-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AyEZznBXrFfok53TK0yW2vjgvBsK/21OzwHg+9W7oJKHsZbTVdBEe4L/W0DQkcsP I8m/hFyLg3fxgoiQqDRbUw== 0000088525-96-000026.txt : 19961210 0000088525-96-000026.hdr.sgml : 19961210 ACCESSION NUMBER: 0000088525-96-000026 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961209 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SECURITY EQUITY FUND CENTRAL INDEX KEY: 0000088525 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 486104426 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-01136 FILM NUMBER: 96677568 BUSINESS ADDRESS: STREET 1: 700 HARRISON ST CITY: TOPEKA STATE: KS ZIP: 66636 BUSINESS PHONE: 9132953127 MAIL ADDRESS: STREET 1: 700 HARRISON ST CITY: TOPEKA STATE: KS ZIP: 66636 N-30D 1 ANNUAL REPORT SECURITY FUNDS ANNUAL REPORT SEPTEMBER 30, 1996 * SECURITY GROWTH AND INCOME FUND * SECURITY EQUITY FUND - EQUITY SERIES - GLOBAL SERIES - ASSET ALLOCATION SERIES * SECURITY ULTRA FUND [SDI LOGO] PRESIDENT'S COMMENTARY - -------------------------------------------------------------------------------- NOVEMBER 15, 1996 SECURITY FUNDS To Our Shareholders: The fiscal year completed September 30 has been another very rewarding period for equity investors. The Dow Jones Industrial Average increased 23.54% in the past twelve months, the Standard & Poor's 500 gained 20.32%, and the Russell 2000 Index was up 12.83%. Your equity portfolios in the Security Funds family all turned in excellent performances, with double-digit total returns. ECONOMIC CONTRIBUTIONS TO EQUITY PERFORMANCE The leading contributor to strong markets this fiscal year was moderate but stable growth of the economy in an environment marked by the absence of accelerating inflation. Moreover, the global inflation story was positive as well, with declining rates of inflation in most of the world's major economies. This was a powerful contributor to global economic growth and interest rate stability throughout the year. Such a climate is extremely favorable for corporate earnings. A second factor encouraging equity growth was productivity improvement. As the technological revolution has progressed, both workers and plant assets have been employed more efficiently and costs have been reduced. This has generated uninterrupted growth in corporate earnings and accordingly, equity market growth. A CORRECTION MAY BE IN THE CARDS As the next fiscal year unfolds, we expect some changes to develop in the economic picture. An economic slowdown, while not necessarily inevitable, may take place in the second half of 1997 that might be sufficient to produce a short-lived consumer recession. This would be accompanied by declining corporate profits and the possibility of a correction in stock prices. [PHOTO OF JOHN CLELAND] JOHN CLELAND, PRESIDENT We expect, however, that the correction would be short in time. In our view, the globalization of the world's economy makes it unlikely that any one country's economic contraction would last very long. Many companies in Europe and Asia are early in their productivity improvement processes. Competitiveness, as well as earnings which are global in nature, will keep companies worldwide working hard at cost efficiency and earnings growth. OUR VIEW OF THE LONG TERM Volatility remains the constant companion of equity investors. Because of ever-growing liquidity in the financial markets, traders can more rapidly respond to reports of all kinds, moving markets oftentimes in wide swings. However, long-term investors are able to step back and view the broader upward trends in the market indexes without overreacting to daily changes. We believe that the long-term bull market for financial assets remains intact. The world in general is at peace with the United States, the only surviving global superpower. This continues to provide a positive outlook for financial markets as we approach the dawn of the twenty-first century. As always, we are pleased that you have chosen us to manage your investments. We invite your questions or comments at any time. Sincerely, JOHN CLELAND John Cleland President - -------------------------------------------------------------------------------- 1 MANAGER'S COMMENTARY - -------------------------------------------------------------------------------- NOVEMBER 15, 1996 SECURITY GROWTH AND INCOME FUND To Our Shareholders: At the close of the fiscal year completed September 30 we look back with surprise at the strength of the market. A year ago we felt that corporate earnings in 1996 would slow, in turn limiting the stock market to a modest upside movement. Instead earnings remained strong even in the face of rising interest rates, and the stock markets reached record highs. Your Growth and Income Fund returned 20.31% for the year, topping last year's return and paralleling the 20.32% gain for the Standard & Poor's 500 Index.* CONTRIBUTORS TO STRONG PERFORMANCE The greatest exposure in the portfolio was to companies with high quality, consistently above-average earnings and low economic sensitivity. Our analytical efforts paid off as we worked to identify good earnings prospects. Many, such as Walgreens Company, a chain of retail drug stores, were in the consumer nondurable goods sector and had low economic sensitivity. Issues including Smithkline Beecham PLC ADR and Merck & Company, Inc. in the health care industry generated solid earnings as they felt little impact from rising interest rates. Albertson's, Inc., a food retailer, also was a strong performer, showing very little sensitivity to a moderating economy. Even though the technology sector was more volatile than many other areas, a strong-performing stock in the portfolio was Microsoft Corporation, increasing over 65% since purchase in early 1996. Another outstanding performer was U.S. Industries, Inc., a manufacturing and distribution conglomerate, which posted a 75% gain in its stock price since we added it to our holdings. THE FIXED INCOME PORTION OF THE PORTFOLIO Consistently throughout the fiscal year about 20% of the fund's portfolio was invested in high yield bonds. This portion contained both BB and B-rated issues, Standard & Poor's two highest rating categories in the high yield area of the fixed income market. Companies in these rating categories exhibit stronger balance sheets than their lower-rated counterparts, and generally will hold their value better in the event of an economic slowdown. Corporate buyouts played a substantial part in the total return contribution of the bond holdings. Cable television operator Continental Cablevision was purchased by U.S. West, Inc., a telecommunications service provider. Because U.S. West was rated higher, our Continental Cablevision bonds benefitted from an upgrade after the purchase. A similar situation in the finance industry involved Keystone Group, a mutual fund company, and its acquiror, a bank holding company called First Union Corporation. The perception that Keystone will soon be upgraded to First Union's ranking drove the price upward. [PHOTO OF THE SECURITY MANAGEMENT GROWTH-INCOME TEAM] THE SECURITY MANAGEMENT GROWTH-INCOME TEAM: (L-R) CHUCK LAUBER, TERRY MILBERGER, TOM SWANK, JIM SCHIER AND (SEATED) JOHN CLELAND LOOKING AHEAD We expect the long-awaited economic slowdown to unfold sometime in 1997. The path we pursued in 1996-focusing on stable growth companies-should continue to serve us well in that event. When economic strength resumes after this period of moderation, it is likely that we will increase our exposure to stocks of a more cyclical nature such as chemicals, paper producers, capital goods-related industries and the housing industry. Terry Milberger Senior Portfolio Manager Tom Swank Portfolio Manager *Performance figures are based on Class A shares and do not reflect deduction of the sales charge. - -------------------------------------------------------------------------------- 2 MANAGER'S COMMENTARY (CONTINUED) - -------------------------------------------------------------------------------- NOVEMBER 15, 1996 SECURITY GROWTH AND INCOME FUND PERFORMANCE ------------------------------------------------------------------- SECURITY GROWTH AND INCOME FUND VS. S&P 500 [LINE GRAPH WITH FOLLOWING INFORMATION CHARTED] BLENDED INDEX OF 80% S&P 500 AND 20% LEHMAN BROTHERS LONG BB SECURITY GROWTH HIGH YIELD AND INCOME FUND S&P 500 BOND INDEX ---------------------------------------------------------------- 12/31/86 9,647.52 10,558.65 10,539 3/31/87 11,073.61 12,811.51 12,471 6/30/87 11,466.66 13,452.05 12,960 9/30/87 11,765.21 14,340.79 13,608 12/31/87 9,732.90 11,108.76 11,213 3/31/88 10,287.69 11,639.74 11,898 6/30/88 10,629.71 12,411.48 12,607 9/30/88 10,482.14 12,450.80 12,732 12/31/88 10,776.56 12,830.71 13,152 3/31/89 11,437.43 13,738.04 13,920 6/30/89 12,146.18 14,948.76 15,054 9/30/89 12,714.35 16,546.27 16,427 12/31/89 12,978.10 16,882.45 16,783 3/31/90 12,493.36 16,371.56 16,418 6/30/90 12,572.14 17,396.25 17,347 9/30/90 11,978.80 15,017.92 15,365 12/31/90 12,589.17 16,355.85 16,483 3/31/91 13,681.07 18,723.54 18,691 6/30/91 13,895.14 18,684.26 19,449 9/30/91 14,645.95 19,683.96 19,743 12/31/91 15,341.48 21,321.71 21,257 3/31/92 15,050.76 20,786.06 20,991 6/30/92 14,903.63 21,182.53 21,434 9/30/92 15,329.00 21,683.89 22,092 12/31/92 16,079.63 22,770.27 23,126 3/31/93 16,803.06 23,758.75 24,163 6/30/93 16,955.43 23,873.65 24,497 9/30/93 17,721.93 24,488.58 25,191 12/31/93 17,394.03 25,053.11 25,820 3/31/94 16,974.35 24,111.23 24,852 6/30/94 15,908.79 24,217.77 24,838 9/30/94 16,368.88 25,402.86 25,888 12/31/94 16,027.39 25,397.70 25,924 3/31/95 16,967.16 27,864.59 28,376 6/30/95 18,571.77 30,516.98 31,107 9/30/95 19,683.37 32,938.57 33,285 12/31/95 20,475.35 34,917.17 35,236 3/31/96 21,867.19 36,787.15 36,693 6/30/96 22,730.29 38,433.91 38,018 9/30/96 23,681.51 39,610.93 39,196 $10,000 OVER TEN YEARS This chart assumes a $10,000 investment in Class A shares of Growth and Income Fund on September 30, 1986, and reflects deduction of the 5.75% sales load. On September 30, 1996, the value of your investment in Class A shares of the fund (with dividends reinvested) would have grown to $23,682. By comparison, the same $10,000 investment would have grown to $39,611 based on the S&P's performance. Comparison is also made to a blend of market indexes which reflect the asset classes in which the Fund invests. The blended index consists of 80% S&P 500 and 20% Lehman Brothers Long BB High Yield Index. The same $10,000 investment in the blended index would have grown to $39,005. The performance illustrated above is based on the performance of Class A shares. The performance of Class B shares, which were first offered on October 19, 1993, will be greater or less than the performance shown for Class A shares as a result of the different loads and fees associated with an investment in Class B shares. TOP 5 HOLDINGS** % OF NET ASSETS ---------- Monsanto Company 1.7% Oracle Corporation 1.7% American Home Products Corporation 1.7% Chase Manhattan Corporation 1.6% Eastman Kodak Company 1.6% **At September 30, 1996 AVERAGE ANNUAL RETURNS As of September 30, 1996 1 year 5 years 10 years ---------------------------- A Shares 20.31% 10.09% 9.65% A Shares with sales charge 13.45% 8.78% 9.00% B Shares 19.01% 9.41% N/A (10-19-93) B Shares with CDSC 14.01% 8.55% N/A (10-19-93) ONE YEAR RETURN PARALLELS INDEX A SHARES - 20.31% S&P 500 - 20.32% The performance data above represents past performance which is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or contingent deferred sales charge of 5% for Class B shares, as applicable, except where noted. Such figures would be lower if the maximum sales charge were deducted. - -------------------------------------------------------------------------------- 3 MANAGER'S COMMENTARY - -------------------------------------------------------------------------------- NOVEMBER 15, 1996 SECURITY EQUITY FUND - EQUITY SERIES To Our Shareholders: The stock markets during the fiscal year completed September 30 surprised us with their strength. Your Equity Series showed outstanding growth, returning 24.90% for the year compared with the Standard & Poor's 500 Index return of 20.32%.* A year ago at this time we anticipated that corporate earnings would slow in 1996, limiting the stock market to a modest rise at best. Instead earnings remained strong despite slightly higher interest rates, and the equity markets reached record high levels. GROWTH ORIENTATION PRODUCES EXCELLENT RETURNS Throughout the year we have maintained a preference for growth companies. The basic portfolio mix has been heavily weighted toward firms exhibiting high quality, above-average earnings growth. For example, one of our best performers has been Safeway, Inc. a grocery retailing chain which has been restructuring to improve their expense structure. This realignment has produced increasing profit margins, resulting in a stock price that more than doubled in the past twelve months. We have kept a large exposure to the healthcare industry, a sector which is now reaping the benefits of cost cutting and many promising new products. The stock of American Home Products Corporation has exhibited steady growth since the company purchased American Cyanamid. Investors perceive that the merger will bring cost efficiencies to the combined company which will lead to higher value. Another company in this sector, Shering-Plough Corporation, has an excellent outlook because of its new product flow. In the highly volatile technology sector we held Microsoft Corporation stock which appreciated over 65% since we purchased it. We also maintained an overweighted position in the aerospace/defense area, including such names as Lockheed Martin Corporation and McDonnell Douglas Corporation. On the negative side, we held a lower weighting than the S&P 500 Index in banking and in the energy sector. Banks were surprisingly strong performers despite rising interest rates, and oil prices have increased much more than anticipated. [PHOTO OF THE SECURITY MANAGEMENT LARGE CAP TEAM] THE SECURITY MANAGEMENT LARGE CAP TEAM JOHN CLELAND, TERRY MILBERGER, CHUCK LAUBER PLANS FOR THE COMING YEAR We think our blend of growth issues and selected value stocks is unique among growth funds. We believe that over time, this combination lowers the fund's volatility while increasing the potential for strong returns. We expect to continue our same strategy over the coming months, given our outlook for a moderating economy in 1997. We plan to maintain an emphasis on companies with above-average earnings growth, including those with exposure to foreign earnings. We think that many foreign economies have the potential to show better growth in the months ahead than the U.S. economy will generate. Terry Milberger Portfolio Manager *Performance figures are based on Class A shares and do not reflect deduction of the sales charge. - -------------------------------------------------------------------------------- 4 MANAGER'S COMMENTARY (CONTINUED) - -------------------------------------------------------------------------------- NOVEMBER 15, 1996 SECURITY EQUITY FUND - EQUITY SERIES PERFORMANCE ------------------------------------------------------------------- SECURITY EQUITY SERIES VS. S&P 500 [LINE GRAPH WITH FOLLOWING INFORMATION CHARTED] Equity Series S&P 500 ------------------------------------------------------ 12/31/86 9,821.47 10,558.65 3/31/87 11,736.94 12,811.51 6/30/87 12,233.07 13,452.05 9/30/87 13,181.37 14,340.79 12/31/87 10,238.37 11,108.76 3/31/88 10,934.18 11,639.74 6/30/88 11,331.79 12,411.48 9/30/88 11,754.25 12,450.80 12/31/88 12,200.27 12,830.71 3/31/89 13,219.09 13,738.04 6/30/89 14,543.55 14,948.76 9/30/89 16,632.11 16,546.27 12/31/89 15,953.97 16,882.45 3/31/90 15,518.86 16,371.56 6/30/90 16,505.10 17,396.25 9/30/90 13,981.48 15,017.92 12/31/90 15,215.92 16,355.85 3/31/91 17,827.12 18,723.54 6/30/91 17,859.35 18,684.26 9/30/91 18,762.00 19,683.96 12/31/91 20,576.87 21,321.71 3/31/92 20,823.93 20,786.06 6/30/92 20,541.58 21,182.53 9/30/92 20,682.76 21,683.89 12/31/92 22,781.62 22,770.27 3/31/93 24,177.18 23,758.75 6/30/93 23,988.59 23,873.65 9/30/93 25,384.15 24,488.58 12/31/93 26,113.40 25,053.11 3/31/94 25,179.11 24,111.23 6/30/94 24,758.69 24,217.77 9/30/94 25,879.83 25,402.86 12/31/94 25,444.24 25,397.70 3/31/95 27,917.98 27,864.59 6/30/95 30,694.64 30,516.98 9/30/95 33,067.42 32,938.57 12/31/95 35,220.14 34,917.17 3/31/96 38,068.41 36,787.15 6/30/96 39,711.67 38,433.91 9/30/96 41,300.13 39,610.93 $10,000 OVER TEN YEARS This chart assumes a $10,000 investment in Class A shares of Equity Series on September 30, 1986, and reflects deduction of the 5.75% sales load. On September 30, 1996, the value of your investment in Class A shares of the Series (with dividends reinvested) would have grown to $41,300. By comparison, the same $10,000 investment would have grown to $39,611 based on the S&P's performance. The performance illustrated above is based on the performance of Class A shares. The performance of Class B shares, which were first offered on October 19, 1993, will be greater or less than the performance shown for Class A shares as a result of the different loads and fees associated with an investment in Class B shares. TOP 5 HOLDINGS** % OF NET ASSETS ---------- AlliedSignal, Inc. 1.7% American Home Products Corporation 1.7% U.S. Industries, Inc. 1.6% Bristol-Myers Squibb Company 1.6% Chase Manhattan Corporation 1.6% **At September 30, 1996 AVERAGE ANNUAL RETURNS As of September 30, 1996 1 year 5 years 10 years ---------------------------- A Shares 24.90% 17.09% 15.92% A Shares with sales charge 17.71% 15.70% 15.24% B Shares 23.57% 16.34% N/A (10-19-93) B Shares with CDSC 18.57% 15.58% N/A (10-19-93) The performance data above represents past performance which is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or contingent deferred sales charge of 5% for Class B shares, as applicable, except where noted. Such figures would be lower if the maximum sales charge were deducted. - -------------------------------------------------------------------------------- 5 MANAGER'S COMMENTARY - -------------------------------------------------------------------------------- NOVEMBER 15, 1996 SECURITY EQUITY FUND - GLOBAL SERIES [LEXINGTON LOGO] SUBADVISOR - LEXINGTON MANAGEMENT CORPORATION To Our Shareholders: The Global Series of Security Equity Fund had an outstanding year in the fiscal year completed September 30, posting a 17.73% gain.