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<PAGE> 1
Dear Contract Owner:
Fixed income has become fashionable. For most of the year, investors plowed
money into bonds and money market securities at a near record pace. Investors
recognizing the powerful fundamentals for bonds, and searching for stability in
a world that appears to be unsettled have driven bond yields to record lows.
Stocks rose strongly during the past six months, propelled by the now familiar
mix of solid economic growth, low inflation, and stable interest rates.
Investors generally ignored slower corporate earnings growth and the Asian
crisis, although there was significant volatility during the past three months.
Nevertheless, slowing earnings growth and trouble overseas could be important
issues for stocks during the months ahead.
I encourage you to review the following report covering the past six months and
to contact us if you have any questions.
Respectfully submitted,
/s/ RICHARD C. PEARSON
-----------------------------------------
Richard C. Pearson
President
[LOGO]
<PAGE> 2
SECURITY FIRST TRUST:
T. ROWE PRICE GROWTH
AND INCOME SERIES AND
EQUITY SERIES
EQUITY MARKET OVERVIEW
Virtually all the economic fundamentals progressed in the right direction,
and investors responded enthusiastically. As a result, stock valuations are
historically high, which has made us a bit cautious. We believe the market could
become more volatile and vulnerable to a correction when the underlying
fundamentals finally change. The economy has begun to slow from its recent pace,
and profit gains were modest during the first two quarters of 1998. We are
somewhat surprised that these events have not had a more adverse impact on
general stock prices. Some stock market sectors continued to surge, while others
more sensitive to an economic slowdown suffered. As a result, a select group of
stocks were bid up to higher levels, but a broader group of industries
struggled. The biggest gains were posted by a handful of S&P 500 stocks whose
valuations are far higher than we would consider buying for a conservative fund
such as this.
EQUITY MARKET OUTLOOK
The current market environment remains difficult for a yield-oriented,
value approach to investing. Although this is frustrating in the short run, we
remain confident that sticking to our valuation discipline will prove rewarding
over the long term. In addition, the portfolios' emphasis on undervalued stocks
with relatively high dividends should cushion their performance in the event of
a broad stock market decline.
PORTFOLIO MANAGEMENT: T. ROWE
PRICE GROWTH AND INCOME SERIES
The major changes during the past few months were in stocks added to the
portfolio. Many of the largest purchases were new investments, including Amerada
Hess, Norfolk Southern, and Browning-Ferris. Our recycling process with fund
holdings is a vital component of our value-oriented investment approach, the
focus of which is to keep enhancing the yield and the relative valuation profile
of fund holdings.
GROWTH AND INCOME SERIES
SECTOR DIVERSIFICATION
<TABLE>
<S> <C>
Capital Equipment.................... 5.2%
Consumer Non-Durables................20.0%
Consumer Cyclicals................... 1.0%
Consumer Services....................13.5%
Transportation....................... 6.1%
Energy...............................10.1%
Financial ...........................14.0%
Process Industries ..................10.0%
Technology .......................... 3.4%
Utilities ........................... 6.5%
Short-Term Securities ...............10.2%
</TABLE>
Other major holdings in the portfolio at the end of July were Travelers
Group, General Electric, Norfolk Southern, American Express, Johnson & Johnson,
and Eastman Kodak. These are all fine companies whose share prices, for one
reason or another, were selling at low prices when we bought them compared with
many leading growth stocks. Fund assets were most heavily committed to the
consumer nondurables, financial, and energy sectors.
We believe that, over time, this approach will result in attractive returns
and lower overall volatility. The fund's emphasis on stocks that are temporarily
out of favor with investors results in lower volatility than that of the S&P
500, with attractive returns over the long term.
1
<PAGE> 3
GROWTH & INCOME SERIES
15 LARGEST HOLDINGS
<TABLE>
<CAPTION>
Percentage of
Security Portfolio
- -------- -------------
<S> <C>
Travelers Group, Inc. 2.6
General Electric Co. 1.6
Philip Morris Companies, Inc. 1.5
Dayton Hudson Corp. 1.5
Norfolk Southern Corp. 1.5
Amoco Corp. 1.4
Motorola, Inc. 1.4
Hewlett-Packard Co. 1.4
Schering-Plough Corp. 1.3
American Express Co. 1.3
St. Paul Companies, Inc. 1.3
Fortune Brands, Inc. 1.3
Browning Ferris, Inc. 1.2
Johnson & Johnson 1.2
Toys R Us, Inc. 1.2
----
TOTAL 21.7
====
</TABLE>
PORTFOLIO MANAGEMENT: EQUITY SERIES
BlackRock assumed the sub-advisory responsibilities of the Equity Series on
March 27, 1998 and proceeded to restructure the fund to more accurately reflect
the sector weightings of the S&P 500. Our strategy going forward is to remain
relatively sector neutral with the S&P 500, while focusing on security selection
within each sector and staying fully invested. Cash balances in the Fund have
been reduced to a 1.0-1.5% range. We will remain focused on companies that we
believe have solid earnings growth prospects but are undervalued by the market.
The repositioning of the portfolio is complete. The portfolio is currently
positioned with a slight over-weighting in the financial, transportation and
energy sectors versus the S&P 500.
EQUITY SERIES
SECTOR DIVERSIFICATION
<TABLE>
<S> <C>
Utilities ........................... 8.5%
Consumer Non-Durables................22.6%
Transportation....................... 3.2%
Technology ..........................13.8%
Consumer Cyclicals................... 2.5%
Financial ...........................19.5%
Capital Equipment.................... 8.1%
Consumer Services.................... 8.4%
Energy............................... 8.5%
Process Industries .................. 4.9%
</TABLE>
EQUITY SERIES
15 LARGEST HOLDINGS
<TABLE>
<CAPTION>
Percentage of
Security Portfolio
- -------- -------------
<S> <C>
General Electric Co. 3.4
Exxon Corp. 3.3
Microsoft Corp. 3.3
Merck & Co. 2.4
Coca Cola 2.3
IBM 2.0
American Home Products Co. 1.9
Phillip Morris Companies, Inc. 1.9
Chase Manhattan Corp. 1.8
Intel Corp. 1.8
Lucent Technologies, Inc. 1.8
SBC Communications, Inc. 1.7
Pfizer, Inc. 1.6
American International Group 1.6
Royal Dutch Petroleum Co. ADR 1.6
----
TOTAL 32.4
====
</TABLE>
2
<PAGE> 4
SECURITY FIRST TRUST:
BOND SERIES AND U.S.
GOVERNMENT INCOME SERIES
FIXED-INCOME MARKET OVERVIEW
The Asian crisis resumed center stage during the second quarter as Japan
joined the list of economies with significant negative growth and limited
prospects of an imminent turnaround. The U.S. economy, as measured by GDP,
exhibited substantially slower growth in the second quarter due to the
detraction from trade and inventories. It should be noted, however, that
domestic final sales (inclusive of imports but net of inventory growth) exhibit
lasting strength, consumer fundamentals are still strong and, despite a decline
in profit growth, business fixed investment is unlikely to collapse.
The trend in the Treasury market in the second quarter was towards lower
rates and a flatter yield curve. The longer maturity Treasuries outperformed the
short and intermediate sectors, as Asia-induced global price disinflation became
more evident. Signs of price disinflation kept the Fed on hold for yet another
quarter maintaining the Federal funds rate at 5.5%. The Treasury is now faced
with the prospect of a potential budget surplus that would further reduce the
need to issue debt. A massive issuance calendar added to the fundamental
pressure on the mortgage sector of the market. Net issuance in mortgage
securities reached all time record levels during the second quarter posting an
annualized rate of $200 billion, more than twice that of 1997. The move to lower
than 7% mortgage rates proved damaging to the performance of mortgage
securities, as investors feared rapid prepayments.
FIXED-INCOME MARKET OUTLOOK
Looking forward, we believe that the global backdrop and a strong dollar
support a positive strategic bias toward the fixed income markets. While a
strong rally is not imminent, the risks are more in favor of an upside breakout
than significant weakness. Within the fixed income sector, we believe that
mortgage-backed securities can recapture some of their recent underperformance
relative to Treasuries. We are maintaining our current exposure to
low-prepayment risk mortgage-backed securities. The fundamentals for U.S.
Treasuries continue to look positive in this environment. In addition, we feel
that the shift in Fed policy coupled with the increase in price disinflation
will shift market sentiment to an easing position on monetary policy.
PORTFOLIO MANAGEMENT:
BOND SERIES
We have made some significant changes to the Bond series portfolio in the
last twelve months. We have had a dramatic bull market in fixed income, most
pronounced in the Treasury market, as it had become apparent to investors that
the Treasury, with its fiscal house in order, would not need to tap the market
for significant new financings. We held a 43% position in Treasuries one year
ago, when Treasury prices were depressed. We have used this dramatic rally in
Treasuries to pare back our position to 17%, as it appears to us that Treasuries
are now overvalued and overowned.
The second dramatic move we made was to go from a 27% Federal Agency
position to 49%. One year ago, Agency spreads were barely 10-15 basis points
above Treasuries, and offered limited value, in
BOND SERIES
SECTOR DIVERSIFICATION
<TABLE>
<S> <C>
Short-Term Securities................ 5.0%
Corporate Bonds......................27.3%
Foreign Governments.................. 2.3%
Federal Agencies.....................48.9%
U.S. Government Obligations..........16.5%
</TABLE>
3
<PAGE> 5
our opinion. Currently, Agency spreads because of significant supply, have
widened to 40 basis points above Treasuries, which now makes them, in our
opinion, ripe for purchase.
The third shift in the fund is our decision to include a 4% position in
commercial mortgages in the portfolio. These securities offer significant income
(about 80 basis points over Treasuries), very little prepayment risk, and are
backed up by solid commercial mortgages.
Finally, we have made a significant yield curve adjustment during the last
year. One year ago we had 67% of your portfolio in bonds longer than 5 years; we
currently have only 49%. We believe that on a risk-adjusted basis, very long
bonds, in a flat curve such as ours, do not provide enough yield cushion and
therefore we have sharply curtailed our longer bond holdings.
The overall credit quality of the fund is AA+. Current yield is 6.8% and
the duration of the portfolio is currently a shade over four years.
PORTFOLIO MANAGEMENT:
U.S. GOVERNMENT
INCOME SERIES
BlackRock assumed the role as sub-advisor for the U.S. Government Income
Series on March 27, 1998 and began restructuring it to reflect our management
style. We emphasize a controlled duration (interest rate sensitive) approach to
managing money, which includes active sector rotation and security selection.
During the restructuring period, we reduced Treasury and Agency exposure in the
Portfolio to roughly 50% and increased the duration of the Portfolio to more
accurately reflect the composition of the Lehman Intermediate Government Index.
