset value end of period...................................... $23.35 $19.01 $17.81
===== ===== =====
Total return (a)................................................... 24.81% 6.74% 18.73%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)............................... $9,136 $5,245 $3,641
Ratio of expenses to average net assets ........................... 2.51% 2.20% 1.84%
Ratio of net investment income (loss) to average net assets........ (1.30)% (0.98)% (0.60)%
Portfolio turnover rate............................................ 26% 41% 38%
</TABLE>

- --------------------------------------------------------------------------------
SECURITY SOCIAL AWARENESS FUND (CLASS C)
- --------------------------------------------------------------------------------
FISCAL PERIOD ENDED
SEPTEMBER 30
-------------------
1999(C)(E)
PER SHARE DATA
Net asset value beginning of period......................... $24.47

INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................ (0.22)
Net gain (loss) on securities (realized & unrealized)....... (0.38)
-------
Total from investment operations............................ (0.60)

LESS DISTRIBUTIONS:
Dividends (from net investment income)...................... ---
Distributions (from realized gains)......................... ---
-------
Total distributions......................................... ---
--------
Net asset value end of period............................... $23.87
=====
Total return (a)............................................ (2.45)%

RATIOS/SUPPLEMENTAL DATA
Net assets end of period (thousands)........................ $405
Ratio of expenses to average net assets .................... 2.66%
Ratio of net investment income (loss) to average net assets. (1.46)%
Portfolio turnover rate..................................... 33%
- --------------------------------------------------------------------------------

(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 or Class C 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 1998
------------------------------
Class A 1.70% 1.51%
Class B 2.80% 2.48%
------------------------------

(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 1, 1996, with a
net asset value of $15 per share. Percentage amounts for the period have
been annualized, except for total return.

(e) Class "C" Shares were initially offered for sale on January 29, 1999.
Percentage amounts for the period, except total return, have been
annualized.
<PAGE>
REDUCED SALES CHARGES

CLASS A SHARES -- 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.

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. Shares equal to five percent (5%) of the amount specified in the
Statement of Intention will be held in escrow 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.

REINSTATEMENT PRIVILEGE -- Shareholders 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 shareholder must provide written notice
and a check in the amount of the reinvestment within thirty days after the
redemption request; the reinstatement will be made at the net asset value per
share on the date received by the Fund or the Security Funds, as appropriate.
<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: On the EDGAR Database at 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 -Rroom may be obtained by calling the
Commission at 1-202-942-8090. Copies may be obtained, upon payment of a
duplicating fee, by electronic request at the following e-mail address:
[email protected] or by writing the Public Reference Section of the Commission,
Washington, DC 20549-0201.
- --------------------------------------------------------------------------------

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
* Total Return Series
* Social Awareness Series
* Value Series
* Small Company Series
* Enhanced Index Series
* International Series
* Select 25 Series

SECURITY ULTRA FUND
Members of The Security Benefit Group of Companies
700 SW Harrison, Topeka, Kansas 66636-0001
(785) 431-3127
(800) 888-2461

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus dated February 1, 2000 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. The Funds' September 30,
1999 Annual Report is incorporated herein by reference.

STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 2000
RELATING TO THE PROSPECTUS DATED FEBRUARY 1, 2000,
AS IT MAY BE SUPPLEMENTED FROM TIME TO TIME
- --------------------------------------------------------------------------------

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>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------

GENERAL INFORMATION......................................................... 3
INVESTMENT OBJECTIVE AND POLICIES OF THE FUNDS.............................. 4
Security Growth and Income Fund.......................................... 4
Security Equity Fund..................................................... 6
Security Ultra Fund...................................................... 16
INVESTMENT METHODS AND RISK FACTORS......................................... 17
Shares of Other Investment Companies..................................... 17
Repurchase Agreements.................................................... 17
When Issued and Forward Commitment Securities............................ 17
American Depositary Receipts............................................. 18
Restricted Securities.................................................... 18
Real Estate Securities................................................... 19
Zero Coupon Securities................................................... 19
Foreign Investment Risks................................................. 19
Risks of Conversion to Euro.............................................. 20
Brady Bonds.............................................................. 20
Emerging Countries....................................................... 20
Political and Economic Risks............................................. 20
Religious and Ethnic Instability......................................... 21
Foreign Investment Restrictions.......................................... 21
Non-Uniform Corporate Disclosure Standards and Governmental Regulation... 21
Adverse Market Characteristics........................................... 21
Non-U.S. Withholding Taxes............................................... 22
Currency Risk............................................................ 22
Put and Call Options..................................................... 22
INVESTMENT POLICY LIMITATIONS............................................... 34
Fundamental Policies..................................................... 34
Operating Policies....................................................... 34
OFFICERS AND DIRECTORS...................................................... 35
REMUNERATION OF DIRECTORS AND OTHERS........................................ 36
PRINCIPAL HOLDERS OF SECURITIES............................................. 37
HOW TO PURCHASE SHARES...................................................... 38
Alternative Purchase Options............................................. 38
Class A Shares........................................................... 39
Security Equity Fund's Class A Distribution Plan......................... 39
Class B Shares........................................................... 40
Class B Distribution Plan................................................ 40
Class C Shares........................................................... 40
Class C Distribution Plan................................................ 41
Calculation and Waiver of Contingent Deferred Sales Charges.............. 41
Arrangements With Broker-Dealers and Others.............................. 41
Purchases at Net Asset Value............................................. 42

Purchases for Employer-Sponsored Retirement Plans........................ 43

ACCUMULATION PLAN........................................................... 43
SYSTEMATIC WITHDRAWAL PROGRAM............................................... 43
INVESTMENT MANAGEMENT....................................................... 44
Portfolio Management..................................................... 48
Code of Ethics........................................................... 49
DISTRIBUTOR................................................................. 50
ALLOCATION OF PORTFOLIO BROKERAGE........................................... 50
BROKERAGE ENHANCEMENT PLAN.................................................. 52
HOW NET ASSET VALUE IS DETERMINED........................................... 53
HOW TO REDEEM SHARES........................................................ 53
Telephone Redemptions.................................................... 54
HOW TO EXCHANGE SHARES...................................................... 55
Exchange by Telephone.................................................... 55
DIVIDENDS AND TAXES......................................................... 56
Passive Foreign Investment Companies..................................... 58
Options, Futures and Forward Contracts and Swap Agreements............... 58
Market Discount.......................................................... 59
Original Issue Discount.................................................. 59
Constructive Sales....................................................... 59
Foreign Taxation......................................................... 59
Foreign Currency Transactions............................................ 60
Other Taxes.............................................................. 60
ORGANIZATION................................................................ 60
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-PAYING AGENT......................... 60
INDEPENDENT AUDITORS........................................................ 60
PERFORMANCE INFORMATION..................................................... 61
RETIREMENT PLANS............................................................ 62
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) ...................................... 62
ROTH IRAS................................................................... 63
EDUCATION IRAS.............................................................. 63
SIMPLE IRAS................................................................. 63
PENSION AND PROFIT-SHARING PLANS............................................ 64
403(B) RETIREMENT PLANS..................................................... 64
SIMPLIFIED EMPLOYEE PENSION PLANS (SEPPS) .................................. 64
FINANCIAL STATEMENTS........................................................ 64
APPENDIX A.................................................................. 65
APPENDIX B.................................................................. 66
<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 53.)