* This compares favorably with both the 13.01% average return of its peer group and the 12.98% advance of its benchmark, the Morgan Stanley Capital International World Index.** WORLD EQUITY MARKET PERFORMANCE Stock markets in both Europe and North America performed well the past year while many Far Eastern markets suffered. Japan and Thailand, for example, both declined over the most recent quarter. Hong Kong, conversely, continued to post strong gains due to an improving outlook for interest rates and property prices there. The Global Series portfolio benefitted from its overweighting in Europe. Interest sensitive stocks did well as weak economies and rising expectations for monetary union pushed interest rates lower. Our holdings in Greece and Poland also added to overall gains. The portfolio's underweighting in the United States dampened performance, however, as that market turned in strong results. THE GLOBAL ECONOMIC PICTURE The outlook for the global economy remains mixed. The U.S. economy is doing well with growth in the 2% to 3% range and inflation remaining subdued. Global equity markets should continue to enjoy a positive environment unless U.S. growth and inflation accelerate, forcing global bond yields higher. The U.S. stock market looks less appealing than those overseas due to an anemic profit outlook combined with high prices for stocks. [PHOTO OF RICHARD SALER] [PHOTO OF ALAN WAPNICK] RICHARD SALER ALAN WAPNICK PORTFOLIO MANAGER PORTFOLIO MANAGER European communities are struggling to maintain any growth at all. Governments are attempting to reduce budget deficits in order to qualify for European Monetary Union membership. This fiscal drag, along with double digit unemployment rates, is keeping growth to a minimum. Equity investors are benefitting from several factors. Because inflation remains low and deficits are being cut, interest rates continue to fall, propelling stock prices to record highs in many European markets. The European profit outlook is excellent as companies are aggressively cutting costs to improve competitiveness. The Japanese economy has finally emerged from recession, but with government fiscal stimulus slowing and a planned 2% increase in consumption taxes, the outlook going forward is muted. Most Japanese companies continue to be managed for the worker rather than the shareholder, reducing their long-term attractiveness. LOOKING FORWARD INTO 1997 We believe European stocks will continue to look attractive because interest rates should remain low for some time. Profits should continue to expand rapidly in many companies undergoing restructuring, as cost cutting will provide several years of margin expansion. The outlook for European monetary union has improved, and several sectors and countries will benefit from this. Japanese stocks are less exciting. Because of a subdued long-term profit outlook, their future remains cloudy. We believe that profits will surprise positively only if the yen continues to decline. In the emerging markets, Poland provides favorable opportunities. Greece is attractive also because of low equity valuations and the potential for falling interest rates if the newly elected government succeeds in bringing down the budget deficit. We feel that U.S. equities may underperform given their high valuations currently and the potential for profit disappointments. Richard Saler and Alan Wapnick Portfolio Managers *Performance figures are based on Class A shares and do not reflect deduction of the sales charge. **Peer group performance information based on data provided by Lipper Analytical Services, Inc. - -------------------------------------------------------------------------------- 6 MANAGER'S COMMENTARY (CONTINUED) - -------------------------------------------------------------------------------- NOVEMBER 15, 1996 SECURITY EQUITY FUND - GLOBAL SERIES PERFORMANCE ------------------------------------------------------------------- SECURITY GLOBAL SERIES VS. MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX [LINE GRAPH WITH FOLLOWING INFORMATION CHARTED] Global Series MSCI ------------------------------------------ 12/93 9,745.28 9,899.23 3/94 9,773.58 9,971.48 6/94 10,009.43 10,282.89 9/94 10,226.42 10,515.81 12/94 9,869.12 10,451.79 3/95 9,744.20 10,954.69 6/95 9,955.61 11,436.49 9/95 10,512.97 12,089.93 12/95 10,892.47 12,679.75 3/96 11,590.07 13,210.98 6/96 12,217.90 13,609.02 9/96 12,377.35 14,189.26 This chart assumes a $10,000 investment in Class A shares of Global Series on October 1, 1993, and reflects deduction of the 5.75% sales load. On September 30, 1996, the value of your investment in Class A shares of the Series (with dividends reinvested) would have grown to $12,377. By comparison, the same $10,000 investment would have grown to $14,189 based on the MSCI's performance. The performance illustrated above is based on the performance of Class A shares. The performance of Class B shares, which were first offered on October 19, 1993, will be greater or less than the performance shown for Class A shares as a result of the different loads and fees associated with an investment in Class B shares. PORTFOLIO BREAKDOWN BY COUNTRY (TOP 5)** % OF NET ASSETS ---------- United States 17.9% Japan 12.8% United Kingdom 8.1% Germany 6.1% France 6.0% **At September 30, 1996 AVERAGE ANNUAL RETURNS As of September 30, 1996 1 year Since Inception ------ --------------- A Shares 17.73% 9.47% (10-1-93) A Shares with sales charge 10.94% 7.33% (10-1-93) B Shares 16.57% 8.75% (10-19-93) B Shares with CDSC 11.57% 7.88% (10-19-93) The performance data above represents past performance which is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or contingent deferred sales charge of 5% for Class B shares, as applicable, except where noted. Such figures would be lower if the maximum sales charge were deducted. Investing in foreign countries may involve risks, such as currency fluctuations and political instability, not associated with investing exclusively in the U.S. - -------------------------------------------------------------------------------- 7 MANAGER'S COMMENTARY - -------------------------------------------------------------------------------- NOVEMBER 15, 1996 SECURITY EQUITY FUND - ASSET ALLOCATION SERIES [TEMPLETON LOGO] [MERIDIAN INVESTMENT MANAGEMENT LOGO] [SECURITY MANAGEMENT COMPANY, LLC LOGO] MANAGED BY SECURITY MANAGEMENT COMPANY, LLC RESEARCH PROVIDED BY MERIDIAN INVESTMENT MANAGEMENT CORPORATION AND TEMPLETON/FRANKLIN INVESTMENT SERVICES, INC. TEMPLETON/FRANKLIN'S RESEARCH IS DERIVED FROM RESEARCH PROVIDED BY A THIRD PARTY WHICH IS ANALYZED AND MONITORED BY TEMPLETON/FRANKLIN. To Our Shareholders: The newest member of the Security Equity Fund family, the Asset Allocation Series, returned a respectable 10.01% to its shareholders in the fiscal year ended September 30.* It is difficult in years when one asset category far outperforms the others, as the U.S. stock market has done the past twelve months, to compare an allocation funds results with those of other types of portfolios. Over the longer term, however, we believe the theories of reduced risk and favorable return that spawned the asset allocation concept will reward its investors. PERFORMANCE IN FISCAL YEAR 1996 The portfolio for the Asset Allocation Series can be divided among seven asset categories: U.S. stocks, foreign stocks, U.S. bonds, foreign bonds, real estate (through Real Estate Investment Trusts), gold stocks, and cash.** For most of the past year we have used all of these categories except gold stocks and cash. The sector allocations recommended by our outside provider of research, Meridian Investment Management Corporation, have been timely. Country recommendations in the foreign equity sector have been strong. However, certain industry choices within the U.S. equity sector have been disappointing. It appears that some of these shifts were too early. Meridian remains positive in their outlook for the industries now held in the portfolio. ALLOCATION CHANGES SINCE MID-YEAR Since the semiannual report was written, Meridian has recommended four allocation changes. The first, in early May, was to sell completely our position in the United Kingdom, and to sell the chemical stock portion of the U.S. equity portfolio. Proceeds from these sales were invested in Italy, raising exposure there to 5.4% of the total portfolio. [PHOTO OF JANE TEDDER] JANE TEDDER PORTFOLIO MANAGER In mid-June Meridian suggested that the Fund's entire cash position (2.65% of the total portfolio) be moved into the real estate sector. They believed that yields were very attractive relative both to the sector's long-term averages and to interest rates in general. This move was followed in July by sales of holdings in the shoe and housing industries in the U.S. equity sector, reinvesting a month later in restaurant and broadcast stocks. THOUGHTS ABOUT NEXT YEAR Going forward, we are considering the value of increasing exposure to bonds, both in the U.S. and foreign sectors. The money would be taken from the U.S. equity sector, which may be nearing a correction as economic growth slows. The research we have been receiving from Meridian indicates that foreign equities will likely outperform U.S. stocks in coming months, especially in Italy and Germany. From an economic standpoint, we believe the potential for rising inflation is slim. Therefore a position in gold stocks, a traditional inflation hedge, is not expected to be added. Jane Tedder Portfolio Manager *Performance figures are based on Class A shares and do not reflect deduction of the sales charge. **Investing in foreign countries may involve risks, such as currency fluctuations and political instability, not associated with investing exclusively in the U.S. - -------------------------------------------------------------------------------- 8 MANAGER'S COMMENTARY (CONTINUED) - -------------------------------------------------------------------------------- NOVEMBER 15, 1996 SECURITY EQUITY FUND - ASSET ALLOCATION SERIES PERFORMANCE ------------------------------------------------------------------- SECURITY ASSET ALLOCATION SERIES VS. S&P 500 [LINE GRAPH WITH FOLLOWING INFORMATION CHARTED] ASSET MERIDIAN ALLOCATION SERIES S&P 500 BLENDED INDEX ----------------------------------------------------------------- 6/30/95 9,500.47 10,277.96 10,083 7/31/95 9,820.92 10,604.75 10,391 8/31/95 9,811.50 10,601.17 10,348 9/30/95 9,934.02 11,090.91 10,607 10/31/95 10,056.55 11,035.31 10,520 11/30/95 10,056.55 11,488.30 10,829 12/31/95 10,158.02 11,756.45 11,109 1/31/96 10,424.82 12,139.91 11,320 2/29/96 10,464.34 12,224.09 11,348 3/31/96 10,563.16 12,385.41 11,445 4/30/96 10,770.67 12,551.95 11,599 5/31/96 10,899.12 12,838.99 11,694 6/30/96 10,790.43 12,941.36 11,784 7/31/96 10,405.06 12,349.31 11,479 8/31/96 10,592.80 12,581.65 11,640 9/30/96 10,928.77 13,339.23 12,052 This chart assumes a $10,000 investment in Class A shares of Asset Allocation Series on June 1, 1995, and reflects deduction of the 5.75% sales load. On September 30, 1996, the value of your investment in Class A shares of the Series (with dividends reinvested) would have grown to $10,929. By comparison, the same $10,000 investment would have grown to $13,339, based on the S&P's performance. Comparison is also made to a blend of market indexes which reflect the asset classes in which the Series has invested over the past fiscal year. The blended index consists of 40% S&P 500, 5% U.S. 30-day Treasury, 20% Lehman Brothers Aggregate Bond, 25% Financial Times World Index (excluding U.S.), 10% Wilshire Real Estate Securities. The same $10,000 investment in the blended index would have grown to $12,052. The performance illustrated above is based on the performance of Class A shares. The performance of Class B shares will be greater or less than the performance shown for Class A shares as a result of the different loads and fees associated with an investment in Class B shares. ASSET MIX** % OF NET ASSETS ---------- International Equities & Equivalents 32.9% U. S. Equities 34.5% U. S. Bonds 15.9% Real Estate 14.8% Cash & Equivalents 1.9% **At September 30, 1996 AVERAGE ANNUAL RETURNS As of September 30, 1996 1 year Since Inception ------ --------------- A Shares 10.01% 11.73% (6-1-95) A Shares with sales charge 3.69% 6.88% (6-1-95) B Shares 8.97% 10.63% (6-1-95) B Shares with CDSC 3.97% 7.71% (6-1-95) The performance data above represents past performance which is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or contingent deferred sales charge of 5% for Class B shares, as applicable, except where noted. In addition, the investment manager is waiving a portion of the management fee for the Series. Performance figures would be lower if the maximum sales charge and advisory fee were deducted. - -------------------------------------------------------------------------------- 9 MANAGER'S COMMENTARY - -------------------------------------------------------------------------------- NOVEMBER 15, 1996 SECURITY ULTRA FUND To Our Shareholders: The strength of the stock markets in the fiscal year completed September 30 has surprised us all. Small-cap and mid-cap stocks have turned in a fine performance over the year. Your Ultra Fund shares generated a 15.36% total return, strongly outperforming the 12.32% return of the fund's benchmark, the Standard & Poor's 400 Midcap Growth Stock Index.