In addition, we increased the mortgage pass-through allocation and diversified
the mortgage holdings of the Portfolio. The Portfolio ended July with a slightly
longer duration of 3.1 versus the benchmark duration of 3.0, reflecting our
positive outlook for the fixed income markets.
U.S. GOVERNMENT INCOME SERIES
SECTOR DIVERSIFICATION
<TABLE>
<S> <C>
U.S. Government Obligations..........26.6%
Federal Agencies.....................67.3%
Corporate Bonds...................... 6.1%
</TABLE>
4
<PAGE> 6
PERFORMANCE OF SECURITY FIRST TRUST
GROWTH AND INCOME SERIES, BOND
SERIES, EQUITY SERIES AND U.S.
GOVERNMENT INCOME SERIES
The following are the average annual and total returns for each series for
the period ending July 31, 1998, assuming an investment of $10,000 at the start
of the period, and redemption at the end of the period, with dividends
reinvested. These returns are based on past experience. Future values of shares
will fluctuate so that their redemption values may be more or less than original
cost.
<TABLE>
<CAPTION>
Average Annual Total Returns
- ---------------------------------------------------------------
Fund 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth and
Income 9.98% 22.76% 18.70% 14.89%
Series(1)(2)
- ---------------------------------------------------------------
Bond 7.77% 7.55% 6.05% 7.68%
Series(1)(2)
- ---------------------------------------------------------------
Equity 14.68% 22.79% 16.48% N/A*
Series(1)
- ---------------------------------------------------------------
U.S.
Government 6.25% 6.42% 4.97% N/A*
Income(1)
- ---------------------------------------------------------------
Consumer 1.69% 2.72% 2.47% 3.25%
Price Index
- ---------------------------------------------------------------
</TABLE>
* Funds were introduced as of May 1993.
<TABLE>
<CAPTION>
Compound Total Returns
- ---------------------------------------------------------------
Fund 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth and
Income 9.98% 85.01% 135.60% 300.93%
Series(1)(2)
- ---------------------------------------------------------------
Bond 7.77% 24.39% 34.15% 109.52%
Series(1)(2)
- ---------------------------------------------------------------
Equity 14.68% 85.12% 114.43% N/A*
Series(1)
- ---------------------------------------------------------------
U.S.
Government 6.25% 20.52% 27.42% N/A*
Income(1)
- ---------------------------------------------------------------
Consumer 1.69% 6.96% 12.99% 37.73%
Price Index
- ---------------------------------------------------------------
</TABLE>
* Funds were introduced as of May 1993.
(1) Return is computed after deduction of all series expenses, but before
deduction of actuarial risk charges and other fees of the variable annuity
account.
(2) From inception to July 1983, Security First Investment Management
Corporation reimbursed the Growth and Income Series for expenses in excess of
the maximum expense limitation, and these reimbursements were repaid from August
1983 to July 1986. Likewise, the Bond Series was reimbursed for excess expenses
from inception to July 1985, and these reimbursements were repaid from August
1985 to July 1993. Reimbursement of expenses to a series increases average
annual reimbursements reduces these returns.
5
<PAGE> 7
The following graphs set forth the historical performance of each series as
compared to a stated market index for the periods ended July 31:
Comparison of Change in Value of $10,000 Investment in Security First Trust
T. Rowe Price Growth and Income Series and Standard and Poors 500 Index
Assuming Dividends and Distributions are Reinvested.
<TABLE>
<CAPTION>
Growth & Income Standard & Poors
Series 500 Index
<S> <C> <C>
1988.......................................... $10,000 $10,000
1989.......................................... 13,162 13,162
1990.......................................... 12,949 13,949
1991.......................................... 13,162 15,562
1992.......................................... 15,000 18,000
1993.......................................... 16,000 19,000
1994.......................................... 17,500 20,000
1995.......................................... 19,500 25,000
1996.......................................... 22,000 30,000
1997.......................................... 35,000 45,000
1998.......................................... $39,000 $54,000
</TABLE>
The performance indicated here may not be indicative of future performance.
Comparison of Change in Value of $10,000 Investment in Security First Trust
Equity Series and Standard and Poors 500 Index Assuming
Dividends and Distributions are Reinvested.
<TABLE>
<CAPTION>
Standard & Poors
Equity Series 500 Index
<S> <C> <C>
5/19/93....................................... $10,000 $10,000
1993.......................................... 10,000 10,256
1994.......................................... 10,040 10,785
1995.......................................... 12,000 14,014
1996.......................................... 12,500 15,615
1997.......................................... 18,000 24,500
1998.......................................... $22,000 $28,000
</TABLE>
The performance indicated here may not be indicative of future performance.
*The Series commenced operations on 5/19/93.
Comparison of Change in Value of $10,000 Investment in Security First Trust
Bond Series, Lehman Government Bonds Index, and the
Lehman Aggregate Bond Index Assuming Dividends and
Distributions are Reinvested.
<TABLE>
<CAPTION>
Growth & Income Lehman Government Lehman Aggregate
Bond Series Bond Index Bond Index
<S> <C> <C> <C>
1988.......................................... $10,000 $10,000 $10,000
1989.......................................... 10,380 10,476 10,546
1990.......................................... 11,000 11,230 11,472
1991.......................................... 12,000 12,230 12,472
1992.......................................... 13,500 13,900 14,300
1993.......................................... 15,500 16,250 17,000
1994.......................................... 15,000 15,800 16,600
1995.......................................... 17,000 17,900 18,900
1996.......................................... 17,200 18,100 19,100
1997.......................................... 20,000 21,000 22,000
1998.......................................... $21,000 $22,500 $24,000
</TABLE>
The performance indicated here may not be indicative of future performance.
Comparison of Change in Value of $10,000 Investment in Security First Trust
U.S. Government Income Series and Lehman Government and Intermediate Index
Assuming Dividends and Distributions are Reinvested.
<TABLE>
<CAPTION>
U.S. Government Lehman Government &
Income Series Intermediate Index
<S> <C> <C>
5/19/93....................................... $10,000 $10,000
1993.......................................... 10,140 10,140
1994.......................................... 9,977 10,229
1995.......................................... 10,732 11,084
1996.......................................... 11,190 11,661
1997.......................................... 12,000 12,500
1998.......................................... $12,800 $13,350
</TABLE>
The performance indicated here may not be indicative of future performance.
*The Series commenced operations on 5/19/93.
6
<PAGE> 8
SECURITY FIRST TRUST T. ROWE
PRICE GROWTH AND INCOME SERIES
The graph and Per Share Data Table below illustrate the growth in per share
value for the period ending July 31, 1998, of one share of the Security First
Trust T. Rowe Price Growth and Income Series purchased on August 1, 1979, at the
price of $5.07 assuming that dividends and capital gains were reinvested.
The results shown should not be considered a representation of the income
that may be earned by investing in the Series today. The value of variable
annuities funded by shares in this Series will be reduced by any actuarial risk
charges.
[GRAPH]
PER SHARE DATA
<TABLE>
<CAPTION>
Per Share
Value with Cumulative
Calendar Net Dividend Dividends & Change
Year Asset & Capital Capital Gains Yearly from
Ending Value Gains Reinvested Change 8/1/79
- -------- ----- --------- -------------- ------ ----------
<S> <C> <C> <C> <C> <C>
1981 $ 5.41 $1.69 $ 8.14 -1.3% +60.6%
1982 5.95 .41 9.73 +19.5 +93.9
1983 7.27 .28 12.45 +28.0 +145.6
1984 6.75 .51 12.48 +0.2 +146.1
1985 7.84 .30 15.11 +21.1 +198.1
1986 7.76 .59 16.07 +6.3 +216.9
1987 5.98 2.62 17.47 +8.8 +244.6
1988 6.97 .41 21.56 +23.4 +325.3
1989 7.52 1.09 26.64 +23.6 +425.4
1990 6.25 .44 23.70 -11.0 +367.5
1991 7.69 .24 30.07 +26.9 +493.1
1992 8.17 .22 32.80 +9.1 +546.9
1993 9.12 .22 37.49 +14.3 +639.4
1994 9.05 .32 38.51 +2.7 +659.6
1995 11.52 .34 50.49 +31.1 +895.8
1996 13.18 .83 61.42 +21.7 +1111.4
1997 15.52 1.25 78.12 +27.2 +1440.8
7/1998 16.56 -- 83.33 +6.7* +1543.6
</TABLE>
* for 7 months ending 7/31/98
SECURITY FIRST TRUST
BOND SERIES
The graph and Per Share Data Table below illustrate the growth in per share
value for the period ending July 31, 1998, of one share of the Security First
Trust Bond Series purchased on August 1, 1979, at a price of $3.12 assuming that
dividends and capital gains were reinvested.
The results shown should not be considered a representation of the income
that may be earned by investing in the Series today. The value of variable
annuities funded by shares in this Series will be reduced by any actuarial risk
charges.
[GRAPH]
PER SHARE DATA
<TABLE>
<CAPTION>
Per Share
Value with Cumulative
Calendar Net Dividend Dividends & Change
Year Asset & Capital Capital Gains Yearly from
Ending Value Gains Reinvested Change 8/1/79
- -------- ----- --------- ------------- ------ -----------
<S> <C> <C> <C> <C> <C>
1981 3.28 $ .36 $ 3.81 +22.9% +22.1%
1982 3.93 0.00 4.56 +19.8 +46.3
1983 3.79 .31 4.78 +4.7 +53.2
1984 3.87 .28 5.26 +10.1 +68.6
1985 4.15 .33 6.14 +16.8 +96.9
1986 4.38 .30 6.95 +13.2 +122.8
1987 3.83 .66 7.14 +2.8 +128.8
1988 3.77 .28 7.55 +5.7 +142.1
1989 3.89 .30 8.39 +11.1 +168.9
1990 3.52 .54 8.76 +4.4 +180.8
1991 3.79 .25 10.06 +14.8 +222.4
1992 3.80 .23 10.70 +6.4 +242.9
1993 3.94 .22 11.72 +9.5 +275.6
1994 3.58 .22 11.31 -3.5 +262.5
1995 3.94 .24 13.21 +16.8 +323.4
1996 3.82 .24 13.58 +2.8 +335.3
1997 3.95 .21 14.81 +9.1 +374.6
7/1998 4.11 -- 15.40 +4.0 +393.5
</TABLE>
7
<PAGE> 9
SECURITIES FIRST TRUST
EQUITY SERIES
The Per Share Data Table below illustrates the growth in per share value
for the period ending July 31, 1998, of one share of the Security First Trust
Equity Series purchased on May 19, 1993, at a price of $5.00 assuming that
dividends and capital gains were reinvested.