Each of Security Growth and Income Fund ("Growth and Income Fund"), the Equity
Series ("Equity Fund"), Global Series ("Global Fund"), Total Return Series
("Total Return 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 on the following pages.
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 under "Investment Policy Limitations," beginning on
page 34. 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 56.)

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 38.)

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, 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 Total Return, 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 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, Total
Return 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 the Total
Return, 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 Total Return, 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 Total Return,
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 Total Return,
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 44.

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 44 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
39, "Class B Distribution Plan," page 40 and "Class C Distribution Plan," page
41.)

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
American Depositary Receipts ("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, as an operating
policy 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. The Fund may also invest in any other type of
security or instrument whose investment characteristics are consistent with the
Fund's investment program.

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," "forward
commitment" or "delayed delivery" basis in excess of customary settlement
periods for the type of security involved. As an operating policy, 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. 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 ("Rule 144A
Securities") subject to the Fund's policy that not more than 15% of its total
assets may 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, as an efficient means of adjusting its exposure to
the stock market or to increase returns. 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."

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. 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"), Total
Return Series ("Total Return 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 the Fund's
investment objective of long-term capital growth.

Equity Fund ordinarily will have at least 65% 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. The Fund may also invest in any other type of security or
instrument whose investment characteristics are consistent with the Fund's
investment program. The 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.

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, 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. The Fund may
also invest in any other type of security or instrument whose investment
characteristics are consistent with the Fund's investment program. 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, 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 OppenheimerFunds 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 OppenheimerFunds. 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
OppenheimerFunds 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 U.S.
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. As an operating policy, 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. 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 ("Rule 144A Securities") subject to the
Fund's policy that not more than 15% of its total assets may be invested in
illiquid securities. 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.

TOTAL RETURN FUND. The investment objective of Total Return Fund is to seek high
total return, consisting of capital appreciation and current income. The Fund
seeks this 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 in any rating category. As an
operating policy, 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. 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 ("Rule 144A Securities") subject to the Fund's policy
that not more than 15% of its total assets may be invested in illiquid
securities. The Total Return Fund may also invest in (i) preferred stocks; (ii)
warrants; and (iii) dollar denominated foreign securities. The Fund may purchase
securities on a "when-issued," "forward commitment" or "delayed delivery" basis
in excess of customary settlement periods for the type of security involved. The
Fund may also invest in any other type of security or instrument whose
investment characteristics are consistent with the Fund's investment program.
The Fund reserves the right to invest its assets temporarily in cash or 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."

To choose stocks, the Investment Manager uses a blended approach, investing in
growth stocks and in value stocks. 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.

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 used to hedge the Fund's portfolio, to increase returns or to maintain
exposure to the equity markets.

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. The Fund may also invest in any other type of security
or instrument whose investment characteristics are consistent with the Fund's
investment program, including any company in the Domini 400 Social Index.

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 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, as
an efficient means of adjusting its exposure to the stock market or to increase
returns. 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 value of all call and put options held by the Fund
will not exceed 5% of the Fund's total assets. Under normal circumstances, the
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. All companies in the DSI 400 will be
deemed to comply with the Fund's social criteria. 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 Value Fund is to seek long-term growth
of capital. The 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 Fund may purchase securities on a "when-issued," "forward commitment" or
"delayed delivery" basis in excess of customary settlement periods for the type
of security involved. As an operating policy, 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. 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 ("Rule 144A Securities") subject to the
Fund's policy that not more than 15% of its total assets may be invested in
illiquid securities. The Fund may also invest in any other type of security or
instrument whose investment characteristics are consistent with the Fund's
investment program. The 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."

SMALL COMPANY FUND. The investment objective of 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 substantially similar to that of the
companies in the Russell 2000 Growth Index 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 OTC market. The Fund also may
invest in securities of emerging growth companies. 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 market capitalizations
which exceed that of companies in the Russell 2000 Growth Index, 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. The Fund may also
invest in any other type of security or instrument whose investment
characteristics are consistent with the Fund's investment program. See the
discussion of such securities under "Investment Methods and Risk Factors."

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 ADRs, European Depository Receipts
("EDRs") 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 than 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. As an
operating policy, 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 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."

As an operating policy, 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. 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 ("Rule 144A Securities") subject to the Fund's policy
that not more than 15% of its total assets may be invested in illiquid
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," "forward commitment" 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, 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.

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.

ENHANCED INDEX FUND. The investment objective of the Enhanced Index 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, 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 Fund may also invest in any other type of security or instrument
whose investment characteristics are consistent with the Fund's investment
program. As an operating policy, under normal market conditions, the Fund will
invest at least 80% of its assets in equity securities of companies in the index
and in futures contracts representative of the stocks in the index. The
Sub-Adviser intends to monitor the sector and security weightings of the Fund
relative to the composition of the S&P 500 Index. As noted in the prospectus,
the Sub-Adviser will overweight and underweight securities in the index based on
whether they believe a stock will generate returns that will exceed or be less
than the Index. While the Fund seeks to modestly outperform the S&P 500 Index,
the Fund expects that its returns will have a coefficient correlation of .90% or
better to the S&P 500 Index. 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 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 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").

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.

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-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 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 OTC 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
them. 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.

INTERNATIONAL FUND. The investment objective of International 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, 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, management
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"), when-issued and delayed
delivery 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.
The Fund may also invest in any other type of security or instrument whose
investment characteristics are consistent with the Fund's investment program.
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 Services
("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 ratings 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 "Appendix A."

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).