* CONTRIBUTORS TO A SUCCESSFUL YEAR Our nearly 30% weighting in technology for most of the year has proven to be a wise decision. We reduced the position prior to the summer months when the market experienced a period of correction, and reinvested in late summer as the upward movement resumed. Many of our holdings in this sector generated very strong returns. A software manufacturer called Viasoft, Inc. gained over 280% since we purchased the stock in January. The company has developed software which helps correct the "millenium" issue in mainframe computers. Many applications which still run on the COBOL language (the Department of Motor Vehicles, for example, still uses this system) will read the two-digit "00" as the year 1900 instead of 2000. The Viasoft program determines how much of the code must be changed and where in the program it appears. Another issue which we purchased in February, Cascade Communications Corporation, rose over 130% during the balance of the year. Cascade specializes in the networking area, manufacturing switches which are used in wide-area networks. These systems allow companies to communicate more rapidly with remote sites by speeding up the flow of data through the telephone lines. OTHER STRONG PERFORMING SECTORS The health care area has helped portfolio performance this year also. Dura Pharmaceuticals, Inc. has capitalized on the mergers of major pharmaceutical manufacturers by buying smaller market-share drugs from them. These products usually receive little attention from the major companies in terms of sales efforts. Dura is purchasing these drugs after they have already received FDA approval, and can concentrate their sales efforts to increase market penetration. Another holding in the health care sector is Guidant Corporation, a manufacturer of cardiac defibrillators which can be implanted in pectoral muscles to regulate heartbeats. [PHOTO OF THE SECURITY MANAGEMENT SMALL CAP TEAM] THE SECURITY MANAGEMENT SMALL CAP TEAM LARRY VALENCIA, FRANK WHITSELL, CINDY SHIELDS, JOHN CLELAND In the business services arena, an outstanding performer is Cambridge Technology Partners (Massachusetts), Inc. The company performs information technology consulting and software development. They assist companies in projects such as moving from their old mainframe computer systems to newer client/server environments. Protecting their clients from cost overruns, Cambridge performs these services for a guaranteed fixed cost and within a guaranteed time period. A LOOK FORWARD TO THE NEXT YEAR We think the U.S. economy will be slowing and inflation will remain under control. We expect small- and mid-cap stocks to outperform the large-cap issues in the months ahead. Large companies have been achieving earnings growth through cutting costs, while small companies have been expanding earnings through sales growth. In our opinion, investors may be willing to pay more for companies showing revenue gains from sales increases than through cost reductions. Overall, we believe the fiscal year ahead will be another favorable one for equity investors. Cindy Shields Portfolio Manager *Performance figures are based on Class A shares and do not reflect deduction of the sales charge. - -------------------------------------------------------------------------------- 10 MANAGER'S COMMENTARY (CONTINUED) - -------------------------------------------------------------------------------- NOVEMBER 15, 1996 SECURITY ULTRA FUND PERFORMANCE ------------------------------------------------------------------- SECURITY ULTRA FUND VS. S&P MIDCAP 400 [LINE GRAPH WITH FOLLOWING INFORMATION CHARTED] Security Ultra Fund S&P Midcap 400 ---------------------------------------------------------------- Dec-86 9,349.19 10,231.21 Mar-87 11,076.90 12,371.30 Jun-87 11,076.90 12,266.45 Sep-87 11,480.96 12,816.07 Dec-87 7,654.05 10,023.15 Mar-88 8,687.99 11,328.66 Jun-88 9,492.16 11,951.35 Sep-88 9,075.72 11,794.81 Dec-88 9,414.11 12,114.83 Mar-89 9,774.53 13,271.13 Jun-89 10,178.20 14,599.23 Sep-89 11,374.78 16,192.45 Dec-89 10,538.74 16,420.52 Mar-90 10,492.52 15,908.44 Jun-90 11,678.90 16,852.55 Sep-90 6,871.76 13,856.38 Dec-90 7,647.54 15,580.30 Mar-91 10,450.55 19,156.41 Jun-91 9,948.29 19,015.77 Sep-91 10,888.02 20,826.68 Dec-91 12,215.99 23,385.48 Mar-92 12,332.17 23,267.27 Jun-92 10,606.01 22,543.45 Sep-92 11,054.15 23,419.84 Dec-92 13,157.80 26,171.07 Mar-93 13,261.27 27,028.62 Jun-93 13,209.53 27,659.14 Sep-93 14,020.03 29,051.46 Dec-93 14,464.52 29,825.72 Mar-94 13,671.95 28,694.22 Jun-94 12,443.46 27,648.94 Sep-94 13,513.43 29,521.48 Dec-94 13,506.57 28,759.69 Mar-95 13,971.61 31,112.96 Jun-95 14,901.70 33,826.76 Sep-95 16,579.92 37,128.28 Dec-95 16,112.61 37,658.64 Mar-96 17,248.61 39,976.91 Jun-96 18,662.81 41,128.06 Sep-96 19,126.48 42,325.44 $10,000 OVER TEN YEARS This chart assumes a $10,000 investment in Class A shares of Ultra Fund on September 30, 1986, and reflects deduction of the 5.75% sales load. On September 30, 1996, the value of your investment in Class A shares of the fund (with dividends reinvested) would have grown to $19,126. In comparison, the same $10,000 investment would have grown to $42,325 based on the S&P's performance. The performance illustrated above is based on the performance of Class A shares. The performance of Class B shares, which were first offered on October 19, 1993, will be greater or less than the performance shown for Class A shares as a result of the different loads and fees associated with an investment in Class B shares. TOP 5 HOLDINGS** % OF NET ASSETS ---------- Franklin Resources, Inc. 1.9% Viasoft, Inc. 1.8% Dura Pharmaceuticals, Inc. 1.7% Cognos, Inc. (Cl. F) 1.7% HFS, Inc. 1.6% **At September 30, 1996 AVERAGE ANNUAL RETURNS As of September 30, 1996 1 year 5 years 10 years ---------------------------- A Shares 15.36% 11.93% 7.34% A Shares with sales charge 8.73% 10.61% 6.70% B Shares 13.81% 9.42% N/A (10-19-93) B Shares with CDSC 8.81% 8.56% N/A (10-19-93) ONE YEAR RETURN BEATS INDEX A SHARES - 15.36% S&P MIDCAP 400 - 12.32% The performance data above represents past performance which is not predictive of future results. The investment return and principal value of an investment in the fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The figures above do not reflect deduction of the maximum front-end sales charge of 5.75% for Class A shares or contingent deferred sales charge of 5% for Class B shares, as applicable, except where noted. Such figures would be lower if the maximum sales charge were deducted. - -------------------------------------------------------------------------------- 11 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY GROWTH AND INCOME FUND PRINCIPAL MARKET AMOUNT CORPORATE BONDS VALUE - -------------------------------------------------------------------------------- AUTOMOTIVE - 0.4% $300,000 Exide Corporation, 10.75% - 2002 ...................................... $313,500 BUILDING MATERIALS - 0.4% 250,000 Knoll, Inc., 10.875% - 2006 ..................................... 265,000 CHEMICALS - 0.4% 250,000 Environdyne Industries, Inc., 12% - 2000 ......................................... 267,813 COMMUNICATIONS - 2.9% 250,000 Allbritton Communication Company, 11.5% - 2004 ....................................... 265,625 750,000 Century Communications Corporation, 9.5% - 2005 ........................................ 753,750 500,000 Comcast Corporation, 9.125% - 2006 ...................................... 496,250 250,000 Heritage Media Corporation, 8.75% - 2006 ....................................... 237,500 500,000 Rogers Cablesystems, Ltd., 9.625% - 2002 ...................................... 503,750 __________ 2,256,875 CONGLOMERATE - 1.0% 250,000 Jordan Industries, Inc., 10.375% - 2003 ..................................... 245,625 500,000 Sequa Corporation, 9.375% - 2003 ...................................... 503,750 __________ 749,375 CONSUMER GOODS & SERVICES - 0.6% 800,000 Semi-Tech Corporation, 0% - 2003(1) ....................................... 482,000 ELECTRIC & GAS COMPANIES - 0.8% 250,000 AES Corporation, 10.25% - 2006 ...................................... 265,000 300,000 CalEnergy Company, Inc., 9.5% - 2006(2) ..................................... 304,500 __________ 569,500 ENTERTAINMENT - 1.0% 250,000 AMF Group, Inc., 10.875% - 2006 ..................................... 256,875 500,000 Harrah's Operating Company, Inc., 8.75% - 2000 ....................................... 508,125 __________ 765,000 FINANCE - 1.0% 1,000,000 Home Holdings, 7.75% - 1998 ....................................... 765,000 PRINCIPAL MARKET AMOUNT CORPORATE BONDS (CONTINUED) VALUE - -------------------------------------------------------------------------------- FOOD & BEVERAGES - 1.4% $500,000 Cott Corporation, 9.375% - 2005 ...................................... $500,000 500,000 TLC Beatrice International Holdings, 11.5% - 2005 ....................................... 524,375 __________ 1,024,375 GROCERY STORES - 0.6% 500,000 Penn Traffic Company, 10.65% - 2004 ...................................... 443,750 INDUSTRIAL PRODUCT - 0.4% 300,000 Shop Vac Corporation, 10.625% - 2003(2) .................................. 308,250 MEDICAL & HEALTH SERVICES - 1.0% 500,000 Regency Health Services, 9.875% - 2002 ...................................... 503,750 250,000 Tenet Healthcare Corporation, 10.125% - 2005 ..................................... 271,250 __________ 775,000 OIL & GAS COMPANIES - 0.7% 500,000 Seagull Energy Corporation, 8.625% - 2005 ...................................... 503,750 PUBLISHING & PRINTING - 1.3% 250,000 Golden Books Publishing, 7.65% - 2002 ....................................... 224,375 1,000,000 Marvel Holdings, 0% - 1998 .......................................... 790,000 __________ 1,014,375 REFINERY - 0.7% 500,000 Crown Central Petroleum, 10.875% - 2005 ..................................... 508,125 RESTAURANTS - 0.7% 500,000 Carrols Corporation, 11.5% - 2003 ....................................... 525,000 TEXTILE - 0.7% 500,000 Westpoint Stevens Inc., 9.375% - 2005 ...................................... 501,250 TOBACCO PRODUCTS - 0.3% 250,000 Dimon, Inc., 8.875% - 2006 ...................................... 251,250 __________ Total corporate bonds - (cost $12,254,780) - 16.3% ......................... 12,289,188 SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 12 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY GROWTH AND INCOME FUND (CONTINUED) NUMBER OF MARKET SHARES PREFERRED STOCKS VALUE - -------------------------------------------------------------------------------- BANKING & CREDIT - 1.2% 8,250 First Nationwide Bank ................................ $932,250 ENTERTAINMENT - 0.7% 524 Time Warner, Inc.,(2) ................................ 552,883 PUBLISHING & PRINTING - 0.6% 5,000 K-III Communications Corporation ..................... 467,500 RADIO & TELEVISION - 0.7% 5,139 Cablevision Systems Corporation ...................... 498,483 __________ Total preferred stocks (cost $2,344,749) - 3.2% ........................... 2,451,116 COMMON STOCKS ------------- ADVERTISING - 1.5% 25,000 Omnicom Group, Inc. .................................. 1,168,750 AEROSPACE & DEFENSE - 4.8% 10,000 Lockheed Martin Corporation .......................... 901,250 20,000 McDonnell Douglas Corporation ........................ 1,050,000 15,000 Raytheon Company ..................................... 834,375 15,000 Rockwell International Corporation ................... 845,625 __________ 3,631,250 BANKING & FINANCE - 1.6% 15,000 Chase Manhattan Corporation .......................... 1,201,875 CHEMICALS - BASIC - 3.6% 15,000 Hercules, Inc. ....................................... 821,250 35,000 Monsanto Company ..................................... 1,277,500 8,000 Olin Corporation ..................................... 672,000 __________ 2,770,750 CHEMICALS - SPECIALTY - 2.5% 20,000 Morton International, Inc. ........................... 795,000 25,000 Praxair, Inc. ........................................ 1,075,000 __________ 1,870,000 COMMUNICATION EQUIPMENT - 0.9% 10,000 U.S. Robotics Corporation* ........................... 646,250 COMPUTER SERVICES - 3.5% 20,000 Ceridian Corporation* ................................ 1,000,000 10,000 Computer Sciences Corporation* ....................... 768,750 15,000 Electronic Data Systems Corporation .................. 920,625 __________ 2,689,375 NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- COMPUTER SOFTWARE - 3.1% 8,000 Microsoft Corporation* ............................... $1,055,000 30,000 Oracle Corporation* .................................. 1,276,875 __________ 2,331,875 CONGLOMERATE - 6.5% 15,000 AlliedSignal, Inc. ................................... 988,125 40,000 Canadian Pacific, Ltd. ............................... 925,000 20,000 Cooper Industries, Inc. .............................. 865,000 10,000 Tenneco, Inc. ........................................ 501,250 40,000 U.S. Industries, Inc.* ............................... 1,050,000 30,000 Westinghouse Electric Corporation .................... 558,750 __________ 4,888,125 CONSUMER SERVICES - 0.8% 30,000 ADT Ltd.* ............................................ 573,750 ELECTRICAL MACHINERY & ELECTRONIC COMPONENTS - 1.4% 12,000 General Electric Company ............................. 1,092,000 ENTERTAINMENT - 2.1% 30,000 Carnival Corporation (Cl. A) ......................... 930,000 10,000 The Walt Disney Company .............................. 633,750 __________ 1,563,750 FERTILIZER - 1.0% 10,000 Potash Corporation of Saskatchewan, Inc. ............. 731,250 FINANCIAL - 1.1% 24,000 Federal National Mortgage Association ................ 837,000 FOOD & BEVERAGES - 6.3% 30,000 Anheuser-Busch Companies, Inc. ....................... 1,128,750 15,000 CPC International, Inc. .............................. 1,123,125 20,000 ConAgra, Inc. ........................................ 985,000 30,000 PepsiCo, Inc. ........................................ 847,500 20,000 Sara Lee Corporation ................................. 715,000 __________ 4,799,375 HOSPITAL MANAGEMENT & SERVICES - 1.1% 15,000 Columbia/HCA Healthcare Corporation .................. 853,125 HOUSEHOLD FURNISHINGS - 1.6% 40,000 Leggett & Platt, Inc. ................................ 1,175,000 HOUSEHOLD PRODUCTS - 1.3% 10,000 Procter & Gamble Company ............................. 975,000 SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 13 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY GROWTH AND INCOME FUND (CONTINUED) NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- INSURANCE - 2.6% 15,000 Allstate Corporation ................................. $738,750 20,000 Equitable Companies, Inc. ............................ 515,000 13,000 Jefferson-Pilot Corporation .......................... 672,750 __________ 1,926,500 MACHINERY - 1.4% 25,000 Deere & Company ...................................... 1,050,000 MANUFACTURING - 1.1% 30,000 Pall Corporation ..................................... 847,500 MEDICAL INSTRUMENTS & SUPPLIES - 2.1% 20,000 Baxter International, Inc. ........................... 935,000 10,000 Medtronic, Inc. ...................................... 641,250 __________ 1,576,250 NATURAL GAS - 2.8% 25,000 Coastal Corporation .................................. 1,031,250 25,000 El Paso Natural Gas Company .......................... 1,100,000 __________ 2,131,250 OIL & GAS PIPELINES - 0.8% 10,000 MAPCO, Inc. .......................................... 596,250 PHARMACEUTICALS - 8.3% 15,000 Allergan, Inc. ....................................... 571,875 20,000 American Home Products Corporation ................... 1,275,000 10,000 Bristol-Myers Squibb Company ......................... 963,750 20,000 Elan Corporation PLC ADR* ............................ 597,500 13,000 Merck & Company, Inc. ................................ 914,875 25,000 Pharmacia & Upjohn, Inc. ............................. 1,031,250 15,000 SmithKline Beecham PLC ADR ........................... 913,125 __________ 6,267,375 PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.6% 15,000 Eastman Kodak Company ................................ 1,177,500 PUBLISHING & PRINTING - 0.7% 13,000 McGraw-Hill Companies, Inc. .......................... 554,125 RESTAURANTS & FOOD SERVICE - 2.4% 20,000 McDonald's Corporation ............................... 947,500 40,000 Wendy's International, Inc. .......................... 860,000 __________ 1,807,500 RETAIL TRADE - 5.0% 20,000 Albertson's, Inc. .................................... 842,500 30,000 Federated Department Stores, Inc.* ................... 1,005,000 15,000 Kroger Company ....................................... 671,250 20,000 Walgreens Company .................................... 740,000 20,000 Wal-Mart Stores, Inc. ................................ 527,500 __________ 3,786,250 NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- TELECOMMUNICATIONS - 1.2% 35,000 Frontier Corporation ................................. $931,875 TRANSPORTATION - 2.1% 10,000 Burlington Northern Santa Fe ......................... 843,750 10,000 Union Pacific Corporation ............................ 732,500 ___________ 1,576,250 ___________ Total common stocks - (cost $42,945,898) - 76.8% ......................... 58,027,125 ___________ Total investments - (cost $57,545,427) - 96.3% ......................... 72,767,429 Cash and other assets, less liabilities - 3.7% ............................ 2,752,865 ___________ Total net assets - 100.0% ............................ $75,520,294 =========== SECURITY EQUITY FUND - EQUITY SERIES COMMON STOCKS ------------- ADVERTISING - 1.5% 200,000 Omnicom Group, Inc. .................................. $9,350,000 AEROSPACE & DEFENSE - 5.1% 100,000 Lockheed Martin Corporation .......................... 9,012,500 160,000 McDonnell Douglas Corporation ........................ 8,400,000 100,000 Raytheon Company ..................................... 5,562,500 150,000 Rockwell International Corporation ................... 8,456,250 ___________ 31,431,250 BANKING & FINANCE - 3.5% 120,000 Chase Manhattan Corporation .......................... 9,615,000 60,000 Northern Trust Corporation ........................... 3,945,000 30,000 Wells Fargo & Company ................................ 7,800,000 ___________ 21,360,000 CHEMICALS - BASIC - 3.4% 120,000 Hercules, Inc. ....................................... 6,570,000 250,000 Monsanto Company ..................................... 9,125,000 60,000 Olin Corporation ..................................... 5,040,000 ___________ 20,735,000 CHEMICALS - SPECIALTY - 2.5% 170,000 Morton International, Inc. ........................... 6,757,500 200,000 Praxair, Inc. ........................................ 8,600,000 ___________ 15,357,500 SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 14 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY EQUITY FUND - EQUITY SERIES (CONTINUED) NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- COMMUNICATION EQUIPMENT - 0.8% 75,000 U.S. Robotics Corporation* ........................... $4,846,875 COMPUTER SERVICES - 4.0% 150,000 Ceridian Corporation* ................................ 