The results shown should not be considered a representation of the income
that may be earned by investing in the Series today. The value of variable
annuities funded by shares in this Series will be reduced by any actuarial risk
charges.
PER SHARE DATA
<TABLE>
<CAPTION>
Per Share
Value with Cumulative
Calendar Net Dividend Dividends & Change
Year Asset & Capital Capital Gains Yearly from
Ending Value Gains Reinvested Change 5/19/93
- -------- ----- --------- ------------- ------- -----------
<S> <C> <C> <C> <C> <C>
1993 $5.15 $.03 $5.18 +3.6% +3.6%+
1994 4.78 .05 4.85 -6.3 -3.0
1995 5.91 .21 6.21 +28.0 +24.2
1996 6.45 .55 7.36 +18.5 +47.2
1997 7.63 .72 9.52 +29.3 +90.4
7/1998 7.32 -- 9.13 +12.4* +114.0
</TABLE>
+ change from 5-19-93 to 12-31-93
* for 7 months ending 7/31/1998
SECURITY FIRST TRUST
U.S. GOVERNMENT INCOME SERIES
The Per Share Data Table below illustrates the growth in per share value
for the period ending July 31, 1998, of one share of the Security First Trust
U.S. Government Income Series purchased on May 19, 1993, at a price of $5.00
assuming the dividends and capital gains were reinvested.
The results shown should not be considered a representation of the income
that may be earned by investing in the Series today. The value of variable
annuities funded by shares in this Series will be reduced by any actuarial risk
charges.
PER SHARE DATA
<TABLE>
<CAPTION>
Per Share
Value with Cumulative
Calendar Net Dividend Dividends & Change
Year Asset & Capital Capital Gains Yearly from
Ending Value Gains Reinvested Change 5/19/93
- -------- ----- --------- ------------- ------ ------------
<S> <C> <C> <C> <C> <C>
1993 $5.04 $.08 $5.11 +2.2% +2.2%+
1994 4.74 .14 4.96 -2.9 -0.8
1995 5.18 .20 5.63 +13.5 +12.6
1996 5.14 .22 5.83 +3.6 +16.6
1997 5.26 .24 6.24 +7.0 +24.8
7/1998 5.53 -- 6.56 +3.5* +29.2
</TABLE>
+ change from 5-19-93 to 12-31-93
* for 7 months ending 7/31/1998
8
<PAGE> 10
SECURITY FIRST TRUST
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998
<TABLE>
<CAPTION>
T. Rowe Price
Growth and Equity U.S. Government
Bond Series Income Series Series Income Series
----------- -------------- ------ ---------------
<S> <C> <C> <C> <C>
ASSETS
Investments at market - Note A and Schedule I:
Investment securities (cost:
Bond Series - $17,447,343; Growth
and Income Series - $219,360,421;
Equity Series - $48,427,386;
U.S. Government Income Series -
$33,556,857) $ 17,657,984 $288,114,149 $54,358,814 $34,037,268
Cash 261,586 1,458,149 973,199 121,161
Interest receivable 208,858 3,954 3,731 403,122
Dividends receivable 418,950 60,808
Receivable from fund manager 366,000
Receivable for securities sold 336 122,688 201,557
Receivable for capital shares purchased 14,516 231,449
Unrealized appreciation on foreign
currency contracts 3,872
------------ ------------ ----------- -----------
18,147,152 290,592,651 55,519,240 34,763,108
LIABILITIES
Payable for securities purchased 194,555 618,869 593,985
Accrued expenses 12,570 56,915 15,951 14,903
Payable for capital shares redeemed 53,460 51,289
Payable to investment adviser - Note B 5,227 88,314 26,623 11,460
Payable for directors' fees 408 5,894 1,185 552
------------ ------------ ----------- -----------
212,760 151,123 716,088 672,189
NET ASSETS
Capital shares (authorized 100,000,000
shares of $.01 par value for each series) 17,089,639 206,912,555 39,946,430 32,422,964
Undistributed net investment income 510,948 2,834,997 261,050 1,101,590
Undistributed net realized gain 119,292 11,940,248 8,664,244 85,954
Net unrealized appreciation of investments 214,513 68,753,728 5,931,428 480,411
------------ ------------ ----------- -----------
NET ASSETS $ 17,934,392 $290,441,528 $54,803,152 $34,090,919
============ ============ =========== ===========
Capital shares outstanding 4,363,493 17,539,794 6,391,475 6,257,420
Net asset value per share $ 4.11 $ 16.56 $ 8.57 $ 5.45
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 11
SECURITY FIRST TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1998
<TABLE>
<CAPTION>
T. Rowe Price
Growth and Equity U.S. Government
Bond Series Income Series Series Income Series
----------- ------------- ------ ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 4,473,055 $ 847,243
Interest $ 893,827 1,705,283 68,966 $2,060,963
Miscellaneous income 27 8,525 279
----------- ------------ ------------ ----------
893,827 6,178,365 924,734 2,061,242
EXPENSES
Custodian fees 14,513 45,844 18,118 12,495
Adviser fees - Note B 47,766 865,740 357,311 208,278
Management fees - Note B 20,472 374,539 79,767 50,153
Printing expenses 8,525 88,942 18,237 17,566
Audit fees 6,313 7,681 6,392 5,154
Insurance expenses 607 11,573 2,667 1,639
Directors' fees and expenses 1,069 21,321 4,958 2,922
Taxes, licenses and fees 858 858 858 858
Miscellaneous expenses 4,605 6,790 3,718
----------- ------------ ------------ ----------
100,123 1,421,103 495,098 302,783
Less: Waiver of management fees (220) (206)
Waiver of adviser fees (19,891) (82,746)
----------- ------------ ------------ ----------
100,123 1,421,103 474,987 219,831
----------- ------------ ------------ ----------
NET INVESTMENT INCOME 793,704 4,757,262 449,747 1,841,411
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS - Notes A and C
Net realized gain on sale of investments 258,714 14,401,027 11,847,457 137,839
Net unrealized appreciation (depreciation) of:
Investments during the year (56,314) 3,597,110 (4,704,685) 68,011
Assets denominated in foreign currencies 3,872
----------- ------------ ------------ ----------
Net gain on investments 206,272 17,998,137 7,142,772 205,850
----------- ------------ ------------ ----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 999,976 $ 22,755,399 $ 7,592,519 $2,047,261
=========== ============ ============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 12
SECURITY FIRST TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED JULY 31, 1998
<TABLE>
<CAPTION>
T. Rowe Price
Growth and Equity U.S. Government
Bond Series Income Series Series Income Series
----------- ------------- ------ ---------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 793,704 $ 4,757,262 $ 449,747 $ 1,841,411
Net realized gain on sale of investments 258,714 14,401,027 11,847,457 137,839
Net unrealized appreciation (depreciation)
during the year (52,442) 3,597,110 (4,704,685) 68,011
------------ ------------- ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 999,976 22,755,399 7,592,519 2,047,261
DISTRIBUTIONS TO SHAREOWNERS
Net investment income (647,867) (4,191,181) (482,528) (1,507,408)
Net realized gains (13,443,002) (4,086,984)
CAPITAL SHARE TRANSACTIONS - NOTE D
Reinvestment of net investment income
distributed 647,867 4,191,181 482,528 1,507,408
Reinvestment of net realized gains
distributed 13,443,002 4,086,984
Sales of capital shares 7,387,828 68,143,134 6,440,386 6,833,426
Redemptions of capital shares (1,088,132) (5,160,103) (6,801,222) (3,679,228)
------------ ------------- ------------ ------------
INCREASE IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS 6,947,563 80,617,214 4,208,676 4,661,606
------------ ------------- ------------ ------------
TOTAL INCREASE IN NET ASSETS 7,299,672 85,738,430 7,231,683 5,201,459
NET ASSETS
BEGINNING OF YEAR 10,634,720 204,703,098 47,571,469 28,889,460
------------ ------------- ------------ ------------
END OF YEAR (including undistributed net
investment income: Bond Series -$510,948;
Growth and Income Series - $2,834,998;
Equity Series - $261,051; U.S. Government
Income Series - $1,101,590) $ 17,934,392 $ 290,441,528 $ 54,803,152 $ 34,090,919
============ ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 13
SECURITY FIRST TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED JULY 31, 1997
<TABLE>
<CAPTION>
T. Rowe Price Virtus Virtus
Growth and Equity U.S. Government
Bond Series Income Series Series Income Series
----------- ------------- ------- --------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 623,673 $ 3,650,955 $ 486,025 $ 1,170,007
Net realized gain on sale of investments 94,297 12,767,189 1,259,322 54,633
Net unrealized appreciation during the year 226,803 38,374,380 11,009,490 508,296
------------ ------------- ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 944,773 54,792,524 12,754,837 1,732,936
DISTRIBUTIONS TO SHAREOWNERS
Net investment income (584,627) (2,941,810) (439,597) (779,578)
Net realized gains (5,408,660) (1,801,912)
CAPITAL SHARE TRANSACTIONS - NOTE D
Reinvestment of net investment income
distributed 584,627 2,941,810 439,597 779,578
Reinvestment of net realized gains
distributed 5,408,660 1,801,912
Sales of capital shares 2,732,192 45,115,260 15,570,582 13,139,907
Redemptions of capital shares (2,023,610) (7,757,579) (1,455,726) (872,207)
------------ ------------- ------------ ------------
INCREASE IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS 1,293,209 45,708,151 16,356,365 13,047,278
------------ ------------- ------------ ------------
TOTAL INCREASE IN NET ASSETS 1,653,355 92,150,205 26,869,693 14,000,636
NET ASSETS
BEGINNING OF YEAR 8,981,365 112,552,893 20,701,776 14,888,824
------------ ------------- ------------ ------------
END OF YEAR (including undistributed net
investment income: Bond Series -$365,111;
Growth and Income Series - $2,268,916;
Equity Series - $293,831; U.S. Government
Income Series - $767,587) $ 10,634,720 $ 204,703,098 $ 47,571,469 $ 28,889,460
============ ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 14
SCHEDULE I
SECURITY FIRST TRUST
BOND SERIES
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of Market
Fixed Maturities Portfolio Principal Value
- ---------------- --------- --------- -----
<S> <C> <C> <C>