SELECT 25 FUND. The investment objective of 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 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 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. As an operating policy, 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. 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 ("Rule 144A
Securities") subject to the Fund's policy that not more than 15% of its total
assets may be invested in illiquid securities. The Fund may also invest in any
other type of security or instrument whose investment characteristics are
consistent with the Fund's investment program. 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."

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, the 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. The Fund may also invest in any other
type of security or instrument whose investment characteristics are consistent
with the Fund's investment program. 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 an operating
policy, 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. 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
("Rule 144A Securities") subject to the Fund's policy that not more than 15% of
its total assets may be invested in illiquid securities.

The Fund may enter into futures contracts to hedge all or a portion of its
portfolio, as an efficient means of adjusting its exposure to the stock market
or to increase returns. 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."

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. 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 -- Each of the Funds may invest in shares
of other investment companies. 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 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 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, 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 adopted the euro as their official currency. However,
their current currencies (for example, the franc, the mark, and the lira) 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
provide 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:

* 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 vendors are not prepared, there could be delays in
settlements and additional costs to the Funds.

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 will not be registered with the SEC or in
some cases 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 Funds that
invest in foreign securities 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 or the
applicable Sub-Adviser 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. 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.

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.

As an operating policy, the Funds will purchase a put or call option 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 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
(or, in some cases, may be held on deposit directly with 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,
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 policies. These
fundamental policies may not be changed without the approval of the lesser of
(i) 67% or more of the Funds' shares present at a meeting of shareholders if the
holders of more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding voting
shares. Other restrictions in the form of operating policies are subject to
change by the Fund's Board of Directors without shareholder approval. Any
investment restrictions that involve a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowing by, the Fund. Calculation of the Fund's
total assets for compliance with any of the following fundamental or operating
policies or any other investment restrictions set forth in the Fund's prospectus
or Statement of Additional Information will not include cash collateral held in
connection with a Fund's securities lending activities.

FUNDAMENTAL POLICIES -- The fundamental policies of the Funds are:

1. PERCENT LIMIT ON ASSETS INVESTED IN ANY ONE ISSUER 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 and
instrumentalities); provided that this limitation applies only with respect
to 75% of the Fund's total assets.

2. PERCENT LIMIT ON SHARE OWNERSHIP OF ANY ONE ISSUER Not to purchase a
security if, as a result, with respect to 75% of the value of the Fund's
total assets, more than 10% of the outstanding voting securities of any one
issuer would be held by the Fund (other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities).

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

4. INDUSTRY CONCENTRATION Not to invest in an amount equal to, or in excess of,
25% or more of the Fund's total assets in a particular industry (other than
securities of the of U.S. Government, its agencies or instrumentalities).

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

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

7. LOANS Not to lend any security or make any other loan if, as a result, more
than 33 1/3% of an 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 objectives and policies, or (ii) by
engaging in repurchase agreements with respect to portfolio securities.

8. BORROWING Not to borrow in excess of 33 1/3% of a Fund's total assets.

9. SENIOR SECURITIES Not to issue senior securities, except as permitted under
the Investment Company Act of 1940.

For the purposes of Fundamental Policies (2) and (4) above, each governmental
subdivision, i.e., state, territory, possession of the United States or any
political subdivision of any of the foregoing, including agencies, authorities,
instrumentalities, or similar entities, or of the District of Columbia shall be
considered a separate issuer if its assets and revenues are separate from those
of the governmental body creating it and the security is backed only by its own
assets and revenues. Further, in the case of an industrial development bond, if
the security is backed only by the assets and revenues of a non-governmental
user, then such non-governmental user will be deemed to be the sole issuer. If
an industrial development bond or government issued security is guaranteed by a
governmental or other entity, such guarantee would be considered a separate
security issued by the guarantor.

OPERATING POLICIES -- The operating policies of the Funds are:

1. LOANS The Funds may not lend assets other than securities to other parties.
(This limitation does not apply to purchases of debt securities or to
repurchase agreements.)

2. BORROWING The Funds 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.

3. OPTIONS The Funds 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 all call and put options held by a
Fund will not exceed 5% of the Fund's total assets. The Funds may write only
covered put and call options.

4. OIL AND GAS PROGRAMS The Funds may not invest in oil, gas, mineral leases or
other mineral exploration or development of programs.

5. INVESTMENT COMPANIES Except in connection with a merger, consolidation,
acquisition, or reorganization, the Funds may not invest in securities of
other investment companies, except in compliance with the Investment Company
Act of 1940.

6. CONTROL OF PORTFOLIO COMPANIES The Funds may not invest in companies for the
purpose of exercising management or control.

7. SHORT SALES The Funds may not 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.

8. MARGINS The Funds do not intend to purchase securities on margin, except
that the Funds 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.

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.

NAME, ADDRESS, POSITIONS HELD WITH THE FUNDS AND PRINCIPAL OCCUPATIONS DURING
THE PAST FIVE YEARS

JOHN D. CLELAND*
- ----------------
POSITION HELD WITH THE FUND--President and Director
PRINCIPAL OCCUPATIONS--Senior Vice President and Managing Member Representative,
Security Management Company, LLC; Senior Vice President, Security Benefit Group,
Inc. and Security Benefit Life Insurance Company.

DONALD A. CHUBB, JR.**
- ----------------------
2222 SW 29th Street, Topeka, Kansas 66611
POSITION HELD WITH THE FUND--Director
PRINCIPAL OCCUPATIONS--Business broker, Griffith & Blair Realtors. Prior to
1997, President, Neon Tube Light Company, Inc.

PENNY A. LUMPKIN**
- ------------------
3616 Canterbury Town Road, Topeka, Kansas 66610
POSITION HELD WITH THE FUND--Director
PRINCIPAL OCCUPATIONS--Owner, Vivian's Gift Shop (Corporate Retail). Vice
President, Palmer Companies, Inc. (Small Business and Shopping Center
Development) and Bellairre Shopping Center (Managing and Leasing Management);
Partner, Goodwin Enterprises (Retail). Prior to 1999, Vice President and
Treasurer, Palmer News, Inc.; Vice President, M/S News, Inc. and Secretary,
Kansas City Periodicals.

MARK L. MORRIS, JR.**
- ---------------------
5500 SW 7th Street, Topeka, Kansas 66606
POSITION HELD WITH THE FUND--Director
PRINCIPAL OCCUPATIONS-- Veterinary Nutrition Consultant. Former General Partner,
Mark Morris Associates (Veterinary Research and Education).