7,500,000 100,000 Computer Sciences Corporation* ....................... 7,687,500 150,000 Electronic Data Systems Corporation .................. 9,206,250 ___________ 24,393,750 COMPUTER SOFTWARE - 2.2% 65,000 Microsoft Corporation* ............................... 8,571,875 112,500 Oracle Corporation* .................................. 4,788,281 ___________ 13,360,156 CONGLOMERATE - 6.9% 160,000 AlliedSignal, Inc. ................................... 10,540,000 400,000 Canadian Pacific, Ltd. ............................... 9,250,000 170,000 Cooper Industries, Inc. .............................. 7,352,500 380,000 U.S. Industries, Inc.* ............................... 9,975,000 300,000 Westinghouse Electric Corporation .................... 5,587,500 ___________ 42,705,000 CONSUMER SERVICES - 0.9% 300,000 ADT, Ltd.* ........................................... 5,737,500 ELECTRICAL MACHINERY & ELECTRONIC COMPONENTS - 1.5% 100,000 General Electric Company ............................. 9,100,000 ENTERTAINMENT - 3.2% 240,000 Carnival Corporation (Cl. A) ......................... 7,440,000 337,900 International Game Technology ........................ 6,926,950 80,000 The Walt Disney Company .............................. 5,070,000 ___________ 19,436,950 FERTILIZER - 1.0% 82,800 Potash Corporation of Saskatchewan, Inc. ............. 6,054,750 FINANCE - 1.3% 230,000 Federal National Mortgage Association ................ 8,021,250 FOOD & BEVERAGES - 6.3% 200,000 Anheuser-Busch Companies, Inc. ....................... 7,525,000 120,000 CPC International, Inc. .............................. 8,985,000 160,000 ConAgra, Inc. ........................................ 7,880,000 260,000 PepsiCo, Inc. ........................................ 7,345,000 200,000 Sara Lee Corporation ................................. 7,150,000 ___________ 38,885,000 NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- HOSPITAL MANAGEMENT - 1.2% 125,000 Columbia/HCA Healthcare Corporation .................. $7,109,375 HOUSEHOLD PRODUCTS - 3.4% 75,000 Colgate-Palmolive Company ............................ 6,515,625 100,000 Gillette Company ..................................... 7,212,500 75,000 Procter & Gamble Company ............................. 7,312,500 ___________ 21,040,625 INSURANCE - 6.2% 175,000 Allstate Corporation ................................. 8,618,750 80,000 American International Group, Inc. ................... 8,060,000 270,000 Equitable Companies, Inc. ............................ 6,952,500 55,000 ITT Hartford Group, Inc. ............................. 3,245,000 111,400 Jefferson-Pilot Corporation .......................... 5,764,950 150,000 Provident Companies, Inc. ............................ 5,625,000 ___________ 38,266,200 MACHINERY - 1.4% 210,000 Deere & Company ...................................... 8,820,000 MANUFACTURING - 1.0% 217,500 Pall Corporation ..................................... 6,144,375 MEDICAL INSTRUMENTS - 2.8% 200,000 Baxter International, Inc. ........................... 9,350,000 120,000 Medtronic, Inc. ...................................... 7,695,000 ___________ 17,045,000 NATURAL GAS - 1.1% 170,000 Coastal Corporation .................................. 7,012,500 OIL & GAS COMPANIES - 0.7% 100,000 Noble Affiliates, Inc. ............................... 4,225,000 OIL & GAS PIPELINES - 1.2% 120,000 MAPCO, Inc. .......................................... 7,155,000 PAINT & ALLIED PRODUCTS - 1.3% 175,000 Sherwin-Williams Company ............................. 8,115,625 PERSONNEL SERVICES - 0.5% 100,000 Manpower, Inc. ....................................... 3,325,000 PETROLEUM REFINING - 2.6% 70,000 Mobil Corporation .................................... 8,102,500 50,000 Royal Dutch Petroleum Company ADR .................... 7,806,250 ___________ 15,908,750 SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 15 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY EQUITY FUND - EQUITY SERIES (CONTINUED) NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- PHARMACEUTICALS - 9.9% 200,000 Allergan, Inc. ....................................... $7,625,000 160,000 American Home Products Corporation ................... 10,200,000 100,000 Bristol-Myers Squibb Company ......................... 9,637,500 140,000 Elan Corporation PLC ADR* ............................ 4,182,500 115,000 Merck & Company, Inc. ................................ 8,093,125 200,000 Pharmacia & Upjohn, Inc. ............................. 8,250,000 110,000 Schering-Plough Corporation .......................... 6,765,000 100,000 SmithKline Beecham PLC ADR ........................... 6,087,500 ___________ 60,840,625 PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.8% 100,000 Eastman Kodak Company ................................ 7,850,000 60,000 Xerox Corporation .................................... 3,217,500 ___________ 11,067,500 PUBLISHING & PRINTING - 1.3% 30,000 Gannett Company, Inc. ................................ 2,111,250 145,000 McGraw-Hill Companies, Inc. .......................... 6,180,625 ___________ 8,291,875 RESTAURANTS & FOOD SERVICE - 2.4% 170,000 McDonald's Corporation ............................... 8,053,750 305,000 Wendy's International, Inc. .......................... 6,557,500 ___________ 14,611,250 RETAIL TRADE - 7.1% 200,000 Albertson's, Inc. .................................... 8,425,000 235,000 Federated Department Stores, Inc.* ................... 7,872,500 100,000 Kroger Company* ...................................... 4,475,000 170,000 Safeway, Inc.* ....................................... 7,246,250 90,000 TJX Companies, Inc. .................................. 3,228,750 180,000 Wal-Mart Stores, Inc. ................................ 4,747,500 200,000 Walgreens Company .................................... 7,400,000 ___________ 43,395,000 SEMICONDUCTORS - 1.0% 85,000 Linear Technology Corporation ........................ 3,134,375 85,000 Xilinx, Inc.* ........................................ 2,890,000 ___________ 6,024,375 TELECOMMUNICATIONS - 1.3% 300,000 Frontier Corporation ................................. 7,987,500 TOYS & SPORTING GOODS - 0.7% 162,500 Mattel, Inc. ......................................... 4,204,688 PRINCIPAL AMOUNT OR NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- TRANSPORTATION - 2.4% 85,000 Burlington Northern Santa Fe ......................... $7,171,875 100,000 Union Pacific Corporation ............................ 7,325,000 ____________ 14,496,875 ____________ Total common stocks (cost $413,186,524) - 95.4% ........................ 585,862,119 COMMERCIAL PAPER ---------------- $700,000 Philip Morris Companies, Inc. 5.255%, 10-15-96 ................................... 698,569 ____________ Total commercial paper (cost $698,569) - 0.1% ............................. 698,569 ____________ Total investments - (cost $413,885,093) - 95.5% ........................ 586,560,688 Cash and other assets, less liabilities - 4.5% ............................ 27,941,988 ____________ Total net assets - 100.0% ............................$614,502,676 ============ SECURITY EQUITY FUND - GLOBAL SERIES PREFERRED STOCKS ---------------- GERMANY - 2.5% 2,260 SAP AG ............................................... $380,099 618 Sto AG ............................................... 305,940 __________ Total preferred stocks - (cost $642,693) - 2.5% ............................. 686,039 COMMON STOCKS ------------- AUSTRALIA - 1.1% 55,625 QBE Insurance Group, Ltd. ............................ 299,271 AUSTRIA - 2.8% 3,700 Bank Austria AG ...................................... 144,517 3,300 Creditanstalt-Bankverein ............................. 203,029 2,200 Wienerberger Baustoff ................................ 403,188 __________ 750,734 BRAZIL - 0.8% 26,700 Aracruz Cellulose S.A. ADR ........................... 233,625 CANADA - 1.3% 9,600 Jetform Corporation .................................. 183,600 28,200 Noranda Forest, Inc. ................................. 177,039 __________ 360,639 SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 16 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY EQUITY FUND - GLOBAL SERIES (CONTINUED) NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- CHILE - 2.1% 22,800 Antofagasta Holdings PLC ............................. $128,438 18,800 Banco Santander ADR .................................. 251,450 7,500 Santa Isabel S.A. ADR ................................ 192,188 __________ 572,076 FRANCE - 6.0% 3,570 Alcatel Alsthom ...................................... 301,084 8,600 Lafarge .............................................. 507,126 5,500 SGS-Thomson Microelectronics N.V. .................... 262,975 3,320 Sidel S.A. ........................................... 199,311 1,540 Societe Generale de Surveillance Holding S.A. "B" .... 170,289 2,000 Synthelabo ........................................... 170,649 __________ 1,611,434 GERMANY - 3.6% 10,800 Continental AG ....................................... 197,645 5,600 Daimler-Benz AG ...................................... 308,072 4,500 Duetsche Bank AG ..................................... 212,150 1,160 G.M. Pfaff AG ........................................ 22,819 6,100 Hoechst AG ........................................... 222,705 __________ 963,391 GREECE - 1.6% 3,900 Ergo Bank S.A. ....................................... 225,059 12,300 Hellenic Tellecommunications ......................... 207,068 __________ 432,127 HONG KONG - 0.6% 188,000 National Mutual Asia, Ltd. ........................... 165,321 HUNGARY - 0.4% 2,600 Pick Szeged Rt. ...................................... 120,129 INDONESIA - 0.5% 51,000 PT Semen Cibinong .................................... 131,794 IRELAND - 2.6% 38,000 Allied Irish Banks PLC ............................... 223,484 172,500 Jefferson Smurfit .................................... 469,933 __________ 693,417 ITALY - 0.6% 8,400 Bulgari SPA .......................................... 156,362 JAPAN - 12.8% 19,000 Amada Company, Ltd. .................................. 175,625 6,248 Amway Japan, Ltd. .................................... 271,385 4,000 CSK Corporation ...................................... 124,563 3,000 H.I.S. Company, Ltd. ................................. 176,883 28,000 Hino Motors, Ltd. .................................... 273,894 NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- JAPAN (CONTINUED) 1,700 Kokusai Denshin Denwa Company ........................ $161,715 32,000 Komatsu Forklift Company, Ltd. ....................... 211,362 2,260 Maruco Company ....................................... 148,058 16,000 Marsushita Electric Industrial Company, Ltd. ......... 268,509 17,000 Matsushita Refrigeration Company, Ltd. ............... 122,049 38,000 Mazda Motor Corporation .............................. 185,175 80 NTT Data Communications Systems Corporation .......... 248,408 9,000 National House Industrial Corporation ................ 139,729 29,000 Nippon Chemi-Con Corporation ......................... 188,684 10,000 Nitto Denko Corporation .............................. 153,459 1,500 Ryohin Keikaku Company, Ltd. ......................... 127,075 4,700 Sony Corporation ..................................... 296,517 16,000 Yamato Kogyo Company, Ltd. ........................... 166,561 __________ 3,439,651 MALAYSIA - 0.9% 44,000 Malaysian Assurance .................................. 242,279 MEXICO - 1.1% 26,300 Tubos De Acero De Mexico S.A. ADR .................... 286,013 NETHERLANDS - 1.3% 9,350 Philips Electronics N.V. ............................. 337,912 NEW ZEALAND - 2.8% 215,100 Brierley Investments, Ltd. ........................... 207,489 85,500 Carter Holt Harvey, Ltd. ............................. 188,259 43,200 Fisher & Paykel Industries, Ltd. ..................... 147,964 91,900 Fletcher Challenge Building, Ltd. .................... 204,277 __________ 747,989 NORWAY - 2.5% 51,400 Fokus Banken AS ...................................... 287,208 23,500 Saga Petroleum AS .................................... 379,826 __________ 667,034 PHILIPPINES - 1.3% 277,100 C & P Homes, Inc. .................................... 187,729 462,750 Filinvest Land, Inc. ................................. 167,791 __________ 355,520 SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 17 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY EQUITY FUND - GLOBAL SERIES (CONTINUED) NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- POLAND - 2.7% 8,700 Debica S.A. .......................................... $185,996 21,100 Elektrim S.A. ........................................ 206,753 4,403 Wedel S.A. ........................................... 235,328 1,520 Zaklady Piwowarski w Zywcu S.A. ...................... 90,447 __________ 718,524 PORTUGAL - 1.1% 11,500 Portugal Telecom S.A. ................................ 295,841 RUSSIA - 0.4% 3,600 Lukoil Oil Company ADR ............................... 131,688 SINGAPORE - 1.1% 31,000 Inchcape ............................................. 103,972 21,000 United Overseas Bank ................................. 204,434 __________ 308,406 SOUTH AFRICA - 0.6% 2,900 Rustenburg Platinum Holdings, Ltd. ................... 45,702 6,819 Rustenburg Platinum Holdings, Ltd. ADR ............... 107,476 __________ 153,178 SPAIN - 0.7% 5,500 Repsol S.A. .......................................... 180,805 SWEDEN - 0.4% 2,660 Astra AB ............................................. 112,524 SWITZERLAND - 2.9% 283 Nestle S.A. .......................................... 315,322 42 Roche Holdings AG .................................... 309,133 140 Union Bank of Switzerland ............................ 134,677 __________ 759,132 THAILAND - 2.4% 10,000 Avanced Info ......................................... 129,814 44,000 Krung Thai Bank Public Company, Ltd. ................. 188,663 9,000 Property Perfect Public Company ...................... 26,199 4,400 Securities One Public Company ........................ 31,415 16,200 Shinawatra Computer Company .......................... 278,084 __________ 654,175 NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- UNITED KINGDOM - 8.1% 157,500 Aegis Group PLC ...................................... $160,813 9,700 Bluebird Toys PLC .................................... 21,326 57,900 British Telecommunication PLC ........................ 322,996 25,200 D.F.S. Furniture Company PLC ......................... 214,120 82,000 Grand Metropolitan PLC ............................... 611,415 10,700 RTZ Corporation PLC .................................. 163,833 3,300 SmithKline Beecham PLC ADR ........................... 200,888 110,900 Tomkins PLC .......................................... 480,695 __________ 2,176,086 UNITED STATES - 17.9% 1,000 AMR Corporation ...................................... 79,625 1,900 Abbott Laboratories .................................. 93,575 1,600 AlliedSignal, Inc. ................................... 105,400 1,000 American International Group ......................... 100,750 2,200 American Re Corporation .............................. 139,700 2,000 B.J. Services Company* ............................... 72,500 1,600 BMC Software, Inc.* .................................. 127,400 2,400 Becton Dickenson Company ............................. 106,200 1,200 Boeing Company ....................................... 113,400 2,800 Borders Group, Inc.* ................................. 104,300 2,000 Boston Scientific Corporation* ....................... 115,000 1,200 CPC International, Inc. .............................. 89,850 2,000 Cisco Systems, Inc. .................................. 124,125 1,200 Citicorp ............................................. 108,750 1,300 Colgate-Palmolive Company ............................ 112,939 1,950 Computer Associates International, Inc. .............. 116,514 2,800 Conseco, Inc. ........................................ 137,900 3,100 Crown Cork & Seal Company, Inc. ...................... 142,988 2,100 Diamond Offshore Drilling, Inc. ...................... 115,500 2,200 Dover Corporation .................................... 105,050 3,100 Ecolab, Inc. ......................................... 104,626 2,700 Federal National Mortgage Association ................ 94,164 3,300 Gap, Inc. ............................................ 95,288 2,800 Hershey Foods Corporation ............................ 140,700 1,900 Honeywell, Inc. ...................................... 119,938 2,200 Johnson & Johnson .................................... 112,750 1,300 Lockheed Martin Corporation .......................... 117,165 900 Mobil Corporation .................................... 104,175 4,200 Monsanto Company ..................................... 153,300 SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 18 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY EQUITY FUND - GLOBAL SERIES (CONTINUED) NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- UNITED STATES (CONTINUED) 2,500 NAC Re Corporation ................................... $90,000 1,200 NationsBank Corporation .............................. 