CORPORATE NOTES 27.3%
Aerospace & Defense: 0.4%
Boeing Co., 8.75%, 08/15/21 50,000 $ 63,188
Automobiles & Related: 1.6%
Ford Motor Credit, 9.50%, 04/15/00 50,000 52,875
GMAC Corporate Bond, 9.63%,12/15/01 100,000 110,750
Mark IV Industries, Inc., 7.75%, 04/01/06 120,000 122,400
----------
286,025
Banking: 3.2%
Banc One Corp., 7.75%, 07/15/25 300,000 343,882
HSBC Fin Nederland Bank, 7.40%, 04/15/03 100,000 102,625
National Australia Bank, 9.70%,10/15/98 125,000 125,938
----------
572,445
Building Materials & Garden Supplies: 0.6%
NBTY, Inc., 8.63%, 09/15/07 100,000 102,750
Computer & Office Equipment: 0.8%
Hydrochem Ind. Service, Inc.,10.375%, 08/01/07 85,000 87,263
Printpack, Inc.,10.625%, 08/15/06 60,000 64,350
----------
151,613
Electric and Electronic Equipment: .6%
Honeywell, Inc., 6.60%, 04/15/01 100,000 101,750
Electric Utilities: 1.1%
National Rural Utilities, 6.50%, 09/15/02 100,000 101,875
Public Service Electric & Gas Co., 6.25%, 01/01/07 100,000 100,250
</TABLE>
13
<PAGE> 15
SCHEDULE I
SECURITY FIRST TRUST
BOND SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of Market
Fixed Maturities Portfolio Principal Value
- ---------------- ---------- --------- -----
<S> <C> <C> <C>
CORPORATE NOTES (CONTINUED)
Finance & Credit: 4.1%
Chase Mortgage Securities, 6.60%,11/19/07 110,000 $ 112,266
Commercial Credit Group, 9.60%, 05/15/99 50,000 51,366
General Electric Capital, 9.38%,10/06/98 125,000 125,705
Margaretten Financial, 6.75%, 06/15/00 100,000 101,125
Standard Credit Card, 7.25%, 04/07/08 100,000 107,322
UCFC Trust, 6.48%, 05/15/12 230,000 230,857
----------
728,641
Food & Beverages: 1.2%
Ameriserve Food Co.,10.125%, 07/15/07 85,000 85,850
Doskocil Manufacturing Inc.,10.125%, 09/15/07 60,000 63,750
Southern Foods Group, 9.875% ,09/01/07 60,000 62,400
----------
212,000
Forest Products: 1.1%
Noranda Forest, Inc., 7.50%, 07/15/03 100,000 103,250
Stone Container Corp.,12.25%, 04/01/02 80,000 82,200
----------
185,450
Insurance Carriers: 0.6%
Prudential Insurance Co. of America, 6.88%, 04/15/03 100,000 101,875
Media & Communications: 0.8%
Heritage Media Corp., 8.75%, 02/15/06 130,000 139,425
Miscellaneous Consumer Products: 2.8%
French Fragrances, Inc.,10.375%, 05/15/07 60,000 64,200
Home Products International, Inc., 9.625%, 05/15/08 70,000 69,825
Hedstrom Corp., 10.00%, 06/01/2007 70,000 70,525
Iron Age Corp., 9.875%, 05/01/08 70,000 69,300
</TABLE>
14
<PAGE> 16
SCHEDULE I
SECURITY FIRST TRUST
BOND SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of Market
Fixed Maturities Portfolio Principal Value
- ---------------- ----------- --------- ------
<S> <C> <C> <C>
CORPORATE NOTES (CONTINUED )
Miscellaneous Consumer Products (Continued)
Kinder Care Learning Centers, 9.50%, 02/15/09 70,000 $ 71,663
Revlon Worldwide Parent, 0.00%, 03/15/01 120,000 95,250
S C International Service, Inc., 9.25%, 09/01/07 60,000 62,250
----------
503,013
Oil and Gas Extraction: 1.0%
Derby Cycle Corp., 10.00%, 05/15/08 70,000 70,525
Quaker State Corp., 6.63%,10/15/05 100,000 102,250
----------
172,775
Security and Commodity Brokers & Services: 5.8%
Lehman Brothers, 8.50%, 05/01/07 100,000 113,875
Morgan Stanley, 6.52%, 01/15/08 350,000 355,775
MS Wells Fargo, 6.54%, 07/15/30 230,000 234,238
Salomon Smith Barney, Inc., 7.38%, 05/15/07 300,000 319,875
----------
1,023,763
Telephone Communication: 0.5%
U.S. West Communications, 7.50%, 06/15/23 80,000 83,000
Textile Mill Products: 0.7%
GFSI, Inc., 9.625%, 03/01/07 60,000 63,450
Polymer Group, Inc., 9.00%, 07/01/07 60,000 61,725
----------
125,175
Transportation: 0.4%
Newport News Shipbuilding, Inc., 9.25%, 12/01/06 60,000 64,050
----------
TOTAL CORPORATE NOTES
(COST $4,696,113) 4,819,063
</TABLE>
15
<PAGE> 17
SCHEDULE I
SECURITY FIRST TRUST
BOND SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of Market
Fixed Maturities Portfolio Principal Value
- ---------------- ---------- --------- -----
<S> <C> <C> <C>
FEDERAL AGENCIES 48.9%
Federal Home Loan Bank: 1.1%
5.50%, 01/10/01 200,000 $ 199,180
Federal Home Loan Mortgage Corp.: 1.6%
7.13%, 07/21/99 235,000 238,250
9.00%, 01/01/17 3,393 3,611
9.50%, 04/01/19 27,110 28,915
9.00%, 06/01/19 13,929 14,826
----------
285,602
Federal National Mortgage Assn.: 18.3%
8.35%, 11/10/99 175,000 180,619
6.92%, 03/19/07 75,000 80,159
6.21%, 11/07/07 1,635,000 1,669,384
6.31%, 02/01/08 224,055 226,923
7.00%, 09/01/10 393,134 400,871
6.50%, 03/01/13 393,458 395,917
7.50%, 08/25/21 9,069 9,159
6.425%, 03/17/30 260,000 262,600
----------
3,225,632
Government National Mortgage Assn.: 27.9%
9.00%, 04/15/09 3,616 3,836
9.00%, 05/15/09 18,293 19,443
9.00%, 05/15/09 6,378 6,778
9.00%, 05/15/09 5,960 6,335
9.00%, 05/15/09 2,343 2,490
9.00%, 05/15/09 3,185 3,385
9.00%, 05/15/09 16,865 17,925
11.25%, 09/15/15 81,493 91,195
11.50%, 11/15/15 56,761 64,512
10.00%, 08/15/16 11,736 12,825
</TABLE>
16
<PAGE> 18
SCHEDULE I
SECURITY FIRST TRUST
BOND SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of Market
Fixed Maturities Portfolio Principal Value
- ---------------- ---------- -------- ------
<S> <C> <C> <C>
FEDERAL AGENCIES (CONTINUED)
Government National Mortgage Association (Continued)
10.00%, 06/15/17 27,745 $ 30,320
9.25%, 07/15/17 43,816 46,842
10.00%, 11/15/17 7,899 8,632
11.50%, 02/15/18 8,627 9,804
10.00%, 03/15/19 43,111 47,112
10.00%, 03/15/20 28,609 31,264
9.25%, 05/15/20 30,285 32,376
7.50%, 09/15/20 288,804 297,467
9.25%, 03/15/21 26,237 28,049
9.25%, 04/15/21 73,819 78,917
9.25%, 05/15/21 89,432 95,608
9.25%, 06/15/21 21,652 23,147
7.50%, 06/15/23 119,473 123,057
7.00%, 08/15/23 91,040 92,519
7.50%, 10/15/23 200,869 206,894
7.00%, 01/15/24 158,559 161,136
7.00%, 03/15/24 145,746 148,115
9.50%, 01/15/25 51,167 55,309
9.50%, 05/15/25 18,267 19,745
7.00%, 02/15/26 581,579 591,030
8.00%, 08/15/26 467,435 485,399
8.00%, 01/15/27 143,117 148,617
8.00%, 02/15/28 207,901 215,890
6.50%, 04/15/28 814,437 812,653
7.00%, 05/01/28 493,056 501,068
7.00%, 06/01/28 393,753 400,151
----------
4,919,845
TOTAL FEDERAL AGENCIES
(COST $8,551,228 ) 8,630,259
</TABLE>
17
<PAGE> 19
SCHEDULE I
SECURITY FIRST TRUST
BOND SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of Market
Fixed Maturities Portfolio Principal Value
- ---------------- ---------- --------- -------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS 16.5%
U.S. Treasury Bonds: 4.1%
6.75%, 08/15/26 645,000 $ 729,347
U.S. Treasury Notes: 12.4%
7.75%, 11/30/99 15,000 15,430
5.625%, 11/30/00 115,000 115,324
6.375%, 08/15/02 440,000 452,782
5.75%, 04/30/03 935,000 942,611
3.375%, 01/15/07 454,716 439,788
6.625%, 05/15/07 205,000 219,398
----------
2,185,333
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $2,912,375) 2,914,680
FOREIGN GOVERNMENT OBLIGATIONS 2.3%
Swedish Government Bond, 5.50%, 04/12/02 401,554 415,043
----------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(COST $408,688) 401,554 415,043
----------
TOTAL FIXED MATURITIES
(COST $16,568,404) 16,288,483 16,779,045
</TABLE>
18
<PAGE> 20
SCHEDULE I
SECURITY FIRST TRUST
BOND SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of Market
Short-Term Investments Portfolio Principal Value
- ---------------------- ----------- --------- -------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS 5.0%
Federal Home Loan Mortgage Corp.: 5.0%
5.45%, 08/06/98 60,000 $ 59,954
5.46%, 08/07/98 625,000 624,430
5.48%, 08/18/98 195,000 194,555
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $878,939) 878,939
------------
TOTAL INVESTMENTS
(COST $17,447,343) 100.0% 17,657,984
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Gain
------------
<S> <C>
Forward Foreign Currency Contract To Sell 3,270,000
Swedish Krona (Settlement date 08/21/98; Receivable
amount $ 415,238; market value $411,366) 3,872
Other assets less liabilities 272,536
------------
NET ASSETS $ 17,934,392
============
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE> 21
SCHEDULE I
SECURITY FIRST TRUST
T. ROWE PRICE GROWTH AND INCOME SERIES
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ----------- ------ -------
<S> <C> <C> <C>
CAPITAL EQUIPMENT 5.2%
Electrical Equipment: 4.4%
General Electric Co. 50,000 $ 4,471,875
Honeywell, Inc. 30,000 2,514,375
Hubbell, Inc. Class B 40,000 1,680,000
Motorola, Inc. 75,000 3,918,750
------------
12,585,000
Machinery: 0.8%
Pall Corp. 100,000 2,250,000
CONSUMER CYCLICALS 1.0%
Automobiles & Related: 1.0%
Genuine Parts Co. 80,000 2,775,000
CONSUMER NONDURABLES 20.0%
Food & Beverages: 5.7%
Anheuser-Busch Company, Inc. 50,000 2,590,625
Best Foods 24,000 1,335,000
General Mills, Inc. 25,000 1,548,438
Int'l. Flavors & Fragrance 75,000 3,150,000
McCormick & Co. 75,000 2,432,813
Pepsico, Inc. 50,000 1,946,875
Quaker Oats Company 30,000 1,590,000
Ralston-Ralston Purina Group 60,000 1,931,250
------------
16,525,001
</TABLE>
20
<PAGE> 22
SCHEDULE I
SECURITY FIRST TRUST
T. ROWE PRICE GROWTH AND INCOME SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- --------- ------ ------
<S> <C> <C> <C>
CONSUMER NONDURABLES (CONTINUED)
Health Services: 1.4%
Baxter International, Inc. 30,000 $ 1,792,500
United States Surgical Corp. 50,000 2,293,750
------------
4,086,250
Miscellaneous Consumer Products: 6.6%
Colgate Palmolive Co. 30,000 2,767,500
Eastman Kodak 40,000 3,355,000
Fortune Brands, Inc. 100,000 3,693,750
Owens Corning Fiber 70,000 2,887,500
Philip Morris Companies, Inc. 100,000 4,381,250
UST, Inc. 75,000 2,025,000
------------
19,110,000
Pharmaceuticals: 6.3%
Abbott Laboratories 80,000 3,330,000
American Home Products 60,000 3,090,000
Amgen* 38,000 2,790,625
Johnson & Johnson 45,000 3,476,250
Pharmacia-Upjohn, Inc. 36,250 1,715,078
Schering-Plough Corp. 40,000 3,870,000
------------
18,271,953
</TABLE>
*Non-income producing.