MAYNARD F. OLIVERIUS
- --------------------
1500 SW 10th Avenue, Topeka, Kansas 66604
POSITION HELD WITH THE FUND--Director
PRINCIPAL OCCUPATIONS--President and Chief Executive Officer, Stormont-Vail
Health Care.

JAMES R. SCHMANK*
- -----------------
POSITION HELD WITH THE FUND--Vice President and Director
PRINCIPAL OCCUPATIONS--President and Managing Member Representative, Security
Management Company, LLC; Senior Vice President, Security Benefit Group, Inc. and
Security Benefit Life Insurance Company.

TERRY A. MILBERGER
- ------------------
POSITION HELD WITH THE FUND--Vice President (Equity Fund only)
PRINCIPAL OCCUPATIONS--Senior Vice President and Senior Portfolio Manager,
Security Management Company, LLC; Senior Vice President, Security
Benefit Group, Inc. and Security Benefit Life Insurance Company.

MICHAEL A. PETERSEN
- -------------------
POSITION HELD WITH THE FUND--Vice President (Growth and Income Fund only)
PRINCIPAL OCCUPATIONS--Vice President and Senior Portfolio Manager, Security
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
- ----------
POSITION HELD WITH THE FUND--Secretary
PRINCIPAL OCCUPATIONS--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
- -----------------
POSITION HELD WITH THE FUND--Treasurer
PRINCIPAL OCCUPATIONS--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
- ----------------
POSITION HELD WITH THE FUND--Vice President (Equity Fund only)
PRINCIPAL OCCUPATIONS--Second Vice President and Portfolio Manager, Security
Management Company, LLC; Second Vice President, Security Benefit Group, Inc. and
Security Benefit Life Insurance Company.

JAMES P. SCHIER
- ---------------
POSITION HELD WITH THE FUND--Vice President (Equity Fund and Ultra Fund only)
PRINCIPAL OCCUPATIONS--Second Vice President and Portfolio Manager, Security
Management Company, LLC; Second 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
- -----------------------
POSITION HELD WITH THE FUND--Assistant Secretary
PRINCIPAL OCCUPATIONS--Assistant Secretary, Security Management Company, LLC;
Assistant Vice President and Assistant Counsel, Security Benefit Group, Inc. and
Security Benefit Life Insurance Company.

*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.

The directors and officers of the Funds hold identical offices in each of the
other Funds managed by the Investment Manager, with the exceptions noted below.
Messrs. Milberger and Petersen are Vice Presidents only of SBL Fund, Ms. Shields
is Vice President only of SBL Fund; and Mr. Schier is Vice President only of SBL
Fund. (See the table under "Investment Management," page 44, 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 Director and 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 $2,000 and a fee of $2,500
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 $1,500 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 Total Return, 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 and Class
C distribution fees. Total Return, 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 44, "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,
1999, and the aggregate compensation paid to each of the directors during
calendar year 1999 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>
- -----------------------------------------------------------------------------------------------------------------------
AGGREGATE COMPENSATION
------------------------------------------- ESTIMATED ANNUAL TOTAL COMPENSATION FROM
NAME OF DIRECTOR SECURITY GROWTH SECURITY SECURITY BENEFITS UPON THE SECURITY FUND COMPLEX,
OF THE FUND AND INCOME FUND EQUITY FUND ULTRA FUND RETIREMENT INCLUDING THE FUNDS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Donald A. Chubb, Jr. $2,249 $2,249 $2,249 $0 $27,000
John D. Cleland 0 0 0 0 0
Penny A. Lumpkin 2,166 2,166 2,166 0 26,000
Mark L. Morris, Jr. 2,249 2,249 2,249 0 27,000
Maynard Oliverius 2,166 2,166 2,166 0 26,000
James R. Schmank 0 0 0 0 0
Harold G. Worswick** 0 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------
<FN>
**Mr. Worswick retired as a fund director February 1996. No deferred compensation accrued for Mr. Worswick as of
September 30, 1999. Mr. Worswick received deferred compensation in the amount of $8,386 during the fiscal-year ended
September 30, 1999.
</FN>
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

The Investment Manager compensates its officers and directors who may also serve
as officers or directors of the Funds. On December 31, 1999, 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,
Total Return Fund, Social Awareness Fund, Small Company Fund, Enhanced Index
Fund and Ultra Fund. On December 31, 1999, the officers and directors of
Security Equity Fund (as a group) beneficially owned approximately 1.4% of the
total outstanding Class A shares of the Select 25 Series , 1.2% of the total
outstanding Class A shares of International Series, 1.3% of the total
outstanding Class A shares of Value Series and 1.1% of the total outstanding
Class A shares of Global Series. On December 31, 1999 the officers and directors
of Security Equity Fund owned 0% of the Class B and Class C shares of Select 25
Series, International Series, Value Series and Global Series.

PRINCIPAL HOLDERS OF SECURITIES

As of December 31, 1999, Security Benefit Life Insurance Company ("SBL"), 700 SW
Harrison Street, Topeka, Kansas, 66636-0001, owned, of record and beneficially,
49.4% of the voting securities of Value Fund (72.1% of the total outstanding
Class A shares and 0% of the total outstanding Class B shares); 43.0% of the
voting securities of Enhanced Index Fund (41.0% of the total outstanding Class A
shares, 34.0% of the total outstanding Class B shares and 62.3% of the total
outstanding Class C shares) and 64.05.0% of the voting securities of
International Fund (57.0% of the total outstanding Class A shares, 75.8% of the
total outstanding Class B shares and 62.0% of the total outstanding Class C
shares). SBL's percentage ownership of Value Fund, Enhanced Index Fund and
International Fund may permit SBL to effectively control the outcome of any
matters submitted to a vote of shareholders of these funds. SBL is stock life
insurance company and is incorporated under the laws of Kansas. SBL is
ultimately controlled by Security Benefit Mutual Holding Company, 700 SW
Harrison Street, Topeka, Kansas, 66636-0001, a mutual holding company organized
under the laws of Kansas.