104,250 1,300 Nike, Inc. (Cl. B) ................................... 157,950 3,200 PepsiCo, Inc. ........................................ 90,400 1,000 Procter & Gamble Company ............................. 97,500 1,500 Ralston-Purina Group ................................. 102,750 3,200 Safeway, Inc.* ....................................... 136,400 1,200 Schlumberger, Ltd. ................................... 101,400 4,200 Service Corporation International .................... 127,050 2,000 Union Pacific Corporation ............................ 146,500 2,700 WMX Technologies, Inc. ............................... 88,763 1,800 Warner-Lambert Company ............................... 118,800 1,400 Willamette Industries, Inc. .......................... 91,350 2,200 Williams Companies, Inc. ............................. 112,200 ___________ 4,818,885 ___________ Total common stocks - (cost $20,969,213) - 85.0% ......................... 22,875,962 ___________ Total investments - (cost $21,611,906) - 87.5% ......................... 23,562,001 Cash and other assets, less liabilities - 12.5% ........................... 3,366,511 ___________ Total net assets - 100.0% ............................ $26,928,512 =========== INVESTMENT CONCENTRATION - ------------------------- At September 30, 1996, Global Series' investment concentration, by industry, was as follows: Banking .......................................................... 8.7% Capital Equipment ................................................ 6.2% Chemicals ........................................................ 0.6% Construction and Housing ......................................... 1.2% Consumer Durables ................................................ 8.2% Consumer Nondurables ............................................. 9.1% Electrical and Electronics ....................................... 6.0% Energy Sources ................................................... 4.1% Financial Services ............................................... 6.3% Healthcare ....................................................... 5.0% Materials ........................................................ 13.1% Merchandising .................................................... 3.2% Metals and Mining ................................................ 0.2% Multi-Industry ................................................... 3.8% Real Estate ...................................................... 0.7% Services ......................................................... 5.8% Telecommunications ............................................... 3.7% Trade ............................................................ 0.8% Transportation ................................................... 0.8% Cash and other assets, less liabilities .......................... 12.5% _________ 100.0% ========= SECURITY EQUITY FUND - ASSET ALLOCATION SERIES PRINCIPAL AMOUNT OR NUMBER OF MARKET SHARES CORPORATE BONDS VALUE - -------------------------------------------------------------------------------- BROKERAGE - 1.0% $50,000 Merrill Lynch & Company, Inc., 8.0% - 2007 ........................................ $52,188 FINANCIAL SERVICES 0.5% $25,000 MCN Investment Corporation, 6.32% - 2003 ....................................... 24,031 __________ Total corporate bonds (cost $78,785) - 1.5% .............................. 76,219 COMMON STOCKS ------------- AUTO PARTS & SUPPLIES - 2.6% 600 Arvin Industries, Inc. ............................... 14,775 1,400 Dana Corporation ..................................... 42,350 400 Eaton Corporation .................................... 24,150 800 Modine Manufacturing Company ......................... 21,000 1,500 Simpson Industries ................................... 15,187 1,000 Walbro Corporation ................................... 19,000 __________ 136,462 BUILDING MATERIALS - 3.6% 900 Ameron International Corporation ..................... 34,650 700 Crane Company ........................................ 31,062 1,500 Jacobs Engineering Group* ............................ 33,750 600 Owens Corning Corporation ............................ 22,125 3,500 Schuller Corporation ................................. 33,688 300 TJ International, Inc. ............................... 5,475 1,400 Thomas Industries, Inc. .............................. 27,125 __________ 187,875 BROADCAST MEDIA - 2.7% 1,000 A.H. Belo Corporation - Series A ..................... 34,500 2,400 Tele-Communications, Inc.* ........................... 35,850 1,000 Time Warner, Inc. .................................... 38,625 2,000 U.S. West Media Group* ............................... 33,750 __________ 142,725 COMPUTER SYSTEMS - 4.5% 600 Compaq Computer Corporation* ......................... 38,475 400 Dell Computer Corporation* ........................... 31,100 600 Hewlett-Packard Company .............................. 29,250 400 International Business Machines Corporation .......... 49,800 SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 19 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY EQUITY FUND - ASSET ALLOCATION SERIES (CONTINUED) NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- COMPUTER SYSTEMS (CONTINUED) 1,000 Quantum Corporation* ................................. $17,562 600 SCI Systems, Inc.* ................................... 33,750 600 Sun Microsystems, Inc.* .............................. 37,275 __________ 237,212 ELECTRONICS - 3.9% 900 Arrow Electronics, Inc.* ............................. 40,050 800 Avnet, Inc. .......................................... 38,800 1,000 Core Industries, Inc. ................................ 13,625 900 Fluke (John) Manufacturing Company ................... 33,187 400 Harris Corporation ................................... 26,050 1,100 Pioneer Standard Electronics, Inc. ................... 12,375 600 Varian Associates, Inc. .............................. 28,800 400 Wyle Electronics ..................................... 12,850 __________ 205,737 HOUSING - HOME BUILDING - 0.2% 300 Centex Corporation ................................... 9,788 MACHINERY - 3.9% 900 Bearings, Inc. ....................................... 25,425 300 Briggs & Stratton Corporation ........................ 13,312 700 Dover Corporation .................................... 33,425 500 Duriron Company, Inc. ................................ 13,250 700 GATX Corporation ..................................... 32,725 1,300 Graco, Inc. .......................................... 24,375 200 Lindsay Manufacturing Company ........................ 8,300 600 Parker-Hannifin Corporation .......................... 25,200 900 Trinova Corporation .................................. 28,350 __________ 204,362 MINING & METALS - 2.3% 200 Aluminum Company of America .......................... 11,800 600 Asarco, Inc. ......................................... 15,975 1,400 Ashland Coal, Inc. ................................... 34,825 700 Phelps Dodge Corporation ............................. 44,888 300 Reynolds Metals Company .............................. 15,337 __________ 122,825 RECREATION - 4.0% 2,200 Brunswick Corporation ................................ 52,800 2,000 CPI Corporation ...................................... 37,500 400 Harcourt General, Inc. ............................... 22,100 1,100 Harley-Davidson, Inc. ................................ 47,300 1,300 King World Productions, Inc.* ........................ 47,938 __________ 207,638 PRINCIPAL AMOUNT OR NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- RESTAURANTS - 2.4% 600 Applebees International, Inc. ........................ $15,900 500 CKE Restaurants, Inc. ................................ 15,375 1,000 International Dairy Queen, Inc. (Cl. A)* ............. 20,500 1,000 Luby's Cafeterias, Inc. .............................. 24,000 1,500 Ruby Tuesday, Inc. ................................... 28,500 1,000 Wendy's International, Inc. .......................... 21,500 __________ 125,775 STEEL - 2.2% 400 Carpenter Technology ................................. 14,000 400 Cleveland Cliffs, Inc. ............................... 16,000 900 Commercial Metals Company ............................ 29,475 100 Nucor Corporation .................................... 5,075 900 Oregon Steel Mills, Inc. ............................. 13,838 800 Quanex Corporation ................................... 21,500 1,000 Steel Technologies, Inc. ............................. 12,500 __________ 112,388 TELECOMMUNICATIONS - 2.2% 400 Ameritech Corporation ................................ 21,050 500 Bell Atlantic Corporation ............................ 29,938 200 Bellsouth Corporation ................................ 7,400 500 GTE Corporation ...................................... 19,250 400 Nynex Corporation .................................... 17,400 300 Southern New England Telecommunications .............. 11,062 200 Sprint Corporation ................................... 7,775 __________ 113,875 __________ Total common stocks - (cost $1,749,717) - 34.5% .......................... 1,806,662 U.S. GOVERNMENT & AGENCIES -------------------------- FEDERAL HOME LOAN MORTGAGE CORPORATION - 5.7% $150,000 5.27% - 10/15/96 ..................................... 149,692 $100,000 7.0% - 2020 .......................................... 98,562 $50,000 7.0% - 2021 .......................................... 48,177 __________ 296,431 FINANCING CORPORATION - 0.5% $75,000 0% - 2010 ............................................ 26,441 SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 20 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY EQUITY FUND - ASSET ALLOCATION SERIES (CONTINUED) PRINCIPAL AMOUNT OR NUMBER OF MARKET SHARES U.S. GOVERNMENT & AGENCIES (CONTINUED) VALUE - -------------------------------------------------------------------------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 6.9% $48,043 6.5% - 2018 .......................................... $45,191 $50,000 6.5% - 2018 .......................................... 47,955 $130,000 6.95% - 2020 ......................................... 125,042 $40,000 7.5% - 2020 .......................................... 39,392 $100,000 8.8% - 2025 .......................................... 102,875 __________ 360,455 U.S. TREASURY BONDS - 0.8% $50,000 6.00% - 2026 ......................................... 43,936 U.S. TREASURY NOTES - 0.5% $25,000 6.38% - 2002 ......................................... 24,819 __________ Total U.S. government & agencies (cost $759,730) - 14.4% ............................ 752,082 REAL ESTATE INVESTMENT TRUSTS ----------------------------- 2,200 Bre Properties, Inc. ................................. 44,000 3,400 Cambridge Shopping Centres, Ltd. ..................... 22,837 2,500 Federal Realty Investment Trust ...................... 58,750 4,000 First Union Real Estate Investment Trust ............. 26,000 1,700 HRE Properties ....................................... 25,925 2,500 MGI Properties, Inc. ................................. 46,875 5,500 New Plan Realty Trust ................................ 118,250 1,400 Pennsylvania Real Estate Investment Trust ............ 29,750 2,000 Santa Anita Realty Enterprises, Inc. ................. 36,500 6,800 Security Capital Pacific Trust ....................... 143,650 5,300 United Dominion Realty Trust ......................... 74,200 3,350 Washington Real Estate Investment Trust .............. 53,600 2,400 Weingarten Realty Investors .......................... 93,000 __________ Total real estate investment trusts (costs $747,996) - 14.8% ........................... 773,337 NUMBER OF MARKET SHARES FOREIGN STOCKS VALUE - -------------------------------------------------------------------------------- BELGIUM - 4.8% 500 Cementbedrijven Cimenteries .......................... $36,955 500 Delhaize - Le Lion ................................... 27,716 100 Electrabel ........................................... 22,332 200 Fortis AG ............................................ 28,162 250 Gevaert Photo Productions ............................ 16,486 100 Petrofina SA ......................................... 30,965 150 Royale Belgium ....................................... 29,818 100 Solvay SA ............................................ 60,210 __________ 252,644 GERMANY - 8.0% 36 Allianz AG Holdings .................................. 63,561 1,081 BASF AG .............................................. 33,736 735 Bayer AG ............................................. 26,851 202 Continental AG ....................................... 3,696 850 Daimler-Benz AG* ..................................... 46,672 14 Degussa AG ........................................... 5,101 692 Deutsche Bank AG ..................................... 32,552 1,211 Dresdner Bank AG ..................................... 31,957 7 Friedrich Grohe AG - Vorzugsak ....................... 1,923 79 Heidelberger Zement AG ............................... 5,490 180 Hochtief AG .......................................... 8,497 14 Linde AG ............................................. 8,931 187 Merck KGAA ........................................... 6,737 7 Muenchener Rueckversicherungs-Gesellschaft AG ........ 15,865 72 Preussag AG .......................................... 18,056 122 SAP AG ............................................... 20,149 1,038 Siemens AG ........................................... 54,627 634 Veba AG .............................................. 33,220 __________ 417,621 HONG KONG - 5.1% 3,600 Bank of East Asia .................................... 13,245 5,000 Cathay Pacific Airways ............................... 8,115 4,000 China Light and Power Company ........................ 18,622 8,000 Chinese Estates ...................................... 7,242 1,600 Dicksons Concept International ....................... 5,193 4,000 Hong Kong and Shanghai Hotels ........................ 7,216 18,410 Hong Kong Telecommunications ......................... 33,330 8,000 Hutchinson Whampoa Limited ........................... 53,795 SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 21 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY EQUITY FUND - ASSET ALLOCATION SERIES (CONTINUED) NUMBER OF MARKET SHARES FOREIGN STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- HONG KONG (CONTINUED) 2,000 Kumagai Gumi ......................................... $1,862 2,000 Lai-Sun Garment International ........................ 2,741 3,000 Oriental Press Group ................................. 1,455 2,000 Peregrine Investments Holdings ....................... 3,168 8,000 Sun Hung Kai Properties .............................. 85,090 12,000 Tai Cheung Holdings .................................. 9,543 2,400 Wing Lung Bank ....................................... 14,121 __________ 264,738 ITALY - 5.4% 2,475 Assicurazioni Generali ............................... 52,685 11,000 Banco Commerciale Italiane ........................... 21,970 4,000 Edison Spa ........................................... 24,940 7,000 Fiat Spa ............................................. 19,684 16,638 Ina-Instituto Naz Assicuraz .......................... 24,104 3,208 Instituto Mobiliare Italiano ......................... 27,273 3,500 Mediobanca* .......................................... 20,236 29,600 Montedison Spa* ...................................... 19,136 18,821 Telecom Italia Mobile Spa ............................ 41,796 15,000 Telecom Italia-Spa ................................... 33,360 __________ 285,184 JAPAN - 9.6% 2,000 The Bank of Tokyo-Mitsubishi ......................... 43,636 1 East Japan Railway Company ........................... 4,831 1,000 Hitachi, Ltd. (Hit. Seisakusho) ...................... 9,697 1,000 Itoham Foods ......................................... 7,138 1,000 Japan Energy Corporation ............................. 3,529 3,000 Kawasaki Heavy Industries ............................ 14,465 1,000 Marui Company, Ltd. .................................. 19,304 1,000 Matsushita Electric Industrial Company, Ltd. ......... 16,790 2,000 Mitsubishi Corporation ............................... 25,499 2,000 Mitsubishi Heavy Industrial, Ltd. .................... 16,287 3,000 Mitsubishi Materials Corporation ..................... 14,384 1,000 Nippon Comsys Corporation ............................ 13,468 1,000 Nippon Shokubai K.K. Company ......................... 8,817 2,000 NSK Limited .......................................... 13,702 200 Oyo Corporation ...................................... 10,325 100 Sega Enterprises ..................................... 4,355 2,000 Sekisui House, Ltd. .................................. 21,908 3,000 Shimizu Corporation .................................. 29,630 1,000 Shin-Etsu Chemical Company ........................... 17,957 2,000 Sumitomo Bank ........................................ 