21
<PAGE> 23
SCHEDULE I
SECURITY FIRST TRUST
T. ROWE PRICE GROWTH AND INCOME SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ---------- ------ ------
<S> <C> <C> <C>
CONSUMER SERVICES 13.5%
Building and Real Estate: 2.0%
Crescent Real Estate Equity Co. 90,000 $ 2,643,750
Starwood Hotel & Resort Trust 75,000 3,079,687
-----------
5,723,437
Entertainment & Leisure: 1.2%
Hilton Hotels Corp. 100,000 2,518,750
Readers Digest Assn., Inc. 35,000 958,125
-----------
3,476,875
General Merchandise Stores: 4.8%
Dayton Hudson Corp. 90,000 4,320,000
J.C. Penney, Inc. 20,000 1,173,750
Neiman-Marcus Group, Inc.* 75,000 2,475,000
Toys R Us, Inc.* 150,000 3,412,500
Tupperware Corp. 90,000 2,272,500
-----------
13,653,750
Media & Communications: 2.7%
CBS Corp. 75,000 2,545,313
Knight Ridder, Inc. 50,000 2,637,500
Meredith Corp. 60,000 2,508,750
-----------
7,691,563
Miscellaneous Business Services: 2.8%
Browning Ferris, Inc. 100,000 3,518,750
Corporate Express, Inc.* 150,000 1,790,625
Waste Management, Inc. 50,750 2,797,587
-----------
8,106,962
</TABLE>
*Non-income producing.
22
<PAGE> 24
SCHEDULE I
SECURITY FIRST TRUST
T. ROWE PRICE GROWTH AND INCOME SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ---------- ------ --------
<S> <C> <C> <C>
ENERGY 10.1%
Oil And Gas Extraction: 10.1%
Amerada Hess Corp. 55,000 $ 2,787,813
Amoco Corp. 100,000 4,175,000
Atlantic Richfield Co. 30,000 2,032,500
British Petroleum PLC 30,000 2,407,500
Chevron Corp. 40,000 3,305,000
Exxon Corp. 36,000 2,529,000
Mobil Corp. 16,000 1,116,000
Occidental Petroleum Corp. 80,000 1,780,000
Pioneer Natural Resources, Co. 125,000 2,460,938
Royal Dutch Petroleum, Co. ADR 40,000 2,040,000
Texaco, Inc. 30,600 1,857,038
Unocal Corp. 75,000 2,456,250
-------------
28,947,039
FINANCIAL 14.0%
Banking: 4.0%
Bankers Trust New York Corp. 20,000 2,241,250
Chase Manhattan Corp. 30,000 2,268,750
Mellon Bank Corp. 50,000 3,359,376
National City Corp. 20,000 1,337,500
Wells Fargo & Co. 6,666 2,372,263
-------------
11,579,139
Federal Agencies: 1.0%
Federal Home Loan Mortgage Corp. 60,000 2,835,000
Financial Services: 5.3%
American Express Co. 35,000 3,863,125
H&R Block, Inc. 50,000 2,125,000
J.P. Morgan & Co., Inc. 15,000 1,891,875
Travelers Group, Inc. 110,365 7,422,046
-------------
15,302,046
</TABLE>
23
<PAGE> 25
SCHEDULE I
SECURITY FIRST TRUST
T. ROWE PRICE GROWTH AND INCOME SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ---------- ------ ------
<S> <C> <C> <C>
FINANCIAL (CONTINUED)
Insurance Carriers: 3.7%
Loews Corp. 30,000 $ 2,418,750
St. Paul Companies, Inc. 105,136 3,804,609
Travelers Aetna P&C 40,000 1,730,000
Willis Corroon Group PLC Sponsored ADR 175,000 2,843,750
------------
10,797,109
PROCESS INDUSTRIES 10.0%
Chemicals and Allied Products: 5.5%
Corning, Inc. 45,000 1,380,938
Dow Chemical Co. 30,000 2,722,500
Dupont Co. 34,000 2,101,625
Great Lakes Chemical Corp. 60,000 2,366,250
Hercules, Inc. 90,000 3,121,875
Imperial Chemical ADR 30,000 1,573,125
Minnesota Mining & Manufacturing Co. 35,000 2,629,375
------------
15,895,688
Forest Products: 0.7%
Georgia Pacific Corp. 18,000 924,750
Weyerhaeuser Co. 30,000 1,260,000
------------
2,184,750
Metal Mining: 2.3%
Inco Ltd. 150,000 1,640,625
Newmont Mining Corp. 75,000 1,415,625
Phelps Dodge Corp. 40,000 2,222,500
Reynolds Metals Co. 25,000 1,312,500
------------
6,591,250
</TABLE>
24
<PAGE> 26
SCHEDULE I
SECURITY FIRST TRUST
T. ROWE PRICE GROWTH AND INCOME SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ----------- ------ ------
<S> <C> <C> <C>
PROCESS INDUSTRIES (CONTINUED)
Paper and Allied Products: 1.5%
Kimberly Clark 60,000 $ 2,696,250
International Paper Co. 25,000 1,115,625
Union Camp Corp. 15,000 636,563
-----------
4,448,438
TECHNOLOGY 3.4%
Computer and Office Equipment: 3.4%
First Data Corp. 100,000 2,893,750
Hewlett Packard Co. 70,000 3,893,750
Intuit* 60,000 2,985,000
-----------
9,772,500
TRANSPORTATION 6.1%
Aerospace and Defense: 2.7%
Allied Signal, Inc. 75,000 3,262,500
Olin Corp. 45,000 1,757,813
Raytheon Co CL B 50,000 2,765,625
-----------
7,785,938
Railroad Transportation: 3.4%
Burlington Northern Santa Fe 25,000 2,573,439
Norfolk Southern Corp. 140,000 4,182,500
Union Pacific Corp. 70,000 2,940,000
-----------
9,695,939
UTILITIES 6.5%
Telephone Communication: 3.9%
AT&T Co. 40,000 2,425,000
Frontier Corp. 70,000 2,349,375
GTE Corp. 40,000 2,175,000
</TABLE>
*Non-income producing
25
<PAGE> 27
SCHEDULE I
SECURITY FIRST TRUST
T. ROWE PRICE GROWTH AND INCOME SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ----------- ------ ------
<S> <C> <C> <C>
UTILITIES (CONTINUED)
Telephone Communication (Continued)
SBC Communications, Inc. 75,000 $ 3,070,313
Southern New England Telecom Corp. 17,000 1,170,875
-------------
11,190,563
Utility Holding Companies: 2.6%
Edison International 50,000 1,387,500
GPU 16,000 572,000
Peco Energy Co. 50,000 1,496,875
Pacificorp 70,000 1,500,625
Unicom Corp. 75,000 2,592,188
-------------
7,549,188
-------------
TOTAL EQUITY SECURITIES
(COST $ 190,076,650) 258,830,378
</TABLE>
<TABLE>
<CAPTION>
Market
Short-Term Investments Principal Value
- ---------------------- --------- -------
<S> <C> <C> <C>
Commercial Paper: 10.2%
BBV Finance Delaware, 5.57% , 08/21/98 9,000,000 8,972,133
General Motors Corp., 5.54%, 08/12/98 6,900,000 6,888,302
General Electric Capital Services, Inc., 5.52%, 08/14/98 1,400,000 1,397,199
General Electric Capital, 5.51%, 09/08/98 2,300,000 2,286,528
Metlife Funding, Inc., 5.50%, 09/11/98 7,200,000 7,154,783
National Australia Funding, Inc., 5.51%, 09/08/98 2,600,000 2,584,826
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $29,283,771) 29,283,771
TOTAL INVESTMENTS
(COST $219,360,421) 100.0% 288,114,149
Other assets less liabilities 2,327,379
-------------
NET ASSETS $ 290,441,528
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 28
SCHEDULE I
SECURITY FIRST TRUST
EQUITY SERIES
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ---------- ------ ------
<S> <C> <C> <C>
CAPITAL EQUIPMENT 8.1%
Electrical Equipment: 6.9%
Amp, Inc. 6,700 $ 196,813
General Electric Co. 20,400 1,821,975
Emerson Electric Co. 6,400 380,400
Lucent Technologies Inc. 10,400 961,350
Motorola, Inc. 7,300 381,425
------------
3,741,963
Machinery: 1.2%
Eaton Corp. 3,800 247,950
Illinois Tool Works, Inc. 7,000 392,438
------------
640,388
CONSUMER NONDURABLES 22.6%
Food and Beverages: 5.7%
Anheuser-Busch Company, Inc. 6,000 310,125
Archer Daniels Midland Co. 11,200 191,800
Best Foods 10,200 567,375
Coca Cola 15,500 1,250,656
Pepsico, Inc. 12,300 477,394
Tyson Foods, Inc. 10,200 220,575
------------
3,017,925
Health Services: 1.2%
Foundation Health System, Inc. 8,800 181,500
United Healthcare Corp. 8,700 491,550
------------
673,050
</TABLE>
27
<PAGE> 29
SCHEDULE I
SECURITY FIRST TRUST
EQUITY SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ----------- ------ ------
<S> <C> <C> <C>
CONSUMER NONDURABLES (CONTINUED)
Miscellaneous Consumer Products: 5.3%
Colgate Palmolive Co. 4,400 $ 406,725
Mattel, Inc. 4,300 165,282
McDonalds Corp. 7,400 494,413
Phillip Morris Companies, Inc. 23,200 1,016,450
Proctor & Gamble Co. 10,200 809,625
------------
2,892,495
Pharmaceuticals: 10.4%
American Home Products Co. 20,200 1,040,300
Bristol Myers Squibb Co. 6,900 786,169
Johnson & Johnson 8,900 687,525
Eli Lilly & Co. 10,700 719,575
Pfizer, Inc. 8,000 880,000
Pharmacia-Upjohn, Inc. 5,900 279,512
Merck & Co. 10,400 1,282,450
------------
5,675,531
CONSUMER CYCLICALS 2.5%
Automobiles & Related: 2.5%
Ford Motor Co. 11,700 666,169
General Motors Corp. 6,800 491,725
Goodyear Tire And Rubber Co. 3,400 207,188
------------
1,365,082
</TABLE>
28
<PAGE> 30
SCHEDULE I
SECURITY FIRST TRUST
EQUITY SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ----------- ------- ------------
<S> <C> <C> <C>
CONSUMER SERVICES 8.4%
General Merchandise Stores: 5.6%
Albertsons, Inc. 6,500 $ 312,406
Home Depot, Inc. 14,400 603,000
K Mart Corp.* 22,200 362,138
J.C. Penney, Inc. 7,000 410,813
Pep Boys Manny Moe & Jack 7,200 124,200
Sears Roebuck & Co. 6,300 319,725
Toys R Us, Inc.* 10,600 241,150
Walmart Stores 11,000 694,375
------------
3,067,807
Media & Communications: 2.4%
Disney Walt Co. 13,800 475,238
Mc Graw-Hill Companies, Inc. 3,800 311,363
News Corp. 9,900 251,831
Tribune Co. 4,300 289,175
------------
1,327,607
Building & Real Estate: 0.4%
Fluor Corp. 3,200 134,600
Starwood Hotel & Resort Trust 5,400 221,738
------------
356,338
ENERGY 8.5%
Oil And Gas Extraction: 8.5%
Atlantic Richfield Co. 5,100 345,525
British Petroleum Co. 4,300 345,075
Exxon Corp. 25,700 1,802,213
Enron Corp. 4,200 222,338
Mobil Corp. 7,400 516,150
Royal Dutch Petroleum Co. ADR 16,600 846,600
Schlumberger Limited 6,300 381,544
------------
4,459,445
</TABLE>
*Non-income producing.