As of December 31, 1999, the following entities owned, of record and
beneficially unless otherwise indicated, 5% or more of a class of a Fund's
outstanding securities:

- --------------------------------------------------------------------------------
CLASS PERCENTAGE
NAME OF STOCKHOLDER FUND OWNED OWNED OWNED
- --------------------------------------------------------------------------------
SBL Ultra Class A 8.0
Value Class A 34.6
Small Company Class A 7.7
Enhanced Index Class A 40.4
Enhanced Index Class B 33.7
Enhanced Index Class C 62.3
International Class A 54.4
International* Class A 17.0
International Class B 75.8
International Class C 62.0
Growth & Income* Class A 8.1
- --------------------------------------------------------------------------------
Thomas & Egenhoefer, Inc.
Profit Sharing Plan Small Company Class B 7.4
- --------------------------------------------------------------------------------
Charles R Murray Small Company Class B 7.9
- --------------------------------------------------------------------------------
James and Carol Sherman Enhanced Index Class B 5.5
- --------------------------------------------------------------------------------
Arthur Odabashian Value Class B 5.8
- --------------------------------------------------------------------------------
Eugene L Cantor International Class B 6.4
- --------------------------------------------------------------------------------
Thomas G. Rasmussen Ultra Class C 17.4
- --------------------------------------------------------------------------------
Larry Rasmussen Ultra Class C 17.0
- --------------------------------------------------------------------------------
Judith E. Parks Ultra Class C 5.0
- --------------------------------------------------------------------------------
Joni C Kimsey Ultra Class C 8.2
- --------------------------------------------------------------------------------
David A Denherd Ultra Class C 29.0
- --------------------------------------------------------------------------------
Nancy A Tewes Ultra Class C 5.6
- --------------------------------------------------------------------------------
Anker Industries, Inc. Equity Class C 18.0
- --------------------------------------------------------------------------------
Richard E. and Michele Antonelli Equity Class C 8.5
- --------------------------------------------------------------------------------
Donaldson, Lufkin Jenrette
Securities Corporation Equity Class C 5.4
- --------------------------------------------------------------------------------
First Albany Corporation Growth & Income Class C 23.9
- --------------------------------------------------------------------------------
Daniel L Brown Growth & Income Class C 5.9
- --------------------------------------------------------------------------------
Pat McCreless Growth & Income Class C 14.9
- --------------------------------------------------------------------------------
Judith E. Parks Growth & Income Class C 7.1
- --------------------------------------------------------------------------------
David A Denherd Growth & Income Class C 13.2
- --------------------------------------------------------------------------------
Diane L Thiessen Global Class C 5.1
- --------------------------------------------------------------------------------
Thomas G. Rasmussen Global Class C 22.3
- --------------------------------------------------------------------------------
Larry Rasmussen Global Class C 22.2
- --------------------------------------------------------------------------------
Eric D Nessel Global Class C 10.8
- --------------------------------------------------------------------------------
David A Denherd Global Class C 18.8
- --------------------------------------------------------------------------------
Bruce M McCallum Small Company Class C 5.1
- --------------------------------------------------------------------------------
William G Timko Small Company Class C 5.6
- --------------------------------------------------------------------------------
Norma J Plonkey Small Company Class C 14.0
- --------------------------------------------------------------------------------
Roy Derminer Small Company Class C 10.4
- --------------------------------------------------------------------------------
David A Denherd Small Company Class C 13.4
- --------------------------------------------------------------------------------
Mercedarian Missionaries Vera-Cruz Social Class C 31.9
- --------------------------------------------------------------------------------
Donaldson Lufkin Jenrette
Securities Corporation Social Class C 7.8
- --------------------------------------------------------------------------------
Richard Eisner and Joan Pollak Social Class C 5.3
- --------------------------------------------------------------------------------
Sisters of St. Francis Ministry Fund Social Class A 27.2
- --------------------------------------------------------------------------------
Robert F Masson Value Class C 5.2
- --------------------------------------------------------------------------------
Norma J Plonkey Value Class C 13.2
- --------------------------------------------------------------------------------
*owned of record only
- --------------------------------------------------------------------------------

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 43.) 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 of 1% 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.

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 PERCENTAGE OF PERCENTAGE
AMOUNT OF PURCHASE OF OFFERING NET AMOUNT REALLOWABLE
AT OFFERING PRICE 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
28, 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. Swickard,
Milberger, Petersen, Schier, Ms. Harwood, Ms. Lee and Ms. Shields (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 Fund 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 .75% of the value of each share sold, and for each
year thereafter, quarterly, in an amount equal to .75% 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 Fund and (2) a service fee 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 Fund.

Rules of the 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 and Class C
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 43.)

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 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 in the
accompanying table.

----------------------------------------------------------------
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.

PURCHASES FOR EMPLOYER-SPONSORED RETIREMENT PLANS -- Security Financial
Resources, Inc., an affiliated company of the Distributor, offers plan
recordkeeping services on a fee basis to employer-sponsored retirement plans.
Employer-sponsored retirement plans that have entered into an agreement to
receive such services from Security Financial Resources, Inc. may purchase Class
A shares of the Funds at net asset value under certain circumstances. Such plans
would first purchase Class C shares of the Funds for an initial period of time
that would vary with the size of the plan, amount of assets flowing into the
plan and level of service provided by the dealer. After that initial period of
time has elapsed, the plan would exchange at net asset value existing Class C
shares for Class A shares of the respective funds, and new purchases under the
plans would be made in Class A shares at net asset value.

The schedule below sets forth the amount of time that retirement plan assets
would remain invested in Class C shares before they would be eligible for
exchange to Class A shares of the respective Funds. The schedule below also sets
forth the commissions paid to dealers in connection with sales of Fund shares
with respect to such retirement plans, which commissions replace those normally
paid in connection with sales of Class C shares.

- --------------------------------------------------------------------------------
COMMISSION BY
NUMBER OF YEARS YEAR OF PURCHASE*
INVESTED IN -----------------------
ELIGIBLE PLANS CLASS C SHARES 1 2 3 4 5+
- --------------------------------------------------------------------------------
Less than $1.5 mil.
in assets or $400,000 in flow 8 years 5% 4% 3% 2% 1%
- --------------------------------------------------------------------------------
Less than $1.5 mil.
in assets or $400,000 in flow 8 years 6% 4% 2% 1% 1%
- --------------------------------------------------------------------------------
Less than $5 mil. in
assets or $1 mil. in flow 6 years 4% 3% 2% 1% 1%
- --------------------------------------------------------------------------------
Less than $5 mil. in
assets or $1 mil. in flow 5 years 3% 2% 1% 1% 1%
- --------------------------------------------------------------------------------
Less than $10 mil. in
assets or $2 mil. in flow 3 years 2% 1% 1% 1% 1%
- --------------------------------------------------------------------------------
Less than $10 mil. in
assets or $2 mil. in flow 0 years** 1%+ 1% 1% 1% 1%
- --------------------------------------------------------------------------------
*The commission is a percentage of the amount invested. The year of purchase is
measured from the date of the plan's initial investment in the Funds.
Notwithstanding the foregoing schedule, if 50% or more of the plan assets
allocated to the Funds is redeemed within the four-year period beginning on
the date of the plan's initial investment in the Funds, the commission will
immediately drop to 1% for all subsequent purchases.