36,992 NUMBER OF MARKET SHARES FOREIGN STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- JAPAN (CONTINUED) 4,000 Sumitomo Chemical Company ............................ $18,532 1,000 Sumitomo Marine and Fire ............................. 7,883 1,000 Tokyo Dome Corporation ............................... 20,651 1,800 Tokyo Electric Power ................................. 43,636 3,000 Tokyu Corporation .................................... 21,118 1,000 Toyoda Auto Loom Works ............................... 19,035 1,000 Toyota Motor Corporation ............................. 25,589 2,000 Yamaichi Securities .................................. 12,301 __________ 501,459 __________ Total foreign stocks (cost $1,667,743) - 32.9% .......................... 1,721,646 FOREIGN WARRANTS ---------------- HONG KONG - 0.0% 400 Kumagai Gumi - Warrants 6/30/98 77 200 Peregrine Investments Holdings - Warrants 5/15/98 37 __________ 114 __________ Total foreign warrants (cost $0) - 0.0% ................................... 114 TEMPORARY CASH INVESTMENTS 83,000 Chase Master Note .................................... 83,000 Total temporary cash investments (cost $83,000) - 1.6% .............................. 83,000 __________ Total investments - (cost $5,086,971) - 99.7% .......................... 5,213,060 Cash and other assets, liabilities - 0.3% ................................. 17,112 __________ Total net assets - 100.0% $5,230,172 ========== SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 22 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY ULTRA FUND NUMBER OF MARKET SHARES COMMON STOCKS VALUE - -------------------------------------------------------------------------------- ADVERTISING - 0.8% 13,500 Omnicom Group, Inc. .................................. $631,125 BANKS & TRUSTS - 1.3% 18,000 State Street Boston Corporation ...................... 1,032,750 BIOTECHNOLOGY - 1.0% 12,500 Amgen, Inc.* ......................................... 789,063 BROKERAGE - 1.4% 47,000 Schwab (Charles) Corporation ......................... 1,086,875 BUSINESS SERVICES - 9.7% 14,500 APAC Teleservices, Inc.* ............................. 743,125 11,000 Cintas Corporation ................................... 616,000 21,000 Concord EFS, Inc.* ................................... 540,750 12,750 Corestaff, Inc.* ..................................... 341,062 22,000 Corrections Corporation of America* .................. 687,500 31,500 Equifax, Inc. ........................................ 830,813 11,530 First Data Corporation ............................... 941,136 14,000 Ha-Lo Industries, Inc.* .............................. 406,000 35,250 PMT Services, Inc.* .................................. 713,813 16,500 Paychex, Inc. ........................................ 957,000 20,250 Snap-On, Inc. ........................................ 650,531 ___________ 7,427,730 CHEMICALS - SPECIALTY - 2.5% 16,000 IMC Global, Inc. ..................................... 626,000 16,000 Praxair, Inc. ........................................ 688,000 11,000 Sigma-Aldrich ........................................ 627,000 ___________ 1,941,000 COMMUNICATIONS - EQUIPMENT - 6.4% 11,000 Ascend Communications, Inc.* ......................... 727,375 15,500 Aspect Telecommunications* ........................... 964,875 12,500 Cascade Communications Corporation* .................. 1,018,750 14,500 Tellabs, Inc.* ....................................... 1,024,062 18,400 U.S. Robotics Corporation* ........................... 1,189,100 ___________ 4,924,162 COMPUTER SOFTWARE - 19.7% 7,500 BMC Software* ........................................ 596,250 8,000 CBT Group PLC ADR* ................................... 376,000 20,250 Cadence Design Systems, Inc.* ........................ 723,937 33,500 Cambridge Technology Partners (Massachusetts), Inc.* . 1,013,375 NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- COMPUTER SOFTWARE (CONTINUED) 8,000 Clarify, Inc.* ....................................... $496,000 39,000 Cognos, Inc. (Cl. F)* ................................ 1,272,375 9,000 Electronics For Imaging, Inc.* ....................... 645,750 15,500 HBO & Company ........................................ 1,034,625 11,000 HCIA, Inc.* .......................................... 660,000 8,000 HNC Software, Inc.* .................................. 320,000 14,500 Informix Corporation* ................................ 404,188 9,500 INSO Corporation* .................................... 515,375 10,000 McAfee Associates* ................................... 690,000 13,000 Medic Computer Systems* .............................. 472,875 10,000 Pairgain Technologies, Inc.* ......................... 781,250 25,000 Parametric Technology Corporation* ................... 1,234,375 10,500 Peoplesoft, Inc.* .................................... 874,125 14,500 Project Software & Development* ...................... 612,625 15,446 Pure Atria Corporation* .............................. 583,086 6,500 Veritas Software Corporation* ........................ 459,875 33,500 Viasoft, Inc.* ....................................... 1,407,000 ___________ 15,173,086 COMPUTER SYSTEMS - 2.9% 14,500 Dell Computer Corporation* ........................... 1,127,375 14,000 SCI Systems, Inc.* ................................... 787,500 7,000 Verifone, Inc.* ...................................... 313,250 ___________ 2,228,125 CONSUMER SERVICES - 1.3% 15,000 Apollo Group, Inc.* .................................. 401,250 17,500 Stewart Enterprises, Inc. (Cl. A) .................... 590,625 ___________ 991,875 ELECTRONICS - 1.2% 22,500 Thermo Electron Corporation* ......................... 911,250 FINANCIAL SERVICES - 1.9% 22,000 Franklin Resources, Inc. ............................. 1,460,250 HEALTH CARE - 4.9% 13,500 Cardinal Health, Inc. ................................ 1,115,437 16,500 OccuSystems, Inc.* ................................... 495,000 24,000 Omnicare, Inc. ....................................... 732,000 20,250 PhyCor, Inc.* ........................................ 770,765 8,500 Quintiles Transnational Corporation* ................. 622,625 ___________ 3,735,827 HEALTH CARE - HMO - 0.5% 7,700 Oxford Health Plans* ................................. 383,075 SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 23 STATEMENTS OF NET ASSETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 SECURITY ULTRA FUND NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- HOSPITAL SUPPLIES/MANAGEMENT - 1.4% 28,500 HEALTHSOUTH Corporation* ............................. $1,093,687 HOTEL/MOTEL - 2.5% 18,500 HFS, Inc.* ........................................... 1,237,188 33,750 La Quinta Inns, Inc. ................................. 658,125 ___________ 1,895,313 INSURANCE - 2.7% 27,500 AFLAC, Inc. .......................................... 976,250 32,000 SunAmerica, Inc. ..................................... 1,104,000 ___________ 2,080,250 MANUFACTURING - 1.0% 10,500 Illinois Tool Works .................................. 757,313 MEDICAL PRODUCTS - 3.0% 15,500 Guidant Corporation .................................. 856,375 19,500 Hologic, Inc.* ....................................... 546,000 25,000 Rexall Sundown, Inc.* ................................ 912,500 ___________ 2,314,875 OFFICE EQUIPMENT & SUPPLIES - 2.5% 15,500 Corporate Express, Inc.* ............................. 602,563 11,000 Diebold, Inc. ........................................ 642,125 23,000 Viking Office Products, Inc.* ........................ 690,000 ___________ 1,934,688 OIL & GAS DRILLING - 1.6% 25,000 Global Marine, Inc.* ................................. 393,750 20,000 Noble Affiliates, Inc. ............................... 845,000 ___________ 1,238,750 OIL & GAS EXPLORATION - 0.9% 16,500 Sonat, Inc. .......................................... 730,125 PACKAGING & CONTAINERS - 0.4% 9,000 Sealed Air Corporation* .............................. 335,250 PHARMACEUTICALS - 2.9% 36,000 Dura Pharmaceuticals, Inc.* .......................... 1,327,500 19,000 Jones Medical Industries, Inc. ....................... 921,500 ___________ 2,249,000 POLLUTION CONTROL - 2.1% 19,500 Superior Services, Inc.* ............................. 312,000 16,500 United States Filter Corporation* .................... 563,063 21,000 United Waste Systems, Inc.* .......................... 729,750 ___________ 1,604,813 RESTAURANTS - 2.0% 29,500 Landry's Seafood Restaurants* ........................ 737,500 14,750 Papa John's International, Inc.* ..................... 774,375 ___________ 1,511,875 NUMBER OF MARKET SHARES COMMON STOCKS (CONTINUED) VALUE - -------------------------------------------------------------------------------- RETAIL - 9.5% 16,000 Bed Bath & Beyond, Inc.* ............................. $438,000 9,500 CDW Computer Centers, Inc.* .......................... 648,375 18,750 Claire's Stores* ..................................... 400,781 20,000 Dollar General Corporation ........................... 622,500 5,500 Fila Holdings SPA ADR ................................ 528,687 18,000 Gadzooks* ............................................ 625,500 6,500 Jones Apparel Group, Inc. ............................ 414,375 10,000 Just For Feet, Inc.* ................................. 501,250 20,000 Kohl's Corporation* .................................. 720,000 12,000 Nine West Group, Inc.* ............................... 651,000 46,375 Staples, Inc.* ....................................... 1,028,945 8,000 Tiffany & Company .................................... 320,000 11,000 West Marine, Inc.* ................................... 363,000 ___________ 7,262,413 SEMICONDUCTORS - 3.4% 11,000 Altera Corporation* .................................. 556,875 27,500 Analog Devices, Inc.* ................................ 745,937 11,000 Atmel Corporation* ................................... 339,625 10,000 Linear Technology Corporation ........................ 368,750 18,000 Xilinx, Inc.* ........................................ 612,000 ___________ 2,623,187 TEXTILES - APPAREL - 0.9% 11,500 Tommy Hilfiger Corporation* .......................... 681,375 TRANSPORTATION - 0.6% 13,500 Illinois Central Corporation ......................... 426,939 ___________ Total common stocks (cost $54,337,203) - 92.9% ......................... 71,456,046 ___________ Total investments (cost $54,337,203) - 92.9% ......................... 71,456,046 Cash and other assets, less liabilities - 7.1% ............................ 5,472,389 ___________ Total net assets - 100.0% ............................ $76,928,435 =========== The identified cost of investments owned at September 30, 1996, was the same for federal income tax and financial statement purposes, except for Ultra Fund for which the identified cost of investments for federal income tax purposes was $54,391,123. *Securities on which no cash dividend was paid during the preceding twelve months. ADR (American Depositary Receipt) (1) Deferred interest obligation; currently zero coupon under terms of initial offering. (2) Restricted Security (a portfolio security that may be sold privately, but that is required to be registered with the SEC or to be exempted from such registration before it may be sold in public distribution). The total value of restricted securities in Security Growth and Income Fund is 1.2% of total net assets. SEE ACCOMPANYING NOTES. - -------------------------------------------------------------------------------- 24 BALANCE SHEETS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996
SECURITY EQUITY FUND ------------------------------------------- SECURITY ASSET SECURITY GROWTH AND EQUITY GLOBAL ALLOCATION ULTRA INCOME FUND SERIES SERIES SERIES FUND ---------------------------------------------------------------------------------- ASSETS Investments, at value (identified cost $57,545,427, $413,186,524, $21,611,906, $5,086,971 and $54,337,203, respectively) .................. $72,767,429 $585,862,119 $23,562,001 $5,213,060 $71,456,046 Commercial paper, at amortized cost which approximates market value ............. -- 698,569 -- -- -- Cash ........................................... 2,626,784 30,227,821 3,300,894 986 5,576,094 Receivables: Fund shares sold ............................ 7,170 698,756 185,812 28,025 65,839 Securities sold ............................. 762,411 4,204,469 35,311 -- 54,911 Foreign forward exchange contracts .......... -- -- 73,725 -- -- Dividends ................................... 326,455 799,590 54,783 7,516 15,076 Interest .................................... 4,424 130,532 11,246 5,908 15,996 Foreign taxes recoverable ................... -- -- 27,074 927 -- Prepaid expenses ............................... -- -- -- 6,532 -- ___________ ____________ ___________ ____________ ___________ Total assets ......................... $76,494,673 $622,621,856 $27,250,846 $5,262,954 $77,183,962 =========== ============ =========== ============ =========== LIABILITIES AND NET ASSETS Liabilities: Payable for: Fund shares redeemed ...................... $92,842 $300,369 $64,517 $634 $34,798 Securities purchased ...................... 800,000 7,259,213 212,697 -- 137,437 Other Liabilities: Management fees ........................... 79,730 524,858 40,330 6,326 80,777 Custodian fees ............................ -- -- -- 361 -- Transfer and administration fees .......... -- -- -- 4,400 -- 12b-1 distribution plan fees .............. 1,807 30,977 4,790 2,279 2,515 Miscellaneous fees ........................ -- 3,763 -- 18,782 -- ___________ ____________ ___________ ____________ ___________ Total liabilities ....................... 974,379 8,119,180 322,334 32,782 255,527 Net Assets: Paid in capital ............................. 54,388,672 392,830,437 22,674,750 4,863,583 55,074,630 Undistributed net investment income ......... 182,698 2,728,863 671,849 112,622 -- Accumulated undistributed net realized gain on sale of investments, futures and foreign currency transactions ......... 5,726,922 46,267,781 1,558,961 127,889 4,734,962 Net unrealized appreciation in value of investments, futures and translation of assets and liabilities in foreign currencies ..................... 15,222,002 172,675,595 2,022,952 126,078 17,118,843 ___________ ____________ ___________ ____________ ___________ Net assets .............................. 75,520,294 614,502,676 26,928,512 5,230,172 76,928,435 ___________ ____________ ___________ ____________ ___________ Total liabilities and net assets ...... $76,494,673 $622,621,856 $27,250,846 $5,262,954 $77,183,962 =========== ============ =========== ============ =========== CLASS "A" SHARES Capital shares outstanding .................. 8,099,424 76,389,986 1,582,223 221,414 8,994,692 Net assets .................................. $73,273,461 $575,680,473 $19,643,985 $2,449,515 $74,230,177 Net asset value per share (net assets divided by shares outstanding) ..... $9.05 $7.54 $12.42 $11.06 $ 8.25 Add: Selling commission (5.75% of the offering price) ........................... 0.55 0.46 0.76 0.67 0.50 ___________ ____________ ___________ ____________ ___________ Offering price per share (net asset value divided by 94.25%) .................. $9.60 $8.00 $13.18 $11.73 $8.75 =========== ============ =========== ============ =========== CLASS "B" SHARES Capital shares outstanding .................. 251,446 5,275,526 598,242 253,411 336,000 Net assets .................................. $2,246,833 $38,822,203 $7,284,527 $2,780,657 $2,698,258 Net asset value per share (net assets divided by shares outstanding). $8.94 $7.36 $12.18 $10.97 $8.03 =========== ============ =========== ============ ===========
See accompanying notes. - -------------------------------------------------------------------------------- 25 STATEMENTS OF OPERATIONS - -------------------------------------------------------------------------------- FOR THE YEAR ENDED SEPTEMBER 30, 1996