29
<PAGE> 31
SCHEDULE I
SECURITY FIRST TRUST
EQUITY SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ----------- ------- ------------
<S> <C> <C> <C>
FINANCIAL
Banking: 8.5%
Banc One Corp. 9,950 $ 514,291
Bankamerica Corp. 7,700 691,075
Bank of Boston Corp. 7,600 367,650
Chase Manhattan Corp. 13,200 998,250
First Chicago Corp. 7,200 603,450
Household International, Inc. 6,300 313,425
Nationsbank Corp. 9,362 746,620
Washington Mutual, Inc. 9,750 389,391
Wells Fargo & Co. 1,500 533,813
-----------
5,157,965
Federal Agencies: 1.0%
Federal Home Loan Mortgage Corp. 7,600 471,200
Financial Services: 6.2%
Associates First Capital Corp. 2,600 201,988
CIT Group, Inc. 6,800 225,250
Equifax, Inc. 7,500 306,562
Fleet Financial Group 6,700 575,781
Morgan Stanley Dean Witter 9,185 799,669
Standard & Poor's 5,000 559,375
Travelers Group, Inc. 10,350 693,450
-----------
3,362,075
Insurance Carriers: 3.8%
Aetna, Inc. 2,900 201,006
Allstate Corp. 9,300 394,669
American General Corp. 3,400 232,262
American International Group 5,700 859,632
Cigna Corp. 2,100 138,731
Conseco, Inc. 5,800 243,600
-----------
2,069,900
</TABLE>
30
<PAGE> 32
SCHEDULE I
SECURITY FIRST TRUST
EQUITY SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ----------- ------- ------------
<S> <C> <C> <C>
PROCESS INDUSTRIES 4.9%
Chemicals and Allied Products: 3.0%
Air Products & Chemical 6,400 $ 224,000
Dow Chemical Co. 5,100 462,825
Dupont Co. 4,400 272,800
IMC Global, Inc. 8,100 207,056
Minnesota Mining & Manufacturing Co. 3,600 269,550
PPG Industries, Inc. 3,000 190,125
------------
1,626,356
Metal Mining: 0.6%
Barrick Gold Corp. 7,800 127,725
Phelps Dodge Corp. 3,400 188,913
------------
316,638
Paper And Allied Products: 1.3%
International Paper Co. 4,100 182,963
Kimberly Clark Corp. 6,800 305,575
Westvaco Corp. 9,300 233,081
------------
721,619
TECHNOLOGY 13.8%
Computer & Office Equipment: 13.8%
Applied Materials, Inc.* 6,500 217,750
Cisco System Inc.* 7,200 689,400
Compaq Computer corp. 15,800 519,425
Hewlett Packard Co. 6,500 360,750
Ikon Office Solution 10,000 107,500
Intel Corp. 11,800 996,362
International Business Machines Corp. 8,100 1,073,250
Microsoft Corp. 16,300 1,795,038
Oracle Corp.* 17,200 455,800
</TABLE>
*Non-income producing.
31
<PAGE> 33
SCHEDULE I
SECURITY FIRST TRUST
EQUITY SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ----------- ------- ------------
<S> <C> <C> <C>
TECHNOLOGY (CONTINUED)
Computer & Office Equipment (Continued)
Seagate Technology, Inc.* 9,000 $ 204,750
Texas Instruments 5,200 308,425
Xerox Corp. 3,300 348,356
-------------
7,076,806
TRANSPORTATION 3.2%
Aerospace & Defense: 1.8%
Boeing Company. 7,500 291,094
Lockheed Martin Corp. 4,100 408,719
United Technologies Corp. 3,000 287,438
-------------
987,251
Transportation Services: 1.4%
Burlington Northern Santa Fe 2,800 288,225
CSX Corp. 5,400 218,363
Delta Air Lines, Inc. 2,100 257,250
-------------
763,838
UTILITIES 8.5%
Telephone Communication: 6.4%
AT&T Co. 12,700 769,938
Alltel Corp. 6,600 276,788
Bell Atlantic Corp. 10,000 453,750
GTE Corp. 10,800 587,250
SBC Communications, Inc. 23,000 940,125
Worldcom, Inc.* 7,900 417,713
-------------
3,445,564
</TABLE>
*Non-income producing.
32
<PAGE> 34
SCHEDULE I
SECURITY FIRST TRUST
EQUITY SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of No. of Market
Equity Securities Portfolio Shares Value
- ----------------- ----------- ------- ------------
<S> <C> <C> <C>
UTILITIES (CONTINUED) 2.1%
Utility Holding Companies:
Cinergy Corp. 7,800 $ 246,188
Entergy Corp. 9,900 271,002
FPL Group, Inc. 6,500 395,281
Southern Co. 9,000 229,500
-----------
1,141,971
-----------
TOTAL INVESTMENTS
(COST $48,427,386) 100.0% 54,358,814
Other Assets Less Liabilities 444,338
-----------
NET ASSETS $54,803,152
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 35
SCHEDULE I
SECURITY FIRST TRUST
U.S. GOVERNMENT INCOME SERIES
PORTFOLIO OF INVESTMENTS
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of Market
Fixed Maturities Portfolio Principal Value
- ----------------- ----------- --------- ------------
<S> <C> <C> <C>
CORPORATE NOTES 6.1%
Finance & Credit: 6.1%
Chase Mortgage Finance Corp., 6.5%, 07/25/28 500,000 $ 501,884
General Electric Capital Mortgage
Services Inc., 6.65%, 05/25/28 350,000 353,105
GMAC Mortgage Corp., 5.94%, 07/01/13 520,694 508,490
Merit Securities Corp., 6.58%, 07/28/22 720,852 722,091
-----------
2,085,570
TOTAL CORPORATE NOTES
(COST $1,575,460) 2,085,570
U.S. GOVERNMENT OBLIGATIONS 26.6%
U.S. Treasury Bonds: 4.2%
8.75%, 11/15/08 500,000 569,140
12.75%, 11/15/10 600,000 850,470
-----------
1,419,610
U.S. Treasury Notes: 22.4%
5.375%, 01/31/00 600,000 599,274
6.50%, 08/31/01 1,125,000 1,155,420
6.50%, 10/15/06 250,000 264,605
3.375%, 01/15/07 340,000 328,837
6.625%, 05/15/07 3,500,000 3,745,805
6.00%, 08/15/00 1,500,000 1,514,760
-----------
7,608,701
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $8,954,689) 9,028,311
</TABLE>
34
<PAGE> 36
SCHEDULE I
SECURITY FIRST TRUST
U.S. GOVERNMENT INCOME SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of Market
Fixed Maturities Portfolio Principal Value
- ----------------- ----------- --------- ------------
<S> <C> <C> <C>
FEDERAL AGENCIES 67.3%
Federal Farm Credit Bank: 6.7%
6.05%, 04/21/03 550,000 $ 556,672
6.94%, 05/19/05 125,000 132,678
7.37%, 08/01/06 1,500,000 1,598,115
-----------
2,287,465
Federal Home Loan Bank: 7.7%
4.80%, 09/22/98 350,000 349,615
5.375%, 02/13/01 1,000,000 992,650
6.83%, 06/07/01 1,000,000 1,008,580
8.00%, 08/27/01 250,000 265,953
-----------
2,616,798
Federal Home Loan Mortgage Corp.: 19.3%
7.00%, 07/15/99 438,670 439,976
7.36%, 06/05/07 1,500,000 1,570,395
7.00%, 07/01/07 126,236 129,312
7.00%, 09/01/10 270,400 275,975
6.50%, 04/01/11 1,431,562 1,442,298
6.00%, 05/11/11 1,431,350 1,417,480
6.00%, 05/15/16 300,000 299,155
6.10%, 10/15/18 1,000,000 1,001,348
-----------
6,575,939
</TABLE>
35
<PAGE> 37
SCHEDULE I
SECURITY FIRST TRUST
U.S. GOVERNMENT INCOME SERIES
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 1998
<TABLE>
<CAPTION>
Percentage
of Market
Value of Market
Fixed Maturities Portfolio Principal Value
- ----------------- ----------- --------- ------------
<S> <C> <C> <C>
FEDERAL AGENCIES (CONTINUED)
Federal National Mortgage Assn.: 28.2%
6.16%, 04/03/01 1,000,000 $ 1,011,370
6.00%, 11/01/03 91,732 91,932
8.625%, 06/30/04 150,000 170,928
6.50%, 05/01/08 1,679,081 1,699,533
6.50%, 07/01/08 989,868 1,001,925
8.50%, 10/01/09 938,880 979,656
6.50%, 03/01/09 180,661 182,383
7.00%, 04/01/11 1,377,816 1,404,931
6.25%, 07/18/13 1,100,000 1,106,097
8.00%, 11/01/13 931,749 966,104
6.50%, 05/17/15 700,000 710,718
8.00%, 10/01/25 276,003 286,179
-----------
9,611,756
Other Federal Agencies: 5.4%
Government National Mortgage Assn., 7.50%, 01/15/26 1,228,689 1,265,550
Government National Mortgage Assn., 6.00%, 07/20/27 454,301 463,101
Student Loan Marketing Assn., 7.50%, 03/08/00 100,000 102,778
-----------
1,831,429
-----------
TOTAL FEDERAL AGENCIES
(COST $23,026,708) 22,923,387
-----------
TOTAL INVESTMENTS
(COST $33,556,857) 100.0% 34,037,268
Other assets less liabilities 53,651
-----------
NET ASSETS $34,090,919
===========
</TABLE>
The accompanying notes are an integral part of these statements.