**Amounts will be invested in Class A shares at net asset value.

+Certain dealers may receive 1.25% in year 1.
- --------------------------------------------------------------------------------

In addition to the commissions set forth above, dealers will receive a service
fee payable beginning in the 13th month following the plan's initial investment.
The Distributor pays service fees quarterly, in an amount equal to 0.25%
annually of the average daily net asset value of Class C shares sold by dealers
in connection with such employer-sponsored retirement plans and remaining
outstanding on the books of the Funds.

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 41.

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

The Investment Manager, located at 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 and
incorporated under the laws of Kansas, is controlled by Security Benefit Corp.
("SBC"). SBC is wholly-owned by Security Benefit Mutual Holding Company, which
is in turn controlled by Security Benefit Life policyholders. Security Benefit
Life together with its subsidiaries, has over $9.8 billion of assets under
management.

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 Fund's
Board of Directors on November 30, 1999 and were approved by the shareholders of
the Funds on January 26, 2000, and which became effective on January 27, 2000.
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
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, Series
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 operated as an investment advisor
since 1960. In addition, Oppenheimer and its subsidiaries and affiliates
currently manage investment companies with assets of more than $112 billion, and
more than 5 million shareholder accounts.

The Investment Manager has engaged Strong, 100 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, 1999,
manages over $35 billion in assets.

The Investment Manager has retained Bankers Trust , 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.

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 Total Return, 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 Total
Return, 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.

Total Return, 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. Total Return, 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. Total Return, 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 Total Return, 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 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 advisory fee for Enhanced Index, Total Return 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, Total Return, 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 Total Return,
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, 1999, 1998 and 1997 the Funds paid
the following amounts to the Investment Manager for its services:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INVESTMENT ADMINISTRATIVE TRANSFER AGENCY
ADVISORY ADVISORY FEES SERVICE FEES SERVICE FEES
FEES PAID TO WAIVED BY PAID TO PAID TO TOTAL EXPENSE RATIO
INVESTMENT INVESTMENT INVESTMENT INVESTMENT -------------------------------
FUND YEAR MANAGER MANAGER MANAGER MANAGER CLASS A CLASS B CLASS C(6)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and 1999 $1,101,276 $ 0 $ 0 $ 0 1.22% 2.22% 2.22%
Income Fund 1998 1,168,375 0 0 0 1.21% 2.21%
1997 1,024,369 0 0 0 --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
1999 11,048,439 0 0 0 1.02% 2.02% 2.02%
Equity Fund 1998 9,261,209 0 0 0 1.02% 2.02%
1997 7,375,751 0 0 0 --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
1999 835,806 0 0 0 2.00% 3.00% 3.00%
Global Fund 1998 670,488 0 0 0 2.00% 3.00%
1997 642,585 0 0 0 --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
1999(1) 67,956 0 49,157 10,768 2.00% 2.94% 2.93%
Total Return Fund 1998 72,662 36,703 63,270 12,372 2.00% 2.94%
1997 62,322 45,581 53,010 7,611 --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
1999 189,229 0 16,807 29,225 1.42% 2.51% 2.66%
Social Awareness Fund 1998 120,016 34,388 10,801 14,440 1.22% 2.20%
1997(2) 0 50,880 4,579 3,925 --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
1999 258,906 0 23,301 31,436 1.33% 2.37% 2.38%
Value Fund 1998 144,005 35,151 19,523 12,984 1.27% 2.33%
1997(3) 0 17,003 1,530 1,345 --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
Small Company Fund 1999 0 114,419 9,398 9,645 0.49% 1.94% 1.47%
1998(4) 0 33,554 3,020 4,672 1.39% 2.38%
- ---------------------------------------------------------------------------------------------------------------------------------
Enhanced Index Fund 1999(5) 82,418 0 9,890 4,312 1.48% 2.20% 2.05%
- ---------------------------------------------------------------------------------------------------------------------------------
International Fund 1999(5) 44,906 0 21,837 1,425 2.50% 3.19% 2.78%
- ---------------------------------------------------------------------------------------------------------------------------------
Select 25 Fund 1999(5) 95,115 0 11,414 16,830 1.48% 2.19% 2.07%
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1,137,409 0 0 0 1.21% 2.21% 2.21%
Ultra Fund 1998 1,068,177 0 0 0 1.23% 2.23%
1997 985,285 0 0 0 --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
1 For the fiscal years ended September 30, 1998 and 1999, the Investment
Manager reimbursed the Total Return Fund $21,941 and $20,929, respectively,
of the Fund's administrative and transfer agency fees.
2 Social Awareness Fund's figures are based on the period November 1 , 1996 (date of inception) to September 30, 1997.
3 Value Fund's figures are based on the period May 1, 1997 (date of inception) to September 30, 1997.
4 Small Company Fund's figures are based on the period October 15, 1997 (date of inception) to September 30, 1998.
Percentage amounts for the period have been annualized.
5 Enhanced Index, International and Select 25 Fund's figures are based on the
period January 29, 1999 (date of inception) to September 30, 1999.
Percentage amounts for the period have been annualized.
6 Class C shares were initially offered for sale on January 29, 1999. Percentage amounts for the period have been
annualized.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

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
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
Amy J. Lee Secretary Secretary
Brenda M. Harwood Treasurer Assistant Vice President and Treasurer
Cindy L. Shields Vice President (Equity Fund only) Second Vice President and Portfolio Manager
Christopher D. Swickard Assistant Secretary Assistant Secretary
James P. Schier Vice President (Equity Fund and Ultra Fund only) Second Vice President and Portfolio Manager
Larry L. Valencia Not Applicable Senior Research Analyst and Assistant Vice President
Frank Whitsell Not Applicable Research Analyst
Jonn Wullschleger Not Applicable Senior Research Analyst
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

PORTFOLIO MANAGEMENT--

DEAN S. BARR, Managing Director and Head of Global Quantitative Index
Strategies, has been co-manager of Enhanced Index Fund since he joined Bankers
Trust in September 1999. Prior to joining Bankers Trust, he was Chief Investment
Officer of Active Quantitative Strategies at State Street Global Advisors. He
has a bachelor's degree from Cornell University and an MBA in finance from New
York University Graduate School of Business.