SECURITY EQUITY FUND ------------------------------------------- SECURITY ASSET SECURITY GROWTH AND EQUITY GLOBAL ALLOCATION ULTRA INCOME FUND SERIES SERIES SERIES FUND ---------------------------------------------------------------------------------- INVESTMENT INCOME: Interest .................................... $1,348,538 $1,238,261 $80,041 $108,168 $198,794 Dividends ................................... 1,068,605 8,213,370 455,115 86,911 260,084 ___________ ____________ ___________ ____________ ___________ 2,417,143 9,451,631 535,156 195,079 458,878 Less foreign tax expense .................. -- -- (47,577) (1,779) -- ___________ ____________ ___________ ____________ ___________ Total investment income ................. 2,417,143 9,451,631 487,579 193,300 458,878 EXPENSES: Management fees ............................. 919,674 5,528,818 470,077 39,560 862,190 Custodian fees .............................. -- -- -- 3,674 -- Transfer/maintenance fees ................... -- -- -- 5,571 -- Administration fees ......................... -- -- -- 36,957 -- Directors' fees ............................. -- -- -- 72 -- Professional fees ........................... -- -- -- 11,284 -- Reports to shareholders ..................... -- -- -- 974 -- Registration fees ........................... -- -- -- 25,949 -- Other expenses .............................. -- -- -- 6,286 -- 12b-1 distribution plan fees (Class B) ...... 16,080 279,934 59,852 22,229 36,559 Interest .................................... -- -- -- 193 -- Reimbursement of expenses ................... -- -- -- (43,856) -- ___________ ____________ ___________ ____________ ___________ Total expenses ............................ 935,754 5,808,752 529,929 108,893 898,749 ___________ ____________ ___________ ____________ ___________ Net investment income (loss) ............ 1,481,389 3,642,879 (42,350) 84,407 (439,871) NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) during the year on: Investments ............................... 6,097,347 54,909,397 2,087,000 198,823 7,783,798 Foreign currency transactions ............. -- -- 580,735 (5,918) -- Futures contracts ......................... -- -- -- 59,868 81,216 ___________ ____________ ___________ ____________ ___________ Net realized gains ...................... 6,097,347 54,909,397 2,667,735 252,773 7,865,014 Net change in unrealized appreciation (depreciation) during the year on: Investments ............................... 5,572,992 59,008,440 1,018,925 36,071 2,292,201 Translation of assets and liabilities in foreign currencies ................... -- -- 72,857 (11) -- Futures contracts ......................... -- -- -- 13,545 -- ___________ ____________ ___________ ____________ ___________ Net unrealized appreciation ............. 5,572,992 59,008,440 1,091,782 49,605 2,292,201 ___________ ____________ ___________ ____________ ___________ Net gain .............................. 11,670,339 113,917,837 3,759,517 302,378 10,157,215 ___________ ____________ ___________ ____________ ___________ Net increase in net assets resulting from operations ......... $13,151,728 $117,560,716 $3,717,167 $386,785 $9,717,344 =========== ============ =========== ============ ===========
See accompanying notes. - -------------------------------------------------------------------------------- 26 STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- FOR THE YEAR ENDED SEPTEMBER 30, 1996
SECURITY EQUITY FUND ------------------------------------------- SECURITY ASSET SECURITY GROWTH AND EQUITY GLOBAL ALLOCATION ULTRA INCOME FUND SERIES SERIES SERIES FUND ---------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) ................ $1,481,389 $3,642,879 $(42,350) $84,407 $(439,871) Net realized gain ........................... 6,097,347 54,909,397 2,667,735 252,773 7,865,014 Unrealized appreciation during the year ..... 5,572,992 59,008,440 1,091,782 49,605 2,292,201 ___________ ____________ ___________ ____________ ___________ Net increase in net assets resulting from operations ............... 13,151,728 117,560,716 3,717,167 386,785 9,717,344 DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A ................................... (1,303,374) (4,154,225) (357,503) (59,841) -- Class B ................................... (16,567) (64,778) (72,239) (50,821) -- Net realized gain Class A ................................... (2,290,075) (33,371,334) (224,880) (30,468) (7,109,009) Class B ................................... (44,993) (1,836,652) (77,719) (31,088) (500,515) ___________ ____________ ___________ ____________ ___________ Total distributions to shareholders ....... (3,655,009) (39,426,989) (732,341) (172,218) (7,609,524) CAPITAL SHARE TRANSACTIONS (A): Proceeds from sale of shares Class A ................................... 3,975,290 299,520,899 5,778,490 682,087 27,602,365 Class B ................................... 1,200,271 93,534,094 2,179,465 1,119,612 3,050,423 Dividends reinvested Class A ................................... 3,265,411 34,973,081 570,969 89,987 6,772,088 Class B ................................... 60,327 1,882,247 149,212 81,908 500,487 Shares redeemed Class A ................................... (10,667,756) (273,412,317) (5,192,505) (337,484) (28,420,959) Class B ................................... (369,561) (79,755,552) (1,236,321) (55,397) (6,164,145) ___________ ____________ ___________ ____________ ___________ Net increase (decrease) from capital share transactions .............. (2,536,018) 76,742,452 2,249,310 1,580,713 3,340,259 ___________ ____________ ___________ ____________ ___________ Total increase in net assets .......... 6,960,701 154,876,179 5,234,136 1,795,280 5,448,079 NET ASSETS: Beginning of year ........................... 68,559,593 459,626,497 21,694,376 3,434,892 71,480,356 ___________ ____________ ___________ ____________ ___________ End of year ................................. $75,520,294 $614,502,676 $26,928,512 $5,230,172 $76,928,435 =========== ============ =========== ============ =========== Undistributed net investment income at end of year .............................. $182,698 $2,728,863 $671,849 $112,622 $-- =========== ============ =========== ============ =========== (a) Shares issued and redeemed Shares sold Class A ............................... 474,232 43,657,565 491,586 63,688 3,632,551 Class B ............................... 143,440 13,771,902 186,645 104,927 412,321 Dividends reinvested Class A ............................... 404,486 5,483,525 52,399 8,801 996,776 Class B ............................... 7,601 300,151 13,842 8,014 75,103 Shares redeemed Class A ............................... (1,281,262) (39,986,054) (447,772) (31,916) (3,688,397) Class B ............................... (43,575) (11,797,000) (107,952) (5,145) (820,769) ___________ ____________ ___________ ____________ ___________ Net increase (decrease) ............. (295,078) 11,430,089 188,748 148,369 (607,585) =========== ============ =========== ============ ===========
See accompanying notes. - -------------------------------------------------------------------------------- 27 STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- FOR THE YEAR ENDED SEPTEMBER 30, 1996
SECURITY EQUITY FUND ------------------------------------------- SECURITY ASSET SECURITY GROWTH AND EQUITY GLOBAL ALLOCATION ULTRA INCOME FUND SERIES SERIES SERIES FUND ---------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss) ................ $1,407,287 $3,304,987 $(91,058) $13,792 $(223,015) Net realized gain ........................... 1,984,078 27,972,416 419,260 61,764 4,989,643 Unrealized appreciation during the period ......................... 8,482,309 69,736,879 95,995 76,473 8,466,565 ___________ ____________ ___________ ____________ ___________ Net increase in net assets resulting from operations ......................... 11,873,674 101,014,282 424,197 152,029 13,233,193 DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A ................................... (1,378,072) -- -- -- -- Class B ................................... (11,951) -- -- -- -- Net realized gain Class A ................................... (1,912,997) (26,300,092) (347,497) -- (1,149,264) Class B ................................... (23,632) (690,558) (84,333) -- (28,504) ___________ ____________ ___________ ____________ ___________ Total distributions to shareholders ....... (3,326,652) (26,990,650) (431,830) -- (1,177,768) CAPITAL SHARE TRANSACTIONS (A): Proceeds from sale of shares Class A ................................... 2,681,709 159,433,767 4,130,645 1,846,588 97,988,749 Class B ................................... 635,799 36,310,779 3,765,671 1,469,193 10,247,969 Dividends reinvested Class A ................................... 2,965,256 24,498,993 340,567 -- 1,088,376 Class B ................................... 34,468 690,184 84,001 -- 28,502 Shares redeemed Class A ................................... (11,959,939) (172,929,497) (8,249,891) (28,739) (105,077,941) Class B ................................... (340,406) (28,090,274) (2,457,097) (4,179) (6,799,714) ___________ ____________ ___________ ____________ ___________ Net increase (decrease) from capital share transactions ............ (5,983,113) 19,913,952 (2,386,104) 3,282,863 (2,524,059) ___________ ____________ ___________ ____________ ___________ Total increase (decrease) in net assets ....................... 2,563,909 93,937,584 (2,393,737) 3,434,892 9,531,366 NET ASSETS: Beginning of period ......................... 65,995,684 365,688,913 24,088,113 -- 61,948,990 ___________ ____________ ___________ ____________ ___________ End of period ............................... $68,559,593 $459,626,497 $21,694,376 $3,434,892 $71,480,356 =========== ============ =========== ============ =========== Undistributed net investment income at end of period ............................ $17,267 $3,304,987 $135,605 $13,792 $-- =========== ============ =========== ============ =========== (a) Shares issued and redeemed Shares sold Class A ............................... 380,257 27,957,351 395,288 183,574 13,881,834 Class B ............................... 91,007 6,432,534 366,335 146,016 1,427,321 Dividends reinvested Class A ............................... 434,705 4,858,020 33,389 -- 164,781 Class B ............................... 5,126 138,507 8,325 -- 4,328 Shares redeemed Class A ............................... (1,697,766) (30,292,120) (799,467) (2,733) (14,892,245) Class B ............................... (48,979) (4,927,928) (237,369) (401) (946,401) ___________ ____________ ___________ ____________ ___________ Net increase (decrease) ............. (835,650) 4,166,364 (233,499) 326,456 (360,382) =========== ============ =========== ============ =========== *Period June 1, 1995 (inception) through September 30, 1995.
See accompanying notes. - -------------------------------------------------------------------------------- 28 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
AVERAGE NET RATIO COMMIS- GAINS OR DIVI- RATIO OF NET SION NET LOSSES TOTAL DENDS NET OF EX- INCOME PAID FISCAL ASSET NET ON SEC- FROM (FROM DISTRI- NET ASSETS PENSES (LOSS) PORT- PER YEAR VALUE INVEST- URITIES INVEST- NET BUTIONS ASSET END OF TO TO AVE- FOLIO INVEST- ENDED BEGIN- MENT (REALIZED MENT INVEST- (FROM TOTAL VALUE TOTAL PERIOD AVERAGE RAGE TURN- MENT SEPTEM- NING OF INCOME & UNREAL- OPERA- MENT REALIZED DISTRI- END OF RETURN (THOU- NET NET OVER SECURITY BER 30 PERIOD (LOSS) IZED) TIONS INCOME) GAINS) BUTIONS PERIOD (A) SANDS) ASSETS ASSETS RATE TRADED - ------------------------------------------------------------------------------------------------------------------------------------ SECURITY GROWTH AND INCOME FUND (CLASS A)(b) 1992 $7.31 $0.35 $(0.016) $0.334 $(0.343) $(0.171) $(0.514) $7.13 4.70% $75,436 1.27% 4.79% 74% $--- 1993 7.13 0.21 0.876 1.086 (0.218) (0.158) (0.376) 7.84 15.60% 81,982 1.26% 2.80% 135% --- 1994(c) 7.84 0.13 (0.713) (0.583) (0.128) (0.169) (0.297) 6.96 (7.60)% 65,328 1.28% 1.70% 163% --- 1995(g) 6.96 0.16 1.183 1.343 (0.158) (0.215) (0.373) 7.93 20.25% 67,430 1.31% 2.21% 130% --- 1996(g) 7.93 0.18 1.373 1.553 (0.158) (0.275) (0.433) 9.05 20.31% 73,273 1.29% 2.09% 69% 0.0625 SECURITY GROWTH AND INCOME FUND (CLASS B) 1994(c) $7.83 $0.05 $(0.694) $(0.644) $(0.117) $(0.169) $(0.286) $6.90 (8.00%) $668 2.27% 1.03% 178% $--- 1995(g) 6.90 0.08 1.179 1.259 (0.094) (0.215) (0.309) 7.85 19.07% 1,130 2.31% 1.21% 130% --- 1996(g) 7.85 0.09 1.353 1.443 (0.078) (0.275) (0.353) 8.94 19.01% 2,247 2.29% 1.09% 69% 0.0625 SECURITY EQUITY SERIES (CLASS A) 1992 $5.82 $0.09 $.475 $0.565 $(0.132) $(0.393) $(0.525) $5.86 10.20% $313,582 1.06% 1.48% 83% $--- 1993 5.86 0.12 1.165 1.285 (0.053) (0.362) (0.415) 6.73 22.70% 375,565 1.06% 1.95% 95% --- 1994(c) 6.73 0.05 0.085 0.135 (0.120) (1.205) (1.325) 5.54 1.95% 358,237 1.06% 0.86% 79% --- 1995(g) 5.54 0.04 1.377 1.417 --- (0.407) (0.407) 6.55 27.77% 440,339 1.05% 0.87% 95% --- 1996(g) 6.55 0.05 1.482 1.532 (0.060) (0.482) (0.542) 7.54 24.90% 575,680 1.04% 0.75% 64% 0.0609 SECURITY EQUITY SERIES (CLASS B) 1994(c) $6.81 $0.01 $(0.005) $0.005 $(0.12) $(1.205) $(1.325) $5.49 (0.15%) $7,452 2.07% (0.01%) 80% $--- 1995(g) 5.49 (0.01) 1.357 1.347 --- (0.407) (0.407) 6.43 26.69% 19,288 2.05% (0.13%) 95% --- 1996(g) 6.43 (0.02) 1.449 1.429 (0.017) (0.482) (0.499) 7.36 23.57% 38,822 2.04% (0.25%) 64% 0.0609 SECURITY GLOBAL SERIES (CLASS A) 1994 $10.00 $(0.03) $0.87 $0.84 $--- $--- $--- $10.84 8.40% $20,128 2.00% (0.01%) 73% $--- (c)(d) 1995(g) 10.84 (0.02) 0.31 0.29 --- (0.19) (0.19) 10.94 2.80% 16,261 2.00% (0.17%) 141% --- 1996(g) 10.94 0.01 1.874 1.884 (0.248) (0.156) (0.404) 12.42 17.73% 19,644 2.00% 0.07% 142% 0.0338 SECURITY GLOBAL SERIES (CLASS B) 1994 $9.96 $(0.12) $0.91 $0.79 $--- $--- $--- $10.75 7.90% $3,960 3.00% (0.01%) 73% $--- (c)(d) 1995(g) 10.75 (0.12) 0.30 0.18 --- (0.19) (0.19) 10.74 1.79% 5,433 3.00% (1.17%) 141% --- 1996(g) 10.74 (0.10) 1.841 1.741 (0.145) (0.156) (0.301) 12.18 16.57% 7,285 3.00% (0.93%) 142% 0.0338 SECURITY ASSET ALLOCATION SERIES (CLASS A) 1995 $10.00 $0.04 $0.50 $0.54 $--- $--- $--- $10.54 5.40% $1,906 2.00% 1.33% 129% $--- (e)(f)(g) 1996(g) 10.54 0.25 0.765 1.015 (0.328) (0.167) (0.495) 11.06 10.01% 2,449 2.00% 2.32% 75% 0.0247 SECURITY ASSET ALLOCATION SERIES (CLASS B) 1995 $10.00 $0.01 $0.490 $0.500 $--- $--- $--- $10.50 5.00% $1,529 3.00% 0.31% 129% $--- (e)(f)(g) 1996(g) 10.50 0.14 0.77 0.91 (0.273) (0.167) (0.44) 10.97 8.97% 2,781 3.00% 1.32% 75% 0.0247
See accompanying notes. - -------------------------------------------------------------------------------- 29 FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
AVERAGE NET RATIO COMMIS- GAINS OR DIVI- RATIO OF NET SION NET LOSSES TOTAL DENDS NET OF EX- INCOME PAID FISCAL ASSET NET ON SEC- FROM (FROM DISTRI- NET ASSETS PENSES (LOSS) PORT- PER YEAR VALUE INVEST- URITIES INVEST- NET BUTIONS ASSET END OF TO TO AVE- FOLIO INVEST- ENDED BEGIN- MENT (REALIZED MENT INVEST- (FROM TOTAL VALUE TOTAL PERIOD AVERAGE RAGE TURN- MENT SEPTEM- NING OF INCOME & UNREAL- OPERA- MENT REALIZED DISTRI- END OF RETURN (THOU- NET NET OVER SECURITY BER 30 PERIOD (LOSS) IZED) TIONS INCOME) GAINS) BUTIONS PERIOD (A) SANDS) ASSETS ASSETS RATE TRADED - ------------------------------------------------------------------------------------------------------------------------------------ SECURITY ULTRA FUND (CLASS A) 1992 $6.72 $(0.090) $(0.202) $(0.292) $--- $(0.172) $(0.172) $6.66 1.50% $57,128 1.32% (0.46%) 142% $--- 1993 6.66 (0.028) 1.791 1.763 --- (0.293) (0.293) 8.13 26.80% 71,056 1.30% (0.50%) 101% --- 1994(c) 8.13 (0.056) (0.188) (0.244) --- (1.066) (1.066) 6.82 (3.60%) 60,695 1.33% (0.80%) 111% --- 1995(g) 6.82 (0.02) 1.535 1.515 --- (0.135) (0.135) 8.20 22.69% 66,052 1.32% (0.31%) 180% --- 1996(g) 8.20 (0.05) 1.096 1.046 --- (0.996) (0.996) 8.25 15.36% 74,230 1.31% (0.61%) 161% 0.0606 SECURITY ULTRA FUND (CLASS B) 1994(c) $8.30 $(0.103) $(0.321) $(0.424) $--- $(1.066) $(1.066) $6.81 (5.70%) $1,254 2.36% (1.76%) 110% $--- 1995(g) 6.81 (0.09) 1.525 1.435 --- (0.135) (0.135) 8.11 21.53% 5,428 2.32% (1.32%) 180% --- 1996(g) 8.11 (0.13) 1.046 0.916 --- (0.996) (0.996) 8.03 13.81% 2,698 2.31% (1.61%) 161% 0.0606