36
<PAGE> 38
SECURITY FIRST TRUST
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
NOTE A -- ORGANIZATION OF THE TRUST AND SIGNIFICANT ACCOUNTING POLICIES
Security First Trust (the Trust) was established under Massachusetts law
pursuant to a Declaration of Trust dated February 13, 1987, as an unincorporated
business trust, a form of organization that is commonly called a Massachusetts
Business Trust. The Trust is registered with the Securities and Exchange
Commission as a diversified open-end management investment company (mutual fund)
under the Investment Company Act of 1940 (1940 Act).
On June 17, 1987, the shareowners of Security First Legal Reserve Fund, Inc. and
Security First Variable Life Fund, Inc. (the Funds), each of which was a
Maryland corporation registered as an investment company under the 1940 Act,
approved Plans of Reorganization and Liquidation and on July 24, 1987, the Funds
became Series of the Trust and their shareowners became shareowners of the Bond
and the T. Rowe Price Growth and Income Series (the Growth and Income Series),
respectively, in a tax-free exchange of shares. The Trust operates as a "series
company," as that term is used in Rule 18f-2 under the 1940 Act. Financial
information for periods prior to June 17, 1987, reflect the results of the
respective funds.
The Declaration of Trust permits the Trustees to issue an unlimited number of
shares and to divide such shares into an unlimited number of series, all without
shareowner approval. Pursuant to this authority, the Board of Trustees of
Security First Trust established the Virtus Equity Series and the Virtus U.S.
Government Income Series on January 11, 1993, which commenced operations May 19,
1993.
On February 27, 1997 the Board of Trustees unanimously approved the name change
of the T. Rowe Price Bond Series to the Bond Series and on March 4, 1998, the
name change of the Virtus Equity Series and the Virtus U.S. Government Income
Series to the Equity Series and U.S. Government Income Series, respectively.
The following is a summary of significant accounting policies followed by the
Trust:
FEDERAL INCOME TAXES -- Each series of the Trust has elected to qualify as a
"Regulated Investment Company." No provision for federal income taxes is
necessary because each series intends to maintain its qualification as a
"Regulated Investment Company" under the Internal Revenue Code and distribute
each year substantially all of its net income and realized capital gains to its
shareowners. Income and gains to be distributed are determined annually as of
December 31, because the Trust reports for tax purposes on a calendar year.
PORTFOLIO VALUATION -- Investments are carried at market value. The market value
of equity securities is determined as follows: securities traded on a national
securities exchange are valued at the last sale price; securities not traded on
a national securities exchange are valued at the bid price for such securities
as reported by security dealers. Fixed maturities are valued at prices obtained
from a major dealer in bonds.
37
<PAGE> 39
SECURITY FIRST TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE A -- ORGANIZATION OF THE TRUST AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Short-term investments which have remaining maturities of more than 60 days and
for which representative market quotations are readily available are valued at
the most recent bid price or yield equivalent as quoted by a major broker-dealer
in money market securities. Securities with remaining maturities of 60 days or
less are valued at their amortized cost, which approximates market value due to
the short duration to maturity. Securities and other assets for which such
procedures are deemed not to reflect fair value, or for which representative
quotes are not readily available, are valued at prices deemed best to reflect
their fair value as determined in good faith by or under supervision of officers
of the Trust in a manner specifically authorized by the Board of Directors and
applied on a consistent basis.
CURRENCY TRANSLATION -- Assets and liabilities are translated into U.S. dollars
at the prevailing exchange rate at the end of the reporting period. Purchases
and sales of securities and income and expenses are translated into U.S. dollars
at the prevailing exchange rate on the dates of such transactions. The effect of
changes in foreign exchange rates on realized and unrealized security gains and
losses is reflected as a component of such gains and losses.
FOREIGN CURRENCY CONTRACTS -- The Trust may use foreign currency contracts to
facilitate transactions in foreign securities and to manage the Trust's currency
exposure.
Contracts to buy generally are used to acquire exposure to foreign currencies,
while contracts to sell are used to hedge the Trust's investments against
currency fluctuations. Also, a contract to buy or sell can offset a previous
contract. Losses may arise from changes in the value of the foreign currency or
if the counterparties do not perform under the contractual terms.
The U.S. dollar value of forward foreign currency contracts is determined using
forward currency exchange rates supplied by The Wall Street Journal. Purchases
and sales of forward foreign currency contracts having the same settlement date
are offset, and any gain or loss is recognized on the date of offset; otherwise,
the gain or loss is recognized on the settlement date.
DIVIDENDS AND DISTRIBUTIONS -- Each series declares dividends annually. Net
realized gains from security transactions, if any, are distributed annually.
OTHER -- As is common in the industry, security transactions are accounted for
no later than the day following the date the securities are purchased or sold.
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily.
38
<PAGE> 40
SECURITY FIRST TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE B -- REMUNERATION OF MANAGER AND OTHERS
Bond Series and T. Rowe Price Growth and Income Series:
Security First Investment Management Corporation (Security Management or
Manager) serves as both investment adviser and manager, and is entitled by
agreement to a monthly fee equal to 1/24 of 1% of the average daily net asset
value of the Bond Series and Growth and Income Series (equivalent annually to
.5%), less compensation payable to the Series' sub-advisers, Neuberger & Berman,
LLC (Bond Series) and T. Rowe Price Associates (Growth and Income Series).
However, to the extent that operating expenses (including management fees but
excluding interest and taxes and certain extraordinary expenses) of each series
exceed 2.5% of the first $30 million of each series' average daily net assets,
2.0% of the next $70 million of each series' average daily net assets, and 1.5%
of each series' average daily net assets in excess of that amount, calculated on
the basis of each series' fiscal year (the expense limitation), the agreement
requires that Security Management waive its fee. In addition, for the year ended
July 31, 1998, Security Management has also agreed to reimburse the Bond Series
for any remaining expenses exceeding a limitation equivalent annually to 1.5%.
Security Management may elect on an annual basis to reimburse the Series for
future excess expenses.
If during the fiscal year repayments are made to the Manager and the series'
expenses subsequently exceed the expense limitation, the Series shall recover
such repayments from the Manager to the extent of the excess determined.
Conversely, if during the fiscal year repayments are made by the Manager and the
series' expenses subsequently are within the expense limitation, the Manager
shall recover such repayments to the extent of the excess repaid. It is
management's opinion that it is reasonably possible that actual operating
expense may be less than the expense limitation; however, in accordance with the
requirements of FASB Statement No. 5, no accrual has been made for the
contingent obligation to repay Security Management for excess expense
reimbursements since the conditions required for such accrual have not, in the
opinion of management, been met. As of July 31, 1998, the T. Rowe Price Growth
and Income Series has a receivable from Security Management for $366,000 in
administrative settlements.
T. Rowe Price Associates provides investment advice and makes investment
decisions for the Growth and Income Series, while Neuberger & Berman, LLC
provides the same for the Bond Series. T. Rowe Price Associates and Neuberger &
Berman, LLC are each paid an annual fee of .35% of the average daily net assets
of the series for which they respectively provide investment advice less any
compensation payable to Security Management acting as adviser on certain assets
in which a series may invest.
39
<PAGE> 41
SECURITY FIRST TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE B -- REMUNERATION OF MANAGER AND OTHERS (CONTINUED)
Equity Series and U.S. Government Income Series:
Security Management serves as both investment adviser and manager, and is
entitled by agreement to a monthly fee equal to 1/17 of 1% (equivalent annually
to .7%) of the average daily net asset value of the Equity Series and 1/22 of 1%
(equivalent annually to .55%) of the average daily net asset value of the U.S.
Government Income Series, less compensation payable to the Series' sub-advisers,
Blackrock, Inc. (Blackrock) for the U.S. Government Income Series and
Blackrock's subsidiary, Provident Capital Financial Management, Inc. (Provident)
for the Equity Series. However, to the extent that operating expenses (including
management fees but excluding interest and taxes and certain extraordinary
expenses) of each series exceed 2.5% of the first $30 million of each series'
average daily net assets, 2.0% of the next $70 million of each series' average
daily net assets and 1.5% of each series' average daily net assets in excess of
that amount, calculated on the basis of each series' fiscal year (the expense
limitation), the agreement requires that Security Management, Blackrock, and
Provident waive their fees.
Effective March 27, 1988, Blackrock became sub-adviser to the U.S. Government
Income Series and Provident became sub-adviser on the Equity Series. Blackrock
provides investment advice and makes investment decisions for the U.S.
Government Income Series while Provident does the same for the Equity Series.
Blackrock is paid an annual fee of .40% of the average daily net assets of the
U.S. Government Income Series and Provident is paid an annual fee of .55% of the
average daily net assets of the Equity Series.
Prior to March 27, 1988, Virtus Capital Management (Virtus) had been both the
Equity Series and U.S. Government Income Series sub-adviser. Virtus had been
paid an annual fee of .75% of the average daily net assets of the two series.
While they were not obligated to do so, Security Management and Virtus had
agreed to defer their fees (and make contributions in respect of excess
expenses) in order to maintain the expense ratios of the Equity Series and the
U.S. Government Income Series at a level of 1.00% and .70% respectively, or
less.