MANISH KESHIVE, Vice President of Bankers Trust, has been co-manager of Enhanced
Index Fund since September 1999. He joined Bankers Trust in 1996. Prior to
joining Bankers Trust, he was a student earning a B.S. degree in Technology from
the Indian Institute of Technology in 1993 and an M.S. degree from the
Massachusetts Institute of Technology in 1995.

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 28 years of business experience, of which
18 years have been in the investment industry.

TERRY A. MILBERGER, Senior Portfolio Manager of the Investment Manager, has
managed Equity Fund since 1981. He has been the lead manager of Select 25 Fund
since its inception in January 1999 and of Total Return 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.

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
30 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 16 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 each has
adopted a written code of ethics (the "Code of Ethics") which governs the
personal securities transactions of "access persons" of the Funds. Access
persons may invest in securities, including securities that may be purchased or
held by the Funds; provided that they obtain prior clearance before engaging in
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 has adopted its own code of ethics to which
the personal securities transactions of its portfolio managers and other access
persons are subject. The Code of Ethics is on public file with the Securities
Exchange Commission and is available from the Commission.

DISTRIBUTOR

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, Total Return 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, 1998 and 1999, 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 COMMISSIONS NET UNDERWRITING COMMISSIONS COMPENSATION ON REDEMPTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 1997 1998 1999 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and Income Fund .. $ 62,437 $ 161,083 $ 63,182 $ 6,497 $ 11,930 $ 10,480 $ 1,741 $ 12,982 $ 20,267
Equity Fund ............. 799,937 1,586,589 1,361,567 21,344 137,516 160,666 31,015 123,648 162,305
Ultra Fund .............. 34,612 51,626 52,603 5,388 3,908 7,112 20,208 19,376 4,914
Global Fund ............. 29,789 16,810 28,694 2,930 66 3,301 13,291 24,076 17,455
Total Return Fund ....... 28,996 14,300 6,452 3,114 728 1,156 1,692 7,197 2,420
Social Awareness Fund ... 61,945(1) 73,830 353,066 7,639(1) 4,310 193,400 267(1) 4,833 7,142
Value Fund .............. 74,602(2) 176,512 73,459 2,015(2) 4,530 8,929 2(2) 5,438 26,386
Small Company Fund ...... --- 29,790(3) 10,311 --- 28(3) 266 --- 2,250(3) 1,025
Enhanced Index Fund(4) .. --- --- 103,177 --- --- 2,153 --- --- 3,015
International Fund(4) ... --- --- 16,430 --- --- 1,422 --- --- 50
Select 25(4) ............ --- --- 346,485 --- --- 7,112 --- --- 11,783
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1 For the period November 1 , 1996 (date of inception) to September 30, 1997.
2 For the period May 1, 1997 (date of inception) to September 30, 1997.
3 For the period October 15, 1997 (date of inception) to September 30, 1998.
4 For the period January 28, 1999 (date of inception) to September 30, 1999.
</FN>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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 Enhanced Index Fund and
International Fund 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
FUND BROKERAGE COMMISSIONS PAID TO BROKER-DEALERS
FUND TOTAL COMMISSIONS WHO ALSO PERFORMED SERVICES
BROKERAGE PAID TO SECURITY ----------------------------------
COMMISSIONS DISTRIBUTORS, INC., BROKERAGE
FUND YEAR PAID THE UNDERWRITER TRANSACTIONS COMMISSIONS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Security Growth 1999 $ 283,962 $0 $ 52,804,552 $ 95,172
and Income Fund 1998 332,718 0 68,503,622 105,204
1997 251,945 0 26,335,380 40,539
- --------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 1,061,580 0 242,335,957 371,592
Equity Fund 1998 1,099,219 0 263,017,019 359,314
1997 1,111,928 0 234,139,342 301,670
- --------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 205,358 0 19,042,698 41,461
Global Fund 1998 218,464 0 21,465,232 59,626
1997 270,065 0 14,817,527 39,165
- --------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 25,284 0 15,281,864 25,284
Total Return Fund 1998 9,871 0 3,474,334 7,670
1997 18,571 0 6,075,844 15,313
- --------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 18,988 0 5,210,696 7,612
Social Awareness Fund 1998 10,661 0 1,418,953 1,722
1997(1) 12,365 0 6,419,564 8,327
- --------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 128,100 0 6,287,986 18,084
Value Fund 1998 64,157 0 8,264,311 14,947
1997(2) 15,192 0 3,606,587 7,392
- --------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999 74,858 0 0 0
Small Company Fund 1998(3) 22,215 0 3,087,031 6,947
- --------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999(4) 15,495 0 0 0
Enhanced Index Fund
- --------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999(4) 43,773 0 0 0
International Fund
- --------------------------------------------------------------------------------------------------------------
Security Equity Fund - 1999(4) 27,042 0 26,372,448 27,042
Select 25
- --------------------------------------------------------------------------------------------------------------
Security Ultra Fund 1999 150,072 0 14,817,087 41,430
1998 268,722 0 39,308,363 69,536
1997 83,841 0 22,060,304 41,217
- --------------------------------------------------------------------------------------------------------------
<FN>
1 Social Awareness Fund's figures are based on the period November 1 , 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.
4 Enhanced Index, International and Select 25 Funds' figures are based on the period January 29, 1999 (date
of inception) to September 30, 1999.
</FN>
- --------------------------------------------------------------------------------------------------------------
</TABLE>

BROKERAGE ENHANCEMENT PLAN

The Boards of Directors of the Funds, including all of the Directors who are not
"interested persons" (as defined in the Investment Company Act of 1940) of the
Funds, the Investment Manager the Distributor (referred to as the "Independent
Directors"), and each Fund's (or Series thereof, as applicable), shareholders
have voted pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 to adopt a Brokerage Enhancement Plan (the "Plan") for the purpose
of utilizing the Funds' brokerage commissions, to the extent available, to
promote the sale and distribution of the Funds' shares.