(a) Total return information does not reflect deduction of any sales charges imposed at the time of purchase for Class A shares or upon redemption for Class B shares. (b) Effective July 6, 1993, Security Growth and Income Fund changed its investment objective from investing for income with secondary emphasis on long-term capital growth to long-term capital growth with secondary emphasis on income. Effective the same date the fund changed its name from Security Investment Fund to Security Growth and Income Fund. (c) Class "B" Shares were initially capitalized on October 19, 1993. Percentage amounts for the period, except total return, have been annualized. Per share data has been calculated using the average month-end shares outstanding. (d) Security Global Series was initially capitalized on October 1, 1993, with a net asset value of $10 per share. Percentage amounts for the period, except for total return, have been annualized. (e) Security Asset Allocation Series was initially capitalized on June 1, 1995, with a net asset value of $10 per share. Percentage amounts for the period have been annualized, except for total return. Per share data has been calculated using average month-end shares outstanding. (f) Fund expenses were reduced by the Investment Manager during the period and expense ratios absent such reimbursement would have been as follows: 1995 1996 ---- ---- Asset Allocation Series Class A 3.6% 3.1% Class B 4.7% 3.9% (g) Net investment income (loss) was computed using average shares outstanding throughout the period. See accompanying notes. - -------------------------------------------------------------------------------- 30 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1996 1. SIGNIFICANT ACCOUNTING POLICIES Security Growth and Income, Equity and Ultra Funds (the Funds) are registered under the Investment Company Act of 1940, as amended, as diversified open-end management investment companies. The shares of Security Equity Fund are currently issued in three Series, the Equity Series, the Global Series, and the Asset Allocation Series, with each Series, in effect representing a separate Fund. The Funds began offering an additional class of shares ("B" shares) to the public on October 19, 1993. The shares are offered without a front-end sales charge but incur additional class - specific expenses. Redemptions of the shares within five years of acquisition incur a contingent deferred sales charge. The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements. These policies are in conformity with generally accepted accounting principles. A. SECURITY VALUATION - Valuations of the Funds' securities are supplied by a pricing service approved by the Board of Directors. Securities listed or traded on a national securities exchange are valued on the basis of the last sales price. If there are no sales on a particular day, then the securities are valued at the last bid price. If a security is traded on multiple exchanges, its value will be based on prices from the principal exchange where it is traded. All other securities for which market quotations are available are valued on the basis of the current bid price. If there is no bid price or if the bid price is deemed to be unsatisfactory by the Board of Directors or the Funds' investment manager, then the securities are valued in good faith by such method as the Board of Directors determines will reflect the fair market value. The Funds generally will value short-term debt securities at prices based on market quotations for securities of similar type, yield, quality and duration, except those securities purchased with 60 days or less to maturity are valued on the basis of amortized cost which approximates market value. Generally, trading in foreign securities markets is substantially completed each day at various times prior to the close of the New York Stock Exchange. The values of foreign securities are determined as of the close of such foreign markets or the close of the New York Stock Exchange, if earlier. All investments quoted in foreign currency are valued in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the close of business. The Global Series' and Asset Allocation Series' investments in foreign securities may involve risks not present in domestic investments. Since foreign securities may be denominated in a foreign currency and involve settlement and pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Global Series and Asset Allocation Series to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which could affect the market and/or credit risk of the investments. B. FOREIGN CURRENCY TRANSACTIONS - The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. The Funds do not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments. Net realized foreign exchange gains or losses arise from sales of portfolio securities, sales of foreign currencies, and the difference between asset and liability amounts initially stated in foreign currencies and the U.S. dollar value of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of portfolio securities and other assets and liabilities at the end of the reporting period, resulting from changes in the exchange rates. C. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - Global Series and Asset Allocation Series may enter into forward foreign exchange contracts in order to manage against foreign currency risk from purchase or sale of securities denominated in foreign currency. Global Series and Asset Allocation Series may also enter into such contracts to manage changes in foreign currency exchange rates on portfolio positions. These contracts are marked to market daily, by recognizing the difference between the contract exchange rate and the current market rate as unrealized gains or losses. Realized gains or losses are recognized when contracts are settled and are reflected in the statement of operations. These contracts involve market risk in excess of the amount reflected in the balance sheet. The face or contract amount in U.S. dollars reflects the total exposure the Global Series and Asset Allocation Series have in that particular currency contract. Losses may arise due to changes in the value of the foreign currency or if the counterparty does not perform under the contract. D. FUTURES - Asset Allocation Series and Ultra Fund utilize futures contracts to a limited extent, with the objectives of maintaining full exposure to the underlying stock markets, enhancing returns, maintaining liquidity, and minimizing transaction costs. Asset Allocation Series and Ultra Fund may purchase futures contracts to immediately position incoming cash in the market, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. In the event of redemptions, the Asset Allocation Series and Ultra Fund may pay departing shareholders from its cash balances and reduce their futures positions accordingly. Returns may be enhanced by purchasing futures contracts instead of the underlying securities when futures are believed to be priced more attractively than the underlying securities. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks contained in the indexes and the prices of futures contracts, and the possibility of an illiquid market. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Funds are required to deposit either cash or securities, representing the initial margin, equal to a certain percentage of the contract value. Subsequent changes in the value of the contract, or variation margin, are recorded as unrealized gains or losses. The variation margin is paid or received in cash daily by the Funds. The Funds realize a gain or loss when the contract is closed or expires. There were no futures contracts held by the Funds at September 30, 1996. - -------------------------------------------------------------------------------- 31 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- E. SECURITY TRANSACTIONS AND INVESTMENT INCOME - Security transactions are accounted for on the date the securities are purchased or sold. Realized gains and losses are reported on an identified cost basis. Dividend income less foreign taxes withheld (if any) plus foreign taxes recoverable (if any) are recorded on the ex-dividend date. Interest income is recognized on the accrual basis. Premium and discounts (except original issue discounts) on debt securities are not amortized. F. DISTRIBUTIONS TO SHAREHOLDERS - Distributions to shareholders are recorded on the ex-dividend date. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences are primarily due to differing treatments relating to the expiration of net operating losses and the recharacterization of foreign currency gains and losses. G. TAXES - The Funds complied with the requirements of the Internal Revenue Code applicable to regulated investment companies and distributed all of their taxable net income and net realized gains sufficient to relieve them from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for federal or state income tax is required. 2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Under terms of the investment advisory contract, Security Management Company (SMC) agrees to provide, or arrange for others to provide, all the services required by the Funds for a single fee (except for the Asset Allocation Series of Security Equity Fund), including investment advisory services, transfer agent services and certain other administrative services. For Growth and Income Fund, Equity Series and Ultra Fund this fee is equal to 2% of the first $10 million of the average daily closing value of each Fund's net assets, 1 1/2% of the next $20 million, and 1% of the remaining net assets of the Fund for the fiscal year. For Global Series this fee is equal to 2% of the first $70 million of the average daily closing value of the Series' net assets and 1 1/2% of the remaining average net assets of the Series for the fiscal year. Additionally, SMC agrees to assume all of the Funds' expenses, except for its fee and the expenses of interest, taxes, brokerage commissions and extraordinary items and Class B distribution fees. SMC also serves as Investment Advisor to the Asset Allocation Series, and accordingly receives a fee equal to 1% of the average net assets of this Series. SMC also acts as the administrative agent and transfer agent for the Asset Allocation Series, and as such performs administrative functions, transfer agency and dividend disbursing services, and the bookkeeping, accounting and pricing functions for the Series. For these services, the Investment Manager receives an administrative fee equal to .045% of the average daily net assets of the Series plus the greater of .10% of its average net assets or (i) $45,000 in the year ending June 1, 1997; and (ii) $60,000 thereafter. For transfer agent services, SMC is paid an annual fixed charge per account as well as a transaction fee for all shareholder and dividend payments. SMC pays a Sub-Advisor, Lexington Management Corporation (LMC), an annual fee in an amount equal to .50% of the average daily net assets of Global Series, for investment advisory and certain administrative services provided to the Global Series. SMC pays Templeton/Franklin Investment Services, Inc. for research provided to the Asset Allocation Series, an annual fee equal to .30% of the first $50 million of the average net assets of the Asset Allocation Series invested in equity securities and .25% of the average equity security assets in excess of $50 million. SMC also pays Meridian Management Corporation for research provided to the Asset Allocation Series an annual fee equal to .20% of the average net assets of that Series. SMC has agreed to limit the total expenses of the Asset Allocation Series to 2% of the average net assets, excluding 12b-1 fees. For the Asset Allocation Series, SMC and Meridian Management Corporation have agreed to waive their portions of the management fees to December 31, 1996. The Funds have adopted Distribution Plans related to the offering of Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plans provide for payments at an annual rate of 1.0% of the average net assets of each Fund's Class B shares. Security Distributors, Inc. (SDI), a wholly-owned subsidiary of SMC and the national distributor for the Funds, received net underwriting commissions after allowances to brokers and dealers in the amounts presented in the following table: ASSET GROWTH AND EQUITY GLOBAL ALLOCATION ULTRA INCOME FUND SERIES SERIES SERIES FUND ----------------------------------------------------------- SDI underwriting $7,615 $107,976 $3,907 $911 $9,163 Broker/Dealer $30,541 $761,334 $25,565 $6,482 $33,172 Certain officers and directors of the Funds are also officers and/or directors of Security Benefit Life Insurance Company and its subsidiaries, which include SMC and SDI. 3. FEDERAL INCOME TAX MATTERS For federal income tax purposes, the amounts of unrealized appreciation (depreciation) at September 30, 1996, were as follows: ASSET GROWTH AND EQUITY GLOBAL ALLOCATION ULTRA INCOME FUND SERIES SERIES SERIES FUND ------------------------------------------------------------- Gross unrealized appreciation $15,608,749 $173,772,495 $2,757,579 $266,330 $17,462,661 Gross unrealized depreciation (386,747) (1,096,900) (734,627) (140,252) (397,738) ------------------------------------------------------------- Net unrealized appreciation $15,222,002 $172,675,595 $2,022,952 $126,078 $17,064,923 ============================================================= The Growth and Income Fund, Equity Series, Global Series and Ultra Fund hereby respectively designate $959,581, $25,710,137, $19,397, and $6,430,082 as capital gain dividends paid during the fiscal year ended September 30, 1996, for the purpose of the dividends paid deduction on each Fund's federal income tax return. - -------------------------------------------------------------------------------- 32 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 4. INVESTMENT TRANSACTIONS Investment transactions for the year ended September 30, 1996, (excluding overnight investments and short-term commercial paper) are as follows: ASSET GROWTH AND EQUITY GLOBAL ALLOCATION ULTRA INCOME FUND SERIES SERIES SERIES FUND ----------------------------------------------------------------- Purchases $47,200,987 $353,045,127 $30,917,967 $5,247,673 $100,294,618 Proceeds from sales $47,075,606 $320,288,296 $31,561,347 $2,947,521 $105,246,179 5. FORWARD FOREIGN EXCHANGE CONTRACTS At September 30, 1996, Global Series had the following open forward foreign exchange contracts to sell currency (excluding foreign currency contracts used for purchase and sale settlements): UNREALIZED SETTLEMENT CONTRACT CONTRACT CURRENT GAIN CURRENCY DATE AMOUNT RATE RATE (LOSS) - -------------------------------------------------------------------------------- French Franc 3-5-97 3,717,779 5.0379 5.11460 $11,067 Japanese Yen 10-11-97 93,628,967 105.6950 111.36000 45,064 Japanese Yen 1-6-97 9,067,305 106.4600 109.92000 2,681 Japanese Yen 1-6-97 81,674,489 107.7200 109.92000 15,175 Japanese Yen 1-6-97 1,204,051 107.4950 109.92000 247 New Zealand Dollar 4-1-97 771,335 0.6859 0.68656 (509) ------- $73,725 6. FEDERAL TAX STATUS OF DIVIDENDS The income dividends paid by the Funds are taxable as ordinary income on the shareholder's tax return. The portion of ordinary income of dividends (including net short-term capital gains) attributed to fiscal year ended September 30, 1996, that qualified for the dividends received deductions for corporate shareholders was 22%, 31%, 3%, 19% and 22% of the amount taxable as ordinary income for Growth and Income Fund, Equity Series, Global Series, Asset Allocation Series and Ultra Fund respectively, in accordance with the provisions of the Internal Revenue Code. - -------------------------------------------------------------------------------- 33 REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- THE SHAREHOLDERS AND BOARD OF DIRECTORS SECURITY GROWTH AND INCOME FUND, SECURITY EQUITY FUND, AND SECURITY ULTRA FUND We have audited the accompanying balance sheets and statements of net assets of Security Growth and Income Fund, Security Equity Fund (comprised of the Equity, Global and Asset Allocation Series) and Security Ultra Fund (the Funds) as of September 30, 1996, the related statements of operations for the year then ended and statements of changes in net assets for each of the two years in the period then ended of Security Growth and Income Fund, Security Equity Series, Security Equity Global Series and Security Ultra Fund and the statements of changes in net assets for the year then ended and for the period June 1, 1995 (commencement of operations) to September 30, 1995 of Security Equity Asset Allocation Series and financial highlights for each of the five years in the period ended September 30, 1996. These financial statements and the financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of September 30, 1996, by correspondence with the custodian. As to securities relating to uncompleted transactions, we performed other audit procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Funds at September 30, 1996, and the results of their operations, changes in their net assets and the financial highlights for the periods indicated above in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Kansas City, Missouri November 1, 1996 - -------------------------------------------------------------------------------- 34 THE SECURITY GROUP OF MUTUAL FUNDS Security Growth and Income Fund Security Equity Fund * Equity Series * Global Series * Asset Allocation Series Security Ultra Fund Security Income Fund * Corporate Bond Series * U.S. Government Series * Limited Maturity Bond Series * Global Aggressive Bond Series * High Yield Series Security Tax-Exempt Fund Security Cash Fund This report is submitted for the general information of the shareholders of the Funds. The report is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective prospectus which contains details concerning the sales charges and other pertinent information. SECURITY FUNDS OFFICERS AND DIRECTORS DIRECTORS - --------- Willis A. Anton Donald A. Chubb, Jr. John D. Cleland Donald L. Hardesty Penny A. Lumpkin Mark L. Morris, Jr., D.V.M. Jeffrey B. Pantages Hugh L. Thompson, Ph.D. OFFICERS - -------- John D. Cleland, PRESIDENT James R. Schmank, VICE PRESIDENT AND TREASURER Mark E. Young, VICE PRESIDENT Terry A. Milberger, VICE PRESIDENT, EQUITY FUND Jane A. Tedder, VICE PRESIDENT Greg A. Hamilton, ASSISTANT VICE PRESIDENT Cindy L. Shields, ASSISTANT VICE PRESIDENT Thomas A. Swank, ASSISTANT VICE PRESIDENT Amy J. Lee, SECRETARY Christopher D. Swickard, ASSISTANT SECRETARY Brenda M. Luthi, ASSISTANT TREASURER AND ASSISTANT SECRETARY BULK RATE U.S. POSTAGE PAID [SDI LOGO] TOPEKA, KS PERMIT NO. 385 700 SW HARRISON ST. TOPEKA, KS 66636-0001 (913) 295-3127 (800) 888-2461 -----END PRIVACY-ENHANCED MESSAGE-----