40
<PAGE> 42
SECURITY FIRST TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE C -- INVESTMENT SECURITIES TRANSACTIONS
Purchases and sales of fixed maturities and equity securities for the period
ended July 31, 1998 were as follows:
<TABLE>
<CAPTION>
T. Rowe Price
Growth U.S.
and Government
Income Equity Income
Bond Series Series Series Series
------------ ------------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Government Securities:
Purchases $16,117,622 $40,083,538
Sales 12,263,203 32,460,031
Other Investment Securities:
Purchases 6,635,580 $109,709,217 $58,330,327 1,377,318
Sales 2,997,759 23,697,140 44,957,272
</TABLE>
Net realized gain or loss on sale of investments is determined by the specific
identification method and would not have been significantly different using the
average cost method. The cost of investments at July 31, 1998 was the same for
both financial statement and federal income tax purposes. At July 31, 1998, the
composition of unrealized appreciation and depreciation of investment securities
was as follows:
<TABLE>
<CAPTION>
Unrealized
------------------------------
Appreciation Depreciation Net
------------ ------------ -----------
<S> <C> <C> <C>
Bond Series $ 237,384 $ 22,871 $ 214,513
T. Rowe Price Growth and Income Series 80,084,052 11,330,424 68,753,728
Equity Series 8,520,981 2,589,553 5,931,428
U.S. Government Income Series 498,459 18,048 480,411
</TABLE>
41
<PAGE> 43
SECURITY FIRST TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE D -- CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of the Trust were as follows:
<TABLE>
<CAPTION>
Shares Issued
in Connection
with Reinvestment of
-----------------------------
Net Net
Investment Realized
Income Gain
Sold Distributions Distributions Redeemed Net
--------- ------------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 31, 1998
Bond Series 1,821,690 164,017 (270,227) 1,715,480
T. Rowe Price Growth and Income Series 4,129,204 270,050 866,173 (313,712) 4,951,715
Equity Series 797,059 63,241 535,647 (821,153) 574,794
U.S. Government Income Series 1,267,299 286,579 (683,910) 869,968
YEAR ENDED JULY 31, 1997
Bond Series 697,683 153,044 (519,644) 331,083
T. Rowe Price Growth and Income Series 3,217,205 223,202 410,369 (561,799) 3,288,977
Virtus Equity Series 2,258,599 68,155 279,366 (209,066) 2,397,054
Virtus U.S. Government Income Series 2,512,098 151,669 (166,573) 2,497,194
</TABLE>
NOTE E -- IMPACT OF YEAR 2000 (UNAUDITED)
Security Management has developed a plan to modify its internal information
technology systems to be ready for the year 2000 and has begun converting
critical data processing systems. The project also includes determining whether
third party service providers have reasonable plans in place to become year 2000
compliant. Security Management currently expects the project to be substantially
complete by the first quarter of 1999. Security Management does not expect this
project to have a significant effect on plan operations.
42
<PAGE> 44
SECURITY FIRST TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE F -- FINANCIAL HIGHLIGHTS
The per share information for each respective series' capital stock outstanding
throughout the period is as follows:
<TABLE>
<CAPTION>
NET REALIZED TOTAL
AND INCOME DISTRIBUTIONS
NET ASSET UNREALIZED (LOSSES) DIVIDENDS FROM NET ASSET
VALUE AT NET GAINS FROM FROM NET REALIZED VALUE AT
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT INVESTMENT CAPITAL END OF TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME GAINS PERIOD RETURN(1)
---------- ---------- ----------- ---------- ---------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BOND SERIES
Year ended July 31,
1994 $ 4.08 $.21 $(.25) $(.04) $(.22) $ 3.82 (0.98)%
1995 3.82 .24 .08 .32 (.22) 3.92 8.38
1996 3.92 .24 (.04) .20 (.24) 3.88 5.10
1997 3.88 .24 .14 .38 (.24) 4.02 9.79
1998 4.02 .19 .11 .30 (.21) 4.11 7.46
T. ROWE PRICE
GROWTH AND
INCOME SERIES
Year ended July 31,
1994 $ 8.81 $.23 $ .44 $.67 $(.22) $ 9.26 7.60%
1995 9.26 .29 1.35 1.64 (.26) $(.06) 10.58 17.71
1996 10.58 .30 1.56 1.86 (.30) (.04) 12.10 17.58
1997 12.10 .30 4.69 4.99 (.29) (.54) 16.26 41.24
1998 16.26 .28 1.27 1.55 (.30) (.95) 16.56 9.53
EQUITY SERIES
Year ended July 31,
1994 $ 5.00 $.05 $(.03) $.02 $(.03) $4.99 0.40%
1995 4.99 .05 .71 .76 (.05) 5.70 15.23
1996 5.70 .10 .46 .56 (.05) $(.16) 6.05 9.82
1997 6.05 .09 2.60 2.69 (.11) (.45) 8.18 44.46
1998 8.18 .07 1.04 1.11 (.08) (.64) 8.57 13.57
U.S. GOVERNMENT
INCOME SERIES
Year ended July 31,
1994 $ 5.07 $.11 $(.19) $(.08) $(.07) $(.01) $ 4.91 (1.58)%
1995 4.91 .21 .15 .36 (.14) 5.13 7.33
1996 5.13 .18 .04 .22 (.19) (.01) 5.15 4.29
1997 5.15 .23 .20 .43 (.22) 5.36 8.35
1998 5.36 .27 .06 .33 (.24) 5.45 6.16
</TABLE>
- ----------
(1) Total return computed after deduction of all series expenses, but before
deduction of actuarial risk charges and other fees of the variable annuity
account.
43
<PAGE> 45
SECURITY FIRST TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE F -- FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET
OPERATING INVESTMENT
EXPENSES INCOME PORTFOLIO NET ASSETS
TO AVERAGE TO AVERAGE TURNOVER END OF
NET ASSETS NET ASSETS RATE PERIOD
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
BOND SERIES
Year ended July 31,
1994 1.30% 5.45% 58% $ 7,225,964
1995 1.29 6.27 56 7,977,781
1996 .90 6.32 34 8,981,365
1997 .75 6.41 54 10,634,720
1998 .73 5.78 125 17,934,392
T. ROWE PRICE
GROWTH AND INCOME SERIES
Year ended July 31,
1994 .78% 2.62% 11% $ 65,660,970
1995 .74 3.10 8 83,789,646
1996 .64 2.73 8 112,552,893
1997 .57 2.44 14 204,703,098
1998 .57 1.92 11 290,441,528
EQUITY SERIES
Year ended July 31,
1994 1.00% 1.38% 121% $ 3,007,073
1995 1.00 1.29 84 7,765,719
1996 1.00 2.24 88 20,701,776
1997 1.00* 1.56* 55 47,571,469
1998 .91* .86* 87 54,803,152
U.S. GOVERNMENT INCOME SERIES
Year ended July 31,
1994 .70% 3.62% 17% $ 3,424,487
1995 .70 5.19 16 5,996,149
1996 .70 5.38 148 14,888,824
1997 .70** 5.68** 62 28,889,460
1998 .66** 5.53** 103 34,090,919
</TABLE>
* The former investment adviser had agreed to waive a portion of its
management and advisory fees. Absent this agreement, the ratio of expenses
to average net assets and the ratio of net investment income to average net
assets would have been .98% and .81% and 1.05% and 1.51% for 1998 and 1997
respectively.
** The former investment adviser had agreed to waive a portion of its
management and advisory fees. Absent this agreement, the ratio of expenses
to average net assets and the ratio of net investment income to average net
assets would have been .90% and 5.27% and 1.04% and 5.34% for 1998 and 1997
respectively.
44
<PAGE> 46
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders
Security First Trust
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of the Security First Trust's Bond Series, T.
Rowe Price Growth and Income Series, the Equity Series (formerly the Virtus
Equity Series), and the U.S. Government Income Series (formerly the Virtus U.S.
Government Income Series) as of July 31, 1998, the related statements of
operations for the year then ended and the changes in net assets for each of the
two years in the period then ended. These financial statements are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of July 31, 1998, by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Security First Trust's Bond
Series, T. Rowe Price Growth and Income Series, the Equity Series (formerly the
Virtus Equity Series) and the U.S. Government Income Series (formerly the Virtus
U.S. Government Income Series) at July 31, 1998, the results of their operations
for the year then ended, and the changes in their net assets for each of the two
years in the period then ended in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
September 14, 1998
Los Angeles, California
<PAGE> 47
ANNUAL REPORT
JULY 31, 1998
SECURITY
FIRST
TRUST
----------------------------
BOARD OF TRUSTEES
----------------------------
Jack R. Borsting Howard H. Kayton
Katherine L. Hensley Lawrence E. Marcus
Security First Trust Bond Series
Security First Trust T. Rowe Price Growth and Income Series
Security First Trust Equity Series
Security First Trust U.S. Government Income Series
VARIABLE ANNUITIES OFFER
CHOICES AND BENEFITS THAT
REGULAR MUTUAL FUNDS CAN'T
Tax-deferred retirement savings plans are among the best investments a
person can make today for his or her future. As a vehicle for creating
tax-favored retirement savings, variable annuities offer many advantages.
A variable annuity offers the opportunity to invest in a diversified
portfolio of securities similar to mutual funds. Taxes are deferred on all
dividends and on all increases in portfolio value until you take your money out.
At retirement, another significant advantage is that the variable annuity
can provide you with income that is based on the performance of the fund or
funds in which you participated. You may elect to receive monthly, quarterly or
annual payments for a specified number of years, your lifetime, or the longer of
your lifetime and the lifetime of your joint payee. See your policy for specific
options available to you.
The Security First Trust series offers you a choice of professionally
managed options. You may invest in a Bond Series, Growth and Income Series,
Equity Series, or U.S. Government Income Series, each with a varying degree of
risk:
SECURITY FIRST TRUST BOND SERIES is for conservative investors. The
objective is to achieve the highest investment income over the long term
consistent with the preservation of capital.
SECURITY FIRST TRUST T. ROWE PRICE GROWTH AND INCOME SERIES is for
individuals willing to accept a degree of risk. The fund's goal is growth of
principal with a reasonable level of income primarily through investment in
common stocks.
SECURITY FIRST TRUST EQUITY SERIES also seeks to provide growth of capital
and income through investment in common stocks of high quality companies. The
fund is for individuals willing to accept a degree of risk.
SECURITY FIRST TRUST U.S. GOVERNMENT INCOME SERIES is for conservative
investors and seeks to provide current income through investment in a
diversified portfolio limited primarily to U.S. government securities.
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