Under the Plan, the Distributor, on behalf of the Funds is authorized to direct
the Investment Manager or a Sub-adviser to effect brokerage transactions in
portfolio securities through certain broker-dealers, consistent with the
obligation to achieve best price and execution. These broker-dealers have agreed
either (i) to pay a portion of their commission from the purchase and sale of
securities to the Distributor or other introducing brokers ("Brokerage
Payments") that provide distribution activities, or (ii) or to provide brokerage
credits, benefits or other services ("Brokerage Credits") to be used for
distribution activities in addition to the execution of the trade. The
Distributor will use a part of the Brokerage Payments to defray legal and
administrative costs associated with implementation of the Plan. These expenses
are expected to be minimal. The remainder of the Brokerage Payments or Brokerage
Credits generated will be used by the Distributor to finance activities
principally intended to result in the sale of the Funds' shares. These
activities will include, but are not limited to:

* holding or participating in seminars and sales meetings promoting the sale of
the Funds' shares

* paying marketing fees requested by broker-dealers who sell the Funds

* training sales personnel

* creating and mailing advertising and sales literature

* financing any other activity that is intended to result in the sale of the
Funds' shares.

The Distributor is obligated to use all amounts generated under the Plan for
distribution expenses, except for a small amount to be used to defray the
incidental costs associated with implementation of the Plan. The Plan may
indirectly benefit the Distributor in that amounts expended under the Plan may
help defray, in whole or in part, distribution expenses that otherwise might be
borne by the Distributor or an affiliate.

The Plan provides (i) that it will be subject to annual approval by the
Directors and the Independent Directors; (ii) that the Distributor must provide
the Directors a quarterly written report of payments made under the Plan and the
purpose of the payments; and (iii) that the Plan may be terminated at any time
by the vote of a majority of the Independent Directors. The Plan may not be
amended to increase materially the amount to be spent for distribution without
shareholder approval, and all material Plan amendments must be approved by a
vote of the Independent Directors. In addition, the selection and nomination of
the Independent Directors must be committed to the Independent Directors.

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.

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 62.)

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 53.

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, 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 53.)

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 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. 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 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 was 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 Code.

Each Series 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 through 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 Funds, Equity Fund, Global Fund, Total
Return 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's 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 55, 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, Total Return 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,
Select 25 Fund, Total Return Fund and Ultra Fund. Chase Manhattan Bank, 4 Chase
MetroTech Center, Brooklyn, New York 11245 acts as custodian for the portfolio
securities of Global, Total Return 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, 1999 the average annual
total return for each Fund was the following:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
---------------------------------- ----------------------------- -----------------------------
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>
Growth and Income Fund .... 5.54% 5.93% 2.49%(7) 13.74% 13.67% --- 9.37% 10.02%(1) ---
Equity Fund ............... 13.73% 14.23% (3.44)%(7) 20.81% 20.85% --- 14.88% 17.37%(1) ---
Global Fund ............... 26.61% 28.04% 8.62%(7) 11.03% 10.96% --- 10.58%(2) 10.76%(1) ---
Ultra Fund ................ 42.18% 44.39% 10.10%(7) 16.26% 16.24% --- 9.70% 12.54%(1) ---
Total Return Fund ......... 11.11% 11.68% (0.13)%(7) 8.47%(3) 8.58%(3) --- --- --- ---
Social Awareness Fund ..... 18.88% 19.81% (3.43)%(7) 15.90%(4) 16.27%(3) --- --- --- ---
Value Fund ................ 30.08% 31.71% 12.55%(7) 21.83%(5) 22.69%(5) --- --- --- ---
Small Company Fund ........ 40.63% 42.05% 14.23%(7) 10.86%(6) 11.08%(6) --- --- --- ---
Enhanced Index Fund ....... (5.37)%(7) (5.10)%(7) (1.00)%(7) --- --- --- --- --- ---
International Fund ........ (8.67)%(7) (8.33)%(7) (4.17)%(7) --- --- --- --- --- ---
Select 25 Fund ............ (0.75)%(7) 0.20%(7) 4.50%(7) --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1 From October 19, 1993 (date of inception) to September 30, 1999
2 From October 1 , 1993 (date of inception) to September 30, 1999
3 From June 1, 1995 (date of inception) to September 30, 1999
4 From November 1 , 1996 (date of inception) to September 30, 1999
5 From May 1, 1997 (date of inception) to September 30, 1999
6 From October 15, 1997 (date of inception) to September 30, 1999
7 From January 29, 1999 (date of inception) to September 30, 1999, percentage amounts are not annualized
</FN>
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

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 for each Fund calculated as
described above was as indicated in the accompanying table. Unless otherwise
noted, the total return numbers are for the ten-year period ended September 30,
1999.

------------------------------------------------------------------------
CLASS A CLASS B CLASS C
------------------------------------------------------------------------
Growth and Income Fund .... 144.95%(1) 76.50%(2) 2.49%(8)
Equity Fund ............... 300.39%(1) 159.41%(2) (3.44)%(8)
Global Fund ............... 82.87%(3) 83.67%(2) 8.62%(8)
Ultra Fund ................ 152.49%(1) 101.99%(2) 10.10%(8)
Total Return Fund ......... 42.25%(4) 42.89%(4) (0.13)%(8)
Social Awareness Fund ..... 53.76%(5) 55.18%(5) (3.43)%(8)
Value Fund ................ 61.25%(6) 66.99%(6) 12.55%(8)
Small Company Fund ........ 22.41%(7) 22.90%(7) 14.23%(8)
Enhanced Index Fund ....... (5.37)%(8) (5.10)%(8) (0.90)%(8)
International Fund ........ (8.67)%(8) (8.33)%(8) (4.17)%(8)
Select 25 Fund ............ (0.75)%(8) 0.20%(8) 4.50%(8)
------------------------------------------------------------------------
1 From September 30, 1989
2 From October 19, 1993
3 From October 1, 1993
4 From June 1, 1995
5 From November 1 , 1996 (date of inception)
6 From May 1, 1997 (date of inception)
7 From October 15, 1997 (date of inception)
8 From January 29, 1999 (date of inception)
------------------------------------------------------------------------

These figures reflect deduction of the maximum sales load. Fee waivers for the
Total Return, 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, Education 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 "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
1999 is affected, $31,000, will increase annually to $50,000 in the year 2005.
The adjusted gross income level at which the deduction for 1999 for a married
taxpayer (who does not file a separate return) is affected, $51,000, 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 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, 1999 Annual Report are incorporated herein by reference. Copies of
the Annual 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
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REDUCED SALES CHARGES

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
Municipal Bond 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 Municipal Bond 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 Municipal Bond 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.